Masco Corporation · NYSE:MAS
Masco — Q2 2023 Earnings Presentation
23 slides from Masco's earnings presentation, Jul 27, 2023
Slide 1: Second Quarter 2023 Earnings Presentation
Second Quarter 2023 Earnings Presentation July 27, 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 David Chaika 3 Q&A Keith Allman David Chaika 3
Slide 4: Summary of Results
1 Summary of Results Keith Allman 4
Slide 5: Q2 2023 Review
Q2 2023 Review Top line decreased 10% with lower volumes partially offset by pricing actions Grew adjusted gross margin 320 bps to 36.2% Expanded adjusted operating profit margin 140 bps to 19.0% Achieved adjusted EPS growth of 3% to $1.19 per share Repurchased 0.5 million shares for $25 million Ent
Slide 6: Financial / Operations Review
2 Financial / Operations Review David Chaika 6
Slide 7: Masco Corporation Quarter Highlights
Masco Corporation Second Quarter Quarter Highlights ($ in Millions) 2023 • Total company sales decreased 10%, or 9% excluding Revenue $2,127 the impact of currency Y-O-Y Change (10%) • In local currency, North American sales decreased 10% Operating Profit* $404 • In local currency, international sal
Slide 8: Plumbing Products Segment
Plumbing Products Segment Second Quarter Quarter Highlights ($ in Millions) 2023 • Total segment sales decreased 11%, or 10% excluding Revenue $1,225 the impact of currency Y-O-Y Change (11%) • In local currency, North American sales decreased 12% Operating Profit* $245 • In local currency, internat
Slide 9: Decorative Architectural Products Segment
Decorative Architectural Products Segment Second Quarter Quarter Highlights ($ in Millions) 2023 • Total segment sales decreased 8% against a 15% comp Revenue $902 Y-O-Y Change (8%) • Revenue of paints and other coating products decreased mid-single digits Operating Profit* $180 • PRO paint sales de
Slide 10: Strong Balance Sheet
Strong Balance Sheet Masco Corporation Balance Sheet Metrics as of 6/30/2023 Cash and cash investments $380M Revolver availability $1,000M Total liquidity $1,380M Net leverage1 1.8x Working capital as a % of sales1 18.9% 1. See Appendix for reconciliation. 10 10
Slide 11: Full Year 2023 Outlook
Full Year 2023 Outlook 2023 Adjusted EPS $3.50 – $3.65 2023 Forecasted 2023 Forecasted Adjusted Business Segment Sales Change Operating Profit Margin Plumbing Products (10-12%) ~17% Decorative Architectural Products (8-10%) ~17% Total Masco (~10%) ~16% 11 11
Slide 12: Q&A
3 Q&A Keith Allman David Chaika 12
Slide 13: Appendix
Appendix 13 13
Slide 14: 2023 Estimates
2023 Estimates Item Assumption Rationalization charges ~$5m 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 sa
Slide 15: 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 3 Maintain relevant dividend • • Current annu
Slide 16: 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 17: 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 $8.7B 89% 80% North America Europe R&R = % of sales to repair NA = % of sales within
Slide 18: 2022 Channel Mix
2022 Channel Mix* 2022 Channel Mix as a Percentage of Sales Plumbing Decorative Architectural Total Channel Products Products Masco Retail 21% 85% 47% Wholesale/trade/dealer 51% 11% 34% E-commerce 16% 4% 11% Specialty Dealer/Other 12% 0% 8% *Based on Company estimates 18
Slide 19: Profit Reconciliations – Second Quarter
Profit Reconciliations – Second Quarter ($ in Millions) Q2 2023 Q2 2022 Net sales $ 2,127 $ 2,352 Gross profit, as reported $ 769 $ 769 Rationalization charges 1 6 Gross profit, as adjusted $ 770 $ 775 Gross margin, as reported 36.2% 32.7% Gross margin, as adjusted 36.2% 33.0% Selling, general and a
Slide 20: EPS Reconciliation – Second Quarter
EPS Reconciliation – Second Quarter (in Millions, Except per Common Share Data) Q2 2023 Q2 2022 Income before income taxes, as reported $ 374 $ 397 Rationalization charges 1 6 Fair value adjustment to contingent earnout obligation (1) - (28) Income before income taxes, as adjusted $ 375 $ 375 Tax at
Slide 21: EPS Outlook Reconciliation
EPS Outlook Reconciliation 2023 Low End High End Net income per common share $ 3.48 $ 3.63 Rationalization charges 0.02 0.02 Net income per common share, as adjusted $ 3.50 $ 3.65 21
Slide 22: Net Leverage Reconciliation
Net Leverage Reconciliation ($ in Millions) June 30, 2023 Debt $ 3,025 Less: Cash and cash investments (380) Net Debt $ 2,645 ($ in Millions) TTM June 30, 2023 Operating profit, as reported $ 1,254 Rationalization charges 21 Impairment charges for goodwill and other intangible assets 26 Operating pr
Slide 23: Working Capital as a % of Sales
Working Capital as a % of Sales As Reported (in Millions) June 30, 2023 Receivables $ 1,371 Inventories 1,144 Less: Accounts payable (958) Working Capital $ 1,557 Working capital as a % of sales (last 12 months) 18.9% 23