Newell Brands Inc.

Good morning, and welcome to Newell Brand's fourth quarter and full year 2023 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. Today's conference is being recorded. A live webcast of this call is available 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 NeuroBrand's year-end earnings call. On the call with me today are Chris Peterson, our President and CEO, and Mark Ersig, 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 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 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 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 that were furnished to the SEC. Thank you, and now I'll turn the call over to Chris.

Thank you, Sophia. Good morning, everyone, and welcome to our year-end call. I want to start with a brief recap of the significant progress we have made during 2023 on the turnaround agenda. In June, we introduced and deployed a comprehensive new corporate strategy, which focuses on disproportionately investing in innovation, brand building, and go-to-market excellence in our top 25 brands and top 10 markets as part of a clear set of where to play and how to win choices. These choices were informed by a thorough and brutally honest company-wide capability assessment we conducted earlier in 2023, which unveiled GAPS and Newell's front-end commercial capabilities. Following deployment of the new corporate strategy, we proceeded to fully cascade and integrate it into business, region, brand, and functional strategies to ensure clarity and consistency of direction across all areas of the company. Last month, we announced additional changes to our operating model designed to accelerate progress in key capability areas, such as innovation, brand building, and go-to-market excellence, while driving even further standardization and scale efficiencies across the supply chain and back office functions. As part of this evolution, we have now stood up a cross-functional brand management organization and for our top 25 brands established multifunctional brand teams spanning brand management, consumer and shopper insights, as well as finance, customer strategy and planning, and supply chain functions. This move allows holistic support for each brand, keeps consumers at the heart of all we do, and ensures appropriate financial and operational rigor is in place to drive on our ambitions. Building on the success of the One Newell approach with Newell's top four customers as part of the organizational realignment, we centralized domestic retail sales teams under our Chief Customer Officer, further reinforcing our partnerships, simplifying interactions, and allowing for additional joint business plans. We also created a new business development team focused on driving distribution with new customers and expanding categories with existing customers. We expect these changes will enable our teams to better leverage Newell's portfolio of leading brands and critical selling capabilities to accelerate both category growth and Newell's market share while serving as best-in-class partners to our customers. Over an eight-month period, key members of the leadership team and I visited eight of Newell's top 10 countries across North America, Europe, and Latin America. These visits reinforced our view that international markets, which accounted for about 37% of Newell's sales in 2023, represent an attractive growth opportunity, particularly if we fully harness the scale benefits and embrace the one Newell go-to-market model. As a result, we are further simplifying and standardizing Newell's regional organizations, which will pivot their focus to commercial delivery with the goal of accelerating speed, agility, effectiveness, and ownership. We've made significant progress upgrading talent across the organization to close skill gaps and accelerate capability build out. We have now filled the majority of critical leadership positions across the company. The two latest hires to the executive team include a new chief HR officer, as well as a new CEO of the outdoor and recreation business, who both bring a wealth of relevant experience and knowledge. We are excited to have them on board. We've made significant progress on each of the 18 breakthrough capability projects we chartered as part of the new corporate strategy. For example, we completely reinvented the consumer insights function under a new leader that we brought in last year. We believe this will unlock actionable insights as well as proprietary understanding of consumers and customers so that we can enable superior innovations with stronger claims. We have also overhauled Newell's innovation approach around a biannual review process and put in place a project tiering system that helps identify big bets. Our goal is to launch fewer, bigger, and longer-lasting innovations that are gross margin accretive. While the health of the funnel is not yet where I'd like it to be, we have made considerable progress not just on cutting the tail, but also identifying Tier 1 and 2 innovations for the coming years. I'll talk more about these as they come to market. To strengthen our market-leading brands with consistent brand building and compelling brand communications, we've put considerable effort into building brand management into a foundational capability for Newell. In addition to upgrading brand manager talent, we put exceptional performance standards in place with clear KPI-driven expectations for all brand managers. We also rolled out a pillars of competitive advantage framework so that we can evaluate our brands relative to competition on product performance, brand communications, packaging, omni-channel execution, and value. Finally, we implemented a new set of corporate values to focus on better serving consumers, increasing accountability, driving a sense of urgency, and returning the company to winning in the marketplace. We have been and will continue to move with speed and agility to action our strategy while developing and strengthening the capabilities required to win. Turning to financial results, full year numbers were either in line with or ahead of our latest outlook across all key metrics. Sales came in ahead of our expectations driven by stronger than expected U.S. demand. Normalized gross margin improved sequentially each quarter and inflected positively in the back half, driven by record-setting productivity performance and the July pricing action to proactively address situations where unit economics were untenable. Operating cash flow increased $1.2 billion versus 2022 ahead of our forecast as we took out about $700 million in inventory. We continued to drive out complexity, ending 2023 with approximately 21,000 SKUs, down about 25% year over year. We unlocked over $150 million of pre-tax savings through Project Phoenix, which helped mitigate inflationary pressure on overheads. And we reduced net debt by about $500 million, driven by strong cash flows. While we are pleased with the significant progress in 2023, we are not satisfied with a 12% core sales decline for the business, even as we estimate that close to 80% of it stemmed from category contraction and retailer inventory actions. We are laser focused on returning the company to sustainable and profitable growth and more broad-based share gains, and that is precisely why we have been moving at pace in implementing our strategy. Turning to 2024, we expect the macroeconomic backdrop to remain challenging as consumers remain under pressure and geopolitical uncertainty creates a dynamic operating environment. Our outlook assumes that Newell's categories continue to contract, albeit not as much as last year. We also believe retailers will continue to manage inventory tightly in durable and discretionary categories. Within this context, we plan to drive continued strong progress on the turnaround agenda and have established five major priorities for 2024. First, continue to operationalize our new strategy and operating model, unlocking the full potential of the organization and our portfolio of leading brands. This includes fortifying organization, talent, and cultural capabilities to better enable meaningful innovation, stronger brand building, and operational excellence. Second, improve top line and market share performance on a sequential basis as the capability work starts to yield tangible results in the marketplace. Third, drive strong gross margin and operating margin improvement, building on the progress made in the second half of 2023 by realizing benefits from a scaled and advantaged supply chain via productivity and other efficiency projects, while also delivering the anticipated savings from Project Phoenix and organization realignment initiatives. Fourth, continue to de-lever the balance sheet and improve the cash conversion cycle by driving strong operating cash flow. Within this, we are planning to fully fund all the necessary high return capability improvement and restructuring projects to build a multi-year productivity improvement runway. And lastly, continue to reduce complexity through business process redesign with a focus on simplification and accountability technology standardization and enablement, and continued SKU count reduction across the organization. Amidst a challenging operating environment, during 2023, we drove record productivity across the supply chain, significantly improved cash flow by rightsizing inventory, further reduced Newell's SKU count, and took decisive actions to strengthen the company's front-end commercial capabilities. On behalf of the entire leadership team, I would like to express our gratitude to all of our employees who have embraced the new strategy and have shown tremendous resilience, commitment, and grit despite a bold change agenda. The tangible progress on our strategy and turnaround agenda more broadly bolster our confidence that we are taking appropriate actions to strengthen the organization, improve its financial performance, and create value for our stakeholders. I'll now turn the call over to Mark.