Good morning ladies and gentlemen. Welcome to Masco Corporation’s fourth quarter and full year conference call. My name is Slessor, and I will be your Operator for today’s conference call. As a reminder, today’s conference is being recorded for replay purposes. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star, zero for the Operator. I will now turn the call over to Renee Benedict, Director, Investor Relations and FP&A. You may begin.

Thank you Operator, and good morning. Welcome to Masco Corporation’s 2023 fourth quarter and full year conference call. With me today are Keith Allman, President and CEO of Masco, and Rick Westenberg, 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’ve described these risks and uncertainties in our Risk Factors and other disclosures in our Form 10-K and Form 10-Q that we filed with the Securities and Exchange Commission. Our statements 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 Renee. Good morning everyone and thank you for joining us today. Before I get started, I’d like to share with you that we have appointed Robin Zondervan as our incoming Vice President of Investor Relations. Robin is currently our Controller and Chief Accounting Officer and will be transitioning to lead Investor Relations at the end of this month. I have full confidence that with Robin’s leadership, we will continue to have a world-class investor relations function at Masco and provide the investment community with the information and transparency you have come to expect from us. Now onto our results. I’ll start this morning with some brief comments on our fourth quarter and full year results, and I’ll finish with our view on 2024 as well as our long term margin expectations. Please turn to Slide 5. We delivered a strong finish to another dynamic and successful year. In the fourth quarter, our top line decreased 2% with volumes down across most categories, partially offset by favorable pricing, currency, and our acquisition of Sauna360. The smaller decline in volume relative to the first three quarters of the year supports our view that many of our markets appear to be stabilizing. Operating profit increased $38 million in the quarter due to a favorable price-commodity relationship as we continued to recover the significant inflation that we have experienced over the past two years and due to our continued efforts to drive efficiencies across our operations. Operating profit margin improved 230 basis points to 14.5%. With our strong execution, our earnings per share for the quarter increased 28% to $0.83 per share. Turning to our segments, plumbing sales were in line with the prior year in local currency with lower volumes being offset by favorable pricing and our acquisition. Plumbing performance in…

Thank you Keith, and good morning everyone. Thank you for joining. As many of you know, I joined Masco as the CFO in mid-October. I’m excited to be part of this strong performing company and team and I’m happy to be sharing our results with you this morning. As Renee mentioned, my comments today will focus on adjusted performance excluding the impact of rationalization charges and other one-time items. Turning to Slide 9, sales in the quarter decreased 2%, or 3% excluding favorable currency impacts. In local currency, North American sales decreased 3%, or 4% excluding acquisition. In local currency, international sales decreased 3%. We continued to drive operational efficiency and price-cost performance in the quarter, which helped lead to gross margin expansion of 560 basis points to 35.1%. SG&A as a percent of sales was 20.6% and was impacted by higher employee-related costs such as incentive compensation. Our operating profit grew 16% in the quarter and margin expanded 230 basis points to 14.5%. This strong operating profit and margin performance was due to pricing actions, lower commodity and freight costs, and cost savings initiatives partially offset by lower volume and higher employee-related expenses. This resulted in EPS growth of 28% to $0.83 per share. Turning to the full year 2023, sales decreased 8% over the prior year, slightly better than our expectations given sales performance in our plumbing segment. FX and acquisitions did not have a material impact on full-year results. In local currency, North American sales decreased 9% and international sales decreased 6%. SG&A as a percent of sales was 18.4%, in line with more normalized levels. Operating profit for the full year was $1.3 billion and operating margin expanded 120 basis points to 16.8%. Lastly, our EPS increased 2% year-over-year to $3.86. This figure assumes a tax…

Thank you. Ladies and gentlemen, we will now conduct the question and answer session. [Operator instructions] Your first question comes from John Lovallo. Your line is now open.

Good morning guys. Thank you for taking my questions. The first one is your R&R is expected to be flat to slightly down in 2024. It seems like you expect flattish sales for both plumbing and decorative architectural, so seemingly basically in line, maybe slightly above the overall market. How are you thinking about Masco’s ability to outgrow its markets longer term?

John, thanks for the question. I haven’t changed my opinion on our ability to gain share, which is that we expect as a company to both outperform the market and to expand margins, and we expect to continue to do that, so we will outperform the market and that’s driven primarily by our brands, which have developed over the years, as you know, to be leaders in their spaces, so there is both consumer pull as well as trade pull, where we’re well recognized by plumbers and pro painters as a quality brand, our service proposition as it relates to our channel partners, to be able to help them drive profitable growth with minimal inventory positions due to our repeatable delivery and service, and our people and our teams around the globe. Our expectation is to outperform the market. Now, in some spaces that we compete with, there will be greater share gains; in other spaces, where we already have substantial leading market share, those share gains will be more modest, but we definitely expect to outperform the market going forward.

Okay, that’s helpful. Then maybe just help us with the cadence of the planned margin expansion across plumbing and decorative architectural to your 2026 targets - I mean, is the improvement expected to be fairly linear in 2025 and 2026, or how should we think about that?

Well, I think if you--you know, ’24, we believe is going to be flattish on the top line and probably more modest as it relates to margin improvements, and when you think about--when we think about our innovation pipeline and our projects that will drive efficiency and cost reductions, which will lead to that margin improvement, those happen more towards the out years and will take some time to settle in and to be realized into the P&L, so I would say there’s a bit of that margin acceleration in ’25 and ’26, primarily. When you think about it, John, the biggest driver will be the drop down in incremental revenue, and we have very strong, let’s call it 25, plumbing it’s knocking on 30% drop down on the incremental volume, and our plan, as we said, is to--our belief is that we’ll be relatively flat in ’24 and then in ’25 and ’26, when we think about the health of the consumer, when we see what’s happening and believe what will continue to happen with regards to stabilization as it relates to rates, etc., we’re expecting more of a typical growth rate in ’25 to ’26, call it in that 3% to 5% growth in R&R. Now, there is--we look at the same analytics and we listen to a lot of the same people as it relates to analytics around expectations, and a lot are calling for significantly more than that. We’re not - we’re just basing our ’25 and ’26 on more of a historical 3% to 5% R&R growth rate, so that will be a significant contributor to margin expansion as well.

Thanks Keith.

Your next question comes from Matthew Bouley from Barclays. Your line is now open.

Morning everyone. Thank you for taking the questions. On that margin cadence into ’24, looking at the past three quarters, your year-over-year margins have expanded, actually kind of improved the past three quarters, and it sounded like you’re saying that that kind of margin expansion will flatten in the first half and then go back to expanding in the second half. I’m just curious if you can kind of touch on that a little bit, sort of why wouldn’t the recent improvements in margins continue to flow through on a year-over-year basis into the first half of ’24. Thank you.

Hey Matt, good morning. I think when you think about the improvement rate that we’ve seen this year, we’ve had some pricing catch-up that we had to do against some, as you know, fairly significant cost inflation, so that was a component of it. When we think about ’24, we have operational improvements that we’re going to continue to drive. When we think about the benefit of pricing, we’ll see, I would say a little bit of a headwind in our paint business. We’ve talked consistently about our relationship with our channel partner as it relates to price, where we keep our operating income dollars whole and match commodities with price, but that affects margin, and it affects it both ways where you go up or go down, so there will be a slight headwind in pricing in our decorative business and probably a slight tailwind in our plumbing business. To your direct question in terms of the rate of margin improvement, I think it really--that really points to--it really answers your question as it relates to pricing. Where we will see margin improvement, despite calling for a flat top line in ’24, is in the efficiency improvements that we’re going to continue to drive with our projects that we have in flight.

Yes Matt, the only thing I would add is from a timing perspective, our margin performance is going to be aligned--in terms of the expansion, aligned with our sales growth, and as we indicated, we expect a bit of softness in the first half of 2024. As growth starts to pick up, we believe in the second half of the year, we’ll get that drop down that Keith referred to, and then as we roll into ’25 and ’26, as growth returns to more normalized levels, that drop down impact in terms of margin expansion, we’ll see that manifest itself more prominently.

Got it, really helpful. Thanks for that. Then second one, just actually coming off that last point there, Rick, the cadence to the top line in ’24, obviously there’s been a lot of volatility in R&R end markets probably more recently year to date, maybe some noise around weather and all that. Can you just put a finer point around that early 2024 expectation - you know, how is demand tracking year to date, any kind of color on some of the volatility or improvement as you get into Q2 and beyond? Thank you.

Matt, in terms of the year-to-date demand or the current demand, I’d characterize it a stabilizing. I would say in terms of what was favorable to our expectation in ’23 was a combination of both our execution, the timing and impact of our cost reduction projects or solid pricing, etc., and then also a little bit better demand than we anticipated. There’s certainly some volatility out there, but we’re seeing signs of stabilization. We had a nice quarter in wholesale plumbing as it relates to top line demand. While still challenged, certainly, in Europe, we have seen some stabilization and starting to see some positive signs coming out of China as well, so that’s how I’d characterize the demand in general.

Yes, and what I would say is it’s in line with what our guidance is indicating, so there’s nothing inconsistent with that, which is we do expect some stabilization, as Keith mentioned, but a bit softer, so down slightly in the first half of the year - that’s kind of what we’re seeing in the market today, but we are seeing some stabilization globally.

All right. Thanks Rick, thanks Keith. Good luck guys.

Thank you.

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

Yes, thanks very much, guys. Appreciate all the info here. Could you talk a little bit more about the trends you’re seeing in hardware and lighting within the dec-arc business, and how that figures into your fiscal ’24 guide and maybe also your long term margin targets for dec-arc?

These businesses were impacted by market softness in 2023 - no question about it. We’ve talked consistently about it. Both businesses, and I’m talking about our lighting and hardware businesses, Kichler and Liberty, took pricing and cost actions to offset the inflation they experienced, partially offset the volume loss in ’23. In ’24, I’d expect these businesses to perform more in line with how we’re seeing the overall R&R market, which is flat to down low single digits. Did you have a second question there, Stephen?

Yes - well, within the hardware and lighting, that was pretty much what I was looking for. Then as I think more broadly about your guide for next year, I think Matt touched on it, but I just wanted to take a finer point. Are you saying--could we see sales and margins on a year-over-year basis be down in 1Q, or is that not what you’re envisioning?

They could be. I’m thinking more kind of flat to maybe slightly down in 1Q, first half, and then better performance both in sales and margins in the second half.

Okay, that’s very helpful. Appreciate it, thanks very much.

Thank you.

Your next question comes from Michael Rehaut from JP Morgan. Your line is now open.

Thanks, good morning. It’s Mike Rehaut. I wanted to first ask about the ’26 targets - appreciate kind of laying some of those out. You know, thinking about the margins, I think Keith, you laid out a framework of in ’25 and ’26, getting to those targets, kind of thinking about a sales growth backdrop of 3% to 5%, so just wanted to make sure that I’m understanding that the margin expansion off of ’24, how much of that would be driven by volume leverage or incremental margins off of the volume leverage, as opposed to perhaps other initiatives around either productivity or discrete cost efficiency measures around manufacturing or SG&A, etc.?

Our margin improvement expectations, and frankly the history of it, has been driven by a basket of initiatives that we drive. Certainly there is the incremental margin improvement that comes from incremental volume, so that drops down at, call it 25% to 30%, and that’s certainly above our fleet average of the company, so that’s the significant driver in our margin expansion. But it’s also part of the benefits of our continued investments in innovation, so we have an innovation pipeline and an expectation over those years to be launching margin accretive products and products that both contribute to our market outperformance on the top line, as well as margin improvements. We’re very excited about the momentum we have in terms of the Masco operating system and what that’s been able to produce in terms of leverage in our factories, in term of variable overhead. In addition to the new product launches and our brand building, in addition to the benefit to the top line, that gives us also pricing power, and we’re confident in that and being able to have that be a contributor to margin expansion as well. The big driver would be the drop down in the incremental volumes, but we also have a pipeline and defined initiatives around labor productivity, variable cost productivity, etc. to drive the margin expansion.

Yes, and Mike, the only thing I would add to that is, as Keith mentioned, a big driver is the drop down on the volume, but as we’re growing, as we’re introducing new products and getting the price for that from innovation, we continue to stay disciplined on price and disciplined on cost, so as we grow, we do see that 25% to 30% drop down. Although pricing and cost initiatives may not be as significant of a contributor, they will contribute both directly as well as indirectly in terms of continuing to leverage that incremental drop down.

Okay, that’s helpful color, I appreciate it. I guess maybe secondly, kind of staying on this topic for a moment, you look at the decorative margins on average between 2015 and 2021, the segment averaged 19.5%, 19.4%, so it kind of seems like you’re getting back to that midpoint, whereas maybe plumbing, you’re getting a little bit above that, which kind of more speaks, I think, to the volume leverage. Just wanted to make sure I’m thinking about this right in that--you know, is the right way to think about this is that the operating leverage, the incremental margins much more so comes through on the plumbing side over the next couple years, whereas decorative, it kind of seems like you’re getting back to that historical gross margin, and maybe there’s some perhaps even deflation that is a margin benefit over the next couple of years as more recently, when you had an inflationary environment that was margin dilutive. Just trying to think about returning to that historical average and what’s assumed in decorative, because if I’m thinking about this right, it does seem like the incremental margins on sales leverage more so apply to plumbing than decorative, and would love any thoughts on that if I’m not thinking about it the way you are.

No, I think simply said, you’ve got it. I think that’s right - we have a higher drop down on incremental margins in plumbing, a little bit lower, call it in the 25% range in deco. In deco specifically thinking about paint, we have a different pricing dynamic, which we’ve talked about - I won’t get into the details on that, but no, I think you’ve got it right, Mike.

All right, perfect. Thanks so much, appreciate it.

Your next question comes from Anthony Pettinari from Citi. Your line is now open.

Good morning. Can you discuss price-cost spread in plumbing and DA in 4Q, and maybe any updated expectations around brass carryover? Then just thinking about COGS, maybe more holistically, what level of cost inflation does the full-year guidance contemplate?

Yes Tony, thanks for the question. From a Q4 perspective, we saw--we did see some favorable pricing, kind of low single digits in the plumbing both for the quarter and for the calendar year. For DAP, it was a lot more muted, and as we look into 2024, we’re expecting in the plumbing segment kind of low single digit pricing as a tailwind, but for the decorative architectural products, we’re expecting a bit of a headwind from a pricing perspective, kind of modest price give-back.

Okay, that’s very helpful. Then this is maybe just a minor point, but in terms of the DA margin target in ’26 being a range versus plumbing and company targets single points, is that the pricing mechanism you discussed, or just any background there?

No, I think just--you know, we’ll give point estimates and range estimates in terms of our guidance in this, we felt a little more appropriate just given some of the uncertainty. As I think Mike articulated, we’ve got a little bit more of a drop down dynamic in terms of the volume dropping down to margins on plumbing, and so we felt pretty confident with regards to our 20% margin target in 2026. On decorative, we just have a range of 19% to 20%, and as Mike pointed out, it’s more consistent with where we ranged historically.

Okay, that’s helpful. I’ll turn it over.

Your next question comes from Susan Maklari from Goldman Sachs. Your line is now open.

Thank you. Good morning everyone.

Morning.

My first question is thinking about the macro and what that could imply for the business this year. There’s increasingly an expectation that rates will move down as we get later into the spring and the summer, and as we think about that perhaps driving that existing home sales coming back, how should we think about the timing of those events relative to how you could start to see that coming through in the business, and what are the segments that could be most benefited by that?

Susan, good morning. When you think about the correlation to our top line drivers, existing home sales is certainly an important factor, but not nearly as important as really how the consumer feels and how the consumer confidence is developing, that confidence driven by the amount of equity in their home, for example. If you think about, let’s say, the existing home turnover, pick a number - say it’s, let’s call it 5 million, so if we have 5 million units turn over, that’s on a 130 million unit base, so roughly--what is that, 3%? We know, or we estimate that a newly purchased home in that year will spend approximately 30% more on home improvement, so if you take 3%-ish spending 30% more, you start to see how that minimizes the impact of that. Said differently, for every million dollars of existing home turnover increase, it only drives a couple tenths of a percent of overall top line volume in the market, so a 25% increase in existing home turnover drives two-tenths of a percent in the overall market roughly. It’s important to us, particularly when you look at something like DIY paint, that tends to be a little bit more sensitive to existing home sales, but more important I think is the correlation to R&R spend as it relates to home price appreciation and consumer confidence, so as rates decrease and the consumer becomes more confident, that’s really a driver of what we think will really be pushing the R&R market.

Okay, that’s helpful. Then shifting to the working capital, you’ve made a lot of really impressive progress there over the last year. As you think about ’24 and just the go forward, what’s the ability to continue to drive benefits from that, and anything you’d highlight there?

Yes Sue, it’s Rick, good morning. Appreciate the question. As you noted, we did as a business unit, really across the business drive working capital efficiencies and improvement. We brought it back down to 16% of sales in 2023, which is more in line with historical levels, and it really was a big contributor to our cash flow in 2023 - it contributed over $200 million in terms of cash flow, in terms of our free cash flow number, which was very beneficial. I think going forward, we plan to really hold working capital in a disciplined manner, make sure we’ve got enough inventory to keep up our service levels, which are important from a customer perspective, but to stay disciplined on that. Our guidance for 2024 is that we’d have working capital as a percent of sales of 16.5, so a modest increase, but we’ll calibrate that based off of the timing of when the market comes back and starts to grow. But we’ll as a business stay disciplined, now that we’ve got the working capital kind of back to where we’d like it to be.

Okay. Thank you and good luck with everything.

Thanks Sue.

Thank you.

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

Hey, good morning everyone. I believe you mentioned on the call that paint pricing was lower in ’23. I guess a couple questions - one, when did that occur throughout the year, and is the outlook for ’24 that you mentioned down based on just the carryover, maybe from some of the movements in ’23, or do you expect incremental pricing pressure beyond what you maybe recently saw?

Yes Adam, maybe just to clarify, for the calendar year 2023, we saw a very modest price increase. It actually corresponded with commodities, so we saw material costs down in Q4 in the paint sector, but for the full year, we saw appreciation overall, and so we saw a slight price increase in terms of the 2023 number. As we look into 2024, as I indicated or as we indicated, we do see some price down in 2024, and that’s really a reflection of what we expect to see, which is kind of modest low single digit deflation in the inputs, so kind of keeping that price-cost relationship in check.

To your point, Adam, there would be some carryover, obviously, with it being a little bit--the price give-back a little bit later in ’23.

Okay, got it. That’s helpful. Then for you, Rick, now that you’ve been at Masco for, I believe it’s almost four months now, where you do see the biggest opportunities for Masco from a cost side going forward?

That’s a good question. Yes, as I mentioned, first of all as I mentioned in my opening comments, I’m really excited to be part of the Masco team and the strong business and operations and portfolio that we have. I’m really excited about the portfolio brands and products in the business. I’ve had the opportunity to really get out and meet all of the business unit leaders, and I’ve been out to many of the business units - I was actually in Germany at Hansgrohe last week, really impressed with the team and really impressed with the mindset in terms of the Masco operating system and the mindset of continuous improvement, operational efficiency and cost reductions. I think we need to continue to exercise ourselves in that regard. I think with regards to opportunities, it’s really leveraging the mindset that we have here at Masco and across the business units, as well as leveraging our scale as we continue to grow the business and drive that productivity and that efficiency, really across all of our business but particularly on the plumbing side as we look at our global business.

Great, thanks. Best of luck.

Thank you Adam.

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

Hi, thanks for taking my questions. I wanted to ask again about costs - I think a question was asked earlier around price-cost spread, and I heard the comments around price. I didn’t hear specifically your expectations for input costs for both segments that are embedded within the ’24 guide, so could you address that please?

Sure Mike, I’m happy to do that. As it pertains to 2024, we’re expecting for input costs not to be a material impact, not to be significant in 2024. Obviously we’ll see how the year plays out. In plumbing specifically, we expect to see some modest decline in input costs, but offset with some freight and some other inflation. Obviously, as I think we all know given the dynamics in the Red Sea, freight cost is a little bit volatile and there’s a bit of a headwind in the first half - that’s baked into our outlook as a contributor to our expectations in the first half of the year. That’s a little bit of the dynamic on plumbing. In terms of decorative architectural products, I think we mentioned a couple times, we expect relatively modest input cost decrease in 2024.

Mike, specifically we’re thinking in plumbing, relatively flat commodities, sort of staying where they are now, and for paint inputs, while they’ve moderated sequentially when you look at resins, we are seeing a little bit of deflation in those input costs, but other costs, including copper-zinc, TIO2, they’re moderated--excuse me, they’ve moderated more and they will moderate a little bit more, but not significant benefit.

Got it, okay. Thanks. Then my second question, just back on the free cash flow, the conversion rate, obviously 90% is still high. I think your business typically targets 100% conversion on that income. When I look at the moving pieces, it doesn’t seem like working cap is that much of an incremental usage, and then you’ve got capex, I think down year-on-year. Just any other drivers in terms of things we should be thinking about, levels of investment or non-working cap line items? Any other moving pieces there?

Mike, those are the two, really. Working capital, I think Sue had asked in terms of that dynamic, we do expect a little bit of build in working capital in 2024. We’ll watch that, obviously, but we’ve got it down to a pretty balanced level right now, so as the market returns, we expect some building working capital. Capital expenditures, as you noted, will be down year-over-year from ’23 to ’24, but it’s still higher than our depreciation and amortization, so our capex guidance for 2024 is $200 million, our D&A is $160 million, so that capex versus D&A is another contributor to the 90% guide.

Okay, that’s helpful, thanks.

Sure.

Your next question comes from Truman Patterson from Wolfe Research. Your line is now open.

Hey, good morning guys. Rick, looking forward to working with you going forward. First question for me, in your plumbing segment, your supply chain is heavily reliant on shipping products to the U.S. and Europe. I’m hoping you can give an update on some of the Red Sea shipping issues currently, any supply chain issues or incremental costs embedded in your ’24 guidance.

We are seeing, as you might expect, Truman, elevated costs for the containers that normally would be routed through the Red Sea, that now have to go around, and you’re exactly right - it’s primarily for our European business. Those container costs have increased and we’ve contemplated that in our guide, and that’s all part and parcel of how we think next year is going to shake out, but we are seeing an increase in those costs.

Truman, to your other question, although we’re seeing elevated costs, so far our service levels have been able to be retained, and so we’re not having disruption per se but we’re watching, obviously, the dynamics closely.

Okay, got it. Just thinking through your ’24 revenue guidance of flattish versus flat to down low single digit R&R market, first, are you all expecting your smaller ticket portfolio to outperform big ticket, and then second, you all have mentioned some incremental market share gains this year specifically, could you just elaborate on that a little bit - product categories, geographies, channels, etc. of some of these kind of near term gains?

We do think that how we have repositioned our portfolio, Truman, to be the lower priced, lower ticket repair and remodel focus is more resilient than the higher priced, higher ticket items that are oftentimes more associated with new construction, so when you compare our type of project that a consumer would execute with paint, plumbing, lighting, hardware, etc., those tend to be more resilient than the bigger tickets, say cabinets and windows, which I’m very familiar with. So yes, we think that bodes well, and that fits in with the strategy and how we aim to be attractive, and who we aim to be attractive to as it relates to investors, as it relates to a higher margin, more resilient, less cyclical portfolio, and that’s really important to us. We’ve demonstrated, as we said, the ability to meet our commitment of double digit EPS growth through cycles when you look at 14% EPS CAGR from ’19 through to where we are today, 2023, so we’re very pleased with that and we think that is partly driven--more than partly driven by the reconfiguration of our portfolio, so that’s a significant part of it. Remind me of your second question, Truman, the second end of that?

Yes, just the near term market share gains that embedded in your guidance, just hoping you could elaborate on product categories, geographies, channels, etc.

Sure. We’re going to continue to invest in our share gains and continue to outperform the market, as we have up to 2023. To highlight a few of those, we’re particularly focused on the showroom channel in plumbing, and that involves our channel relationships with and our programs to drive growth. Our innovation pipeline is certainly a part of that brand and the pull that we have, as I mentioned before, both from the trade and the consumers is part of that. We’ve invested extensively in involving showroom associates and creating advocacy in the showroom market, so it’s not just about products, it’s also about capturing the hearts and minds of the folks in the showroom that sell our products, as it relates to involving them in literally in the design of our products, and we treat that as an operational type of exercise for us to create advocacy. We measure it and we drive it. Certainly pro paint - when you look at our pro paint, Truman, on a stacked basis over the last three years, we’ve driven 60% growth - six-zero. I know a year, year and a half ago, there was a lot of questions on the stickiness of that demand, and we’ve proven that we’re not only able to maintain those share gains but also intend to grow those share gains, and that’s through service, through having the right product in the can, obviously, but through our overall competitiveness as it relates to as applied costs and jobs. Look at our net promoter scores that we’re clocking on our new and existing pro paint customers - it’s industry leading, so we feel really good about that, so there’s a couple areas there, plumbing, wholesale, pro paint, but we’re really driving across the board an expectation of market outperformance and margin expansion.

Great, thank you and good luck in ’24.

Thank you.

Your next question comes from Garik Shmois from Loop Capital. Your line is now open.

Hi, thanks for squeezing me in. First question is just on the 2026 margin targets. I was wondering if you could speak to maybe some of the levers you can pull more on the cost side if the remodeling market doesn’t, say, recover to that 3% to 5% expected range.

Variable cost productivity, making sure that we’re matching our shifts and our operating plan to the volume that we’ve had. It’s very hard to do, but we’ve gotten very good at that, for obvious reasons, in the last couple years with the volatility we’ve seen. Depending on where the overall market goes, there’s fixed cost productivity that we would drive. We continue, as Rick mentioned, to be disciplined in both price as well as our ability to manage costs and to make sure that we are continuing to invest in those key areas that drive growth and nothing more, so cost maintenance, variable cost productivity, direct labor productivity, matching our fixed footprint to actual demand, all those sorts of things are part of our Masco operating system. It’s what we’re measured on and what our teams across the company are compensated on in terms of the ultimate metric of how we perform, is our ability to do that. It’s about all those disciplined together. There’s no one silver bullet. We will hit those margin commitments in 2026, and just like we have hit our double digit earnings for growth commitment through cycles. I believe--you know, that’s something I value and we as a company value very much, is the hard earned credibility that we’ve developed with the investment community and our high say-do ratio.

Understood, thanks for that. I wanted to follow up just on one of the bigger ticket item businesses that you offer. Your cited bigger ticket is likely to remain--is more volatile or perhaps underperform smaller ticket, and just wondering about the spa business, what you’re assuming for that in 2024, maybe if we exclude the Sauna360 deal. What are you expecting on an organic basis?

Yes, I like our spa business. It’s a strong business with global market share. It’s one of--on a percentage, one of our more global businesses. I like the tailwinds behind it as it relates to the overlay with an aging population and the importance placed on mental and physical health, and we have a tremendous team there. We’re going to continue to drive market share and the business is growing and doing a fine job. I’m not going to get into specifics of how we parse out within the segment where it’s growing, but I like that business and we’re going to continue to invest in it. We have a great product offering that’s recently launched, that’s performing well for us. We have industry-leading technology that makes those devices very easy to use and monitor and interface with, and as I said, it’s an outstanding team out there, so that business is going to continue to perform very well for us in ’24 and beyond.

Sounds good. Thanks again, best of luck.

We’d like to thank you all for joining us on the call this morning and for your interest in Masco. That concludes today’s call. Thank you.

Ladies and gentlemen, this concludes today’s conference. Thank you for joining. You may now disconnect.