Newell Brands Inc.

Good morning and welcome to Newell Brand's first quarter 2022 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 time schedule 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.newellbrands.com. I will now turn the call over to Sophia Sinnes, Vice President of Investor Relations. Ms. Sinnes, please go ahead.

Thank you. Good morning, everyone. Welcome to Newell Brands' first quarter earnings call. On the call with me today are Ravi Sologram, 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 revolve risks and uncertainty. 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, Form 10-Q, 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 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's Investor Relations website. Thank you, and now I'll turn the call over to Ravi.

Thank you, Sophia. Good morning, everyone, and welcome to the new new and our first quarter call. We're pleased with a strong start to 2022, building on the momentum from the prior quarters as our team remained laser-focused on executing with excellence in a challenging environment. Course sales grew 6.9%. against a difficult 20.9% comparison while normalized operating income or normalized earnings per share increased 10.4% and 20% respectively despite significant ongoing, excuse me, ongoing inflation. This demonstrates the power of our diversified portfolio and the nimbleness of our model. We're significantly better today at leveraging our brands to scale growth and efficiency. Our strategy is working, and we have put a strong foundation in place for sustainable and profitable growth. Q1 marked the seventh consecutive quarter of core sales growth for new brands. In Q1, our core sales growth was driven by pricing, as volume was relatively flat. Core sales grew in five of seven business units, including food, riding, outdoor and recreation, baby, and commercial. The outdoor and recreation and food businesses led the charge with double-digit increases versus the prior year period, despite difficult comparisons. Home fragrance and home appliances declined in the first quarter as they lapped a significant surge in demand in the year-ago period due to the pandemic and the passage of stimulus in the U.S., Importantly, on both a two-year and three-year stacked basis, core sales increased in the double-digit range for all seven business units, a fantastic achievement. As we shared last quarter, given the ongoing supply chain challenges that have beset the industry, retailers accelerated orders of seasonal products into the first quarter, particularly in the outdoor and recreation and writing businesses, which contributed to the strong top-line results. We are proud of the fact that we were able to fulfill these orders despite external obstacles, showing the team's resilience and agility, as well as the power of One Newell. As anticipated, we experienced normalization in category and consumption trends relative to last year, which was turbocharged by the stimulus in the U.S. While domestic POS was below the elevated year-ago base, it remained well ahead of 2019 and 20 levels, showing that the behavioral shifts we've seen throughout the pandemic are enduring. Our diverse all-weather portfolio is well-positioned to capitalize on the evolving consumer trends surrounding hybrid work, homeless hub, as well as increased focus on well-being, outdoor activities, and sustainability. We continue to sharpen brand positioning, enhance our marketing and innovation muscle, and improve our execution in the marketplace, substantially strengthening our iconic purpose-driven brands. These actions have unlocked another quarter of strong growth for many of our largest brands, such as Coleman, Graco, Rubbermaid, Rubbermaid Commercial Products, Sharpie, PaperMate, and Ball. Fourteen of our top 20 brands grew in Q1 versus last year. We're continuing to elevate the digital IQ of the organization and believe our early investments behind omni-channel execution are driving stronger connections with our customers and consumers. In early April, we launched a new creative kitchen in Hoboken, New Jersey, which is a new dream kitchen space and inspiration incubator that will sew up a steady stream of recipes and tips, connecting people with the latest kitchen innovations, food, and kitchen trends. Together with our partner, we will produce cutting-edge and inspiring content for all digital platforms, showcasing our innovations, hosting live events, With a studio audience and partnering with influencers and customers to engage with media, this is really exciting. This is a great way to showcase our new and differentiated innovations and food and appliances that satisfy consumers' unmet needs. One such product is the recently launched Rubbermaid Duralite Bakeware, an all-in-one bakeware solution for broiling, baking, freezing, serving, and storing. Innovation is the lifeblood of every consumer products company, and we have been hard at work reigniting this growth engine at Neal Brands, leveraging consumer and shopper insights, foresight, analytics, and latest trends. From a geographic perspective, core sales in North America grew at nearly twice the rate of international markets as EMEA softened against a difficult comparison and the impact on consumer sentiment from the unfortunate war in Ukraine. Let me now shed some light on business unit results, starting with writing, where we saw continued momentum both on top line and market share, as the fundamentals remained in excellent shape. Core sales grew for the fifth straight quarter, lapping a strong double-digit increase in the year-ago period, driven by North America, Latin America, and Asia Pacific. While the commercial slash office channel still remains below pre-pandemic levels, we're winning there as well, and we're seeing year-over-year growth in this channel as people return to offices, albeit in a hybrid environment. Writing and creative expression, glue and fine writing all grow in the core, helping to offset the decline in labeling due to chip shortages. Given the ongoing supply challenges across the industry, retailers accelerated some of their back-to-school orders into Q1, which contributed to the strong results. We believe we are well positioned for the upcoming back-to-school season and will have strong merchandising plans in place to capture consumer demand. In BEBI, the core sales increase was driven by North America and APAC markets. From a category perspective, both baby gear and baby care grew core sales, even as the business lapped a double-digit comp that was aided by the stimulus in the U.S. This is particularly impressive given the pervasive supply challenges that have been pressuring availability of products. Food delivered an excellent quarter. Core sales grew at a low double-digit pace, even as it left a very difficult double-digit year-ago comparison, reflecting strong growth across the fresh preserving, cookware, and bakeware, as well as food storage and kitchen organization categories. March marked the largest global sales in over five years for fresh preserving, a fantastic result fueled by strong consumption and innovation. This business goes from strength to strength, and our teams continue to leverage favorable trends and new product launches to draw consumers into this category. Even as mobility continues to improve and more people are returning to work in the office, kitchen remains an integral part of consumers' lives. In the context of a hybrid work environment and a highly inflationary backdrop, we believe that food consumption at home will remain ahead of pre-pandemic levels with our leading brands well-positioned to capitalize on these trends. Home fragrance core sales and consumption declined against a record first quarter performance a year ago, as pandemic-driven demand and category trends have slowed down as expected. Modest core growth in EMEA was not enough to offset declines in North America. On a two- and three-year stack basis, core sales grew in the strong double-digit range. Similar to home appliances, we expect the category to continue to normalize through the balance of the year, but feel good about brand health and new product pipeline, both within and outside the candle category. Core sales growth for home appliances declined low single digits as the business lapped a significant surge in consumption last year when it grew nearly 39%. Higher core sales in Latin America were more than offset by declines in other regions. Both two- and three-year stacked core growth rates were in the strong double-digit range. Given the challenging comparisons, we expect the slowdown in consumption to continue in this category as shopping behavior normalizes. The outdoor and recreation business continued its excellent momentum and stole the show once again as core sales increased 22.9% on top of 7% in the year-ago period, with Q1 marking the fifth consecutive quarter of growth. The strong performance was broad-braced across all regions and major businesses, driven by retailer optimism regarding the upcoming season, with outdoor participation expected to remain robust. Our customers placed some of their orders for outdoor equipment earlier than usual due to the unpredictable supply chain environment and the seasonal nature of the category. Strong top line and share momentum in the beverage business persisted in Q1 as our innovation and brand building efforts behind Contigo and Bubba continued to gain traction with the category further benefiting from increasing consumer mobility. Core sales growth for the commercial business accelerated to 7.4% against its toughest comparison of the year led by North America and Latin America. Strong momentum in the quarter was supported by pricing. We're also seeing improved product availability and view our portfolio diversity across both commercial and retail verticals as an advantage. Commercial cleaning, material handling, refuse and recycling, outdoor and organization, and washroom were the major drivers of core sales growth, helping to offset softness in disposable gloves, which are lapping a high base period due to COVID. were encouraged by a strong order book and believed that return to office bodes well for the commercial categories. The external environment has remained quite difficult in the first quarter, as prevailing headwinds surrounding supply chain and inflation were further exacerbated by the unfortunate war in Ukraine. Even as inflationary pressures have gotten more onerous than we previously anticipated due to the ongoing political situation and its impact on costs, our resolve to restore gross margin and drive operating margins remain higher than ever, despite the significant impact from inflation. Newel's normalized operating margin improved about 50 basis points versus last year, ahead of our expectations, largely reflecting incremental pricing actions and stronger management of overhead costs. We are proceeding swiftly with mitigating actions, giving us confidence to reiterate our outlook for the year in spite of about $80 million of incremental inflation. We still expect 2022 to be a year of margins, even though inflation has continued to move against us. Our outlook calls for top and bottom line growth, despite a challenging and uncertain macro backdrop. For 2022, we remain focused on five key priorities. First, improving gross margins as we continue to double down on our efforts to offset 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 of our businesses while ensuring they remain a good value for consumers. In addition, we'll continue to optimize commercial spend, price innovation to be gross margin accretive, direct ANP spend towards higher gross margin categories, and drive productivity. Second, continue to drive core sales growth and innovations. Focus on mastering the 360-degree consumer and shopper journey and delight consumers and customers at each touchpoint and shoppers at each touchpoint with compelling storytelling focused on consumer value and brand uniqueness. We will capture consumer demand by directing A&P to the brands with the highest margins and growth potential. and target appropriate consumer segments to maximize conversion. Third, turbocharge internationally to accelerate growth and profits. Fourth, continue investing in transforming our supply chain through Project Avid and automation. And last but not least, continue to strengthen the one-year culture and build on our employee engagement momentum. We remain committed to driving sustainable and profitable growth, and building operational excellence throughout the organization while being a force for good. We recently announced a carbon neutrality goal by 2040 for all scope one and scope two emissions. We'll also continue to address existing macro headwinds and forge ahead with our strategic initiatives such as Project Arvin, automation, and realizing the potential of international. Strong results in Q1 are building on our track record of following through with our commitments and we are confident in our outlook for 2022. I am thankful to our employees for always rising to the occasion and helping us to successfully navigating through the ever-changing operating environment. I continue to believe that Newell's best days are ahead of us, and we have a significant opportunity to drive shareholder value onwards and upwards. And now I'll turn it over to Chris.