Fortune Brands Innovations (FBIN) 27 Jul 232023 Q2 Earnings call transcript

Hello. My name is Shamali, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands Second Quarter 2023 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to Leigh Avsec, Vice President of Investor Relations and Corporate Affairs.

You may begin the conference call.

welcome Fortune and Quarter Innovations everyone, Call. Earnings afternoon, to Brands the Second Good had to on a release has our everyone Hopefully, chance web acquisition well for supplemental recent financials. and review posting additional most information our as as our earnings the

the and in section earnings be release this can fbin.com audio our The of of our replay call found Investors website.

undertake either session, in everyone we expectations outlook make based actual call and results or today, I the current statements revise obligation forward-looking on cause various currently in to statements, or uncertainties remarks from question-and-answer forward-looking those any want our be may in except that to and prepared anticipated. our not These and are to remind filings law. on with are that may associated our The required certain any the differ are market SEC. by detailed subject to update risks the risks as materially does company

to operating call will Any website reconciliations. today's per before on visit our results specified. unless free on charges Please in profit a or our otherwise earnings references our gains flow focus basis cash or for margin, and share

Executive are Officer. the Officer; on our Chief With me and our Nick Fink, Barry, call today Dave Chief Financial

time Following allowed prepared our remarks, questions. we to some address have

turn I will the now call over Nick? to Nick.

joining today. us and for Leigh, everyone you, to Thank you thank

performance Dave results XXXX, how forecasts, and turn thinking the sales we and our discussion year of increase guidance. and revisions then strategic of and meaningfully leading discuss thoughts these I walk also and XXXX a how accelerate of some will and the market second through for offer performance. our call, to key expect this remainder full quarter the highlights brands our we our On to acquisition call to I EPS contribute upward macro the on are recent our will about over the to including to initiatives I'll environment. our financial

Turning to our second quarter performance.

the strength and demonstrate this resilience results we actions took quarter the Innovations. and Our Brands Fortune of

strong remains amidst and sales solid that margin delivered external teams environment an results Our dynamic.

on all we brands us Our environment thank to our focused want welcome to going to your well excellence, I dedication our our to Together, current again, associates continue are Innovations. pursuit for our build results. associates are of and advantaged Fortune leading relationships company. of innovation drove meaningful in an positioned and channel the Brands exceptional and newest and

year, billion in X% our Net were the prior the operating versus $X.X sales XX%. was of and down quarter margin

were ability for XX results above key our above invest initiatives, demonstrate estimates growth in protect the margins These Our points top basis our the challenging and results environment. strategic in market. our line to even grow market,

generated margin earnings Our performance $X.XX. per share sales and of

knew second we that As into earnings were on year-over-year uniquely call, up heading last discussed the quarter, against we we challenging coming comparisons. our

As growth of first not the we ramp-up was that of experienced we expected, saw at quarter versus same XXXX. sequential levels the point-of-sale XXXX. we exceptional in dollar It

XXXX. and our slowdown began second inventory destocking the the a As of the reminder, in for half products in market major

our quarter homes. their XXXX investing second the quarter demonstrating in sales of than higher results second fact, in in continue In consumers organic XX% interested be that to XXXX, were

of preserving additions, we XXXX. that investments, including margins results meaningful key building, the prioritize transformation. reflect second while believe focus half I quarter are outgrowing cash, positioned very we well capacity head digital Our unwavering into our this innovation on all to and our market, generating the continuing brand as and thoughtful

thoughts market some Turning U.S. the for market the current now and to on our housing products.

positioned products demand, market in brands This is shortly. for and on pent-up in housing, touch medium- remodel. long-term I'll remodel. demand our for construction for and business housing and to that our There construction stated, in significant As both optimally opportunity outstrips we which have and and supply a consistently factors will new driven repair demand U.S. both repair in with the result new strong several by together tailwinds our creates

new Starting with construction.

home building particularly with sales despite enjoys inventories production and reported, in remain fared As severely builders higher large Brands market better the dynamic Existing relationships, has whom lows, have housing than home underbuilt. anticipated marketplace providing responding challenges buydowns. a rate to rates. construction including new interest near U.S. has incentives, the as Fortune been strong affordability Builders, inventory been by widely remains historic spec

a rate. is new at of are and homes year been again increasing, more new have starts completions. throughout also increasing manageable Sales of the homes outpacing much albeit backlog The

revised With economic that continuing for full volatility a we of outlook for potential and the the remainder for a upward recession. backdrop, while construction monitor the to have as our new single-family year,

to Turning R&R.

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with X%, into home of combined under over fact are have and lack to XX% that the the inclined current more in the people means want. First, the stay that mortgages existing they home inventory, are they place of make

strong to extremely an of which high in return. offered given estate home of Next, high rates asset, confidence consumers levels the have equity real and investments, continue have their as financial stability personal homes and

age. and XXXX's prime R&R is built Finally, boom old, during over homes early XX years are home coming the into the average

place Additionally, investing limited need prefer to aging generation and in of trends upgrades their homes These other affordability are and continues homebuyers millennials the purchasing in available inventory of and demographic baby supportive to due homes, are and all boomer concerns. remodel. first-time in while repair

and and enjoy and improvement ticket a them. products of because tied items less innovation immediate and because our on sales to equity home are We want levels. are like R&R believe dependent age meaningful items, that disruptive In shows and employment the data home Our install buy are our consumer insulated more to they other factors are people they products offer our because house instead, than more confidence, to they to relatively aesthetic short, existing are or products functionality smaller home. less

That respond closely, will quickly aware environment, the watching uncertainty we warranted. the are said, inherent we are market macro and if we broader of in and conditions

our $X.XX to most $XXX the half XXXX great I'm from high and Schaub $X.XX provide will $X.XX and and acquisition accretive color million the X disciplined extremely Emtek of the world-class residential recent of This to these purchase amortization. price expect excited at into to to be for now $XXX our premium the example but and acquisition XXXX, about we business. in to luxury second ASSA and is even of Yale hardware M&A. after a deal to and Turning to Dave level, with business approximately ABLOY, Canadian businesses this U.S. lock acquisition. for door recent smart August more EPS and million, a P&L in sales businesses our be of factoring approach numbers,

space a portfolio. and look margins Emtek Fortune business. fantastic driving House our customer entire complement will the and demonstrated skill these hardware phenomenal forward the also market-leading designed for The be while team's highly to service Schaub luxury across margins to of brands maintaining are the high and brands we leveraging Brands at in the Rohl products exceptional, are in

global will and now an Including offering annual hospitality $X.X expand Emtek the in the luxury acquisition our allow will in home. in design over offerings meaningful. us cohesive and platform luxury This showrooms, market throughout be finishes our and potential authentic to further product presence sales become luxury house, Schaub, synergies are luxury the penetrate billion

strong consumer secular speaks remains distinctive the products and and our in to storied growing is Our portfolio and trend. demand we interested with brands increasingly believe quality, luxury

businesses security of portfolio smart residential consist a August and Yale The IP strong brands digital with exceptional talent. innovative and

XXX roughly software added brands in-house we've and we acquisition, across will new time. the portfolio of of leverage engineers platforms part who hardware As supporting our over

a and door connected will retail security innovation lock business, door and system. allow including expand integrated fully entry the smart and across omnichannel potentially this our addition, ecosystem wholesale residential broaden to In development acquisition transformative brands, accelerate our us our of

the significant. again, synergies potential Here for is

acquisition This in key to as tailwinds. as in channels be and growth It spaces accelerant with will categories us well high-growth existing new to expand allows strategy. our a secular

key in of this transformation Importantly, through a August, is innovative our into digital a step and addition disruptor. the acquisition Yale

to for global with of and addition existing will Combined our with our Rohl Schuab, Further, the into the powerhouse home. strategy build accelerate entire materially of a luxury the Fortune Emtek we House now that will market base, to the brands knowledge new the platforms to kind. Brands of the services the bring business, and first the growth and be their have and we disruptive products

for Overall, term. the Fortune well near is both term Brands Innovations long positioned the and

powerful value-add Our in branding moats in the distribution power, and economic of in and are broader channel times times uncertain accelerants meaningful and growth. multistep innovation strength

the branding, acquisition August of Emtek, provide complement innovation our leading will opportunities nicely channel. Our brands growth and Yale Schuab, strategic focus on and and recent

structure together enable as our demonstrated quarter. positioned uniquely in the this all and Brands' environments our aligned results are capabilities brands this market to Our newly Fortune outperform outperformance our past will with

full raising will more free in As confidence we Fortune guidance. in the our guidance full and details, year are Dave business. announced afternoon, the sales Brands release and this cash EPS but this raising reflects give our year our again, increase flow we

performance, through prior Before market, to reflect impact which I new the second XXXX. that slowed the plus the digested of to year impact both of would now the half in slowdown second I like business. That comparisons turn individual of our everyone being quarter challenging is businesses' construction results remind the XXXX abruptly single-family our

due to sales declined the market-driven to offset declines segment, across X% second quarter the partially In Innovations volume Water price. year compared by prior quarter, the

Our XX.X%. margins were for the segment

builders strong top The with the customers in long-standing decision invest results. production business strategic key with and these Moen U.S. to tangible U.S. relationships our yielded has relationships our

the general saw as market In DIY retail, slowed. more we consumer softness market

XXXX Aqualisa high organically, sales Rohl of comps of quarter teens quarter, down second single for House the high Our and impact the including up a reflecting digits were brands total market. low softer and

as and expect For of with designs unique resonate to year, differentiated we to flat luxury be who our increasingly seeking craftsmanship the values full continues is story our sales in our quality. goods we organic and the of brands to U.K., global the We capacity recently will as the business expect perform announced to the building of meet a well. help which facility continue needs new timeless consumer,

the were year-over-year. quarter reflects This sales shutdown. of the COVID XXXX, the In China, XX% Shanghai was lapping which up second of by impact marked over

We consumer also saw the Chinese remains and higher-than-expected remains although overall cautious. completions the soft market project

the our increasingly continue on are capitalize on positions emerging housing we leadership Chinese where Chinese market market. the are focused R&R positioned we and within to However, well

we high For now year, down the single China sales to expect digits. full be

which by price. In by so sequentially quarter improvement the far. reflecting expected Outdoors, offset July XX%, partially sales saw encouraged throughout and are market sales declined softness, We was results

which We are model. operating aligned XX of operating points XXXX pleased than of the our proof margin a our results and second basis newly our quarter point is is XX.X%, of with higher success

to continue best brands well demand all while customers in are our partners, to patterns positioned will on of changes which across our and serve any channel focusing products. to believe differentiate We also to the making further are and innovations, Outdoors we respond our investments

trends in we exited consumers sales up indeed sales continued increasingly value Wholesale same of interest were throughout the single quarter In quarter, understood In and high alike. pros reacceleration decking, versus the and category teens this recent proposition consumer the XXXX. POS quarter, the improved by as digits. sellout is strong the June high down and of

of to comparing sequential XXXX, we sales QX increase than by when XX%. However, more saw

been POS Our with quarter, the are and we the July, buys June our the purchases that have but their beginning above market. were channel inventory shows accelerating and partners in conservative of growing inventory into data in

new declined In Therma-Tru. low teens construction from Doors, XXXX single-family the market impacted sales slowdown the as

parts long-term the market, offerings, share market the with including as of maintain and in grow partners relationships new and to single-family and look the our confident construction as are well key channel We of long-standing the product customers in advantage our our we opportunity attractive the strength most in as market.

and Security, the price quarter. sales and driven increased commercial growth international prior in were in over X% These results year continued markets. Lastly, by

previously have Security and trade many operations supply the brands our share their partners, on with products structure chains. mentioned, iconic Water their the consumers and key importance businesses a similarities, we As focus and of and connected including of strategic

used first are continues becoming business Brands' Fortune business the we results playbook Security apparent. implement Water The transform and advantaged X our to years ago the to that

power Going of will team higher-margin continue to forward, developing this brands business, business into a driving and the meaningful to focused innovation. the work our evolve higher-growth, on

few meaningful this Fortune Before We for I Brands share thoughts. quarter to prepare past a turn me growth. Dave, the continued took call steps to let final

progressed has Our we more focusing apparent impact a results. into efficient more channel engagement brands, the company, to centralized from teams on reorganization our strong and and anticipated, than quickly the in innovation thanks our was

growth our to margin made targets. progression with align our chain We to important areas changes supply and

key our exciting larger that innovation. on and growth meaningful an transformative digital we've drive potentially in strategy. expect we accelerate priorities, We finally, our and continued to strategic invest to acquisition transformation including iconic closed brands, And our

to As highly into achieve following excited we X the separation, highlighted encouraged will took transform XXXX innovative all we Fortune Brands we actions in accomplished months company. and I designed about we've last by were year, our next. am growth-focused, a that what

As characteristics. indicators are term, disruptions. our consumer revised longer-term we potential by for growth full of to We're ourselves reflected outperformance guidance, constantly accelerating prepared well while mindful market see fundamental monitoring positive also the in the end uncertain to short-term year healthy of position in supported and in a some respond short markets while we being

margins. and on As and second we above-market head into are delivering focused the execution our of to commitment growth XXXX, on sales we half

to the With call that, I'll Dave. turn over

Thanks, Nick.

on best and will ongoing business charges income a before reflect my As performance. focus to comments gains reminder,

be noted. unless last comparisons against same Additionally, the otherwise will year, made period

start results. quarter with me our second Let

highlighted, comparables last Nick quarter new in this amid the As construction. impact teams and single-family abrupt year's executed well slowdown our challenging of

Our were $X.X results margin dedication. and were share reflected was per million, billion, $X.XX. company operating down income $XXX was and XX%, consolidated down their operating Total XX%. X% earnings Sales

quarter sales price. was tracked impact POS. single-digit channel in results. the largely our offset low high consolidated which digits, not by in down did inventories was Volume second Our Changes single partially

efforts. As in to inventory fixed margin we we first be and related production impacted costs discussed heavily by expected inefficiencies previously, half the XXXX to reduction stranded our of operating

organic our inventory at quarter finished inventory We $XXX our down XXXX continue million quarter near-term and third progress against target our $XXX from million, peak. second to roughly reduction make excellent

impact half included to the these Our million. of XX% margin than P&L second in impact efforts, quarter more million $XX operating a roughly the first $XX from bringing total

mix. forecast service forward, improve aligned accurately on our levels and continued to focus Going our inventory should organizational healthier supply structure ability more chains with and

margins pleased our growth, preserving cash. above-market While second remain and quarter and our with we focused on results, enhancing are including outperformance, teams driving generating

cash on focus growth team enabled continued strategic has key these the flow. performance strong drive and metrics Our both to investments

later, I outcomes value. various As manage through and the to while will shareholder deploying additional we remains drive our detail have economic flexibility capital strong, to balance sheet

Water more FX. on Innovations, $XXX me were the segment and X% color Now of acquisition provide and let The X%, with sales net Aqualisa down million, our excluding results. Beginning sales impact down the was lower income Water partially operating of impact volumes, offset XX.X%, by the and partially reflecting by and was initiatives. reflect results continuous price. price offset lower operating volumes, margin Innovations' $XXX million, improvement

expectations down Our slowdown Rohl point-of-sale with outside and double low of which House sales, to down low pronounced the and given year sales performance digits strong single our single-family for teens, construction. States. line were comparable year our up prior prior Moen was most acquisition, while and due high total new was Aqualisa were challenging period in organic digits, market softness, primarily the comparables United excluding in

starts see shutdown and Shanghai completion region. for emerging that That delayed in Chinese consumer due market China the strength Chinese year's our COVID of sales to home and remains market of as cautious. and than the accelerating, remains said, are though following growth comparable to the are positioned an is leadership. the sales in-country of we R&R expertise brand our channels moderating continue impacted outperformance to acutely The primarily prior more the and due soft grew projects easy new XX%, the

million, to Turning XX%. XX%. million, Outdoors. $XXX was Sales Segment down income down $XX.X operating were

volume the teens. Importantly, plant sequentially our price low and margins prior improved were driven both down Door XX.X% productivity. sales to versus year leverage, and by

lower by new As POS the slowdown single-family challenging construction expected, sales and were comparables. from volumes XXXX the impacted in

outlook. new above impacted by business the construction market, should wholesale and business positively is be performing improved the our However,

In the roughly full mentioned, decking, accelerate we expect quarter to POS as and to through year sales continue to saw year. be Nick flat prior

basis in Security, reflecting was million, up increased Security's X% was Finally, strength $XX price X%, operating XX points. segment sales XX.X%, in and XXXX. security. operating margin distribution, increased continued and up income versus international commercial Segment

team This business over be the growth, where drive higher share attractive transform business higher-margin integration customer innovations Our August our will work focused to and asset. time. strategy categories Yale on our to by and the and gains consumer accelerated a of brands Security into continues can

performance. sheet Turning balance to flow and the our cash

cash Our and recent strong our debt-to-EBITDA leverage acquisition at $XXX the net remains net of over of $X.X generate net impact to ratio cash leverage leverage This with debt billion sheet to flow. strong million, the business balance ratio expect of continues and as we X.Xx. our reduce reflects time

in million of quarter, free cash flow free generation bringing million. We our generated $XXX cash first to $XXX the half

balance reduction our efforts shrink working cash. to capital Our sheet generate and continue

results solid slowdown ABLOY sales acquisition of in our overcoming the we while assets. period provide now guidance in year impact a update the strong challenging XXXX. With in of To ASSA and prior delivered that most I'll environment market mind, comparables of quarter, construction inclusive single-family new margin and to summarize in an the the the fluid the XXXX of

As our second and indicated of amortization. sales earnings to presentation, XXXX, to share from $X.XX. and the million to includes generate unfavorable is half expected the purchase release our $X.XX impact approximately for of of supplemental $X.XX million in net This of $XXX acquisition price per $XXX the in

We year to expect outlook an of from consolidated operating acquisition, to now assumptions, the X% for on the we Based full expect impact operating we construction, our full down an an On purchase continue now X% the to acquisition. to reflecting or revised impact margin ASSA X% the XX.X%. of XX% price XX.X%, between amortization margins basis. around expect organic be and basis, organic market U.S. single-family be include on which down plus flat Fortune improved new Brands' to sales year

to we midpoint narrowing an release organic our our businesses overall As of $X.XX today's the $X.XX and increasing guidance in EPS reflecting by the improving market. performance posting and the and range web acquisition to press $X.XX, our indicated, are supplemental

reminder, outperformance. a guidance quarter previously first earnings EPS operational XXXX we call, raised As our our our during reflecting

So over guidance updated in the reflects $X.XX midpoint a EPS guidance. increase total, our our initial of

we ahead beginning In the into or the head forth to year. we remain put at targets the second guidance closing, of half of tracking as XXXX, of we this

We improvements have sales and solid significant delivered margins generation. our results, in cash made managed

done of the and confident job come future of few as the half the back we remain XXXX, the navigating teams the about past of a uncertainty into we Our have fantastic business. years,

the open Leigh? pass Leigh I call questions. for the will now to to back call

our concludes That Dave. Thanks, prepared remarks.

will We you limit be number like to who ask of you X, additional will reenter Since questions. of questions number ask a taking question, would that now to then begin questions. may a there limited a your I and the to queue ask initial

to will over now back operator I session. to the turn question-and-answer begin the the call

Operator, open you. can line the you Thank for questions?

the Our [Operator line of with question comes Ng Jefferies. Instructions] first from Phil

typically the much out? Appreciate calling from drivers? the some color what's in kind some provide million. asset up? deals, opportunities? think ramping I It's great to are you're growth insights million of sales looks investor you synergies cross-selling about deal. cross-selling up good confidence you past the $XXX what you're the It big strong the of pretty you $XX do on on you How in And think that it's million Can giving I And XXXX. the deck. Nick, $XXX like bake don't anticipating million with some on see stepping to got $XX growth

one say the is variety seen is the a is exceptional we we other at pay really for We've asset these of Fortune together and of great portfolio. asking items, great to Happy come putting with one then being backed of price really we've this a then by a thirdly, deals to seen. disciplined be the crossroads the that looking some time. which the fantastic over And obviously excellent an for portfolio. the done X more of unlock where disciplined And of brands value really and things thanks but variety approach intersection team; third teams, the and Brands really add in around opportunity the disciplined little brands I'd elaborate try our to but itself; also question. really value, part sits wonderful but to by This deals a Phil, through a deals can growth bit. around

And and kind of so a the business. Emtek to foundational pillars start it's I'd happy if with I'll then give elaborate just helpful. one, key actually But couple you

that in chain of and So colors Emtek doing luxury often approach service, choices very and incredible those margins. really, Schuab, that design-led, hardware really all supply bringing together. lot things for at the really a see something you and leader very designers, and of fantastic category, concierge a Not

when X really consumers organic share take of results north And the the right? that's the we'll in can platform you has those resonating and outperform billion, at outgrowing Rohl have House a really, together here, and which and putting global over platform, we and look the with designers. By continues market of see $X.X is market reach, to time, now things

work a route, way design backing it, but a unlock be our and channel necessarily as And types being with even designer a gets an but together works matching, a provide the do of or we company. way where things to overlapping solution entire all our the it of distribution to channels, really really do that able in consumer in color where the elements work something together, for in whether distribution, not but a have want overlap collections they like put together then

And so example. an that's

it. from more can to August getting something you connected a powerful way, and And side, learn then it learning which they've you in together. made, things I platform. agile greater but other engineers, the bring could of bring we've think over products right? business huge as in first and we bring be that thoughtful is about think done The kind very, the it, set, fast in we many how by what And about business, is those potentially be that we happy when X That go unlock we we're and there transformational Yale very of really that platform it we're the unlock way connected really product tech August, skill with, itself, already think as a think first. driving the the to ability and and generally, exponentially see and really that the I we working But integrate our investments into

one a is lock right, example, right? innovation think leader existing consumers. called the of in and space, best already system, system to the in with into businesses of you not technology things out brands things door about an We're that smart all the some with total but of And work the went thing one kinds entry solution That's best, for and that, leading and if an that about. that have as its going bolt-on the you marry thinking not actually of we're to fiberglass that the make entry, the we a for example a leading deck, the entry brand, just and of just

sort team been of with. They on kind on jumped has business a number pushing and we team's I've really jump team beyond seen after ever And was with excitement thought a synergies I'm good of case, this our this so getting sure really not which begin the enthusiastically. way one to it have a of deals. the of and them level done pretty initial

and it's potential with so into at this it able together, team we quality this things this have to have brands, our unlock transformational just those to really exciting been this portfolio bring do valuation. And of all think to you coming

about really you're excited That's great to Glad transaction. super. this That's Nick. see color,

any read guide. saw, You sales organic early bumped you July. into some trends Give color us intra-quarter on your

your see upbeat builders a more orders on construction. do expressed and particularly the Doors? in outlook the inflection in new that business, out you have called How You've Plumbing

Dave, highest quarter. level, I'll I'd it detail to the the we been it. you it's it, saw thematically But if more in consistent a give he Yes. Sure. actually bit at hand then over what I'll start, can second and about and with say think fairly about

And relative expectations, builder, Saw being what in you in order reported. both strength relative I what their did was to so see? books and think

And uptick Now we're yet to last is the through right? the summer, of obviously, slowdown in 'XX, come digesting the P&L. from so QX

DIY pro more on I'd relative that then that strength kind project weakness related. in R&R the related And relative of was side, or things more everything weekend warrior in and were say or

then production value as I'd be see to to continues to July, we're We're supply going look builders. uptick And into chain you chain true. around and so seen strengthen the the more through. people thematically And large pro-related as more strong. say seeing that that start where continued continue continue it's see channels to projects orders you in prepare around for those strength to weakness. very our And the discretionary to We've be some their products come DIY

alluded But of encouraging seen there weeks, life at there, remarks, few retail that the Dave in even last to product little in bit DIY some as his we've stuff. signs are more where certain a groups in you're seeing than

know have don't if Dave, I So a... you

Yes.

around So sales I'd add some color just the half second cadence.

from the X includes the in all remind is fourth And nonrepeating percentage so X points our I'd for that second overall. people roughly or prior X%. the week year, organic extra guidance points last percentage was to fiscal down X% quarter that half

down points, organic X percentage excluding call that then, guidance it, So comp. that

the year. at about half And a guidance down the think the I you low it, offset simply, now single the midpoint it We're our moving to of second POS flat digits, in think by comp inventory it's digits. of current percentage the low of X favorable midpoint to of nonrepeating to the roughly gets single That guidance. you gets and flat. the week point fiscal headwind, then a that is you And

you to this as forecast. trending And to second our at of of half direction quarter, gives fourth our POS us right it construction see look in Nick's then support we in here layer new at that top benefit outlook. we that us the -- the to we the in data, July, single-family confidence improvement on the point, to that will start really believe if end So

Kim comes Our of next Evercore from the ISI. line question with Stephen

to lot ask a Yes, about.

with Let's the start acquisition.

there going in that back the for impact I be 'XX? we why Any you half. think to accounting continue little into reason purchase was had expect that indicated to a fiscal should that

end across and we the you XQ? trickle the of by do some as color see you I in to give of guess, cost the timing could synergies, the XQ, sales cost little XQ a a us on, synergies And look into Just think in? start and look year synergies maybe

to Steve, is Dave. that. this I'll talk

some On I sales year. maybe side, the the of synergies think the by the synergies trickle end in of

sheet. will side positions, doing the our work, their year won't while the given the in see of just P&L next On we that because the cost until balance teams be inventory

then And on price amortization. purchase to question your

these period of remember, that amortized over trade are a are So names time. long

be back amortized for then impact. next of that, sheet. is is So forward so trade $X.XX XX the will until and off beyond pretty going half year year year. It this And the it in balance roughly $X.XX name that or the full fully years next consistent

So question. to answer your that hopefully, helps

I if there's Nick, don't know, you'd… anything

No. No.

Yes, absolutely.

very helpful. That's Great. Okay.

lagged Now enhanced guide, effect. I'm I could some the to there to there's that in or assuming you of guide, improvement and And starts think well? Are large the the rebound sort mentioned a the that from that seeing starts least talk be to degree, margin degree, -- helpful. basically we've your implications view as single-family would reflects, mix an I you know your that, emerge activity. any At start been housing of if

on impact us? mix So the

Yes. to you. Benefit

might there You might come those but talked if about you what And from I'm that would could implications line, be describe the that. if top wondering margin be.

Yes.

and portfolio point color. margin-agnostic, ], keep So percentage -- margin point channel. to around or sorry I'm I we give -- around [ we are some price it around price would and product more thoughts really line is it you thematically whether I'll say the be bottom product just give around work can Dave

customers, larger lower at big have a -- -- business you showroom than them. And that; lot can more come maybe takes sort margin, day, may contribution because business, call out you it that the market need see you it. it, margin, for out. It's serving production a more to business, balances less we in on but that forces standardized serve at example, in of sales about SG&A so say, if lot contribution And that higher think builder supporting might which end we the the big of look a if you but they're

but price geography, P&L from of to around as sort about the I in channel would we're in fairly think our And set we so the kind P&L ultra-luxury or continuum portfolio. agnostic, it matter no of where the points the premium moves it as

add. for XX% which just margins XX% for point Steve, is XX.X%. prior and full guidance would to I'd I updated was And you Yes. operating around And Water, year to our

of segment. at from the construction amortization now single-family that new into the midpoint, that deal So inclusive the ASSA rolling the headwind that's change price from in purchase and

So Water. consistent standpoint within margin a pretty from

the with line question next from Our Michael of JPMorgan. comes Rehaut

prior and the I segment on Security just the updated just of you assume, driven takes confirm margin in that's, I year. little end largely I on on dial by wanted just puts wanted I for a to the nick the guess, First, bit high guidance. a guidance of level, at that the the some accounting? down had to acquisition

at least. top if outlook, line leverage little and half offset the thinking are you other And have was And anything there to there that of? I'm better by were a puts particularly into additional outlook, organically that that Were else? bit any thinking takes about back any the extent you

a follow-up. I just had And then

is Dave. this Mike,

you correct. their On as question, quarter. is in well, the and evidenced That's second the are the results margin from predominantly just the by impact Security performing accounting business base acquisition from

half, back XX% We then and half we the XX%. that range And margin between half, that's be right XX%. still to said initial between year operating this in think the have back we on the and for XX% back our call expected

there. are in there and Now takes some puts

in in But incremental to tightly. we investing some investment, and that XXXX. in half, head areas and digital, the making want second some brand we are that controlling accelerate we as see We investing into we're R&D

million of the look performance of reduction you're overhead first and normalized inventory we about at margin if at you out, interestingly, XX.X% for half our $XX then that XX.X%. And that right called

pretty while our the going So is performance implications and feel outlook trajectory of margin market we some the the consistent balance forward. of sheet the digesting about but reducing volatility, business and demonstrating good

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taking we're teams see we can time. aligned the progression newly applying businesses doing feeling over structure to that by the Fortune it and very You playbook and to are this make. that that ability making the want them and Brands' the And advantaged their about good well execute against

slide the the well detailed line, synergy around out. Right. And deck on very opportunities which go guess, maybe on to and the thought just And top secondly, very obviously, I that. appreciate the back

secure to over correct to a you want you the that I'm and on growth to see the both new Schuab. distribution and nice if the Fiberon and additions lot I a me added of We et able say, in think had, years. due I for to of cetera, Fiberon product. channel acquisition customers, lot the side XX% I expansion wrong, some that really distribution and Yale a back Emtek August of were believe X And of

is, too too, conservative. just the it point cross-selling being on things of upside of that. guess about in potential. being X-year And I'm wanted a but really terms Particularly a perhaps question these there you're -- thinking terms greater for push, a slide. little on good maybe would like or some I'm actually been side, over seem obviously, And perhaps aggressive, aggressively numbers sales take there's are if so have higher maybe I opportunities too to for just to numbers. on synergies curious maybe would slightly the the room have I just I thought lot period, just but your And a the the even little -- of maybe in does

Yes.

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think. so And dramatically very I

what we call I'd to say firstly specific I'd XX. August, out, Somewhat Emtek June closed and Schaub just is

the we'll here, that businesses And series particularly Innovations of is together be around legacy of So we'll a only Fortune identified had for a short synergies respectful these they've than what better we time. we've of very do put do channel. Brands teams And amount what the business.

we that And certain areas will it business. learn into from better, channel the is so they and and to in have that legacy build look strength

places strengthen conversely, of are, don't, strength and channel, these business to then a course, that And expand distribution legacy through has access in there the construct businesses where where relationships. our we

business to we And you there can going cares who these over the the time side unlock us those new them a innovation, a bring unlock as that's for on at I and lot to faster opportunities little that's time big to where on more a that real really work the plus and that? strategy, think which after consumer basis from the luxury to to going stories upside real it and so with a backbone connected to things about but of be bigger scale I or much brand X take going put pace. and that Possibly. it, all innovation X new the technology go the may our unlock exist, be where X will business together, a we But really us to sits behind enabled the allow approach, now equals on is business And cares side, think on more about the is and innovation to global it through are have market. luxury global upside just be comes is artisanal which infrastructure on going whether sort where

comes of with question line from Maklari next Susan Our the Sachs. Goldman

bit from lift did through that you sounds the a little the how talk different segments? you inventory there. from a quarter flow in volumes you're an channels like Can perspective about the It got nice and the across different positioned

to about the back continue As volumes demand and the you see further? what's ability to think perhaps those bit any half, move a further capture to upside

Yes.

decking. little from So I'd at to the relative still sales. of it's We perspective, a I'd and the But Water expect some in to have of channel, say of primarily the inventory Dave. relatively Outdoors rate around light in to Security, July an through those that quarter. and bit looking we're wholesale decking balanced come say do really we orders started for expected at see in the end

we're opportunities half, But expectations to the sales. beyond accelerate so inventory inventory think up. our second would back ahead And if some there put fill seeing expect we be that in those I were of inventory would market customers as upside the to some

But lot the line. from that where challenges and we and balanced, on gotten the through inventory we've sit right builds now, prior a of well noisy year was sales depletes kind it's really pretty of

thinking more over you about going Can them to are bit just be of business closed beyond this the then drive through some acquisitions that we And the you that of the Okay. on those both and talked terms above sort in efforts and to the That's Security helpful. there about should specific about of time? how results, revenue a and some company's quarter. coming of initiatives? the -- actually through margins talk And and flowing the just

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so playbook. And a sort of lot of can shift really that you and lift almost

emphasis the line more from far starting So down, on top innovation.

will It's commercial. drive right help do that We're data-driven It's we're consultative great will of connected put work. a And sticky be can on emphasis or we footprint to of lot example able and like now. a We vector just you ours. top which in the time, to to over saw lot we it more allowed thing. line. developing come came the a a that innovation progress of it. was that some Eventually, into and drive lot strength the obviously play line. And top that really alluded the sourcing work us through, there's a so behind top and that in We you reinvested some invested an be line, go a we what of do the but to over Water, of margin very whether of we leadership it through brand strength We're years, selling. and seeing safety And be position much the well in chain made safer, improvements as facilities then that of in in then in which in the sort facilities. generate a margin, fuel that's of make supply

capabilities of because we that about play not playbook, And assets, taking so the it then over really applying particularly margins those Brands' talk and sorts I we the the of able accelerate but see into these and with capabilities it that is bring and new connected just some see that. are as advantaged along we'll overlap, go time, the we'll to Fortune assets line it's these think in top accelerate

margins, And philosophy, businesses those in as very because cycle you're invest a much faster. able in you develop virtuous our it's these to

the invest top grows quicker. you in them, line As obviously, even

some put through it to starting just behind results. come Susan, And, numbers see Yes. are we the because that, to

X% And so margin basis XXX XXXX, points. a second their sales is if and or performance the of at up Security's are up roughly look XX% operating quarter you versus CAGR,

and reinvestment And of taking growth, embedding that really around see getting at so the from playbook that Security Water, Nick and going it is what margin output described enhancement. flywheel you

from line question of Ahlersmeyer Deutsche comes Our with the Bank. next Joe

deeper. little bit to want business the Just into go Yale a

amount customer currently that's And there business anything there? with the of maybe of consider you If quantify around to key through the e-commerce? change any control, considerations partnerships going could the

integrated the granularity, although here. interesting. broadly Yes. found that Dave channel information some business in think that usually and level would to But it the which you perspectives we some down in this break historic of give can we've we very deck elaborate, has I'll don't put strength I

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can that And leverage we backbone. if so

e-commerce, lot has for we and course, let's of say, weaker been, Yale. a of then, historically But retail strength in have which

think their opportunity can an that historic business we build our And to where up. so strength that's we leverage

I'd the like years. third-party business, actually our this chip been these product has prioritize few connected past Joe, channels say integrators And over they constrained, interestingly, over business and other Yes.

for would So of be brick-and-mortar demand even this are flowing retail the of products. e-commerce amount the lower type than through sales or

get we be going business will that this avenue forward. in growth back As us stock, integrated another for

Yes.

my mentioned those And Yes. constraints earlier, around was had guess, you that I question, actually second was last year. late

before decking. question And that say versus Did on clarifying my I'll [ of for sellout high that you ] a second time? single specific question, maybe ask a digits? amount So just the improved was wholesale

versus prior Yes, we sellout? year July, digits we single said in at of high were the end

some period? like what's trailing or the X weeks -- a Like

how That's yes. we'd it. Yes, at look

from question UBS. next John of Lovallo, line our And the comes

first impact what would us mean, guess in be volume second you question help was? that was the from down positive maybe I can quarter I on just U.S. what the in and with pricing Water the

across of pricing broader more move as into portfolio seeing back we the year? are then broadly, where potential incremental half the opportunities And you for your

then comment. can and start, I'll Yes, Nick

Strong previously sales some the the sales. Water year decompose to of comp Just growth down China acceleration sales, reported and prior from X%. given Well, started development.

organic, down low about pull it'd So we down digits. that excluding POS China, see X%. if out, be you And double

low along. consistent we've beginning offset took increase digits, stuck with single-digit in that and the which price been John, saying market. the remains at that then, We down what so it's And is Water single, up price and volume, year by in of all low within low double a

And and down into around second single-digit last on small it it the weeks benefit think POS, quarter. cleanest low about to from year volume Day, Amazon down way this low year But offset price. versus timing just double double; Prime is then by was a single sales low the fell digits; which there's low different product load-in

gives invested of I'd and about, your to then optimize in of is then analytics pricing things to And really the with capabilities, Water and shelf pricing. now particularly data part advantaged over with is turning to on Outdoors what Brands' the in one Security work we've that happening us wholesale what just the using Fortune category the management I our consumer, them and business. skills opportunity, and the question to And talking partners part understand say was happening does of that ability these second the capabilities, is is the pro at customers and what what is with and

to doing massive try we're price avoid constantly we -- And or increases. shocking so

customers but do incremental expects, in you never our in think And are to Water, really beyond used the digestible. that at peak Now, that digits. obviously, more easily I between smaller, are regular there was we price XXXX that mid-single categories, move and that today, saw some market certain the seek us to, even of

bringing for time, were you and reflected value the to entire think to consistently it it. And do a I still you able create way doing that's that but chain, it share all for the the you're as fact partners, all do gain consumer and we do it that the consistently if able that and our do along we've value been you're of in in

this a than it's little from your little is more where where why I an it get And there's Nick, being I the you some business, to mean comments the would opposite thoughts money helpful. love not trying in bit you to pro it. -- what dynamic challenge a mean, think of unique where an a better? environment up is would could standpoint. holding consumer by perhaps themselves. intuitively, to the driving that but is you one That's on more made, pro the be and doing economic save do bit DIY think do bit softer you I your things little

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new And so construction. going you're to see

have builders that and the they're and they're seeing and processes the through systems doing doing. You're excellent come the what production

them And have stock. you So share. aged take then seen a very housing you've

and prioritize into seen more I projects to need consumers go homes era you've their hold bring so they think you And see where and their that homes up. after a really modern

months. pretty we've that the seen kind of retail XXXX people I'd called saw I that say a is where POS in huge early that and out saying lot is growth and out coming period, what in And summer weakness the XXXX spring saw kind in go you think you've selling spring of we spend into really relative consistently, in into retail for

numbers out have probably of did a My winter at were people was built prior stimulus did improved if had went them a into as comp projects sequentially, you week to seasonality, now the we of belief the money anticipated, and sort they was we spring, with normal the is And They huge driven. week the they week on done. on that went lot you would late through not the that doing wouldn't expect but the that otherwise look as hill and POS data, year when lot. as

and we've with those normal to consistent consistent kind you and and that, season expect interestingly, dollars you what versus into past get now closer would consistent with hump, like. -- see of into can say, flat that look last line we'd gotten with POS I and as year, to And flat, mid-summer back a come

projects, modernizing homes so construction, I building sum to I it homes bigger continues or driven. guess think be to new new up, And

surprised 'XX. big then we lap stimulus that what the growth, we dollars. was pretty much tough. think a too And sequential was is that without digesting in 'XX think support of are was stimulus-driven I 'XX, pretty lapped you and a there those just I lap actually did see I

call. also and the conference. have joining today's Q&A of does today's you session we conclude We And do reached for the end thank conference this

may now disconnect. You