Q2 2024 Whirlpool Corp Earnings Call

Good morning and welcome to Whirlpool Corporation's second quarter 2024 earnings call.

Operator: 2024 Earnings 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.

Speaker Change: 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: 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. 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. We also want to remind you that today's presentation includes the NIME 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 results from our ongoing business operations.

Speaker Change: Our remarks today track with the presentation available on the investor section of our website at WhirlpoolCorp.com.

Operator: We also think the adjusted measures will provide you with a better baseline for analyzing trends and our ongoing business operations. Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for the Reconciliation of Non-GAP Items to the Most Directly Comparable GAP Measure. At this time, all participants are in listen-only mode.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: 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.

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

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

Speaker Change: 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.

Operator: 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.

Speaker Change: 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.

Marc Robert Bitzer: Thanks, Scott, and good morning, everyone, to demonstrate the strong sequential global margin expansion in the second quarter. This global margin expansion of 100 base points is an important step toward continued margin expansion throughout 2024. MDA North America also delivered sequential margin expansion, supported by our pricing actions announced in our first quarter earnings. Our pricing actions in North America delivered as expected, sell through trends improving throughout the course, which reflects our execution capabilities and confirms the strength of our products and brand. We were confident in our ability to execute the pricing actions while maintaining our MDA North America market share for over four years. We continue to be very pleased with the performance of our SDA Global and International MBA program.

Speaker Change: With that, I'll turn the call over to Marc. Thanks, Scott, and good morning, everyone.

Marc Robert Bitzer: We demonstrated strong sequential global margin expansion in the second quarter.

Marc Robert Bitzer: This global margin expansion of 100 base points is an important step towards continued margin expansion throughout 2024.

Marc Robert Bitzer: MDA North America also delivered sequential margin expansion, supported by our pricing actions announced in our first quarter earnings call.

Marc Robert Bitzer: Our pricing actions in North America delivered as expected, with sell-through trends improving throughout the quarter.

Marc Robert Bitzer: which reflects our execution capabilities and confirms the strength of our products and brands.

Marc Robert Bitzer: We're confident in our ability to execute the pricing actions while maintaining our MDA North America market share for the full year.

Marc Robert Bitzer: We continue to be very pleased with the performance of our SDA Global and International MBA business.

Marc Robert Bitzer: Our SDA global business saw strong top-line growth and margin expansion as we benefited from the momentum of new product launches and continue to grow our direct-to-consumer business. We're excited about the future potential and our MDA Latin America and MDA Asia business. We continue to gain share key And we continue to see meaningful long-term growth potential in both businesses. We were disciplined with our cost management and successfully completed our organizational simplification mission, putting us on track to achieve our full year cost takeout guidance of $300 to $400 million.

Marc Robert Bitzer: Our SDA global business saw strong top line growth and margin expansion as we benefited from a momentum of new product launches and continue to grow our direct-to-consumer business.

Marc Robert Bitzer: We're excited about the future potential of this business.

Marc Robert Bitzer: In our MDA Latin America and MDA Asia business, we continue to gain share in key countries, and we continue to see meaningful long-term growth potential in most businesses.

Marc Robert Bitzer: We were disciplined with our cost management and successfully completed our organizational simplification misquotor, putting us on track to achieve our full year cost takeout guidance of $300 to $400 million.

Marc Robert Bitzer: We are confident there are additional cost takeout opportunities ahead, as we shared at our investor day, such as manufacturing supply chain efficiencies, including automation across our business, and continuing to optimize our input costs back to pre-COVID levels. Turning to our full year guidance, we are reiterating flat net sales of $16.9 billion. This is driven by new product launches, strong replacement demand, previously announced MDA North America pricing actions, and continued strength in our international business, offsetting the challenging macro environment in the U.S. given elevated mortgage rates, which have led to continued weakness in home sales and overall discretionary demand.

Marc Robert Bitzer: We are confident there are additional cost take-out opportunities ahead, as we shared at our investor day, such as manufacturing supply chain efficiencies, including automation across our business, and continuing to optimize our input costs back to pre-COVID levels.

Marc Robert Bitzer: Turning to our full year guidance, we are reiterating flat net sales of $16.9 billion driven by new product launches, strong replacement demand, previously announced MDA North America pricing actions, and continued strength in our international businesses.

Marc Robert Bitzer: Offsetting the challenging macro-environment in the U.S. given elevated mortgage rates which have led to continued weakness in home sales and overall discretionary demands.

Marc Robert Bitzer: We are revising our ongoing EBIT margin to 6% from 6.8% previously, as we expect continued discretionary demand pressure from a soft housing market impacting full-year price-mix negatives. However, at the same time, the previously announced pricing and cost takeout actions are expected to deliver sequential margin expansion and a solid exit rate of approximately 7.5% ongoing EBIT margin in Q4. In turn, we expect to deliver $12 ongoing earnings per share.

Marc Robert Bitzer: We are revising our ongoing EBIT margin to 6% from 6.8% previously, as we expect continued discretionary demand pressure from a soft housing market, impacting fully your price mix negatively.

Marc Robert Bitzer: However, at the same time, the previously announced pricing and cost take-out actions are expected to deliver sequential margin expansion with a solid exit rate of approximately 7.5% ongoing EBIT margin in Q4.

Marc Robert Bitzer: In turn, we expect to deliver $12 ongoing earnings per share this year.

Marc Robert Bitzer: As we look ahead, we're confident in our strategy and the favor of the long-term fundamentals of our business. Our view of the housing market remains... given the well-documented structural undersupply of houses in the U.S. and existing home sales at multi-decade lows.

Marc Robert Bitzer: As we look ahead, we're confident in our strategy and the favorable long-term fundamentals of our business.

Marc Robert Bitzer: Our view of the housing market remains unchanged, given the well-documented structural undersupply of houses in the U.S., existing home sales at multi-decade lows.

Marc Robert Bitzer: Elevated home equity values, which are near all-time highs and are in a strong position with eight of the top ten US builds. We are very well positioned to benefit from any housing recovery, and we continue to innovate and have a strong lineup of new products this year that I'm personally excited about, which would support the strength of our brand. Turning to slide six, I will provide an overview of our second quarter results. Organic net sales, excluding the Europe divestiture, increased by over 1% in the quarter.

Marc Robert Bitzer: elevated home equity values which are near all-time highs and our strong position with eight of a top ten US builders.

Marc Robert Bitzer: We are very well positioned to benefit from eventual housing rebounds.

Speaker Change: And we continue to innovate and have a strong lineup of new products this year that I'm personally excited about, which would support the strength of our brands.

Speaker Change: Turning to slide six, I will provide an overview of our second quarter results.

Speaker Change: Organic net sales, excluding the Europe divestiture, increased by over 1% in the quarter.

Marc Robert Bitzer: The growth across our international businesses and SDA global offset the expected decline in North America, which was impacted by the carryover of the second half of 2023 normalized promotion environment, but still resulted in an unfavorable price mix in the second quarter, along with continued suppressed discretionary. This negative microenvironment was partially offset by our pricing actions taken within the quarter, which are fully on track. We delivered ongoing earnings per share of $2.39 with ongoing EBIT margin of 5.3%, representing solid sequential margin expansion of 100 base points. This trend continued throughout the second half of the year.

Speaker Change: The growth across our international businesses and SDA global offset the expected decline in North America, which was impacted by the carryover of the second half of 2023 normalized promotion environment, but still resulted in unfavorable price mix in the second quarter.

Speaker Change: along with continued suppressed discretionary demand.

Speaker Change: This negative microenvironment was partially offset by our pricing actions taken within the quarter, which are fully on track.

Speaker Change: We delivered ongoing earnings per share of $2.39 with ongoing EBIT margin of 5.3%.

Speaker Change: representing solid sequential margin expansion of 100 base points, which we expect to continue throughout the second half of the year.

Marc Robert Bitzer: Within the quarter, we made meaningful progress on our working capital and inventory management, resulting in $275 million of cash generated. We remain confident in our ability to improve free cash flow in the second half of the year to deliver approximately $500 million on a fully-automated basis. As a reminder, free cash flow year-to-date was negatively impacted by non-recurring cash outflows associated with a European transaction of 250 to $300 million in the first quarter.

Speaker Change: Within the quarter, we made meaningful progress on our working capital and inventory management, resulting in $275 million of cash generation.

Speaker Change: Remain confident in our ability to improve free cash flow in the second half of a year to deliver approximately $500 million on a full year base.

Speaker Change: As a reminder, free cash flow year-to-date was negatively impacted by non-recurring cash outflows associated with a Europe transaction of 250 to 300 million dollars in the first quarter.

Marc Robert Bitzer: Cash consumption will no longer impact our results in 2025, structurally strengthening our free cash flow delivery going forward. Our free cash flow delivery enables us to continue to return cash to shareholders with our capital allocation priorities unchanged. Finally, continuing our nearly 70-year history of steady or increasing dividends, we paid $1.75 per share in the second quarter and expect to return $400 million to shareholders in the form of dividends.

Speaker Change: This cash consumption will no longer impact our results in 2025, structurally strengthening our free cash flow delivery going forward.

Speaker Change: Our free cash flow delivery enables us to continue to return cash to shareholders with our capital allocation priorities unchanged.

Speaker Change: Finally, continuing our nearly 70-year history of steady or increasing dividends, we paid $1.75 per share in the second quarter and expect to return $400 million to shareholders in the form of dividends this year.

Marc Robert Bitzer: Turning to slide 7, I will review second quarter ongoing EBIT margins. Price mix impacted margin unfavorably at $300, a negative mix resulting from lower discretionary demand.

Speaker Change: Turning to slide 7, I will review second quarter ongoing EBIT margin drivers.

Speaker Change: price mix impacted margin unfavorable by 300 base points

Speaker Change: with a negative mix resulting from lower discretionary demand.

Marc Robert Bitzer: And as we look ahead, we expect the second half price mix comparison to sequentially improve with our executed price, in addition to lapping a more normalized promotion environment from the second half of 2025. Our cost takeout actions deliver the 100 base point margin, led by the completion of our organizational simplification. As expected, raw materials did not have a meaningful impact on the course.

Speaker Change: And as we look ahead, we expect the second half price mix comparison to sequentially improve with our executed pricing actions.

Speaker Change: in addition to lapping a more normalized promotion environment from the second half of 2023.

Speaker Change: Our cost takeout actions deliver the 100 base point margin expansion.

Speaker Change: led by the completion of our organizational simplification actions.

Speaker Change: As expected, raw materials did not have a meaningful impact on the quarter.

Marc Robert Bitzer: We continue to invest in marketing and technology, supporting product launches such as the Fuli and the semi-automatic KitchenAid Express. Finally, foreign currency negatively impacted margin as the Brazilian real and the Canadian dollar experienced some weakening relative to the U.S. dollar. Ultimately, we delivered 100 base point ongoing even margin expansion sequentially to 5.3% in the second quarter. Now, I will turn it over to Jim to review our segment results and fully agree. Thanks, Marc. Good morning, everyone.

Speaker Change: We continue to invest in marketing and technology, supporting product launches such as the Fuli and semi-automatic KitchenAid espresso machine.

Speaker Change: Finally, foreign currency negatively impacted margin as the Brazilian Real and the Canadian Dollar experienced some weakening relative to the US Dollar.

Speaker Change: Ultimately, we delivered 100 base point ongoing even margin expansion sequentially to 5.3% in the second quarter.

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

James W. Peters: Turning to slide eight, I'll review second quarter results for our MDA North America business. Net sales were down 6% year over year, driven by unfavorable price mix. Our pricing actions are fully on track as evidenced by price mix turning positive in June. These actions drove approximately 70 basis points of sequential EBIT margin expansion. Overall, the segment delivered a 6.3% EBIT margin for the quarter.

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

James W. Peters: Turning to slide 8, I'll review second quarter results for our MDA North America business.

James W. Peters: Net sales were down 6% year-over-year driven by unfavorable price mix.

James W. Peters: Our pricing actions are fully on track as evidenced by price mix turning positive in June .

James W. Peters: These actions drove approximately 70 basis points of sequential EBIT margin expansion. Overall, the segment delivered a 6.3% EBIT margin for the quarter.

James W. Peters: We expect that our pricing and cost takeout actions will continue to drive greater than 100 basis points of sequential margin expansion each quarter in the second half of 2024 and expect a Q4 EBIT margin of approximately 9%. Turning to slide 9, I will provide an update on our pricing actions and cost actions, which remain on track. As you may recall, last quarter, we discussed the promotional investments in the U.S. that were not achieving the expected incremental volume lift. The current environment of strong replacement demand typically brings a lower mix and limits promotional effectiveness.

James W. Peters: We expect that our pricing and cost takeout actions will continue to drive greater than 100 basis points of sequential margin expansion each quarter in the second half of 2024, and expect a Q4 EBIT margin of approximately 9%.

James W. Peters: Turning to slide 9, I will provide an update on our pricing actions and cost actions which remain on track.

James W. Peters: As you may recall, last quarter we discussed the promotional investments in the U.S. that were not achieving the expected incremental volume lift. The current environment of strong replacement demand typically brings a lower mix and limits promotional effectiveness.

James W. Peters: To address the environment, we announced a 5% weighted average increase to our promotional pricing programs in MDA North America, which went into effect on April 25th, demonstrating our commitment to only participate in value-creating promotions. We are confident in our pricing strategy. Although we have continued to see discretionary demand impacted by depressed existing home sales and a weary consumer, we have already driven 70 basis points of sequential margin expansion in the second quarter and expect the net margin benefit from our price actions to be fully realized in the third quarter, as noted in our first quarter earnings.

James W. Peters: To address the environment, we announced a 5% weighted average increase to our promotional pricing programs in MDA North America, which went into effect on April 25th, demonstrating our commitment to only participate in value-creating promotions.

James W. Peters: We are confident in our pricing actions.

James W. Peters: Although we have continued to see discretionary demand impacted by a depressed existing home sales and a weary consumer, we have already driven 70 basis points of sequential margin expansion in the second quarter and expect the net margin benefit from our price actions to be fully realized in the third quarter.

James W. Peters: With persistently high inflation impacting manufacturing and the supply chain, we are experiencing a slower realization of our incremental cost. While we remain on track to deliver $300 to $400 million of cost savings in 2024, we continue to trend towards the lower end of the range. The North America MDA portion of this is approximately 60%.

James W. Peters: As noted in our first quarter earnings, with persistently high inflation impacting manufacturing and supply chain, we are experiencing a slower realization of our incremental cost actions.

James W. Peters: While we remain on track to deliver $300 million to $400 million of cost savings in 2024, we continue to trend towards the lower end of the range.

James W. Peters: The North America MDA portion of this is approximately 60%.

James W. Peters: We completed our organizational simplification in early May and expect to fully realize the margin benefit from these actions in the third quarter. Despite the macro environment, we delivered approximately $150 million of cost takeout globally in the first half of 2024, and we expect our manufacturing and supply chain initiatives to deliver the majority of the cost takeout in the second half. Turning to slide 10, I'll review the results of our MDA Latin America business.

James W. Peters: We completed our organizational simplification in early May and expect to fully realize the margin benefit from these actions in the third quarter.

James W. Peters: Despite the macro environment, we delivered approximately $150 million of cost takeout globally in the first half of 2024, and we expect our manufacturing and supply chain initiatives to deliver the majority of the cost takeout in the second half.

James W. Peters: Turning to slide 10, I'll review the results of our MDA Latin America business.

James W. Peters: The segment saw strong net sales growth of 15% year over year, excluding currency, driven by industry growth and continued share gains in both Brazil and Mexico. More than offsetting an unfavorable price mix, we delivered a solid EBIT margin of 5.8% in the quarter. Turning to slide 11, I'll review a very strong quarter from our MDA Asia business. The segment saw significant net sales growth of 21% year-over-year, excluding currency, driven by industry growth and continued share gains.

James W. Peters: The segment saw strong net sales growth of 15% year-over-year, excluding currency, driven by industry growth and continued share gains in both Brazil and Mexico, more than offsetting unfavorable price mix.

James W. Peters: We delivered a solid EBIT margin of 5.8% in the quarter.

James W. Peters: Turning to slide 11, I'll review the very strong quarter from our MDA Asia business.

James W. Peters: The segment saw significant net sales growth of 21% year-over-year, excluding currency, driven by industry growth and continued share gains.

James W. Peters: We delivered a 6.2% EBIT margin, driven by our strong cost actions and fixed cost leverage, delivering significant year-over-year and sequential margin expansion. Turning to slide 12, I'll review the solid results for our SDA global business. Despite industry decline, net sales increased 12%, excluding currency, year over year, driven by new product launches and growth in our direct-to-consumer business.

James W. Peters: We delivered a 6.2% EBIT margin, driven by our strong cost actions and fixed cost leverage, delivering significant year-over-year and sequential margin expansion.

James W. Peters: Turning to slide 12, I'll review the solid results for our SDA global business.

James W. Peters: Despite industry decline, net sales increased 12%, excluding currency year-over-year, driven by new product launches and growth in our direct-to-consumer business.

James W. Peters: We delivered a solid EBIT margin of 13.9% through cost actions and volume growth, partially offset by incremental marketing investments for our recent espresso product launch. The SDA business is well positioned for the selling season in the second half of the year, where we expect approximately two-thirds of its demand and profitability to occur. Turning to slide 13, I'll review our revised full year 2024 guidance. Our net sales guidance of $16.9 billion is unchanged.

James W. Peters: We delivered a solid EBIT margin of 13.9% through cost actions and volume growth. Partially offset by incremental marketing investments for our recent espresso product launches.

James W. Peters: The SDA business is well-positioned for the selling season in the second half of the year, where we expect approximately two-thirds of its demand and profitability to occur.

James W. Peters: Turning to slide 13, I'll review our revised full year 2024 guidance.

James W. Peters: Our net sales guidance of $16.9 billion is unchanged.

James W. Peters: We are revising our full year ongoing earnings per share to approximately $12 and refining our free cash flow guidance to approximately $500 million. In addition, our product mix in North America is impacted by low consumer sentiment and suppressed existing home sales.

James W. Peters: We are revising our full year ongoing earnings per share to approximately $12 and refining our free cash flow guidance to approximately $500 million.

James W. Peters: In addition, our product mix in North America is impacted by low consumer sentiment and suppressed existing home sales. As a result, we now expect to deliver a full year ongoing EBIT margin of 6%.

James W. Peters: As a result, we now expect to deliver a full year ongoing EBIT margin of 6%. Our guidance also includes updated expectations for adjusted effective taxes. Now that we have closed the Europe transaction, we are able to more appropriately estimate the benefits of our tax planning strategy. We now expect an ongoing full-year tax rate of approximately negative 8%.

James W. Peters: Our guidance also includes updated expectations for our adjusted effective tax rate.

James W. Peters: Now that we have closed the Europe transaction, we are able to more appropriately estimate the benefits of our tax planning strategies.

James W. Peters: We now expect an ongoing full-year tax rate of approximately negative 8 percent.

James W. Peters: On slide 14, we show the strong progression of our quarterly ongoing EBIT margin. The sequential margin expansion of approximately 100 basis points quarterly in the second half is driven by on-track MDA North America pricing action. Incremental global cost takeout actions such as part complexity reductions and manufacturing efficiency, continued strength across our international business, and SDA Global Seasonality. Our decisive actions and operational execution are expected to deliver a Q4 exit EBIT margin of approximately 7.5%.

James W. Peters: On slide 14, we show the strong progression of our quarterly ongoing EBIT margin.

James W. Peters: The sequential margin expansion of approximately 100 basis points quarterly in the second half is driven by on-track MDA North America pricing actions, incremental global cost takeout actions such as part complexity reductions and manufacturing efficiencies,

James W. Peters: Continued strength across our international businesses and SDA global seasonality.

James W. Peters: Our decisive actions and operational execution are expected to deliver a Q4 exit EBIT margin of approximately 7.5%.

James W. Peters: Turning to slide 15, we show the drivers of our updated full year ongoing EBIT margin guidance. We have updated our expectation of price mix by 25 basis points to a negative 200 basis point impact, reflecting a negative product mix driven by lower than expected discretionary demand in the U.S. that is expected to continue into the second half. Net cost takeout reflects the expectation of delivering on the lower end of the $300 million to $400 million range. Lastly, currency is anticipated to have a slight impact for the full year at 25 basis points due to the weakening Brazilian Hei and Canadian dollar.

James W. Peters: Turning to slide 15, we show the drivers of our updated full-year ongoing EBIT margin guidance.

James W. Peters: We have updated our expectation of price mix by 25 basis points to a negative 200 basis point impact, reflecting a negative product mix driven by lower-than-expected discretionary demand in the U.S. that is expected to continue into the second half.

James W. Peters: Net cost takeout reflects the expectation of delivering on the lower end of the $300 million to $400 million range. Lastly, currency is anticipated to have a slight impact for the full year at 25 basis points due to weakening Brazil Hei and Canadian dollar.

James W. Peters: We now expect an ongoing EBIT margin of approximately 6% for the year. Turning to slide 16, I'll review our updated segment expectations. Globally, we now expect the total industry to be approximately flat.

James W. Peters: We now expect an ongoing EBIT margin of approximately 6% for the year.

James W. Peters: Turning to slide 16, I'll review our updated segment expectations. Globally, we now expect the total industry to be approximately flat. In MDA North America, the recent restatement of AHAM information has created some quarterly comparability issues.

James W. Peters: In MDA North America, the recent restatement of AHAM information has created some quarterly comparability. However, we are in alignment with the year-to-date reported AHAM results of down approximately 2% year-over-year. This links well to the sell-through results we have experienced in the first half of 2020. Replacement demand remains strong. However, discretionary demand continues to experience macro-health. As a result, we expect the industry to remain approximately flat for the year.

James W. Peters: However, we are in alignment with the year-to-date reported AHAM results of down approximately 2% year-over-year.

James W. Peters: This links well to the sell-through results we have experienced in the first half of 2024. Replacement demand remains strong. However, discretionary demand continues to experience macro headwinds.

James W. Peters: As a result, we expect the industry to remain approximately flat for the year.

James W. Peters: MDA Latin America has seen significant demand recovery in both Brazil and Mexico, more than offsetting a very challenging economic environment that persists in Argentina. We now expect the industry to be up five to seven percent in Latin America. MDA Asia's industry remains unchanged as we continue to see demand improvement in India, as expected.

Speaker Change: MDA Latin America has seen significant demand recovery in both Brazil and Mexico, more than offsetting a very challenging economic environment that persists in Argentina. We now expect the industry to be up 5-7% in Latin America.

Speaker Change: MDA Asia industry remains unchanged as we continue to see demand improvement in India as expected.

James W. Peters: Finally, SDA Global continues to be impacted by discretionary demand weakness in the U.S. and Europe, resulting in the expected industry for the year to be approximately flat. We have adjusted EBIT margin to reflect the discretionary demand softness in the U.S. negatively impacting price mix. We expect full-year MDA in North America margins of approximately 7%, with a Q4 EBIT margin of approximately 9%. With the strong share growth and cost actions in MDA Latin America and MDA Asia, we now expect higher EBIT margins of approximately 7% and approximately 4%, respectively. SDA Global's strong EBIT margin of 15.5% remains unchanged.

Speaker Change: Finally, SDA Global continues to be impacted by discretionary demand weakness in the U.S. and Europe , resulting in the expected industry for the year to be approximately flat.

Speaker Change: We have adjusted EBIT margin to reflect the discretionary demand softness in the U.S. negatively impacting price mix.

Speaker Change: We expect full-year MDA North America margins of approximately 7%, with a Q4 EBIT margin of approximately 9%.

Speaker Change: With the strong share growth and cost actions in MDA Latin America and MDA Asia, we now expect higher EBIT margins of approximately 7% and approximately 4% respectively.

Speaker Change: SDA Global's strong EBIT margin of 15.5% remains unchanged.

James W. Peters: Turning to slide 17, I'll review our free cash flow guide. We have updated our cash earnings and other operating accounts consistent with full-year EBIT. We have further refined our capital expenditure expectations and remain competent in achieving 100 plus new products launched in 2024. In the second quarter, we made meaningful progress on our working capital, leading to an improvement of over $200 million of cash versus the first quarter. As we move through the year, we expect to further reduce investment.

Speaker Change: Turning to slide 17, I'll review our free cash flow guidance.

Speaker Change: We have updated our cash earnings and other operating accounts consistent with full-year EBIT guidance. We have further refined our capital expenditure expectations and remain confident in achieving 100-plus new products launched in 2024.

Speaker Change: In the second quarter, we made meaningful progress on our working capital, leading to an improvement of over $200 million of cash versus the first quarter. As we move through the year, we expect to further reduce inventories.

James W. Peters: We also expect to see accounts receivable and accounts payable return to similar levels by the end of 2023, allowing us to deliver sequential free cash flow from working capital throughout the back half of the year. Finally, we have updated the restructuring impact of the previously announced Organizational Simplification Act.

Speaker Change: We also expect to see accounts receivable and accounts payable return to similar levels as the end of 2023, allowing us to deliver sequential free cash flow from working capital throughout the back half of the year.

Speaker Change: Finally, we updated the restructuring impact of the previously announced organizational simplification actions.

James W. Peters: Overall, we expect free cash flow of approximately $500 million for the year. Turning to slide 18, let me recap our commitment to our capital allocation priority. We've completed actions to strengthen our balance sheet in 2024. In the first quarter, we completed the sale of 24% of Whirlpool of India's outstanding shares while retaining a majority. Additionally, the planned divestiture of our Braztemp-branded water filtration business in Brazil closed on July 1st, generating over $50 million of cash.

Speaker Change: Overall, we expect free cash flow of approximately $500 million for the year.

Speaker Change: Turning to slide 18, let me recap our commitment to our capital allocation priorities.

Speaker Change: We've completed actions to strengthen our balance sheet in 2024. In the first quarter, we completed the sale of 24% of Whirlpool of India's outstanding shares while retaining a majority interest.

Speaker Change: Additionally, the planned divestiture of our Brastemp-branded water filtration business in Brazil closed on July 1st, generating over $50 million of cash. Combined, these two actions generated more than $500 million of cash.

James W. Peters: Combined, these two actions generated more than $500 million of cash. Coupled with our beginning cash on hand of $1.6 billion and free cash flow generation of approximately $500 million, we are well positioned to pay dividends of approximately $400 million in 2024 and continue our debt reduction initiative, demonstrated by a $500 million term loan repayment in April. With these actions, we are fully on track to deliver our 2024 capital allocation priorities. Now, I will turn the call over to Marc. Thanks, Jim.

Speaker Change: Coupled with our beginning cash on hand of $1.6 billion and pre-cash flow generation of approximately $500 million, we are well positioned to pay dividends of approximately $400 million in 2024 and continue our debt reduction initiatives.

Speaker Change: demonstrated by a 500 million dollar term loan repayment in April .

Speaker Change: With these actions, we are fully on track to deliver our 2024 capital allocation priorities. Now, I will turn the call over to Marc.

Marc Robert Bitzer: Turning to slide 19, let me recap what you heard today. We are pleased to have delivered sequential margin expansion globally and in North America, primarily driven by our price. We continue to navigate a soft macro environment, but we're executing well and are confident in our strategy. In 2021 and 2022, we incurred over $2.5 billion of costs.

Marc Robert Bitzer: Thanks, Jim. Turning to slide 19, let me recap what you heard today.

Marc Robert Bitzer: We are pleased to have delivered sequential margin expansion globally and in North America primarily driven by our pricing actions.

Marc Robert Bitzer: We continue to navigate a soft macro environment, but we're executing well and are confident in our strategy.

Marc Robert Bitzer: In 2021 and 2022, we incurred over $2.5 billion of cost inflation.

Marc Robert Bitzer: And we've been relentless in addressing these costs. We took out $500 million of fixed costs since 2019, with organizational simplification delivering $100 million in cost savings alone in 2021. We're on track to achieve $300 to $400 million of cost savings this year, and as we look forward, we continue to see significant opportunities to take additional costs out of our products for input costs, manufacturing, and supply. At the same time, the soft macro environment, and in particular, the US housing market, will eventually turn positive, and our North America business is well-positioned for future growth and turbo margin.

Marc Robert Bitzer: And we've been relentless in addressing these cost challenges.

Marc Robert Bitzer: We took out $500 million of fixed costs since 2019, with the organizational simplification delivering $100 million cost savings alone in 2024.

Marc Robert Bitzer: We're on track to achieve 300 to 400 million dollars of cost savings for the year.

Marc Robert Bitzer: And as we look forward, we continue to see significant opportunities to take additional costs out of our products for input costs, manufacturing, and supply chains.

Marc Robert Bitzer: At the same time, the soft macro environment, and in particular the US housing market, will eventually turn positive, and our North America business is well positioned for future growth and fervor margin expansion.

Marc Robert Bitzer: We've seen the downturn of consumer discretionary demand intensify since 2022, and existing home sales hit multi-decade lows in 2023 and 2024. There is no doubt that we have been and are still at a low point in U.S. housing.

Speaker Change: We've seen the downturn of consumer discretionary demand intensify since 2022, and existing home sales hit multi-decade lows in 2023 and 2024. There is no doubt that we have been and still are at a low point in the U.S. housing market.

Marc Robert Bitzer: With interest rate reductions, this will ease at some point, and we are well positioned to benefit from improving conditions. Replacement demand remains strong, and we expect this to continue due to a strong installed base and increased usage of appliances, which remains higher than pre-pandemic. Overall, we have the right strategy and operational priorities to navigate the challenging environment in our North America base. Our FDA and international businesses continue to perform ahead of previous expectations, delivering sizable markets.

Speaker Change: With interest rate reductions, this will ease at some point, and we are well positioned to benefit from improving demand.

Speaker Change: Replacement demand remains strong and we expect this to continue due to a strong install base and increased usage of appliances, which remains higher than pre-pandemic norms.

Speaker Change: Overall, we have the right strategy and operational priorities to navigate the challenging environment in our North America business.

Speaker Change: Our SDA and international businesses continue to perform ahead of previous expectations, delivering sizable market share gains.

Marc Robert Bitzer: These businesses have a long runway for growth and continue to be very important to our overall portfolio. Finally, we are delivering strong cash generation in McWhorter and are expecting significant improvement in the back half of 2024. A good line of sight to our approximately $500 million free cash flow target focus. We continue to return cash-to-shoulders for our attractive dividends and have a long track record of shoulder-friendly capital. We are confident in our strategy and the steps we are taking, both in the short and long term, to deliver value for our shareholders.

Speaker Change: These businesses have a long runway for growth and continue to be very important to our overall portfolio.

Speaker Change: Finally, we are delivering strong cash generation in McWhorter and are expecting significant improvement in the back half of 2024. We have a good line of sight to our approximately $500 million free cash flow target for the year.

Speaker Change: We continue to return cash to shareholders through our attractive dividend and have a long track record of shareholder-friendly capital allocation.

Speaker Change: We are confident in our strategy and the steps we are taking, both for short and long term, to deliver value for our shareholders.

Marc Robert Bitzer: And that concludes our formal remarks, and we will now open it up for questions. Please stand by 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 1 on your telephone keypad. Your first question comes from the line of Sam Darkash from Raymond James. Your line is open. Good morning, Marc. Good morning, Jim. How are you?

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

Speaker Change: Please stand by 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 1 on your telephone keypad.

Speaker Change: Your first question comes from the line of Sam Darkash from Raymond James. Your line is open.

Operator: Good morning, Sam. Two questions, both as it relates to North America MDA. First one, originally, we're looking at a 10 or 11% margin exit rate in the fourth quarter. How long do you figure it will take to return the segment to that 10 or 11% and what specifically would have to happen for those levels to be achieved? And then I've got a follow-up. So, Sam, I just want to take that question.

Samuel John Darkatsh: Good morning, Marc. Good morning, Jim. How are you?

Speaker Change: Good morning, Sam. Two questions, both as it relates to North America MDA.

Samuel John Darkatsh: First one, originally we're looking at a 10 or 11% margin exit rate in the fourth quarter. How long do you figure it will take to return?

Samuel John Darkatsh: The segment to that 10 or 11 percent and what specifically would have to happen For those levels to be achieved and then I've got a follow-up

Marc Robert Bitzer: Well, the revised guidance that we issued basically points to roughly 9% exit margin, which is different from a previous 10 to 11, which we had in mind. That is entirely and entirely driven by the delay of the housing recovery. As you know, we ended the year assuming, like many other people, that there would probably be two or three interest rate reductions, and let's see how many will actually happen. So, in reality, you are talking about the delay of a recovery, which is reflected in our guide. So the simple answer to your question is, when will it happen? What does it need to happen?

Samuel John Darkatsh: So Sam, let me just take that question.

Samuel John Darkatsh: The revised guidance which we issued basically points to a roughly 9% exit margin which is different from a previous 10 to 11 which we had in mind.

Speaker Change: That is all and entirely driven by the delay of a housing recovery. As you know, we ended the year assuming, like many other people, that there will be probably two or three interest rate reductions, and let's see how many will actually happen.

Speaker Change: In reality, you talk about the delay of a recovery, which is reflected in our guide.

Marc Robert Bitzer: Housing recovery needs to happen. As you know, we're disproportionately benefiting from any housing recovery because of our strength in the builder channel. And that is a really important element in getting to these run rates. Now, in the meantime, we do what we can in our own control.

Speaker Change: A simple answer to your question is, when will it happen and what needs to happen? Housing recovery needs to happen. As you know, we're...

Speaker Change: disproportionately benefiting from any housing recovery because of our strength in the Build-A-Channel.

Speaker Change: And that is a really important element in getting to these run rates. Now, in the meantime, we do what we can do in our own control, that was the promotion price increase. We're taking aggressive stance from cost action, but the housing market at the same time needs to recover in order to get to these double-digit run rates again.

Marc Robert Bitzer: That was the promotion price increase. We're taking an aggressive stance on cost action. But the housing market, at the same time, needs to recover in order to get to these double-digit run rates. Got you.

Operator: My second question is actually related to your answer there. It was notable, at least to me, that mix alone created such a large cut to North American margins, at least versus the expectations previously. Just trying to, at a high level...

Speaker Change: My second question is actually related to your answer there.

Speaker Change: It was notable, at least to me, that Mix alone created such a large cut to North American margins, at least versus the expectations previously. I'm just trying to, at a high level...

Marc Robert Bitzer: Trying to get a sense of what informed your assumption. Of such a margin benefit in the back half, originally from mix, I guess it would be, I guess 200 basis points or so, especially knowing that, you know, you're in the process of raising price, which could inhibit mix. And, you know, your early interest rate cuts typically actually give homeowners a pause until they wait for interest rates to stabilize. So I'm just trying to get a sense of why inflation was originally expected to be such a positive benefit in the back half.

Speaker Change: Trying to get a sense of what informed your assumption of such a margin benefit in the back half originally from mix. I guess it would be I guess 200 basis points or so.

Speaker Change: Especially knowing that, you know, you're in the process of raising price, which could inhibit mix and, you know, your early, um...

Speaker Change: interest rate cuts typically actually give homeowners a pause until they wait for interest rates to stabilize. So I'm just trying to get a sense of why

Speaker Change: Mix was originally expected to be such a positive benefit in the back half.

Marc Robert Bitzer: Yes, there are obviously multiple elements going on the pricing side, and we have to differentiate the year-over-year versus the sequential perspective. First of all, on pure pricing, and I will just come back to mix, as you know, there have not been a lot of like-for-like price changes, but obviously, the carryover of a deep promotion discount in the second half of 2023, that was very visible and maybe more visible than we originally assumed in the first half, and that, by definition, impacted fully in numbers.

Speaker Change: Yes, there's obviously multiple elements going on the pricing side, and we got to differentiate the year-over-year versus the sequential perspective.

Speaker Change: First of all, I'm a pure pricing and I will just come back to mix.

Speaker Change: As you know, there have not been a lot of like-for-like price change, but obviously the...

Bebos: a carryover of a deep promotion discount on the second half of 23, Bebos.

Marc Robert Bitzer: So, as you also know, we issued our promotion price program changes in late April. We see the benefits of that fully coming into our business in June, and that will, on a go-forward-based drive, quite a bit of pricing. But the promotional impact in the first half, frankly, that was one element that was probably even bigger than we originally assumed.

Bebos: very visible, and maybe more visible than we originally assumed in the first half, and that, by definition, impacts a Fourier number.

Bebos: As you also know, we issued our promotion price program changes late April .

Bebos: We see the benefits of that fully coming into our business in June , and that will go forward by quite a bit of pricing. But the promotional impact in the first half, frankly, that was one element, which was probably even bigger than we originally assumed.

Marc Robert Bitzer: The second part to your question about mix, what you have right now going on, and I think you even pointed this one out in your report, is that there are almost two offsetting dynamics going on in the marketplace. You have, on the one hand, a replacement market, which is very strong, driven by high appliance usage, and you're also now competing against good baseline numbers, and so that's a strength, but it comes with a very weak mix.

Speaker Change: The second part to your question about NICs.

Speaker Change: What you have right now going on, and I think you even pointed towards this one in your report, is there's almost two offsetting dynamics going on the marketplace. You have on one hand a replacement market which is very strong, driven by higher appliance usage, and you're also now competing against good baseline numbers.

Speaker Change: And so that's a strength, but it comes with a very weak mix.

Marc Robert Bitzer: Just think about the consumer. The consumer who wants to replace the refrigerator or washing machine in one or two days. Typically, you don't have a lot of opportunities to get them to a higher price point to explain the new technology or bigger product because, typically, it has to fit the cutout. The other side of it, the discretionary demand, that is the really weak side, even weaker than you would see right now in the overall industry numbers, quite a bit weaker. The discretionary side comes with fundamental renovation or existing home sales or new housing.

Speaker Change: Just think about the consumer, the consumer who wants to replace the refrigerator or washing machine in one or two days, typically you don't have a lot of opportunities to kind of get them to a higher price point to explain the new technology or a bigger product because typically it has to fit the cutout.

Speaker Change: The other side of it, the discretionary demand, that is the really weak side, even weaker than you would see right now in the overall industry numbers, quite a bit weaker.

Speaker Change: The discretionary side comes with fundamental remodel or existing home sales or new housing. And of course, the moment you have a planned kitchen, which is designed, you have much, much, much bigger mix opportunities. And that's the element which has really changed versus the beginning of a year assumption.

Operator: And of course, the moment you have a planned kitchen which is designed, you have much, much, much bigger mixing opportunities. And that's the element which has really changed versus the beginning of the years. Your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is open.

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

Operator: Hi, thanks for taking my question. As a follow-up on North America, Marc, can you talk about the competitive response you've seen so far? Because I completely understand your point on, and it looks like, you know, that competitor and maybe one of your retailers have talked about promotional activity, maybe staying stable at heightened levels. So, just give us a little more color on what you're seeing. Are people following your actions, and how does that inform your set-in-half implied guide?

Michael Glaser Dahl: All right, thanks for taking my question. A follow-up on North America. Marc, can you talk to the competitive response you've seen so far? Because I completely understand your point on...

Michael Glaser Dahl: And it looks like, you know, that competitor and maybe one of your retailers has talked about promotional activity, maybe staying stable at the heightened levels. So, just give us a little more color on what you're seeing. Are people following your...

Michael Glaser Dahl: Your actions and how does that inform your set-in-half implied guide?

Marc Robert Bitzer: So, Michael, let me just maybe respond to the broader industry and the results of our promotion price program changes. So, the broader industry, as we pointed out, and I think some of you also reported in your own analyst report, there's been more noise than usual in the reported industry data. As you know, we were not exactly representing the industry data in Q1, and also in Q2, we have a slightly different picture.

Speaker Change: So, Michael, let me just maybe respond to a broader industry and the results of our promotion price program changes.

Michael: So a broader industry, as we pointed out, and I think some of you also reported in your own analyst report.

Speaker Change: There's been more noise than usual in the reported industry data. As you know, we were not exactly representing the industry data in Q1, and also in Q2 we have a slightly different picture. So the year-to-date number, we're pretty confident, is roughly minus 2% on the volume base.

Speaker Change: which by the way, what I've seen on the competitors investor relations communication is very similar. So everybody pretty much points to a down market on unit and probably because of the promotion price environment quite a bit more on the revenue side or on the ASV side.

Marc Robert Bitzer: So, the year-to-date number, we're pretty confident it's roughly minus 2% on a volume basis, which, by the way, what I've seen in the competitors', investor relations communication is very similar. So, everybody pretty much points to a down market on units and, probably because of the promotion price environment, quite a bit more on the revenue side or on the ASV side. We came out with our promotion price program changes

Marc Robert Bitzer: As I said before, we see the full impact, the positive impact of this one starting in our June results. And of course, whenever you come up with these promotional program changes, because you're kind of less promotional, if you want to say so, of course, you expect some volatility in your market share. But frankly, we see that stabilizing towards the end of the quarter. And knowing our product launches, which we're having in Q3 and Q4, we feel very good about our overall market share will be pretty much stable. And also, year-to-date, there's not been so much noise. So honestly, I can't tell you what the competitors do or might do. You've got to ask them.

Speaker Change: We came out with our promotion price program changes.

Speaker Change: Late April , as I said before, we see the full impact, the positive impact of RISPON.

Speaker Change: starting and now doing results. And of course, whenever you you come up with these promotional program changes, because you're kind of less promotional, if you want to say so,

Speaker Change: Of course, you expect some volatility in your market share.

Speaker Change: But frankly, we see that stabilizing towards the end of the quarter.

Speaker Change: And knowing our product launches, which we're having Q3 and Q4, we feel very good about our fully market share will be pretty much stable. And also year-to-date, there's not so much noise.

Speaker Change: Honestly, I can't tell you what the competitors do or might do. You've got to ask them. And, you know, we do what's right for our company. And that is, you know, continue on the course of margin expansion. And pricing is a key element in this one.

Marc Robert Bitzer: And we do what's right for our company, and that is continue on the course of margin expansion. And pricing is a key element. Okay, thanks for that, Marc. And then my second question, maybe just... Taking that and back to the margin bridge in terms of getting from here, I know the price actions only helped half your quarter in 2Q, so there's still half that to come through in 3Q. Can you just help us maybe just bucket out the walk because it's still a pretty steep walk?

Speaker Change: Okay, thanks for that, Marc. And then my second question, maybe just...

Speaker Change: [inaudible]

Speaker Change: 3Q, can you just help us maybe just bucket out the walk because it's still a pretty steep walk. So how much

Operator: So how much is the incremental benefit from the price actions? How much is the incremental benefit from the cost outs? And then what's the remaining delta, and kind of is it bridged to get up to the 9 by 4Q?

Speaker Change: How much is the incremental benefit from the price actions? How much is the incremental benefit from the cost outs? And then what's the remaining delta in the bridge to get up to the nine by 4Q?

James W. Peters: Yeah, so, you know, Mike, and this is Jim. I think the first thing, and you've got the components there, but as you take it, you know, the pricing, obviously, because it's only partially in, you know, it's only partially in the results here in Q2. So, you know, once you get the full run rate coming in in Q3 and Q4, that's obviously a big part of it. And then the cost is the remaining part of this.

Speaker Change: Yeah, so, you know, Mike, I think that, and this is Jim, I think the first thing, and you've got the components there, but as you take it, you know, the pricing obviously, because it's only partially in,

James W. Peters: It's only partially in the results here in Q2, so once you get the full run rate coming in in Q3 and Q4.

James W. Peters: you know that's obviously a big part of it and then the cost is the remaining part of this and you would have heard me say that you know if you look at the cost benefits that we're seeing approximately 60% of that really falls so it's pretty much a pro-rational part of it that falls to the North America bottom line and also those cost benefits are ramping up sequentially here as we commit as we completed a lot of our cost actions here within the second quarter so you don't get the full run rate until you get to the third quarter so I think you can think about those in many cases about equal in terms of the drivers that expand us from you know the six to the nine percent exit rate

James W. Peters: And you would have heard me say that, you know, if you look at the cost benefits that we're seeing, approximately 60% of that really falls. So it's pretty much a prorational part of it that falls to the North American bottom line. And also, those cost benefits are ramping up sequentially here as we commit to and complete a lot of our cost actions here within the second quarter. So you don't get the full run rate until you get to the third quarter. So I think you can think about those in many cases about equal in terms of the drivers that expanded us from, you know, the six to the 9% exit rate. Michael, it's Marc.

Marc Robert Bitzer: There's also one additional element, just echoing Jim's point, which is to keep in mind our very profitable small domestic appliance business has a seasonality which is heavily skewed towards the back half, so that historically would have been sitting in North America and, to some extent, Europe. That is now showing up in the segment results. So obviously, the profit which comes with that heavily skewed business in Q3 and Q4, that also is another element which explains much more. Thank you. Good morning, everyone.

James W. Peters: Like Michael, it's Marc. There's also one additional element, just echoing Jim's point.

Marc Robert Bitzer: Keep in mind, our very profitable small domestic appliance business has a seasonality which is heavily skewed towards the back half. That historically would have been sitting in the North America and to some extent European margin. That is now showing up in the segment results.

James W. Peters: The profit, which comes with that heavily skewed business in Q3 and Q4, but also is another element which explains margin work.

Speaker Change: Your next question comes from a line of Susan Maklari from Goldman Sachs. Your line is open.

Operator: Good morning. My first question is, going back to the realization of the promotional price increase, can you talk a bit about where North America fell in the quarter relative to that down three that you reported for price mix? I know you normally don't give us that level of color, but I think given the shift in there, any additional details would be helpful. And then it seems like, or can you comment on, are we still tracking to that 1% to 2% realization that you had initially targeted?

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

James W. Peters: Money Thingy

Susan Marie Maklari: Good morning. My first question is, you know, going back to the realization of the promotional price increase, can you talk a bit about where North America perhaps fell in the quarter relative to that down three that you reported for price mix? I know you normally don't give us that level of color, but I think given the shift in there, any additional details would be helpful. And then it seems like, or can you comment on, are we still tracking to that 1 to 2 percent realization that you had initially targeted? Does that still seem like a reasonable goal, or has that changed at all given the implementation and the way that this has started to come through?

Operator: Does that still seem like a reasonable goal, or has that changed at all given the implementation and the way that this has started to come through? In terms of a net impact, we're fully on track towards that net impact which we referred to earlier. So we feel very good about what the team has done, and we will remain disciplined on this one. That's what we communicated, and that's what we're seeing. Okay, that's helpful.

Susan Marie Maklari: Yeah, Susan, without getting to the exact details of a North America versus a global number, but both in the year-to-date, call it year-to-date May, negative pricing.

Susan Marie Maklari: North America U.S. was the lion's share and also now of improvement North America is the lion's share. It's heavily driven by the North American market.

Susan Marie Maklari: And, you know, we had significant negative carryover, if you want to say, from a promotion price environment from a backup last year. And we see that fully now turning, and we saw that turning in kind of late May and fully in June . So we feel very good about that.

Susan Marie Maklari: certain sequential pricing trends in North America and by definition that now we're starting Q3 and Q4 will turn into also year-over-year positive benefits.

Susan Marie Maklari: In terms of a net impact, we're fully on track towards that net impact which we referred to earlier. So we feel very good about what the team has done and we will remain disciplined on this one. That's what we communicated and that's what we're seeing.

Operator: And then when you think about the global footprint that you have today, you know, you mentioned that you closed the sale of the Brazilian assets in early July. Can you talk a bit about the cash generation of the business given where these markets are all operating and how you think about them contributing, and perhaps with that, the path to deleveraging over time? Yeah, and Susan. This is Jim.

Speaker Change: Okay, that's helpful. And then when you think about the global footprint that you have today, you know, you mentioned that you closed the sale of the Brazilian assets in early July . Can you talk a bit about the cash generation of the business, given where these markets are all operating, and how you think about them contributing, and perhaps with that, the path to deleveraging over time?

James W. Peters: And I would say, you know, if you really step back and you look at our international businesses right now, what I would say is, you know, we've seen strong margin performance in the first half of the year on both our Asia business and our Latin America business. And so, you know, on a full year basis, both of those will be positive cash generators for us, unlike what we talked about in the past with our EMEA business, which was a cash consumer, but that was more because of continuous investment and restructuring.

James W. Peters: Yeah, and Susan, this is Jim, and I would say, you know, if you really step back and you look at our international businesses right now, what I would say is, you know, you've seen strong margin performance in the first half of the year on, you know, both our Asia business, as well as our Latin America business.

James W. Peters: And so, you know, on a full-year basis, both of those will be positive cash generators for us, unlike what we talked about in the past with our EMEA business that was a cash consumer, but that was more because of continuous investment and restructuring. On the other hand today,

James W. Peters: On the other hand, today, our Asia and our Latin America businesses are actually positive cash generators. They generate enough cash to support their own investments, and they don't require significant restructuring. And if you think about right now, just the growth we're seeing in those markets, that growth is leading to both the higher, you know, margins that we've talked about, but absolute higher cash generation. So they are positive cash generating businesses for us. And really, if you just think about it, the easiest way to take one of those is just take, you know, what they generate from an EBIT perspective, and then tax affects it.

James W. Peters: Our Asia and our Latin America businesses actually are positive cash generators. They generate enough cash to support their own investments. They don't require significant restructuring. And if you think about right now, just the growth we're seeing in those markets.

James W. Peters: That growth is leading to both the higher, you know, margins that we've talked about, but absolute higher cash generation. So they are positive cash generating businesses for us, and really if you just think about it, the easiest way to take one of those is just take

James W. Peters: you know, what they generate from an EBIT perspective, and then tax affected. And that's about what they generate from a free cash flow perspective, you know, on a full year type of basis, they obviously have some seasonality to them with their working capital. But outside of that, there's there's no other significant investments we need to make in them.

James W. Peters: And that's about what they generate from a free cash flow perspective, you know, on a full year type of basis. They obviously have some seasonality to them with their working capital. But outside of that, there's no other significant investments we need to make in them. And maybe just adding, Susan, to your question about the deleveraging, as you've seen before, we did not fundamentally change what we were, in terms of capital allocation, 24. And even though we're kind of far away from giving 25 guidance, that's pretty much a theme which we would also see for 25.

James W. Peters: And maybe just adding, Susan, to your question about the deleveraging, as you've seen before, we did not change fundamentally what we're, in terms of capital allocation, 24. And even though we're kind of far away from giving 25 guidance, that's pretty much a theme that we would also see for 25. What I mean with that is,

Marc Robert Bitzer: And what I mean by that is, in 24, I think we have a very good balance between returning cash to shareholders, large approval, a very attractive dividend, and we pay down half a billion dollars of long-term debt. And again, absent having a board discussion, I would right now assume that in 25, we will have a similar picture, i.e. a moderate reduction in long-term debt, and we want to be very attractive and continue to be very attractive in returning cash to shareholders. Your next question comes from the line of David MacGregor from Longbow Research. Your line is open. Just a good morning, everyone.

James W. Peters: In 2024, I think we have a very good balance between returning cash to shareholders, large approval, very attractive dividend, and we pay down half a billion dollars of long-term debt.

James W. Peters: And again, absent of having a board discussion, but I would right now assume that in 2025 we will have a similar picture, i.e. a moderate reduction of long-term debt. And we want to be very attractive and continue to be very attractive in returning cash to shareholders.

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

Operator: Thanks for taking the questions. I just had a couple of a couple of high level sort of strategic questions here. And, you know, we're talking about 9% margins for the end of the year for North America, but you're also talking about 9% margins on a consolidated basis for 2026. And I guess just given your 2024 guide of 6%, can you just bridge for us, again, it seems like a long putt, but can you just bridge for us how you're thinking about getting to that 9% number using, you know, price mix and that cost? Yes.

David Sutherland MacGregor: Good morning, everyone. Thanks for taking the questions. I just had a couple of high-level sort of strategic questions here. We're talking about 9% margins for the end of the year for North America, but you're also talking about 9% margins on a consolidated basis for 2026.

Speaker Change: And I guess just given your 2024 guide of 6%, can you just bridge for us, again, it seems like a long pot, but can you just bridge for us how you're thinking about getting to that 9% number using price mix, net cost, raw materials?

Marc Robert Bitzer: So, David, I mean, it's obviously too early to yet give you a 25 guidance because you mentioned what you were implying in your question. But I think, you know, there's a couple of fundamental drivers. First of all, you see, if I split it by our BUs, I think the Latin America and our Asia business are actually very well on track. I mean, yes, we expect an upper half a point to a point of margin expansion over the time horizon, yes, but directionally, we're on a good pace. On our small domestic appliance business, it's actually all about growth. I mean, we're operating at 15.5% or 15.5% to 16%, which is a very healthy level. So it is all about growth.

Speaker Change: Yes, so David, I mean it's obviously too early to yet give you a 25 guidance because what you're implying your question, but I think you know, there's a couple fundamental drivers. First of all, you see

Speaker Change: If I split it by our BUs, I think the Latin America and our Asia business are actually very well on track. I mean, yes, we'll be expecting over half a point to a point of margin expansion over time horizon, yes, but directionally we're on a good pace.

Speaker Change: On our small domestic appliance business, it's actually all about growth. I mean, we're operating in 15.5% or 15.5% to 16%, which is a very healthy level.

Marc Robert Bitzer: And frankly, even versus what we shared with you and kind of when we met at investor day, revenue growth is very strong, and with the product introduction, we expect that to continue to be very strong. So the growth that we see in the SDA business and the impact that it has on our overall margin is an important element as we get to 2025 and 2026. But the core of all of that, as you know, will be about North America, the margin turnaround in North America, which, you know, we're doing the right things in pricing, we're doing the right things in cost.

Speaker Change: So it is all about the growth, and frankly, even versus what we shared with you when we met a bit yesterday, that revenue growth is very strong. And with a product introduction, we expect that to continue to be very strong.

Speaker Change: So the growth which we see out of the SDA business and the impact that it has on our overall margin is an important element as we get to 2025 and 2026.

Speaker Change: at the core of all of that.

Speaker Change: And, you know, it will be about North America, the margin turnaround in North America, which, you know, we're doing the right things in pricing. We're doing the right things in cost.

Marc Robert Bitzer: And yes, at one point, we need to also have some support from housing markets. And that will be a key element in how we bridge the gap. But North America is right now, and we are also probably towards next year.

Speaker Change: And yes, at one point, we need to also have some support from the housing market. And that will be a key element in how we bridge. But North America is right now, we are also probably towards next year, we're not looking so much in revenue growth, we're really pushing over margin expansion.

Marc Robert Bitzer: We're not looking so much for revenue growth. We're really pushing for margin expansion, and that is our goal.

James W. Peters: David, and this is Jim, and just to kind of add to what Marc said, if you go back to Investor Day, you know, we really highlighted the biggest move from seven to nine percent was cost. Now the difference between the six and the seven right now is what Marc kind of highlighted earlier, which is that the mix in North America and the discretionary part of the business has been much lower.

Speaker Change: and that is our course.

Speaker Change: Seven to nine percent was cost.

Speaker Change: Now, the difference between the six and the seven right now is what Marc kind of highlighted earlier is that the mix in North America and the discretionary part of the business has been much lower.

James W. Peters: We did assume that it would be slightly better within 2024. I do think you can expect between now and 2026 an improvement that is just to the level that we only assumed in 2024. And so that helps you get from where the starting point was, and it moves. But then the biggest part of this still will be, you know, costs that we intend to continue to take out within our business through simplification over a multi-year period. That's helpful; thank you.

Speaker Change: We did assume that would be slightly, you know, it would be better within 2024.

Speaker Change: I do think you can expect between now and 2026 an improvement that is just to the level that we only assumed in 2024. And so that helps you get from where the starting point was and it moved.

Speaker Change: But then the biggest part of this still will be, you know, costs that we intend to continue to take out within our business through simplification over a multi-year period.

Operator: I guess secondly, you know, there's been talk in the market of a Whirlpool sale. I'm not asking you just to be clear about commenting on market rumors; I'm not asking for that, but also just being mindful that at the right price, everything's for sale. Is there a plausible scenario whereby Whirlpool exits most or all of its core six white goods businesses in North America, Latin America, and Asia and goes forward with small domestic appliances and commercial appliances similar to what you've envisioned in your transformation strategy?

Speaker Change: That's helpful, thank you. I guess secondly, you know, there's been talk in the market of a Whirlpool sale.

Speaker Change: I'm not asking you just to be clear to comment on market rumors, I'm not asking for that, but also just being mindful that at the right price everything's for sale. Is there a plausible scenario whereby Whirlpool exits most or all of its core six white goods business in North America, Latin America and Asia?

Speaker Change: It goes forward with small domestic appliances and commercial appliances, similar to what you've envisioned in your transformation strategy, where the economics of the small domestic appliance business and the commercial appliance business is just so dependent on the white goods business that it would render them inseparable.

Operator: Or are the economics of the small domestic appliance business and the commercial appliance businesses just so dependent on the white goods business that it would render them separate? So, David, that is obviously a question which goes well beyond an earnings call. But first of all, as you rightfully point out, we're not going to comment on any speculation and rumor. We've never done it, and we will not do that going forward.

Speaker Change: So David, that is obviously a question which goes probably well beyond an earnings call, but first of all, you know, as you rightfully point out, we're not going to comment on any speculation and rumor. We've never done it and we will not do that going forward. I think the critical element is

Marc Robert Bitzer: I think the critical element is if you really step back and look at the portfolio transformation which we've done over the last couple of years, be it China, the rest of Europe, or even Bracco, what we have right now is all our businesses, be it Integrator, be it North America, be it Latin America, be it SEA, in their respective segments, we're number one. India may be the exception, but India is just such an attractive growth market.

Speaker Change: If you really step back and look at the portfolio transformation which we've done over the last couple of years, be it the China divestiture of Europe or even in Bracco, what we have right now is all our businesses, be it Integrator, be it North America, be it Latin America,

Speaker Change: Big SEA in their respective segments. We're the number one India may be the exception, but India is just such an attractive growth market. So we have in our portfolio We have now a set of business which I don't think you will find many companies who can claim being number one pretty much everywhere We operate

Marc Robert Bitzer: So in our portfolio, we now have a set of businesses that I don't think you will find many companies who can claim to be number one pretty much everywhere we operate. And that is a very, very good and sustainable base going forward. Right now, we do see, particularly as you think about, for example, Latin America versus North America, there is quite a bit of connection, and there's quite a bit of synergies. There's quite a bit of connection on the brand side between KitchenAid SDA and our KitchenAid majors business. So there is a strong connector among all these elements.

Speaker Change: And that is a very, very good and sustainable base going forward.

Speaker Change: Right now, we do see, particularly if you think about, for example, Latin America versus North America, there is quite a bit of a connection and there's quite a bit of synergies. There's quite a bit of connection on the brand side between KitchenAid SDA and now KitchenAid Majors business.

Speaker Change: So there is a strong connector among all these elements and that's why we right now see we have post-portfolio transformation. We have a very strong core business with a lot of growth opportunities going forward.

Marc Robert Bitzer: And that's why we right now see that we have a post-portfolio transformation; we have a very strong core business with a lot of growth opportunities going forward. Your next question comes from the line of Laura Champine from Loop Capital. Your line is open.

Speaker Change: Your next question comes from the line of Laura Champine from Loop Capital. Your line is open.

Operator: Hi guys, is there any meaningful shift in your mix in the North American business by major appliance category or brand? You know, Laura, what I would say is probably if you look at the shift that we've had in terms of mix, as we talked about with the discretionary sales being lower and going to more of a replacement market, what I'd say is the shift is it's gone away from selling things such as sweets, and we're not seeing as much in terms of at the super premium and maybe at the top of the premium area, because again, we've got a lot more consumers that are coming in as duress purchasers or looking for a replacement.

Laura Allyson Champine: Hi guys, is there any meaningful shift in your mix in the North American business by major appliance category or brand?

Operator: That also naturally drives a little bit more mix to certain products that a consumer can't live without in terms of a short period of time. So, you know, obviously, it'll help you from a refrigeration perspective, but also from a washer perspective, a laundry perspective, where you see that a consumer can wait a little bit longer to replace something such as a dishwasher or a cooking product. So, again, we are seeing some shifts, but it's being driven really by that it's much more of a replacement market right now, which does move the mix down some, and that's just less discretionary.

Speaker Change: You know, Laura, what I would say is probably if you look at the shift that we've had in terms of mix,

Speaker Change: As we talked about with the discretionary sales being lower and going to more of a replacement market, what I'd say is the shift is it's gone away from selling things such as suites.

Speaker Change: and we're not seeing as much in terms of at the super premium and maybe at the top of the premium area because again we've got a lot more consumers that are coming in as duress purchasers or looking for a replacement. That also naturally drives a little bit more mix to certain products that a consumer can't live without in terms of in a short period of time so you know obviously it'll help you from a refrigeration perspective but and also from a

Speaker Change: washer perspective, a laundry perspective, where you see that a consumer can wait a little bit longer to replace something such as a dishwasher or a cooking product. So again, we are seeing some shifts, but it's being driven really by that it's much more of a replacement market right now, which does move the mix down some, and that's just less discretionary.

Marc Robert Bitzer: And then on raw materials, I know you're trying to get raw materials costs back to pre-COVID levels, but I'm also curious about your comments that you had no change in raw materials in the quarter. So when should we start to see improvement there? And that's all for me. Thank you. So Laura, it's Marc. So we basically refer to we didn't see a lot of raw material change versus what we previously assumed.

Speaker Change: Got it. And then on raw materials, I know you're trying to get raw materials cost back to pre-COVID, but I'm also curious about your comments that you had no change in raw materials in the quarter. So when should we start to see improvement there? And that's all for me. Thanks.

Speaker Change: So Laura, it's Marc, so we basically refer to, we didn't see a lot of raw material change versus what we previously assumed. My previous assumption is that on a four-year base it's neither going to be usually negative or usually positive.

Marc Robert Bitzer: My previous assumption was that on a four-year basis, it's neither going to be usually negative or usually positive. So let me give you a little bit more color. As you know, our number one material source or raw material source is steel by a long shot. As a company, depending on where the steel price is, we're buying up to $2 billion of steel. So it's massive.

Speaker Change: Let me give you a little bit more color. As you know, our number one raw material source is steel, by a long shot. As a company, depending on where steel price is, we're buying up to $2 billion of steel, so it's massive.

Marc Robert Bitzer: And yes, versus our assumption, there's not a lot of change now. To give you a little bit more color on this one, we don't buy steel on spot or very rarely in some regions. But in North America, these are larger contractual purchases, which are either on an annual or we're trying to even get to longer contracts. They were largely fixed with some moving parameters, and we didn't see a huge change on this one. Now, you know, right now the... There's a lot of confusion out there between the hot road and the cold road.

Speaker Change: Our assumption, there's not a lot of change now. To give you a little bit more color on this one, we don't buy steel on spot or very rarely in some regions up in the North America. These are larger contractual purchases, which are either on an annual or we're trying to even get to longer contracts.

Speaker Change: They were largely fixed with some moving parameters and we didn't see a huge change on this one. Now, you know, right now the...

Marc Robert Bitzer: On cold road steel, there is now finally some movement in the right direction. It gives us a little bit more benefit in our contractual setup, but it's not massive. Oil and plastics have been pretty stable. However, we saw some negative impact on some other elements like zinc, which is not insignificant for some of our businesses. But overall, versus our original assumptions, it's a wash. Now, that also means we don't have right now on raw materials a significant tailwind.

Speaker Change: And then there's a lot of confusion out there between hot road and cold road.

Speaker Change: On the Cold Roads deal, there is now finally some movement in the right direction, which gives us a little bit more benefit, even in our contractual setup, but it's not massively.

Speaker Change: Oil and plastics have been pretty stable, so we saw some negative impacts on some other elements like zinc, which is not insignificant for some of our businesses. But overall, versus our original assumptions, it's a wash.

Speaker Change: Now, that also means we don't have right now in raw materials a significant tailwind. As you think about 25, it's obviously too early to say. We may get a small tailwind, but I'm not counting on a big one.

Marc Robert Bitzer: As you think about 2025, it's obviously too early to say; we may get a small tailwind, but I'm not counting on it. Your next question comes from the line of Michael Rehaut from J.P. Morgan. Your line is open. Thanks. Good morning, everyone.

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

Operator: I just want to, and I apologize if this sounds similar to prior questions, but just wanted to make sure I'm fully appreciating the different drivers behind the North American margin guidance reduction for the year and, you know, versus 90 days ago. I mean, obviously, you've talked about the fact that discretionary demand has not come back. It's been primarily mixed. At the same time, obviously, it's kind of driven a fairly significant change in the back half outlook.

Michael Jason Rehaut: Thanks. Good morning, everyone.

Michael Jason Rehaut: I just wanted to, and I apologize if this sounds similar to prior questions, but just wanted to make sure I'm fully appreciating the different drivers behind the North American margin guidance reduction for the year.

Speaker Change: You know, versus 90 days ago, I mean, obviously, you've talked about...

Speaker Change: You know the fact that discretionary demand has not come back. It's been primarily mixed

Speaker Change: At the same time, obviously, it's kind of driven a fairly significant change in the back half outlook. So I just want to make sure that we're understanding the drivers of that guidance change, if it's purely the assumptions of mix.

Operator: So just want to make sure that, you know, we're understanding the drivers of that guidance change, you know, if it's purely the assumptions of mix that informs the new guidance of 7% for the year versus 9% before, or if there's any other changes that we should be aware of as it relates to perhaps the pricing backdrop, operational leverage, you have the North American shipment outlook down slightly from before, or if there's Michael, it's Marc.

Speaker Change: that, you know, informs the new guidance of 7% for the year versus 9% before or if there's any other changes that, you know, we should be aware of.

Speaker Change: as it relates to perhaps, you know, the pricing backdrop, you know, operational leverage where, you know, you have the North American shipment outlook down slightly from before or if there's any other, you know, factors to consider there.

Marc Robert Bitzer: Of course, there are always a lot of components, but in very simple terms, compared to the original guidance, the single biggest change is that we originally assumed, like most people, that we would start seeing a housing recovery in 2024, and it's not happening. Okay? That was based on the assumption that we would see interest rate and, therefore, mortgage rate reductions, and that didn't happen. The most visible is actually existing home sales, which, as we have pointed out several times, is the single biggest driver of overall appliance demand. And existing home sales are dropping to now, what was it? 3.89 million units.

Speaker Change: Michael, it's Marc. So let me, of course, there's always a lot of components, but in very simple terms, versus the original guidance.

Michael Jason Rehaut: The single biggest change is we originally assumed, like most people, that we would start seeing a housing recovery in 2024, and it's not happening.

Speaker Change: Okay, that was based on the assumption that we would see interest rate and therefore mortgage rate reductions, and it didn't happen. Most visible is actually existing home sales, which

Speaker Change: as we several times point out is the

Marc Robert Bitzer: Frankly, we did not have that in our original guidance assumption. We would have counted more on a number between 4.5M and 5M, and we're back at it. It's just not happening.

Speaker Change: and the existing home sales dropping to now what was it 3.89 million units. Frankly we did not have that in our original guidance assumption. We would have would have counted more on a number four and a half to five million and back aft.

Marc Robert Bitzer: Now, it will happen at one point, but it's not a 2024 event. So, that's the single biggest driver of a guidance change. Now, as a result of that, yes, you have an overall slight decline in the industry. You have a more negative mix, all of the subsequent effects, but the number one cause is the delay in the housing recovery.

Speaker Change: It's just not happening. Now, it will happen at one point, but it's not a 24 event. So that's the single biggest driver of the...

Speaker Change: of a guidance change. Now, as a result of that, yes, you have an overall slightly decline of the industry, you have a more negative mix, all of the subsequent effects, but the number one cause is the delay of housing recovery.

Marc Robert Bitzer: So your second part of what is the fundamental drive between first half and second half margin in North America, 80% of that change is pricing because we had a huge negative carryover from promotion pricing in the first half. We corrected that with our actions in late April, and it became visible in June. And that explains the vast majority of improvement in the second half versus the first. Okay. All right. Thanks, Marc.

Speaker Change: to the second part of what is the fundamental drive between first half and second half margins in North America.

Speaker Change: 80% of that change is pricing, because we had a huge negative carryover from a promotion pricing in the first half. We corrected that with our actions in late April . They become visible in June , and that explains the vast majority of improvement in the second half versus the first half.

Operator: I appreciate that. Perhaps on a more positive note, you know, the FDA Global Industry Outlook you revised downwards, you know, from 2 to 4% to roughly flat. I think, as you probably earlier mentioned, also impacted by, you know, perhaps reduced discretionary spend versus prior outlook. But you've been able to maintain your margin outlook for the year at 15 and a half percent. And, you know, I'm just curious if the ability to hold the margins is due to the fact that, you know, you're still executing from a sales growth standpoint, and your own sales growth outlooks are similar despite a weaker industry.

Speaker Change: Okay.

Speaker Change: All right, thanks Marc, I appreciate that. I guess the second question, perhaps on a more positive note, the FDA Global Industry Outlook you revised downwards.

Speaker Change: You know, from 2-4% to roughly flat. I think, as you probably earlier mentioned, also impacted by, you know, perhaps reduced...

Speaker Change: You know discretionary spend versus prior outlook, but you've been able to maintain your margin outlook

Speaker Change: for the year at 15.5%.

Speaker Change: You know, I'm just curious if...

Speaker Change: You know, the ability to hold the margins is due to the fact that, you know, you're still executing from a sales growth standpoint, and your own sales growth.

Speaker Change: Outlooks are similar, despite a weaker industry, if there's other drivers that are, you know, allowing you to maintain that margin outlook that you've been able to maybe

Operator: If there are other drivers that are, you know, allowing you to maintain that margin outlook that you've been able to maybe put into gear in a softer market backdrop, but I would just love your take on the ability to hold margins. And, you know, perhaps the first part of the factors that you're just still able to execute and deliver sales growth in line with your prior expectations despite a softer market background.

Speaker Change: put into gear in a softer market backdrop but would just love your take on the ability to hold margins and you know if in fact perhaps

Speaker Change: You know, the first part of the factors that you're just still able to execute and deliver sales growth in line with your prior expectations despite a softer market backdrop.

Operator: Yeah, so Michael, obviously, we like our SDA business and wholeheartedly, you know, it's, [inaudible] Portfolio of strong brands, the KitchenAid brand is probably the diamond. It is a super strong brand in both majors and small domains.

Speaker Change: So Michael, obviously we like our SDA business, wholeheartedly, and you know it's

Speaker Change: It's probably an hour.

Michael Jason Rehaut: Portfolio of strong brands, the KitchenAid brand is is probably the diamond. It is a super strong brand in both majors and small domestics.

Marc Robert Bitzer: On small appliances, when we refer to the industry, to be honest, that industry data has maybe less relevance for SDA business than it has for majors. And that's very simply driven by the SDA market being such a diverse market where you have low-end cheap toasters. And on the other hand, you have $2,000 fully automatic espresso machines.

Speaker Change: on the small domestic appliances.

Speaker Change: When we refer to industry...

Speaker Change: To be honest, that industry data has maybe less relevance for SDA business than it has on majors. And that's very simply driven by the SDA market is such a diverse market where you have low-end cheap posters. And on the other hand, you have $2,000 fully automatic espresso machine. So it's a wide spectrum. So that's why I'm

Marc Robert Bitzer: So it's a wide spectrum. So that's why I would say we're a little bit more disconnected from a broader industry trend. I would see the industry trends more as broader consumer confidence in that. But I think what we demonstrate with the SDA business is not only Stamix, which is just our evergreen strong product, but you bring meaningful innovation to the market itself. And, you know, it's kind of the fully automatic espresso maker which we launched is selling between $1,400 and $1,900. So it's not cheap by any definition, but you bring good innovation, and it has a consumer rating of 4.8 itself. Same thing on the rising grain cooker, which I know is a super small segment.

Speaker Change: I would say we're a little bit more disconnected from a broader industry trend. I would see the industry trends more as broader consumer confidence in that segment.

Speaker Change: But I think what we demonstrate with the SDA business, it's not only the Stamix, which is just our evergreen, strong product, but you bring meaningful innovation to the market itself. And, you know, it's kind of...

Speaker Change: The fully automatic espresso maker which we launched is selling between $1,400 and $1,900, so it's not cheap by any definition, but you bring good innovation and it has a consumer rating of 4.8 itself.

Marc Robert Bitzer: You bring meaningful innovation to the market itself. And that's why I think that demonstrates our ability to somewhat disconnect ourselves from a broader, call it sentiment, SDA market. You have a strong brand, you bring straight good innovation, coupled with great quality itself. And the margin run rate, and it was probably in between the lines, we actually invested a lot more in marketing for KitchenAid SDA. Despite that, we have a margin expansion, and we see the same theme also containing a proper backhatch.

Marc Robert Bitzer: Same thing on the rice and grain cooker, which I know is a super small segment. You bring meaningful innovation to the market itself. And that's why...

Speaker Change: I think that demonstrates our ability to somewhat disconnect ourselves to a broader, call it sentiment, SDA market. You have a strong brand, you bring straight good innovation coupled with great quality itself.

Speaker Change: and the margin run rates.

Speaker Change: and it was probably in between the lines. We actually in Q2, we invested a lot more in marketing for KitchenAid SDA. Despite that, we have a margin expansion and we see the same theme also containing a profitable backhatch. So, that is a very strong business.

Marc Robert Bitzer: So that is a very strong business. Honestly, I have zero concerns about their margin. This is all about how much we can grow with this. Your next question comes from the line of Eric Bosshard from Cleveland Research. Your line is open. Thanks. Good morning.

Speaker Change: Honestly, I have zero concerns about my margin. This is all about how much we can grow with business.

Speaker Change: Your next question comes from a line of Eric Bosshard from Cleveland Research. Your line is open.

Operator: Housekeeping question first, just North American revenue. It looks like it's down roughly 7% in the first half, and you've talked about a full year market being flat, progress with price. Does the map then suggest we should be thinking about the second half of North American revenue growing? 3 or 5%. Is that reasonable? Or is there something that, Yes, so Eric, just a directional color.

Eric Sartre: Thanks, good morning. Housekeeping, yeah, housekeeping question first. Just North American revenue...

Eric Sartre: It looks like it's down roughly 7% in the first half, and you've talked about a full year market being flat.

Speaker Change: and progress with price. Does the math then suggest we should be thinking about second half North American revenue growing three or five percent? Is that is that reasonable or is there something that I'm missing?

Marc Robert Bitzer: On our kind of call it mid-single-digit revenue down, there's a big element which is the pricing carryover. And then you have a small unit decline, I would say of a year-to-date down the mid-single-digit. Three quarters of that is pretty much pricing carryover, and promotional, and the rest is unit.

Speaker Change: Yes, so Eric, just a directional color. On our kind of call it mid-single digit revenue down, there's a big element which is the pricing carryover.

Speaker Change: And then you have a small unit decline, I would say, of a year-to-date down with mid-single digit.

Marc Robert Bitzer: So the unit decline is obviously a little bit less than we oversaw in revenue. And the same thing now flips as we look at the second half, because we have a promotional price increase, and we will start getting positive coms compared to last year, and that stabilizes. On the unit side, versus the trend which we have had so far, I wouldn't expect too much of a change. So the difference on the revenue side between the first and second half is coming from the price realization per unit sold.

Speaker Change: Three quarters of that is pretty much pricing, carryover, promotional, and the rest is unit. So the unit...

Marc Robert Bitzer: The decline is obviously a little bit less than we oversaw in revenue.

Speaker Change: And the same thing now flips as we look at the second half because we have the promotion price increase.

Speaker Change: And we will start getting positive comms against last year, and that stabilizes. On the unit side versus the trend we've had so far, I wouldn't expect too much of change. But the difference on the revenue side between first and second half is coming from a price realization per unit sold.

Operator: And then, and then secondly, on market share in North America. You know, there was a comment made about a bit of a greater focus on margin relative to market share. And also comments about full year stable market share. I guess we would love you to talk a little bit about what your strategy and path is on holding or even gaining share in the back half from what looks to maybe be a little bit of dislocation in 2Q.

Speaker Change: And then, and then secondly, on, um...

Speaker Change: Market share in North America, you know, there was a comment made about a bit of a greater focus on margin relative to market share and then also comments about full year stable market share. I guess would just love you to talk a little bit about what your strategy and path is on

Marc Robert Bitzer: And also just to make sure that I'm framing the strategic plan on market share and what you're trying to do. So, Eric, we, as we said before, are planning to hold our market share this year, and we have a high degree of confidence in this one. Now, zooming out a little bit, you know, the fundamental reason why we did all these promotion price change actions was that in a replacement market, if you invest heavily in promotions, you typically don't get the lift because the replacement consumer doesn't wait for the July 4 holiday to get the deal.

Marc Robert Bitzer: So the fundamental economic return you get in promotion investments is just different right now than in any comparable year. So do you expect some volatility in market share in the short term? Yes, of course.

Marc Robert Bitzer: But it's already kind of leveled out, and we feel pretty good about how we exited the market share in June. The real big drive of market share stable is maybe less promotion, but at the same time, we have a strong product pipeline. The products which have been launched now are some major ones. And in North America, we will have an all new front load, vocal front load washer coming for free, et cetera, et cetera.

Marc Robert Bitzer: So we have a strong product pipeline in itself. That's what gives us confidence in our market share being stable. And keep in mind, that does not yet have any positive market impact that would come with a building business. The moment the housing recovers because of our disproportionate strong share on the housing side, of course, you will get an automatic lift in market share. But that's not factored in for 24 hours.

Speaker Change: Not factored in for 24.

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

Rafe Jason Jadrosich: Our next question comes from the line of Ralph <unk> from Bank of America. Your line is open.

Operator: Thanks for taking my question. I just wanted to ask about some of the comments you've made on mix so far. Is there any way you could help us understand the margin difference between the replacement business and then the discretionary business? And then where is the discretionary mix today versus where it's been historically? How depressed is that business?

Rafe Jason Jadrosich: Hi, Good morning, Thanks for taking my question one of your offering.

Rafe Jason Jadrosich: I just wanted to ask about.

Rafe Jason Jadrosich: Some of the comments you've made on on mix. So far is there any way you could help help us understand the different the margin difference between the replacement business and then the discretionary business and then where are where is the discretionary mix today versus where it's been historically how depressed.

Speaker Change: That is that business just so we can get an idea of how much that that's that's pressuring pressuring margins right now.

James W. Peters: Just so we can get an idea of how much that's pressuring margins right now. Yeah, so let me kind of start with your second part of the question, and then we can talk about at least how margin progression kind of goes within our portfolio. But, you know, to your point, typically, replacement is about 50 to 55 percent of our business, and new housing is about 10 to 15 percent. So it kind of leaves about a 30 to 35 percent section which is typically the discretionary.

James W. Peters: And, you know, when you step back now and you look at it, we're at over 60 percent in terms of what replacement is today. And what that's really doing is that it's driving the discretionary to be close to in the mid-mid type of 20s or low 20 percent of what our business is. So that is a pretty significant reduction in terms of shift, even if volumes are relatively flat.

James W. Peters: We've just got such a strong replacement industry, and that is so that is a significant shift within there. Now, as you talk about margins, and we don't really give margin-specific type of information among all our different product categories because there are there's a lot of factors that go into that.

James W. Peters: What I will say is we've always talked about the margin progression that we see within our portfolio and within our portfolio or brands. It starts from value, obviously having lower margins, up to our premium and super premium, which have higher margins. In a down discretionary environment, you are impacted at the super premium and premium level significantly more, and you do see more business in the value. So you've got a shift to a lower, you know, margin in terms of your brand portfolio.

James W. Peters: Also, as you look at your product portfolio, I talked about the type of products that you see a consumer replacing relatively quickly. We've always talked about within our portfolio refrigeration, which is the lowest in terms of margin, very competitive space through laundry and then to more your cooking and dishes. Obviously, I talked earlier that a consumer will replace a refrigerator or washer almost immediately after it breaks.

James W. Peters: So you see that replacement industry driving also towards what are probably lower margin product categories within there, and then the last piece you know that I said is that what you don't get in terms of what you get from existing home sales and remodels is a lot of sweet sales, which then tend to go more towards your premium brands and go towards your premium product mix of cooking and dishes included within there. So while we don't give specific guidance, you can see just based on when you go to more of a replacement industry, whether it's from a brand or product category perspective, it pushes you into lower margin areas. And as discretionary spending comes back or new housing comes back, that's where we see growth in the higher margin areas. Okay, that's a really helpful, helpful color.

Speaker Change: So towards would've probably lower margin product categories within there and then the last piece you know as I said is that that you don't get in terms of what you get from existing home sales and Remodels is a lot of suite sales, which then tend to go more towards your premium brands and go towards your premium product mix of cooking and dish included within there. So while we don't give specific.

Speaker Change: Guidance you can see just based on when you go to more of a replacement industry, whether it's from a brand a product category perspective. It pushes you into the lower margin areas and as the discretionary comes back or new housing comes back that's where we see the growth in the higher margin areas.

Speaker Change: Okay. That's really helpful helpful color.

James W. Peters: And then, Jim, I just wanted to follow up on... So, like, you've been successful in refinancing, you just paid down $500 million, but you are reducing the cash flow out. How do you think about sort of balancing the IG credit rating you have today with capital return to shareholders? And just remind us when the next debt payment you have due is and just how you think about cash flow relative to your maturities and managing the dividend?

Speaker Change: And then Jim I, just I wanted to follow up on.

Speaker Change: Some of the debt.

Speaker Change: Financing.

Speaker Change: You've been because you've been successful in refinancing you just pay down 500 million, but you are reducing the cash flow outlook.

Speaker Change: How do you think about sort of balancing.

Speaker Change: <unk> credit ratings, we have today with capital return to shareholders and just remind us when the next debt payment you have to do is and just how you think about cash flow relative to your maturities.

Speaker Change: And managing the dividend.

James W. Peters: Yeah, so, you know, Rafe, here's what I would say is, you know, we did reduce the cash flow sum for this year. But, we still are confident as we go into next year that we have the $300 million incremental on top of where we are this year that comes just by not having EMEA within the portfolio and the divestiture of EMEA. So when you step back and you look at that, we will have, as usual, some long-term debt coming due in the first quarter, and then we have the remainder of the term loan related to Insincorator that will also come due next year.

Speaker Change: Yeah. So.

Speaker Change: Here's what I would say is is we did reduce the cash flow. Some for this year now we still are confident as we go into next year that we have the $300 million incremental on top of where we are this year that comes just by not having.

Speaker Change: Within the portfolio and the divestiture of EMEA. So when you step back and you look at that we will have as usual a some long term debt coming due in the first quarter and then we have the remainder of the term loan related to in Syncrude or that will also come due next year, we're very confident in terms of our ability to.

James W. Peters: We're very confident in terms of our ability to pay down and refinance whatever we need to do in terms of that as we go into next year, and we don't get into specifics ahead of that, but just saying that that's what we've talked about as we look to next year. We are confident in terms of our ability to handle that, also looking at where that will put us. As we expand margins, you know, part of the whole thing of getting back to the leverage levels and leverage ratios we've talked about, yes, we will continue to focus on returning debt and prioritizing that.

James W. Peters: We'll prioritise the dividend and reducing debt but deprioritize the share buyback. But as we go into next year, that will be the continued priority. But as our EBITDA grows, it will also help us reduce debt and grow EBITDA to get closer to the metrics that we've talked about by 2025 and 2026. So we're very confident with our path to deleveraging, and I would say that, you know, right now, the reduction in cash flow this year is probably only having a small impact on that. All right. I think that marks pretty much the end of our Q&A session. I do appreciate you all joining me.

Marc Robert Bitzer: As you obviously heard today, we're still in a broader macro environment. We're still, and I emphasize this, still in a somewhat negative cycle in North America. You also saw and heard that the rest of the world has already shifted into a much more favorable cycle. But irrespective of this still slightly negative market cycle or macro cycle in North America, we're doing what we said we would be doing. We're successful in our pricing actions.

Marc Robert Bitzer: We're successful in our cost takeout. We're committed to our margin expansion, and that market market environment, which I referred to earlier, will have a one point turn, and that I think sets us up very well for 2025. With all of that in mind, have a wonderful day and talk to you soon. Ladies and gentlemen, that concludes today's conference call. You may now disconnect.