Title

Presentation

Masco Corporation beats earnings expectations. Reported EPS is $1.04, expectations were $0.88.

Operator: Good morning, ladies and gentlemen. Welcome to the Masco Corporation’s First Quarter 2026 Conference Call. My name is Jenny, and I will be your operator for today’s call. As a reminder, today’s conference call is being recorded for replay purposes. [Operator Instructions] I will now turn the call over to Robin Zondervan, Vice President, Investor Relations and FP&A. You may begin.

Robin Zondervan: Thank you, operator, and good morning, everyone. Welcome to Masco Corporation’s 2026 First Quarter Conference Call. With me today are Jon Nudi, President and CEO of Masco; and Rick Westenberg, Masco’s Vice President and Chief Financial Officer. . Our first quarter earnings release and the presentation slides are available on our website under Investor Relations. Following our remarks, we will open the call for analyst questions. Please limit yourself to one question with one follow-up. If we can’t take your question now, please call me directly at (313) 792-5500. Our statements today will include our views about future performance, which constitute forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements.

We’ve described these risks and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission. Our statements will also include non-GAAP financial metrics. Our references to operating profit and earnings per share will be as adjusted, unless otherwise noted. We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under Investor Relations. With that, I will now turn the call over to Jon.

Jonathon Nudi: Thank you, Robin. Good morning, everyone, and thank you for joining us. Before I discuss our quarterly results, I want to spend a few minutes talking about the continued evolution of our Masco Executive Committee, which we established at the end of last year. Jay Shah, Group President Pulling and Wellness; and Rick Marshall, Vice President of Masco Operating System, recently announced their intent to retire from Masco later this summer. I’d like to thank both Jay and Rick for their leadership and their important contributions to both our business and our culture. With Jay’s retirement, we’ve taken steps to further streamline our organization, the leaders of our 4 largest businesses: Delta, Hunts grow, Bar and Watkins Wellness will now all report directly to me.

These 4 leaders have over 80 years of combined service at Masco, have extensive experience in our industry and are key contributors to Masco’s performance and our culture. Furthermore, we are adding 2 new leaders to our executive committee with expertise in supply chain and procurement. The addition of these leaders and capabilities will enable us to drive additional efficiencies, leverage our scale and enhance our speed of execution across the enterprise. The structure and leadership composition of our executive committee will help enable greater agility and tighter alignment between corporate and business unit priorities all in the pursuit of delivering above-market top and bottom line growth. In addition, we have continued the implementation of other initiatives that were announced earlier this year.

Our integration of Liberty Hardware into Delta Faucet Company is on track as we further leverage the brands, capabilities and scale of our Delta Faucet business. Restructuring actions to streamline our business, reduce head count and optimize operations are ongoing. We incurred approximately $8 million in restructuring charges in the first quarter, and we continue to expect approximately $50 million in total charges in 2026. The — the savings generated from these actions will fund additional growth initiatives and contribute to our future margin expansion. We’re already experiencing the positive impact of these actions in our results. With that, let’s dive into our first quarter results. Please turn to Slide 5. Overall, we are pleased with our performance in an extremely dynamic environment.

Net sales increased 6% or 4% in local currency, primarily driven by favorable pricing. Additionally, while still down slightly, this was our strongest year-over-year first quarter volume performance since the end of the pandemic. Operating profit was $324 million, an increase of 13%. Operating profit margin was 16.9%, an improvement of 90 basis points. Earnings per share grew 20% during the quarter to $1.04 per share. Now turning to our segments. Columbia product sales increased 7% in local currency, exceeding our expectations, largely due to more resilient than expected volume. North American sales increased 9% in local currency, driven by favorable pricing as well as slightly higher volumes. Delta Faucet delivered a strong quarter with sales growth across all 3 channels: trade, retail and e-commerce.

Additionally, Delta Faucet was recognized by USA — today as a most trusted brand and by Newsweek as 1 of America’s most trustworthy companies, demonstrating the significant strength of Delta’s brand and service capabilities, which are resonating with customers and consumers. Turning to International plumbing sales increased 1% in local currency, driven by growth across many European markets, particularly Germany, partially offset by the ongoing weak market in China. Operating profit for the Plumbing Products segment grew 10% to $250 million and operating margin expanded 10 basis points to 18.3%. Turning to our Decorative Architectural segment. Sales were in line with the prior year. DIY paint sales decreased low single digits, while Pro paint sales grew mid-single digits.

Operating profit for the segment increased 19% to $105 million, and operating margin was 19%. Showcasing our commitment to innovative new products, BEHR PREMIUM PLUS Ecomix was recently named a 2026 Green Building Sustainable Product of the Year. BEHR continues its industry leadership in delivering both innovative and sustainable products. Turning to capital allocation. Our strong cash flow allowed us to return $267 million to shareholders this quarter through dividends and share repurchases. We are pleased with our first quarter performance and the team’s strong execution and operational focus. Additionally, I’m proud of how our teams are working quickly to implement various restructuring actions to ensure we have the appropriate cost structure for our business in this rapidly changing environment.

Turning to our expectations for the full year. We continue to face a highly dynamic macroeconomic and geopolitical environment. Therefore, we believe it is prudent to maintain our 2026 earnings per share guidance in the range of $4.10 to $4.30 per share. Our guidance includes our expectation that our sales will now be up low single digits for 2026, but that we will also incur higher than previously anticipated commodity costs. Rick will share additional details of our guidance in a few moments. While uncertainty remains in the near term, we are focused on positioning ourselves for ongoing sales and profit growth over the mid- to long term. The structural factors for repair and remodel activity are strong including record high home equity levels, the age of the housing stock and increasing pent-up demand for renovation projects.

As consumer sentiment improves, interest rates decrease, and existing home turnover increases, we expect these favorable fundamentals to become a tailwind for our business. In addition, we are taking the right actions to optimize our business, leaving us well positioned to deliver above-market top and bottom line growth. We are committed to our consumer-driven strategy, which leverages our industry-leading brands, expanded commercial capabilities and enhanced operational excellence. We look forward to further sharing the strategy and our long-term goals with you, either in person or online at our upcoming Investor Day on Wednesday, May 13 in New York City. With that, I’ll now turn the call over to Rick to go over our first quarter results and 2026 outlook in more detail.

Rick?

Richard Westenberg: Thank you, Jon, and good morning, everyone. Thank you for joining. As Robin mentioned, my comments today will focus on adjusted performance, excluding the impact of rationalization charges and other onetime items. Turning to Slide 7. We delivered strong first quarter results, with total sales increasing 6% or 4%, excluding the favorable impact of currency. In local currency, North American sales increased 5%, and international sales increased 1%. Gross margin expanded 10 basis points to 36% in the quarter. SG&A as a percent of sales was 19.1%, 80 basis points lower than the prior year. Operating profit grew 13% to $324 million in the quarter, and our margin expanded 90 basis points to 16.9%. Operating profit was driven by pricing actions and cost savings initiatives partially offset by higher tariff and commodity costs.

Our EPS grew 20% to $1.04 per share in the quarter. Turning to Slide 8. Plumbing sales increased 9% in the first quarter or 7%, excluding the favorable impact of currency. While this growth was primarily driven by pricing actions, which increased sales by 6%, our performance was better than expected, driven by volume, which was up slightly in the quarter. In local currency, North American plumbing sales increased 9% in the quarter. This performance was primarily driven by strong growth in our Delta Faucet and Watkins Wellness businesses. In local currency, international plumbing sales increased 1% in the quarter. Hansgrohe grew in many of its European markets, including its key market of Germany. This growth was partially offset by softness in China and other smaller markets.

Segment operating profit in the first quarter increased 10% to $250 million and operating margin expanded 10 basis points to 18.3%. Operating profit was driven by pricing actions and cost savings initiatives, partially offset by higher tariff and commodity costs. Turning to Slide 9. Decorative Architectural sales were in line with the prior year. This performance was driven by mid-single-digit growth in our pro paint sales, offset by a low single-digit decrease in our DIY paint sales. These results were largely in line with our expectations, and we continue to anticipate full year pro paint sales to increase mid-single digits and for DIY paint sales to decrease mid-single digits. Operating profit in the first quarter was $105 million. Growth versus the prior year was primarily driven by cost savings initiatives, which are inclusive of benefits from our recent restructuring actions as well as increased pricing.

This was partially offset by higher commodity costs. Operating margin was 19% in the quarter and reflects the benefit of our Liberty Hardware business now being reported in our Plumbing segment. This was coupled with a more normalized first quarter for our paint business as we lap the inventory timing dynamic that unfavorably impacted the first quarter of last year. Turning to Slide 10. Our balance sheet remains strong with gross debt-to-EBITDA at 2.1x at quarter end. We finished the quarter with $1.3 billion of liquidity, including cash and availability under our revolving credit facility. Working capital was 19.5% of sales at quarter end. As expected, working capital balances in the first half of the year remained elevated versus the prior year due to the timing of when tariffs were implemented.

However, we continue to anticipate working capital as a percent of sales will be approximately 16.5% at the end of the year. Our strong cash performance enabled us to return $267 million to shareholders through dividends and share repurchases, including the repurchase of $202 million of stock in the first quarter. Additionally, based on the strength of our balance sheet and confidence in our future performance, we recently entered into a 2-year delayed draw term loan of up to $500 million. We plan to utilize the available funds under this facility to opportunistically repurchase our shares. As a result, we now expect to deploy at least $800 million towards share repurchases or acquisitions in 2026, up from our previous expectation of approximately $600 million.

Now let’s turn to Slide 11 and review our outlook for 2026. While we are pleased with our strong results in the first quarter, there remains a high degree of uncertainty in the macroeconomic and geopolitical environment. As a result, we are largely maintaining our full year outlook. For Masco overall, we expect 2026 sales to be up low single digits versus our previous guide of flat to up low single digits, and we continue to expect our margins to expand to approximately 17% — regarding cadence for the year, given the timing of tariff impacts, which largely impacted our results in the second half of last year, we anticipate total Masco margin to be relatively flat in the first half of the year versus our previous guide of margin contraction and to expand in the second half of the year as we lap the tariff impact and as our mitigation actions continue to take hold.

As it relates to tariffs, on our prior earnings call, we estimated the total cost impact from incremental tariffs to be approximately $200 million before mitigation this year. Given the recent ruling on NEPA tariffs, the implementation of temporary Section 122 tariffs and changes to how Section 232 tariffs on steel, aluminum and copper are applied, we do anticipate the impact of these tariff changes before mitigation to be favorable. However, given the great deal of uncertainty as to where tariffs will ultimately land, it is challenging to quantify. In addition, we anticipate any tailwind from these tariff changes will be more than offset by anticipated increases in commodity and related input costs. Copper prices remain elevated and oil, which impacts a wide range of material as well as logistics costs also remains elevated and volatile.

We continue to monitor these dynamics and we’ll work diligently to mitigate the impact as we have demonstrated in the past. Turning to our segments. In our Plumbing segment, we continue to expect 2026 full year sales to be up low single digits and our operating margin to expand to approximately 18%, driven by pricing discipline, operational efficiencies and continued cost savings initiatives. In our Decorative Architectural segment, we continue to expect 2026 sales to be roughly flat with the prior year and our operating margin to be approximately 19% and with a continued focus on cost savings initiatives. Finally, as John mentioned earlier, we are maintaining our 2026 EPS estimate of $4.10 to $4.30 per share. This now assumes a $200 million average diluted share count for the year versus our previous guide of 202 million shares and a 24.5% effective tax rate.

Additional financial assumptions for 2026 can be found on Slide 14 of our earnings deck. With that, I would like to open up the call for questions. Operator?

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Operator: [Operator Instructions] Your first question comes from the line of John Lovallo with UBS.

John Lovallo: The first one is just on the Section 232. — you said that this could be actually favorable, which seems right to us. But is this really driven by the fact that the product that you’re importing whether it’s faucets or shower heads, are not entirely copper and that some of the subassembly is done in the U.S. And how do you kind of wrap your arms around what this potential benefit could be? .

Richard Westenberg: John, it’s Rick. So with regards to our comments on the potential favorability on the tariff impact, it’s really an impact — it’s really a composite impact. So it’s not just the 232 tariffs, but it’s the really on the EBA tariffs at the end of February, the imposition of Section [indiscernible] tariffs. And then, of course, the 232 tariffs, which — so we look at it from a composite perspective. The 232 tariffs themselves are relatively nominal in terms of their net impact. But on composite, we expect a favorable impact. But in addition to the ones that we talked about in our opening comments, as you probably are aware, the administration is looking into a couple of investigations and Section 301 tariffs as well.

The environment remains uncertain. We think net-net, it will be favorable for us for the year, but it’s difficult to quantify just given the moving parts — and as we also mentioned, we think any favorability will likely be offset by elevated commodity costs, as we talked about.

John Lovallo: Okay. That’s helpful. And then I think you guys said your prior estimate was for consolidated pricing to be up low single digits with mid-single-digit pricing and plumbing and sort of flattish and deck arc. I mean how are you guys kind of thinking about this now, particularly with the move in resins since the conflicts in the Middle East began? .

Richard Westenberg: Yes. So with regards to our pricing expectations for the year, our plumbing expectation is mid-single digit. In terms of deck arc, it’s really going to be dependent on where we end up commodity perspective, we are seeing significant headwinds given the elevated and volatile oil prices and the impact that it has really across the input spectrum and including freight costs as well, but certainly on the deck arc side with regards to resins, et cetera. And so we’re seeing upward pressure in the neighborhood of mid- to high single digits. Obviously, it’s still in discussion. And so that’s something that we’re tracking very closely. — we — I think from an overall company perspective, we would expect mid-single-digit inflation, and that’s really commodities as well as 1 of the way inflation as well.

So it’s something that we’re monitoring and managing very closely. We do have a track record of offsetting and managing through these challenges, and we believe we’ll do so here as well. through a combination of levers. But that’s really the landscape. And caveat, as we all recognize it’s still uncertain, but there is upward pressure.

Operator: Your next question comes from the line of Stephen Kim with Evercore ISI.

Stephen Kim: I think you effectively have said that you — well, you just reiterated that you think that the changes in the tariffs will largely be offset by the commodity. I was wondering if you could give us just an overall estimate of how much that piece, which will be transferred effectively will be for the year. And if there’s a quarterly cadence to that, that we should be mindful of? .

Jonathon Nudi: Steve, just to clarify your question. In terms of the transfer of costs. Could you just elaborate.

Stephen Kim: Offset. Yes, the offset you are basically saying that the tariff changes could be beneficial to you, but the commodity costs will be higher and that those pieces would effectively be offsetting, if I heard you correctly. And so I’m just wondering how big is that piece effectively? .

Jonathon Nudi: Yes. We’re not going to quantify the actual magnitude of it. I think on a net basis, you can think of them as relatively flat to potentially a headwind for us for the year, just given the extent of commodity inflation that we’ve seen really across many input costs, particularly copper and zinc as well as oil-based inputs, particularly resins, et cetera. So we’re basically tracking that. But I think at the end of the day, those commodity costs are going to offset the favorability or potentially more than that. In terms of your second question, quarterly cadence, this is largely a back half of 2026 phenomenon. As I think we’ve described in the past, particularly on the plumbing side of the business. commodity costs when they show up in the market really have to flow through our inventory and in our P&L, usually a couple of quarters later.

And we saw elevated copper and zinc cost really as we entered into 2026. So that will be more of a back half 26 phenomenon. As it pertains to oil in resin costs. That’s a little bit more near term because we’ve been seeing that as of late, and that’s more of a quarter to 2 quarters out. So it’s really kind of as we approach midyear and the second half of the year, that we would see that impact — and that lines up pretty cleanly with regards to our tariff favorability because the tariff favorability is largely driven by the EPA tariff ruling. — and that occurred as we all know, on February 20. And so that takes some time to flow through our P&L as well. So they tend to map pretty cleanly. But at the end of the day, there’s still a lot of volatility out there, Stephen, as you recognize.

Stephen Kim: Okay. Great. That’s actually a good cleanup. I appreciate that. In the deck Ark segment, your margins were stronger than we expected. And I was curious if you could give us some sense for the relative importance of the cost savings initiatives from restructuring versus pricing? And give us a sense for what your expectation is about the quarterly cadence because we typically see the margins rise in 2Q and 3Q from 1Q. Is there anything that we should be mindful of that would be different this year than normal?

Jonathon Nudi: Stephen, this is Jon. I’ll jump in first, and then Rick can follow up with anything I missed here. We — I guess, overall, feel good about this trajectory that our paint business is on. As you know, we exited with the challenging year behind us, and we feel better about our performance. Again, we saw our business overall flat with propane growing mid-single digits, DIY down low single digits. We feel great about the plans we have in place with our retail partner, and we’ll continue to, again, grow share with the Pro painter HUTENSa, which is a big opportunity for us, and we’ve got a significant amount of headroom there and then make sure that we continue to grow with DIY as well where we have a significant share.

In terms of margins, I would say, yes, they were up significantly versus last year. they are much more normalized versus a typical Q1 though, we had an easy comp this year versus Q1 of last year. and we feel good about our ability to continue to manage our margins as we move forward. I would say our restructuring actions are paying off and particularly in our bar business as we’ve taken significant steps to really streamline our cost structure and allow us to compete in the market that hasn’t been drawn the way that we’d like overall. And I’ll let Rick answer the question just on quarterly cadence, but hopefully, that gives you a perspective.

Richard Westenberg: Yes, Stephen. So with regards to Jon’s comments were spot on in terms of the implications on Q1. I would just reinforce that the performance in Q1 was driven really based off of of cost reduction actions that were in our control, including the restructuring actions that Jon alluded to. We did see some low single-digit inflation in the commodity input costs. So that’s something that we are mindful of, and as I mentioned earlier, are expected to increase over time. So that’s something that we’re tracking. But I think in terms of our margin performance in Q1, it was largely in line with what we would have seen from a historical standpoint on a clean Q1.

Operator: Your next question comes from the line of Sam Reid with Wells Fargo.

Richard Reid: Coming back on the quarter here. In Plumbing, really nice beat versus expectations I just wanted to perhaps unpack the plumbing volumes that you put up during the quarter. I know they were modest, but I believe there was some volume benefit there. I just wanted to double confirm that there wasn’t any being onetime or any pull forward in there around pricing that we should be mindful of?

Jonathon Nudi: Sam, this is Jon. I would say the short answer is no. It was a pretty normalized quarter in terms of inventories. — we feel really good about deploying business and the performance that, that team put up really around the world where we saw our business grow nicely. Our North American business, in particular, with Delta Faucet had a terrific first quarter. growing high single digits. I think 1 of the — if you look at our beat versus our internal expectations for Q1, it was really a plumbing and then primarily North American Plumbing and the vast majority of that was really just volume versus expectations. As you’re aware, we took a fairly significant amount of pricing as we exited last year. And the team has done a terrific job really putting that pricing in place and navigating with our customers to have really good plans.

And we saw our volume perform better than we would have expected from an elasticity standpoint. So we feel like the fundamentals are incredibly strong. We grew share across our channels. In fact, we grew in every channel across plumbing, whether it be wholesale trade or e-commerce. We’ve got a great new product lineup. Our marketing plans are strong. We feel really good about our plumbing business, and we’ll continue to focus on as we move through the rest of the year.

Richard Reid: That’s super helpful. And then maybe double-clicking on the plumbing price in a little bit more detail. I mean it sounds like the strength was widespread across all of your channels. But could you perhaps give us a little bit more color on whether there were any nuances between plumbing price, say, retail versus wholesale, wholesale versus e-com? We just lost maybe a view on how that plumbing price might have looked by channel.

Jonathon Nudi: Yes, this is Jon again. We typically don’t get into that level of detail from a pricing standpoint. I think it’s suffice to say, though, if you look at our results, we executed our plans well from a pricing standpoint across all channels, given that we saw the price realization in the market that we had hoped for. and our elasticities were as severe as they could be. So again, we feel really good about how we navigated — and the performance was pretty consistent through all channels. And again, in North America, it was high single digits, which is terrific.

Operator: Your next question comes from the line of Matthew Bouley with Barclays.

Matthew Bouley: Wanted to start on the growth guidance in plumbing. So you obviously started the year at this 9% growth and still guiding the full year up low single digits. And — so presumably, those pricing comps will get a lot tougher in the second half. So I guess that part is understood, but you would still need a lot more deceleration in either as soon as Q2 or perhaps even a negative comp at some point just to kind of hit that guide. So I guess the question is, should we be expecting that, that deceleration in growth is sort of already happening here in Q2? Or are you just really building in a lot of conservatism on the volume side that you kind of think is prudent here to sort of get that type of deceleration? .

Jonathon Nudi: You’re welcome. This is Jon. So as I mentioned, really pleased with the performance in Q1. As we look to the remainder of the year, really, it’s the uncertainty that we see in the road around is that, that cause us to keep our guidance where it is. Certainly, you had all of the uncertainty prior to the war and ramp with tariffs. And consumer sentiment and things like that. And then obviously, the war adds a whole another level of uncertainty. So we’re looking at 2 things very closely. One, the demand environment and how our consumers purchasing across our markets. And today, we have not seen a meaningful change, but it’s something that we’re looking at very, very closely. And I think as the oil shock rubles for the economy, we have questions in terms of how the economy is going to perform.

Again, nothing to date that gives us pause, but we’re going to continue to watch that closely. As Rick mentioned earlier, what we have seen certainly is the impact of inflation from the oil shock, particularly in petrochemicals and particularly in our decorative architectural business. As Rick also mentioned and our team has really, I think, distinguished itself as being able to navigate through tough times in a dynamic environment, and we’ll do everything that we can to offset that inflation by negotiating with their suppliers, looking at footprint — but ultimately, if we have to take price, we’ll work to do that in a very efficient and effective way.

Matthew Bouley: Got it. Okay. That’s very helpful. Secondly, shifting over to the Hansgrohe business. question is on basically both demand and energy costs, specifically in Europe. So as the conflict began, the question is, have you sort of seen any changes either from a consumer perspective? I mean, it sounded like Europe was still positive in the quarter. But anything changing on the margin around demand in Europe or just the energy costs related to natural gas in your business there. So any kind of color on how you expect that to play out?

Jonathon Nudi: [indiscernible] I’d say similar to what we’re seeing in North America. We haven’t seen a dramatic change to date, something we’re obviously watching closely. We see commodity pressure in Europe just like we do in North America, and that team is taking — Hansgrohes taken the initiatives to offset it. And then from a demand standpoint, again, remember that [indiscernible] is really a global business. We like how Europe is holding up at this point. China is no secret. It remains challenging market from a new home construction standpoint and a building standpoint. So if anything, that’s the market we continue to look at in terms of trends and looking to improve our trends in that market. But Europe is hanging in there pretty well to date. So we feel good about [indiscernible] as well.

Operator: Your next question comes from the line of Ketan Mamtora with BMO Capital Markets.

Ketan Mamtora: Congrats on a strong quarter. Maybe just coming back to the full year guidance Jon or Rick, what is the right way to think about sort of what you’re betting as the base case? If volumes, the demand environment stay kind of where it is today, do you expect to be more sort of at the midpoint of that range? How should we think about that?

Richard Westenberg: It’s Rick. So with regards to our guidance, it’s informed by all the information that we have to date with regards to what we’re seeing in the marketplace. Obviously, the uncertainty in the macroeconomic and geopolitical environment as well as from an earnings perspective, the tariff implications and the commodity implications that we’ve spoken to already. I mean at the end of the day, we feel confident in terms of delivering our results within the range. And without further input on that, I think you can comfortably assume that we’ll end in the mid part of the range. From a top line perspective, our guidance, we did increase our expectations for the year from flat to low single digits to up low single digits.

So we do expect growth in our top line this year from a total company perspective, driven primarily in our plumbing space. And from a bottom line perspective, we do expect earnings growth and EPS expansion in lending in the $410 million to $430 million range for the year.

Ketan Mamtora: Got it. That’s helpful, Rick. And just as a follow-up on the capital allocation side, you moved the target higher to $800 million. Is it fair to say that you see bigger opportunity on sort of the share repurchase side? Or are you seeing kind of more M&A opportunity as well?

Richard Westenberg: Yes. Fair question. As it pertains to the increase in our share repurchase expectations or availability for share purchases or acquisitions. Basically, we saw an opportunity with regards to the strength of our balance sheet. We’ve got a very healthy gross debt-to-EBITDA ratio or leverage ratio and our confidence in our performance, obviously demonstrated in Q1 and our confidence in our future performance and opportunity to look at increasing the cash available for share repurchases from $600 million to at least $800 million. To enable to do that we entered into, as I mentioned in my opening comments, delay draw term loan facility to enable that. So it’s really going to be opportunistic. We like the flexibility that, that offers.

And we like the opportunity in terms of the valuation that we’re at today to be able to be opportunistic and leverage that. And so we’ll keep providing updates as we progress on each quarter. But right now, we do expect an increase in share repurchases from $600 million to $800 million plus absent any M&A at this point.

Jonathon Nudi: And just reiterating our capital allocation strategy hasn’t changed. So we continue to look at M&A. And as we’ve said before, bolt-on M&A is our focus. We find the right deal, we’ll do it. As Rick mentioned, we just felt like this was a great opportunity. we have the ability to go out and borrow a bit more. And we frankly believe that our shares are valued right now we believe that we’re performing well, and we continue to as we move into the future as well. .

Operator: Your next question comes from the line of Mike Dahl with RBC Capital Markets.

Michael Dahl: I wanted to circle back to some of the cost and margin dynamics. I think the question is if you look at this being kind of net neutral to less favorable in terms of costs and tariffs and a lot of uncertainty around the second half. I understand that historically, had the ability to do things to offset this. When you have like broad increases in inputs and global tariffs, it’s a little harder to get those savings from shifting footprint. I don’t know if I’m wrong about that. So in your guide, if that is potentially a net negative versus your initial assumption is what is the primary lever that you’re relying on to offset that and giving you the confidence to still guide margins up in the back half?

Richard Westenberg: Yes, Mike, it’s Rick. So your understanding of the playing field is accurate in terms of our read of the fact that commodity and input costs are likely to be a headwind that exceeds the favorability on tariffs. And as I mentioned earlier, it is more of a back half of the 2026 dynamic. In terms of the levers that we’re looking at, it’s really the same levers that we’ve been executing against already. So footprint in terms of sourcing footprint, is still a lever that we’re pulling. And that is really on track in terms of helping to mitigate the tariff impact that we still are encountering but it’s also a cost reduction. We’ve really executed well in terms of our cost savings initiative. And of course, the restructuring that we announced in our February call and John alluded to earlier in his opening comments, that is really taking hold.

And so that is amplifying our cost savings initiatives, and we’re streamlining the business, reducing head count and optimizing operations. And so that’s a huge lever for us, and we’re going to continue to do that. And then pricing, obviously, we’ve been really effective at our execution on pricing and although much of the pricing actions that we’ve been pursuing are implemented, there’s still a lever that we’re looking at selectively as we proceed during the course of the year. So I would say overall, Mike, the levers remain the same, and we’re going to continue to execute like we’ve done in the past, and we believe that the mitigation actions that we are executing and we intend to execute through the course of the year. will be sufficient to allow us to mitigate the headwinds and allow us to deliver results complement within the guidance range that we provided.

Michael Dahl: Okay. Great. That’s helpful. Then shifting gears and back to the — I guess, part of this might tie back to the capital allocation. I did note that in your [indiscernible], you have a little bit of commentary about the potential to seek relief or refunds from previously paid tariffs, but that nothing has currently been done or contemplated? What can you articulate about your strategy in terms of speaking refunds? And does that tie in at all to kind of the expanded buyback guide where if you do get some refunds, your inclination would be to to return that back to shareholders? Or how would you frame that? .

Jonathon Nudi: Mike, this is Jon. I would say we think the refund process still has a lot of uncertainty in it until if and when we get refunds, we’ll obviously report what they might be and how it might handle them. But we are not banking on refunds, and it didn’t really play any kind of role in our decision to take on the incremental data that we talked about. So again, we’re doing particular steps necessary to protect our shareholders. And at the same time, it’s still highly uncertain. So we another report, we’ll start to review that.

Operator: Your next question comes from the line of Trevor Allinson with Wolfe Research.

Trevor Allinson: I wanted to follow up on the restructuring actions. I think last quarter, you guys had talked about those being bigger impacts to ’27 and ’28, but it sounds like you’re seeing those come through this year as well and providing nice tailwinds. So can you size for us what sort of benefit you’re getting from the restructuring actions here in 2016? And then how much larger does that become as you move into ’27 and ’28.

Richard Westenberg: Trevor. It’s Rick. So with regards to the restructuring actions, we’re really pleased with the execution, both the true execution and the timing of our restructuring actions as we disclosed we incurred about $8 million in Q1. We had incurred several million dollars in Q4 of last year, and we expect $50 million of restructuring costs for the calendar year and those are on track. And so we’re starting to see those savings. We haven’t quantified nor do we intend to quantify the savings per se because part of the savings are going to be redeployed in terms of growth initiatives as well as helping us to expand our margins. And that’s a contributing factor to our margin expansion this year. You’re absolutely right.

The restructuring actions are going to be executed over the course of 2026. And — and so we’ll see more of a full year benefit as we move into ’27 into ’28. But we’re going to be managing those cost savings and leveraging those, as I mentioned, to drive growth. as well as managing our margin expansion.

Trevor Allinson: Okay. And then second question maybe is related to that then. I mean you guys have made some changes in your incentive comp structure recently. It looks like you’ve been more focused on growth than you have been in the past. Can you talk about that change? Why you made the adjustment? And does that imply some shifting priorities for you guys in terms of growth moving forward.

Jonathon Nudi: Trevor, this is Jon. Maybe I’ll jump in. So as I joined Masco last summer, it’s clear to me Masco is a high-performing company. As I wanted to do the listening tour and talked to a lot of key constituents. The 1 thing I heard is that there is likely an opportunity for us to drive our top line a bit faster. Don’t take the focus off margins. We don’t take the focus off of cash flow. The company has done a great job on that. But if you can continue to deliver the bottom line and grow a little bit faster is probably a benefit to everyone. So we’ve been focused on doing just that. We’re taking actions across the board, including the structuring of our executive committee to bring some external expertise in, in areas that we believe that we can benefit, see some additional savings.

We’re setting up centers of excellence around things like digital marketing and e-commerce, commercial excellence, all in the pursuit of helping to not only grow the bottom line, but also grow our top line a bit more quickly. And then certainly, incentive is important. So we did make a change to change the weight in terms of how we incent our teams. And I would say profit is still the largest percentage of the pie we have balanced it out a little bit to make sure that we have the appropriate focus on top line as well. So I’m really pleased with the progress we’re making. I’m pleased that we were able to grow the way we did in Q1. And again, our goal over time is to be able to do that consistently.

Operator: Your next question comes from the line of Adam Baumgarten with Vertical Research Partners.

Adam Baumgarten: I guess just on the margin piece, you talked about first half margins now being flattish year-over-year, which would still imply some margin pressure in 2Q. Do you expect both segments to see margin pressure next quarter?

Richard Westenberg: Adam, it’s Rick. So in terms of our margin expectations, you’re right in terms of our updated guide for the first half of the year is flat margins. And given the fact that we had expanded margins in Q1, it does imply a margin contraction in Q2. I would just remind you that Q2 of 2025 to last year’s quarter, we really weren’t impacted by tariffs quite quite significantly at that point in time. And we had a very strong quarter with regards to 20% margin. So it’s a challenging quarter from a year-over-year perspective. We do expect a very solid quarter in Q2 from a margin traction perspective. I’m not going to comment on the segments per se, but overall, we do expect some margin contraction, but we do expect to deliver a very strong quarter in Q2.

Adam Baumgarten: Okay. Got it. And then I think you guys alluded to maybe some incremental price actions. A couple of questions. Would that be in both segments? And would that happen if kind of commodity costs stay where they are today? Or would you need to see more commodity inflation to then think about raising prices further?

Jonathon Nudi: Adam, it’s Jon. I guess I would say we’re not going to talk about prospective price advances. I just would probably tell you to look at history here, the recent history in terms of how we approach things. And pricing is the last resort for us. We start with negotiating with our suppliers, changing our footprint where possible, taking cost out of our own system. But if the need is there. I think our team has proven that they can take pricing very effectively and efficiently and do in a way that benefits not only the bottom line but doesn’t harm the top line as well. So we’ll continue to monitor things. Again, as we talked before, I’d say the one surprise for us so far this year has been the impacts on petrochemicals and particularly on our architectural business.

So that’s an area that we have a lot of focus. We’re spending a lot of time with our suppliers to negotiate the best deals we can. And then ultimately, we’ll work with our retail partner in terms of how we [indiscernible] forward. But — just know that we’ve had good practice over the last few years given all the dynamic environment and feel really confident the team can navigate as we move forward.

Operator: Your next question comes from the line of Phil Ng with Jefferies.

Philip Ng: Congrats on a really impressive quarter. I guess to kind of kick things off, John. I mean, I think volumes for plumbing came in, as you’ve pointed out better than you expected. Is that a more resilient consumer, maybe better price elasticity? Can you tease out if there is any share gains of note that drove some of that? Help us kind of think through where, I guess, plumbing would have surprised and it sounds like it’s been pretty resilient thus far.

Jonathon Nudi: Yes, Phil. Yes, I mean, we’re really pleased with plumbing, as I mentioned. It’s globally we grew, which is great. I would say, again, versus expectations, it was really North America that we saw the beat. And as I mentioned, the vast majority of that will be versus our expectation was volume. And I would say our Delta team was firing on all cylinders right now. They’ve got great marketing plan for the year. They’ve got terrific new products that they’ve lost. Our vitality rate continues to increase year-over-year. Our commercial plans with our key customers are incredibly strong as well. So team continues to perform. And then when you break it down across channels, we grew high single digits in North America across each of the channels.

So wholesale and e-commerce and retail. And that’s tricky to do, and the team is hyper-focused on building strong plans at each each of our customers. So we do feel like you’re taking some share. And at the same time, I think executed pricing in a really effective way that we didn’t see the elasticity maybe that we would have modeled out beforehand. And I think it’s to get a testament to strong execution. So — the last thing I would add is we continue to see strength in our upper premium and luxury segment of the market where we have brands such as Brizo and Axor and Newport Brass. And the high-end consumer definitely seems to be hanging in there strong and we see really strong margins in that segment as well. So we feel great about the performance and feel good about the plans we have in place for the rest of the year as well.

Philip Ng: Got you. And just kind of teasing off that, I guess, for Plumbing for perhaps Rick, you guys kept your guidance for up low single-digit top line growth. It sounds like there is nothing of note for 1Q and volumes were up — it sounds like things are pretty resilient. Could that be a source of upside? Or are you kind of expecting volumes to kind of decline in the back half, perhaps just given some of the macro dynamics that is out there? Just want to kind of think through some of the puts and takes there on the demand side.

Richard Westenberg: Yes. Sure, Phil. As it pertains to — as Jon mentioned and we talked before, Q1 was a really strong quarter. We’re very pleased with our results and the consumer in terms of our businesses is holding in there. The uncertainty is something that we’re continuing to track both on the macro and geopolitical consumer confidence is a bit challenged. But as it pertains to the fundamentals of our business are strong. The only thing I would point to from a first half versus second half perspective is — we started to take pricing from a tariff mitigation standpoint in the second half of 2025. And so we’ll lap that as we get to the middle of the year. As evidenced by our Q1 pricing of 6% in Q1. We won’t see that type of year-over-year comp in the second half of the year.

So that’s part of the dynamic, just mechanically, but we still feel pretty confident. And obviously, we’re hopeful that there is upside relative to our expectations. But at this point, we’re we’re guiding at low single digit in terms of growth for the year.

Operator: Your next question comes from the line of Michael Rehaut with JPMorgan.

Michael Rehaut: Wanted to shift the focus to decorative and the sales were flat, still better than what we were looking for down low single digits. Was hoping to get a sense of DIY versus Pro and the different drivers there and where things might be if it’s indeed the case maybe coming a little stronger if you’re seeing any momentum similar to what you’ve seen in plumbing and how you might contrast the sales momentum that you’ve seen in plumbing versus what you’re seeing in decorative across, again, DIY versus Pro on the paint side?

Jonathon Nudi: Mike, good question. It’s Jon. So our sales for the quarter were flat. Clearly, that was a better performance than what we saw in Q4 of 2025 and really most of 2025. When you break it down, we saw Pro continue to grow mid-single digits. DIY was down low single digits, and we feel good about the plans we have in place. I mean I do believe that DIY is going to remain pressured when you look at that business. It’s highly correlated with existing home sales. And obviously, existing home sales remain pressured. So as a result, we’re putting strong plans in place. We’re going to focus on the great quality that we provide the best value in the industry, really make sure that, that’s playing through and feel good about our plans with our retail partner.

. The pro side is where we continue to see a tremendous amount of opportunity. I mean that’s where the growth has been over the last longer time. We have a relatively small share in that space as well. We’ve grown our share by 200 basis points over the last few years. We’re continuing to invest to take friction out of the experience for Pro. So whether that be order online, pick up the store or online, having delivered to the job site. We continue to hire both inside and outside sales reps to develop those pro relationships. And I can tell you that the home people have that same exact was our focus on the Pro as well. So I think we hope to see incremental progress as we move throughout the year. And we remain a tough DIY market, we believe, for the short term, I feel really good about the plans we have in place and the trajectory that we’re heading on.

Michael Rehaut: Great. No, that’s helpful. And I know at the risk of of beating this one to [indiscernible] a little bit, but I think it’s going to be a big topic over the next month or two around the strength in plumbing, particularly the volume side. And you just highlighted the fact that you’ve seen that strength across different channels in North America, a lot of success in your execution. Notwithstanding maybe being a little more conservative in the back half of various reasons. And I presume you also hit on this at our Analyst Day next month. But are we to think about let’s say, the share gains that you’ve been able to achieve in the first quarter as sustainable? And are there parts of the market that maybe you see an opportunity where this share gain dynamic can persist throughout this year into 2028.

Just trying to get a sense of the sustainability in the performance. And if there’s anything that’s shifted within the market, either on the customer side or some of your competitors out there, that lead you to believe that the share gain dynamic can persist on a, let’s say, on a medium-term basis?

Jonathon Nudi: Mike, good question. I mean, as I mentioned, we feel terrific about what our team has delivered in Q1, particularly in North America. We don’t think anything for granted. Our competitors are strong. There’s good brands out there and it’s a dynamic environment. So we’re going to keep playing our game, keep focused on building our brands, innovating and then executing at a high level. And if we do that, we believe it will continue to be as strong as we move forward. As I mentioned earlier, I mean the big question mark for us is just what happens with the end consumer. And a couple of months ago, we clearly talked about it being uncertain times and a lot of dynamic environment. And obviously, since the conflict in the Middle East, it’s take it to a whole new level.

So we believe that we’re just being prudent in terms of, hey, let’s wait and see what happens and how it plays out with consumers. And as we mentioned before, we are starting to see some inflation through. So if there’s any caution, it’s just that. And certainly, these are very uncertain times that we’ll continue to monitor and to what we can control. I feel great about what our teams are doing. I feel we have a very clear line of sight into our plans for the rest of the year. and I expect our performance to be strong certainly versus the category. And ultimately, it’s the category, how that performs with all these uncertainties and the things that we’re watching.

Operator: Your next question comes from the line of Anthony Pettinari with Citi.

Anthony Pettinari: Just following up on plumbing. Can you give any additional color on the growth you saw in Watkins and the opportunity or the TAM there? I think you flagged Delta and Watkins as your strongest growers is Watkins growing maybe similar to Delta? Or is it growing faster off a lower base? Is there any product set or brand within Watkins that’s really driving the strength? .

Jonathon Nudi: Anthony, it’s Jon. We feel, as we’ve talked about, great about Watkins and the opportunity. Watkins did grow in Q1. And we’re going to get into a lot more detail at our Investor Day next month in New York City. So we’ll walk you through the TAM. We’ll walk you through the opportunities that we see — what I would tell you is that hot tubs is our biggest business, and we like the momentum. We’re the share leader in that space across North America, where we’re seeing outsized growth is really in [indiscernible], which is only 1% health penetration in the U.S. today. It’s very much front and center of the wellness movement, and we’re seeing just a lot of demand for that product. So we grew nicely from a walk-in standpoint in Q1. We’ll give you a lot more details next month when we get together.

Anthony Pettinari: Great. Great. And then, I guess, given the rise in diesel and gas prices, I’m wondering if you’ve historically seen real sensitivity between gasoline prices and consumer spending for your products? I guess I’m thinking specifically about DIY paint and maybe some of the smaller ticket items. It seems like you haven’t seen that so far, but I’m just wondering if that’s something historically that’s moved the business.

Richard Westenberg: Anthony, it’s Rick. So — it’s tough to single out a particular driver. I think what we watch, generally speaking, is consumer sentiment as well as overall the health of the economy. And so higher oil prices, as we all recognize, is generally a headwind to consumer confidence is generally a headwind to disposable income. So — and it’s a headwind in terms of input costs. So those are things that we’re monitoring closely, and that’s one of the reasons that gives us caution and why we’re prudent with regards to our expectations as we move out through the course of the year. Again, the fundamentals of the business, as Jon articulated, are really strong. We’re pleased with the execution of what we’ve been doing here at Masco and across our business units.

Oil prices is something that is a headwind, but it’s more how it manifests itself in terms of consumer confidence, et cetera. For us, in terms of our products, they tend to be a lower ticket R&R items, so they tend to be more resilient in these types of environments. But nonetheless, we’re not immune to it, but it’s something that we’ll continue to monitor and track progress through the course of the year.

Operator: Your next question comes from the line of Susan Maklari with Goldman Sachs.

Susan Maklari: I want to talk about the longer-term growth path. With the changes in leadership that you announced this week, do you now have the heads of those 4 key businesses reporting directly to you, Jon. Can you talk about what that means in terms of your ability to drive growth over time? And how the executive committee is focused on some of these items? And what that will mean for Masco?

Jonathon Nudi: Yes. So great question. As I mentioned before, as I came into Masco, I heard that. top line growth as something that probably was an opportunity, something for us to focus on. And then as I took a deeper the of the feedback, the other thing I heard is just our ability to move with pace and be agile is probably the other area to focus on. So with the executive community returned to 2 things. One, make sure that we have the right experts in terms of our centers of excellence and deep functional knowledge where it matters. . We announced just earlier this week that we’re bringing in a procurement — Chief Procurement Officer who has 30 years of experience in the space and will be able to help us bring the most modern capabilities as which we feel great about.

And also with the executive committee, really trying to streamline the organization to have more frequent communication, allow us to make decisions more quickly and move with pace. So with the new organization, essentially have removed a layer — and with that, we think that our speed and agility will increase even more we talk as an executive committee, we meet once a week. I can tell you I talk to my direct reports many more times than that. And I think with the roll around us and the pace that we’re seeing, it’s really important that we have the organization that’s set up to read and respond and deliver to consumers and customers what they expect from us.

Susan Maklari: Okay. That’s great color. And then despite the moving parts around inventories and costs, still targeting to get that working capital down to about 16.5% of sales this year. Can you just talk through some of the pieces in there and how we should think about that coming together? .

Richard Westenberg: Sure, Sue. It’s Rick. So part of the reason our working capital is higher than it typically is this time of the year or has been for the last several months is because of the implications of tariffs. So the payer tariff costs and commodity costs, quite frankly, that lead into our inventory and receivables have elevated our working capital in the shorter payment terms on the tariff bills or invoices also reduces are payable. So there’s an overarching tariff dynamic that has been at play. We’ll see that normalize as we get into the second half of the year. And we continue to be. The team is very focused on managing not only cost, but also working capital. And so that’s something that we’ll continue to execute on. And once we get through the normalization of the tariff implications in the second half of the year, we should be able to execute towards the working capital that’s more in line with our historical average, and we’ve guided towards 16.5%.

Operator: And your last question comes from Rafe Jadrosich with Bank of America.

Rafe Jadrosich: The outperformance in plumbing volume in the first quarter in North America, how much would you attribute to just broader consumer resilience and the category holding up relative to your market share outperforming what you were expecting going into the quarter?

Jonathon Nudi: So I’m not sure we’ll quantify it to the level of detail you’re looking for. I mean, I think the category performed fairly well. I am very confident we also took market share that mentioned I believe that we’re firing on all cylinders right now and really strong plans in place across each of our channels, each of our customers. So just leave it out is probably a bit of both. But if I had to say which one was the bigger driver, I would think probably our market share gains.

Rafe Jadrosich: Great. That’s helpful. And then in terms of the input cost inflation, what you’re expecting, can you talk about what the copper price is embedded in guidance for the second half of the year or should we be assuming that copper prices and like stay where they are today. So just what are you assuming to get to the full year guidance? .

Richard Westenberg: Sure, Rafe. It’s Rick. We’re not going to disclose a specific assumption in our outlook. But suffice it to say, I would assume that where we have been recently relays we closed out 2025 is a pretty reasonable place to be. Obviously, it’s volatile in that nature. I mean I think as we sit at $6 or above $6 per pound, that is something that represents a bit of a headwind to us, but it’s a volatile environment. And at the end of the day, as I’ve mentioned before, we’re not only monitoring the situation, but we’re proactively taking actions from a cost reduction standpoint, from an efficiency standpoint and as necessary, a pricing standpoint to mitigate those impacts, whether they’re copper, oil inputs, tariffs, et cetera, to be able to deliver the results that we’ve guided to for the year.

Operator: This concludes the question-and-answer session. I will now turn the call back to Robin Zondervan for closing remarks.

Robin Zondervan: We’d like to thank all of you for joining us on the call this morning and for your interest in Masco. That concludes today’s call. Have a wonderful day. .

Operator: This concludes today’s conference call. Thank you all for joining. You may now disconnect.

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