Newell Brands Inc.

Good morning and welcome to the Newell Brands first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open the call for questions. In order to stay within the scheduled time for the call, please limit yourself to one question during the Q&A session. As a reminder, today's conference is being recorded. A live webcast of the call is available at ir.newellbrands.com. I will now turn the call over to Sophia Sinnes, VP of Investor Relations. Ms. Sinnes, you may begin. Thank you.

Good morning, everyone. Welcome to Neil Brand's first quarter earnings call. On the call with me today are Ravi Silagram, 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 cautionary language and risk factors available in our earnings release, our Form 10-K, and other SEC filings available in our Investor Relations website for a further discussion of the factors affecting forward-looking statements. Please also recognize that today's remarks will refer to certain non-GAAP financial measures, including those referred 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 reconciliations between GAAP and non-GAAP measures can be found in today's earnings release and tables as well as in other materials on Newell's Investor Relations website. Thank you, and now I'll turn the call over to Ravi.

Thank you, Sophia. A very hearty good morning, everybody, and welcome to our call. I am pleased and honored to share the highlights of our phenomenal first quarter results as we carry forward the strong momentum from the back half of 2020. Topline grew an astounding 21% as normalized operating profit doubled. normalized earnings per share tripled versus last year. This is the third consecutive quarter of core sales growth for the company and by far the best result yet. Even on a two-year stack basis, core sales grew in the mid-teens. I'm particularly encouraged that the first quarter growth was in all eight businesses, all four regions and all channels. Importantly, the collective power of our iconic brands is evident in this performance with top 18 out of 20 brands demonstrating growth with Oster, Yankee Candle, Coleman, Rubbermaid, and Dymo leading the pack. while top-line strength was truly broad-based as seven out of eight business units grew sales at double-digit rates. Home fragrances and home appliances businesses stole the show. We were also really pleased to see that the writing business is moving past the pandemic-related woes as more schools open up for in-person learning. The business returned to strong core sales growth in the first quarter, mirroring the levels of the company. All four geographic regions grew core sales at a double-digit rate, with international markets up nearly 27%, continuing to outpace North America. In the U.S., we experienced strong consumer demand throughout the first quarter, with acceleration in the last month. We started to lap initial lockdowns from 2020 in mid-March and also saw a lift in demand following the passage of fiscal stimulus. Shoppers continue to seek out home-centric products as well as those that favor personal well-being and outdoor activities. With the gradual reopening of the economy, we're also seeing an uptick across some categories, such as writing, that have been disproportionately hit by the pandemic. We expect continued evolution of consumer behavior throughout this year as vaccination rate and mobility improve. At the same time, we believe many of the new habits consumers formed will persist beyond the pandemic. Example, at-home cooking. We expect the shift towards online shopping to have a lasting impact on consumption trends. Newell's e-commerce sales growth accelerated into the mid-40s range during the first quarter, as global sales penetration improved about 4 percentage points versus last year to approximately 21%. While sustained growth in the digital business paved the way for such a strong top-line outcome in Q1, sales trends were also healthy across other channels as we started to lap year-ago lockdowns in mid-March and mobility improved, particularly in the U.S. E-commerce is a notable competitive advantage and an engine for growth in your brands. I am thrilled to share that we have recently approved filled a critical role in this area as we appointed Mike Guetta as president of e-commerce and digital. He joined us from PepsiCo where he served as senior vice president e-commerce marketing technology and data science. Prior to that, Mike spent 10 years at Amazon with extensive e-commerce expertise. His technology prowess, data science and analytics capabilities his entrepreneurial zeal and intellectual curiosity, Mike will build on Newell's strong e-commerce foundation to make us a digital powerhouse and an Omni leader. I am pleased to report that the leadership team now is complete. We've built a team that is best in class, diverse in thinking, and unified in strategic direction, and will pave the way for lasting success. The strength of the first quarter results reflect the progress we're making on the execution front, strengthening our brands, scaling innovations, increasing distribution, improving customer relationships, leveraging consumer trends as well as macro tailwinds. The common theme in this quarter was the broad-based strength in consumption, core sales growth across the entire portfolio, share gains in several categories and regions, and and strength in international. The whole fragrance business delivered phenomenal results in the first quarter, as consumption growth accelerated to about double the levels from the back half of 2020. In fact, this was by far our fastest growing business, both from a core sales and POS perspectives, a reflection of pent-up demand following supply constraints in 2020. Consumers continue to seek out moments of serenity in their homes as they adopt a more holistic approach to well-being. We drove core sales growth more than double the rate of the overall company. To put it in perspective, home fragrance grew net sales at a double-digit rate both versus 2020 and 2019, despite closure of about 150 stores during this time frame, and last year's exit from the fundraising business. We are successfully managing the purposeful transition of our business as we pivot towards expanding distribution across traditional retail and direct-to-consumer channels while reducing our Yankee Candle retail store footprint. We're driving strong growth in our direct-to-consumer channel through personalization and loyalty programs that are maximizing lifetime customer value. Our recent launch of Yankee Candle Signature Collection, the most meaningful redesign of the Yankee line in years is gaining traction. We're not just focused on winning in candles. We're gaining share in track channels, but also within the overall home fragrance category with an exciting pipeline of new products planned across the sleep diffuser, wax mouths, oral reads, and scent blood categories. Excuse me. The food business, which now includes California cookware and cutlery, maintained a strong growth momentum as sales increased in the trainings. Excuse me. With a large portion of meals still prepared and eaten in the home, It is not surprising that consumption has remained strong, particularly in the food storage and fresh preserving categories. I am delighted to share that early in April, Rubbermaid was named the most trusted food storage brand in Newsweek magazine. What an honor. We have driven strong share gains on Rubbermaid and are seeing solid traction on the Brilliance Glass and Triton Food and Pantry Storage line. We continue to drive elevated demand for our canning business, where we also built on our leading share position with Ball leading the way. Heightened consumer interest in gardening bodes well for continuation of this trend, and we are continuing to bring new innovation and new users to the market. In the first quarter, Ball launched nesting jars that stack together, which helps make storage more compact and will reduce the amount of space needed for mason jars by 30%. FoodSaver continues to do well. Our VS3000 innovation, launched in July 2020, has already sold 350,000 units and is moving the needle. Home appliances delivered its strongest performance yet. Sales grew 38%, with double-digit increases across all four regions, as the category remained quite buoyant in the U.S. Double-digit growth in consumption was evident across most subcategories, including heated cooking, blending, coffee, pain management, and air purifiers, as stimulus provided additional fuel. Despite the lockdowns, Latin America posted very strong results across all countries, with Brazil, Colombia, Chile, and Peru being the standouts. Similar consumer trends played out in Asia-Pacific and EMEA, where we saw broad-based sales growth. During the first quarter, we continue to build on the terrific fall 2020 launch of Mr. Coffee Iced Coffee Maker by expanding its distribution with additional rollout plans in place for balance of the year as capacity comes online to meet demand. It's quickly becoming the number one selling coffee SKU in relevant retailers where the product is available. I'm pleased that this is another innovation that's gaining traction. Just last week, Crock-Pot, which celebrates its 50th anniversary this year, was recognized as the most trusted slow cooker brand in Newsweek. In another exciting news, NPD Mexico awarded Oster as the winner of 2020 market share growth in the kitchen electronics segment. In the first quarter, our writing business rebounded nicely as core sales contributed grew at a strong double-digit rate with broad-based growth across writing and creating expressions, labeling, and fine-writing businesses. We're finally beginning to put the 2020 pandemic-related disruption on this business in the rearview mirror. While the category also returned to growth in the U.S. in the first quarter, news consumption grew. at approximately double, double the rate of the market in the segments we compete as we gain meaningful share. Dymo captured over 400 basis points of incremental share, while our share in gel pens increased by more than 1,300 basis points on the heels of the successful year-ago launch of Sharpie S-Gel. Sharpie SGL has become a needle mover with excellent gross margin. The fourth quarter expansion of Sharpie SGL platform through Sharpie SGL fashion barrels and frost blue and pearl white, as well as Sharpie SGL metal barrels and gunmetal and champagne are off to a promising start and already among our top selling pens. The rebound in our writing business as well as the category is driven by the return of nearly 60% of school districts to in-person learning and cycling against the onset of the pandemic. Similar dynamics played out in the UK and Australia and New Zealand where our consumption growth significantly outpaced the market. Although admittedly, there's still a fair amount of uncertainty surrounding the timing of return to normalcy, in schools and offices. We're excited about the prospects for the writing business this year and together with our retail partners are planning for a normal back to school season. We continue to assume that offices may remain in a hybrid model for the balance of the year. Sales growth for our baby business accelerated to a mid-teens rate in the first quarter, as we experienced a significant uptick in consumption levels across our baby gear and baby care categories. The strong outcome was driven by a combination of healthy share gains by Graco and Nook in the U.S., stimulus funding, as well as cycling against comparatively depressed consumption levels in March 2020 as lockdowns were implemented. This team is knocking it out of the park with fantastic e-commerce penetration of more than 50% of global sales in the first quarter, up more than 700 basis points versus last year. Both Graco and Nook continue to bring news to the market in Q1 through launches such as Graco Slim Fit 3, a three-in-one car seat, and Nook Space Night pacifiers in EMEA. I'm also pleased to announce a new addition to our baby portfolio with the launch of Century, a sustainable and stylish baby brand for young families. Q1 was another strong quarter for the commercial business unit as low double-digit sales growth reflected sustained momentum in many consumer-facing categories such as outdoor and garage organization, gloves, and home cleaning. Consumers continue to direct discretionary spending towards home improvement projects, with home still being their hub. We're beginning to see traction in commercial demand for some of our products, such as cleaning carts, step-on containers, and professional gloves. However, lockdowns, along with slow global reopening and back to office, are still a limiting factor in commercial categories. within the food service, travel and entertainment, and hospitality verticals, as well as in washroom solutions. With good momentum on recent launches, such as Rubbermaid Easy Install 7x7 Shed, Deck Boxes, and Wheel Brew, as well as a robust innovation pipeline, we think commercial is very well positioned going forward. The connected home and security business delivered double-digit growth. The team is making considerable progress on a complete innovation overhaul of their smoke alarm product line as part of UL217 through advanced technology. This team leads in IoT and has made huge advances in automation in their Wires plant. Similar to the rest of our business units, outdoor and recreation started off 2021 on a solid note as sales increased at a high single-digit rate, reflecting growth in the outdoor equipment business with particular strength in the international regions. In the U.S., consumption accelerated versus the second half of 2020, driven by broad-based demand across most of the outdoor equipment categories, such as coolers, tents, and stoves. Consumers are tired of being cooped up inside and answering the call of the outdoors. Although core cells were still under pressure, consumption for technical apparel turned positive during the first quarter. We expect the beverage business to rebound as the on-the-go activities pick up and more schools reopen. While still early days, we are seeing traction from the recent introduction of three new product lines in Contigo's hydration portfolio. Coleman continues to bring news to the market with an exciting assortment of new products launched in the first quarter, including SkyDome tent expansion, Expand soft cooler collection, and the Reunion steel belted cooler collection. While the first quarter results came in ahead of our expectations, And Chris will explain the key reasons. We contended with a fair amount of challenges as well, including poor congestion, the impact of Texas storms on raw material availability, a significant rise in inflationary costs, freight challenges, as well as demand spikes across many categories. Our supply chain teams operated with excellence through these turbulent conditions and successfully managed broad-based demand surges. Looking out into the remainder of 2021 and beyond, we're laser-focused on building on the solid momentum in the business as our turnaround continues to gain traction. There's no change in the five strategic priorities that I laid out last quarter, which include, first, galvanize our employees behind our purpose to create a consumer-obsessed, customer-focused organization that is digital savvy and committed to providing moments of joy and peace of mind to consumers. Second, sustain top-line growth. by focusing on the end-to-end consumer journey, securing new distribution across channels, especially food, dollar, and home centers, strengthening omnichannel capabilities while accelerating online penetration, and focusing on scaling and modernizing our top brands. We will also strengthen efforts to improve supply availability, to improve customer service levels through a strong focus on forecast accuracy. Third, become an innovation engine. by sharpening our focus on consumer insights and trends, and implementing an enterprise innovation operating model and building cross-business unit technology platforms. A distinguishing aspect of our go-forward innovation efforts is that in addition to our normal line extensions, refreshes, and renovations, We will strive to launch three to five major needle-mover new product innovations per year that can be scaled to $50 to $100 million in sales and have strong gross margins. Sharpie SGL, FoodSaver VS3000, and Mr. Coffee Ice are illustrative of this thinking. Fourth, accelerate international growth and improve profitability. And fifth, continue to make progress on reducing complexity, controlling overheads and strengthening the balance sheet. And in particular for 2021, offsetting the significant search and raw material inflation, as well as labor and freight costs through a combination of productivity improvements and selective price increases. We're still in the early stages of realizing the full potential of our business and see tremendous opportunity for value creation through focused execution of our strategic priorities and serving as a force for good in the world. We feel good about the last three quarters and are confident about the second quarter 2021 as we see sales and consumption momentum continuing in April. The second half of 2021 is difficult to predict given global uncertainties around COVID and evolving consumer habits. Nevertheless, We're optimistic and see more upside than downside. I'd like to conclude by thanking our 31,000 employees for their commitment, hard work, and perseverance, all of which made it possible to deliver such an incredibly strong outcome, onwards and upwards. Now I'll turn over the call to my partner in crime, the billion-dollar man, efficiency guru, and complexity reduction czar, one and only Chris Peterson.