Good morning and welcome to Newell Brands’ Second Quarter 2022 Earnings Conference Call. [Operator Instructions] 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 Sofya Tsinis, VP of Investor Relations. Ms. Tsinis, you may begin.

Thank you. Good morning, everyone. Welcome to Newell Brands’ second quarter earnings call. On the call with me today are Ravi Saligram, our CEO and Chris Peterson, our President and 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 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 will turn the call over to Ravi.

Thank you, Sofya. Good morning, everyone and welcome to our second quarter call. We are pleased with our second quarter results, which demonstrate the power of our diverse all-weather portfolio and another quarter of terrific execution by our team. We delivered balanced performance across core sales and normalized operating margin in a difficult environment as we remain laser focused on driving sustainable and profitable growth and operational excellence. For the quarter, core sales increased 1.7%, while normalized operating margin improved 100 basis points versus last year. For the first half, this puts us at 4% core sales growth and 70 basis points expansion in normalized operating margins, which is excellent performance. Q2 was the eighth consecutive quarter of core sales growth for Newell Brands. This is a significant achievement, particularly given the difficult comparison of 25.4% from the prior year period, which reflected double-digit growth across nearly each business unit. We saw a shift of some customer orders from Q3 into Q2, although this was less meaningful than we initially anticipated given retailers increased focus on rightsizing their inventory levels. Core sales increased year-over-year across 4 of our 7 business units as growth in Commercial, Writing, Baby and Outdoor & Recreation more than offset declines in home fragrance, home appliance and the food businesses. We were not surprised to see a divergence in performance across businesses as some such as Writing and Commercial are benefiting from the reopening activities, while others such as home fragrance, home appliance and food are in challenging parts of the cycle due to elevated levels of demand during the pandemic and prior year stimulus benefits in the U.S. These dynamics are expected to continue to impact consumption, which contracted year-over-year in the U.S., while still remaining well ahead of pre-pandemic levels. During the quarter, 6…

Thank you, Ravi and good morning everyone. We delivered solid results in the second quarter, with core sales growing on top of a difficult year ago comparison and better-than-anticipated performance on margins despite ongoing inflationary pressures. This quarter is another testament to the actions we have taken over the past several years to put the business on a much firmer footing to effectively manage external challenges. Before discussing the details of Newell’s quarterly performance, I want to provide an update on the current operating environment and Project Ovid. While we continue to face elevated levels of inflation, the outlook on costs for the balance of the year has not changed materially relative to the first quarter. We still expect inflation to account for about 9% of cost of goods sold in 2022, similar to last year. We continue to anticipate that the most significant drivers of inflation this year will be ocean freight, source finished goods and wages. And we have good visibility into each of these buckets. At this stage, we have implemented nearly all major domestic price increases planned to-date. And in many instances, competitors have followed. We are staying very close to consumer trends, which remain volatile. Lower income consumers are being forced to allocate a greater portion of their wallets to everyday essentials such as gasoline, food and housing. Category growth rates are being affected significantly by increased mobility and base period comparisons. To manage through this, we are adjusting our demand forecast and supply plans on a more frequent basis to ensure we are meeting consumer demand in businesses such as Commercial and Writing, where we are experiencing strong growth, and we are maintaining appropriate inventory levels in businesses such as Home Fragrance and Home Appliances where consumer demand is below year ago levels. While…

Thank you. [Operator Instructions] And our first question today comes from Olivia Tong of Raymond James.

Great, thanks you. I was wondering if you could talk a little bit about consumption versus selling and any major disconnects there and where they are the most acute and how long you think that will last. And then obviously, a few of your retailers are not necessarily in the spot right now. So have you changed any of your practices on the more challenged retailers? And what are you factoring in for them in the second half? Thank you.

Hi, good morning, Olivia. So let me start on the consumption side. Recognize, of course, last year, consumption was very robust. And we have, in the first half of this year, seen some softness in consumption. Though as we are going into July we are beginning to see some pickup and thanks to a great Prime Day that happened, so there is a little gap between consumption and our sales growth. Clearly, I think some of the businesses – the same businesses that are challenged on the sales side, Home Appliances, Home Fragrance, are some of the ones that are having some consumption issues. So I think, look, there is going to be – I think as we work through the inventories and what we’re happy to see is that at least in July that uptick, so that is positive. Let me just talk through the second comment – the second question on retailers and retail inventories. Look, for us, interestingly enough, because of a lot of the supply challenges that we had last year and going into this year, we actually had low in-stock levels, and we’re trying to get them up, and it varies. But in most cases, we’re kind of still at their targets or maybe slightly below. So we’re working hard on that. So I don’t think for us notwithstanding all the headlines you see on general merchandise in terms of our own businesses. In fact, when you think about writing and stuff, we’ve been working hard to provide the retailers, as you know, that shift a little bit from Q3 into Q2. So that aspect has not been as much of an issue. But look, we do get caught up because even though it may not be us, because they are looking at overall inventories, including competitors, etcetera. So we could get caught up in that aspect of it. And so that’s sort of the view that I have. Look – but the fact of the matter is we are off to a great start on BTS. Our commercial business is on a real roar. And food, while the first half has been a big challenge, part of it was really some of our out of stocks and so on. So we expect some pickup there as well in the second half.

Great. And then on the flipside on some of the offsets that you could potentially make with respect to the cost containment and savings programs, if you could give a little bit more color in terms Ovid. It sounds like it’s progressing quite nicely. Any color in terms of the plans in July with respect to the three businesses that are impacted? And then if you could just update us on sort of the path forward on the Ovid-related things for the remainder of the year, that would be great?

Yes. So we passed, as I mentioned in the prepared remarks, a major milestone going live with our first wave of businesses into our single legal entity on July 1. And frankly, it’s gone dramatically better than we expected and were planning for. We’ve seen – as we shut off the old system and turned on the new system, we’ve seen very minimal to no issues with regard to our ability to receive orders, process orders, ship products. Our facilities have come up to speed faster than we expected. And perhaps most importantly, one of the big parts of this program was going and working with the retail – with our retail customers to harmonize payment terms and transportation terms. So in many cases, with retailers, we were going from 30 different sets of payment terms or 25 sets of payment terms down to one set of payment terms. We’ve completed that negotiation process with all of our top retailers, and the vast majority of them are now ordering. And in many cases, we’ve shipped products on the new system and collected receivables at the same time. So I think we are very excited about it. I think it’s a testament to the hard work that the teams have done and all of the system integration testing, the day and the life testing that I had mentioned previously. And I think it sets us up well for the remaining businesses to come on to the legal entity in early 2023. With regard to the financial impact, as we’ve mentioned previously, this year is going to be relatively neutral on Ovid versus last year. And we expect the savings from Ovid really to come in 2023 as we get fully into the new model, and we remain very much on track with that.

Our next question comes from Peter Grom of UBS.

Hey, good morning. I guess, good afternoon, everyone. I hope you are doing well. So I guess I just wanted to ask around the comfort or the confidence to maintain your core sales outlook just in the current environment. I mean it seems like many of your peers or competitors have lowered their outlook to reflect kind of the inventory dynamics, changes in demand, etcetera. So can you just comment on your comfort or degree of flexibility in the guidance should demand deteriorate from here?

So let me kick it off, and then Chris can add. So Peter, I think sometimes there is a little misunderstanding about our business, thinking that everything is discretionary. We actually have really essentials, and every day in terms of the baby businesses. There are lots of things in writing that are needed from a school standpoint. And then we’ve got a whole business on Commercial where it’s – when – it’s other than certain cycles, it’s really back on track as the economy is opening up. So I would say other than to me, the discretionary side has been Home Fragrance. That’s been hit because there was a lot of building up during the pandemic as people were stressed, and they were using a lot of cameras. They are now working their way out of that. So I think that’s been there. And then on Home Appliance, clearly, there was some acceleration of consumer purchasing because of the stimulus and so on. And by the way, that happened a little bit on candles as well with the stimulus. Some low-income consumers came into the category, and we will probably not get some of those people back. And with the long purchase cycles in home appliances, it will be difficult. But I think we’ve got Writing that is doing very well, with shares are continuing to be strong. And then we’ve got a lot of innovations coming out. In the Food business, we’ve got the whole DuraLite from Rubbermaid coming out that I think we should do well. Fresh preserving is doing extremely well. We’ve got – and then there is been a whole emphasis – the marketing teams have shifted to a value story. So when you look at FoodSaver, for instance, we have just introduced a $99 appliance in one of the leading clubs – chains. And we think that’s going to do extremely well. We’ve looked at sort of FoodSaver roles and said, hey, we got consumer input that we were giving too much. And so we’ve reduced that and got the price points down. And so we think that is going to have a positive impact. Bonus packs on things like Sistema. We’re looking at BOGOs on Contigo. So I think that value message is also going to stimulate consumption. So we feel – and when you look at the first quarter where we still – I’m sorry, the first half where we had a 4% growth on top of a very challenging comp of about 23%. So the second half, we are taking into – in the second quarter, we’re taking into account what happened with the shifts. And so I’d say that the guidance we’ve given is appropriate.

Yes. The only thing I would add is that the guidance that we gave at the beginning of the year heading into this year did contemplate stimulus money coming out and did contemplate categories normalizing, as Ravi mentioned. And so we had factored into this – largely, this effect into our initial plan for the year. I will say that the plan for the year has changed versus what we thought, but the power of the portfolio is what’s enabling us to maintain the total company. I think relative to our plan at the beginning of the year, I think we would say Writing and Commercial are doing better than we expected, and Home Fragrance and Home Appliances are normalizing a little faster than we expected, but the two of those basically offset, which allows us to maintain the guidance for the year on core sales growth.

Got it. That’s helpful. And I guess just on Writing, can you remind us of the normal replenishment cycle or when you would have visibility on replenishment orders for back-to-school? And I guess the reason I ask is some of the inventory dynamics discussed at retail seemed to have resulted in fewer replenishing orders in certain categories, but largely in some of these seasonal items. But just any commentary on that and then what you have embedded in your guidance for the third quarter around replenishment?

Yes. Look, it’s too – we are right now week 3 in BTS and what we are seeing is positive, but it’s too early for replenishments. I think that’s really more late August, September that you start seeing that. So Chris, do you have anything you want to add there?

No. I think Ravi is exactly right. The only thing I would say is that – and then Ravi mentioned it in his prepared remarks, is recall that we did – retailers did order writing earlier this year. And so there will be a shift from Q3 into the front half of the year that will disproportionately affect the Writing business in Q3 because we shipped a lot of those back-to-school display volumes in Q2.

The business itself is very strong, and we’re very happy with the performance. And the brands are remaining strong, and share positions are good, so...

Our next question is from Andrea Teixeira of JPMorgan.

Thank you. Good afternoon. I just wanted to follow on, on the inventory level. But at retail, I’m assuming with Project Ovid, you had to work with your retailers to just add them up and make sure that they had enough inventory. And of course, the FUEL rates that you worked since the beginning of the whole issue with transportation from Asia – I worked at your advantage. I do remember that being one of the strengths in your results. I was just hoping to kind of reconcile all of this and think about what, I guess, the retailers have talked about reducing inventory, some of the discretionary items, just thinking about the camping season, also the outdoor business, like trying to help. And just on Peter’s question in terms of like the back-to-school, is there anything that we should be aware of this pull forward that we are not going the benefit in the third quarter? Anything you can help us kind of understand how we should be thinking of inventory and sell in and sell out for those categories that benefit from the reopening? Thank you.

Alright. Thanks, Andrea. Let me try to give it a shot. So we monitor weeks of coverage at all of our major retail customers, and we get the data generally on about a 1-month lag. It depends on which retailer. But we can see exactly how much of our product is at retail. And I think, as Ravi said earlier, we feel pretty good about our retail inventory levels overall. We are not at a position broadly where our retail inventories are elevated. We have some categories where our retail inventories are below target levels because we are still supply constrained and we are still catching up. And we have got some categories where we may be slightly above. But broadly speaking, we are in good shape with our retail inventory levels, I would say, is sort of the first point. And we do monitor it very closely. It doesn’t mean that we couldn’t get caught up with retailers who make a broad change to their general merchandise inventory and inadvertently caught up, not because our retail inventories are out of line, but because a major retailer takes an inventory action. And frankly, that’s why if you looked at our Q3 guidance, we guided our core sales growth in Q3 to a little bit broader range than we typically would because of that uncertainty with regard to do we inadvertently get caught up in something that a retailer does. But if you look at our Q3 guidance range on core sales and you compare that to 2019, we are still forecasting a quarter that’s up mid to high-single digits versus 2019 levels. So, that’s what I would say broadly about our inventory levels.

And in terms of the back-to-school, that’s super helpful. The back-to-school, also we don’t need to worry about those dynamics, I am assuming.

Now back-to-school, we are actually – is one of the ones where we probably have too little inventory at retail. And what I mean by that is we have – the customers have ordered the displays earlier, and that’s accounted for the shift from Q3 into the first half of the year that we have talked about. Some of the major retailers wanted to set up back-to-school earlier, and we are off to a good start. But we are supply constrained on replenishment orders. And so, if anything on that business we are trying to ramp up production capacity to keep up with customer demand.

Our next question comes from Kevin Grundy of Jefferies.

Great. Hey. Good morning everyone. First question for Chris. Just on the EPS guidance, I think you touched on some of it, would seem to imply that margins would be down in the back half of the year, albeit modestly versus a pretty strong first half of the year. Maybe just comment on that and then constraints around pricing, our ability to lean on productivity, particularly versus last year where you guys held the line and even raised EPS guidance, what was a difficult environment, understanding the operating leverage was certainly better. And then within that response, maybe just comment on the transactional effects from FX, which seem to be larger, and that is to say about 3x the impact on top line. And then I have a follow-on buyback. Thanks.

Okay. Let me try to kind of tackle them one at a time. So, on margins, I think – we think that we have talked a lot about the dynamic of pricing and FUEL productivity savings offsetting the impact from inflation and FX. And the pricing now being fully implemented, which is why you saw our gross margins in the second quarter being roughly flat with a year ago. Going forward into the back half of the year, we expect pricing and FUEL productivity savings to more than offset the impact of inflation and FX. And so we are expecting continued gross margin improvement relative to prior years in the back half. In Q3, we are expecting our A&P levels to ramp up a bit. And so A&P as a percent of sales is planned higher in the back half versus a year ago. Because in the year ago level, we were frankly not spending a lot of A&P primarily because we were so supply constrained. And then I think the other thing that’s happening in the back half is that because the revenue growth is somewhat more front-half loaded this year because of the base period comparisons, there is an overhead deleverage that happens in the back half that’s sort of a one-time in nature type of thing, but very much on track for the year. So, that’s sort of where we are on margins. The new news on margins – and all of that together has us guiding operating margins up versus last year on the full year 20 basis points to 40 basis points. I think the new news on margins is really the FX impact. And as I mentioned, the FX impact is really because the Japanese yen has devalued significantly versus the U.S. dollar as…

Got it. Thanks for all that Chris. That’s helpful. Just one quick follow-up. Just updated thoughts on share buyback. You expressed some openness that the Board seems certainly open. The stock is in sort of deep value territory. Ravi, you made comments on perhaps the misunderstanding about more of the defensive nature of the business. But that being said, this is within the context of sort of a less certain macro. As you sort of pull all of that together, would love to get your updated thoughts on returning cash to shareholders and how you should weigh on that within all of these variables. And I will pass it on. Thank you.

Very good. Yes. We – as you know, when we sold the CH&S business, the Board authorized $375 million of share repurchase. We have executed $325 million to-date, and we have $50 million left on the current authorization. The other thing I would say is from a seasonality standpoint, as you have seen in our results, we typically are a back half cash generation company because of the seasonality of our business. And so we are expecting to generate a significant amount of operating cash flow in the back half of the year, and we will evaluate when to deploy the $1 billion of authorization over the next six months or so. From a longer term perspective, we do expect this company to continue to generate strong operating cash flow. We expect our first use of cash to be – to invest in the business. And generally, we are seeing opportunities to invest at 30% type rates of return is what we are looking at for CapEx. Beyond that, we pay a very good dividend of $0.92 a share, which we expect to maintain. And then we expect to generate cash beyond that, which we will look to return to shareholders through share repurchase or consider tuck-in acquisition. But I think as we have said in the past, tuck-in acquisition, we would be very selective on that. And it would have to be something that was a clear shareholder value winner for us to reenter that strategy.

Our next question comes from Bill Chappell of Truist Securities.

Thanks. Good afternoon.

Hi Bill.

Most on the call I listen to, I guess P&G this morning talked about the U.S. consumer seeing not that being very healthy to, Church and Dwight saying we have seen trade down happen kind of across the board. And so putting that in context with kind of your comments for the second half of the year of expected low-end consumer to be under pressure and maybe some trade down, is that based on what you are seeing right now, or is that just based on reading what economists are calling for a recession or an expectation and – which is understandable? Just trying to understand what you are seeing versus what you are expecting.

Yes. So, Bill, on the losing out a tranche of the lower-income consumers that we are definitely seeing on the home fragrance business. And we have done a lot of modeling and a lot of the work, and that is clear. And that is probably a more discretionary purchase. But also the stimulus really bounced up. So, we are able to track and see that a lot of new consumers come in, and we have lost them. So, that is definitely something we are seeing. On the trade down, there is different types. One of the interesting hypothesis is, say, losing to private label. We are not seeing that in the main with the exception of again home fragrance. And look, in home fragrance of private label, a lot of their own brands from the big retailers. But aside from that one category, even in Rubbermaid, where there is some portions, which is susceptible to private label, we are actually not seeing that. We are holding our shares, which is a positive. There are some trade downs in – so I will give you two examples, one where – with sort of baby car seats, which is a very sensitive segment, there is sometimes a shift to kind of the lower – the value brands, if you will. So, some of that we tend to see. But because the power of our brands like we are holding our own innovations, but that one we have to be careful. So, we are very targeted – and because we have put a map policy in, so when we do promote, we are very targeted and we see big surges. And for instance, on Prime Day, we saw like four car seats sell per minute of Newell – of Graco. So, we are understanding the sensitivities and being very laser-focused on when we promote. The other side of trade down, we are also being the beneficiary. Like in specialty retailers on our door, for instance, we have – where we are kind of more the value brand with Coleman, we are actually getting the benefits. And for the first time on some of the specialty retailers, we are being included for ‘23 on their big promotions and so on. So, that’s what we are seeing. And so our thoughts are based on what we are seeing. I am always in the markets with my teams trying to check stores and looking at behaviors. So, that’s sort of the quick view.

The only thing I would add is that I think our guidance contemplates a further softening of low-income consumer. So, to your point of what we are seeing versus what we are expecting. And I think we have deliberately chosen to be a little bit more cautious on that in the guidance versus what we have seen to-date because we don’t want to get in a position where we are overbuilding inventory. And so we have tried to be a little cautious with regard to future trends based on what we have seen so far. And we are trying to set the supply plan lower so that we wind up at the end of the year in a good inventory position and we don’t carry over excess inventory as we go into next year.

From that – one pivot that we have made as a company is really with all our views, focus on value, value, value in marketing messages and search terms, in product offerings, in promotions. It is all about trying to demonstrate the value. And the value is not just low price, but it’s really about the great quality that we have, but combined with making it attractive for them.

No, that – I appreciate that. And then just a follow-up on writing, where do we stand, or where do you expect us to be at maybe at year-end versus 2019 levels? I mean it’s tough to sell back-to-school. Are we back to normal, back to work, but clearly not 100% back to normal. I mean is there an expectation you are going to be there, expectations you are going to see a surge as we have kind of the most normal fall we have had in years? How do you look at that versus 2019 this year and even going into next year?

Yes. I would say I have a very clear answer on that, Bill, which is the writing business is going from strength-to-strength as the offices are opening up. And even though it’s just hybrid, we are seeing the momentum, and we are seeing momentum with Staples and Depot as well versus our regular customers on Walmart and Amazon, etcetera. So, I would say that we would definitely be on the positive side of the ledger versus ‘19 and with all the innovations we are driving that we have got some new activity based of that we are driving in Q4. So – and with Sharpie S-Gel, that has been a knockout success. Paper Mate doing very well. I feel – and look, in the future, one other thing, as soon as we overcome the chip shortage on Dymo, I think that will be another growth item. So, I would say writing, a lot of confidence.

Our next question is from Chris Carey of Wells Fargo Securities.

Hi. Thank you. So, a quick margin question and then just a bigger picture question. Just on margins, Learning & Development was a historically high margin delivery in the quarter. Anything atypical there? Are we reaching new thresholds from which to improve going forward? And then similarly, in the Home Solutions segment, kind of historically low margin, is that just about sales deleverage? Then just a quick follow-up.

So, again, Steve, the – I am sorry. So, again, Chris, the Home Solutions margin, I got – I missed the first part.

Learning & Development, historically high, anything atypical over the quarter, or is that something that you see as sustainable going forward?

Yes. So, let me take both of those because you are right. Learning & Development, I think, was a function of really strong top line growth across both writing and baby, strong FUEL productivity savings that we are driving. And that translates through into margin improvement in that business. So, it’s – I think it is sustainable going forward. On the Home Solutions, I think we had a significant drop in margins during the quarter, and that really was largely deleveraging from the top line normalizing. There was some higher A&P spend because of the – as a percent of sales because of the top line slowdown. There was also some gross margin being down as we started to right-size the supply plan, and we started to get some manufacturing, fixed manufacturing cost absorption issues on that. So, I don’t think that the Home Solutions margin drop is sustainable. I think that’s sort of a temporary thing that’s going to bounce back as we go forward.

Okay. Got it. Then this is a bit more big picture. Hopefully, not big of a question. But I guess the challenge for the stock in a way is that results are good and resilient. Yes, the overhang is on this general merchandise and the lack of visibility on the demand environment going forward. And I guess I am trying to maybe get a sense of what you might define as success if the demand environment significantly changes something that’s outside of your control. It’s pretty clear that you are looking at tightening your own inventory perhaps in that sort of environment. You focus more on cash flow, maybe buying back stock, which is something that you can’t control. Just big picture, right? Like if the demand environment continues to soften, how are you positioning yourself, or what is the right way to look at successful execution for this business on this curve? I realize that’s a big question for the end of the call, but it does feel important in the context of the stock and delivery so far this year, and yet still in the lack of visibility on the go-forward demand, so.

I will give a quick one, and then Chris can add to it. Look, I think the experiences are where you have to walk into gum at the same time. And one thing Newell has demonstrated, starting with the turnaround, then COVID, then supply chain challenges, then inflation, and now FX, we have been in our last 12 quarters, I think continued to demonstrate that the teams can execute, and we deliver on our promises. So, we recognize that the environment is tougher. But look, part of it is just being quick and agile on pivots. On the top line side, it is pivoting to really how do you make sure that the consumers continue to see the value and continue to drive our innovations. So, we will continue to do that, but that’s – we declared this year again was the year of the margins, and we are continuing to – despite everything, we have still guided that we will be higher on operating margins. So, we are going to continue to be very focused on that. Long-term, we are very determined to get the gross margin right and get it up. So, I think we have got to do both. And – but if there is one focus, it is – and we have got Ovid, which is going to be a real help for us, as Chris pointed out in ‘23. And then finally, look, we are going to continue to generate cash, which gives us flexibility. And Chris already outlined the uses of it. So, I don’t want to repeat it. But I would say, we just have to – and this is where the power of the portfolio, and it’s, yes, a little misunderstood portfolio, thinking everything is discretionary, but it’s not. But we are going to continue to – I think our actions and results will speak for themselves. And finally, I think hopefully, investors will say, this is a company poised to continue to drive long-term shareholder value.

And the final question today comes from Steve Powers of Deutsche Bank.

Hey. Thanks. Thanks guys. So, my questions are more clarification on the back half outlook, and there is three of them, but they are quick. Number one is just I want to be clear what you said, Chris, on the gross margin trajectory. I think you said that there will be improvement in the back half and sequentially improvement – sequential improvement in the rate of year-over-year change. I just wanted to clarify that, number one. Number two, I don’t – I got the guidance on the tax benefit in the third quarter. I don’t know if you called out exactly what’s driving that just for explanation purposes. That would be helpful if there as an easy answer. And then lastly, on cash flow cadence, is there a bias to having more of the cash flow come in 3Q versus 4Q or different? I guess I am – I interpreted your comments as more 3Q versus 4Q as you allow for the additional inventory build ahead of Project Ovid rollout. But just any clarity there would be great. Thank you.

Yes. So, let me try to take them one at a time. On gross margin, what I was referring to was the rate of gross margin improvement I expect to improve in the back half. We were down versus a year ago in Q1. We were flat in Q2. And I am expecting gross margin to be up versus a year ago in the back half. So, that’s the answer on that one. The tax benefit that we are guiding to in Q3 is a one-time discrete tax benefit from a tax project that we are working on, that we expect to implement in Q3. And so that is a sort of one-time discrete tax benefit that we have got a high degree of confidence that we are going to execute in Q3 and felt like it was appropriate to reflect it in the guidance. And then on the cash flow, I think you are likely to see the cash flow be larger in Q4 than in Q3, and part of that has to do with the timing of shipments and the timing of collections. And so typically, that’s the case for Newell, and I expect this year to sort of follow that same trend. So, I do think that you will see Q4 significantly larger cash flow quarter than Q3. But I am expecting Q3 to be positive.

Okay. That’s helpful. I know we are at the end. But just on the tax because I have just got a couple of people pick me on it. What’s the right normalized kind of long-term tax rate? We talked in the past about sort of approaching upon 20%, but with discrete benefits over the next couple of years, keeping you below that range. But is there – any way to better describe sort of normalized tax and the cadence to get there, because it is a question that’s topical right now.

Yes. In our tax – our tax rate is somewhat volatile because we continue to have opportunities that we are going after with NOLs, structuring work, legal entity rationalization, etcetera, that we think are good value drivers for the company, and they don’t all come sort of in a linear fashion. I think in the past, I have said that a normalized tax rate for this company, excluding discrete items, might be around 20%. I actually think that, that number may wind up being a little bit below that now. If I were to think about it, I would probably say maybe in the high-teens to 20% is probably a normalized tax rate for this company based on our existing structure.

Ladies and gentlemen, that ends today’s question-and-answer session and concludes the Newell Brands’ second quarter 2022 earnings conference call. We thank you all for your participation, and you may now disconnect.