Mohawk Industries, Inc. · NYSE:MHK
Mohawk Industries — Q2 2023 Earnings Presentation
34 slides from Mohawk Industries's earnings presentation, July 2023
Slide 1: The Long View
The Long View mohawkind.com Q2 2023 NYSE: MHK July 2023 Investor Presentation
Slide 2: Forward-looking Statements
Forward-looking Statements This presentation may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties including, but not limited to, those set forth in our press releases and our periodic filings w
Slide 3: Company Overview
Company Overview
Slide 4: Mohawk at a Glance
Mohawk at a Glance $11.3B $1.4B $9.16 $987M Q2 2023 TTM Q2 2023 TTM Q2 2023 TTM Q2 2023 TTM Net Sales Adjusted EBITDA Adjusted EPS Cash Flow from Operations ~ ~ 32 40,900 19 170 Acquisitions Worldwide Countries Countries 2013-2023 Team Members1 with Manufacturing with Sales 1As of December 31, 2022
Slide 5: Three Reporting Segments
Three Reporting Segments Flooring Flooring Global North Rest of the Ceramic America World • 38% Sales Q2 ’23 TTM • 35% Sales Q2 ’23 TTM • 27% Sales Q2 ’23 TTM • North America, Europe, • Primarily U.S./Canada • Europe, Australia/NZ, South America South America, Asia • Residential/Commercial • Floor a
Slide 6: The Long View
The Long View
Slide 7: Growth Strategy
Growth Strategy Non-Organic Market Development Growth & Penetration Mergers & acquisitions Higher sales to existing customers, sales of existing products to new customers & expansion into new markets Operational Product Innovation Excellence & Improvement Simplified operations, Higher-value product
Slide 8: Operational Excellence
Operational Excellence • Reduce manufacturing complexities • Maximize productivity • Continuously improve quality • Leverage differentiated distribution advantages • Invest in assets that drive speed & efficiency • Optimize automation opportunities • Drive better decisions through advanced informati
Slide 9: Three Decades of Expansion
Three Decades of Expansion Strong record of integrating acquisitions while investing for organic growth Established leading Boosted share in Extended presence Expanded global two major ceramic Went public in Established U.S. & EU position sheet vinyl & in the EU ceramic markets – Brazil & 1992; expa
Slide 10: Market Development & Penetration
Market Development & Penetration Expanding sales with existing customers through • Differentiated new product launches • Superior marketing and merchandising • Exclusive retail partnerships/aligned dealerships Entering new sales channels • Ceramic pavers for garden centers, landscapers and pool cons
Slide 11: Product Innovation
Product Innovation CERAMIC TILE CARPET Built-in antibacterial Superior integral 3x the fiber of traditional Combines exclusive protection slip resistance carpet; ultra soft & fibers for next level stain resistant design & performance LAMINATE / WOOD LVT / SHEET VINYL Hyper-realistic visuals; Exclusi
Slide 12: Prudent Financial Management
Prudent Financial Management Generate strong free cash flow, effectively manage working capital & investments Maintain financial flexibility Use excess cash to pay down debt and re-invest in the business Disciplined approach to acquisitions Committed to maintaining investment grade rating 12
Slide 13: Second Quarter 2023
Second Quarter 2023
Slide 14: Q2 2023 Financial Results
Q2 2023 Financial Results Net Sales Q2 Q2 Adjusted EBITDA (Amounts in millions, except EPS) 2022 2023 $3.0B $390M Net Sales $3,153 $2,950 (-9.6 YOY (-24.1% YOY) on a Constant Basis) % Change -- -6.4% % Change on a Constant and -- -9.6% Adjusted OI Adjusted Diluted EPS Legacy Basis $244M $2.76 Adjust
Slide 15: Key Current Issues
Key Current Issues U.S. Economy • Revised Q1 GDP: 2.0%; Q2 advance estimate 2.4% • Historically low unemployment rates • Material and energy inflation declining • Commercial continues to outperform residential • July Architectural Billing Index at 50.9 • Aging housing stock & families staying in cur
Slide 16: Key Current Issues (continued)
Key Current Issues (continued) Operations • Additional restructuring projects initiated; ~$35M annualized savings • Cost-reduction projects ongoing • Capacity expansion projects on schedule • North America: LVT, laminate, quartz countertops • New West Coast LVT plant operating on schedule • Europe:
Slide 17: Global Ceramic Segment
Global Ceramic Segment • Sales: down 6.7% on a constant & legacy basis • Adj. Op. Margin down due to higher inflation, lower volumes & temp shutdowns, partially offset by productivity gains, favorable pricing & product mix • Residential sales soft as inflation & interest rates affect consumer spend
Slide 18: Flooring Rest of the World Segment
Flooring Rest of the World Segment • Sales down 10.2% on a constant & legacy basis • Adj. Op. Margin down due to lower volumes, transactional foreign exchange headwinds & temp shutdowns, partially offset by productivity gains • Flooring under pressure; sheet vinyl outperforming as value alternative
Slide 19: Flooring North America Segment
Flooring North America Segment • Sales down 12.1% on a legacy basis • Adj. Op. Margin down due to unfavorable pricing & product mix, reduced volumes and temp shutdowns, partially offset by lower inflation • Commercial sector continues to outperform residential • Carpet & laminate volumes up sequenti
Slide 20: Outlook
Outlook • High interest rates & consumer inflation persist ▪ Commercial sector expected to continue outperforming residential, though weakness in office channel persists • Believe customer inventory adjustments may have bottomed • Lower volumes resulting in higher costs from unabsorbed overhead • Ad
Slide 21: Outlook (continued)
Outlook (continued) • Selectively implementing promotional activity to increase volumes • Material and energy costs expected to continue declining, benefiting margins as costs flow through P&L • Conservatively managing near term while investing to optimize growth & profitability when markets recover
Slide 22: Financials
Financials MOHAWK:
Slide 23: Earnings Summary (Consolidated)
Earnings Summary (Consolidated) 2019 2020 2021 2022 Q2 TTM Net Sales $9,971 $9,552 $11,201 $11,737 $11,325 % Change -0.1% -4.2% 17.3% 4.8% -3.5% Adjusted EBITDA $1,530 $1,389 $1,949 $1,650 $1,366 % Adjusted EBITDA Margin 15.3% 14.5% 17.4% 14.1% 12.1% Adjusted Operating Income $938 $799 $1,360 $1,083
Slide 24: Results by Segments
Results by Segments 2019 2020 2021 2022 Q2 TTM GLOBAL CERAMIC Sales $3,631 $3,433 $3,917 $4,308 $4,299 % Change 2.2% -5.5% 14.1% 10.0% -0.2% Adjusted Operating Income $344 $234 $406 $457 $368 % Adjusted Operating Margin 9.5% 6.8% 10.4% 10.6% 8.6% FLOORING NA Sales $3,844 $3,594 $4,116 $4,207 $3,991
Slide 25: Maturity Profile
Maturity Profile1 $2,500 July 1, 2023 Total Debt (millions)3 June 2027 EUR Note $546 63% Floating May 2030 USD Note $500 37% Fixed Avail. Term Loan USD $675 Average rate 3.90% Revolver2 Term Loan EUR $240 $2,000 USCP/Revolver $616 ($442) Term Loan ECP/Revolver $407 Leases/Other $74 ECP/Revolver Tota
Slide 26: Reconciliation Tables
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Slide 27: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures NET EARNINGS TO ADJUSTED EBITDA (Amounts in thousands) Q2 2022 Q2 2023 Net earnings including noncontrolling interests 280,510 101,214 Interest expense 12,059 22,857 Income tax expense 78,176 26,760 Net (income)/loss attributable to noncontrolling interests (79) 3
Slide 28: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures ADJUSTED OPERATING INCOME (Amounts in thousands) Q2 2022 Q2 2023 CONSOLIDATED Operating income 367,927 153,046 Adjustments to operating income: Restructuring, acquisition and integration-related and other costs 1,899 41,660 Inventory step-up from purchase accounti
Slide 29: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures ADJUSTED OPERATING INCOME (Amounts in thousands) 2019 2020 2021 2022 Q2 TTM Operating income (loss) $ 827,224 636,002 1,335,011 244,217 (165,675) Adjustments to operating income (loss): Restructuring, acquisition and integration-related and other costs 107,201 163
Slide 30: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures RECONCILIATION OF NET SALES TO ADJUSTED NET SALES (Amounts in thousands) Q2 2022 Q2 2023 CONSOLIDATED Net Sales $ 3,153,188 2,950,428 Adjustment for constant shipping days - 17,305 Adjustment for constant exchange rates - 19,376 Adjustment for acquisition volume -
Slide 31: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures ADJUSTED OPERATING INCOME (Amounts in thousands) 2019 2020 2021 2022 Q2 TTM GLOBAL CERAMIC SEGMENT Operating income (loss) $ 335,639 167,731 403,135 (236,066) (343,322) Adjustments to operating income (loss): Restructuring, acquisition and integration-related and
Slide 32: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures ADJUSTED NET EARNINGS (Amounts in thousands, except EPS) 2019 2020 2021 2022 Q2 TTM Net earnings attributable to Mohawk Industries, Inc. $ 744,211 515,595 1,033,159 25,247 (319,058) Adjusting items: Restructuring, acquisition, integration-related and other costs 9
Slide 33: Reconciliation of Non-GAAP Measures: Net Debt
Reconciliation of Non-GAAP Measures NET DEBT (Amounts in thousands) 2020Q4 2021Q4 2022Q4 2023Q2 Current portion of long-term debt and commercial paper $ 377,255 624,503 840,571 1,038,032 Long-term debt, less current portion 2,356,887 1,700,282 1,978,563 2,013,327 Total debt 2,734,142 2,324,785 2,819
Slide 34: Q2 2023 Investor Presentation
Q2 2023 Investor Presentation For additional information, please visit mohawkind.com 34