Good day, ladies and gentlemen. My name is Morgan, and I will be your conference operator today. I'd like to welcome you to the Fortune Brands Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Following the speakers' remarks, we will open the call for a question-and-answer session. At this time, I'd like to turn the call over to Leigh Avsec, Vice President of Investor Relations and Corporate Affairs. Leigh, please go ahead.

Good afternoon, everyone, and welcome to the Fortune Brands Innovations third quarter 2024 earnings call. Hopefully, everyone has had a chance to review the earnings release and our supplemental financials. The earnings release and the audio replay of this call can be found in the Investors section of our website. I want to remind everyone that the forward-looking statements we make on the call today, either in our prepared remarks or in the associated question-and-answer session, are based on current expectations and market outlook and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated. These risks are detailed in our various filings with the SEC. The company does not undertake any obligation to update or revise any forward-looking statements, except as required by law. Any references to operating profit or margin, earnings per share or free cash flow on today's call will focus on our results on a before charges and gains basis unless otherwise specified. Please visit our website for reconciliations. With me on the call today are Nick Fink, our Chief Executive Officer; and Dave Barry, our Chief Financial Officer. Following the prepared remarks, we have allowed time to address some questions. I will now turn the call over to Nick. Nick?

Thank you, Leigh, and thanks to everyone for joining us today. On this call, I will walk through the highlights of our third quarter performance, give some color on the drivers of this performance, including progress on our digital strategy and offer some thoughts on the macro environment. I'll then turn the call over to Dave for a more detailed discussion of our financial results, our updates to our guidance for the remainder of 2024 as well as some thoughts on our emerging expectations for 2025. Before turning to our third quarter performance, I would like to provide some context around our market. While we are increasingly excited about the long-term opportunities in our space and for our company, we continue to operate in a choppy environment with continuous year-over-year U.S. repair and remodel declines and unprecedented market disruption in China. Our seasoned team is managing our business tightly while continuing to prioritize investments in our strategic growth priorities, including our digital transformation. We have purposely moved away from less profitable categories to focus our resources on our supercharged higher-margin opportunities. We continue to streamline our operating model, which has allowed us to operate more efficiently, reduce SG&A and fuel growth. While our short-term results remain pressured in a demand-challenged environment, we are already seeing tangible results from the strategic actions and investments undertaken to advance our longer-term growth opportunities. As in Q2, we saw areas of sales strength in our core North American Moen and Therma-Tru businesses. Our digital products portfolio once again saw some very exciting wins this past quarter and the organization continues to ramp our sales pipeline. Finally, as we approach the two-year anniversary of our new operating model, we are working as a more aligned and efficient organization, including developing new marketing campaigns, launching new…

Thanks, Nick. As a reminder, my comments will focus on income before charges and gains to best reflect ongoing business performance. Additionally, comparisons will be made against the same period last year, unless otherwise noted. Let me start with our third quarter results. As Nick highlighted, our results reflect our focused execution on a tight set of priorities amidst a challenging external market. Sales were $1.2 billion, down 8%. And excluding the impact of China, organic sales were down 5%. Consolidated operating income was $216 million, down 2%. Total company operating margin improved to 18.7% and earnings per share were $1.16, down 3%. Free cash flow in the quarter was $176 million, which brings our year-to-date free cash flow generation to $262 million. Turning to sales. Net sales results were driven by China softness, low single-digit POS declines and inventory reductions in outdoors and security. Our operating margin of 18.7%, a 130 basis point improvement reflects our team's focus on a narrower set of priorities and our ability to drive continuous improvement savings, offset by our investment in our strategic initiatives which we are confident will result in growth as the end markets improve. Our teams execution resulted in decremental operating leverage of 4% in a sales environment that was softer than expected. As I will detail later, our balance sheet remains strong, and we have the flexibility to manage various economic outcomes while deploying additional capital to drive shareholder value. Now let me provide more color on our segment results. Beginning with Water Innovations, sales were $635 million, down 8%. Excluding the impact of China, organic sales were down 2%. The organic net sales results reflect the impact of lower volumes amid a softer market. Water Innovations operating income was $156 million and operating margin remained strong at 24.6%,…

Thanks, Dave. That concludes our prepared remarks. We will now begin taking a limited number of questions. Since there may be a number of you who would like to ask a question, I will ask that you limit your initial questions to two and then reenter the queue to ask additional questions. I will now turn the call back to the operator to begin the question-and-answer session. Thank you.

[Operator Instructions] Our first question comes from John Lovallo with UBS. Your line is open.

Hey guys, thank you for taking my questions. A lot of information here, so hoping -- hopefully, you can help us unpack some of this. So starting at the top, you lowered the consolidated sales growth for the full-year from a positive 2.5 to 4.5 to down -- or sorry, to flat to plus 1 and then lower the organic sales outlook from down 1 to down 3, to down 1.5 to down 3.5 and the downward revisions were across segments. In terms of the third quarter, it looks like results were below expectations across segments. It sounds like the operating environment certainly got more challenging. But I was hoping you can just kind of help us better unpack some of the moving pieces in the quarter and in the outlook. I mean how much of the decline is from the third quarter being softer versus expected fourth quarter slowing versus storm impact, things of that nature?

Hi, John, this is Nick. I'll try to break it down for you [indiscernible]. So if I think about it, sales reported an outlook or organic, excluding China because that's all of the thing was down 5. Within that point-of-sale, excluding China was down low-single-digits. So you start to dial it in a little bit. And certainly, I take [indiscernible] was weaker in the quarter than we thought they were, particularly in the middle of the summer, July or August. It was particularly slow. I think we saw it across consumer company, saw some recovery towards the end of the quarter. But if I look at our performance in particular, I really see three things at play. One, we've deliberately pivoted away from some of the low-margin and commoditized business in favor of focusing on our supercharge categories. And while we did that, we work and did exceed our own expectations on the digital side, but we need to convert those contracts to revenue faster. And to do that, we need to rate capacity even faster than we thought. And that's just a question of throughput. We've signed a deal. They're in the pipeline but it's a space we're learning. And just like mechanic products, you've got to go build the factory in order to produce it, and we realize we need to ramp that capacity faster than we thought. And so those are in the pipeline that didn't materialize in the reported results for the quarter. And then the third thing I would call out that is a marketplace dynamic is we are seeing some trade down to knock off in poster rates, not so much a regular private label, which you'd expect to bring generally important brands are making false claims about safety and performance that we're going to come back and as I described, we're already doing some of that. We have some of that in play. We've got more of it in the pipeline. But where we've done it, we're already seeing the point-of-sale start to reaccelerate as we do a better job, explains our consumers what the difference is and what the brand premium is worth. And so that sort of leaves me confident as I kind of pull it all together, that while it was a bit softer, and we also had some stuff moving away from us, while a lot of good news coming our way, we just need to listen to the sales even faster.

Yes, and John, I'd add a couple of things and I'll unpack guidance a little bit. But before I do that, what's also evident as the team's focus on margin. And as we re-platformed the business and stepped away from some of the lower-margin categories where brands and innovation don't matter as much. You see that even though sales were softer, we're delivering very strong margin results 4% decremental in a quarter that was softer than we anticipated up 130 basis points in operating margin year-over-year and 110 year-to-date. So the margin is still coming through the story we expect to continue. And then on the guidance, you're right to point out the consolidated change. I'd say that's roughly 3 percentage points lower for the year at the midpoint, which call it $135 million or so, 80 of that came through in the third quarter, which leaves about 55 then in the fourth. And of that in the fourth, about half is hurricane related, about half is continued consumer POS softness that we're working to combat. That said, as we look at the fourth quarter, it still leaves us in a spot where sales are down low-single-digits. We have operating margin improvement of 100 basis points, maybe a bit better than that and high single to low-double-digit EPS. And so EPS growth. And so while not as good as we may have thought 30 days ago, still a pretty good quarter, just not as robust from the consumer, and we were hoping heading in the back half of the year.

That's helpful. And then maybe focusing in on some of the margin improvements. I mean, in outdoors, sales were down 6.5% year-over-year. Margins were up, I think, over 300 basis points. Security was down, I think, 14% for sales and op margins were up 250 basis points. And even on a sequential basis, sales were down and margins were up. I mean -- so what kind of drove the margin strength in those two segments, both sequentially and year-over-year?

Yes, an outdoor is a combination of doors, Therma-Tru door volumes being better year-over-year and volume even in Larson and [indiscernible] being better year-over-year. And then in decking, some of the work we've done to shed some of the lower profitable business that we had. And we've talked about in the past, we exited window supply agreement for window components. We've looked hard at our kind of sourcing and manufacturing around PE and PVC decking to make sure we're driving continuous improvement productivity there. And so a lot of internal initiatives to really drive the margin in outdoors plus some volume coming through on the door side. And then in security, we talked about the actions we took earlier this year to drive the cost savings by altering our footprint. I mean that's really coming through now. And we'd expect that to continue to be a tailwind into 2025. And to Nick's point, this is an area where we are investing back in the business. We're investing in innovation that will come to market next year. We're investing in marketing campaigns for the first time in a while for these brands that will come to market. Now and into next year and it's all really to combat some challenges on the shelf from the import brand.

Understood, thank you guys.

Your next question comes from Phil Ng with Jefferies. Your line is open.

Hey guys, Dave, thanks for giving us a framework for '25. I fully appreciate that guidance per se. Frankly, I thought the back half '24 is not that bad. I mean if you flush out some noise, it sounds like organic sales are down low-single-digits, 1% or so. So when we kind of look at the '25 you said slight growth in the market and usually grow a little faster than the market by a few points, are we kind of talking about, low to mid-single-digit organic growth and little more muted in the first half and you see better growth? And then help us kind of think through the levers you have at play in terms of the margin side of things for next year as well.

Yes. It's a great question. It's tough for us to pinpoint right now and still a lot of uncertainty. When you've seen what happened with bond markets over the past month that's going to lead to higher mortgage rates on the flip side. We expect the prime rate to continue to come down, which is going to lead to some affordability benefits around refinances and HELOCs and home equity loans and just everyday borrowing. So it's tough for us to say. I would say we see the outperformance really driven in two areas. So one, improving core category POS based on the actions that we're taking now. And then two, as we talked about conversion of the connected pipeline into sale. And so I would expect our outperformance to accelerate through the year as both of those things come through the P&L, but hard to say kind of what that level is based on the underlying market in this place.

Okay, that is helpful.

And as we get to '25 guidance, I think we'll have another 90 days of converting that connected stickiness in Flo contracts into sales, and we'll have a better sense. I mean it's just been very kind of surprised the pace at which we were able to ramp. That business, we now have, as I said, 8 million policyholders under contract and only a 5% conversion rate, it's $160 million of sales rep in the pipeline. So what we're learning is you got -- so our website, you got to book collateral. You've got to get these things activated in market. And I think as we get a better sense of how quickly we're able to do that, we'll be able to dimension market outperformance that we expect. The fact that we have another 60 million policyholders under discussion right now, at least a portion of which will convert the contract we think it's going to go as a great pipeline into next year.

Okay. That's helpful. Actually, that was my -- that's a perfect segue, Nick. On connected products, if I remember correctly, last quarter, you were calling for maybe 2 points of incremental growth in the fourth quarter. How are you kind of shaping up in 3Q, 4Q? And then as we look out to '25, it sounds like a high-class problem to have. There's really strong demand, and you've got some natural bottlenecks here. How do you unlock that supply? Are you actually building facilities? Are you going through third-party partners, help size of that opportunity perhaps in '25 and how that capacity unlock will like shape up next year?

Yes. I'll start with the second part of your question, I can mention on the sales piece of what we expect. But think about it like -- you might think about building a factory, but just in the virtual world, and that's exactly what we're learning. Like you have -- there are certainly the ideas, not there a lot of our team work on the charge of engineers, their production people, they're helping produce the product or the software for sites. The things that you need to actually make that sale. And that need to do a great job of ramping even faster than we have now. You know the history that started almost at 0 in '21, and we're now investing very happily and dimensionalize like, behind our digital opportunity, and we've done that while delivering this margin expense. So we're super excited that we've been able to fill this engine. It's been a little while in for us that we probably have to build it even faster, and so that is growing investment where the growth in the business is and really just invest in the people. You've got sort of an onshore, offshore it's a combination. I mean you really need the leaders and the thinkers and the architects are part of our organization. A lot of those people came across with the August acquisition, they're fabulous. But then we're also going to leverage outside health or offshore parties that might be really steeped in just a particular part of digital piece of the puzzle that you need to deliver. And so we call that there. But myself and my executive team really been focused over the last 90 days on just how do we put the capability and capacity to ramp this even quicker.

And on the financials, Phil, I'd say, if we look at the pipeline and POS activity ahead of expectations, if we look at how that's converting into sales is a bit behind where we were a quarter ago. And to Nick's point, that's where we're trying to ramp up some targeted investment to unlock those sales. But I feel really good about the opportunity is still there and growing as we're working hard to convert to sale. And then we had a little bit of inventory come out of the Yale channel that the other headwind under the sales number, but I feel like that it's a onetime event that we'll be through by the end of the year and really focus on getting this pipeline through and converting into sales in '25.

Okay, Exciting, really appreciate the color guys.

A little bit more around that. The way to think about it today probably sign an agreement, taking us two to three months, want to be in the two to three week range. That's good.

Okay, thank you.

Your next question comes from Mike Dahl with RBC Capital Markets. Your line is open.

Thanks for taking my questions. I just -- starting with that, I want to make sure we're clear with kind of the terminology on Flo. When you're talking about the pipeline and you're talking about the $160 million in sales and assuming 5% conversion, is that the actual agreements you have in place? Or this is still an estimate that you're using for a conversion rate based on just the number of insurance policies that you have coverage for right now?

Yes. I'll dive a little bit for you. I'd say broad line is an estimate. There are three -- probably three types of agreements precise. Various types of agreements where the product may be recommended an offer. There is the type of agreement where the product is offered with a rebate and then there's a type of agreement where it's actually mandated where the insurer will say to the policyholder unless you put this in, you will get no more insurance from us. Now even in the third bucket where it's mandated. It's not an instant off. I mean you could imagine what would happen publicly if they just turn polices up. So they give that homeowner some time to comply with the mandate. But those are the three types of contracts we're currently out and executing in the marketplace, but we did to get to $160 million was saying, well, we took a near 5% conversion rate, that would be $160 million on the contracts we've already signed. Now I would tell you, we expect a far, far higher conversion rate with the mandated contract. Those will go in at, it should be 100% minus whatever policyholders choose to walk away. So these are not markets very easy to walk away new insurance because there's a whole lot of insurance. Some of the places where it might be recommended, they pay back for itself with a discount and that's a lower conversion rate. We felt 5% is very conservative, but that's how we get to the number of what we've already signed.

That's really helpful, Nick. And if I could just point of clarification and then a second question, a point of clarification would be that 5%. Do you work with your partners on, hey, this is kind of when we've done other things for other parts of insurance policies where you're having to lock in, whether it's like alarm monitoring or whatever, like this is kind of the conversion rate we think about or what informs that? And then the second separate question just in the spirit of this week's events. Can you remind us, there's been a lot of moving pieces in your portfolio and your sourcing initiatives. What is your current cost of goods exposure to China? And then what's your total cost of goods exposure that's outside of the U.S. that brought onshore at this point?

So just on the -- on your first question, we use very, very precise models with insurers to understand, A, what the effect of savings will be. I will tell you, they are pretty eye water when you see the numbers, multiplied by number policies they have. And then B, from there we work on an expected conversion rate in the period of the supply chain accordingly. The 5% is quite a bit lower than that. That's our conservative assumption. That's not what we are actually gearing a supply chain and these contacts we're gearing them to do something in excess of that. So that's the first part. The second part, I'll just give you a general concept to think about in the [indiscernible] a little bit the sourcing piece spend. I will tell you that we have been in the mode of optimizing the supply chain and managing tariffs really all the way back to fiber tariffs in 2017. The team is extremely experienced in this area. One of the things that I would say has evolved pretty significantly is our ability to flex that supply chain. And so we've moved away almost everywhere from a single source. We now have two sources and your secondary source may cost you a bit more than your primary source. But if your primary source were to become more expensive because of tariffs, you can dial that down and dial up your secondary source and rebalance it to be the most efficient. Of course, added to that, we still have a very large U.S. manufacturing footprint that becomes part of that total network solution, not just an independent thing. It's the role that it plays in that total network solution. So I'm confident that we are very well positioned, it'll increase tariffs. I'll tell you, we don't divide it, because it's a lot of hard work. But every time it happens, our share tends to accelerate because of our ability to execute relative to the competition. And that's where we really put the emphasis. And a final thought we're headed today that as we do have our [indiscernible] team against this that have been working on this for many months and run up to I guess in today with the expectation that we will see tariffs. I think the PPT may be exactly where you see them and to what degree. But with the network that I've described.

Yeah, and the impact, Mike, I'd say, going back to 2018 and look at these set of assets, we had over 50% of our COGS sourced from China, that's down to less than 25% today. The next point, the team has been working against that for a lot of peers, they're still in place. We're still paying more steps we can get out of China, the better. Looking broadly at our COGS, I'd say U.S. is roughly 40% to 50% of the COGS base. If you remember, outdoor is almost fully U.S. Water has a big piece in the U.S. and then Security has a piece in the U.S. So you take that add a little business in China, the balance being Rest of World and a portion of that Rest of World is North American based. And so -- but we do have options. We're operating under a base case scenario that tariffs from China, at least are going to increase, and the team is working to optimize our network around that. And we do view this as an opportunity.

That's very helpful.

I just refer to the session we had around John's question. I'll just end on that third point. We have seen in the market bunch of import brands they claim to perform whether it be in security and fire safes, in water safety at levels that our own testing demonstrates they do not deliver that is something that you'll see us increasingly ramp up our communications around. Some of it is directly to people's while being in health and safety. I don't think that increased focus on some of that product that we've seen coming into the marketplace and that's really a good path way.

Yes, make sense. Thank you.

Your next question comes from Trevor Allinson with Wolfe Research. Your line is open.

Hey, good evening. Thank you for taking my questions. Nick, I wanted to follow-up on what you were just referring to with some of that non-complaint product competition. Can you just dive into that a bit further, talk about how big of an impact that had on the quarter? Is that something that you expect to linger here going forward? I know you talked about some initiatives that you're going through to mitigate some of that. But just any way you can size that for us would be helpful.

I'll give you a few examples just to start off. First kind of start on the fire safe, so we're paying this via fire safes. And our waterproof safes and consumers really depend on that, particularly in the fire zone or arcade zone. We see -- you can all do your own research, you'll see products in the market that claims similar performance. We had it through our own testing. And we're -- our sites will withstand a fighter. Most of these import brands burn within two minutes. We put collateral app into the marketplace that is the first one, we took test it and we put collateral that into the marketplace and investment behind telling the story, and we are seeing our point-of-sale turn around and start to gain -- actually gain share very quickly. I'm really within weeks of activation. So it gives us confidence that when we tell the story, the consumer sees the value in it. We've now extended some of that work to things like, but we're finding their fastest assets at each led into the waterway that is not legal. We will tell that story and so on and so forth. We have started on connected security. So there is no doubt on an opportunity. I wouldn't say the impact was massive. But unlike regular way private label, where we don't really compete at opening price point, and we've done just fine because people see the value paying for the premium for the brands and we strategically position our portfolio like that. These are places where people are advertising in a misleading way. That is directly competitive, because they're claiming the same benefits as our rates provide at a lower price than they actually are not providing them. And so again, we told the story, it seems to change this trajectory. We're just now making the investments, and taking the time to do that, and we'll be doing it more publicly as we move forward.

And Trevor, you see this both acutely in our organic security results year-to-date. This is where most of the problem is showing up and where the team as Nick would try to taking action to offset it.

Okay. It makes a lot of sense. I appreciate that color. And then the second question is on China. Conditions there are clearly dynamic. Nick, I think you used the word unprecedented. So a lot of uncertainty there. Can you talk about how you're thinking about that market moving forward? Do you think you're nearing a bottom here? I mean, comps are clearly getting a lot easier. If any color there would be greatly appreciated? Thanks.

Yes. Firstly I'd say your question is highly logical. You would think one is there in the bottom, just given how long it's going on, how much less of new construction there has been as well as the fact that the government does seem committed to creating that bottom and stimulating that marketplace. That said, I will say, after a couple of years in, we just feel like to comp think on that. The team here has done a fabulous job managing the cost structure and the P&L [indiscernible] that is still a profitable business for us. And so the way we think about it as long as we can keep it. Isolated and manage it in that way. And frankly, when I look at the size of the profit pool today, it's really could go to zero, and I wouldn't have a noticeable impact on the total company, it really is a market that should give us exposure to growth and grow returns and demographics on telling our growth has to return at some point. And also, it's a really nice innovation engine for the business. We have a great team there that is very, very close to a lot of great innovation in that service on the pipeline from the whole business. And so that's really with a lot of humility to the team over there have done a great job in how we're thinking about it and how we're managing it. When that bottom actually forms that would lose money making that prediction. So we'll just manage the type in the [indiscernible].

I would appreciate all the color. Thanks.

Your next question comes from Stephen Kim with Evercore ISI. Your line is open.

Yes, thanks very much guys. Appreciate all the color so far. I wanted to ask you in security, I think you had mentioned that POS was down mid-single digits, but you're guiding to sales down, I think high-single digits, if I'm not mistaken in the fourth quarter. I was just curious if you could sort of talk about that?

Yes, happy to the guide, implied sales down mid-to-high single digits in the fourth quarter, that's right. And I'd say it's continued consumer POS softness. And I said we are starting to see some of the trends churn based on the investments we made, but those investments came late third quarter into the beginning of the fourth quarter. And so not really to predict a complete turnaround yet on that POS trend.

Got it. Okay. But maybe the outlook into '25 might be better, hopefully. And then to sort of follow on these low-quality competition, low-quality competitive products you're dealing with in digital security. I just wanted to get a sense, is this issue more pronounced in -- maybe in the online channel? Or is it -- are you seeing it pretty much across the retail -- across all retail, including online? And can you share with us like what share of your digital products are sold online?

Why don't I start. And again, just to reiterate external problem where they're lower quality like we are just certainly not competing at that bottom end of the channel, it's where they're making false claims that we are combating and competing with success. And so that is where we saw this issue sort of emerge very quickly. And yes, you're absolutely right. It's much more prevalent in the online space where you've got the institutional. And there's probably less scrutiny around product claims that are put on web pages. And in terms of breaking out the percentage, Dave.

Yes, I would just say, Stephen, it definitely over-indexes our mechanical channel breakdown. The digital products more have to be purchased online at least today as we build out the other channel.

Okay. Thanks very much guys.

Your next question comes from Adam Baumgarten with Zelman. Your line is open.

Hey, good evening guys. Just back to the digital, I think you talked about 150 basis points of growth contribution in the back half of '24 last quarter. Maybe if you could update that number and maybe what it was in the third quarter?

Yes. We talked about that a little bit earlier. So I'd say our POS and our pipeline is exceeding expectations. The sales number coming through is a bit below that, just given our conversion rate from the pipeline into sales, and we're investing to trying to unlock that. As Nick mentioned, taking that time to revenue from three months down to three weeks is really the goal. Third quarter, similar, I'd say POS very strong. It's up over 80%, signing new agreements we just have to get into revenue.

Okay. Got it. And then just -- you mentioned trade down, I think, in security or maybe some of the positive products. Are you seeing trade down across any other areas like outdoors and water?

No, not across outdoors and yes, a bit in water and again, it's not so much a trade down just upping price points. I want to be really clear. That's always been around. It's where we've seen false claims that we've seen the impact in water, we've seen a bit, and we've got some of those products in testing and not just false claims, they're non-compliant. And so we're confident in the thought to work back against that.

But in the non-connected products, you're not seeing any material turndown?

We're not -- actually, I'm not talking about connected products at all [indiscernible]. It's really in mechanical things like fire safes, kitchen faucets, some in the padlocks. It's really mechanical product that just coming in sort of looks the same, makes all venture clients doesn't perform where they claim.

Got it. That's helpful.

Your next question comes from Matt Bouley with Barclays. Your line is open.

Good afternoon everyone. Thanks for taking the questions. I think you made a comment in the prepared remarks around 2025 with that slightly positive market growth and that you would outgrow that. That in that scenario, you would see meaningful margin progress, I think I heard you say. And so given your outgrowth that maybe you're seeing a little bit of volume leverage. But I guess what are the other pieces of the bridge that might get us to meaningful margin progress? And how do you think about incremental margins in a scenario where the market would be slightly positive? Thank you.

I'll give you a bit of color and context, Matt, I'd say we see margin next year coming from a few areas, right? So productivity, we've had a very nice trajectory. SG&A efficiency as we continue to bring the businesses together that we're finding more SG&A efficiency and then mix, we expect to be favorable. I think price cost will probably be a slight benefit as well. The offset and why we're not being more specific right now is the level of investment back in the business. When we talk to guidance, we'll be clear about where and how we're reinvesting primarily around unlocking growth and setting it up for future growth opportunities. So that's the big offset lever right now. The teams are still working through. And Nick and I look at the decision to make how much are we going to invest back in and how quickly could we turn that into growth at the top line.

Got it. Okay. Thanks for that Dave. And then secondly, on the decking business, I think I heard you say you were seeing some evidence of improving trends to enter the fourth quarter and something around destocking, if you guys were talking about it potentially being onetime. Just maybe hit on both of those points. Just have you seen the destocking subside? Or is there any more to come? And what are you seeing around some of these improving trends here? Thank you.

The destocking, I think the channel loaded up for a season that was disappointing and so that came out. That was really primarily the driver of the destocking. On the POS side, we were down mid-single in the quarter. As we've looked over the past four weeks, it has improved from there from a POS standpoint, which gives us confidence that improving out of where we were in Q3.

Okay. Thanks Dave. Good luck guys.

Thanks.

Thanks.

Thank you for joining the Future Brands Third Quarter 2024 Earnings Conference Call. You may now disconnect. Have a wonderful rest of your day.