Good morning, ladies and gentlemen. Welcome to Masco Corporation's Fourth Quarter and Full Year Conference Call. My name is Emily, and I'll 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 David Chaika, Vice President, Treasurer and Investor Relations. You may begin.

Thank you, Emily, and good morning. Welcome to Masco Corporation's 2022 fourth quarter and full year conference call. With me today are Keith Allman, President and CEO of Masco; and John Sznewajs, Masco's Vice President and Chief Financial Officer. Our fourth 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 our 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 describe 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'll now turn the call over to Keith.

Thank you, Dave. Good morning, everyone, and thank you for joining us today. I'll start this morning with some brief comments on our fourth quarter, and I'll turn to our full year results and our view on 2023. Before I get started, however, I'm sure you saw our announcement that John Sznewajs has decided to retire from Masco, effective at the end of May, and we are working to identify his replacement. John has been a fixture at Masco and in the industry for over 25 years now, and has been an invaluable partner to me, our Board and the investment community during his 15-year tenure as CFO of our company. He will be sorely missed, and we wish John all the best in his future endeavors. Now please turn to Slide 5. In the fourth quarter, our top-line decreased 5%, as we saw lower volumes across most categories, partially offset by significant pricing actions of 9%. Our operating profit declined in the quarter due to the lower volumes, higher operational costs and currency. This was partially offset by pricing actions and expense control as SG&A declined $22 million to 17.4% of sales. Our earnings per share for the quarter were $0.65. Earnings per share benefited from a lower average diluted share count as well as effective tax rate of 24%, lower than our previously guided 25%. Turning to our segments. Plumbing grew 2% in local currency with a 1% decline in North American Plumbing, offset by 7% growth in International Plumbing. Hansgrohe drove market share gains in many key markets, including China, Germany and France. Our International business has continued to execute well, which speaks to the strength of the Hansgrohe team, its strong brands and its ability to gain market share. In North America, our spa business has…

Thank you, Keith, and good morning, everyone. Before I begin my comments, I want to take a moment to thank Keith, our Board and the entire Masco organization for the opportunity to serve as CFO for more than 15 years. I've had an amazing and fulfilling 27-year career with company. As I look forward to my retirement, I wish everyone the best. With that, as Dave mentioned, my comments today will focus on adjusted performance, excluding the impact of rationalization and other one-time items. Turning to Slide 8. Sales in the quarter decreased 5% and, excluding currency, decreased 2%. Lower volumes decreased sales by 11%, partially offset by net selling prices, which increased sales by 9%. In local currency, North American sales decreased 5%. Lower volume decreased sales by 14%, partially offset by higher net selling prices, which increased sales by 10%. In local currency, International sales increased 7%, driven by increased selling prices. As it relates to inventory, we believe channel inventories have stabilized as we saw sell-through approximately equal to sell-in and destocking had minimal impact in the quarter. Our gross margin of 29.5% was impacted by lower volumes, and higher year-over-year operational costs in the quarter. Our SG&A as a percentage of sales improved 20 basis points to 17.4% through continued cost discipline. Our operating profit in the fourth quarter was $234 million and operating margin was 12.2%. Operating profit was impacted by lower volumes, higher operational costs and currency, partially offset by higher net selling prices. Lastly, our EPS in the quarter was $0.65. I would like to note that this performance was based on a tax rate of 24% versus the previously guided 25% tax rate due to the implementation of our tax planning strategies. Because of this assumption, we have provided restated adjusted EPS…

Thank you. [Operator Instructions] Our first question comes from Michael Rehaut with J.P. Morgan. Please go ahead, Michael.

Great. Thanks so much. And John, best of luck. It's been a real pleasure working with you. I can't believe it's been 15 years. You've been a real pro the whole time. So, best of luck.

Thank you, Mike. Look forward to catching up with you later.

Sounds good. First question, I appreciate the 2023 guidance and particularly the volume assumptions, which I think are more conservative than your peers and -- so far at least this earning season and appropriate. I wanted to focus though on the Decorative margins and your comments around the fact that the price -- the cost inflation recovery doesn't include margin in that price, so hence, the margin decline. But when you look at the margins versus the last 10, 15 years, Decorative has consistently done an 18%-plus margin. So, this would be somewhat below. I was hoping to get a sense of, if not for 2023, perhaps '24, '25, how you're thinking about the business if cost deflation might help reverse some of that margin contraction if that might occur later this year? Or is perhaps there's anything structurally different about the business either with PRO perhaps having a slightly lower margin or other factors to consider relative to the longer-term average?

Hey, Mike, this is Keith. As you pointed out, the past two years have really been unprecedented, in recent times anyway, with regards to the rate of inflation coupled with supply chain difficulties, which clearly impacted our margins. We are absolutely focused on bringing the costs out of our operations and taking additional price where needed. Now, when you look at the impact of this significant inflation, and we've talked about this before when you -- particularly in our paint business, recover the dollars, we performed well in the overall dollars, but a significant margin erosion arises from that dollar-only coverage when you talk about increases to this level. So, there will be incremental pricing that we take as we move through the year in some parts of our business. We expect these levels that we're experiencing in 2023 to be the kind of the base of which we will build going forward. And when you think about that with regards to our 30% incremental leverage on additional volume, that would actively improve our margins. So, we anticipate [and are] (ph) driving very nice margin expansion as we get through 2023. We do feel that this is going to be a relatively short-lived recession. I'm reluctant to put a number on where we can go to, but I think if you think about the margins historically that we experienced pre-pandemic, that's certainly where this business is heading.

And Mike, maybe I can give you -- in addition to Keith's comments maybe a little more color specifically as it relates to the Decorative Architectural segment, the margins there. So, to your point that you raised, obviously, we recover the dollar cost and inflation. And maybe to put a finer point on that, if you consider -- if we take a 10% price increase in the segment, that will result in roughly 180 basis points of margin compression. And so, while we maintain our operating dollars at flat levels, and so -- and to the point that you were making, yes, clearly what we're seeing now and what we're foreshadowing for 2023, a big part of our '23 guide versus historical performance relates to the cost recovery that we're getting on inflation. The other thing that I would point you to, in Keith's prepared remarks and my prepared remarks, we talked about that we're going to make some incremental investment in the -- particularly, in the Decorative Architectural segment around the PRO business. And so that's also having an impact on 2023 margins. Now, to the point you also raised, to the extent that commodities were to roll over, and there would be input cost deflation, you would see some margin expansion as a result of that -- due to the fact that there could be some pricing concessions that we would give when commodities rollover. So that's how that math would work. So, I think your point is well taken and I think that helps explain the 16% versus our historical margin.

Okay. No, that's a great answer. And before I ask my second question, perhaps you could fold it in. You highlighted the incremental investment in PRO. I'd be curious to know how much of a drag that might be in this current upcoming year. But secondly, I mentioned also that overall volume expectations for '23, I think, being much more conservative than some of your peers and we're certainly in that direction ourselves in terms of how we're thinking about things, would be helpful, and sorry if I missed that earlier, if you think about the low double digit volume decline, you kind of broke it out between, I believe, how you're thinking or at least on a top-line basis the two segments. But from an end market perspective, I'd assume that repair/remodel end market demand, you're thinking about in a similar level, but correct me if I'm wrong. And also, how that other end markets that you play in such as Europe or new res, which is admittedly pretty small, how those different end markets play into the down low double digits? And if you're expecting that to kind of accelerate as the year progresses? Thanks.

Mike, maybe it'd be helpful if I kind of go through our principal markets and talk through our assumptions as it relates to overall market performance. The big one, obviously, is North American repair and remodeling. And in general, we're looking at that market to be down low double digits. International, obviously, a significant portion of our business. We're calling to be down high single digits. And then, as we talked a little bit already in terms of the paint market, we think broadly of that and, obviously, in two markets, the DIY and the PRO market, and our estimation is that the DIY market will be down high single digits and the PRO market would be down mid-single digits. So, we look at -- to get those numbers, we look at trends that we see and numbers that we evaluate in terms of industry research and we come to an assumption on how that all filters out. And then, importantly, we look at how we were performing in the back half of '22 and we roll that in with our R&R focus and industry research to come up with, our estimations are where they are. Now, obviously, we've heard and talked to many folks who have different views. So, it really is a matter of the point of view that we take. And if that point of view varies, I think, you can see that we consistently have delivered 30% drop down on the incrementals. And when we see some pullbacks like we're expecting in '23, we will [Technical Difficulty] decrementals that look better than that 30%. So, we are ready to not only flex our business down and have demonstrated that with regards to cost control and working through issues associated with variable productivity and lining up our supply chains to address a new volume level, but we're also committed to investing in the key growth levers of our business. PRO being one, PRO paint, investing in high growth markets for us. We've talked about how successful we've been in China and in Europe. We continue to do that. And then, of course, the core business here in North America. So, hopefully that gives you an idea about our perspective and why our guidance is what it is. And how this business is ready to do what I think is most important in these times of volatility and that is to adapt to changes as they come.

Great.

Our next question comes from Stephen Kim with Evercore. Please go ahead, Stephen.

Yes, thanks very much guys. And again, John, I'm sure you're going to get a lot of this, but it's been a pleasure and best of luck. First question for you, I guess, sort of at a high level. I understand that certainly things are uncertain and you don't want to lean too much, I suppose, on your outlook for later in FY '23. But you did provide a -- some commentary about a quarterly cadence, which I found very helpful. I was curious as to whether when you said that you anticipate that the sales growth and the margins would improve quarter-by-quarter as you make your way through 2023, is it your sense that by the time you get to the end of the year, we could actually be looking at some positive comparisons on the top-line and then certainly on the margin as well?

So, Stephen, yes, the guidance that we gave in terms of the cadence, obviously, we said Q1 is going to look a lot like Q4 of last year. So -- and then what we said, from there, operating margins should expand on a year-over-year basis each quarter thereafter. To your question on whether we should see positive sales comps by year-end, just given the double-digit decline, the approximately 10% decline that we're expecting in sales for the year, it's hard to say how Q4 is going to develop at this point. But at this stage, I probably wouldn't count on positive comps in Q4.

Okay. That's helpful. Thanks for that. And then, just a sort of a broader question about your expectations. Obviously, 4Q came in a little bit lighter than I think you were expecting. What's interesting to me is the timing of when you provided that commentary or outlook, was right about when mortgage rates were peaking in the U.S. And I would say, in general, since late October, there's kind of been a growing sense in the U.S. housing market that perhaps we've at least -- we can see where the bottom is, we -- January was actually surprisingly strong. I know you're going to say one month doesn't a quarter make and all that, but if you could just sort of comment a little bit as to what it is that worsened in your -- worsened relative to your expectations despite the fact that maybe the housing market, which is sort of the leading indicator perhaps, looks like it's actually gotten better?

Yes. Maybe, Stephen, I'll start off and maybe, Keith, you can chime in. So, I know you're [tying] (ph) things off the housing market, I just want to remind everyone on the call that the housing -- the new construction market really doesn't impact us all that much. It's about 10% of our revenue. But what we look at in the fourth quarter with our demand that we are seeing and also how the consumer is behaving, that's what really kind of drove us to the guide that we're giving right now. The other thing I would say, as you think about 2023 and think about some of our businesses, Keith in his prepared remarks talked about how our spa business, which has been a strong growth engine for us during the pandemic, and its backlogs are now down to more normalized levels. And as we think about that product category in particular, as we go into 2023, just given the high-ticket nature of that product, we do expect that will probably weigh more heavily on Plumbing growth in 2023. And so, it's broadly around what we're seeing relative to the consumer right now. But Keith, I don't know if there's something else you want to add?

Sure. Stephen, if you think the fundamental question of, if things are better, what would that drive in our business, and I think we've covered that in terms of thinking about our dropdowns on the incrementals and how we manage on the down with the decrementals. I would also put a finer point on this notion of volatility and things can change. And sure, yes, absolutely, a month doesn't a quarter make and a quarter doesn't make the year, particularly if you think about our business and our industry is in June or July and then what have ended up happening in kind of a tale of two halves of last year. So, things can change and this is a volatile time and we're specifically focusing our organization on adaptability and looking at signals. Now, in terms of how our guide or how the industry may improve, you point to rates, obviously, that's a factor. We are a new -- a repair and remodeling company and a little bit of new construction, but fundamentally, we're in repair and remodeling. So, some of the things that could change the assumption for us would be home prices and home equity holding up better than expected, for example. Certainly, an increase in existing home sales would help. When you think about our International, down high single digits, if we saw better than expected GDP in U.S., Europe and China, that would clearly help. We're strongly related to consumer confidence. So -- and then, on the performance side, the ability for us to gain more share than expected. So, there are things that could -- we're watching and that could drive the economy to perform better than our guide. Again, I'll take us back to -- our fundamental message here is, we have a very adaptable business, small ticket used on big projects, used on small projects. We cover very effectively on the premium segment in China, a brand leader in Europe and, of course, a strong fundamental base here in North America. So, our business is built for that and for these sorts of things in terms of variability and that's what we're driving. But there are areas, Stephen, that could lead to better-than-expected performance on the overall macro.

Great. Thanks a lot, guys.

The next question comes from Michael Dahl with RBC Capital Markets. Michael, please go ahead.

Good morning. Thanks for taking my questions. And I'll echo others, John, congrats. It's been a heck of a ride and look forward to catching up more offline. A couple of follow ups here. On the cost side, I think that the discussion with Mike earlier around the paint side was helpful. But just to follow-up there, some of your peers in paint have been talking about deflation coming through as the next quarter -- couple of quarters progress. And so maybe you can give us a sense of how you're thinking about costs and how you're seeing costs in the paint business? And also, let's expand that in Plumbing, it seems like it was going to have some tailwinds now maybe copper is back up. So, give us a little more color on what you're seeing on Plumbing costs as we look through this year?

Thanks, Mike. I'll -- this is Keith. I'll start off on the paint raw basket to give you a perspective on what we're seeing in terms of inflation and how we're thinking about that. If you look at our overall paint raw material baskets, while we have seen some relief in feedstocks for resin, but TiO2, for example, and other specialty chemicals are very sticky and remain elevated. So, we are continuing to see overall in the basket an elevation. On the indirect costs, which is a big portion of our raw materials and our manufacturing process, we are seeing continued inflation, so it remains a challenge. And I'm talking about things like pallets, transportation, labor absolutely is still elevated. So, we've seen some sequential moderation, but the raws continue to remain relatively elevated. We are still recovering from significant cost increase that we've incurred over the past couple of years. So, at this point, we really have minimal raw material deflation built into our plans for 2023, and don't expect to see it. And that's based on what we're currently seeing from our supply base and from the market.

And Mike, maybe I'll take the Plumbing side of the equation. So, as you know, as you look at some of the base metals, copper, zinc that go into our Plumbing products, obviously, the inflation there was pretty significant in the year, [up low] (ph) double digits. If you look at the prices through the course of '22, they probably peaked in the second quarter. We saw some moderation in Q3 and Q4 of last year in those commodities. That said, since the year has begun, we've seen a little bit of an uptick in both of those copper and zinc. And so, they're still elevated, but off their highs, obviously. In ocean freight, which is another good significant input for us on that side, has moderated as well. But it's still, compared to historical, it's above normal levels. And then, obviously, wage inflation is still something that we're dealing with. Some of the things that are also impacting us in the Plumbing segment, like, are energy cost in Europe, as you might expect, given what's going on over there, that's offset. So, any of the benefit from moderating demand -- or moderating inflation in the raw materials have been partially offset by some of these things. So, net-net, where do we land on this in 2023, we think we'll expect -- we're expecting low single-digit deflation in our Plumbing input basket as we continue to recoup some of the cost increases that we've incurred over the course of the last couple of years.

Okay. That's great. Thank you, both. That's very helpful. And then, on my follow-up question, I wanted to ask about the SG&A. So, the comment that it's going back to 17.5%, certainly, conceptually understand the idea of needing to invest in the business and some of the baskets qualitatively that you've talked about. But when I look at the numbers, I mean, what that really implies is you're guiding sales to be down, give or take, $900 million year-on-year with SG&A dollars down immaterial now maybe $20 million, $25 million. So that seems like an awful lot of reinvestment. Maybe you can help us understand a little bit more bucket out quantitatively some of the things that you've discussed in terms of what's [Technical Difficulty] sticky outlook on SG&A dollars.

Yes, Mike, maybe I'll give you a couple, and then, Keith, feel free to add to supplement my comments. So, Mike, you're right. We are guiding SG&A as a percent of sales to be up, and a big part of it is what you refer to. Obviously, we're foreshadowing sales down 10% for the year, which will have an impact on the margin. I think the other thing to point out -- two things, I guess, I would point out. One is the reinvestment that we're making in SG&A and some of that comes in a couple of different forms. Some of it is the PRO investment that Keith referred to some of the headcount, PRO sales reps and things like that, that we'll be adding some more feet on the street and the job site delivery. Also, like in Q1, for instance, there's a couple of large trade shows that we historically went to, but we're really suspended during the pandemic. So, this is the first time that we are going back to those in several years. And so that will be an expense for us. And then, I'd also point out, like in '22 for instance, there are certain variable costs that were just lower in the year, and we're projecting those to come back to more normalized levels in '23. So, those are two or three things that would be impacting our SG&A for next year. So, Keith, I don't know if there's anything else you want to add?

Yes. Mike, when you think about it, it's kind of in general areas, the economy is coming back and the way that we approach growth and the way we develop advocacy in the markets, you have to be out in those markets. So, I think you were at KBIS in -- out in Las Vegas. That's an example of a big national Kitchen and Bath Show in the United States. Every two years, there's a similar, even bigger show, I know you're aware of this, in ISH, where we have significant investments and big presence there as a matter of -- of course, of business. And that hasn't happened in four years, and that's coming back this year. And there's other examples of that across the globe where we're investing in what I would say is a more normalized way of building advocacy for our brands and launching our new products. Now, when you look, for example, in Europe, at ISH, we've always had our significant competitor in a very big position out there. They've made the decision not to reinvest and won't be there. We don't think that's the right thing to do. In fact, we're leaning into that investment. We're showing a great new product assortment with Hansgrohe in terms of our showers and our faucet launch. We're getting into adjacent products with our bath furniture, and we're continuing to build our brand. When you look at where we're investing in, continued growth and continued momentum. Look to the PRO, as John mentioned, that's an investment for us. PRO loyalty has been building over the last three years. We've gained significant share, and we intend to continue to outgrow that market. So, adding more people on the street to continue to get new customers, new painting customers to try our products, we've seen that be very successful when they try it. There was a lot of question on our ability to maintain the share gain and the stickiness, we've done that. So, we're focused on continuing to drive those share gains, and it takes an investment to do that. In terms of operations, things like buy online, pick up in store, expanding delivery options, expanding the PRO sales force, as I mentioned, working and expanding our loyalty programs. This is all fundamentally part of our strategy. And at the end of the day, we're committed to managing our decrementals in the downturn, while at the same time, investing so that we win and exit stronger coming out of this recovery. And we think that's the right equation for our business.

That's great. Very comprehensive. Thank you both.

The next question comes from Matthew Bouley with Barclays. Matthew, please go ahead.

Good morning, everyone. Thanks for taking the questions. I also want to extend my best wishes to John. Apologies if I missed this. I had some call issues. But on the revenue guide for Plumbing, the down 10% to 14%, I think you had talked about Q1 sales results for the whole business perhaps looking similar to Q4. So, I'm assuming that you're saying something similar for Plumbing. And so therefore, the assumption would be a rather sharp deceleration in the Plumbing segment beyond Q1. I guess, number one, correct me if I'm wrong. But number two, can you sort of help us out with any additional cadence there? And any kind of specifics around whether it's the spa business that's moving the needle or some assumed destocking? Anything along those lines to help us on that Plumbing guide? Thank you.

Yes. Sure, Matthew. So, I'll give you a little bit of color on that. And you touched on it partly in your question. And a portion of what we expect to see happen in the year in Plumbing is due to the spa business, because it is a high-ticket item and it's one that, as Keith mentioned in his prepared remarks, is now back at normalized backlog levels -- backlogs. And so that's a portion. But the other portion that I would guide you to think about is, if you look at the sales cadence through the course of 2022, Plumbing had much less of a pullback than our paint business did in 2022. And so, as we see the calendar role to 2023, partly due to the spa business, partly due to some of the stronger comps that they're going to be facing in the first part of the year, we should expect to see a little bit of soft -- a little bit more softness perhaps in the Plumbing segment as a result of those strong comps that they'll face.

Matthew, you mentioned destocking, and I know there's been talk out in the industry of that in various channels. We did see, I'll call it, moderate to very moderate destocking in Plumbing in Q4, a little bit in North American wholesale and less in retail. It really wasn't significantly material for us, and we're not expecting significant headwinds from destocking in 2023.

All right. Thank you for that. That's super helpful. And then, just second one, sticking with Plumbing on the margin side and the guide there. I mean it seems like the assumption on the decrementals, I guess, on the softer end of the low 20%-s you mentioned for the entire business for the year. And I heard you say earlier, you're not assuming much in terms of raw material tailwinds for the business. So, just kind of any help on kind of what you are assuming there? Is it ocean freight, et cetera? What are some of the areas where you feel like you can sort of manage that decremental in 2023? Thank you.

The biggest impact is the planned volume reduction. So, the way we impact that is to drive productivity and to reset our manufacturing and supply chain. So, as you might imagine, we're working hard to equalize shifts to make sure we're continuing to drive productivity in the variable overhead line. We always drive and focus on our direct labor and shifting that direct labor down. And we have had, as we talked about, really starting in the back half of last year's operational and supply chain challenges, and it really is on rhythm and getting our supply base to deliver us and delivered in a way that's synchronous with what we expect and how we have our build scheduled, so we can be very efficient. That's still a challenge. Now we're significantly better. That challenge will remain through Q1, but coming out of Q1, we're going to have that behind us and have our productivity where we expect it to be. So, lower volumes is the principal driver of the margin pressure, and then higher costs that we'll work through early in the year.

Got it. All right. Thanks, Keith. Thank, John. Good luck, guys.

Thanks, Matt.

Thanks, Matt.

The next question comes from John Lovallo with UBS. John, your line is open.

Good morning, guys. Thank you for taking my questions. And John, best of luck with everything. The first question I guess is, are you guys anticipating implementing additional pricing actions in 2023, or is it really just largely carryover pricing at this point?

No, we'll have some additional actions. There are spots of our Plumbing business that we're looking at, and we'll be implementing price. And then, in our Decorative business, as I mentioned with our commodity basket, we're continuing to see elevation there, and we'll watch that.

Got it. Okay. And then, I think, the outlook for $500 million of either acquisitions or buybacks, I think you mentioned buybacks would be sort of back-half weighted. Just more curious on the acquisition front. I mean, what you're seeing in terms of pipeline there?

Yes, I'll take that, John. So, our corporate development team is active and we, as a management team, are active in the cultivation process of [flock] (ph) of acquisitions. But at the same time, as you might imagine, in this environment, there's -- the conversations are probably not as productive, just given some of the softening performance in businesses through the course of the back half of '22. But that said, you never know when people are going to transact. And so, we have to be out there. We have to be engaged. And so, we've got the team out there and actively looking. That's -- and so it's always hard to forecast what may develop through the course of '23, and so that's why we're guiding for everyone to think more about share repurchases at this moment. But Keith, I don't know if there's...

Yes. I think it remains to be seen, but the cost of capital and the leverage limitation that, that represents could make it a little bit more difficult for financial buyers and could help us. But we are seeing a little bit of a slower deal flow, but again, very active in the cultivation and trying to make sure that we drive strategic fit and right return.

Makes sense. Thanks guys.

The next question comes from Garik Shmois with Loop Capital Markets. Please go ahead.

Hi, thanks. Just curious on the DIY paint side with [Technical Difficulty] down low double digits in 2023. This category has been slowly up against some tough comps, but it has been trending lower from a growth perspective. Just wondering, are we at pre-pandemic levels for DIY paint? And any perspective of how we are there relative to history would be great.

Yes. So, as we look at our DIY paint volumes, Garik, we are at roughly 2019 volumes, if not, just slightly under them right now. So we -- the market has kind of reverted back to those 2019 levels.

I would tell you that the fundamentals and how we look at that market are still supportive of long-term growth for DIY, particularly the millennials. That's a big cohort. They're clearly influxing into the housing market. And we've seen, based on our basic research that they're more than willing to pick up a paint brush and do their own painting. So, I think that's a position that will bode well for us as our brand gains more and more traction and really a leadership position with those millennials when they look at the data that we see.

And the other thing I would point out, Garik, and I should have mentioned this earlier, to the extent that the economy does soften, you do tend to see a shift more towards DIY consumers take on projects, more projects themselves as opposed to have the projects done for them. So that could be a tailwind for us as we go into 2023.

If you think about the pandemic and how that played out as it relates to a significant growth early in the pandemic with DIY, and then as that fear, if you will, of folks coming into your house abated as the pandemic was more under control, that shifted over to PRO growth. And I think the position that we have with our outstanding partnership with the Home Depot, in terms of being able to cover that variability in those shifts, our PRO business is very strong now. [Technical Difficulty] different shifts in the market and potentially different shifts from one part of that market, say DIY to PRO. We like our brand, and we like what our brand represents to both the end consumer as well as the professional.

No, great. Thanks for the color. On the pricing side, you mentioned you're looking at some targeted price increases. I'm curious just given some of the softening in demand, are you seeing any pushback on pricing? Any impact on mix at all?

Again, where we're talking about our targeted price increases for 2023, it's mainly in Plumbing. We've got some international price increases planned in some spots. I think we have some on certain parts of our assortment in North America. So that gives you a little bit of color. In terms of pushback, to-date, not really. I think it's all about the price value relationship and the service that we bring, and our customers and channels are well aware of the costs that we're experiencing, not only in the direct material front, but really, as I talked a little bit before referencing our paint basket, the way we ship our packaging, our freight costs, our labor costs, those sorts of things. So, I would say not any more pushback than you would normally see. On the mix front, a little bit of trade down. Slight trade down in our Plumbing business we've seen in spots, but really nothing that I would call significant at all in '22 and nor do we expect it in '23. And that's part of that similar to our coverage across DIY and PRO in paint as it relates to being able to address market swings. We also have broad assortments. And we cover price points, and we have styles and various technologies that fit for different people. So, we're prepared for those kinds of changes if they come, but we're really not anticipating very much mix shift at all.

And Garik, the one point that I would just add to Keith's good comment is, as you think about price for '23, the significant majority of price will be carryover price rather than newly implemented price in 2023. So, I just want to make sure that, that distinction is very clear to everyone.

Our final question today comes from Keith Hughes with Truist. Keith, please go ahead.

Thank you. I just want to go back on the guidance in Plumbing. You highlighted some several things that have done well, particularly the spa business. They're coming off some big numbers. But is there any other detail you could give us? The decline you're forecasting is greater than your -- equal to or greater than your decline in remodel that you're assuming. What else is going on there?

I think John touched on this a little bit earlier, Keith, is the -- if you think about our paint business, that adjusted volume-wise, kind of midyear. The Plumbing business was a little bit later to do that. So, I think that's a combination of larger backlogs, bigger projects that tended not to flex so much. So, I think that carryover helps to account for a little bit more of a volume reduction guide on Plumbing than we have on paint.

And will it be all the same cadence you talked about earlier, or will the decline be more ratably during the year based on your forecast?

I think, Keith, it would be kind of the same -- similar cadence that we described earlier, where a little bit more impact in the first part of the year, given the stronger comps that we're up against, and then we get into easier comps in the back half of the year.

Okay. Thank you.

I'd like to thank all of you for joining us on the call this morning and for your interest in Masco. This concludes today's call.

Thank you, everyone, for joining us today. The call has now concluded, and you may disconnect your lines.