Q2 2025 Masco Corp Earnings Call

Marissa: Good morning, ladies and gentlemen. Welcome to the Masco Corporation's second quarter 2025 conference call. My name is Marissa, and I will be your operator for today's call. As a reminder, today's conference call is being recorded for replay purposes. To ask a question, please press star, then the number 1 on your telephone keypad. To withdraw your question, please press star followed by 2. I will now turn the call over to Robin Zondervan, Vice President, Investor Relations and FP&A. You may begin.

Good morning, ladies and gentlemen. Welcome to the Masco Corporation second quarter 2025 conference call. My name is Marissa, and I will be your operator for today's call.

As a reminder, today's conference call is being recorded for replay purposes to ask a question. Please press star. Then the number 1 on your telephone keypad to withdraw your question. Please. Press star followed by 2. I will now turn the call over to Robin by President investor relations and fpna. You may begin

Robin Zondervan: Thank you, Operator, and good morning, everyone. Welcome to Masco Corporation's 2025 second quarter conference call. With me today are John Lovallo, President and CEO of Masco, and Rick Westenberg, Masco's Vice President and Chief Financial Officer. Our second quarter earnings release and the presentation slides are available on our website under Investor Relations. Following our remarks, we will open the call for analyst questions. Please limit yourself to one question with one follow-up. If we cannot take your question now, please call me directly at 313-792-5500. Our statements today will include our views about our future performance, which constitute forward-looking statements.

Thank you, operator. And good morning, everyone.

Welcome to Moscow. Corporations Q2 2025 conference call.

With me today are John nudie, president and CEO of Moscow, and Rick westenberg, mascot's vice president and Chief Financial Officer.

Our second quarter, earnings release and the presentation slides are available on our website under investor relations.

Following our remarks, we will open the call for analyst questions.

Please limit yourself to 1, question with 1, follow up.

If we can't take your question now, please call me directly at 313-792-5500.

Robin Zondervan: These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We have described these risks and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission. Our statements will also include non-GAAP financial metrics. Our references to operating profit and earnings per share will be as adjusted unless otherwise noted. We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under Investor Relations. With that, I will now turn the call over to John.

Our statements today will include our views about our future performance, which constitute forward-looking statements.

These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements.

We describe these risks and uncertainties in our risk factors and other disclosures in our form 10K and our form 10q that we filed with the Securities and Exchange Commission.

Our statements will also include non-GAAP financial metrics.

our references to operating profit and earnings per share will be as adjusted unless otherwise noted

We reconcile these adjusted metrics to Gap, in our earnings release and presentation slides, which are available on our website under investor relations.

with that, I will now turn the call over to John

John Lovallo: Thank you, Robin. Good morning, everyone, and thank you for joining us. I want to start today by expressing my gratitude to all of our employees, customers, suppliers, and investors who have been so welcoming and supportive as I officially started my role as President and CEO of Masco as of the beginning of this month. I am humbled by the opportunity to lead such an outstanding company, and I intend to build on Masco's successful history of creating exceptional value for all of our stakeholders. During my two years serving on our board of directors, I came to deeply respect and admire this company. I strongly believe in the power of our brands, the strength of our people, and the opportunities ahead.

Thank you, Robin. Good morning, everyone and thank you for joining us. I want to start today by expressing my gratitude to all of our employees customers suppliers and investors who have been so welcoming and supportive. As I officially started my role as president and CEO of Moscow, as in the beginning of this month,

My two year, serving on our board of directors I came to deeply respect and admire this company I strongly believe in the power of our brands the strength of our people and the opportunities ahead.

John Lovallo: I plan to use my first 100 days to actively engage with internal and external stakeholders to hear their views on Masco, our industry, and further opportunities for our business. I already had the opportunity to kick off my listening tour at the headquarters of Delta Faucet and one of their manufacturing facilities. I returned from that trip energized by the team's passion, shared sense of ownership, and desire for growth. As I visit our other businesses over the next several weeks, I am excited to work closely with our entire Masco team to continue to strengthen our portfolio of brands, enhance consumers' lives, drive profitable growth, and deliver meaningful shareholder value. Now let's turn to our Q2 performance. Please turn to slide five. As I mentioned, I believe in the power of Masco's brands. During the quarter, our innovative products received several recognitions.

I plan to use my first 100 days to actively engage with internal and external stakeholders to hear their views on Moscow, our industry and further opportunities for our business.

I already had the opportunity to kick off my listening tour the headquarters of Delta Faucet, and one of their manufacturing facilities, a return from that trip energized by the team's passion sure sense of ownership.

Xyrem for growth.

As I visit our other businesses over the next several weeks I'm excited to work closely with their entire masco team to continue to strengthen our portfolio of brands enhance consumers' lives drive profitable growth and deliver meaningful shareholder value.

Now, let's turn to our second quarter performance, Please turn to slide five.

As I mentioned I believe in the power of <unk> brands during the quarter, our innovative products received several recognitions.

John Lovallo: Beginning with North America Plumbing, we are very pleased with Delta Faucet's performance in their newest product category of water filtration and a $1.2 billion market for under-counter water filtration products. Delta and Brizo's award-winning reverse osmosis systems are the most certified tankless systems based on leading competitors' National Sanitation Foundation certifications. These products are also the first reverse osmosis systems in the industry to earn the WaterSense certification label from the U.S. Environmental Protection Agency. In our international plumbing business, Hansgrohe continues to demonstrate their leadership in branding and design. This quarter, Hansgrohe won four Red Dot Design Awards, including the Best of the Best Award for their Raindance Live Showering products. In our decorative architectural segment, Behr received the number one rating for interior paint from a leading independent third-party rating agency for the 12th year in a row.

Beginning with North America plumbing, we are very pleased with Delta faucet, <unk> performance and their newest product category of water filtration.

One $2 billion market for under counter water filtration products Delta and Breezes award winning reverse osmosis systems are the most certified Tankless systems based on leading competitors National Sanitation Foundation certifications. These products were also the first reverse osmosis systems in the industry to earn the water sense.

Certification of label from the U S Environmental Protection Agency.

And our international plumbing business hunts Gorilla continues to demonstrate their leadership in branding and design. This quarter. Hence grew one four red Dot design awards, including the best of the Best Award for their rain dance alive Shang products.

In our decorative architectural segment Behr received the number one rating for interior paint from a leading independent third party rating agency for the 12th year in a row.

John Lovallo: This year, we swept the top three spots with our Dynasty, Marquis, and Ultra products. Two of Behr's wood stain products were also rated number one in their respective categories. These top ratings across multiple product categories show the depth and strength of products across our Behr brand. Finally, Behr introduced ChatU, an innovative AI tool designed to make choosing the perfect paint color even easier. I am incredibly proud of the team at Behr for evolving the way we approach color selection, providing our consumers with a more personalized and enhanced experience. I will now shift to discuss our Q2 results and outlook for 2025. Please turn to slide six. We are very pleased with our operating performance in the Q2, particularly as we navigated a dynamic geopolitical and macroeconomic environment.

This year, we swept the top three spots with their dynasty marquee and ultra products.

<unk> would say products. We're also rated number one in their respective categories.

This operating across multiple product categories show, the depth and strength of products across a bear Brad.

Finally bear introduced chassis and innovative AI tool designed to make choosing the perfect pink color, even easier I'm incredibly proud of the team up there for evolving the way we approach color selection, providing our consumers with a more personalized and enhanced experience.

I'll shift to discuss our second quarter results and outlook for 2025, Please turn to slide six.

We are very pleased with our operating performance for the second quarter, particularly as we navigated a dynamic geopolitical and macroeconomic environment. We have worked diligently to address the impacts from additional tariffs through various mitigating actions, including cost savings initiatives ongoing changes to our sourcing footprint and pricing.

John Lovallo: We have worked diligently to address the impacts from additional tariffs through various mitigating actions, including cost savings initiatives, ongoing changes to our sourcing footprint, and pricing where necessary. For the quarter, our net sales decreased 2%. However, in local currency, excluding the Kichler divestiture, sales were in line with the year prior. Gross margins increased 10 basis points to 37.7%. Operating profit grew $14 million to $413 million, and operating profit margin increased 100 basis points to 20.1%. Lastly, we delivered earnings per share growth of 8% in the quarter to $1.30 per share. Turning to our segments, plumbing sales increased 4% in local currency. North America plumbing sales increased 5% in local currency, driven by favorable pricing and volume. Delta Faucet continues to deliver strong performance through consumer-driven demand for their innovative products and industry-leading brands.

Where necessary.

For the quarter, our net sales decreased 2%, however in local currency and excluding the Quechua divestiture sales were in line with the year prior.

Gross margins increased 10 basis points to 37, 7%.

Operating profit grew $14 million to $413 million and operating profit margin increased 100 basis points to 21%.

Lastly, we delivered earnings per share growth of 8% in the quarter to $1 30 per share.

Turning to our segments plumbing sales increased 4% in local currency north.

North American plumbing sales increased 5% in local currency driven by favorable pricing and volume Delta Faucet continues to deliver strong performance through consumer driven demand for our innovative products and industry leading brands.

John Lovallo: International plumbing sales increased 1% in local currency as we continue to see stability in many European markets, while other markets such as China remain challenged. Operating profit for the segment was $276 million, and operating margin increased 110 basis points to 21%. Turning to our decorative architectural segment, sales decreased 12% in the quarter, or 4% excluding our divestiture of Kichler. Overall, paint sales decreased mid-single digits. DIY paint sales decreased high single digits. Demand for DIY paints remains soft across the industry, driven by low existing home turnover and the dampened macroeconomic environment. We expect this pressure to continue throughout the remainder of this year. In ProPaint, sales increased mid-single digits. Our strategic investments in this category and our close partnership with The Home Depot continue to result in growth with ProCustomers.

International plumbing sales increased 1% in local currency as we continue to see stability in many European markets, while other markets such as China remained challenged.

Operating profit for the segment was $276 million and operating margin increased 110 basis points to 21%.

Turning to our decorative architectural segment sales decreased 12% in the quarter or 4%, excluding our divestiture of catch later overall paint sales decreased mid single digits DIY.

DIY paint sales decreased high single digits demand for DIY paint remained soft across the industry driven by low existing home turnover and the dampened macroeconomic environment and we expect this pressure to continue throughout the remainder of this year and propane sales increased mid single digits, our strategic investments in this category and our close.

<unk> shipped with the home depot continue to result in growth with pro customers the strength of our Behr brand and the quality of our products resonates with pro customers and allows us to capitalize on the sizable growth opportunity in the propane market.

John Lovallo: The strength of our Behr brand and the quality of our products resonate with ProCustomers and allow us to capitalize on the sizable growth opportunity in the ProPaint market. Operating profit for the segment was $157 million, and operating margin was 21.3%. We are proud of the work of our teams across our business during the first half of the year as they mobilized quickly to implement various mitigation actions in response to increased tariffs, higher commodity costs, and the macroeconomic uncertainty. Our teams were able to deliver strong financial results through focused execution and responding rapidly to the changing environment. Turning to our expectations for the full year, while some uncertainty surrounding near-term market conditions persists, we are restoring financial guidance for 2025. Rick Westenberg will provide more detail into the components of our guidance.

Operating profit for the segment was $157 million.

And operating margin was 21, 3%.

We are proud of the work of our teams across our business during the first half of the year as they mobilize quickly to implement various mitigation actions in response to increased tariffs higher commodity costs and the macroeconomic uncertainty our teams were able to deliver strong financial results through focused execution and responding rapidly to the changing environment.

Now turning to our expectations for the full year or some uncertainty surrounding near term market conditions persist. We are restoring financial guidance for 2025, Rick will provide more detail into the components of our guidance. However, given the overall macroeconomic environment, we now anticipate that global repair and remodel market to be down low single digits.

John Lovallo: However, given the overall macroeconomic environment, we now anticipate the global repair and remodel market to be down low single digits. We expect to continue to outperform the market. We anticipate our sales to be roughly flat, excluding the impacts of divestiture and currency, with lower volumes largely offset with pricing. Based on our expected operating performance and capital deployment actions, we anticipate adjusted earnings per share for 2025 to be in the range of $3.90 to $4.10 per share. It is important to note that the 2025 estimates we are providing today include the impact from inactive tariffs that are currently in effect, net of our various mitigation actions. These estimates do not include impacts from any potential future tariffs or changes in existing tariffs.

We expect to continue to outperform the market.

We anticipate our sales will be roughly flat, excluding the impacts of divestiture and currency with lower volumes largely offset with pricing.

Based on our expected operating performance and capital deployment actions, we anticipate adjusted earnings per share for 2025 to be in the range of $3 90 to $4 10 per share.

It is important to note that the 2025 estimates we are providing today include the impact from an app to tariffs that are currently in effect net of our various mitigation actions. These estimates do not include impacts from any potential future tariffs or changes in existing tariffs.

John Lovallo: While some market uncertainty remains for the near term, the structural factors for repair and remodel activity over the mid to long term are strong. Namely, the growing age of the housing stock and home equity levels. Nearly 1.7 million more homes will reach the prime remodeling ages of 20 to 39 years old by 2027. Homeowners are staying in their homes longer, and home equity levels are near record highs. We continue to be focused on achieving additional growth, and we are structured to achieve favorable incremental benefits from volume growth due to our available capacity, high levels of productivity, and disciplined cost structures. We believe we are well-positioned to grow faster than our competition, to evolve and lead, while remaining true to the values that have been foundational throughout our nearly 100-year history.

Some market uncertainty remains for the near term the structural factors for our repair and remodel activity over the mid to long term, our strong, namely the growing age of the housing stock home equity levels.

The $1 7 million more homes were reached the primary modeling ages 20 to 39 years old by 2027.

Homeowners are staying in their homes longer and home equity levels are near record highs. We continue to be focused on achieving additional growth and we our structure to achieve favorable incremental benefits from volume growth due to our available capacity at high levels of productivity and disciplined cost structures.

We believe we are well positioned to grow faster than our competition to evolve and lead while remaining true to the values that have been foundational throughout our nearly 100 year history and it's an absolute privilege for me to join such a high performing company, but an iconic brands are part of People's Daily lives and Im honored to help write the next chapter with.

John Lovallo: It is an absolute privilege for me to join such a high-performing company, one of the iconic brands that are part of people's daily lives, and I am honored to help write the next chapter. With that, I will turn the call over to Rick to go over our second quarter results and our 2025 outlook in more detail. Rick?

I'll turn the call over to Rick to go over our second quarter results and our 2025 outlook in more detail Rick. Thank.

Rick Westenberg: Thank you, John. Good morning, everyone. Thank you for joining. As Robin mentioned, my comments today will focus on adjusted performance, excluding the impact of rationalization charges and other one-time items. Turning to slide eight, sales in the second quarter decreased 2%, but were in line with the prior year, excluding the impacts of our divestiture of Kichler and favorable currency. Our divestiture of Kichler in the third quarter of 2024 decreased sales by 3% year over year in the second quarter of 2025, while currency represented a 1% increase in sales. In local currency, North American sales decreased 3% or were in line with the prior year, excluding the divestiture impact. International sales increased 1% in local currency. Gross margin increased 10 basis points in the quarter to 37.7%.

Thank you John and good morning, everyone. Thank you for joining.

As Robin mentioned my comments today will focus on adjusted performance.

Excluding the impact of rationalization charges and other onetime items.

Turning to slide eight.

Sales in the second quarter decreased 2%.

But were in line with the prior year, excluding the impact of our divestiture of kettler and favorable currency.

Our divestiture of catch there in the third quarter of 2024.

Decreased sales by 3% year over year.

Second quarter of 2025.

While currency represented a 1% increase in sales.

Yes.

In local currency North American sales decreased 3% or were in line with the prior year, excluding the divestiture impact.

International sales increased 1% in local currency.

Gross margin increased 10 basis points in the quarter to 37, 7%.

Rick Westenberg: SG&A decreased $27 million, driven by our divestiture and lower employee-related expenses. SG&A as a percent of sales improved 90 basis points to 17.6% in the quarter. Operating profit increased 4% to $413 million in the quarter, and our margin expanded 100 basis points to 20.1%. Operating profit was driven by cost productivity initiatives, favorable SG&A, and a positive price-cost relationship, partially offset by lower volume. Lastly, our EPS increased 8% to $1.30 per share. Turning to slide nine, plumbing sales increased 5% in the second quarter, or 4%, excluding the favorable impact of currency, largely driven by pricing, which increased sales by 3%. In local currency, North American plumbing sales increased 5% in the quarter. This performance was primarily driven by Delta Faucet, which delivered strong growth in both the trade and e-commerce channels. In local currency, international plumbing sales increased 1%, driven by pricing action.

SG&A decreased $27 million driven by our divestiture.

And lower employee related expenses.

SG&A as a percentage of sales improved 90 basis points to 17, 6% in the quarter.

Operating profit increased 4% to $413 million in the quarter.

And our margin expanded 100 basis points to 21%.

Operating profit was driven by cost productivity initiatives.

Favorable SG&A and a positive price cost relationship.

Partially offset by lower volume.

Lastly, our EPS increased 8% to $1 30 per share.

Turning to slide nine plumbing.

Plumbing sales increased 5% in the second quarter.

Or 4%, excluding the favorable impact of currency.

Largely driven by pricing, which increased sales by 3%.

In local currency North American plumbing sales increased 5% in the quarter.

This performance was primarily driven by Delta faucet, which delivered strong growth in both the trade and e-commerce channels.

In local currency international plumbing sales increased 1% driven by pricing actions.

Rick Westenberg: Hansgrohe achieved growth in many of its European markets, including its key market of Germany. This was largely offset by softness in other markets, particularly China. Segment operating profit in the second quarter increased 11% to $276 million, and operating margin expanded 110 basis points to 21%. Operating performance was driven by cost savings initiatives and a favorable price-cost relationship. Turning to slide 10, decorative architectural sales decreased 12% in the second quarter. The divestiture of Kichler reduced sales by 8%. In the quarter, total paint sales decreased mid-single digits due to lower volume. ProPaint sales were up mid-single digits, and DIY paint sales decreased high single digits. Given the continued softness in the overall DIY market and the unfavorable impact of inventory timing this year versus 2024, as discussed on prior earnings calls, we anticipate our total paint sales for the full year to decrease mid-single digits.

Contrary achieved growth in many of its European markets, including its key market of Germany.

This was largely offset by softness in other markets, particularly China.

Segment operating profit in the second quarter increased 11% to $276 million and operating margin expanded 110 basis points to 21%.

Operating performance was driven by cost savings initiatives and.

And a favorable price cost relationship.

Turning to slide 10.

Decorative architectural sales decreased 12% in the second quarter.

The divestiture of catch the reduced sales by 8%.

In the quarter total paint sales decreased mid single digits due to lower volume.

Propane sales were up mid single digits and.

In DIY paint sales decreased high single digits.

Given the continued softness in the overall DIY market and the unfavorable impact of inventory timing this year versus 2024 as discussed on prior earnings calls.

We anticipate our total paint sales for the full year to decrease mid single digits.

Rick Westenberg: We anticipate our full-year DIY paint business to decrease high single digits. In our ProPaint business, we expect sales to increase mid-single digits for the full year. Operating profit in the second quarter was $157 million, impacted by lower volume and an unfavorable price-cost relationship, partially offset by cost savings initiatives. Operating profit margin was 21.3% and was favorably impacted by the divestiture of Kichler. Turning to slide 11, our balance sheet remains strong with gross debt to EBITDA at two times at quarter end. We ended the quarter with $1.3 billion of liquidity, including cash and availability under our revolving credit facility. Working capital was 20.1% of sales at quarter end. Working capital was impacted by tariff-related dynamics, including higher material costs and pricing, increasing our working capital balances.

We anticipate our full year DIY paint business to decreased high single digits.

And our propane business, we expect sales to increase mid single digits for the full year.

Operating profit in the second quarter was $157 million.

<unk> by lower volume and an unfavorable price cost relationship.

Partially offset by cost savings initiatives.

Operating profit margin was 21, 3% and was favorably impacted by the divestiture of <unk>.

Turning to slide 11, our balance sheet remained strong with gross debt to EBITDA at two times at quarter end.

We ended the quarter with $1 3 billion of liquidity, including cash and availability under our revolving credit facility.

Working capital was 21% of sales at quarter end.

Working capital was impacted by tariff related dynamics.

Including higher material cost and pricing increases.

Increasing our working capital balances.

Rick Westenberg: As a result of these tariff-related impacts, we anticipate that our working capital as a percent of sales will be approximately 17.5% at year end. Given our strong cash generation, we returned $167 million to shareholders in the second quarter through dividends and share repurchases, including the repurchase of $101 million in stock. As it relates to capital allocation, we expect to invest approximately $175 million through capital expenditures to pay a dividend of $1.24 per share and currently anticipate deploying at least $450 million towards share repurchases or acquisitions in 2025. Now let's turn to slide 12 and review our outlook for the full year. The market environment remains volatile and uncertain, particularly related to tariffs. That said, there has been some improved visibility since our Q1 earnings. Based on this visibility, we are reinstating our 2025 guidance.

As a result of these tariff related impacts we anticipate that our working capital as a percent of sales will be approximately 17, 5% at year end.

Given our strong cash generation, we returned $167 million to shareholders in the second quarter through.

Through dividends and share repurchases.

Including the repurchase of $101 million in stock.

As it relates to capital allocation, we expect to invest approximately $175 million through capital expenditures.

To pay a dividend of $1 24 per share.

And currently anticipate deploying at least $450 million towards share repurchases or acquisitions in 2025.

Yeah.

Now, let's turn to slide 12, and review our outlook for the full year.

The market environment remains volatile and uncertain, particularly related to tariffs.

That said there has been some improved visibility since our Q1 earnings.

Based on the visibility we are reinstating our 2025 guidance.

Rick Westenberg: Please note that the guidance being provided today includes the impacts of currently enacted tariffs in effect in July. We estimate the total annualized cost impact of these incremental tariffs to be approximately $210 million before mitigation, down from $675 million as of our Q1 earnings call. Of the $210 million annualized cost impact, approximately $140 million relates to the incremental 30% China tariffs, while the remaining $70 million is driven by the 10% global reciprocal tariffs and the 50% tariff on steel and aluminum. Of this approximately $210 million total annual cost, we expect a 2025 in-year impact of approximately $140 million before mitigation, with the impact largely occurring in the second half of the year. Our teams continue to actively work to mitigate these additional costs through a combination of levers. These include cost reduction, continued efforts to change our sourcing footprint, and pricing where necessary.

Please note that the guidance being provided today includes the impact of currently enacted tariffs in effect in July.

We estimate the total annualized cost impact of these incremental tariffs to be approximately $210 million before mitigation.

Down from $675 million as of our Q1 earnings call.

Of the $210 million annualized cost impact approximately $140 million relates to the incremental 30% China tariffs.

While the remaining $70 million is driven by the 10% global reciprocal tariff.

And 50% tariff on steel and aluminum.

Of this approximately $210 million total annual cost.

We expect a 2025 in year impact of approximately $140 million before mitigation.

With the impact largely occurring in the second half of the year.

Our teams continue to actively work to mitigate these additional costs through a combination of levers.

These include cost reduction continue.

Our continued efforts to change our sourcing footprint.

And pricing where necessary.

Rick Westenberg: We anticipate that these mitigation actions will largely offset the direct cost impacts of the currently enacted tariffs in 2025. It is important to note that our guidance does not attempt to estimate the impact of potential future tariffs, including on copper or any changes in existing tariffs. Turning to the overall market, our expectation is that the U.S. and international repair and remodel markets will decrease low single digits in 2025. For Masco, we expect our sales in 2025 to decrease low single digits, impacted by the 2024 divestiture of Kichler, which will reduce sales by approximately 2% year over year. We anticipate currency will have a favorable impact of approximately 1%, similar to the favorable impact experienced in the second quarter. Excluding the impacts of divestiture and currency, we anticipate Masco's overall sales to be roughly flat year over year, with lower volumes largely offset with pricing.

We anticipate that these mitigation actions will largely offset the direct cost impacts of the currently enacted tariffs in 2025.

It is important to note that our guidance does not attempt to estimate the impact of potential future tariffs, including on copper or any changes in existing tariffs.

Turning to the overall market our expectation is that the U S and international repair and remodel markets will decrease low single digits in 2025.

For Masco, we expect our sales in $2025 to decrease low single digits.

Impacted by the 2020 for a divestiture of capsular.

It will reduce sales by approximately 2% year over year.

We anticipate currency will have a favorable impact of approximately 1%.

Similar to the favorable impact experienced in the second quarter.

Excluding the impact of the divestiture and currency, we anticipate masco as overall sales to be roughly flat year over year.

With lower volumes, largely offset with pricing.

Rick Westenberg: We will continue to invest in our business for future growth while also maintaining cost discipline. As a result, we expect SG&A as a percent of sales to be in line with 2024. As always, we will take appropriate actions to address our costs as the year develops based on market conditions. We anticipate total company operating margin to be approximately 17% in 2025, including the impacts of tariffs and lower volumes. As we think about our results in the first half of the year versus our expected second half performance, we anticipate there to be some headwinds in the second half, particularly as it relates to tariff costs and commodity inflation. In addition, we experienced some favorability in certain cost items in the second quarter, such as lower employee-related costs that are not expected to repeat in the second half of the year.

We will continue to invest in our business for future growth, while also maintaining cost discipline.

As a result, we expect SG&A as a percent of sales to be in line with 2024.

As always we will take appropriate actions to address our cost as the year develops based on market conditions.

We anticipate total company operating margin to be approximately 17% in 2025, including the impact of tariffs and lower volume as.

As we think about our results in the first half of the year versus our expected second half performance.

We anticipate there to be some headwinds in the second half, particularly as it relates to tariff costs and commodity inflation.

In addition, we experienced some favorability in certain cost items in the second quarter.

Such as lower employee related costs.

That are not expected to repeat in the second half of the year.

Rick Westenberg: Finally, as a reminder, fourth quarter sales will face a challenging year-over-year comparison due to the favorable inventory timing impact we experienced in our paint business in the fourth quarter of last year. In our plumbing segment, we expect 2025 full-year sales to be up low single digits. We anticipate the full-year plumbing margin will be approximately 18.5%. In our decorative architectural segment, we expect 2025 sales to decrease low double digits or mid-single digits, excluding the impacts of our divestiture. We anticipate the full-year decorative architectural margin to be approximately 18%. Finally, as John mentioned earlier, our 2025 EPS estimate is $3.90 to $4.10 per share. This assumes a $211 million average diluted share count for the year and a 24.5% effective tax rate, which is consistent with our 2024 effective tax rate. With that, I would like to open up the call for questions. Operator?

Finally, as a reminder, fourth quarter sales will face a challenging year over year comparison due to the favorable inventory timing impact we experienced in our paint business in the fourth quarter of last year.

In our plumbing segment, we expect 2025 full year sales to be up low single digits.

We anticipate the full year plumbing margin will be approximately 18, 5%.

In our decorative architectural segment, we expect 2025 sales to decrease low double digits.

We're mid single digits, excluding the impact of our divestiture.

We.

<unk> the full year decorative architectural margin to be approximately 18%.

Finally, as John mentioned earlier, our 2025 EPS estimate is $3 90.

To $4 10 per share.

This assumes a 211 million average diluted share count for the year.

And a 24, 5% effective tax rate.

Which is consistent with our 2024 effective tax rate.

With that I would like to open up the call for questions operator.

Marissa: Thank you. In order to ensure that everyone has a chance to participate, we would like to request that you limit yourself to asking one question and one follow-up question during the Q&A session. To ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, please press star followed by two. Just a moment for your first question. The first question comes from John Lovallo with UBS. Please go ahead.

Thank you.

Order to ensure that everyone has a chance to participate we would like to request that you limit yourself to asking one question and one follow up question. During the Q&A session to ask a question. Please press Star then the number one on your telephone keypad to withdraw your question. Please press star followed by two just a moment for your first question.

<unk>.

The first question comes from John Lovallo with UBS. Please go ahead.

John Lovallo: Good morning, guys. Thanks for taking my questions. The first one is on the expectation to allocate $450 million to repos and acquisitions. I guess maybe two parts here. One, would you expect any acquisitions to be pretty close to core? In other words, not adding an additional leg. More importantly, what does the landscape look like out there? Would you expect the majority of this $450 million to be allocated to share repos this year?

Good morning, guys. Thanks for taking my questions.

First one is on the expectation to allocate $450 million to repos in acquisitions I guess, maybe two parts here. One I mean would you expect any acquisitions to be pretty close to core in other words, not adding an additional leg and then more importantly, I mean, what does the landscape look like out there and would you expect in <unk>.

Juruti of this $4 50 to be allocated to share repurchase this year.

John Lovallo: Hi, John. It's John Lovallo. Maybe I will take the first part of the question and let Rick Westenberg give a little bit more color as well. We feel really good about where we are from a portfolio standpoint. Keith Allman and the management team over the last decade have done a terrific job really being focused on R&R, low ticket items, and we really like where we play today. So, I would say M&A is going to be bolt-on in nature. I will stay committed to the strategy that we have in place. As you know, I have been on the board for the last couple of years, so myself and the rest of the board have been actively involved in the strategy. Again, I believe in it. Maybe over to Rick for a little bit more detail.

Hi, John its John Doody, maybe I'll take the first part of the question I'll, let Rick give a little bit more color as well.

Really good about where we are from a portfolio standpoint, Keith and the management team over the last decade have done a terrific job really being focused on R&R low ticket items, and we really like where we play today. So I would say M&A is gonna be bolt on in nature.

Committed to the strategy that we have in place as you know I've been on the board for the last couple of years, So myself and the rest of the board has been actively involved in the strategy and again I believe in it maybe over to Rick for a bit more detail yeah, John with regards to the $4 50 estimate for the year.

Rick Westenberg: Yeah, John, with regards to the $450 million estimate for the year, we have repurchased about $230 million of shares through the first half of the year. Absent any M&A transaction, you would expect us to deploy the remaining amount to share repurchases.

Repurchased about $230 million of shares through the first half of the year.

And absent any M&A transaction, you would expect us to deploy the remaining amount to share repurchases.

John Lovallo: Okay. Yeah, that is really helpful. Then, in terms of ProPaint, it has been growing really nicely. It is sort of mid-single digits each quarter over, I think, the past five quarters. How are you thinking about the sustainability of this growth as we move through the back half of this year and into next year? John, our ProPaint business has grown nicely. Between 2020 and 2024, it has grown 70% and obviously taken share through that period. We think there is a lot more room to run. As you know, our partner, The Home Depot, is very focused on the pro. We are very committed to working with them and putting strategies in place to continue to grow into the future. So we think it can continue to grow at an outsized rate for us as we move into the future. Okay. Thank you, guys.

Okay. Yeah, that's really helpful. And then in terms of propane it's been it's been growing really nicely at sort of mid single digits each quarter over the past five quarters with how you're sort of thinking about the sustainability of this growth as we move through.

Through the back half of this year and into next year.

Hey, John our propane business has grown nicely between 2000 22024 has grown 70%.

Obviously taken share through that period, we think theres a lot more room to run.

Our partner the home depot is very focused on the pro we're very committed to working with them and putting strategies in place to continue to grow into the future. So we think it can continue to grow outsize rate for us as we move into the future.

Okay. Thank you guys.

Rick Westenberg: Thanks, John.

Thanks, Sean.

Marissa: Your next question comes from Stephen Kim with Evercore ISI. Please go ahead.

Your next question comes from Stephen Kim with Evercore ISI. Please go ahead.

Stephen Kim: Yeah, thanks very much, guys. Appreciate it. Obviously strong results here, particularly domestically. In the plumbing business in particular, I was curious if you felt like there was maybe any pre-buy activity, maybe ahead of some anticipated price increases. I think you said e-commerce was strong. Maybe you could give us a sense for, did you see what you might consider to be some element of pre-buy in some of your channels?

Yes, thanks, very much guys I appreciate it.

Yes.

Obviously strong results here, particularly domestically and I guess in the plumbing business in particular I was curious if you felt like there was maybe any pre buy activity. Maybe ahead of anticipated price increases I think you said E. Commerce was strong maybe you could give us a sense for you.

Did you see what you might consider to be some element of pre buy.

And some of your channels.

Rick Westenberg: Yeah, good morning, Stephen. It is Rick. We did see a little bit of pre-buy on the plumbing side. It was not significant, so we did not call it out in our prepared remarks, but we did see a bit on the plumbing side as it pertains to getting ahead a little bit of the tariff prices. I would say from an overall channel inventory standpoint, channel inventories are reasonably healthy across the plumbing segment. For this time of year, everything looks pretty normal.

Yes, good morning, Stephen It's Rick So we did see a little bit of pre buy really on the plumbing side. It wasn't significant so we didn't call it out in our prepared remarks, but we did see a bit.

On the plumbing side.

As it pertains to getting ahead, a little bit of the tariff prices, but I would say from an overall channel inventory standpoint channel inventories are reasonably healthy.

Really across the four main segments. So for this time of year everything looks pretty pretty normal.

John Lovallo: Right. Kind of like I said here, our Delta business is really firing on all cylinders right now. We really like our brand building. We like the innovation that they're putting into the market. We know they're growing share overall, and they're growing quite a bit of share when it comes to e-commerce. So really like the performance of our biggest plumbing business in North America.

And I'd like to see.

Third our dealt our delta business is really firing on all cylinders right now we really like our brand building, we like the innovation that they are putting into the market. We know theyre growing share overall, and they're growing quite a bit of share when it comes to ecommerce. So really like the performance of our biggest plumbing business in North America.

Stephen Kim: Encouraging. I appreciate that. I wanted to switch gears to paint and particularly DIY. I think you have done a good job laying out the dynamics between DIY and pro. My question is a little bit of a broader one. I am curious about the handoff from baby boomers to millennials. I think you have said in the past that, as baby boomers sort of age out of the DIY kind of age bracket, the backfilling by millennials is not quite sufficient to take up the slack. I was wondering if you could expound on that. In particular, do you have any data or any research which suggests how millennial paint consumption looks compared to baby boomers when they were at a similar age? I am thinking particularly on a gallons basis. I was curious if you have any insight into that.

Encouraging I appreciate that.

I wanted to switch gears to paint and particularly DIY I think you've done a good job laying out the dynamics between DIY and pro so.

So my question is a little bit of a broader one.

I'm curious about the.

The handoff from baby Boomers to millennials I think you've said in the past that.

As baby Boomers age out of the DIY kind of age bracket that the back filling by millennials isn't quite sufficient to take up the slack and so I was wondering if you could expound on that and in particular do you have any data or any research which suggests.

Millennial paint consumption looks compared to baby boomers when they were at a similar age I'm thinking, particularly on a gallon basis I was curious if you have any insight into that.

John Lovallo: Yeah, Stephen, this is John. We won't get into that specific data right now. We can continue to look and talk about it as we move forward. I think the bigger thing that's affecting DIY right now is really existing home sales, which we know is highly correlated to DIY sales. If you look at existing home sales, they're down dramatically, certainly during the COVID period. They're down pretty significantly since the pre-COVID period as well. In fact, existing home sales are at a three-decade low right now. So we would say that's the major driver of the softness in DIY. As consumer confidence improves, as interest rates get a bit better, we'd expect that to pick up. We continue to look hard at millennials. They're forming households now, and their behaviors are certainly different than other generations.

Stephen This is John we won't get into that specific data right. Now we can continue to look and talk about that as we move forward I think the biggest thing thats affecting DIY right now is really existing home sales, which we know is highly correlated to DIY sales and if you look at existing home sales are down dramatically certainly during the Covid period there down.

Pretty significantly since the pre COVID-19 period as well in fact existing home sales are at a three decade low right. Now so we would say thats. The major driver of the softness in DIY and as consumer confidence improves as interest rates get a bit better we'd expect that to pick up we continue to look hard at millennials, they're they're forming households, now in their behaviors are.

Certainly different than other generations at the same time, we are seeing DIY behaviors being exhibited by them, but we'll continue to look that we'll talk about that as we move to the future as well.

John Lovallo: At the same time, we are seeing DIY behaviors being exhibited by them. We'll continue to look at that. We can continue to talk about that as we move into the future as well.

Stephen Kim: Okay. Thanks a lot, guys.

Okay. Thanks, a lot guys.

John Lovallo: Thank you.

Thank you.

Marissa: Your next question comes from Anthony Pettinari with Citi. Please go ahead.

Your next question comes from Anthony Pettinari with Citi. Please go ahead.

Anthony Pettinari: Good morning. In plumbing, given some of the consumer trends that you called out, I am wondering how the brands are performing between good, better, best. So, Peerless, Delta Faucet, and Bristan. For the full-year sales guidance of up low single digits, I am sorry if I missed this, but in terms of price versus volume, what would you expect that would break out as?

Hi, good morning.

In.

Plumbing.

Given some of the consumer trends that you called out I'm wondering how.

The brands are performing between good better best So Peerless Delta Breeze, though.

And then for the full year.

Sales guidance of up low single digits I'm, sorry, if I missed this but in terms of price versus volume.

What would you expect that would breakout is.

John Lovallo: Yeah, so Anthony Pettinari, this is John Lovallo. I'll take the first part and turn it over to Rick Westenberg for the second part. We really like the performance of our brands. When we look at what's holding up best, it's really our upper premium and luxury brands that consumer continues to spend and continues to invest in remodeling. I would say some of our mid-tier brands that we're seeing a bit of trade down, but nothing overly concerning at this point. But our luxury brands and our upper premium is really performing quite strongly right now. Turn it over to Rick Westenberg for the second part.

Yeah. So Anthony this is John I'll take the first part and turn it over to rest of the second part we really like the performance of our brands.

When we look at what's holding up the best it's really our upper premium and luxury brands that consumer continues to spend and continues to invest in.

Remodeling I would say some of our our mid tier brands, we're seeing a bit of trade down but nothing overly concerning at this point, but were luxury brands in our upper premium is really performing quite strong quite strongly right now turn over to Rick for the second part, yes, sure Anthony with regards to our expectations on sales in the plumbing segment. So.

Rick Westenberg: Yeah, sure, Anthony Pettinari. With regards to our expectations on sales in the plumbing segment, we indicated in our guidance that we would expect plumbing sales to be up low single digits. The composition of that is really pricing partially offset by lower volume. We do expect a bit lower volume as we move through the course of the year, but more than offset by pricing.

We had indicated in our guidance that we would expect plumbing sales to be up low single digits. The composition of that is really <unk>.

<unk>, partially offset by lower volumes, so we do expect a bit lower volume.

As we move through the course of the year more than offset by pricing.

Anthony Pettinari: Okay. That's helpful. I'll turn it over.

Okay. That's helpful I'll turn it over.

Marissa: Your next question comes from Michael Rehaut with J.P. Morgan. Please go ahead.

Your next question comes from Michael Rowe with J P. Morgan. Please go ahead.

Michael Rehaut: Thanks. Good morning, everyone. Thanks for taking my questions. I wanted to first try and dive in a little bit to demand trends during Q2. We have heard so far this earning season from other companies that there has been some disruption, probably more on the inventory and retail side as opposed to the end user, perhaps. But I would love to get a sense across both plumbing and decorative how that progressed throughout the quarter, if there were any kind of unusual movements from a channel perspective or from an end customer perspective.

Thanks, Good morning, everyone. Thanks for taking my questions.

Wanted to first try and dive in a little bit too.

Demand trends during the second quarter, we've heard so far this earnings season from.

Other companies that there has been some.

Disruption.

More on the inventory and.

Retail side.

As opposed to the end user perhaps.

But would love to get a sense across both plumbing and decorative.

How that progressed throughout the quarter.

If there were any kind of unusual movements.

From a channel perspective or from an end customer perspective.

John Lovallo: Mike, this is John. I would say in plumbing, we did not see anything all that unusual. Rick mentioned earlier, again, we have seen with tariffs and pricing maybe a little bit of pull forward, but nothing too concerning. Across our different channels, we have seasonal movements and other things, but nothing of surprise there. In paint, it is really the dynamic between DIY and pro. Our DIY business is soft. I think that is consistent across the rest of the industry. We believe that we are holding share in DIY. At the same time, pro is growing nicely for us, and we believe that we absolutely are taking share. We think there is a lot more room to run there. If you look at our overall share levels in pro, they are much lower than they are in DIY.

Yes.

John I would say in plumbing, we didn't see anything all that unusual Rick mentioned earlier.

Again, we've seen with with tariffs and pricing, maybe a little bit of pull forward, but nothing too concerning.

And again across our different channels, we have seasonal movements and other things, but nothing no surprise, there and pay that's really the dynamic between DIY and pro.

And again, our DIY business is soft I think thats consistent across the rest of the industry. We believe that we are holding share in DIY is.

At the same time pro is growing nicely for us and we believe that we absolutely are taking share we think theres a lot more room to run there again, if you look at our over overall share levels in pro.

There are much lower than the R&D iwai. So again, that's an area that we believe that we can continue to focus on with our retail partner the home depot and continue to get some nice those gains as we move forward.

John Lovallo: That is an area that we believe that we can continue to focus on with our retail partner in the Home Depot and continue to get some nice size gains as we move forward.

Michael Rehaut: Great. Thanks for that. Secondly, on the mitigation actions against the tariffs, I was wondering if you can give a little more detail there in terms of unpacking how those actions would fall out. If you are thinking about the $140 million, how that would roughly be offset between supply chain, cost control, and price. If it would be kind of evenly matched in Q3 or Q4, or if there would be a greater hit in Q3 maybe before some of the actions fully come to bear. If I could just throw in a small third question, if you are able to quantify the Q2 non-repeating cost benefits that help the margins in Q2, that would be helpful as well. Thanks.

Great Thanks for that.

Secondly.

On the mitigation actions against the tariff so I was wondering if.

We'll give a little more detail there in terms of may.

Maybe unpacking how those actions.

Fallout is all about $140 million.

How that would roughly be offset between.

Our supply chain cost control and price.

And if it would be kind of.

Evenly matched and <unk> be kind of a greater hitting suites, you'd maybe before some of the actions fully.

Come to bear.

And if I could just throwing us a small third question.

Are you able to quantify the second quarter non repeating cost benefits that helped the margins.

No.

In Q2 that would be helpful as well thanks.

Rick Westenberg: Yeah, sure, Mike. It is Rick. I will answer your third question first. With regards to the cost benefits that we experienced in Q2, just to mention it, our SG&A costs were down favorably about $27 million. About half of that related to the divestiture of Kichler, so those costs going away. The other half of that, roughly speaking, was favorable cost performance. Some timing, but mostly favorable items that we do not expect to repeat in the second half of the year. Hopefully, that dimensions the magnitude of the favorability we saw in cost in Q2.

Yes, sure Mike It's Rick I'll answer your third question first.

With regards to the cost benefits that we experienced in Q2.

So dimension at our SG&A costs were down favorably about $27 million about half of that related to the divestiture of <unk>.

So the those costs going away and then the other half of that roughly speaking what's favorable cost performance, some timing, but mostly favorable items that we don't expect to repeat in the second half of the year. So hopefully that dimension the magnitude of the favorability we saw in cost in Q2.

Rick Westenberg: As it pertains to your second question on the tariff cadence and the mitigation actions, what we have said is, with regards, and it is important to note that we are talking about currently enacted tariffs, so not tariffs that are, you know, may or are expected to go into effect here in August, but tariffs that are in effect here in July. Our in-year impact of those tariffs is approximately $140 million and largely in the second half of the year. In terms of our mitigation, we really are pulling on all three levers. There are many other elements to our mitigation activity, but the three main levers are pricing, cost reductions, and sourcing footprint. Really, the drivers of the mitigation this year are going to be the cost reduction and pricing activities.

As it pertains to your second question on the tariff cadence and the mitigation actions.

We have said is with regards to <unk>. It's important to note that we are talking about currently enacted tariffs are not tariffs at all.

Our EMEA or expected to go into effect here in August but tariffs that are in fact here in July or in your impact of those tariffs is approximately $140 million and largely in the second half of the year.

In terms of our mitigation, we really our point on all three levers and there are many other elements to our mitigation activity, but the three main levers our pricing cost reductions and sourcing footprint really the drivers of the mitigation. This year are going to be the cost reduction and pricing activities as we mentioned before the resource.

Rick Westenberg: As we mentioned before, the resourcing activity that we have been doing, primarily moving imports from China to other markets, is going to be something that we have accelerated, and we continue to build on momentum in that regard. That is largely going to be a 2026 mitigation impact. We are not going to get into the dimension or the split between price and cost. Suffice it to say that they are both significant contributors in terms of our mitigation. I think in terms of cadence during the course of the year, again, mostly largely in the second half of the year, both in terms of tariff impacts as well as our mitigation activities.

We're seeing activity that we've been doing primarily moving.

<unk>.

China to other markets.

Going to be something that we have accelerated and we continue to build on momentum in that regard, but that's largely going to be a 2026 mitigation impact.

Impact.

We're not going to get into the dimension of the split.

Between price and cost suffice it to say that they are both significant contributors in terms of our mitigation I.

I think in terms of cadence during the course of the year again, mostly largely in the second half of the year, both in terms of tariff impacts as well as well as our mitigation activities I think the one thing to note that we will highlight it.

Rick Westenberg: I think the one thing to note that we will highlight, it was not mentioned in the prepared remarks, is, as you may recall, well, first of all, China tariffs, as we all know, are currently sitting at an incremental of 30%. As you recall, for about a month period of time, from about April 10th to May 12th, there were incremental tariffs of 145% imposed on imports from China. Although we did manage our import activity during that window of time, we did still import products into the U.S. during that window of time and were impacted by the increased tariffs at 145%. That really is flowing to our inventory, and that will be an impact that we will experience in the first half of the second half of the year, so really on a Q3 basis.

It wasn't mentioned in the prepared remarks is as you may recall.

Well first of all China tariffs as we all know are currently sitting at an incremental 30%, but as you recall for about one month period of time from about April 10th of May 12, there was incremental tariffs of 145% imposed on imports from China.

Although we did manage.

Our import activity during that window of time, we did still import products in to the U S. During that window of time and were.

Impacted by the increased tariffs at 145% that really is flowing through our inventory and that will be an impact that we'll experience in the first half of the second half of the year. So really in a Q3 basis. So that's the one kind of a timing element that I would call out.

Rick Westenberg: That is the one kind of timing element that I would call out.

Yeah.

Michael Rehaut: Great. Thank you.

Great. Thank you.

Marissa: Your next question comes from Matthew Bouley with Barclays. Please go ahead.

Your next question comes from Matthew Bouley with Barclays. Please go ahead.

John Lovallo: Good morning, everyone. Thanks for taking the question. Welcome, John, to the call. Questions for you. You know, obviously, you have only been in the seat here for just a few weeks. But curious, as you have kind of delved deeper into the company, obviously, you are not new to the company, having been previously on the board. But as you have delved deeper, as you have spoken to the board under the new role, any just kind of high-level thoughts on your early priorities? You know, what might you look to kind of tweak from a strategic perspective? What might be some of the goals and, I guess, milestones we can look for from you? Thank you.

Hi, good morning, everyone. Thanks for taking the question.

Welcome John to the call a questions for you.

Obviously, you've only been in the seat here for just a few weeks.

But curious.

As you've kind of delve deeper into the company. Obviously you are not new to the company having been previously on the board, but as you've dealt deeper as you've spoken to the board under the new role at any any just kind of high level thoughts on your early priorities what might you look to kind of tweak from a strategic perspective.

What might be some of the goals and.

And I guess milestones we can look for from you. Thank you.

John Lovallo: You are welcome. Absolutely. I am spending my first 100 days just really listening and learning. I have been active and getting out with our teams. I was, again, with our Delta team. I am heading to Germany next week. I will be on the West Coast with the Behr and Watkins teams the week after that. I spent time with customers. I really value that. I have met all of our major customers and several of them twice since I was announced, and we will continue to focus on that. What I see and what I continue to hear is that Masco is an incredibly strong company. Again, I knew that being on the board and coming in with teams that really know our business, know how to innovate. We have strong brands, which is great.

Yep, you're welcome absolutely. So im spending my first 100 days, just really listening and learning have been active in getting out with.

With our teams I was again with our Delta team I'm heading to Germany next week I'll be on the West coast of the bear and Watkins teams a week after that.

Time with customers I really value that have been.

All of our major customers and several of them twice since I was announced and we will continue to focus on that and what I see and what I continue to hear is that <unk> was an incredibly strong company and again I knew that being on the board and coming in with teams that really know our business know how to innovate we have strong brands, which is great.

John Lovallo: Our strategy, I think, is spot on with repair, remodel, and low ticket items. I think the one thing, and this will not surprise anyone, likely is that we would like to grow a bit faster on a top line standpoint and to do that profitably. That is what I am really focused on, is understanding what are some levers for us to continue to drive strong margins and profit like we have historically and at the same time accelerate our top line. Some of the opportunities we are talking about internally are leveraging digital a bit more aggressively and things like e-commerce and digital marketing and even strategic revenue management.

Our strategy I think is spot on with repair remodel and low ticket items I think the one thing and this won't surprise anyone.

Is that we would like to grow a bit faster on topline standpoint does it do that profitably. So that's what I'm really focused on is understanding what are some levers for us to continue to drive strong margins and profit like we have historically.

Same time accelerate our top line and some of the opportunities we're talking about internally are leveraging digital.

A bit more aggressively in things like E Commerce, and digital marketing strategic revenue management.

John Lovallo: Again, it is early days, but just know that that is the area that I will be focused on with the rest of the team to continue to do all the great things that we do here at Masco, but probably do it with a bit more top line and profitable top line at that.

But again, it's early days, but just know that that is the area that I will be focused on with the rest of the team to continue to do all the great things that we do here at masco, but probably do it with a bit more topline unprofitable top line of that.

Michael Rehaut: Excellent. Great. We will certainly look forward to the news on that front. Second question, I guess for Rick. You had mentioned that this is on the tariffs, of course. You are not including what may change from a tariff perspective in August, perhaps even tomorrow. If I am thinking about Vietnam, perhaps even the copper announcement yesterday, I am not sure if what you source from a brass components perspective would or would not be included in that. We would just kind of love to hear your thoughts on, as some of these things go into effect, any potential framework, dollar framework you can give us and how you would be thinking about mitigating those new tariffs coming. Thank you.

Excellent great well, we'll certainly look forward to the news on that front second question.

I guess for Rick.

You had mentioned that this is on the tariffs of course so the.

Youre not including what May change from a tariff perspective in August the perhaps even tomorrow, so if I'm thinking about Vietnam.

Perhaps even the copper announcement yesterday I'm not sure.

If what you source from a brass components perspective would or would not be included in that so we're just kind of love to hear your thoughts on as some of these things go into effect any potential framework dollar framework, you can give us and how you would be thinking about mitigating those new.

New tariffs coming thank you.

Rick Westenberg: Yeah, sure, Matt. I appreciate the question. Obviously, it is a very dynamic environment. It remains uncertain, as you mentioned. There was a proclamation yesterday as it pertains to the 232 tariffs on copper that are effective August 1st. What I would say is we are pretty focused on providing our outlook and guidance based off of tariffs that are in place and enacted, and that has informed us with regards to our guidance that we shared here this morning. As it pertains to dimensioning the future tariffs, whether that is copper or in the case of other countries, the reciprocal tariffs changing, it is premature for us to really dimension that. Obviously, we have run different scenarios and the like internally.

Yeah sure, Matt and I. Appreciate the question, obviously, it's a very dynamic environment remains uncertain. As you mentioned there was the proclamation yesterday as it pertains to the 232 tariffs on copper that are effective August one.

I would say is we're pretty focused on providing our outlook and guidance based off of tariffs that are in place and enacted and that's in.

Informed us with regards to our guidance that we shared with you here. This morning as it pertains to dimension in the future tariffs, whether that's copper or in the case of other countries the reciprocal tariffs changing.

It's premature for us to really dimension that obviously, we've run different scenarios.

And the like internally.

Rick Westenberg: But as it pertains to influencing our outlook, at the end of the day, it really will depend on what the ultimate rates are, the timing of those, and some of the specific regulations. So with regards to copper, we know the timing and the rate, but we do not know the composition and the HTS code. So it is premature for us to estimate what the impact is for Masco specifically. It does impact our sourcing. It will also have an impact on commodities. As you have seen lately, the commodity costs have been fairly volatile. At this point, it would be premature for us to share estimates just because we do not have full visibility in terms of the implications of where they may settle. That said, as we have demonstrated in the past, we will be transparent with regards to what those impacts are.

But as it pertains to two.

Influencing our outlook at the end of the day, it really will depend on what the ultimate rates are.

The timing of those and some of the specific regulation, so with regards to copper.

You know the timing and the rate, but we don't know the composition of the HTS codes. So it's premature for us to estimate what the impact is for masco specifically.

It does impact our sourcing it will also have an impact on commodities as you have seen lately the commodity costs have been fairly volatile. So at this point.

It would be premature for us to share estimates just because we don't have full visibility in terms of the implications of where they may settle that said as we've demonstrated in the past we will be transparent.

With regards to what those impacts are once their once they are known and we provide an updated outlook will update.

Rick Westenberg: Once they are known and we provide an updated outlook, we will update the street as it pertains to those impacts. Again, when we have those known and we provide an updated outlook.

As it pertains to those impacts.

When we have those those known and we've provided.

<unk> outlook.

John Lovallo: All right. Understood. Thanks again and good luck, guys.

Alright understood. Thanks, again, and good luck guys.

Rick Westenberg: Thanks, Matt.

Thanks, Matt.

Marissa: Your next question comes from Sam Reid with Wells Fargo. Please go ahead.

Your next question comes from Sam Reed with Wells Fargo. Please go ahead.

Sam Reid: Awesome. Thanks so much, John. John, also welcome aboard. I believe you took anywhere from, I want to say, a 7% to 9% price in May in plumbing based on the letter you sent out to some of your customers, if I was reading it correctly. Just wanted to talk through the reception on that price, perhaps by channel. Give us a sense as to what realization on that pricing could look like, especially as we move into the second half. Then, just digging a little bit deeper, it does sound like plumbing volumes are going to slow a little bit in the second half, if I am listening to your commentary correctly. Is that just a function of elasticity, or are you embedding something, kind of more market-specific, like a slowdown? Just want to unpack those dynamics.

Awesome. Thanks, so much John also welcome aboard.

Believe you took anywhere from I wanted to say, a 7% to 9% price in may and plumbing based on the letter you sent out to some of your customers. If I was reading it correctly I just wanted to talk to the reception on that price, perhaps by channel give us a sense as to what realization on that pricing could look like especially as we move into the second.

<unk>.

And then just thinking a little bit deeper it does sound like plumbing volumes are going to slow a little bit in the second half if I'm listening to your commentary correctly is that just a function of elasticity are you embedding something kind of more market specific like a slowdown so I just wanted to unpack those dynamics.

Rick Westenberg: Hey, Sam. It is Rick. With regards to pricing actions, we are not going to disclose specific pricing actions, certainly not by channel. We provided an outlook as it pertains to pricing impacts on the plumbing segment overall. We indicated it was a low single-digit 3% benefit here in Q2. We are expecting a mid-single-digit benefit for the full year. You can kind of read into that what you can as it pertains to the magnitude of the pricing. It continues to be something that we continue to look at. It is really something that we work with our channel partners on in addition to our cost in sourcing mitigation actions as it pertains to the cadence.

Hey, Sam it's Rick with regards to pricing actions.

We're not going to disclose specific pricing actions certainly not by channel.

We've provided an outlook as it pertains to pricing impacts on plumbing segment overall, and we indicated it was a low single digit 3% benefit here in Q2, and we're expecting a mid single digit benefit for the full year and so you can kind of read into that.

What you can as it pertains to the magnitude of the pricing.

To be something that we continue to look at.

It's really something that we work with our channel partners on in.

In addition to our cost and sourcing.

Mitigation actions.

As it pertains to how that cadence so yes in regards to your second question Sam in terms of cadence.

Michael Rehaut: Yeah, that has.

Rick Westenberg: Yeah, in regards to your second question, Sam, in terms of cadence, I would say that what we are seeing is, as we mentioned before, we did see some pull forward in terms of sales into Q2. It was not significant, but that is somewhat impacting our expectations in the second half of the year. Just as a general matter, we are just seeing some headwinds from a macroeconomic perspective that is impacting the overall industry. So, as I mentioned earlier, we are expecting plumbing volume to be down low single digits, but to be more than offset by pricing. So our expectation is for the plumbing segment overall to be up low single digits for the year.

I would say that what we're seeing as we mentioned before we did see some pull forward in terms of sales into Q2 wasn't significant but that is some somewhat impacting our expectations in the second half of the year.

Just as a general matter, we're just seeing some headwinds from a macroeconomic perspective, that's impacting the overall industry and so as I mentioned earlier, we're expecting.

Volume to be down low single digits, but to be more than offset by pricing. So our expectation is for the plumbing segment overall to be up low single digits for the year.

Michael Rehaut: No, very helpful, Rick. You talked about adjustments to strategic sourcing since a lot of this tariff noise started to enter the narrative. I realize it is kind of early days, but could you contextualize any early wins, perhaps steps you have taken to reorient your footprint to more tariff-favorable geographies like Mexico, for instance? Just to quickly follow up on the commodity piece, can you remind us what the lag typically is between spot and impact to your P&L?

No. It's very helpful. Rick and then you talked about adjustments to strategic sourcing since a lot of this tariff noise started to enter the narrative and I realize its kind of early days, but could you contextualize any early wins, perhaps steps you've taken to reorient your footprint to more tariff favorable.

All geographies like Mexico for instance, and then just to quickly follow up on the commodity piece can you remind us what the lag typically between spot and impact to your P&L.

Rick Westenberg: Sure, Sam. With regards to the, yeah, sorry about that, Sam. With regards to from a sourcing perspective, as we've articulated in the past, we've really focused on reducing our exposure to China. We've effectively reduced our exposure to China by about 45% since 2018, and that continues to be a focus. We're focused overall in terms of building a resilient and cost-effective supply chain. That entails sourcing from multiple countries. Obviously, the tariff environment is dynamic, as we've talked about before. We want to be dynamic as well and flexible. In terms of what we've done, we've largely moved some sourcing out of China to other markets, and we'll continue to do that. We expect to accelerate those efforts this year and to have much more of an impact in terms of next year.

Sure Sam.

So with regards to the.

Yes, sorry about that Sam so with regards to from a sourcing perspective as we've articulated in the past, we've really focused on reducing our exposure to China, we have effectively reduced our exposure to China by about 45% since 2018 and that continues to.

We are focused.

Really we're focused overall from in terms of building a resilient.

And cost effective.

Supply supply chain, and so that entails sourcing for multiple countries. Obviously the tariff environment is dynamic as we've talked about before and so we want to be dynamic as well on flexible. So in terms of in terms of what we've done we've largely moved some sourcing out of China to other markets and we will continue to do that we expect to accelerate those efforts. This.

Year and to have much more of an impact in terms of next year.

Rick Westenberg: The team has done an excellent job just in terms of overall managing the tariff exposure as well as mitigating our cost overall, and we'll continue to do that.

Jim has done an excellent job just in terms of overall managing the tariff exposure as well as mitigating our cost overall and we will continue to do that maybe maybe I just want to add and thats that we have a significant manufacturing presence in the U S. Today, we will continue to build on that we have 29 manufacturing facilities 21 distribution centers. So again, we have a significant flip.

John Lovallo: Maybe just one add, and that's that we have a significant manufacturing presence in the U.S. today. We'll continue to build on that. We have 29 manufacturing facilities, 21 distribution centers. So again, we have a significant footprint in the U.S. as well.

In the U S as well.

Rick Westenberg: Thanks, John. As it pertains to commodity cadence, generally speaking, it is about a two-quarter impact. So you would expect the inflation, commodity inflation in copper and other raws that we saw in Q2 to really impact us in Q4 on a cadence perspective.

Thanks, John as.

As it pertains to commodity cadence generally speaking, it's about a two quarter impact. So you would expect the inflation commodity inflation in copper and other raws that we saw in Q2, it's really impact us in Q4.

On a on a cadence perspective.

Michael Rehaut: All helpful, caller, guys. Thanks so much. I will pass it on.

All helpful color guys. Thanks, so much I'll pass it on.

John Lovallo: Thank you.

Thank you.

Marissa: Your next question comes from Trevor Allison with Wolf Research. Please go ahead.

Your next question comes from Trevor Allison with Wolfe Research. Please go ahead.

Sam Reid: Hi, good morning. Thank you for taking my questions and welcome to the call, John. Rick, I wanted to follow up on some of the comments you just made in answering that last question, specifically on your China exposure. You have made a lot of progress over the last several years reducing that exposure. How significantly do you expect to reduce it from here moving forward as you look out over the next 12 to 18 months? Previously, the expectation was China tariff rates are going to be 145%. Clearly, that has come down a lot since then. Does that change the rapidity in which you are shifting your supply chain or your views on the ultimate end state?

Hi, Good morning, Thank you for taking my questions and welcome to the call Jon Rick.

Rick I wanted to follow up on some of the comments you just made.

Greg and Andy.

During that last question, specifically on your China exposure.

You made a lot of progress over the last several years, reducing that exposure how significantly do you expect to reduce it from here moving forward as you look out over the next 12 to 18 months.

And then previously.

Previously the expectation was China tariff rate is going to be a higher 45% clearly has come down a lot. Since then does that change the rapidity and which you are shifting your supply chain or your views on the ultimate end state.

Rick Westenberg: Sure. Sure, Trevor. With regards to our sourcing footprint out of China, as we have articulated in the past, we have reduced our China exposure by 45% since 2018. We have articulated and shared in the past that our exposure to China import tariffs is about $450 million currently. We are not going to quantify in terms of what that end state looks like. Needless to say, we are continuing to focus on reducing the exposure to China. In terms of the dynamics with tariffs, yes, there has been a volatile dynamic with regards to China tariffs. They increased us all the way up to 145%, which we have mentioned. They are now sitting at an incremental 30%. But keep in mind, that is on top of the initial tariffs from 2018-2019. The all-in tariff rates for imports from China is roughly 55%.

Sure.

Sure Trevor so with regards to our.

Sourcing footprint out of China as we've articulated in the past we've reduced our China exposure by 45% for 2018, and we've articulated and shared in the past that our our exposure to China import tariffs is about $450 million currently.

We're not going to quantify in terms of what the end state looks like needless to say, we're continuing to focus on reducing the exposure to China.

In terms of in terms of the dynamics with tariffs.

Yes, there has been a volatile dynamic with regards to China tariffs.

<unk>, all the way up to 145%, which we've mentioned.

They are now sitting at an incremental 30%, but keep in mind. That's on top of the initial tariffs from 2018 in 2019. So the all in tariff rates for imports from China is roughly 55%. So it still makes economic sense for us to be aggressively looking at diversifying our sourcing footprint.

Rick Westenberg: So it still makes economic sense for us to be aggressively looking at diversifying our sourcing footprint. Just from an overall geopolitical mitigation standpoint, it seems to be the prudent thing to do. So we are going to continue to do that. Our focus is to really develop a resilient and flexible sourcing footprint, not to be overly exposed to any particular country. As we are looking at our various levers, we are looking at diversifying from a country perspective overall from a sourcing standpoint.

From an overall geopolitical mitigation.

Mitigation standpoint, it seems to be the prudent thing to do so we're going to continue to do that but our focus is to really develop a resilient and flexible sourcing footprint not to be overly exposed to any particular country and so as we're looking at our various levers we're looking at diversifying from a country perspective overall.

From a sourcing standpoint.

Sam Reid: Okay. That makes a lot of sense. My second question on working capital, 17.5% is clearly above the 16% historically we pegged you guys at. Is that purely just inflation, or are you also intentionally holding some more inventory with the expectation that perhaps you have higher costs to come in the future? Thanks.

Okay makes a lot of sense and then.

Second question on working capital of 17, 5% clearly above the 16% historically, we'd pick you guys that is that purely just inflation are you also holding.

Intentionally holding some more inventory with the expectation that perhaps yes higher costs to come in the future. Thanks.

Rick Westenberg: Yeah, sure, Trevor. It is driven largely by tariffs. What I would say is both with regards to material cost inflation as well as the impact on pricing. So material cost impacting the nominal value of our inventory, as well as pricing impacting the nominal value of our receivables. What I did not mention in the opening comments, but it is also a driver, is the payment terms with regards to the tariff invoices. They are roughly 30 days, which is shorter than our average payment terms. So the combination of inflation as well as on our receivables and inventory, as well as payment terms on our payables, are the main drivers. We really are focused on lean inventory. We do prudently build inventory, whether it is for tariff mitigation or other activities as we continue to look at resourcing alternatives, etc.

Yeah sure Trevor it's driven largely by Vitaros, what I would say is both.

With regards to material cost inflation as well as the impact on pricing and material cost impacting the nominal value of our inventory as well as pricing impacting the nominal value of our receivables what I Didnt mentioned in the opening comments, but it is also a driver as the payment terms with regards to the tariff invoices.

Roughly 30 days, which is shorter than our average payment terms and so the combination of <unk>.

Of inflation as well as on our receivables and inventory as well as payment terms on our payables are the main drivers.

We really are focused on lean inventory, we do prudently build inventory, whether it's for tariff mitigation or other activities. As we continue to look at Resourcing alternatives et cetera. So that is a small contributing factor, but the large driver is really the tariffs the direct tariff impact on our on our working capital balances.

Rick Westenberg: So that is a small contributing factor, but the large driver is really the direct tariff impacts on our working capital balances.

Sam Reid: Very helpful. Thanks for all the color and good luck moving forward.

Very helpful. Thank you for all the color and good luck moving forward.

Rick Westenberg: Sure. Thanks, Trevor.

Sure. Thanks, Trevor Trevor.

John Lovallo: Thanks, Trevor.

Marissa: Your next question comes from Susan McClary with Goldman Sachs. Please go ahead.

Your next question comes from Susan Mcclary with Goldman Sachs. Please go ahead.

Susan Mcclary: Thank you. Good morning, everyone. Thinking a bit about the elasticity of demand, you mentioned that you are seeing strength in plumbing at that upper premium and the luxury price points. I guess, how are you thinking about the state of the consumer today and how that mix is impacting the business? Are there any thoughts on how that may come together over the upcoming quarters?

Thank you and good morning, everyone.

Good morning.

Thank you Dan about the elasticity of demand you mentioned that you are seeing strength in plumbing at that upper premium and luxury.

The luxury price points.

How are you thinking about the state of the consumer today, and how that mix is impacting the business and any thoughts on how that may come together over the upcoming quarters.

John Lovallo: Yeah, Susan, confidence is obviously lower than what we would like to see with consumers today. That is obviously putting pressure on everyone's business. As I said, the upper premium and luxury segment has held in better than some of the other segments as that consumer continues to spend, they continue to remodel. I think for us, we are going to keep playing our game, and that is about building our brands and marketing our brands. That is all of them, whether it is a luxury brand or a mid-tier brand like Delta Faucet, that is the biggest plumbing brand in the U.S., and continues to perform well. Consumers are still looking for innovation. They are still looking for unique benefits. So we are doubling down on that.

Yes, so Susan confidence was obviously lower than what we'd like to see with consumers today, and obviously, that's putting pressure on everyone's business like I said, the upper premium and luxury segment is called in.

Better than some of the other segments is that consumer continues to spend that continue to remodel I think for us we're going to keep playing our game and that's about building our brands and in marketing our brands all of them, whether it's a luxury brand or brand or a mid tier brand like delta that saw the biggest brand plumbing brand in the U S. Could you just perform well and then innovation.

<unk> are still looking for innovation, they're still looking for unique benefits. So we're doubling down on that and in fact, if you look at our vitality index. Its at a 25% rate, meaning that 25% of all of our sales are coming from products introduced in the last three years and that's up pretty dramatically over the last several years. So we will continue to play our game.

John Lovallo: In fact, if you look at our vitality index, it is at a 25% rate, meaning that 25% of all of our sales are coming from products introduced in the last three years. That is up pretty dramatically over the last several years. So we will continue to play our game. We think for the long term, all the fundamentals are looking quite bright in terms of the housing stock, the age of the housing stock. Interest rates, we think when they start heading a bit lower, will really unlock some things as well. So I think that we will see some choppiness over the near term here. We are going to keep playing our game and keep serving our consumers and then be really well set up for when the market gets back to historical growth rates, whenever that might be.

For the long term all the fundamentals are looking quite bright in terms of the housing stock the age of the housing stock.

Interest rates, we think when they start heading a bit lower will really unlock some things as well.

I think that we will see some choppiness over the near term here, we're going to keep playing our game. It keeps us serving our consumers and then be really well set up for one the market gets back to historical growth rates whenever that might be.

Susan Mcclary: Okay. That is helpful, caller. Turning to the cost side, aside from the tariffs, can you talk about where you are in terms of the lean initiatives and the cost-saving efforts that you have been focused on in the last couple of years and how you are thinking about where the most opportunity lies to see further improvement?

Okay. That's helpful color and turning to the cost side aside from the tariffs can you talk about where you are in terms of the lean initiatives and the cost saving efforts that you've been focused on over the last couple of years and how youre thinking about where the most opportunity lies to see further improvement.

Rick Westenberg: Sure, Sue. Good morning. It is Rick. As you have heard us talk about in the past and you are pretty well familiar with, we really leverage our Masco operating system that has allowed us to drive efficiencies, productivities, and ultimately cost reductions really through our enterprise. It has been a really important driver and contributor to our margin expansion over the last couple of years, even despite a challenging environment. We are continuing to leverage the Masco operating system. There is really no change in terms of our approach, in terms of really continuous improvement and cost reduction. We are seeing that really from a supply chain, logistics, manufacturing efficiencies, productivity, etc. We are going to continue to do that.

Sure. So good morning, it's Rick.

As you've heard us talk about in the past and you are pretty well familiar with we really leverage our masco operating system.

Allowed us to drive efficiencies productivity and ultimately cost reductions really through our enterprise.

It's been a really important driver and contributor to our margin expansion over the last couple of years, even despite a challenging environment and we are continuing to leverage the masco operating system. So theres really no change in terms of our approach.

In terms of really continuous improvement and cost reduction, we're seeing that really and from a supply chain logistics manufacturing efficiencies productivity et cetera.

And we're going to continue to do that I think in the near term what you'll see more of an it did grow itself a bit in Q2 is with regards to further austerity just given the current climate, we're faced with with regards to tariffs and commodity inflation, we're taking a little bit more significant actions with regards to things such as hiring travel discretionary.

Rick Westenberg: I think in the near term, what you will see more of, and it did show itself a bit in Q2, is with regards to further austerity, just given the current climate we are faced with with regards to tariff and commodity inflation. We are taking a little bit more significant actions with regards to things such as hiring, travel, discretionary spend. It is important to note that we are really protecting investments in our key growth areas to make sure that we are really well positioned to continue to outperform the market, as well as to leverage the growth opportunities when the R&R market does return to growth here in the foreseeable future.

Spend but important to note that were really protecting investments in our key growth areas to make sure that we're really well positioned to continue to outperform the market as well as to leverage the growth opportunities when the R&R market does return to growth here in the foreseeable future.

Susan Mcclary: Okay. Thank you both, and good luck with the quarter.

Okay. Thank you both and go back to the quarter.

Rick Westenberg: Great. Thanks, Susan.

Alright, Thanks Susan.

Marissa: Your next question comes from Phil Ng with Jefferies. Please go ahead.

Your next question comes from Phil <unk> with Jefferies. Please go ahead.

Maggie: Hey, good morning. It is Maggie on for Phil. I wanted to go back to some of your commentary around pricing. Obviously, it has been a really dynamic backdrop with tariffs, and some of your price increases were announced when tariffs were at a much higher rate. How are you thinking about adjusting those increases in response to changing tariff policy versus holding on to the initial headline increase? Are you getting more pushback as tariffs get negotiated down? How will future tariff policy implications play into that pricing strategy?

Hey, good morning, Maggie on for Phil.

I wanted to go back to some of your commentary around pricing.

Obviously, it's been a really dynamic backdrop with tariffs and.

Some of your price increases were announced when tariffs were at a much higher rate. So just how are you thinking about adjusting those increases in response to changing tariff policy.

Yes.

Versus holding onto the initial headline.

Are you getting more pushback.

Tariffs get negotiated down and then how the future.

Future tariff policy.

Locations may plan to that pricing strategy.

John Lovallo: Hi, Maggie. It's John. I guess maybe I would start by saying just a reminder that pricing is just one of the mitigation levers that we are pulling, and it really starts with the footprint moves that we have been taking for quite some time, really looking at costs both within our walls as well as negotiating with suppliers to make sure that we are getting the best costs that we can. Then finally, discipline pricing, and really that is the last lever that we pull. As you mentioned, we did take some pricing earlier this year, and I can tell you, we are not going to get into channel specifics or customer specifics, but generally, we have been able to stick handle that pricing with our customers.

Hi, <unk>, it's John I guess, maybe I'd start by saying just.

A reminder, that pricing is just one of the mitigation levers that we're pulling and it really starts with the footprint moves that we can take quite some time.

Really looking at costs, both within our walls as well as negotiating with suppliers to make sure that we're getting the best cost. We can and then finally disciplined pricing and really thats the last lever that we pool as.

As you mentioned, we did take some pricing earlier this year and I can tell you in it we're not going to get into channel specifics of customer specifics, but generally we've been able to stick handle that pricing.

With our with our customers.

John Lovallo: It is a dynamic environment, as you mentioned. We will continue to be cognizant of what is happening in the road around us. We want to make sure that we are protecting our margins, but at the same time that we are continuing to hold and grow share, and I think that is the balancing act. At this point, I feel really good about the disciplined fashion in which we have taken pricing. I think our teams are thinking about it the right way. They have got a lot of experience over the years in doing this. Again, I think we will continue to monitor the environment, stay agile, and continue to pull all those levers as needed as we move forward.

We work environment as you mentioned, we will continue to be cognizant of what's happening in the road around US we want to make sure that we are protecting our margins, but at the same time that we're continuing to hold and grow share and I think thats. The balancing act, but at this point it feel really good about the disciplined fashion in which we've taken pricing I think our teams are thinking about it the right way they've got a lot of experience over.

The years in doing this and again I think we'll continue to monitor the environment stay agile and continue to pull all of those levers as needed as we move forward.

Speaker 1: Right. Thanks so much for the color. I will turn it over.

Alright, thanks, so much for the color I'll turn it over.

Speaker 2: Thank you.

<unk>.

Speaker 1: Your next question comes from Mike Dahl with RBC Capital Markets. Please go ahead.

Your next question comes from Mike Dahl with RBC capital markets. Please go ahead.

Yeah.

Speaker 2: Thanks for taking my questions. Maybe just one last cleanup on tariffs. When you talked about largely offsetting the $140 million of in-the-air costs, is that dollar for dollar, or does that include offsetting the $140 million plus your normal margin?

Thanks for taking my questions.

Maybe just one last cleanup on tariffs when you talked about largely offsetting the 140 million of in year cost is that dollar for dollar or does that include offsetting.

<unk> 40 million plus here at normal margin.

Rick Westenberg: Mike, it is Rick. When we talk about largely offsetting, it is really on a nominal basis. That is what we are endeavoring to do. Ultimately, we do focus on margins, and we look to drive margin improvement over time. As it pertains to our mitigation actions in 2025, in terms of currently enacted tariffs, we are talking on a dollar for dollar basis.

Yeah, Mike It's Rick so when we talk about largely offsetting it's really on a nominal basis. So that's what we're endeavoring to do ultimately we do focus on margins and we look to drive margin improvement over time, but as it pertains to our mitigation actions in 2025.

A currently enacted tariffs we're talking on a dollar for dollar basis.

Speaker 2: Okay, got it. Second question, just the comments about e-com outperformance, John. I think you made it start of the Q&A or some of your comments. I think that has been something that has been kind of inconsistent across the peers. If we look at one of your large distributors, I think the e-com results have been under some pressure for most of the last kind of year and a half or so. I guess maybe just a question on what you think is driving the strength for you against what still seems to be kind of a broader backdrop there.

Okay got it.

Second question just.

The comments about E comm outperformance, John I think you've made it.

Sorry to the Q&A or are some of your comments.

I think thats been something thats kind of inconsistent across the peers and if we look at one of your large distributors that E com results Thats been.

Under some pressure for most of the last kind of year and a half or.

So I guess, maybe just a question on what you.

Sure.

What you think is driving the strength for you against which still seems to be kind of a choppy or broader backdrop there.

Marissa: Yeah, Mike, it is John. So again, week four, I am probably not as versed as I will be the next time we talk at the end of Q3. What I can tell you, like I mentioned, I spent quite a bit of time with our Delta team and their largest plumbing business. I have been really, really impressed with their e-commerce capabilities and really the talent that they have built to drive our business there. I think over time, Delta has been a leader in e-commerce, and I think they continue to outpace the competition. Clearly, e-commerce is going to continue to grow. It continues to evolve and change as well. If you think about search for many years drove e-commerce. Now we have AI coming in, which requires different capabilities. But staying ahead of the curve here, I think is going to be really important.

Yeah, Mike This is John so so again a week four so I'm probably not as first as I will be the next time, we talk at the end of Q3, what I can tell you that like I mentioned I spent quite a bit of time with our delta team and they are our largest plumbing business.

I have been really really impressed with their e-commerce capabilities and really the talent that they built.

To drive our business there. So I think overtime Delta has been a leader in ecommerce and I think they.

We continue to outpace the competition so <unk>.

Clearly.

E Commerce is going to continue to grow it continues to evolve and change as well, but if you think about.

Search for many years drove ecommerce I'll get AI coming in which requires different capabilities.

Ahead of the curve here I think it can be really important I think the team has done a great job to date.

Marissa: I think the team has done a great job to date. With my background, I will be spending a lot of time to make sure that we continue to evolve and continue to lead in the e-commerce space.

And with my background I'll be spending a lot of time to make sure that we continue to evolve we continue to lead in the ecommerce space.

Speaker 2: Okay. Great. Thank you.

Okay, great. Thank you.

Marissa: Thank you.

Steve.

Speaker 1: The final question comes from Rafe Jadwisi. Please go ahead with Bank of America. Thank you.

The final question comes from Ralph.

Matt.

Yes. Please go ahead with bank of America. Thank you.

Robin Zondervan: Hi. Good morning. Thanks for taking my question.

Hi, good morning, Thanks for taking my question.

Mark.

Speaker 2: Of course.

Robin Zondervan: On the $70 million of exposed non-China exposure or impact from tariffs, can you just give some more color on what the exposure there is by country? Understand that we still don't know how those tariffs are going to shake out, but can you just give a little bit more color on what that is actually included in that?

On the on.

On the $70 million of.

Okay.

Excluding non China exposure.

Impact.

Impact from from tariffs can you just give some more color on like what the exposure there is by by country.

Understand that we still don't know how those tariffs are going to shake out, but can you just give a little bit more color on what that is actually included in that.

Rick Westenberg: Morning, Rafe. It's Rick. The only exposure dimensionality that we are really providing at this point in time is our exposure to China, the $450 million that we have mentioned previously. We are not providing our exposure by country. It is a very dynamic environment, not only in terms of the tariff rates, but also our sourcing footprint, which is changing over time, as we have talked about before, as we build a more diversified and resilient sourcing footprint. The approach that we have taken is to be very transparent and clear as it pertains to the impact on tariffs. That is what we have done here, is provide that $70 million as part of the overall $210 million annualized impact with regards to the impact, with regards to not only reciprocal tariffs but steel and aluminum.

Good morning, or if it's Rick So you know.

The only exposure dimensionality that we're really providing at this point in time is our exposure to China. The 450 million that we've mentioned previously.

We're not providing our exposure by country, obviously, it's a very dynamic environment.

Not only in terms of the tariff rates, but also our sourcing footprint, which is changing over time as we've talked about before as we build a more diversified and resilient sourcing footprint. So.

The approach that we've taken is to be very transparent and clear as it pertains to the impact on tariffs and so that's what we've done here is provide that $70 million.

Part of the overall.

210 annualized impact.

With regards to the impact with regards to now a reciprocal tariffs with steel and aluminum. So at this point, we're not going provide incremental exposure detail, but we will continue to provide the impact not only on this call, but going forward as if and as things change.

Rick Westenberg: At this point, we are not going to provide incremental exposure detail, but we will continue to provide the impacts not only on this call, but going forward as and as things change.

Robin Zondervan: Okay. Understood. If I look at the plumbing organic growth, I think it is the strongest quarter you have put up since 2022. I understand there is some pull forward there, but it does not seem like it is the majority of it. You are expecting some slowdown off that in the second half. What did you see in terms of sell-through in the second quarter? What drove the improvement? Even with the pull forward, it does seem like there has been an uptick here. Is there anything specific to call out? What is your trend versus the industry in the second quarter?

Okay understood and then if I look at the plumbing organic growth I think it's the strongest quarter, you've put up since 2022 and understand there is some pull forward there.

But it doesn't seem like it's the majority of it and you're expecting some slowdown of that in the second half, but what did you see in terms of could you saw in terms of sell through in the second quarter and like what drove the improvement.

Even with the pull forward. It does seem like has there been an uptick here is there anything specific to call out.

And your trend versus the industry in the second quarter.

Rick Westenberg: Sure, Rafe. With regards, we are not going to speak to specific trends. We are very pleased with the performance of our plumbing business, particularly here in North America. As you mentioned, or we mentioned, we did have some pull forward effect, but the underlying business was very strong, and it was both from a volume and price perspective. In terms of underlying demand, we continue to monitor the situation closely. The macroeconomic environment continues to be volatile, and we track it. As we have articulated, we do expect overall R&R, both here in North America as well as globally, to be down low single digits. We do expect to outperform the market. I think from an overall performance perspective, we are performing very strongly across all of our channels, but particularly the e-commerce and trade channels have been particularly strong for us.

Sure right, so with regard to where I can speak to specific trends, we're very pleased with the performance of our plumbing business, particularly here in North America as.

As you mentioned or we mentioned we did have some pull forward effect, but the underlying business was very strong and it was both from a from a volume and price perspective, and so in terms of underlying demand. We're continuing to monitor the situation closely the macroeconomic environment continues to be volatile.

We track it and as we've articulated we do expect overall R&R both here in North America, as well as globally to be down low single digits.

We do expect to outperform the market. So I think from an overall performance perspective.

We're performing very strongly across all of our channels, but particularly the e-commerce and trade channels have been particularly strong for us and we're continuing to make investments in those channels to continue to outperform the market and position ourselves for success over the mid middle and long term.

Rick Westenberg: We are continuing to make investments in those channels to continue to outperform the market and position ourselves for success over the middle and long term.

Robin Zondervan: Great. Thank you.

Great. Thank you.

Speaker 2: Thanks, Rafe.

Thanks, Alright.

Okay.

Speaker 1: That concludes the Q&A portion of today's call. I would now like to turn it back over to Robin Zondervan.

That concludes the Q&A portion of today's call I would now like to turn it back over to Robyn Zondervan.

John Lovallo: would like to thank all of you for joining us this morning and for your interest in Masco. That concludes today's call. Have a wonderful day.

We'd like to thank all of you for joining US this morning and for your interest in Masco that concludes today's call have a wonderful day.

Speaker 1: Ladies and gentlemen, this concludes today's conference call. Thank you so much for your participation. You may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you. So much for your participation you may now disconnect.

Yes.

Okay.

Okay.

Okay.

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Okay.