Okay. Good morning, everyone. Thanks for joining us. My name is Mike Rehaut. I'm the senior analyst covering the home building and building product space for JP Morgan. We're kicking off day two of our 17th Annual Homebuilding and Building Products Conference. I want to thank all the companies yesterday for participating, and we have a nice lineup today as well. We're going to kick off today with Masco Corporation, and pleased to have with us Rick Westenberg, CFO. As with prior presentations, this will be a fireside chat, but I'll turn it over to Rick initially just for a few words on Masco to set the stage, and then we'll dive into the fireside and also have time at the end for questions from the audience. Rick, thanks for joining us. Great. Thanks, Mike. Good morning, everybody. It's great to be here at the JP Morgan builders conference. And really appreciate everyone joining this morning here in person, as well as via webcast. What I thought I would do is just provide a just a couple-minute overview on on Masco for those that may not be as familiar with the company. So Masco is an approximately $8 billion building products company that's really focused on the repair and remodel sector of the industry. Primarily in North America. About 80% of our our business is North America, but we do have a global footprint. About 20% is international. We are organized in in two primary segments. One is plumbing which is anchored by our our Delta, Hansgrohe as well as our our Watkins Wellness businesses. In 2023, we generated just shy of $5 billion of revenue in that segment, but 18% margin, so really healthy margins. As I mentioned, we've got an international footprint. It's really anchored by our Hansgrohe international plumbing business, which operates in over, sells product in over 150 countries. So perhaps something that's, that's not fully appreciated. Our second segment is the decorative architectural product segment, which is anchored by our, our Behr brand. So the vast majority of our decorative architectural products segment is paintings or, or, or coatings business. Again, anchored by, by Behr, which we partner very closely with The Home Depot. We've been partners with The Home Depot for, for over 40 years. In addition to, to coatings, we have a, a lighting business as well as a building hardware business. It had just over $3 billion of revenue and 17.8% margin, so again, strong margins. In terms of the Masco portfolio overall, foundation on strong brands, as I mentioned, a few of them. Strong brands, product innovation and customer service, really focused on a above-market growth and margin expansion. We also, in terms of a capital allocation strategy, have a very consistent and disciplined capital allocation strategy. It's focused on, first and foremost, reinvesting in the business to drive growth. Second is an investment-grade credit rating, and then third is a resilient dividend. We have a 30% payout ratio in terms of our dividend, and we've grown the dividend 11 years in a row. And then fourth is returning all available cash to shareholders, either through the dividend or through share buybacks, and we've guided this year to return approximately $600 million to shareholders through share buybacks. That is in absence of any M & A activity that we may have, which I'm sure we'll talk about, Mike. But anyway, that's just a really synopsis of Masco overall, and really excited to be here again this morning. Great. Thanks, Rick. Appreciate the overview. So just jumping into the fireside chat here in terms of the questions, you know, first wanted to hit on, you know, the macro growth, the market growth backdrop for 2024, and potentially even next year. Obviously, not asking for any type of guidance, but, you know, you continue to expect for this year the repair and remodel market to be flat to down low single digits. I was wondering if you could kind of just review the drivers of this year's market dynamics and what might change potentially to lead to growth next year. Sure. So Mike, as you indicated, we've guided, or our expectations for the R&R industry here in North America is flat to down low single digits. For clarity, we do expect our international business or international industry to be down low to mid-single digits. So a little bit of a more of a headwind there in the international markets, particularly in China. What I would say in terms of where we're headed, just a couple of things. First is I think people appreciate there was a significant pull forward of R&R activity, particularly in 2021 and 2022, and we're seeing the repercussions of that, a little bit of a hangover of sorts with regards to the pull-forward activity. And we're starting to cycle through that. We've seen that in our own business. So last year, in 2023, the first three quarters of the year, our revenue was down 10%. But in the last six months, so Q4 of last year and Q1 of this year, was down 2%-3%. So we're seeing that stabilization as we cycle through that pull-forward impact. And in fact, we're seeing a little bit of pent-up demand with regards to the higher interest rate environment that I think we all recognize may be higher for longer. But the stabilization is there, and what we're seeing is improvement in terms of the orders, return to more normal seasonality, so a stronger Q2, a stronger Q3, and the sort, so kind of return to normalization. But I think importantly, as we look forward, is really the strong foundation of the industry. The fundamentals are very strong. You've got what we've experienced is a strong home price appreciation over the last few years, and is therefore strong home equity, and people feeling confident to reinvest in their homes, which is a strong secular trend. Secondly is the age of the housing stock. Every year it gets older. But importantly, there's about 1.7 million homes, incremental homes that will enter what is often called the primary remodeling age of 20-40 years. And why that's important is because homes in that age bracket tend to spend 15%-20% more on discretionary remodeling products, projects. It is estimated that there'll be about 20% more homes in that category than there were in 2025 than there were in 2020. And then you've got the secular trends in terms of the millennial home ownership, as well as household formation. And so it really bodes well, and what we're anticipating, and it's really a triangulation of data points, is that we would expect that ultimately, the industry here in North America to return to more normalized growth in the 3%-5% annualized growth space. Great. And, you know, maybe just a little more granular, driving into, you know, second half of this year versus first half. You know, you continue to expect to outperform the market this year overall by 1%-2% this year. Sales down slightly year-over-year in the first half versus a modest growth outlook in the back half. So when thinking about that back half growth, is that simply a function of comps, or does do you see any inflection in market demand or other trends driving that back-half improvement? Yeah. So there is a dynamic of comps with the decline in the industry that I indicated, really, and started in late 2022, and we saw that throughout 2023, sets up for more favorable comps, particularly in our international market, as we think about the second half of the year. But importantly, what we're seeing in the business is, as I mentioned earlier, stabilization. And so the industry in our business has declined at a decreasing rate. And what we're seeing is some favorable trends, not only stabilization, but some opportunities. So I think just to mention it as a data point, in Q1, in North America, our Delta Faucet Company wholesale business actually grew, and Delta grew overall in Q1. So that's shaping up to be favorable, and we're seeing that slowly manifest itself across the industry. I think that, you know, it's a matter of timing. As I mentioned, the fundamentals are strong, and so it's not a matter of if, but when. And so we're tracking it very closely. Things are encouraging, and we see 2024 really as a kind of a transition year, and we see things stabilizing here as we progress during the course of the calendar year. Great. So maybe shifting a little bit to even longer term, you know, goals around growth. You know, you've set your organic growth goals at 3%-5% annually on a longer-term basis. And part of that is outperforming the market a little bit. How do you break down that growth goal by segment, you know, kind of thinking about plumbing versus decorative architectural, and what do you see in terms of the opportunity for share gains in each of those segments? Yeah, no, I appreciate it. Yeah, so in terms of our expectations of 3%-5% growth, we haven't specifically broken it down by each of our segments, but it's fair to say that our growth expectations are fairly similar within that range for both of our segments. And what I would say is, as I mentioned in my opening comments, we expect above-market growth, and that's something that we're very focused on and really a function of our brands, our products, and our service. What I would say specifically in terms of where we're focused on driving growth and above-market growth, there are kind of three specific areas. One is in North America plumbing, and specifically in the wholesale business, where we're investing in terms of displays, product innovation, etc. And so we're seeing, as I mentioned, growth already here in Q1, but that's really a longer-term focus of ours. Second is in the international space, Hansgrohe specifically. And in terms of that, we've seen performance against our primary competitor really outperform in terms of our performance on a global basis and specifically in Europe. And although the industry is down, as I mentioned before, we're gaining share in that environment, which is encouraging and sets up well when the market does turn to grow. And then third is really in the coatings space and in the pro specifically. And we've been able to, with our partnership with The Home Depot, really invest in the pro paint space, and we can talk more about that. But the pro paint space is an area that we've seen significant progress. We've actually grown 60% on a stacked basis over the last three years through 2023. And so that bodes well in terms of the initiatives that we've put in place, and we're continuing to double down on those and grow in the pro paint space. So those are the areas that I would highlight as areas that we're focused on in terms of growth and above market growth, specifically. ... Right. No, that's perfect, and actually kinda leads to kind of a subset question around that pro paint opportunity that I wanted to zero in on a little bit more. So, you know, if you know, obviously a lot of success, and I think, you know, when you look at the last two or three years, you know, arguably being able to not just capitalize on some challenges more broadly that the market saw in terms of some of the competitors out there, but hold on to those gains, which is equally as impressive. And so, you know, thinking about the next two or three years for the pro paint efforts, you know, maybe if you could dive a little bit more into what the playbook is to continue to gain share. You know, during the first quarter, pro paint was roughly flat. It's similar to DIY, and, you know, I think conceptually, a lot of people think about pro paint still having a little bit of a stronger growth profile relative to DIY. So maybe just, you know, kinda talk about what the opportunity is, and for pro, what would that translate to in an ongoing growth rate over the next two or three years? And again, how to get there. Sure. So as I alluded to, some of the success that we've had historically, or at least in the past few years. And maybe for context, Behr, Behr brand, in terms of paint, has historically been known as a DIY paint brand, and it holds a significant share in the DIY paint segment. We believe it's about a third, 33% market share, roughly speaking. We have grown the pro paint business from close to nothing to what we estimate is about a 20% share in the last kind of few years, really anchored off the growth that we've experienced over the last three years. To dimension that, you know, our pro paint business is about a $900 million business, and the overall, we think, addressable pro industry is about $5 billion here in North America, so just shy of 20%. And so we see that as, as an underrepresented share and an opportunity. Now, obviously, we need to invest and go after that opportunity, and the areas that we're focused on in partnership with The Home Depot is first really making sure we've got the resources at the retail stores, the sales reps, the product rep, to really reduce the friction in terms of the purchasing experience. Second is make it convenient for the pros, and that is, that is really enabling more convenient and more flexible delivery options, order online, pick up in store, on-site delivery, those types of mechanisms. And third is a loyalty program to make sure that we, as we gain share, that we retain that, that share. And I think we're really, really optimistic in terms of the progress that we've made and what that translates into going forward as we, as we, as we recognize those successes and, and focus on, on growth, to, to grow our share, but also the, the business overall. Great. Shifting to margins, you know, your long-term goals for margins for the company, you know, plumbing at and decorative at, you know, roughly 20% and 19%-20%, respectively, which is, you know, approximately 150 basis points above our 2024 estimates. So I guess the question is, you know, why not higher, ostensibly? What are the incremental margins for both businesses? And are there structural limits to the profitability by segment in terms of, you know, either product reinvestment or your relationship with Home Depot that perhaps prevents a higher level of profitability over time? Sure. So maybe for context and background, the margins you mentioned, which I'll come back to, are margins we put out for 2026. But for some context, and I'll talk about Masco overall, in 2022, our operating profit margins for Masco were 15.6%, and before the pandemic, they were anywhere between 15% to the mid-16%. Fast-forward to 2023, we achieved 16.8% operating profit margins, and we've guided to approximately 17% margins here in 2024. And as you alluded to, Mike, we've put out long-term margins for Masco of 18.5% in 2026. And so it really represents, from 2022, about almost a 300 basis point margin expansion, and relative to where we are, call it today, about a 150 basis point margin expansion. And so we feel really good about the progress that we've made and that we intend to make, and we're committed to making over the near medium term. And the reason we put those margin targets out there for 2026 was to be able to communicate the margin potential of the business. We intend to grow above market, as well as expand margins, and we wanted to make sure that that was clear and understood. What I would say is that in terms of our, our incremental margins, or what we call oftentimes our drop-down margins, are about 25%-30%, and that's a big part of what's gonna help drive the margin expansion that we see between now and 2026. So, you know, we of course will reinvest that in the business because we wanna grow above, above market and grow margins at the same time. So I think that helps dimension the opportunity that we have in front of us, particularly as the market turns back to a growth dynamic here in the 3%-5% range over the next couple of years. Okay. Appreciate it. Wanted to shift also to focus in a little bit on the acquisition strategy. You know, M&A bolt-ons, I believe, looked at as contributing, you know, 1%-2% of incremental growth, I think, in terms of the algorithm, over time on average. I'm sorry, 1%-3%, actually, I have here. So, you know, just would love to dive into this a little bit, you know, maybe just talk about the opportunity, by segment and, you know, if there's the potential for any larger acquisitions over time as well. Yeah. So Mike, as you stated, our growth algorithm is generally 3%-5% organic growth, which we've mentioned, plus an additional 1%-3% inorganic growth. We have a range because, as we all know, M&A activity is lumpy, but it's an important part of our growth algorithm. Our focus in terms of acquisition targets are really bolt-ons. Bolt-ons, what we mean by bolt-ons are businesses or companies that really fit and are consistent with our strategic philosophy, but importantly, within our product portfolio. We are not looking to add an additional line of business, a third leg, as often referred to. Our focus is on acquiring companies that we can bolt on to our existing businesses. A couple of examples of that recently was the Steamist acquisition in late 2021, early 2022, which bolted on to our Delta business. And then more recently in 2023, the Sauna360 acquisition that closed in the Q3 of 2023, that is a Finnish sauna business that we bolted onto our Watkins Wellness platform, and has been an excellent addition to the portfolio, but is really gonna leverage the existing business and dealer network that we have here in North America. As it pertains to larger acquisitions, we're not averse to a larger acquisition, but that isn't our mainstream focus. It'll be more opportunistic. Right. So, yeah, talking about not adding a third leg, you know, I think one of the questions that we get from time to time is, you know, the Kichler acquisition, that has, you know, since being acquired, gone through some ups and downs. You know, so kind of curious on your take of Kichler at this point in terms of the, how it's performing, its fit in the portfolio. You know, at the time of acquisition, it had about, you know, $450 million- May I have your attention, please? May I have your attention, please? We've had a disruption with the fire alarm system. Please disregard any alert tones or strobe lights you will see. There's gonna be another- We're gonna have- It's gonna be repeated as well. ... take a look at the panel and correct the condition. Thank you. All right. I thought there'd be a repeat of the original. We're returning from intermission. Yes. Everyone on the webcast, we are okay. Thank you. So, as I was asking about the Kichler acquisition. So, you know, it has had some ups and downs. You know, wanted kind of your updated thoughts around you know, the performance of the business, how it fits, or still fits or may not fit in the business today as part of the portfolio. You know, at the time it was acquired, it had annual revenue of $450 million. So just trying to get a sense of maybe the size of it today as well, and again, and any kind of thoughts on its fit within the company. Sure. Again, maybe for broader context, Kichler is a business we acquired a number of years ago. It's a lighting segment, and it fits within our decorative architectural product segment. We don't disclose the size and performance of specific business units. We report, obviously, at a segment level, but we do disclose that their lighting business, i.e., Kichler, is about 3% of Masco's revenue. So it puts in perspective in terms of the size of that business relative to broader Masco. In terms of performance, what I would say is the team over the last couple of years has done a tremendous job really restructuring the business and positioning the business for success. And they've taken actions, some hard decisions in terms of exiting certain unprofitable or low-profit lines of business, addressing pricing opportunities, as well as, of course, cost opportunities. And has again, really positioned, turned around the business in terms of where it stands in the portfolio and from a profitability standpoint. What I would say is, as a general matter, as we talked about M&A previously, we Masco have had a long history of really buying and selling companies. And we look at our portfolio on a regular basis, on a periodic basis, and we assess in terms of strategic fit, both on the acquisition and disposition side. So obviously, no comments with regards to any specific business unit, but I just wanted to add that, as that's something that we look at on a regular basis. Okay. You know, also, on the plumbing side, you know, you mentioned Steamist and Sauna360. You know, I think in general the awareness of wellness and some of those added types of products and features in a home or in or around a home are getting better and better understood. You know, your competitor also in the plumbing space, you know, has kinda made a lot of noise around you know, digital, you know, various types of Wi-Fi-enabled monitoring, et cetera. You actually made an acquisition in 2020 of SmarTap, smart bathing system monitoring, and it monitors and controls the temperature of and flow of water. So how do you think about, you know, that, that element of the equation within the water space, within the, you know, within the home, if there's other avenues maybe to, you know, drive in terms of, you know, growth for the business? Sure. What I would say is one of the key tenets of one of our key strengths is product innovation, and we look at that both organically and inorganically. And so, Mike, you referenced a couple of acquisitions that were largely product-based acquisitions that were bolt-ons to our business, which have been successful. And as I mentioned before, our bolt-on strategy is focused on targets that are strategic fits in our business, will add obviously to our business financially, but also oftentimes provide technology, incremental technology. But it's not limited to acquisitions. In terms of our focus on product innovation, we look at really water quality and water sustainability. You know, one example that I would reference that is going to be launched here in Q3 of this year is the Delta Reverse Osmosis water filtration system that we launched in the Las Vegas building products show in terms of a new product, and that's an organic-based development. But those are the types of opportunities that Masco, particularly in the water quality and the plumbing space, focus on. I guess another one that I reference is our Watkins Wellness, which is a spa or hot tub business, and we launched a FreshWater IQ system, which really monitors the quality of the water and really provides the customers with information and really digitally communicated information with regards to managing the chemistry in their hot tubs. So those are our organic examples that complement the acquisition strategy that you referenced. Mm. Great. I have one or two more questions, but maybe I'll pause here, if there's any questions from the audience. Yeah. Just curious, Home Depot's made a big move to bolster their pro exposure. Just any thoughts, what, if any, impact that will have in your efforts with them to bolster your pro business? Yeah. So the acquisition you're referring to is Home Depot announced an acquisition of SRS Distribution. That business is focused really on roofing, landscaping, and pools, so it doesn't have a real direct impact or very limited direct impact in terms of our business with the Home Depot. But I think it's illustrative of the commitment to the pro, and that's one of the investment thesis that I know they put forward. And for us, as I mentioned before, partnering with the Home Depot in terms of continuing to build a pro business, particularly in the coatings, not limited to the coatings, but particularly in the coatings business. So I think it is just a reinforcement of that orientation, of focusing on competing and having good amount of service level to the pro. And just one more, if I could. We heard from a bunch of companies yesterday talking about, you know, existing home sales would be good for your business, and obviously, it would be good for yours as well. But, you know, painting, plumbing, typically thought to be lower, you know, cost projects happen on a more regular basis. So just your thoughts on existing home sales picking up versus just, you know, getting past that pull forward that maybe you had a couple of years ago, and what would be the bigger drivers for your business over the next couple of years? Yeah, good question. Interestingly, I mean, existing home sales does have an impact, but it is a bit more muted in our business, particularly in the repair and remodel side of the business. In Masco, about 90% of our business is in repair and remodel. And the interesting fact is, you know, existing home sales have historically run, you know, 5 million-6 million. They're down closer to 4 million-4.5 million now, so they are suppressed. But that's compared to about 130 million installed base, and 90% of repair and remodel product projects are initiated by homeowners that haven't recently moved. And so the critical mass is really based off of existing home, or existing homes that are out there. And the home equity that I mentioned before is a real driver in terms of consumer confidence and willingness to invest in the home. So that's the foundational part of the industry. Existing home sales does help, though. Obviously, it's been impacted by the higher interest rate environment, and so I don't have a particular prediction on when that will change or pivot, but it will ultimately. I think there's pent-up demand. That will be helpful as it returns to more normalized levels in the coming years. And it does have a bit of a bigger impact on our paint business, particularly the DIY business, as I mentioned earlier, is a bigger part of our paint business. So it does have an impact. But what we're seeing is our future growth isn't dependent on that, but it'll be a helpful tailwind once that does pivot. Sure. Paint's a pretty cozy industry. Have you seen any competitive response to Behr's success in recent years? It's a competitive environment. You know, I think what I would say is there's an increased amount of focus on the pro, really across the board. But we feel really good about the initiatives that we've had and the success that has borne out. And the partnership with The Home Depot has never been stronger with regards to going after the pro and pursuing the pro. And where we think we're well-positioned is the pro that paints. So the pro that's going into a home center to effectively do a multifaceted project, and paint is a key element of that, and we're able, in partnership with The Home Depot, provide that solution to them and continue to make it an attractive purchase experience. Any other questions? We have a few minutes left. I'll throw one more out. And but if anyone has anything, just raise your hand. But, you know, the last kind of question I was kinda curious on a little bit was on the e-commerce side. You know, currently, your e-commerce accounts for about 17%, 17%, this is off of the last slide deck, 17% of plumbing, a mid-single-digit percentage on decorative. How do you see the e-commerce channel evolving over the next two or three years, and what type of impact could that have on Masco? You know, what steps do you feel you need to take to ensure positioning in that channel over the next few years? Sure. E-commerce has been an important and growing in importance channel for us. As you mentioned, we have about 17% of our sales on the plumbing side that go through the e-commerce channel. And it's more significant in plumbing than it is on the decorative architectural product side, because that's mostly paint, and e-commerce isn't as important in that space. Although, as I mentioned before, we are working with The Home Depot on a number of initiatives to facilitate that transaction. Delta has been really a leader in the e-commerce space, and they continue to invest in terms of the people, the capabilities, the resources in that. E-commerce is important, not only in terms of the transactional element, but also driving traffic to the Delta brands and the new products. As I mentioned before, product innovation is really important, and product innovation isn't limited just to technology, it's design and capabilities. And to get awareness of our new products out there, for example, the reverse osmosis water filtration system, driving digital traffic is a key element of that. And it also helps with our partnership with our omni-channel partners, with the you know, homedepot.com, et cetera. And so it really helps drive traffic in terms of transactional, but also in terms of consideration. And so it has continued to be an increasing part of our go-to-market strategy, and the team is focused on continuing to invest in that space and continue to lead in that space. Perfect. Well, we're, we're just about out of time, so I'm going to close it off here. Thanks again, Rick, and also Robin, for all your help, coordinating. We will continue the conference at 9:00 A.M. with TopBuild. Later today, we'll be joined by home builders, Taylor Morrison, LGI, and Smith Douglas, rounding out, early afternoon with Forestar Group. So thanks again, Rick. Appreciate it, and, we'll, we'll be back here in a few. Great. Thank you. Thanks.