Third Quarter 2024 Operating Results

Net sales were $1.9 billion, a 4.9 percent decline compared with the prior year period, reflecting a core sales decline of 1.7 percent, as well as the impact of unfavorable foreign exchange and business exits. Pricing in international markets to offset inflation and currency movements was a meaningful contributor to the company's core sales performance.

Reported gross margin was 34.9 percent compared with 30.3 percent in the prior year period, as the positive impact from productivity savings and lower restructuring-related charges more than offset the headwinds from lower sales volume, inflation and foreign exchange. Normalized gross margin was 35.4 percent compared with 30.7 percent in the prior year period, which represents the fifth consecutive quarter of year-over-year improvement.

Reported operating loss was $121 million compared with $159 million in the prior year period. Non-cash impairment charges of $260 million and $263 million were incurred in the current and prior year periods, respectively, related to goodwill and intangible assets. Reported operating margin was negative 6.2 percent compared with negative 7.8 percent in the prior year period, largely reflecting benefits from higher gross profit and savings from restructuring actions that were partially offset by higher incentive compensation expense, advertising and promotions costs and additional amortization of certain tradenames. Normalized operating income was $185 million, or 9.5 percent of sales, compared with $152 million, or 7.4 percent of sales, in the prior year period.

Net interest expense was $75 million compared with $69 million in the prior year period.

Reported tax benefit was $7 million compared with a benefit of $80 million in the prior year period. The normalized tax provision was $34 million compared with a benefit of $79 million in the prior year period.

Reported net loss was $198 million compared with $218 million in the prior year period. Normalized net income was $69 million compared with $154 million in the prior year period. Normalized EBITDA was $250 million compared with $218 million in the prior year period.

Reported diluted loss per share were $0.48 compared with $0.53 in the prior year period. Normalized diluted earnings per share were $0.16 compared with $0.37 in the prior year period. Normalized diluted earnings per share included a negative $0.02 impact associated with a change in the company's normalization practice.

Change to Normalization Practice

In addition to its GAAP results, the company has provided and will continue to provide certain non-GAAP financial measures, referred to as "normalized" measures, which provide investors supplementary information helpful in understanding the company’s underlying operating performance. Commencing in the third quarter of 2024, the company changed its normalization practice. Historically, the company has excluded from normalized results inventory write-downs and accelerated depreciation charges relating to restructuring and exit activities that were reflected within its restructuring-related costs non-GAAP adjustment. Beginning in the third quarter 2024, the company no longer excludes these charges from its normalized results. These changes had no impact on reported diluted earnings per share and a negative impact of approximately $0.02 on normalized diluted earnings per share for the third quarter of 2024. The company has also ceased to exclude from normalized results prior period adjustments related to a bad debt reserve and subsequent recovery with respect to the bankruptcy of an international customer. The company’s outlook for the three months and twelve months ending December 31, 2024 reflect these changes, and we have recast prior periods presented in this release to conform to current period presentation. The company will continue to provide normalized measures which exclude the impact of restructuring costs and restructuring-related costs (other than inventory write-downs and accelerated depreciation), acquisition-related amortization expense and impairment charges, pension settlement losses and other items. Additional prior periods have been recast as presented in Exhibit 99.2 to the company’s current report on Form 8-K dated October 25, 2024.

An explanation of non-GAAP measures disclosed in this release and a reconciliation of these non-GAAP results to comparable GAAP measures, if available, are included in the tables attached to this release.

Balance Sheet and Cash Flow

Year-to-date operating cash flow was $346 million compared with $679 million in the prior year period. The prior year operating cash flow included a significant contribution from working capital primarily due to inventory reduction.

At the end of the third quarter, Newell Brands had debt outstanding of $5.0 billion and cash and cash equivalents of $494 million, compared with $5.1 billion and $396 million, respectively, at the end of the third quarter of 2023.

Third Quarter 2024 Operating Segment Results

The Learning & Development segment generated net sales of $717 million compared with $694 million in the prior year period, reflecting core sales growth of 4.4 percent, as well as the impact of unfavorable foreign exchange. Core sales increased in the Baby business and decreased in the Writing business. Reported operating income was $75 million, or 10.5 percent of sales, including the impact of a non-cash impairment charge of $70 million, compared with a loss of $127 million, or negative 18.3 percent of sales, which included a non-cash impairment charge of $241 million, in the prior year period. Normalized operating income was $154 million, or 21.5 percent of sales, compared with $123 million, or 17.7 percent of sales, in the prior year period.

The Home & Commercial Solutions segment generated net sales of $1.0 billion compared with $1.1 billion in the prior year period, reflecting a core sales decline of 2.3 percent, as well as the impact of unfavorable foreign exchange and certain business exits. Core sales increased in Commercial, primarily due to international pricing to offset inflation and currency movements, and declined in Kitchen and Home Fragrance. Reported operating loss was $94 million, or negative 9.0 percent of sales, including the impact of a non-cash impairment charge of $190 million, compared with operating income of $64 million, or 5.7 percent of sales, in the prior year period. Normalized operating income was $122 million, or 11.7 percent of sales, compared with $91 million, or 8.1 percent of sales, in the prior year period.

The Outdoor & Recreation segment generated net sales of $183 million compared with $231 million in the prior year period, reflecting a core sales decline of 16.8 percent, as well as the impact of unfavorable foreign exchange and certain business exits. Reported operating loss was $23 million, or negative 12.6 percent of sales, compared with $42 million, or negative 18.2 percent of sales, including a non-cash impairment charge of $22 million in the prior year period. Normalized operating loss was $15 million, or negative 8.2 percent of sales, compared with loss of $16 million, or negative 6.9 percent of sales, in the prior year period.

Organizational Realignment Update

In January 2024, the company announced an organizational realignment, which is expected to strengthen the company’s front-end commercial capabilities, such as consumer understanding and brand communication, in support of the Where to Play / How to Win choices the company unveiled in June of 2023 (the "Realignment Plan"). In addition to improving accountability, the Realignment Plan should further unlock operational efficiencies and cost savings, reduce complexity and free up funds for reinvestment. As part of the organizational realignment, the company made several organizational design changes, which entailed: standing up a cross-functional brand management organization, realigning business unit finance to fully support the new global brand management model, further simplifying and standardizing regional go-to-market organizations, and centralizing domestic retail sales teams, the digital technology team, business-aligned accounting personnel, the Manufacturing Quality team, and the Human Resources functions into the appropriate center-led teams to drive standardization, efficiency and scale with a One Newell approach. The company will also further optimize Newell’s real estate footprint and pursue other cost reduction initiatives. These actions are expected to be substantially implemented by the end of 2024. Once the organizational design changes are fully executed, the company expects to realize annualized pretax savings in the range of $65 million to $90 million, net of reinvestment, with $55 million to $70 million expected in 2024. Restructuring and related charges associated with these actions are estimated to be in the range of $75 million to $90 million and are expected to be substantially incurred by the end of 2024. During the first nine months of 2024, the company incurred restructuring and related charges of $42 million related to the Realignment Plan.

Outlook for Fourth Quarter and Full Year 2024

The company initiated its outlook for fourth quarter 2024 and increased its full year 2024 outlook for normalized operating margin, normalized EPS and operating cash flow.

The company also increased its outlook for full year 2024 operating cash flow to a range of $500 million to $600 million from the previous range of $450 million to $550 million. The operating cash flow outlook assumes approximately $150 million in cash payments associated with restructuring and related initiatives.

The company has presented forward-looking statements regarding core sales, normalized operating margin and normalized earnings per share. These non-GAAP financial measures are derived by excluding certain amounts, expenses or income, from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts that are excluded from these non-GAAP financial measures is a matter of management judgement and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period in reliance on the exception provided by item 10(e)(1)(i)(B) of Regulation S-K. We are unable to present a quantitative reconciliation of forward-looking normalized operating margin or normalized earnings per share to their most directly comparable forward-looking GAAP financial measures because such information is not available, and management cannot reliably predict all of the necessary components of such GAAP measures without unreasonable effort or expense. In addition, we believe such reconciliations would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on the company's future financial results. These non-GAAP financial measures are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between the company's actual results and preliminary financial data set forth above may be material.

Conference Call

Newell Brands’ third quarter 2024 earnings conference call will be held today, October 25, at 9:30 a.m. ET. A link to the webcast is provided under Events & Presentations in the Investors section of the company’s website at www.newellbrands.com. A webcast replay will be made available in the Quarterly Earnings section of the company’s website.

Non-GAAP Financial Measures

This release and the accompanying remarks contain non-GAAP financial measures within the meaning of Regulation G promulgated by the U.S. Securities and Exchange Commission (the "SEC") and includes a reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.

The company uses certain non-GAAP financial measures that are included in this press release, the additional financial information and accompanying remarks both to explain its results to stockholders and the investment community and in the internal evaluation and management of its businesses. The company’s management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures (a) permit investors to view the company’s performance and liquidity using the same tools that management uses to evaluate the company’s past performance, reportable segments, prospects for future performance and liquidity, and (b) determine certain elements of management incentive compensation.

The company’s management believes that core sales provides a more complete understanding of underlying sales trends by providing sales on a consistent basis as it excludes the impacts of acquisitions, divestitures, retail store openings and closings, certain market and category exits, and changes in foreign exchange from year-over-year comparisons. The effect of changes in foreign exchange on reported sales is calculated by applying the prior year average monthly exchange rates to the current year local currency sales amounts (excluding acquisitions and divestitures), with the difference between the current year reported sales and constant currency sales presented as the foreign exchange impact increase or decrease in core sales. The company’s management believes that "normalized" gross margin, "normalized" operating income, "normalized" operating margin, "normalized EBITDA", "normalized" net income, "normalized" diluted earnings per share, "normalized" interest and "normalized" income tax benefit or expense, which exclude restructuring and restructuring-related expenses and one-time and other events such as costs related to the extinguishment of debt; certain tax benefits and charges; impairment charges; pension settlement charges; divestiture costs; costs related to the acquisition, integration and financing of acquired businesses; amortization of acquisition-related intangible assets; inflationary adjustments; and certain other items, are useful because they provide investors with a meaningful perspective on the current underlying performance of the company’s core ongoing operations and liquidity. "Normalized EBITDA" is an ongoing liquidity measure (that excludes non-cash items) and is calculated as normalized earnings before interest, tax, depreciation, amortization and stock-based compensation expense.

The company uses a "with" and "without" approach to calculate normalized income tax expense or benefit. At an interim period, the company determines the year to date tax effect of the pretax items excluded from normalized results by allocating the difference between the calculated GAAP and calculated normalized tax expense or benefit.

The company defines "net debt" as short-term debt, current portion of long-term debt and long-term debt less cash and cash equivalents.

While the company believes these non-GAAP financial measures are useful in evaluating the company’s performance and liquidity, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ from similar measures presented by other companies.