Q1 2025 Fortune Brands Innovations Inc Earnings Call
Fink, Leigh Avsec, David Barry
Speaker Change: Good afternoon everyone and welcome to the Fortune Brand's innovations first quarter earnings call. Hopefully everyone has had the chance to review the earnings release.
Speaker Change: The earnings release and the audio replay this call can be found on the investor section of our SBIN.com website.
Speaker Change: I want to remind everyone that the four-looking statements we make on the call today, either in our prepared remarks or in our associated question and answer session, are based on current expectations and market outlook, and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated.
Speaker Change: The company does not undertake any obligation to update or revise any forward looking statements and accept as required by law.
Speaker Change: Any references to operating profit or margin earnings for share or free cash flow on today's call will focus on our results in a before-charges-in-gain spaces unless otherwise specified. Please visit our website for recommendations of these non-GAAP financial measures to the most directly comparable GAAP financial measures.
Speaker Change: With me on the call today are Nick Fink, our chief executive officer, and Dave Barry, our former chief financial officer and current president of security and connected products.
Speaker Change: Kurt is a seasoned IR professional and joins us from Pactive Evergreen where he worked alongside John .
Speaker Change: I will continue to be involved in investor relations as part of my role as head of external affairs and chief of staff just in a different capacity. I am looking forward to working with Kurt to ensure a seamless transition.
Speaker Change: In addition to giving an overview of our expectations around the impact of tariffs, we'll provide some color into the areas where we believe we have opportunities to outperform and grow share.
Speaker Change: Then, Dave will review our financial results and assumptions and give more information on tariffs on mitigation efforts and our balance sheet.
Speaker Change: I would like to take a moment to thank Dave and extend my heartfelt gratitude for his partnership, his RCFO. Now as he fully transitions to his new role of president, security and connected products, I'm excited for how he will accelerate our success with that portfolio.
Speaker Change: I'm also pleased to have Fortune Brand's new CFO , John Vosht, join us for Q&A today.
Speaker Change: John's level of experience is a successful public company CFO is outstanding and he's quickly learning our business and already providing valuable insights.
Speaker Change: He and David are working closely together to ensure a smooth transition.
Speaker Change: John is one of several recent highly talented key hires that we have made as we prepare to consolidate most of our U.S. office associates into one state-of-the-art campus in Deerfield, Illinois.
Speaker Change: We've been delighted by the quality of talent that we are attracting and now have a world-class leadership team fully in place.
Speaker Change: Additionally, we're pleased to have many of our existing out-of-state associates willing and able to continue their career journeys with S&DR field, with the numbers of associates who have chosen to relocate and remain with the company exceeding benchmarks.
Speaker Change: Overall, I am extremely pleased with our progress as we consolidate our offices into one headquarters campus.
Speaker Change: By establishing an inspiring hub where our associates can effectively collaborate and ideate, we will elevate our execution and expedite our growth potential.
Speaker Change: We anticipate that our first wave of associates will come together at the new campus towards the end of the summer.
These are very dynamic times.
Speaker Change: has demonstrated the capabilities to respond promptly, adapt swiftly, and identify opportunities, even in the face of challenging circumstances.
Speaker Change: such as the initial tear of increases from 2017 to 2019. The COVID-19 pandemic and the subsequent supply chain disruptions.
Speaker Change: Through each of these challenges, our team's execution exceeded our customers' expectations as well as our own, enabling us to capture additional share.
Speaker Change: This proven track record gives me great confidence that we will continue to thrive and deliver exceptional results for our stakeholders.
Speaker Change: Our associates are demonstrating the same urgency and strategic thinking with the current tariff situation from both a supply chain and commercial perspective.
Speaker Change: I'm very grateful to our teams for rising to the challenge presented by the current uncertainty and focusing on the very real opportunities we have right now and delivering for our customers and consumers.
Speaker Change: In response to the uncertainty of the external environment, we have established a focused set of priorities designed to ensure that we can continue to execute our strategy and deliver for customers and consumers.
This includes...
Speaker Change: Mitigating the expected impacts of tariffs by leveraging our strong U.S. footprint.
Investing behind our successful brands and impactful innovation.
Speaker Change: expanding our digital business and driving free cash loads to support our fortress balance sheet.
Speaker Change: By dedicating our resources to these crucial priorities and sustaining strategic investments I have confidence that we will succeed.
Speaker Change: We remain agile in a very rapidly changing environment and have already taken significant actions to mitigate our exposure, to the anticipated impacts of tariffs, and to optimize our competitive positions in the light of our robust U.S. and North American supply chain and operations footprint in leading brand positions.
Speaker Change: Our initial guidance of every six included the impact of the then-announced tariffs and our EPS range assumed that some additional tariffs could be imposed.
Speaker Change: However, because of the uncertainty around how consumer demand will trend throughout the year, we will not be providing detailed full-year financial guidance this quarter.
Speaker Change: Instead, we will be providing a framework that outlines how various volume scenarios may impact our full-year EPS.
Speaker Change: We expect to fully offset the anticipated $200 million of 2025 tariff impact through a combination of supply chain opportunities, cost out activities, and strategic pricing actions across all of our channels and brands.
Speaker Change: Assuming current tariff levels, we expect the full annualized impact of tariffs in 2026 to be around 525 million which we expect to fully mitigate through supply chain actions and other mitigation strategies.
Speaker Change: In addition to our three main mitigation strategies, we have been actively engaged with senior level officials in the Trump administration, key agencies and members of both the House and the Senate to educate them on our story and to find ways to further bolster U.S. manufacturing.
Speaker Change: While we are not planning on any tariff exclusions or exemptions,
Speaker Change: We believe ourselves to be well positioned if there are government actions to support U.S. manufacturers.
Notwithstanding some of the shorter term cost challenges,
Speaker Change: We believe the tariffs and current geopolitical situation are creating some very relevant, short and long-term growth opportunities, and we are working to maximize these opportunities, including leveraging our significant US and North American manufacturing presence.
Speaker Change: We are predominantly a North American-based manufacturer with around 60% of our cogs from the US and 70% from North America.
Speaker Change: We have 15 North American manufacturing and distribution sites, including 12 US sites employing thousands of Americans.
Speaker Change: Since 2017, we have reduced our spend from China by over 60% and by the end of the year we expect our China cogs to be around 10%
Speaker Change: We have already made significant progress on other large supply chain moves which will further reduce our exposure to China.
Speaker Change: Many of our competitors, particularly in our outdoors and security segments.
Speaker Change: Source almost exclusively from China, putting us at a clear and immediate advantage.
Speaker Change: In other parts of our supply chain, we are noting potential trans shipping of Chinese products.
Speaker Change: We are confident these actions will be exposed and stopped leading to further opportunity.
Speaker Change: In the coming months, we expect our advantage supply chain will offer us opportunities to take share in many of our categories.
Beyond our supply chain, we have several other competitive advantages.
We're price leaders.
Speaker Change: And the majority of ourselves are through complex channels which allow us to more effectively possible on price increases, where and as needed.
Speaker Change: We have sophisticated data capabilities, allowing us to take strategic and more surgical pricing actions.
Speaker Change: We've leading brands in spaces where brands, innovation and quality matter, giving us a competitive advantage during periods where consumers are looking for more value.
Speaker Change: Our products are generally smaller ticket items that can enhance the space at a relatively low cost.
Speaker Change: Finally, we make digital products that help solve some of the most pressing challenges facing the world today and can help consumers and commercial customers reduce costs.
and therefore have idiosyncratic demand curves with non-traditional drivers.
Speaker Change: Importantly, they have a fortress balance sheet with strong annual cash flow.
Speaker Change: This robust foundation allows us additional flexibility to navigate challenging external conditions without compromising our long-term strategy of opportunistically deploying capital and paying a reasonable dividend.
Speaker Change: We believe that we are well prepared for any future economic downturns.
Speaker Change: with the ability to generate cash and maintain a strong balance sheet while continuing to invest for the future.
Speaker Change: We have demonstrated that we can deliver attractive decremental margins in the face of material market declines and take various cost out actions if necessary.
Speaker Change: Importantly, while I'll recently announced headquarters consolidation was driven by highly strategic reasons
It also has the expected impact of reducing our S.G.A.
Speaker Change: Additionally, we are now hiring for those roles made available by associates who chose not to relocate.
Speaker Change: and a full control over the pace of hiring with the ability to scale back discretionary re-hiring if external conditions weren't.
Speaker Change: We are many months ahead of other companies that may potentially look to make tough decisions about their workforce in the coming months.
Speaker Change: Turning now to some thoughts on the current housing market and the market for our products.
Speaker Change: We continue to see effects of uncertainty around the economy, weighing on the consumer, and ultimately on our demand.
Speaker Change: The spring-selling season has been slower due to cautious consumer behavior.
in the repair and remodel sector.
Speaker Change: Consumers are similarly hesitant to lay major purchases because of the uncertain environment.
Speaker Change: Larger, more discretionary projects are expected to be more impacted than smaller R&R tusks.
Speaker Change: Despite this, the housing market is still under bolt with significant pent-up demand and historically the housing sector tends to recover first during economic downturns.
Speaker Change: We believe the medium and long-term fundamentals in this space remain strong.
Turning to our first quarter performance
Speaker Change: Our first quarter results reflected a softer market, including inventory reductions across our channels, primarily in water.
Speaker Change: Consumers and customers are showing caution to the external uncertainty.
Speaker Change: Admissed this uncertain backdrop. We delivered margins and EPS in line with our expectations.
Speaker Change: Bales were a billion dollars, down 7% versus the first quarter of 2024, or down 5% organically excluding the impact of China and FX.
Speaker Change: Our results reflected the impact of a soft demand environment, with point of sale excluding China down low single digits and reductions in wholesale inventories.
Speaker Change: Our teams remain focused on our key priorities amidst a volatile environment and delivered margin results in line with our expectations while continuing to invest in a narrow set of long-term strategic initiatives.
Speaker Change: Operating income was $136 million, and an operating margin was 13.1%
Arnees for Share, for 66 cents.
Speaker Change: This past quarter we saw the implementation of several key initiatives.
Speaker Change: We believe the progress that we made on these strategic initiatives will result in long-term value.
Speaker Change: A New Master I Can Century Safe brand campaign launched.
Speaker Change: and we have seen an immediate positive uptick of sales and website traffic.
Speaker Change: Our Lyson perfect aisle rollout accelerated this pause quarter with extremely favorable responses and will bring new energy to this category.
Speaker Change: Our moment brand is stronger than ever, and we were recently recognized as the most trusted brand of faucets for the 10th consecutive year.
Speaker Change: Moan introduced updated, fashionable product suites that are in line with current trends receiving very positive market feedback.
Speaker Change: These products are expected to perform well throughout the year and beyond.
Speaker Change: And as I will detail in a bit, our flow leak detection device continues to have incredible momentum.
Speaker Change: We've sold more flow devices your date than in all of 2024.
Speaker Change: We are pleased with performance of our digital products with over 200,000 device activations in the first quarter.
Speaker Change: Our digital business remains strong and we believe that we are on track to deliver around $300 million in sales in 2025 in this portion of our business.
Speaker Change: Our flow business was especially strong with impressive momentum. We added three new major insurance partnerships in the first quarter, including a recently announced partnership with Liberty Mutual Insurance, one of the largest national insurance companies.
Speaker Change: Flow sales increased by 180% over the first quarter of 2024.
Speaker Change: We also unveiled our first bundled subscription model with very positive feedback on our pricing structure.
Speaker Change: Even before we started marketing this new pricing model, we saw consumer uptake.
Speaker Change: We're confident that our flow business will continue to accelerate even in the current uncertain environment driven by its clear win-win value proposition for both homeowners and insurers.
Speaker Change: These new insurance partnerships, growing consumer awareness of the criticality of this product.
Anitability to protect homes and lower insurance premiums.
is fueling its continued strong momentum.
Speaker Change: Are Yale Lock Businesses Accelerating, with many recent developments in new partnerships?
Speaker Change: This post-corder, Yale expanded into some of the largest retailers with very encouraging initial sales and we introduced new multi-family smart lock solutions.
Speaker Change: In partnership with Google, our new and haunst Yale smart luck with matter roll out later this quarter, replacing the prior Nest Yale luck.
Speaker Change: We recently announced that ADT and Yale have partnered together to introduce the first ever biometric Z-Wave Credential Command Class Lock.
and Industry First Innovation.
Speaker Change: which allows ADT users to unlock and disarm the security system from their door using just their fingerprint.
Speaker Change: And finally, we made important strides with our monster luck connected lockout tag out this bus quarter.
Speaker Change: This Commercial Safety Solution has been adopted at several large-scale customers, including a Zingha manufacturing and Christmas Wakefield.
Speaker Change: Connected like our tag-out is a significant and attractive opportunity for manufacturing companies because it leverages technological advancements.
Speaker Change: to provide superior protection, efficiency, and safety for employees during maintenance and servicing of machinery while reducing workers' compensation claims.
Speaker Change: We continue to expect big things out of this digital business.
Speaker Change: and the other one is David Barry. So, I'm going to be doing a little bit of a presentation on the the the the the the the the the the the the the the the the the the the the the the the
Turning now to our individual business results.
starting with water innovations.
Speaker Change: This segment saw sales decrease by 10% or 7% organically excluding China and FX.
Speaker Change: Our results reflect the softer demand environment, with point of sale excluding China down low single digits.
Speaker Change: as well as inventory destocking in wholesale as our partners prepared for a softening environment.
Speaker Change: Our results also reflect a transition to enhanced pricing discipline in our e-commerce channels, resulting in lower point of sale and shipments in the quarter.
Speaker Change: Within the segment, we saw market outperformance in our house of role business as the luxury consumer remains resilient.
Speaker Change: We're looking forward to the remainder of 2025. This segment will be impacted by tariffs and we cannot accurately predict the demand landscape.
Speaker Change: We are focused on addressing our tariff exposure through sourcing moves, cost out activities and selective pricing actions.
Speaker Change: We believe that our domestic moan operations will provide us with a competitive advantage, particularly against Finnish goods which come directly from China or other tariffed countries.
Speaker Change: In addition, the current geopolitical environment is providing us with opportunities to distinguish our safe and reliable bond products versus inferior and dangerous imposter brains.
Speaker Change: We will focus on achieving above-market sales by targeting areas of the market with significant
Speaker Change: Our strategy includes making careful and selective investments in our key priorities, such as branding, marketing, and digital initiatives.
Speaker Change: I am confident in the ability of our new leadership in our water business to launch another era of market out performance for the story business.
Twenty-trot doors.
Sales decreased 3% on softer retail point of sale.
and wholesale inventory reductions indoors.
partially upset by double digit sales growth in decking.
Speaker Change: We remain laser focused on leveraging our expertise and investing behind our core categories and in those products which we expect will offer the most attractive growth opportunities.
Speaker Change: Outdoors Business has a significant North American manufacturing base, with strong domestic manufacturing presence.
Speaker Change: We expect this advantaged operational footprint. We'll give us a strong competitive advantage.
Speaker Change: Particularly in the case of Firmature, where many of our competitors are sourced directly from China.
Speaker Change: The high tariffs should result in narrowed price differentials, and our North American supply chains should provide more stability of products.
Speaker Change: In addition, we are in the first phase of our anti-dumping lawsuit, where we are seeking to address unfair trade practices of a number of China-sourced fiberglass door products.
Speaker Change: The combination of tariffs and the anti-dumping lawsuit is an opportunity to even further accelerate our expected market outperformance.
Speaker Change: Finally, our security segment sales decreased 4% in the quarter, primarily due to soft point of sale, as consumer confidence decreased, and channel partners took out inventory.
Speaker Change: However, we see opportunity in this business to take share because many of our competitors products come from China and we are accelerating our braining efforts around helping consumers understand the true value of our products, which has already been proven very successfully in our safe business.
Speaker Change: We expect to see some benefits in the second half of the year related to some new product rollouts in both traditional security and our digital locks business.
A Yale Law Business is showing positive momentum.
Speaker Change: As we look to the backhoff of the year, and compagnates disruptions in 2024.
Speaker Change: To recap, as we look across the balance of the year, we are acutely aware of the pressures of the external environment and we'll be executing on a narrow set of clear priorities.
Speaker Change: These priorities include mitigating the expected impact of tariffs, controlling costs.
Speaker Change: Continuing to drive our strong brains in digital portfolio and maintaining her fortress balance sheet.
Speaker Change: We have full confidence in our team's ability to mitigate the expected impact of tariffs through strategic sourcing moves, cost-out activities, and pricing actions.
Speaker Change: While we have less clarity around volume and demand trends, the current situation creates several opportunities to drive market out performance across upward folio.
Speaker Change: Our digital business remains strong with opportunities for growth even in the current environment.
Speaker Change: Our brands are trusted and known for their dependability, safety, and design.
Speaker Change: We have advantaged supply chains across our portfolio with reduced reliance in China which we can leverage to our advantage.
Speaker Change: Finally, we have a world-class leadership team in place and engaged high-performing associates who are energized by external challenges.
Speaker Change: As we have done in the past, we will seek and execute upon opportunities to excel in the current environment.
I will now turn the call over to Dave.
Dave Barry: Thank you. Before I begin, I would like to express my heartfelt gratitude to Nick for his exceptional friendship, leadership, and mentorship during my tenure as CFO .
Dave Barry: As I continue in my new role, the Enterprise Perspective I have gained as a result of my tenure as CFO will be invaluable. And I know all of our stakeholders are in great hands with John .
Speaker Change: As a reminder, my comments will focus on results before charges and gains to best reflect ongoing business performance. Additionally, comparisons will be made against the same period last year unless otherwise noted.
John: As Nick mentioned, in light of the uncertainty around price elasticity and the demand environment, we will not be providing our usual detailed guidance for the year.
and we have suspended our prior financial and market assumptions.
Speaker Change: However, I will provide a framework and range for two different EPS scenarios based on different volume assumptions resulting from potential consumer behavior.
But first, let me start with our first quarter results.
Speaker Change: As Nick highlighted, our team's executed our priorities amidst a very dynamic macro environment in which we saw demand slow from mid-February through the end of the quarter.
and continuing into the second quarter.
Speaker Change: In the first quarter, sales were 1 billion, down 7 percent, and down 5 percent organically excluding China and FX.
Speaker Change: Consolidated operating income was 135.8 million, down 19%. Total company operating margin was 13.1% and earnings per share were 66 cents.
Speaker Change: Our first quarter sales performance was driven by low single digit POS declines and low single digit impact from inventory reductions in wholesale and retail channels as consumers and customers reacted to an uncertain economic environment.
Speaker Change: Beginning with water innovations, sales were 565 million, down 10% and down 7% organically excluding the impact of FX and China, which was as expected down significantly versus 2024.
Speaker Change: Our results reflect POS which was down low single digits excluding China and channel inventory reductions at wholesale and retail, as well as the impact of lower POS and shipments into the e-commerce channel as we transitioned to enhanced pricing discipline.
Speaker Change: Within our water segment, House of Roll continues to outperform the market.
Speaker Change: Water Innovations Operating Income was 113.2 million, a decrease of 20%.
Speaker Change: Operating margin was 20% as expected, reflecting the impact of lower volumes and higher cost inventory moving on to the P&L.
Speaker Change: Turning to Outdoors, sales were 305 million down 3%, driven by low single digit POS declines.
Speaker Change: Looking forward, we expect doors to be a relative beneficiary of the anticipated impact of tariffs.
Speaker Change: particularly in Thermatru, and we expect to see the benefit of the Larson Isle Reset, which is accelerating through the second quarter.
Speaker Change: Segment Operating Margin was in line with our expectation at 10.4%.
Speaker Change: In security, our first quarter sales were 163 million and declined 4% reflecting low single digit POS declines and continued Yale destocking of older product lines ahead of new product line introductions later this year.
Speaker Change: or Safe Products delivered positive POS as the impact of our innovative marketing campaign continues to resonate.
Segment Operating Income was 23.2 million, down 13%.
Speaker Change: and Segment Operating Margin was 14.2% reflecting the impact of lower volumes and continued investment into innovation and brand building.
Speaker Change: As noted, many competitors in this space are sourced from China and we would expect to have an opportunity for us in the near term given the current tariff environment.
Turning to the balance sheet.
Speaker Change: Our balance sheet remains solid with cash of 340 million, net debt of 2.6 billion, and net debt to even that leverage is 2.8 times reflecting a seasonal peak.
Speaker Change: Given the EPS scenarios that I will outline shortly, we expect net debt to EBITDA to be between 2.0 times and 2.5 times at your end.
We have $970 million available on our revolver.
Speaker Change: In the first quarter, we returned over $200 million to shareholders by a combination of share repurchases and dividends, including $175 million of share repurchases in the first quarter.
We have repurchased $225 million of shares the year to date.
Speaker Change: Our first quarter of free cash flow was negative $113 million, reflecting the typical seasonality of our business and in line with our expectations.
Speaker Change: Given the current environment, we are actively managing our expenses in cash flow.
Speaker Change: And after paying our dividend, we will remain returns focused and opportunistic in deploying capital through additional share of purchases in M&A.
Speaker Change: Additionally, we have a head start on expense and cash low management given the timing of the head quarter consolidation project currently underway.
Speaker Change: Before turning to our outlook, let me provide additional detail on our tariff exposure.
Speaker Change: As a reminder, we are predominantly US-based manufacturer with 60% of our cost of goods in North America.
Speaker Change: Our footprint leaves us very well positioned to both service our customers at a high level and take share in this current environment.
Speaker Change: As Nick mentioned, under the current tariffs as of May 5, 2025, we expect unmitigated impact of approximately 200 million in 2025 and 525 million annualized.
Speaker Change: of the 525 million annualized impact. 425 million is related to China and the balance is the rest of the world.
We expect to fully mitigate the in-year and annualized impacts.
Speaker Change: Turning now to our outlook, given the uncertain external market environment, we are not providing our usual detailed financial guidance for 2025. However, I will provide a framework to set a range for our expectations.
Speaker Change: This framework assumes all tariffs remain in effect at the current levels.
Speaker Change: We expect to fully offset the impacts of anticipated tariffs in 2025 through supply chain moves, cost out activity, and strategic pricing actions, with the most meaningful in-year impacts coming from price and cost controls.
Speaker Change: While we have good line of sight to our ability to mitigate tariffs, we cannot predict how the consumer will react and consequently the impact on our volume remains uncertain. To help frame potential outcomes, we are providing new guidance for a full-year 2025 EPS range of $3.70 to $4.20 underpin by two different volume scenarios.
Speaker Change: Both scenarios assume that we fully offset the in-year impact of terrorists through supply chain moves, cost out activities and pricing actions at an average mid-single digit percentage rate across the entire business.
Speaker Change: Given the uncertainty surrounding the consumer in recent data points, suggesting a slowdown.
Our EPS Outlook incorporates two potential outcomes.
No single digit or high single digit volume declines
Speaker Change: In the event we see low single digit volume decline, coupled with the mid single digit price increase from tariffs.
This would equate to EPS of around $4.20.
Speaker Change: In the event we see high single-digit volume declines, coupled with the same mid-single-digit price increases, we expect to see low single-digit revenue declines and operating margin around
This would equate to EPS of around $3.70.
Speaker Change: Regardless of what scenario plays out, the teams are working with agility and urgency executing our supply chain moves, cost-out activities, and pricing strategies.
Speaker Change: We will continue to find win-win solutions with our customers, where our products are more favorably positioned versus our competition.
Speaker Change: In conclusion, while the current external environment remains uncertain and challenging, we have full confidence in our team's ability to navigate these complexities.
Speaker Change: We expect to fully offset the impact of anticipated terrorists in both 2025 and 2026 through supply chain actions, cost out and pricing.
Speaker Change: by focusing on our key priorities, including mitigating the impact of terrorists.
Speaker Change: Concentrating on our successful brands and impactful innovation, expanding our digital business and managing our balance sheet.
We believe we are well positioned to succeed.
Speaker Change: We believe our competitive advantages, such as our North American focus supply chain, strong balance sheet, and leading grants, will enable us to thrive despite the current external conditions.
Speaker Change: We will proactively manage these dynamic periods while actively positioning Fortune Brand's innovations for the future.
Leigh: We'll now pass the call back to Lee to open the call for questions.
Leigh: Thanks, Dave. That concludes our prepared remarks. We will now begin taking a limited number of questions.
Leigh: Since there may be a number of you who would like to ask a question, I will ask that you limit your initial questions to two and then re-enter the queue to ask additional questions. I will now turn the call back over to the operator to begin the Q&A session. Operator, can you open the line for questions? Thank you.
Leigh: If you'd like to ask a question, please press star followed by the number one on your telephone keypad.
Leigh: Information tone will indicate that your question has been added to the queue. To withdraw your question, press the number one. If you're using a speaker phone, please pick up the handset before you're pressing the star keys. Once again, press star, followed by the number one, to ask a question.
Speaker Change: Your first question comes from Phil Ng with Jeffries. Your line is open.
Speaker Change: Hey guys, Dave congrats on the new row and John and Kurt looking forward to working with you guys again.
Speaker Change: I appreciate all the great color. I guess first of all Nick, a question for you, obviously a very dynamic environment. You guys have announced this transformation effort, kind of moved the headquarter and kind of...
Son of the Lair Advancement, how does that kind of progress, and how does that allow you to kind of navigate this dynamic backdrop?
Speaker Change: Well, hey, Paul, I'm happy to give some perspective around that, you know, why don't I start just by putting it in context, at least the way I think about it, I...
You know, I think of this as we're in the-
Speaker Change: The third of three phases around our transformation. If you think about that kind of first phase, we transformed the portfolio. We spun the cabinet's business out, right, Yale, MTECH acquisition. We also did the acquisition around Springwell, so a lot of portfolio transformation kind of phase one.
Speaker Change: Phase 2 was really a transformation in turn operating company, so we could fully leverage our scales.
Speaker Change: particularly for the digital transformation, but also around marketing, supply chain. I think things that you're really starting to see yield dividends, particularly in this dynamic environment, I'm sure we're going to talk about tariffs so that you can see the speed of which we're going to be able to move. And I think a lot of that is tanks, the fact that we are much more of a consolidated and aligned operating company.
Speaker Change: and the third phase is really in a co-location to drive innovation and performance acceleration. And so we're in the midst of that third phase, which I think will get us to the finish line of this transformation effort.
you know
Speaker Change: to date. It's a heavy lift. I won't minimize it. It's a heavy lift, but it's going really well. We now know who is coming along to continue their careers with us.
Speaker Change: amongst the impacted population who isn't and we turned up actually pretty materially better than industry benchmarks we'd suggest and so we're very happy about the talent choosing to relocate to the area and continue their careers with the company.
Speaker Change: For those not continuing, they've been very engaged, and our hiring process is well underway, and I gotta say, you know, maybe...
Speaker Change: Part of this was the timing ended up even better than we thought because we are in a dynamic economic environment.
Speaker Change: that we are seeing interested in joining our company is pretty spectacular and so you know I think we're going to see you know a very very dynamic group join the company and I think you're already seeing that as we fold out the leadership team.
Speaker Change: You know another third part that you know you alluded to here just sort of like in this very dynamic environment that actually you know unintended but perhaps happily gives us a lot of flexibility is. [inaudible]
You know, we're now in the rehiring process.
Speaker Change: and we can control the pace of that rehiring in what is going to be a dynamic and changing economic backdrop. I know a lot of companies out there are thinking about restructuring, are thinking about how to control costs and manage this environment.
You know
We're actually if you if you think about it almost
Sixth Months
Speaker Change: I had that process because of the move, you know people have opted out we're in the rehiring phase we can really control the pace of rehiring right now we're all systems go full steam ahead on critical roles but as we see the economy unfold here we're going to be able to control the pace of that and I think that's just going to give us a lot more flexibility than had we've been at the you know just at the front end of it now [inaudible]
So, you know,
Speaker Change: In some, it is a heavy lift, but I think we're going to land in a really good place, have quarters open.
Fink, Leigh Avsec, David Barry
David Barry: Kim, people on the face as they walk through the doors, this is a company that innovates in the next things. And that's going to be a big part of this. This is about bringing people together so they can ideate, innovate, move foster with more agility and, and perform some better. It's going to be an exciting chapter for our company. [inaudible]
Speaker Change: Super, super, appreciate all the colors. Dave, on the tarot set of things, great colors. If I heard you correctly you're fully expecting an offset the 220 impact this year.
Speaker Change: and then, I guess, on an annualized basis, it's 5.25. So, number one, how should we think about that 5.25 being divvied up by segments where you have exposure?
Speaker Change: and then how much of these mitigate actions you have, whether it's price increase, cost offsets.
Speaker Change: and they kind of help us contextualize when this hits your P&L. There's a lag dynamic. It's a pretty impressive if you're expecting your downside scenarios 378. It's pretty manageable. Just any color be
Speaker Change: Thanks for the kind words of happy to give us more color on tariff. Let me first clean up just the exposure. So it's in your impact was 200.
Annualized with 525 525
Speaker Change: And as we've talked about on prior calls, the teams have anticipated this environment would likely be becoming at us, although it's more extreme. I think we all can imagine a few quarters ago. So there have been work underway to move the supply chain. The supply chain moves are the most impactful lever we will deploy. The supply chain moves are the most impactful lever we will deploy.
Speaker Change: But as you know, they take time, time to implement, but also then longer time to actually impact the PNL and so those are underway. We expect supply chain to be more of a mitigating factor as we move late into 25 and into early 26.
Speaker Change: So in the meantime, you know, are all of our brands, the cross-channels are taking price.
Speaker Change: and I think it's also good to remember that about 65% of our business is...
Speaker Change: through wholesale and or direct to consumer, where we have a better ability to pass through price with ease. And so successful negotiations with customers on price are already more negotiations on going.
Speaker Change: Price and Cocked Out are going to be the two biggest lovers for us this year and feel good about minus sight to delivering that mitigation.
Speaker Change: Joseph, think about impact, you know, I can break it down a little bit, so 525 annualized impact.
Speaker Change: to take about 425 million of that are 80% it's China related.
Balanced as Rest of World 12.
and then looking at segments.
Speaker Change: Water is about 60% of the impact, security 25% Outdoors 15%
Speaker Change: We'll start to see P&L impact from the tariffs in this quarter, late in this quarter but then really ramping your third quarter into fourth quarter and see more than 50% of the in-year impact in the fourth quarter.
Speaker Change: So pricing coming in now will offset here in the next couple quarters to start to ramp as we go through the year and then supply chain actions impacting the PLL late this year into next year. So that's how we're thinking about it. No, I think in hour.
Speaker Change: in our two scenarios, you know, a bit of context around the downside scenario. You know, a high single digit volume decline implies an acceleration in volume declines from where we are year to date.
Speaker Change: So here to date, we've seen volume down low single digit in the first quarter. It's down mid single digit to start the second.
Speaker Change: So it would be an acceleration to get to that 370. I mean, I think we think about it the consumer reaction to what's happening in the external environment remains the biggest unknown for the business. We can control
Speaker Change: Supply Chain, we can control the pricing, our cost down is just what's going to happen to the consumer and that's why we decided to frame our guidance a little bit differently this time and give these two end quotes.
Speaker Change: Okay, appreciate all the great color guys. Thank you so much.
Thank you.
Speaker Change: Your next question comes from John Lovallo with UBS. Your line is open.
Speaker Change: Good evening, guys, and thanks for taking my questions. You know, the first one is on the digital initiative. I mean, there's certainly a lot of focus.
Speaker Change: and excitement internally on that. There's been some good progress with the 200,000 activations in the quarter, the major insurance wins, I think Liberty this quarter. I guess the question is how confident are you in still achieving that 300 million in sales?
Speaker Change: And along the same lines, internally, how do you sort of balance these efforts with continuing to drive the performance in the core business where the market is for better or worse focused?
Speaker Change: Jenna, I'll start a couple thoughts and then you're constantly very lucky that we got the President of the Connected Business on the call here today, so I'll let him...
Speaker Change: really digging and opine. The obviously super excited about the Connect and the Digital Business and the performance has been phenomenal. We talk a lot about flow, the growth rate in the quarter alone and it's no longer a small business. I try to get this clip.
Speaker Change: Dave touched a lot on and his remarks on the security business, which had some bumpy laps lost here as we really transitioned that for a more kind of mid-cycle start-up to a more consistent or roll-out of new products.
Speaker Change: but we're really seeing some great performance there and some big new partnerships.
Speaker Change: Announce that are really meaningful. You know, the confidence really comes from the fact that
Speaker Change: You know, these drive a lot of value outside of kind of, you know, the normal sort of consumer repair and remodel need whether it be something like flow that actually takes cost out of the system, right? People are going to have to cost out of the system no matter.
Speaker Change: The economy, in fact, the tougher the economy and the more likely they're going to be driven to do that, and flow just.
Speaker Change: Who does that? No, new subscription model that we just started trialing really allows consumers to do that at a very low entry level. And then you look at, you know, on the...
Fink, Leigh Avsec, David Barry
Speaker Change: or the consumer business where you can do things like this arm, your alarm system, with your finger as you enter your door and in the fingerprint, I mean, again, huge value driver to a consumer that just sort of detaches us from...
Speaker Change: The Moon, the Cycle, so a lot of confidence there. You know, the second part of the question which I just want to answer before I hand it today is very important one which is how do you balance these things and obviously you put a lot of focus on a lot of investment.
Speaker Change: on the rest of the business. I do think, you know, coming [inaudible]
Speaker Change: together in our new headquarters, single campus, again, driving industrial design, innovation, commercial discussion, supply chain discussions, performance all in the same place is actually really going to help accentuate.
Speaker Change: That performance where we've got a really big and very important core business.
Speaker Change: that we need to continue to drive. If you look at this year and you'll see it roll out over the course there, you're going to see a lot of innovation.
Around the Corps of Business
Speaker Change: A moment has a lot that's coming to market that we rolled out at ourselves vents in the cave business here. You see the Washington perfect aisle, which will be a total refreshment aisle. Our 1700 stores really, really impactful. And then in security, you know, brand new campaigns by very much like century safe, new industrial design rolling up.
Speaker Change: Much cleaner product segmentation and making much easier for the consumer and the pro to navigate our products in our shelf. So I think you're going to see a lot of focus and excitement around the core and I really think it's going to show up in our share numbers.
John Lovallo: John , a couple things I had, so one, I'm sorry, just one couple things, so...
John Lovallo: Good start to the year and on pace to deliver the full year goals, that's as a performance updated.
John Lovallo: I'd keep it that simple. I'd say the team is actually doing a great job of staying focused on opportunities given the challenges in the current environment elsewhere, and Nick talks through in his prepared remarks we have.
John Lovallo: Find new insurance partners. We've launched Subtrips and based pricing tests. No, additionally, we've qualified another national installation partner for flow.
John Lovallo: and signed up more than 40 regional carriers, which was a new initiative this quarter, to if we focus on national carriers, the past year, now moving into the regional carriers, and really, then adding focus on...
John Lovallo: Driving Sales Activation Through The Agent Base, which is the next level of activation that we're doing to drive sales on flow. And then for Yale, we touched on some of the neat partnerships that are coming, the launch with ADT, Google is selling, you know, we've also won more than $10 million of placements.
John Lovallo: in Retail and E-commerce, which was a focus and a point of synergy from the acquisition to take this brand back through our traditional channels. And we're starting to see that play out and come to fruition. So we're excited about the momentum and on track to deliver our full year estimates.
Speaker Change: You're a large competitor, and I, the POS was down low single digits, I know there's some inventory destalk, but I guess the question would be one, just any more color I'm at e-commerce pricing strategy that you mentioned, and then any kind of relative shareships that may be worth noting in the quarter, please.
Speaker Change: Yeah, I'm happy to give a bit of color on it and Dave to round it out, but you know, as you look at that, you're, you know, your rights, low single digit declines.
Speaker Change: in POS. We did see a fair amount of inventory come up, particularly from our wholesale channel, I think, in preparation for some softness, and we've probably seen that come through about with the boulders, and then as we turn to segment the low single digit.
POS the client to look across
Speaker Change: You know, the feedback from the retailers on our business has actually been very good, particularly of late where they've been telling us that we're doing better than categories. So, you know, I'm going to take that at face value. You know, in the commerce, we did transition and we are transitioning through to a firmer pricing strategy so that we can keep our all channels healthy and competitive, but that is a transition as you do it. I mean, you sort of got to force it at one place. And then it takes a while before you
Speaker Change: We see the uptick in the other channels. We also have to make sure that we have all offerings available, no matter where the consumer is. So we thought that was unnecessary and important.
Speaker Change: The thing to do, we noticed with some new analytics, we've gotten a bit out of whack.
Speaker Change: and now we're transitioning through it, but you know, I acknowledge I think it did cost us some share in e-commerce as we're doing it, but you know, our focus is being a long-term share gainer, and you know, we will do the right things with the help of the brain even if it means, you know, it trade off in a quarter or two.
Speaker Change: You know, Ed John , if you think about the water sales, you know, down 10 organic X-China FX
Speaker Change: Nick talked about that low single digit POS decline, which is really consistent with what we saw across the rest of the portfolio.
Speaker Change: I think where we were surprised as the quarter went along was the inventory drawdown, especially in full sale.
of the Missing Related Impact on the Segment. .
Speaker Change: As we look at weeks of supply with some of our bigger wholesale customers there now, although any point that had been in the past 18 to 24 months and so I think it's a sign potentially of softening single-family new construction.
Volume and multi-family new construction volumes they're seeing, that was probably the biggest surprise up in the corner in the waters night.
Okay, thank you guys.
Speaker Change: Your next question comes from Trevor Allison with Wolf Research. Your line is open.
Hi, good evening. Thanks for taking my questions.
Speaker Change: First, when you talk about reducing your China exposure, I think you said that 10% of cogs by the end of the year, on the 525 million impact in 2026, is that assuming current China exposure or your exposure after you've moved that to 10% of cogs, and then what additional assumptions are there around cost to move products elsewhere and what other countries are you primarily moving that exposure to? [inaudible]
Dave Barry: Yeah, I prefer to say that I'll start with some and the Nick can give some context on the 525 number is unmitigated.
Dave Barry: So before any mitigation action until we'd expect to be able to, that number will come down obviously as we mitigate and will update the subsequent quarters now that that's progressing. Thank you.
Dave Barry: You know, as we looked at supply chain shifts, right, we as we talked about, we have.
Dave Barry: Global footprint. We have significant presence in the US and in other North American sites and so it's leveraging.
who's finding the best cost.
Dave Barry: position for our customers given our footprint and those things take time and there are investments to your point. Most of the investments though are capital and I say reasonable amount of capital to stand up for some assembly lines and production lines in our near-shore facility.
Dave Barry: Artistical Capital Range, and then on the cost, I mean, we're again trying to get to a lowest cost position given our network to be able to continue to be competitive and take share in our market.
Speaker Change: I'll just add for a bit of context, Trevor, you know the-
Speaker Change: from a strategic perspective and a callout to our supply chain team that have just simply been phenomenal. I'm really glad that, you know, I kind of said two parts strategy. One is a bat on our U.S. and North American manufacturing footprint. And so as I said in my remarks at 12 U.S.
Speaker Change: Sites, you know, 15 North American Sites, you know, that was decision that was made. I mean, we've been, we've been thinking about debating this and preparing this, obviously, for several years now. You know, the other leg to the strategy has been a hyper flexible supply chain, and so they've, as we've debated what to do over the last several years, rather than betting on any particular country, we've bet on making our supply chain hyper flexible so that we could move it about.
Speaker Change: As needed and you're seeing that come through now in the speed of some of the mitigation that Dave's discussed. And as we've done in other primes of great dislocation, we really expect that this is going to generate a competitive advantage for us and we're going to press that advantage to service our customers very well.
Speaker Change: Yeah, it makes a lot of sense. And then my second question is somewhat related in just your general approach to China here. I mean, there's some speculation that tariff rates could come down here in the not-too-distant future. You've been moving your supply chain out of China for a while, you're accelerating here. Do you change your approach to moving your supply chain if tariff rates on China specifically were to come down significantly? And then a second question would be on your business actually in China.
Speaker Change: Just given everything that's going on in between the two countries, do you have any different views on that business now that the dynamic seems to be had change between the two countries? Thanks.
[inaudible]
Speaker Change: You know, I just took this quickly. I said, you know, firstly on the moving about, I think the lanes of travel are pretty well set, you know, the mount of...
Fink, Leigh Avsec, David Barry
Speaker Change: At some other point, I'm happy to detail how we do some of that, but there are specific initiatives that we undertake to make it.
Speaker Change: very flexible, but I think that the lanes of travel pretty well set, and we expect it to be short up.
Speaker Change: and to take advantage of our US footprint. You know, the second part is that, you know, a business in China is really at this point, as we said before, China for China. It's a manufacturing in China. It's...
Fink, Leigh Avsec, David Barry
Speaker Change: I'm not going to predict where that economy goes, but I will say what we were expecting to see was certainly the end of the big disruptions and at least a bottoming out of that business. We'll see if this makes it any worse, but I think strategically it kind of stays where it is, which is a closed loop system. It still serves that consumer over there and also gives us exposure to a lot of innovation that we see from suppliers in that market. [inaudible]
Speaker Change: Yeah, I just add, you know, this was since our minors was the last.
Speaker Change: Quarter of a Challenging Cup where we were coughing accelerated completions.
Speaker Change: and so, you know, our sales were down in the 30% range in China as expected, but now expect to see a much more.
Fink, Leigh Avsec, David Barry
Speaker Change: Thank you for all the color and good luck moving forward.
Speaker Change: Your next question comes from Susan Maklari with Goldman Sachs. Your line is open.
Thank you. Good afternoon, everyone. Thanks for digging the questions.
I'm Steve Jarrett.
Speaker Change: Hey Nick, I want to start with your comments around the ability to leverage this environment and the assets that you do have in the US.
Nick Fink: to gain share. Can you talk a bit about how some of those conversations may be starting or areas that you're especially focused on and how we should think about that coming through over time and what it could mean for the upside perhaps to some of those already really meaningful growth targets that you've set across the various segments? [inaudible]
Nick Fink: Yeah, well, we're very focused on it. I would say, you know, never let a disruption go to waste. And we do believe there's a lot of opportunity. You know, I'll start with outdoors. I mean, you look at outdoors business, very vertically integrated, very U.S. manufacturer, and is the leader, particularly the leader in exterior fiberglass doors with manufacturing.
here in the U.S. [inaudible]
Nick Fink: Capacity that we invested in and we've seen a lot of competition over the last few years.
Nick Fink: and frankly some unfair competition has been outlined in our anti-dumping suit from China that, you know, I believe between those two things is going to go away. No matter.
Nick Fink: Weird Terrace Settle, I think that kind of behavior has been called out.
Nick Fink: and people are going to need the volume in the marketplace, and we're one of the few that can provide that volume. So that's an example of a place where we think there's a lot of
Nick Fink: A lot of inventory that was dumped into this market that will have to be chewed through but that's going to happen at some point and I think people are going to be actually looking for those that can provide consistent, reliable volume. Some big opportunity for that business. I'm going to.
Speaker Change: Conor Dave's business for a second in the security business, a lot of competition from Chinese brands, entirely sourced product from China in the securities and safes business. We think there's a big opportunity there with having to work in American manufacturing footprint.
and then finally in water we've
Speaker Change: Maintain a high level of manufacturing here in the U.S. and that's a very complex.
Supply Chain with a lot of moving parts.
Speaker Change: But we see a lot of opportunities outlined in our mitigation to really continue to leverage and grow the U.S. North American footprint that we have to serve customers and ultimately when you look at all this mitigation we're talking about, we're talking about doing it
single
Price Adjustments [inaudible]
on Average Across the Portfolio, which is really...
Speaker Change: Very modest for the amount of dollars we're mitigating and so we think that in and of itself will give us a competitive advantage in addition to being able to supply consistently to any disruptions, have that footprint, the fact that we can do it and what is going to be a fairly modest relative to other price increases is going to give us an opportunity across the portfolio. Thank you.
Speaker Change: Yeah, okay. That's great color. And then, um, turning to security, you know, the margin there really outperformed nicely relative to what we had in our model and appreciating some of the current operating pressures that are coming through. But, you know, any thoughts on some of the cost benefits that you're seeing there and anything on how we should think about the path forward over time is some of those benefits continue to come in. [inaudible]
David Barry.
Speaker Change: No, they talked about with security. Now that Yale is in that segment, the margins can be of a lumpier quarter to quarter just based on.
Speaker Change: and investment patterns within that business and new customer launches. You know, the core masterlock margins remain very strong, right, in that high-teens level. And then as we invest behind Yale, if the margin could fluctuate, it might move a few hundred basis points over the quarter space on our expectations. So nothing that we're seeing that's unusual. We are continuing to invest there and they've highlighted the brand campaigns that we've launched.
Speaker Change: for Century State and Master Lock. You know, it's Master Lock's first campaign in decades and we immediately can watch our website traffic and our brand metrics start to spike in the market. So it's resonating with consumers and we'll continue to lean in that. We're driving some new innovations for all three brands with Master Lock. [inaudible]
Speaker Change: Sutru Safe and Yale, you know, having launched new products or having new products coming later this year. So you're seeing just because I've margin a bit of the investment cycle timing, you know, predominantly for Yale with a very healthy core master lot business underneath. [inaudible]
Speaker Change: I'll just add, to put in some context, that was part of a multi-year plan. We looked at that business and we said the brains and that business were far too solid.
Beautiful, great brains that we had.
Speaker Change: for us not to be investing behind them, but we were not going to be investing behind them and the margins that the business used to have as you recall. You've tracked us for a long time. And so, you know, we undertook even going back to our investor today to do a lot of work to re-platform that whole business to really help the margins so we could start to. Thank you very much.
Speaker Change: Invest Innovation in Branding, and that is just coming to the marketplace now. Right, so it takes a while, but we're really excited that not only did we deliver that in margin journey, but we did it in a way that actually allowed us to reinvest in a significant way behind the business. [inaudible]
Speaker Change: Yeah, okay. Thank you all for the comments and good luck.
Thank you, sir.
Speaker Change: Your next question comes from Michael Rehaut with Fortune Brands. Your line is open.
[inaudible]
Speaker Change: Thanks, Mike Rehaut with JP Morgan, not joining the company. Welcome to the team, I guess. That's right. You didn't realize how much the new headquarters would change personnel, I guess.
I'd love to-
Speaker Change: The $200 million that you expect to hit you this year in Paris, so I know you'd also talked about cost reductions and I'm just curious if those numbers are right because it would seem like...
Fink, Leigh Avsec, David Barry
Speaker Change: The potentiality around volume being impacted by tariffs, that volume is coming in a little bit softer than expected.
Speaker Change: You know, just given that the high end of the impact maybe the high end of the framework is so below your prior guide and so just trying to understand some of the moving pieces there.
Dave Barry: Yeah, Mike Stave, I'll try to put it in the context. Keep on the pricing side.
Dave Barry: I think if you're kind of lower in the range of mid-single digits, you probably get to a more realistic number of where we'll be still in that mid-single digit range and then...
Dave Barry: You know, that as that comes across the year, there'll be different realization levels and timing and so...
Dave Barry: It will flow through the differently that comes across, there will be then cost out and supply chain activities that help that. On the two scenarios, I'd say a couple of things on volume.
Dave Barry: We're all from our prior guidance that the second half has easier comps.
Dave Barry: We exited some low margin product, right, China, Slatton's out. We had the issue with the security distribution center going offline in the fourth quarter. So they're just to get better like the comp.
Dave Barry: perspective in the second half from a volume year-over-year volume comparison. In the next days, we think about the volume scenarios.
with the downtown scenario at 370.
and High Single Digit Volume Decline. We'll be looking.
to the Target Decoramentals on the Volume.
Dave Barry: in the mid-20s or better, and that's where the cost levers that Nick outline come into play. So if we see volume trending that way, we can pull back on hiring and reduce the messy in there, and that would be our target from a volume standpoint.
Okay, that's helpful. And I guess, secondly, just...
Dave Barry: Maybe zeroing a little bit into the upcoming quarter, the second quarter.
Dave Barry: You had said that sales were on track to be down. I believe mid-single digits if I heard that right and any other type of framework around how to think about 2Q either by segment and also from a margin standpoint.
Dave Barry: We are happy to give it a fortune level. I think we see sales down in that low-to-mid single-digit range Mike, as you mentioned, that's roughly in line with quarter trends, we're seeing POS down in that 4% range. It does imply sequential growth.
Dave Barry: You know, we're not, right now seeing inventory moves one way or another really, there isn't a lot of pre-pricing.
Bies, and we don't see any inventory reduction.
Speaker Change: You know, the other unusual item I'd call out in the quarter is around the tax rate and because we are patriating about a hundred million dollars of cash from China as a one-time dividend.
Okay, very good. Thank you very much.
Speaker Change: This concludes the QA session. I'll now turn the call back over to Nick Fink for closing remarks.
Nick Fink: Well, thanks everyone for joining us today, and thank you for your thoughtful questions. So, you never get a choppy environment, but do our very best to put this company on some really good footing, and we see some solid advantages we can take about to jump, and thank you also for welcoming John and Kurt to their first call.
John Lovallo: Well, thanks, Nick. Yeah, I'm really thrilled to be here. I'm joining at a really exciting time with the transformation underway and the move to the new headquarters. You know, I see an enormous opportunity for Fortune Brand's innovations and I look forward to speaking with menu on the call today in the future. Thank you.
Nick Fink: Well, we're delighted you joined and I'll just say we have a lot of interest for John's role. We set a very, very high bar and John cleared it, clearly easily, so we're very excited to have.
Speaker Change: John and Karen on board, and I'll just say as we continue to progress on this ongoing transformation
Speaker Change: John , Dave, Kurt, and Lee are all emblematic of the phenomenal talent that we can both attract and retain in this business. And so, our full confidence that with the very striking we have, we're going to navigate choppy waters ahead and deliver ahead of competitors for our customers.
while seizing the opportunities that destruction inevitably creates.
So that, thank you.
Speaker Change: Thank you for joining today's conference call. You may now disconnect.
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