Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $3.8 billion, flat compared to the prior year, with a 1% organic decline driven by a 5% increase in pricing and a 6% decrease in volume [14][15] - Adjusted gross margin rate was 31.6%, up 110 basis points year-over-year, primarily due to pricing strategies and supply chain efficiencies [15][21] - Adjusted EBITDA margin was 12.3%, reflecting a 150 basis point improvement year-over-year, mainly attributed to gross margin expansion [15] Business Line Data and Key Metrics Changes - Tools and Outdoor segment revenue was approximately $3.3 billion, flat year-over-year, with a 2% organic revenue decline due to a 5% pricing benefit offset by a 7% volume decrease [16][18] - DEWALT brand continued to show growth, with revenue expansion across all product lines and regions, reflecting targeted investments in innovation and market activation [17][19] - Engineered Fastening segment revenue grew 3% on a reported basis and 5% organically, driven by a 4% volume increase and a 1% price benefit [19][20] Market Data and Key Metrics Changes - North America organic revenue declined 2%, consistent with overall segment performance, while Europe saw flat organic revenue with growth in the U.K. offset by softness in France and Germany [18][19] - The rest of the world experienced a 1% organic revenue decline, primarily due to market softness in Asia [19] Company Strategy and Development Direction - The company aims to achieve a 35% adjusted gross margin while strengthening its balance sheet, focusing on three strategic imperatives: activating brands with purpose, driving operational excellence, and accelerating innovation [6][10] - The transformation program has generated about $1.9 billion in pre-tax run rate cost savings since mid-2022, with a target of $2 billion by year-end 2025 [23][24] - The company is reducing reliance on Chinese imports, aiming to decrease U.S. supply from China to less than 10% by mid-2026 [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong long-term shareholder returns despite a challenging macroeconomic environment [14][35] - The company anticipates continued year-over-year expansion of adjusted gross margin, targeting around 33% for Q4 2025 [30][34] - Adjusted earnings per share for the full year is expected to be approximately $4.55, reflecting higher-than-anticipated production costs [26][29] Other Important Information - The company plans to allocate free cash flow in excess of dividends toward debt reduction and maintaining a strong balance sheet [32][33] - Total pre-tax non-GAAP adjustments for the year are estimated to range between $370-$400 million, primarily related to supply chain transformation and non-cash asset impairment charges [28] Q&A Session Summary Question: How did volumes perform relative to expectations? - Management indicated that volumes were in line with expectations, starting strong but tapering towards the end of Q3 due to a non-standard promotional window [36][37] Question: What are the profit levers for Q4? - Operating profit for Q4 is expected to expand due to gross margin improvements and SG&A reductions, with a targeted gross margin around 33% [39][40] Question: What is the impact of tariff inflation on pricing? - The second price increase is expected to be in the low single-digit range, with minimal impact from recent tariff changes [42][43] Question: How does the company view its position in the housing market? - Management does not see immediate catalysts for housing market growth but believes the company is well-positioned to benefit when the market improves [56] Question: What progress has been made on USMCA compliance? - The company is making significant progress towards USMCA compliance, which is a key part of its mitigation strategy [58]