Slide 1: Fourth Quarter and Full Year 2023 Earnings Presentation
Fourth Quarter and Full Year 2023 Earnings Presentation February 8, 2024
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements that reflect our views about our future performance and constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “outlook,” “believe,”
Slide 3: Agenda
Agenda 1 Summary of Results Keith Allman 2 Financial / Operations Review Rick Westenberg 3 Q&A Keith Allman Rick Westenberg 3
Slide 4: Summary of Results
1 Summary of Results Keith Allman 4
Slide 5: Q4 2023 Review
Q4 2023 Review Top line decreased 2% with lower volumes partially offset by pricing actions Grew adjusted gross margin 560 bps to 35.1% Expanded adjusted operating profit margin 230 bps to 14.5% Achieved adjusted EPS growth of 28% to $0.83 per share Repurchased 3.8 million shares for $227 million 5
Slide 6: Full Year 2023 Review
Full Year 2023 Review Top line decreased 8% with lower volumes partially offset by pricing actions Grew adjusted gross margin 360 bps to 35.2% Expanded adjusted operating profit margin 120 bps to 16.8% Achieved adjusted EPS growth of 2% to $3.86 per share Achieved a return on invested capital of ~36
Slide 7: Future Targets
Future Targets Well positioned to achieve strong, profitable growth in 2024 and beyond Full Year 2024 Adjusted EPS • In the range of $4.00 - $4.25 per share Adjusted Operating Profit Margin Targets FY 2024 FY 2026 Plumbing Products ~18.5% ~20% Decorative Architectural Products ~18% ~19-20% Masco ~17
Slide 8: Financial / Operations Review
2 Financial / Operations Review Rick Westenberg 8
Slide 9: Masco Corporation
Masco Corporation Fourth Full Quarter Highlights ($ in Millions) Quarter Year 2023 2023 • Total company sales decreased 2% Revenue $1,882 $7,967 • Acquisitions and FX increased sales by 1% each Y-O-Y Change (2%) (8%) • In local currency, North American sales decreased 3%, or 4% excluding acquisition
Slide 10: Plumbing Products Segment
Plumbing Products Segment Fourth Full Quarter Highlights ($ in Millions) Quarter Year 2023 2023 • Total segment sales increased 1% Revenue $1,204 $4,842 • Acquisitions increased sales by 2% and FX by 1% Y-O-Y Change 1% (8%) • In local currency, North American sales increased 1%, or decreased 1% excl
Slide 11: Decorative Architectural Products Segment
Decorative Architectural Products Segment Fourth Full Quarter Highlights ($ in Millions) Quarter Year 2023 2023 • Total segment sales decreased 7% Revenue $677 $3,125 • Revenue of paints and other coating products Y-O-Y Change (7%) (9%) decreased mid-single digits • PRO paint sales were down slightl
Slide 12: Strong Balance Sheet
Strong Balance Sheet Masco Corporation Balance Sheet Metrics as of 12/31/2023 Cash and cash investments $634M Revolver availability $1,000M Total liquidity $1,634M Gross debt to EBITDA1 2.0x Working capital as a % of sales1 16.0% Adjusted free cash flow conversion rate1 122% 1. See Appendix for reco
Slide 13: Full Year 2024 Outlook
Full Year 2024 Outlook 2024 Adjusted EPS $4.00 – $4.25 2024 Forecasted 2024 Forecasted Adjusted Business Segment Sales Change Operating Profit Margin Plumbing Products +/- LSD ~18.5% Decorative Architectural Products +/- LSD ~18% Total Masco +/- LSD ~17% 13 13
Slide 14: Q&A
3 Q&A Keith Allman Rick Westenberg 14 14
Slide 15: Appendix
Appendix 15
Slide 16: 2024 Estimates
2024 Estimates Item Assumption Tax rate 24.5% General corporate expense ~$95m Interest and other expense ~$105m Capital expenditures ~$200m (includes maintenance capex of ~$75m) Depreciation and amortization1 ~$160m Favorable foreign currency translation impact ~$15m to sales2 Share repurchase or ac
Slide 17: Capital Allocation Strategy
Capital Allocation Strategy Balanced Approach to Continue to Drive Shareholder Value • 1 Capex: 2-2.5% of sales Reinvest in the Business • Working capital: ~16.5% of sales 2 Maintain investment grade credit rating • Target gross debt to EBITDA below 2.5x • Board declared a quarterly dividend of $0.2
Slide 18: Long-Term Outlook
Low ticket, repair and remodel products provide growth and stability through LONG-TERM OUTLOOK an economic cycle Average annual sales growth • Organic: ~3-5% • Acquisition: ~1-3% Market-leading brands, Operating profit margin history of innovation, • Expand margins through cost productivity customer
Slide 19: 2023 Segment Mix
2023 Segment Mix* Business Total Geographic 2023 Revenue R&R% vs. NC NA% v. Int’l Segment Revenue Split Plumbing Products $4.8B 82% 67% 12% Decorative 80% Architectural $3.1B 97% 100% 2% Products 3% 3% Total Company $8.0B 88% 80% North America Europe R&R = % of sales to repair NA = % of sales within
Slide 20: 2023 Channel Mix
2023 Channel Mix* 2023 Channel Mix as a Percentage of Sales Plumbing Decorative Architectural Total Channel Products Products Masco Retail 19% 86% 46% Wholesale/trade/dealer 53% 10% 35% E-commerce 17% 4% 12% Specialty Dealer/Other 11% 0% 7% *Based on Company estimates 20
Slide 21: Profit Reconciliations – Fourth Quarter
Profit Reconciliations – Fourth Quarter ($ in Millions) Q4 2023 Q4 2022 Net sales $ 1,882 $ 1,923 Gross profit, as reported $ 653 $ 545 Rationalization charges 7 23 Gross profit, as adjusted $ 660 $ 568 Gross margin, as reported 34.7% 28.3% Gross margin, as adjusted 35.1% 29.5% Selling, general and
Slide 22: Profit Reconciliations – Full Year
Profit Reconciliations – Full Year ($ in Millions) 2023 2022 Net sales $ 7,967 $ 8,680 Gross profit, as reported $ 2,836 $ 2,713 Rationalization charges 9 32 Insurance settlement (1) (40) - Gross profit, as adjusted $ 2,805 $ 2,745 Gross margin, as reported 35.6% 31.3% Gross margin, as adjusted 35.2
Slide 23: EPS Reconciliation – Fourth Quarter
EPS Reconciliation – Fourth Quarter (in Millions, Except per Common Share Data) Q4 2023 Q4 2022 Income before income taxes, as reported $ 233 $ 159 Rationalization charges 10 23 Impairment charges for goodwill and other intangible assets 15 26 Income before income taxes, as adjusted $ 257 $ 208 Tax
Slide 24: EPS Reconciliation – Full Year
EPS Reconciliation – Full Year (in Millions, Except per Common Share Data) 2023 2022 Income before income taxes, as reported $ 1,238 $ 1,193 Rationalization charges 13 32 Impairment charges for goodwill and other intangible assets 15 26 Fair value adjustment to contingent earnout obligation (1) - (2
Slide 25: Return on Invested Capital and Free Cash Flow Reconciliation
Return on Invested Capital and Free Cash Flow Reconciliation Return on Invested Capital Reconciliation ($ in Millions) December 31, 2023 Net income, as adjusted $ 873 Average invested capital Average shareholders' equity $ (82) Average debt 3,050 Less: Average cash and cash investments (543) $ 2,425
Slide 26: EPS Outlook Reconciliation
EPS Outlook Reconciliation 2024 Low End High End Net income per common share $ 4.00 $ 4.25 Rationalization charges - - Net income per common share, as adjusted $ 4.00 $ 4.25 Amounts may not add due to rounding. 26
Slide 27: Gross Debt to EBITDA Reconciliation
Gross Debt to EBITDA Reconciliation ($ in Millions) December 31, 2023 Debt $ 2,948 ($ in Millions) TTM December 31, 2023 Operating profit, as reported $ 1,348 Rationalization charges 13 Impairment charge for other intangible assets 15 Insurance settlement (1) (40) Operating profit, as adjusted $ 1,3
Slide 28: Working Capital as a % of Sales
Working Capital as a % of Sales As Reported (in Millions) December 31, 2023 Receivables $ 1,090 Inventories 1,022 Less: Accounts payable (840) Working Capital $ 1,272 Working capital as a % of sales (last 12 months) 16.0% Amounts may not add due to rounding. 28
Slide 29: EPS Reconciliation by Quarter – 2023
EPS Reconciliation by Quarter – 2023 (in Millions, Except per Common Share Data) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Income before income taxes, as reported $ 233 $ 346 $ 374 $ 285 Rationalization charges (income) (1) 10 5 1 (3) Impairment charge for other intangible assets 15 - - - Realized (gains) fro