Good morning, and welcome to the Newell Brands First Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After a brief discussion by management, we will open the call up for questions. [Operator Instructions] Today's conference call is being recorded. A live webcast of this call is available at ir.newellbrands.com. I will now call -- turn the call over to Joanne Freiberger, SVP of Investor Relations and Chief Communications Officer. Ms. Freiberger, you may begin.

Thank you. Good morning, everyone, and welcome to Newell Brands' first quarter 2025 earnings call. On the call with me today are Chris Peterson, our President and CEO; and Mark Erceg, our CFO. Before we begin, I'd like to inform you that during 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 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 are available and 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 with that, I'll turn the call over to Chris.

Thank you, Joanne. Good morning, everyone, and welcome to our first quarter earnings call. We had a strong start to the year with Q1 results in-line or ahead of expectations across all key financial metrics. Core sales at minus 2.1% improved both sequentially and versus a year ago. Both Learning and Development and the International business in total delivered core sales growth in the quarter. Normalized gross margin increased meaning -- meaningfully for the seventh consecutive quarter, expanding by 150 basis points. Normalized operating margin exceeded our outlook even after increasing A&P investment dollars by high-single digits compared to prior year and normalized earnings per share came in $0.05 better than the upper end of our guidance range, driven by strong operational performance. We remain confident that Newell's new strategy is working. A key piece of our new strategy relates to product innovation. As we shared last quarter, our multi-year innovation funnel has now largely been rebuilt with exciting consumer led proprietary products, which will begin launching in a sustained manner starting with the second half of this year. Despite the dynamic operating environment, we remain laser focused on driving continued progress on our where to play and how to win strategy choices and the capabilities required to deliver against them. That said, we know that tariffs are top of mind, so we'd like to start this morning by explaining why we're confident Newell Brands after what will likely be a period of temporary disruption is well-positioned to disproportionately benefit from the global trade realignment currently underway. Specifically, we believe past decisions to proactively prepare for higher China tariffs by aggressively shifting source finished goods procurement to alternate geographies and to maintain and invest in a robust and extensive in-house domestic manufacturing base, while many of our top competitors outsourced…

Thanks, Chris. Good morning, everyone. First quarter 2025 core sales were minus 2.1%, which was at the high end of our guidance range, reflecting new product innovation and to a lesser extent net pricing benefits. Both the Learning and Development segment and our International business, which represents nearly 40% of Newell's total sales posted positive core sales growth for the last five consecutive quarters, which we believe further demonstrates that our new strategy and one Newell operating model are working. 2025 first quarter net sales included about 2.5 points of currency headwind and just over 0.5 point of category exits. Normalized gross margin in the first quarter expanded by 150 basis points to 32.5%, which was the seventh consecutive quarter of year-over-year improvement. Gross productivity savings and pricing more than offset inflation and foreign exchange. [Technical Difficulty]

Please excuse us one moment. We're experiencing a little bit of technical difficulty. Please just hold for one moment.

All dropped.

It looks like we are making progress. If you guys can hear me, okay and if we can hear you okay, we may begin again if you're ready.

Yeah. We can hear you.

That's great. Thank you for your patience, everyone. Allow us to begin again.

Great. Thanks, everyone for being patient with us on our little technical snafu there. I'm going to go ahead and start with my first portion of my prepared remarks transitioning over from Chris. So thanks and good morning, everyone. First quarter 2025 core sales were minus 2.1%, which was at the high end of our guidance range, reflecting new product innovation and to a lesser extent net pricing benefits. Both the Learning and Development segment, and our International business, which represents nearly 40% of Newell's total sales posted positive core sales growth for the last five consecutive quarters, which we believe further demonstrates that our new strategy and one Newell operating model are working. 2025 first quarter net sales included about 2.5 points of currency headwind and just over 0.5 point of category exits. Normalized gross margin in the first quarter expanded by 150 basis points to 32.5%, which was the seventh consecutive quarter of year-over-year improvement. Gross productivity savings and pricing more than offset inflation and foreign exchange headwinds. During Q1, Newell's normalized operating margin was 4.5%, which was comfortably above the guidance range we provided during our last earnings call. Operating margin results were better than anticipated despite higher levels of A&P investment for two reasons. First, core sales came in towards the top end of our guidance range and second, gross margin performance was stronger than expected. Net interest expense of $72 million represented an increase of $2 million from the prior year and a normalized income tax provision of $2 million was recorded in Q1. Relative to normalized diluted earnings per share, we recorded a loss of $0.01 in the quarter, but this was $0.05 to $0.08 above our guidance range without any discrete tax benefits distorting operating results. We had an operating cash outflow of…

Thank you. At this time, we will now conduct the question-and-answer session. [Operator Instructions] Our first question comes from Andrea Teixeira from JPMorgan. The floor is yours.

Thank you, operator, and good morning, everyone. I wanted to just go back to what, what you both said in terms of the retail destocking and also a clarification on the tariff in the 125%. But just on the destocking and consumption, if you can walk us through how was the exit rate for consumption? And if we are mostly out of -- it seems like from your second quarter guidance you are still assuming some destocking by retailers and how we should be thinking about those as you set yourself to the big season for back to school? And then second would be the tariff, this 125% mitigation efforts. You did call out that it was not included in your guidance, but the $0.20 impact and you would have mitigation for half of it. So we are just wondering, if you can explain what those -- when is the likelihood and the mitigation -- not the likelihood, of course, it's out of your control, but what are the mitigation efforts that you would see and why to begin with, you didn't include that tariff in the guide? Thank you.

Yeah. Very good. Thanks, Andrea. So let me start with the first part of your question. Through the first quarter, we delivered obviously core sales growth of minus 2.1%, which was at the high end of our guidance range and frankly, a little bit better than our base plan. We have not -- so through Q1, we believe we're on track. We decided to lower our market growth assumption from what was previously flat when we issued guidance in February to now down 1% to 2% out of a spirit of caution and prudence given what we've seen from consumer confidence levels and broader macroeconomic forecast. We have not yet seen consumption levels decline in our categories broadly versus our plan, but we believe that it's prudent for us to do that because we didn't want to wind up over planning the inventory and having too much cash flow. So that's why we took the decision to lower the forecast for market growth this year. We believe it's prudent. We believe it derisks the plan. And frankly, we believe that we have a plan to fully offset that and not have an impact on operating income or earnings per share as a result. On the retailer inventory levels, we really didn't see a significant change in retailer inventory levels in Q1 of any magnitude. Recall that the Liberation Day tariffs were announced on April 2, so after Q1 ended. And so we didn't see a big surge in retailer inventory levels in Q1. That being said, when we -- as we've talked many times in the past, we do tend to look at our business on six month periods versus quarterly periods because sometimes order flow associated with promotional events can drive a point or two of difference between one…

Thank you very much.

Thank you.

Thank you for your question. Our next question comes from the line of Lauren Lieberman from Barclays. The floor is yours.

Hey. Thanks. Good morning. You guys mentioned you looking to utilize your U.S. capacity and talking to retailers and effectively looking to contract manufacture in your plants, I think is what you were suggesting. So. I just wanted to understand that a little bit better. Are you considering doing private label for retailers? I just want to understand a little bit more about in the near-term and how you were -- what you meant to sort of say about leveraging the U.S. based manufacturing and the excess slack that you have in the system? Thanks.

Yeah. Thanks, Lauren. Yeah, let me clarify. We've been asked by a number of retailers whether we would be willing to do their private label because much of the private label products that retailers are selling are sourced from China. Our answer has been that we're not really set up to do that, so that's not what we're referring to. Instead, what we're recommending is that the retailers basically discontinue their private label product and replace it with our branded product. And in addition, there's a number of our competitive brands that are 100% sourced from Asia that are subject to significant tariffs where we are not. And so, we're recommending there that retailers replace other branded products that are sourced from Asia with our branded products that are sourced from either the U.S. or Mexico. Let me give you an example. We have a blender plant in Mexico is one of our two Mexican blender plants. We have invested over the last several years significant amount of money in automating that blender plant. And as a result, the capacity on that blender plant has virtually doubled and we are operating with 50% capacity. So we can scale up that blender plant to take and supply the U.S. market. That blender plant largely today supplies Latin America that does not supply the U.S., but almost all blenders that are sold in the U.S. come from either China or other Southeast Asia countries that are going to be subject to some amount of tariff. Our blender plant in Latin America or in Mexico is not subject to any tariffs and so, we believe it's going to create a competitive advantage. So, we are in active dialogue with retailers at discontinuing other branded blenders and replacing them with Oster branded blenders because our products will become a much better value versus competitive blender products, that's an example of what we're talking -- what we're trying to talk about here.

Okay. That's great. Thank you. And then also, I know you mentioned in terms of your core sales guidance and your expectations on categories. I just want to make sure I heard it correctly that at this point, you haven't really seen any change in consumer behavior in your categories that is different than what you had in your budget. But that you're adjusting the core sales guidance on an assumption that the environment does become more challenged and to avoid having excess inventory if that comes to pass.

Yes, that's correct. And it's interesting because it's a little bit hard to predict. We just felt like it was prudent to do that based on sort of the macro forecast, even though we haven't seen it. It could be that we're wrong and the category does better than we think. One of the trends that we've been talking with the market researchers about is, if consumers begin to cut back on eating out at restaurants and that type of thing and start to spend more time eating at home, that generally is a tailwind for our category of our kitchen products. And so, it's possible that depending on how this plays out, we may be wrong and overly conservative in our outlook, but we felt like we would rather err on the side of being a little bit more muted in our category growth outlook to ensure that we don't overbuild inventory and ensure that we deliver the cash flow that's in our cash flow forecast.

Perfect. Okay. Thanks so much. I'll pass it on.

Thank you for your question. Our next question comes from Steve Powers with Deutsche Bank. The floor is yours.

Sorry about that. I was on mute. Assuming the tariffs -- the China tariffs do remain, it sounds like you would not really start to feel the impacts that you've called out until the second half of the year. So a couple of questions around that. First, if we think about the annualized 12 month impact, should we be thinking kind of 2x as a run rate or would the longer-term impacts be a little bit more muted because of further mitigation and maybe some seasonality? Question number one. And then if you could, just sort of the sensitivities that you've run, what would be the analogous impacts on operating cash flow both in fiscal '25 and on an annualized basis as well as on your go forward leverage ratio expectations?

Great questions. So as we think about the tariff effects, they would, as you rightly said, largely fall into the second half of the year. As we've done our math, we probably think the impact would be roughly 40% in the third quarter, 60% in the fourth. That's partly driven by some of the commentary that Chris offered earlier. As we sit here today, at March 31, home and commercial had about 110 days on hand, learning development was around 120, outdoor and rec had a higher number than that, right? So we have inventory that we can actually bleed through and work into the system. As far as the cash impact, if that $0.10 that we can't mitigate actually does come home to roost and we put that in an after tax basis, that's probably a $30 million impact to operating cash flow in the current year. Now that said, we widened our range of $400 million to $500 million. And so it's entirely reasonable to assume that it could fall within that. And then as far as trying to project that out into 2026, frankly, I don't think that's a game we really want to play right now because I think people are thinking about tariffs in isolation. And I'm not an economist, I'm not a politician most certainly, but there's a lot of other things at play here. And we're talking about consumer dynamics. Fuel prices are down, the last few inflation reports were fairly benign. There is talk about a meaningful tax cut that would largely advantage and help the lower and middle class. So it's really, I think, too early to say what this looks like on an ongoing basis. We just know that we're well-positioned as we sit here today, we invested in a domestic manufacturing base that others have not chosen to do and we're ready and prepared to help our strategic retailers provide great high quality products to their consumers.

The other thing I would say on that, which is interesting is that there's a bit of a timing impact here. So in all of these categories where we are advantaged with U.S. or Mexican manufacturing, that revenue ups -- up lever that we expect is going to be a little bit delayed because it relies on retailers changing their store shelves or changing their merchandise events, which tends to take a little bit of time to work through the system. And so that as a tailwind, I would expect would be significantly larger in 2026 than 2025 given the timing of implementation of that. The tariff impact on baby, which again affects the whole industry, baby gear in the U.S., I think creates a little bit of a near-term issue. But if the market moves up in pricing, which I expect it will, if it sustains, it's unclear whether that continues as a headwind into 2026 or not.

Yes. Okay. Very good. And do you have -- it sounds like you have a lot of active conversations ongoing where you are competitively advantaged. In terms of our expectations, when do you think -- I mean, to your point, most of this as you are successful probably benefit next year more than this year, but when do you feel like those conversations will start to materialize in actual contracted change?

Yeah. So we've seen a couple of them already. I mentioned in the prepared remarks on our FoodSaver consumables business, we gotten some wins there because some of the competitive product was sourced from China, the retailer that was selling that has basically discontinued that item and moved their entire business back to us. So that's a win that will start to materialize in July. Also on Rubbermaid food storage, we've gotten significant uptake in that business. I think I mentioned on the last call, we have a major innovation that's launching this summer with Rubbermaid Easy Store and that's replacing EasyFindLids. It also happens in that business that we manufacture that product in Ohio and much of the competitive product is coming from Asia. And so, we've gotten significant wins on that, both in terms of promotions that are shifting from competitive product to us and in terms of some of the private label product being delisted entirely because it's no longer economically viable that was coming from China. We are beyond those two categories, we are in active discussions on 19 total categories. And so, we factored those two into our guidance, but there are 17 others where we believe we've got a significant competitive advantage that we're having active discussions across our top 10 retailers as we speak on how to navigate and move their stores to advantage our brands.

Okay. Thank you. That's very helpful framing. Appreciate it. I'll pass it on.

Thank you for your question. Our next question comes from Bill Chappell with Truist Securities. The floor is yours.

Thanks. Good morning. You just…

Good morning, Bill.

Taking just -- taking a step back, I guess I'm not 100% sure I understand why you're continuing to have guidance. And I say that I understand kind of how you operate and your -- and you understand your tariff exposure and pricing, but it seems like forecasting market growth, especially when it's a combination of volume and price is next to impossible at this point for all your various categories. So maybe help us understand how you came to that estimate and are you expecting price to be up double-digits and volume down double-digits and how your competitors will -- I'm just trying to understand how we get confidence in not necessarily your numbers in a vacuum, but the market growth over the next two, three quarters.

Yeah. It's a good question. We spent a fair amount of time talking about that. And I think we feel like in the majority of our business is not tariff impacted. And so when we're talking about the tariff impact, the tariff impact of significance is largely this China 125%, which is largely centered on the baby gear category, which is a -- for import into the U..S, which is less than 10% of the total company revenue. And so, for 90% plus of our business, the tariff impact is relatively minor and we've got a plan to fully offset it, as I mentioned. And so, we think that our thought on this is that we have pretty good visibility internally to the plan, how we're adjusting the plan, how we're offsetting this and we have a view of what we would do if this 125% sustains on China. You're right that our ability to forecast in the current macroenvironment has become more challenged. But I think our other view is that given the data that we have, we believe that providing some guidance is helpful to the Street because if we left it out there with no guidance, we feel like people would be all over the map and not really understanding and we actually feel, I think, better about our position than what I think the market was thinking about our position over the last three months, because if you look back on this period, as I mentioned in the prepared remarks, a year or two from now, I actually think this is going to be a benefit for Newell, all in. Because the advantaged categories that we have with our U.S. manufacturing base significantly exceed the number of places where we're disadvantaged. We've heard some of our competitors who are 100% sourced from China talk about going out of business. We're not anywhere close to that position. We're talking about 19 product categories where we're competitively advantaged where we're selling, we've got incremental capacity. And by the way, that incremental capacity with -- when you factor in the fixed cost element of our manufacturing base is highly profitable. And so, if we do our job well and sell the incremental volume on our U.S. and Mexican manufacturing base, I think we're going to come out stronger, over the medium and long-term than if the tariffs had not gone into place.

And if I could, we've talked in the past about how we've largely rebuilt our internal management reporting systems and our new trade fund management system that allows us to get much better price promotion diagnostics. And so, we feel that we have demonstrated the ability to be pretty good with respect to our forecast as of late. And then as Chris intimated, we feel guidance is frankly an obligation of management. We don't own this company. We have an obligation to our owners to tell them what we know. Now as part of our approach to this particular exercise, I will say that we really went out of our way to derisk our fiscal year plan and that's why I think we've been so communicative on all these different elements as we sit here today.

Yeah. I appreciate that. I just guess it's still -- it seems like it's in a vacuum because we don't know if your competitors have liquidation sales or what they do with pricing or stuff like that, that's what -- I understand you can forecast. I'm just trying to understand how you forecast your competitive space. [indiscernible] Thanks a lot.

Thank you for your questions. Our next question comes from Brian McNamara from Canaccord Genuity. The floor is yours.

Hey. Good morning, guys. Thanks for taking the questions. So I guess the China sensitivity sounds a little worse than we would have expected given your relatively low exposure there and your high domestic sourcing. Is it simply just lack of pricing in the baby category specifically with triple digit tariffs in place or is there anything else we should be considering?

I think it's primarily driven by the baby category because that's our -- 70% of our China import exposure is the baby gear category. The balance of what's coming from China to the U.S., we've had a plan in place that we've been working on for a number of years, as I mentioned, to move out of China and we are accelerating that plan as we speak. And so there could be a small amount of impact and a few other places, but the majority of the impact is the baby gear category. By the way, the baby gear category, I think we -- what Mark said or what we said was that at this point, we've got a plan to mitigate at least half of the $0.20 impact, it could be better than that. I mean, because we're not alone in this, the majority of the stroller market today is in the super premium and premium category. Those brands are all affected by this as well. And Graco being positioned at the high end of mass could wind up being a beneficiary, as prices in the market move up, not just for us, but for everybody depending on how this tariff sustains. So that's the primary impact.

The other piece of the puzzle is, look, we said it's $0.20 assuming that 125 China tariff stay in force for the full calendar year. We said as we sit here today, we found way that we think we can offset half of it roughly. Well, we still have eight months to go. And the last thing, we're going to do is sit on our hands, right? So the full intention is to continually chew against that and we're optimistic that with the team we have in place and the lines that we have in the water to bring in incremental sales, we can continue to make headway.

Yeah. I appreciate the transparency there. Secondly, Chris, you just alluded to this a little while ago, but your markets, especially the small kitchen appliances still have some pretty significant China sourcing many are 100% as you said. If triple-digit tariffs remain in place on China, wouldn't this result in material consolidation with smaller players effectively dropping out of the market and effectively widen your competitive note?

Yes. No question about it. And that's a -- we think we've got that opportunity in a number of product categories. I think I mentioned there's 19 product categories that we think we are competitively advantaged and we do think that there are going to be some competitors that basically drop out that's going to allow for significant market share gains for us in some of these categories. As I mentioned on the prepared remarks, the two places where we're seeing already wins are in vacuum ceiling with the FoodSaver brand and in the Rubbermaid food storage business. But we've -- as Mark said, got a lot of lines out in the water right now and I think we're in active discussions with retailers on shifting their shelf space and shifting their merchandising to our brands that are made in the U.S.

I mean, if you could -- if we could wave a wand and either make the Chinese 125 tariffs go away or be guaranteed they would be in place for the full calendar year, we would take the latter. Based on our positioning in market and based on our strong domestic manufacturing base and based on what we know about the competitive set. Now there might be some temporal disruption, but for the mid and long-term, we're well-positioned to be advantaged by this scenario.

Very helpful. Thanks, guys. Best of luck.

Thank you for your question. Our next question comes from Filippo Falorni at Citi. The floor is yours.

Hi. Good morning, everyone. First, I want to ask you on pricing, just following up on Bill's question. Based on the announced pricing as of today, what are you expecting in terms of price contribution in your core sales guidance and just roughly like what elasticities are you assuming based on your expected response from competitors?

Right now, based in our sales walk and our build bridges, we would tell you that for the full year, we think pricing net of elasticity will be up a point or two.

Net of total company number, including international.

Correct.

Got it. Okay. And then just a follow-up on the baby gear category. You mentioned last time in the Trump administration, you were able to get an exemption for those categories or the industry was able to get an extension -- an exemption for those categories. Is that -- are there conversations currently to ask for an exemption? Just any thoughts on potentially getting the exemption again this time?

Yes. We are actively engaged in lobbying efforts to get an exemption for baby gear products sourced from China. And the Trump administration was the administration that gave the exemptions for baby gear products in the last or in the first-term when the initial China tariffs went into effect. It's a fluid situation, so I certainly can't predict the outcome of it, but I can say that there are certainly efforts ongoing not just by us at Newell but also by the industry on this -- on the lobbying front.

Great. Thank you so much, guys.

Thank you for your question. Our last question comes from Olivia Tong at Raymond James. The floor is yours.

Great. Thank you so much. You mentioned no change in your market share outlook, but if you were able to secure new distribution food storage. So can you talk through that a little bit in terms of how you're thinking about some of the discussions that you're having in the other 17 categories? That's my first question. And then second, did you price in any other categories beyond baby? And then, my last question is just around your key industries, what your competition is doing and if there's any excess capacity outside of China or even domestically because as you mentioned, the efficiency improvements you were able to achieve in the U.S. and the blender category in getting to 50% more space. Is there other capacity out there that others are able to capitalize on? Thanks.

Yeah. So let's start with -- on the pricing, we did take select pricing on some other goods that were sourced from China that we expected to be sourced from China for a long period of time. It was very small -- so the 20% pricing that we put into effect -- effective as of tomorrow was, I would say, 90% on baby gear, but there was 10% on some other small businesses that we have, that we don't anticipate moving out of China in the near-term. But baby gear for purposes of the financial modeling was the major place where we took the pricing. From a capacity standpoint, we don't think that there is significant excess capacity in the U.S. or Mexican market on the categories where we're advantaged. We think many of our competitors have effectively shut down capacity and moved capacity to source finished goods players in Asia and a lot of these -- in a lot of these categories. And so I mentioned the two categories where we've already secured wins. On the other 17 categories where we're having discussions, this is still relatively new. So recall that it's only been about four weeks since the Liberation Day tariffs have been announced, even though it seems like a long time. And many retailers are still trying to understand the impact of those tariffs and how they're going to mitigate them because they affect a lot of different categories, not just that Newell participates in, but that the retailer participates broadly in. And so, we are showing up with a proposal and plan for the categories in which we compete in where we're competitively advantaged, as I mentioned at each of our top 10 retail customers, we've already had initial conversations top to top with all 10 of them and we're now starting to drive to the next steps, which is to go down and begin to have discussions with merchants. What I can tell you is that many of our retailers have paused or canceled their purchase orders from China in these categories where we're advantaged. So we do believe that there's going to be a supply disruption in the categories where we're competitively advantaged and that's going to position us, I think, to be able to come in and fill in that incremental inventory level. We have not factored that into our guidance at this point. So that is upside to our guidance on the extra 17 because we don't have commitments at this point. And so that's kind of how we're thinking about it and how we're approaching it. But we are having active discussions as we speak across all of these categories with all of these top retailers.

Great. Thank you.

Okay. Thank you all for joining, and we look forward to talking in follow-up conversations.

That's great. Thank you. This does conclude the question-and-answer session. Thank you for your participation. A replay of today's call will be available later today on the company's website at ir.newellbrands.com. You may now disconnect. Have a great day.