Masco Corporation · NYSE:MAS
Masco — Q4 2022 Earnings Presentation
28 slides from Masco's earnings presentation, Feb 9, 2023
Slide 1: Fourth Quarter and Full Year 2022 Earnings Presentation
Fourth Quarter and Full Year 2022 Earnings Presentation February 9, 2023
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 John Sznewajs 3 Q&A Keith Allman John Sznewajs 3
Slide 4: Summary of Results
1 Summary of Results Keith Allman 4
Slide 5: Q4 2022 Review
Q4 2022 Review Top line decreased 5% with lower volumes partially offset by pricing actions International Plumbing grew 7% in local currency PRO paint business grew mid-single digits against an over 50% comp in Q4 2021 Reduced SG&A $22 million to 17.4% of sales Achieved adjusted EPS of $0.65 per sha
Slide 6: Full Year 2022 Review
Full Year 2022 Review Drove top line growth of 4% for two-year growth of 21% Grew adjusted EPS to $3.77 per share Behr Paint earned second consecutive Partner of the Year Award from The Home Depot Repurchased 16.6 million shares for $914 million, ~7% of outstanding shares Achieved a return on invest
Slide 7: Financial / Operations Review
2 Financial / Operations Review John Sznewajs 7
Slide 8: Masco Corporation Quarter Highlights
Masco Corporation Fourth Full Quarter Highlights ($ in Millions) Quarter Year 2022 2022 • Total company sales decreased 5% Revenue $1,923 $8,680 • Sales decreased 2%, excluding the impact of currency Y-O-Y Change (5%) 4% • In local currency, North American sales decreased 5% Operating Profit* $234 $
Slide 9: Plumbing Products Segment
Plumbing Products Segment Fourth Full Quarter Highlights ($ in Millions) Quarter Year 2022 2022 • Total segment sales decreased 3% Revenue $1,196 $5,252 • Sales increased 2%, excluding the impact of currency Y-O-Y Change (3%) 2% • In local currency, North American sales decreased 1% Operating Profit
Slide 10: Decorative Architectural Products Segment
Decorative Architectural Products Segment Fourth Full Quarter Highlights ($ in Millions) Quarter Year 2022 2022 • Total segment sales decreased 8% Revenue $727 $3,428 • Revenue of paints and other coating products Y-O-Y Change (8%) 6% decreased mid-single digits • PRO paint sales grew mid-single dig
Slide 11: Strong Balance Sheet
Strong Balance Sheet Masco Corporation Balance Sheet Metrics as of 12/31/2022 Cash and cash investments $452M Revolver availability $1,000M Total liquidity $1,452M Net leverage1 1.8x Working capital as a % of sales1 17.4% 1. See Appendix for reconciliation. 11 11
Slide 12: Full Year 2023 Outlook
Full Year 2023 Outlook 2023 Adjusted EPS $3.10 – $3.40 2023 Forecasted 2023 Forecasted Adjusted Business Segment Sales Change Operating Profit Margin Plumbing Products (10-14%) ~16% Decorative Architectural Products (5-10%) ~16% Total Masco (~10%) ~15% 12 12
Slide 13: Q&A
3 Q&A Keith Allman John Sznewajs 13
Slide 14: Appendix
Appendix 14 14
Slide 15: 2023 Estimates
2023 Estimates Item Assumption Rationalization charges ~$10m Tax rate 24% General corporate expense ~$90m Interest and other expense ~$115m Capital expenditures ~$250m (includes maintenance capex of ~$75m) Depreciation and amortization1 ~$150m Favorable foreign currency translation ~$10m impact to s
Slide 16: Capital Allocation Strategy
Capital Allocation Strategy Balanced Approach to Continue to Drive Shareholder Value 1 Reinvest in the Business • • Capex: 2-2.5% of sales 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 17: Long-Term Outlook
Low ticket, repair and remodel products provide growth and stability LONG-TERM OUTLOOK through an economic cycle Average annual sales growth • Organic: ~3-5% • Acquisition: ~1-3% Market-leading brands, Operating margin history of innovation, customer focus • Expand margins through cost productivity
Slide 18: 2022 Segment Mix
2022 Segment Mix* Business Segment 2022 Revenue R&R% vs. NC NA% v. Int’l Total Geographic Revenue Split Plumbing Products $5.3B 83% 68% 12% Decorative 80% Architectural $3.4B 97% 100% 2% Products 4% 2% Total Company $8.7B 89% 80% North America Europe R&R = % of sales to repair NA = % of sales within
Slide 19: 2022 Channel Mix
2022 Channel Mix* 2022 Channel Mix as a Percentage of Sales Plumbing Decorative Architectural Total Channel Products Products Masco Retail 21% 85% 47% Wholesale/trade/dealer 51% 11% 34% E-commerce 16% 4% 11% Specialty Dealer/Other 12% 0% 8% *Based on Company estimates 19
Slide 20: Profit Reconciliations – Fourth Quarter
Profit Reconciliations – Fourth Quarter ($ in Millions) Q4 2022 Q4 2021 Net sales $ 1,923 $ 2,022 Gross profit, as reported $ 545 $ 619 Rationalization charges 23 2 Gross profit, as adjusted $ 568 $ 621 Gross margin, as reported 28.3% 30.6% Gross margin, as adjusted 29.5% 30.7% Selling, general and
Slide 21: Profit Reconciliations – Full Year
Profit Reconciliations – Full Year ($ in Millions) 2022 2021 Net sales $ 8,680 $ 8,375 Gross profit, as reported $ 2,713 $ 2,863 Rationalization charges 32 4 Gross profit, as adjusted $ 2,745 $ 2,867 Gross margin, as reported 31.3% 34.2% Gross margin, as adjusted 31.6% 34.2% Selling, general and adm
Slide 22: EPS Reconciliation – Fourth Quarter
EPS Reconciliation – Fourth Quarter (in Millions, Except per Common Share Data) Q4 2022 Q4 2021 Income before income taxes, as reported $ 159 $ 192 Rationalization charges 23 2 Impairment charges for goodwill and other intangible assets 26 45 Pension (reversion) charges associated with terminated pl
Slide 23: EPS Reconciliation – Full Year
EPS Reconciliation – Full Year (in Millions, Except per Common Share Data) 2022 2021 Income before income taxes, as reported $ 1,193 $ 688 Rationalization charges 32 4 Impairment charges for goodwill and other intangible assets 26 45 Pension (reversion) charges associated with terminated plans - 415
Slide 24: Return on Invested Capital Reconciliation
Return on Invested Capital Reconciliation Return on Invested Capital Reconciliation ($ in Millions) December 31, 2022 Net income, as adjusted $ 875 Average invested capital Average shareholders' equity $ (103) Average debt 3,055 Less: Average cash and cash investments (689) $ 2,263 Return on investe
Slide 25: EPS Outlook Reconciliation
EPS Outlook Reconciliation 2023 Low End High End Net income per common share $ 3.06 $ 3.36 Rationalization charges 0.04 0.04 Net income per common share, as adjusted $ 3.10 $ 3.40 25
Slide 26: Net Leverage Reconciliation
Net Leverage Reconciliation ($ in Millions) December 31, 2022 Debt $ 3,151 Less: Cash and cash investments (452) Net Debt $ 2,699 ($ in Millions) TTM December 31, 2022 Operating profit, as reported $ 1,297 Rationalization charges 32 Impairment charges for goodwill and other intangible assets 26 Oper
Slide 27: Working Capital as a % of Sales
Working Capital as a % of Sales As Reported (in Millions) December 31, 2022 Receivables $ 1,149 Inventories 1,236 Less: Accounts payable (877) Working Capital $ 1,508 Working capital as a % of sales (last 12 months) 17.4% 27
Slide 28: EPS Reconciliation by Quarter - 2022
EPS Reconciliation by Quarter - 2022 (in Millions, Except per Common Share Data) Q4 2022 Q3 2022 Q2 2022 Q1 2022 Income before income taxes, as reported $ 159 $ 310 $ 397 $ 327 Rationalization charges 23 - 6 3 Impairment charges for goodwill and other intangible assets 26 - - - Fair value adjustment