NEWELL BRANDS INC. Q4 FY2024 earnings call

Key Priorities Achieved in 2024 - Fully operationalized new strategy and operating model while strengthening culture, with strategy rolled out to all segments, regions, brands, and functions, operating model fully implemented with brand management for top 25 brands, etc. - Made progress on top-line performance with core sales growth in line with expectations and sequential improvement in the second half. - Dramatically improved structural economics with normalized gross margin increasing 460 basis points and normalized operating margin up 210 basis points. - Improved cash flow and strengthened balance sheet with strong normalized EBITDA growth, reduced debt, and delevered balance sheet. - Reduced complexity through business process redesign, including consolidating ERP environment, reducing legal entities, brands, SKUs, and supply base. ### Tariffs and 2025 Priorities - Actively pursuing tariff mitigation strategy, with efforts to insource production from China, shift production out of China, and leveraging US manufacturing capability. - For 2025, priorities include returning to top-line growth through product and commercial innovation, distribution expansion, and international growth. Examples of innovations include Graco SmartSense soothing bassinet, Sharpie Creative Markers expansion, Expo dry erase marker innovation, Rubbermaid Commercial Products Brut farm products, Oster Extreme Mix Professional Blender, and Yankee Candle revitalization.

In 2024, core sales had a 3.4% decline though there was sequential improvement in the second half compared to the first half. Normalized gross margin improved 460 basis points to 34.1% for the full year, with sequential improvement each quarter. Normalized operating margin was 8.2%, up 210 basis points. Core sales growth was in line with expectations with sequential improvement in the second half. Six business units saw core sales trends improve, with three turning positive for the year. International business and learning and development segment had positive core sales growth in all quarters of 2024.

2025 Guidance - Core sales expected to be between -2% and +1% with sequential improvement, first half down low single digits and back half slightly positive. - Net sales expected to decline between 4% and 2% with 2% - 4% headwind from unfavorable foreign exchange and business exits. - Normalized operating margin expected between 9% and 9.5%, representing ~110 basis point improvement from 2024. - Normalized diluted earnings per share expected in range of $0.70 to $0.76, midpoint representing 18% increase vs 2024. - Operating cash flow expected $450 million to $500 million, assuming high single-digit days reduction in cash conversion cycle. - Leverage ratio expected to be about 4.5 times by year-end 2025. - First quarter 2025 core sales decline 4% to 2%, net sales down 8% to 5%, normalized operating margin 2% to 4%.

• Tariffs: Uncertainty around tariffs on China, Mexico, and Canada, including potential retaliatory tariffs and impact on sourcing and competitiveness. - Macroeconomic uncertainties: Dynamic macroeconomic backdrop with lower-income consumers under pressure, US dollar appreciation, evolving tax policies, etc. - Currency movements: Impact on net sales and margins due to foreign exchange fluctuations.

Q: Focus on organic or core sales growth for 2025 and outdoor and rec outlook A: Chris Peterson said core sales guidance is -2% to +1% with sequential improvement, first half down low single digits and back half positive. Excluding tail businesses, core sales guidance is -1% to +2%. Learning and development and international have core sales growth, home and commercial to move to positive in back half of 2025. Outdoor and rec expected to improve sequentially in 2025 but unlikely to turn positive on core sales this year, likely to turn positive in 2026.

Q: Interest expense increase A: Mark Erceg said year-over-year interest expense has step-ups from refinancing, and guidance incorporates projected refinancing about midyear, not an incremental headwind Q: Tariffs impact and US manufacturing tailwind A: Chris Peterson said tariffs are hard to predict but US manufacturing base is a positive tailwind, with Newell having invested close to $2 billion in US manufacturing since 2017, but impact of tariffs on sourced business is uncertain Q: Driver of return to core sales growth A: Chris Peterson said it includes category improvement, ramped up new product innovation pipeline, distribution expansion, and sharper mix and pricing. Mark Erceg added they weren't spending enough in A&P before and now are investing more Q: Practical tariff exposure China and Mexico impact A: Chris Peterson said China exposure is 15% currently, expected to be 10% by year-end with majority baby-related. Mexico is a top international market with significant growth opportunity despite macroeconomic environment Q: Degree of flexibility in guidance and operating margin phasing A: Chris Peterson said they are prudent in guidance but have internal targets higher than external guidance and can adjust discretionary spend. Mark Erceg said operating margin expansion is phased with first quarter being temporal and expecting back half improvement, confident in moving towards long-term target of low double-digit operating margins