Newell Brands Inc.

Good morning, and welcome to the Newell Brands' fourth quarter and full year 2022 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 Q&A session. As a reminder, today's conference is being recorded. A live webcast for this call is available at ir.newellbrands.com. I will now turn the call over to Sophia Simas, Vice President of Investor Relations. Ms. Simas, you may begin.

Thank you. Good morning, everyone. Welcome to Newell Brand's fourth quarter and full year earnings call. On the call with me today are Ravi Saligram, our CEO, Chris Peterson, our president, and the newest member of the executive team, Mark Ercik, our CFO. 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, Form 10-Q, and other SEC filings available on 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 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 conciliations between GAAP and non-GAAP measures can be found in today's earnings release and tables, as well as other materials on the Investor Relations website. Thank you, and now I'll turn the call over to Ravi.

Thank you, Sophia. Good morning, everyone, and thank you for joining us on our year-end call. Fourth quarter results were in line with our expectations and brought to a close a difficult second half. Business continued to be impacted by a tough operating environment, including slowing consumer demand for general merchandise categories, as well as inventory reductions at retail. Our team remained focused on executing our strategic priorities with excellence while navigating these challenges. They did a great job in reducing inventories in the fourth quarter and drove sequentially stronger cash flow performance. For the year, core sales declined 3.4% against a very demanding year-ago comparison of 12.5% growth. Soft volumes more than offset favorable pricing. Two-year stacked growth exceeded 9%. The writing and commercial businesses delivered core sales growth in 2022, while core sales for the other businesses declined. The company's core sales and domestic consumption exceeded 2019 levels, even as home and outdoor categories are continuing to normalize from peak pandemic levels. Many of our major brands, such as Rubbermaid, Sharpie, PaperMate, Rubbermaid Commercial Products, Ball, Expo, Elmer's, and Camping Gas showed strength. Despite a much tougher than anticipated operating and macro environment in 2022, which weighed heavily on the company's results, we made tangible progress across a number of focused areas. First, many of our iconic brands were recognized for their innovations. For example, all stack and store innovation and good housekeeping screening and organization award. Graco won the JPMA Innovation Award for Child Restraint Systems with the Graco Turn-Tree Car Seat. Coleman Road Trip 285 Standard Propane Grill was recently ranked by Outdoor Grill Lab as the best portable grill in 2022. In the US, new innovation under Mr. Coffee Latte 4-in-1 received the Good Housekeeping Best Gear and Best Coffee Award. Our latest innovation in writing, Elmer's Squishies, launched exclusively in Q4 at a major retailer with very strong results. In three months, it became Newell's top activity item, outpacing slime sales over 3-to-1. National launch of Squishies across U.S. retail will begin in late March 2023. In April of 22, we launched New Creative Kitchen, a unique, efficient social media vehicle that allows us to take a perennial approach to connect our brands across consumer life moments and occasions and bring curated content to target consumers, allowing them to repost to their own followers. We've seen a four-fold increase in engagement through our live presentations and a 90% higher click-through rate to our branded websites since creating your creative kitchen. Second, we continue to build operational excellence across the organization by transforming our supply chain for Project Arbit and automation. And earlier this year, we announced the next major step in this journey as we are unifying our global supply chain and centralizing manufacturing, which we expect to drive meaningful margin improvement in the long term. Third, we made significant progress on complexity reduction, ending 2022 with about 28,000 SKUs as compared to approximately 36,000 in 2021 and over 100,000 in 2018. Our revenue per SKU has more than tripled versus 2018. We will continue reducing SKUs and accelerate SKU productivity. Fourth, we drove another year of strong productivity savings at around 3% of COGS, which in combination with pricing actions helped to mitigate the high single-digit headwind from inflation. We will further accelerate our productivity efforts in 2023. And last, but certainly not least, We advanced our corporate citizenship agenda as we continue to galvanize our employees to be a force for good. We strengthened our people-first one-year culture, maintained strong employee engagement at world-class norms, and committed to carbon neutrality by 2040 for all Scope 1 and 2 emissions across our global portfolio. I'm also pleased to share that for the second consecutive year, New Brands has been named one of Fortune's 2023 World's Most Admired Companies. While we are proud of the operational achievements and believe we are a much more agile company today, we also recognize that the macros have put considerable pressure on our business. We've been taking proactive and decisive actions to effectively navigate the current environment while positioning the organization for long-term success. In late January, We announced Project Phoenix, a major evolution in our operating model and a restructuring program that is expected to drive significant savings. Phoenix will further simplify and strengthen our company by leveraging the scale and power of One Newell to optimize our cost structure and operate more efficiently. Let me shed more light on Project Phoenix. There are five key tenets. First, we'll combine business units into three operating segments based on consumer dynamics and customer commonalities. Second, we will centralize our sales efforts for our top four customers. Third, we'll go to a one-year go-to-market approach in key international geographies. Fourth, we will centralize and unify manufacturing globally. And fifth, we'll strengthen key capabilities, reduce duplication, enhance role clarity, and drive standardization of processes, tools, and measurements. We're bringing the food, home, pregnancy, home appliances, and commercial businesses under one umbrella, Home and Commercial Solutions, led by Mike McDermott, the segment CEO. Lisa McCarthy has assumed a new role as Chief Operating Officer of the Home Business, reporting to Mike. Learning and development, which includes writing and baby, is led by Chris Malkowski. Jim Patani will continue to lead our outdoor recreation business. Through this evolution, we will honor the differences and nuances among our businesses and unify our commonalities related to the consumer and customer while leveraging our scale and enabling better opportunities for internal mobility. Our iconic brands play a key role in the lives of nearly every U.S. household. We expect the new operating model to unlock additional growth opportunities for the business over time. We will leverage the power of our brands to meet consumers' daily needs in and out of their homes through their major life moments vacations. our international business, remains an important priority for Newell. In 2023, core sales for international increased 0.4%, significantly outpacing North America, despite macro and geopolitical pressures. As part of Project Phoenix, we are continuing to reduce international fragmentation by moving to a one-year go-to-market approach in key geographies such as Australia and New Zealand, LATAM Japan, and as announced last fall, Canada. We're also evaluating the structure and consultation with employee work councils in Europe. This should dramatically reduce fragmentation, accelerate growth and profit trajectory for our international businesses over time, and increase depth and breadth of franchise outside of the US. As part of Project Phoenix in the US, we're also moving to a one-year sales model for several of our top customers. Centralizing these teams will simplify our customer interaction significantly improve the customer experience and strengthen our position as a best-in-class partner. I'm proud that we've built high, wide, deep, and enduring relationships with key customers and are increasingly perceived as a valuable strategic partner. Based on the success of Project Arbit and in the spirit of One New, we are moving to a unified global supply chain organization, which Chris will elaborate on later. As we focus on optimizing our cost structure, we are taking decisive action on our real estate. In a hybrid work environment, we have the opportunity to close or consolidate offices and adopt new ways of working. We just announced closure of our corporate offices in Boca Raton and South Deerfield and earlier this year, the consolidation of our Huntersville campus. We're in the process of assessing other actions. In total, Project Phoenix is expected to result in elimination of approximately 13% of office positions. While this was a very difficult decision and one we as a leadership team did not take lightly, We made every effort to treat our departing colleagues with respect and dignity, and we are doing all we can to help with their transitions. The actions we are undertaking are a continuation of the simplification agenda that we've driven over the last four years and in response to the difficult macro environment. We expect Phoenix to yield annualized pre-tax savings in the $220 to $250 million range when fully implemented. At its core, Phoenix is not just about restructuring. It is about leveraging our scale. It is about significantly evolving our operating model to strengthen the company and prepare for the future. As macro conditions remain unfavorable to top-line growth, our prime focus in the near term is cash flow and gross margin improvement. I know Chris is working hard to get his nickname back as the Billion Dollar Man. Speaking about the future, this morning we also shared that I'll be retiring on May 16th. This is a very bittersweet moment for me. I look forward to pursuing new interests and spending more time with my family, including my first granddaughter, Lux. who was born just a few weeks ago, I'll certainly miss everyone at New Orleans. It's been a distinct honor and privilege to lead the company over the last several years, and I've loved every day at work. I remain inspired by our talented employees who are passionate, resilient, and courageous. I'm very proud of our strong, world-class executive leadership team who've made significant progress in strengthening the company. by reducing complexity are on the journey to rejuvenate our iconic brands to be more modern and relevant, launching successful innovations that leverage pandemic trends, building e-commerce and omnichannel as a competitive advantage, and transforming our supply chain. The team is working diligently to implement Project Phoenix and make our new segment-based operating model a major success. I want to congratulate Chris on his well-deserved elevation to the new CEO of Newell. He's been a true partner to me in the turnaround, and I believe he is the right person with the right skill set and right temperament to take Newell to the next level. I know our leadership team respects Chris and will strongly support him to deliver our key priorities. I'll be partnering closely with Chris to ensure a smooth and seamless transition and will focus my efforts on ensuring a successful execution of Project Phoenix, accelerate momentum on international, and rallying the organization to overcome macro challenges with speed and dexterity. I'm also pleased to welcome Mark to Newell's leadership team and his first earnings call with us. I believe his multiple experiences as CFO will add significant value to Newell Brands And I'm confident that he and Chris will be a powerful combination to move Mule forward. Despite the macro headwinds the company faces, I am optimistic about the future of Mule. We have great brands that consumers love. We've built e-comm and omni-channel prowess. We have excellent customer relationships. and are reigniting the processes and passion to drive meaningful innovation. We believe we will return to driving sustainable, profitable growth once the economy turns in our favor. Our best days are ahead of us, onwards and upwards, and now I turn over to Mark for brief remarks.