Newell Brands Inc.

Good morning and welcome to Newell Brand's fourth quarter and full year 2020 earnings conference call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open up the call for questions. In order to stay within the time schedule for the call, please limit yourself to one question during the questions and answers session. As a reminder, today's conference is being recorded. A live webcast of this call is available at ir.newwellbrands.com. I will now turn the call over to Sophia Sinnes, VP of Investor Relations. Miss Sinnes, you may begin.

Thank you. Good morning, everyone. Welcome to Neil Brand's fourth quarter earnings call. On the call with me today are Roddy Salagram, our President and CEO, and Chris Peterson, our CFO and President, Business Operations. Before we begin, I'd like to inform you that during the course of today's call, we will be making forward-looking statements which involve risks and uncertainties. Actual results and outcomes may differ materially. I refer you to the questionary language and risk factors available in our earnings release and our forms 10-K and 10-Q available in our investor relations website for further discussion of the factors affecting forward-looking statements. We assume no obligation to update any forward-looking statements. Please also recognize that today's remarks will refer to certain non-GAAP financial measures, including those who refer to as normalized measures. We believe these non-GAAP measures are useful to investors, although they should not be considered superior to the measures presented in accordance with GAAP. Explanations of these non-GAAP measures and available considerations between GAAP and non-GAAP measures can be found in today's earnings release and tables, as well as in other materials on the New Investor Relations website. Thank you, and now I'll turn the call over to Ravi.

Thank you, Sophia. Good morning, everyone. Happy New Year and Happy Lunar New Year, and welcome to our call. I sincerely hope that you and your loved ones are staying healthy and safe. While there's no answer, 2020 was very challenging yet. I'm immensely proud of the results our team delivered as we quickly adapted to the evolving environment. At the same time, we remain focused on ensuring the safety and well-being of our employees, carefully operating our farms and distribution facilities, while ratcheting up capacity and maintaining financial viability and business continuity. We close this historic year on an exceptional note, with fourth quarter and full year results ahead of our expectations across the board. This is a testament to the incredible resilience, fortitude, and commitment of our employees who executed this excellence. In fact, in third quarter, we pivoted to accelerate the turnaround plan and drove significantly stronger underlying performance in the business in the second half of the year across all key value drivers, top line margins, earnings per share, and cash flow. We also achieved meaningful progress against our strategic priorities in 2020. First, we strengthened and diversified our team as we brought in WorldCraft leaders from the outside into our appliance, commercial, food, and outdoor and recreation businesses, as well as into other functions. They hit the ground running, as COVID certainly did not allow for any downtime. They complement our strong existing leaders across the domain for businesses. The leadership team and I are focused on building a winning one-year culture, focused on trust, transparency, and teamwork. Our diversity, inclusion, belonging efforts are our top priority as we continue to galvanize our employees and unify everyone behind the common purpose of delighting consumers with our innovative brands that create moments of joy, build confidence, and provide peace of mind. Second, throughout the year, we improve customer relationships through enhanced collaboration, joint business planning efforts, as well as increased emphasis on delivering excellent service for our customers. We are leveraging our omnichannel capabilities to advance joint business planning and believe this is an area of strength for new. We're also seizing opportunities to close our distribution gaps, particularly in the food, drug, and dollar channels. We're already making progress on that front across a number of businesses, such as food writing and home pregnancy. Third, we drove a 30 basis point improvement in normalized operating margin in 2020, an incredible feat. Given the cost and business mix headwinds, we had to overcome during the year. This was made possible by establishing a culture of productivity, as well as aggressively attacking overhead costs and organizational complexity. In fact, normalized operating margin expanded 120 basis points year over year in the second half, reversing the losses in the second quarter that were mostly driven by fixed cost de-averaging. And for the full year, ETS of $1.79. Wow. Up nearly 12% from continuing operations. For tight working capital management resulted in stellar operating cash flow of more than $1.4 billion. Yes, folks, $1.4 billion. Our business unit, CFOs, led by our own billion-dollar man, Chris Peterson, did a phenomenal job. Lastly, one of the key objectives of our turnaround has been to return the company to sustainable core sales growth. While core sales for the year declined 1.1%, I'm delighted to say that in the second half of 2020, we turned the corner. Core sales grew 6% and increased across seven out of eight business units with every geographic region growing. During 2020, we experienced healthy domestic consumption, both broad-based. The strength and resilience of our portfolio, shown through as growth in food, commercial and appliances, cookware, business units, offset rising softness. The team successfully navigated demand surges, product and container availability issues, and temporary factory and distribution center closures. Tightened focus on relevant innovation, grounded in consumer insights, as well as omni-channel execution are making a difference. During 2020, we drove improved domestic market share across a number of businesses, including baby gear, food storage, vacuum sealing, fresh preserving, tents, corridors, and fence, to name a few. Many of our top brands delivered incredible results in 2020. as Rubbermaid, FoodSaver, Oster, Mapa, Spontex, Ball, Breville, and Woodwick all grew at a double-digit rate. Omnichannel is the way forward and a critical priority for us. Our e-commerce business has continued to be a substantial growth engine for the company. In 2020, e-commerce revenue growth accelerated to the high 30s, and penetration online improved to about 22% of net sales on a global basis. close to double the rate versus two years ago. While baby remains by far the most highly penetrated business across the digital platforms, we've seen meaningful shift towards online consumption across the portfolio. In fact, in 2020, four business units commanded digital penetration as a percent of net sales of more than 20%, including baby, home fragrance, outdoor and recreation, and appliances and cookware, and food is chasing that number. All of our leaders took quick and decisive actions to swiftly adapt to the COVID-19 environment and emerging trends. These trends include preparing more food at home as regular people turn into home chefs, heightened interest in outdoor hobbies and personal well-being, and increased investment in sanitation. We anticipate that trends will continue to evolve throughout 2021. We also believe that many of the habits that have been found during the pandemic are here to stay, with our portfolio well positioned to capitalize on them. Let me briefly touch upon how each of our businesses performed in 2020, as I'm truly thrilled with the progress we have made. Let's start with appliances and cookware, where we delivered mid-single-digit core sales growth driven by the strength in the international markets. In the U.S., consumption increased during the fourth quarter and for the full year, as more people have been cooking, baking, and spending time at home. In Latin America, despite COVID-related challenges, the team delivered outstanding results as they quickly pivoted towards the digital platform. Although I'm extremely proud of these results, I also realize that a lot more work needs to be done to reposition the appliance business for sustainable growth. During 2020, the appliances category accelerated significantly, and in some instances, we did not keep up, especially in the U.S. This resulted in share losses, albeit lower in magnitude than in prior years. Although we have seen good traction with recent innovations such as Mr. Coffee iced coffee maker, poster texture select blenders, and as the diamond force heated cooking products, we need to extend the learning and leverage consumer insights across the entire brand portfolio. That work began in 2020 and is continuing in earnest throughout 2021 as we implement the necessary strategic changes to successfully position appliances. We have a strong international appliance franchise with strong brand equity for Oster, Crock-Pot, and Sunbeam in Latam in Australia and New Zealand, followed by Breville in Europe. Our challenge is to address pale category businesses in the U.S. with low gross margins that track down the portfolio. Chris Robbins, our CEO for that business, will undertake actions in 2021 to improve the portfolio. Within the commercial solution segment, our commercial business had a phenomenal 2020, as core sales growth during each quarter culminated in high single-digit growth for the year. We saw particularly strong sales growth in washroom, glove, and scouring products, as well as outdoor and garage organization businesses, which benefited from heightened consumer engagement across the home improvement categories. In response to strong demand for sanitization, as well as our strategic investments to expand production capacity, we placed about 3.3 million soap and dispenser sanitizer dispensers globally and sold enough soap and sanitizers to clean over 30 billion pairs of hands. That's a lot of hands. We're not stopping there. We're introducing innovative stands and brackets that enable facility operators to put hand sanitizers virtually anywhere in a building, including on a wall, on a tabletop, or any general open space. The breadth of the commercial business portfolio, which includes both consumer and commercial offerings, as well as the diverse coverage of verticals, and enhanced partnership with retail partners position the business for long-term success. Let's move to connected home and security business. While poor sales were down in 2020 due to supply constraints caused by pandemic-related plant shutdowns, the business performed well in the back half of the year, with top-line accelerating in the fourth quarter. Within the home solution segment, our food business has certainly lived up to its rocket ship status that I've grown very fond of. It actually returned to growth prior to the pandemic and built momentum to mid- 20% core sales growth in 2020, propelled by strong consumption throughout the year, as well as market share gains. In the U.S., our leading brands, Rubbermaid, FoodSaver, and Ball took share across food storage, food preservation, and canning verticals, benefiting from improved commercialization of products, stronger consumer social engagement and programming, as well as recent innovations, such as the latest vacuum sealing device, FoodSaver, a BS3000 multi-use preservation system, and Rubbermaid Brilliance Glass. The launch of Brilliance Glass is off to a rolling start. And the overall sub-brand of Rubbermaid Brilliance sales have almost doubled in 2020. 2020 was a stellar year for FoodSaver, which is the fastest-growing brand across all of your brands. And it broke through as a top-ten brand for us. Strong appliance sales in 2020 should translate into increased consumer purchases in 2021. In food, we continue to chase strong demand for January, and we are working hard to address supply constraints in certain product lines. And turning to home fragrance, we experienced strong consumption growth in our home fragrance business during 2020, driven by a surge in demand in the back half of the year. As a result, core sales increased in both North America and EMEA in the second half of the year and in the seasonally critical fourth quarter period. Full year top line sales performance was partially hindered by the temporary closure of our Yankee Candle retail stores and other specialty chains. for several months earlier in the year and the supply chain disruption experienced in the second quarter. I'm extremely proud of the team's resilience and creativity in addressing supply shortages as they worked around the clock and even engaged the corporate teams in the manufacturing and packing operations. They went all out on production in an attempt to keep up with consumer demand, which remained robust in January. The category category was on fire in 2020, no pun intended. As demand for products that help bring tranquility to consumer homes remained robust. We helped share despite supply constraints. As we look out to 2021, there are a number of exciting innovations in the harbor, including the Yankee Cam signature collection, the largest update to the Yankee line in years, and it's launching this month. It'll provide our best burning experience today. We continue to reposition the home fragrance business for the long term. During 2020, we exited the fundraising business and 77 retail stores with additional store closures anticipated in 2021. At the same time, we're building great momentum on our direct-to-consumer business. which grew strong double digits in 2020, offsetting shortfalls in retail, expanding distribution into the grocery and truck channels, and diversifying the product portfolio into auto diffusers, etc. The learning and development segment for our baby business grew modestly during 2020. The rebound from Q3 to Q4, driven by healthy consumption, recovering from the depressed levels in March and April, where lockdowns went full effect. For the year, domestic demand improved across baby-gear and infant care businesses, particularly from our car seats, high chairs, swings, and bottles. We have seen a continuation of strong domestic consumption trends in January. As mobility improved post-lockdowns, the rebound in demand for toddler currencies has been nothing short of remarkable. What's even more gratifying is that we solidified our leading position in this important category in 2020, gaining over 250 basis points of share. With thrilled by the strong performance of our Graco brand, which picked up 130 basis points of share in 2020, InnoGear packed with innovation. More exciting launches are planned for 2021, including Graco's slim fit 3-in-1 car seat, our slimmest design that fits three car seats across, saving space in the backseat without compromising on safety in the future features parents need. Now, as anticipated, 2020 was a tough year for our writing business and the category in towing, particularly in the commercial channel. Core sales pressure continued into the fourth quarter, albeit at lower levels relative to the prior two quarters as demand in the U.S. normalized a bit. During the fourth quarter, we did see continued consumption growth in the U.S., which started in September as the back-to-school season was extending. For the full year, there were also few bright spots, including pens, labeling and fine art businesses, all of which grew POS despite the disruption. Although category headwinds were significant both in the U.S. and internationally, we've made progress on the market share front in our core writing categories, which position us to come out of the pandemic on a stronger footing. 2020 was the year of the pen for the writing business, with our innovation delivering outstanding market share gains of about 750 basis points in gel pens and 260 basis points across the total pen categories. We're optimistic about our momentum in the PENS category and have launched expansion to our Sharpie S-gel platform with Sharpie S-gel fashion designs and color expansion and Sharpie S-gel metal barrel. We'll be launching this platform around the globe. We also achieved strong share performance in our labeling business as Dymo reached record share both in the U.S. and the M.E.A. While category challenges persist, consumption has remained positive thus far in 2021. We exited 2020 with the lowest retailer inventory position across the office superstore since several years. This should better position us and the retailers for a rebound post-pandemic as schools and offices return to more normal cases. While there's a great degree of uncertainty around the timing of return to a sense of normalcy in schools and offices, we're assuming a more novel back-to-school season in 2021, but that offices may remain in a hybrid environment for the balance of the year, impacting our commercial channel. Lastly, core sales and consumption in our outdoor and recreation business were under pressure during 2020, weighed down by the softness in our technical apparel and beverage businesses as a result of our reduced on-the-go activities. We delivered fast performance in the outdoor business in the back half of the year, particularly in the outdoor equipment category, such as coolers, stands, and stoves. We also saw a number of favorable developments in the market share fund in several core categories, such as coolers and tents, where we gained about 90 and 190 basis points of share respectively. I'm especially excited to share that Coleman, which is one of New York's largest brands, returned to growth during 2020. What a way to celebrate the band's 120th anniversary. Coleman had a number of successful launches in 2020, including the Coleman, Skyder, and we refresh many coolers. We're following up in the 2021 season with additional consumer-centric and purposeful innovations. To highlight just a few, we're expanding the assortment of the 2020 Coleman Sky Dome Tent to larger dome tent formats in a variety of styles and colors. We're also introducing a Coleman reunion collection of coolers, which will include new mass-powered quick finishes and three beautiful trans-focus colors that elevate and rejuvenate the Coleman steel belted cooler. Although I'm certainly encouraged by the progress we've made in the outdoor equipment business, we have more work to do on technical apparel, which is especially led by my mom and brand, and beverage with Contigo. We've brought in capable leaders to do just that, and I expect a stronger 2021. Newell is now two years into the turnaround with notable progress across the organization. As we look out to 2021 and beyond, we intend to build on the improving momentum. We will continue to position new brands for sustainable and profitable growth with our strategic priorities focused on the four and five areas. First, galvanize our employees behind our purpose to create consumer-obsessed, customer-focused organizations that are digitally savvy and willing to experiment and learn while adhering to our core values. Second, sustain top-line growth by focusing on the end-to-end consumer journey, strengthening omnichannel capabilities while accelerating online penetration, and focusing on scaling and modernizing our top brands. We also want to strengthen efforts to improve supply availability, to improve customer service levels with a strong focus on forecast accuracy. Third, become an innovation engine by sharpening our focus on consumer insights and trends, implementing an enterprise-wide innovation operating model, building cross-business unit platforms, and better leveraging our R&D resources. Fourth, accelerate international growth and improve profitability by addressing fragmentation, high overheads, prioritizing drive countries, evolving autonomous, geographic units to one new approach to build scale and move to a distributor model in non-parity countries. And fifth, continue to make progress on the financial agenda, expanding margins to productivity-type management of overhead costs and complexity reduction, as well as strengthening New York's cash conversion cycle and balance sheet. Although 2020 was undeniably one of the most trying and volatile periods in recent history, I'm extremely proud of my employees' resilience, persistence, ability to adapt, pivot, and execute with speed and agility. This has enabled us to gain significant traction on our turnaround strategy and strengthen the underlying fundamentals, positioning the company to come out even stronger post the pandemic. I'm excited about Newell's prospects and feel our better days are ahead of us. Onward. And now I turn the call over to our billion-dollar man, Chris Peterson.