Newell Brands Inc.

Good morning and welcome to Newelbrand's fourth quarter and full year 2021 earnings conference call. At this time, all participants are in listen-only mode. After a brief discussion by management, we will open up the call for questions. In order to stay within the time scheduled 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 this call is available at ir.newelbrands.com. I will now turn the call over to Sophia Tsinos, VP of Investor Relations. Ms. Tsinos, you may begin.

Thank you. Good morning, everyone. Welcome to Neal Brand's fourth quarter and full year earnings call. On the call with me today are Ravi Saligram, 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, and we undertake no obligation to update forward-looking statements. I refer you to the cautionary language and risk factors available in our earnings release, our Form 10-K, Forms 10-Q, and other SEC filings available in our investor relations website for 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 we 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 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 Investors Relations' website. Thank you, and now I'll turn the call over to Ravi.

Thank you, Sophia. Good morning, everyone, and welcome to our year-end call. We continued our growth momentum from the past five quarters into the fourth quarter, which helped us achieve an important milestone in 2021 as we returned the company to core sales growth with strong results across each business unit and geographic region. Despite a challenging and disruptive operating backdrop, as well as significant inflationary pressures, we delivered over 12% growth in both core sales and normalized operating income in 2021, with further progress in complexity reduction, productivity, cash conversion cycle, and a robust innovation pipeline. Let me share some highlights from fiscal 2021. Core sales increased 12.5% as each business unit grew versus last year and on a two-year stacked basis. This was fueled by strong consumption in the U.S. relative to both 2020 and 2019. Domestic consumption increased across all eight business units relative to 2019, with writing, food, baby, commercial, home appliances, and home fragrances in the double digits. Even as mobility is returning and some trends are moderating from peak levels, we are seeing stickiness in consumer behavior versus pre-pandemic levels. We believe that the strategic work we've done to rejuvenate our iconic brands, sharpen brand positioning, strengthen our marketing and innovation muscle, while leveraging consumer insights and foresight is enabling us to better capitalize on consumer trends. Our major brands are healthy, And in 2021, each of our top 10 brands grew with Graco, Oster, Coleman, Yankee Candle, Sharpie, and Peppermint, each registering double-digit growth. 2021 was also a stellar year for all our regions, as each one delivered double-digit top-line growth with international outpacing North America. We continue to believe that the international markets abound in opportunity, and we just appointed Maria Fernanda Meya as CEO International. Maria Fernanda has three decades of international CPG experience at firms such as Kellogg's and Colgate and has a track record of accelerating growth and profit. She'll join you at the end of this month with the goal of fully unlocking international growth potential and accelerating profit by leveraging scale, reducing fragmentation, and building up brand franchises outside of the U.S. Strong omnichannel execution allowed us to attract shoppers across all channels, despite consumers' return to brick-and-mortar stores through the year. Newell's global e-commerce sales grew at a low double-digit pace in 2021, as digital penetration for the company remained at about 22% of net sales, similar to 2020, and significantly ahead of prior years. Our go-to-market strategy is yielding strong results and enabling us to forge stronger connections both with our consumers and customers. Although our service levels were challenged due to the supply environment, we saw excellent growth at our top customers and developed strong joint business plans. We're also building momentum on our innovation operating model with tighter integration of consumer insights and foresight into the process. This is yielding more impactful launches. Not only are innovations becoming a larger contributor to sales, we also see opportunity to continue to scale many of the franchises, such as Sharpie SGL, Mr. Coffee Iced, FoodSaver, VS Line, and Rubbermaid Brilliance. In 2021, although Newell's normalized operating margin declined about 10 basis points to 11%, normalized operating profit grew more than 12% despite approximately a 700 basis point inflationary headwind, which was 9% of COPs. Offsetting levers were strong fuel productivity, pricing, and tight cost control. normalized earnings per share grew nearly 2% versus 2020. On a tax-adjusted basis, that would represent over 20% increase in normalized EPS, a remarkable result, particularly in this environment. Our cash conversion cycle improved by five days year-over-year to 68, from a high of 115 in 2018. Strong cash generation, despite strategic inventory build, allowed us to de-level our balance sheet to 3.0 times. As we focus on driving sustainable and profitable growth, we're placing significant emphasis on building operational excellence throughout the organization, with Project Ovid and automation being two major initiatives that we are implementing. We also significantly improved our employee engagement. Based on a Glint employee survey, the company's engagement score moved up significantly to 75 at benchmarks, indicating that culture is becoming a competitive advantage for us. We continue to strengthen our commitment to corporate citizenship, sustainability, as well as diversity, inclusion, and belonging, guided by our core values of truth, transparency, teamwork, and trust. I'm pleased to share that Neal Brands has been named one of Fortune's 2022 World's Most Admired Companies. The company was also recognized on several other lists, such as the Wall Street Journal Management's Top 250 Best Managed Companies of 2021. Forbes World's Top Female Friendly Companies in 21, Forbes Best Employers for Diversity in 2021, Newsweek America's Most Responsible Companies in 2022, and was awarded 100% on the Human Rights Capital Foundation's Corporate Equality Index in both 21 and 22. Last year, we also continued to give back to our communities, donating products worth nearly $17 million. Let me share some insights on 2021 results for each business unit. Writing had a terrific year with double-digit growth, almost double the rate of the total company, and market share gains across each geographic region as schools came back to a more normal cadence. We saw strong domestic consumption relative to both 2020 and 2019. On a two-year stack basis, writing core sales grew despite the delay in return of the commercial channel as new variants continued to disrupt back-to-office plans. The rebound in the writing category in combination with excellent market share gains in the U.S., Canada, U.K., and Australia drove excellent results for the business in 2021. In the U.S., Newell outpaced the market, delivering a seven-plus-year high in market share and over two points in share gains in writing instruments. Sharp ESGL continued to turbocharge our share in pence for the second straight year, resulting in US share gains of nearly 500 basis points in this important category. New share of the writing category also improved by more than two points in Australia and Canada and almost one point in the UK. We're confident writing is well positioned for a great 2022 when we expect more of a rebound in the commercial channel. 2021 was a solid year for the baby business, both on the gear and care sides, as core sales grew at low double-digit rate due to distribution gains, innovation, increased stimulus, and child tax credit funding, and continued strength in e-commerce. We saw strong momentum in domestic consumption. There was lots of great innovations throughout 2021, and I'm pleased to share that Newell Baby Gear won four awards at the annual Juvenile Products Manufacturing Association Awards, the most of any company, including the Tried and True Award for the Graco Forever and Green and Environmentally Friendly for Century. Along with writing, Home Fragrance was the best performing business unit during 2021, as consumers focused on their well-being in homes, drove strong double-digit core sales growth supported by healthy consumption relative to both 2020 and 2019. Net sales for the home fragrance business reached record levels in 2021, despite closure of underperforming retail locations and exit from the fundraising business in 2020. We saw a really strong performance from Yankee Candle retail stores this year, with positive comps as consumers returned to in-store shopping. The 2021 launch of the Yankee Candle Signature Collection, as well as added distribution points, helped drive modest share gains in the candle category in track channel. In EMEA, we delivered strong growth across all territories, leveraging e-commerce and added distribution points. Moving on to food, 2021 was another strong top-line year for the food business, even as performance moderated in the second half against very challenging comparisons. And we experienced supply challenges across some businesses. Domestic POS was significantly ahead of 2019 and slightly below elevated year-ago levels. In 2021, two of our brands, Ball and FoodSaver, achieved record sales, and Ball continued to drive significant share gains in the canning category. benefiting from the 2021 launches of ball storage latch pantry jars as well as the nesting jars. We also saw share gains in the Rubbermaid brand drawing upon the successful expansion of the Brilliance line into glass and pantry categories. Our products are also getting external validation as good housekeeping named Calphalon, best nonstick cookware, Rubbermane Brilliance Glass was named best food storage, and FoodSaver was recognized as best vacuum cleaner for 2021. We continue to believe that in a world where hybrid work environments are likely to prevail, at-home cooking and food consumption occasions will remain above pre-pandemic levels and have an exciting lineup of new products for 2022. In 2021, core sales growth for home appliances accelerated relative to already elevated 2020 levels led by Latin America, North America, and EMEA. Domestic construction was up significantly ahead of 2019 levels and up modestly versus 2020. Due to strong demand, we hit an all-time record production of blenders as Oster Blenders celebrated the 75th anniversary in both the U.S. and Latin America. In 2021, our outdoor and recreation business grew core sales in each quarter. demonstrating momentum and the strength of the turnaround strategy we began 18 months ago. For the full year, core sales improved across all regions, with robust growth driven by Japan, U.S., Europe, and Latin America. The iconic and largest brand in the ONR portfolio, Coleman, led this growth, showing a lifestyle brand-building focus is working. We also saw strong results from our portable beverage category, with both Contigo and Baba growing double digits. Key product innovations in outdoor and recreation include the Coleman Peak One platform, Coleman 1900 collection, Contigo hydration, and a new camping gas grill in Europe. Our global marketing campaign with Coleman, the outside is calling, is resonating well with our outdoor enthusiast consumer as brand sentiment and brand health scores continue to rise and helping us win new distribution for 2022 across various channels, including outdoor speciality. In beverage, the Contigo Street Available Desk Mug, which was introduced in 21, has become the number one mug in the coffee mug category, and Contigo is restoring its leadership position. I'm also encouraged by the progress in margins, both in outdoor and recreation and home appliances. In 2022, we will exit some lower margin categories, such as beddings, fans, and aerobeds, which will be a headwind to top line, but will help make further inroads on improving profitability. From a top line perspective, 2021 was another solid year for the commercial business. as core cells grew on top of very difficult comparison fueled by consumption growth. We saw strong consumption performance across major categories, with the exception of washroom, which surged a year ago due to the pandemic. While the business has been amongst the hardest hit by inflation, the team has done an outstanding job in implementing a series of price increases to help mitigate the impact. Given our expectations that resin prices have stabilized, we're confident that we will restore gross margins and drive strong operating profit growth in 2022. Lastly, core sales for connected home and security increased in 2021, driven by strong domestic consumption. Earlier this week, we announced an agreement to sell the CHNS business to Residio Technologies, and it is consistent with our strategy of tuck-out divestitures. We're confident that Residio is the right strategic owner for this business and believe this transaction will enable CHNS to realize its full potential. At the same time, it allows us to bring even greater focus to our core businesses where we see the highest potential for value creation. Since CH&S was not integrated with the rest of NEO, we do not expect this transaction to be disruptive. We're exiting 2021 from a position of strength, and I am confident that the strategic investments behind brand rejuvenation, omni-channel and social media listening capabilities, as well as supply chain resiliency position us well for driving sustainable, profitable growth. As we look to 2022, an overall theme is that if 2021 was a year of top-line growth, 2022 will be a year of margins. We're focused on five key priorities. First, laser focus on improving gross margins as we double down on our efforts to mitigate the significant inflationary pressures and supply chain challenges while improving customer service levels. The strength of our brands has allowed us to take the appropriate pricing actions on all our businesses while ensuring they remain a good value for consumers. In addition, we'll continue to optimize promotional spend, price the innovations to be gross margin accretive, direct A&P spend towards higher gross margin categories, and drive productivity. Second, we'll continue to drive core sales growth and innovations, focus on mastering the 360-degree consumer journey, and delight consumers at each touchpoint with compelling storytelling and joyous brand experiences. I genuinely believe we're making the shift to becoming a consistent growth company. Third, turbocharge international to accelerate growth and profits. Fourth, continue investing in transforming our supply chain through Project Orbit and automation. Fifth, and last but not least, continue to strengthen the One Newell culture and build on our employee engagement momentum. Folks, it is a new rule. Our can-do teams delivered over 12% core sales growth and normalized operating profit growth in 2021. In 22, we're committed to rebuilding gross margins and delivering top and bottom line growth despite a tough macro environment. I'd like to express my sincere gratitude to our employees whose grit, hard work, and agility make it possible for us to deliver on our commitments and pivot as necessary. I continue to believe that Yule's best days are ahead of us and that our focused and deliberate actions will drive sustainable and profitable growth, achieve strong shareholder returns, while being a force for good. Onwards and upwards. And now I'll turn it over to Chris.