Newell Brands Announces First Quarter 2024 Results

ATLANTA- Newell Brands (NASDAQ: NWL) today announced its first quarter 2024 financial results.

Highlights:

* Q1 2024 Earnings Release and Financials

* Turnaround Gains Momentum As Sales Improve Sequentially

* Gross and Operating Margin Expand Significantly Versus Prior Year

* Operating Cash Flow Increases Versus Prior Year

* Affirms Outlook for Full Year 2024

Chris Peterson, Newell Brands President and Chief Executive Officer, said, 'The decisive actions we've taken as part of our new strategy have led to excellent progress on the major operational and financial priorities for this year. During the first quarter, core sales performance improved sequentially, normalized operating margin nearly doubled versus last year and we meaningfully increased operating cash flow. We remain confident in our ability to strengthen the company's performance and create value for our stakeholders over time, as we continue to move with speed and agility to operationalize our strategy, which focuses on disproportionately investing in innovation, brand building and go-to-market excellence in our largest and most profitable brands and markets.'

Mark Erceg, Newell Brands Chief Financial Officer, said, 'The interventions made to operationalize Newell's new corporate strategy and improve the structural economics of the business are taking hold as evidenced by the fact this was the third consecutive quarter of strong year-over-year gross margin expansion, enabled by world class productivity, favorable mix and pricing. In addition, working capital reduction, together with operating income growth, resulted in positive operating cash flow during the first quarter which, historically, has been very hard to achieve due to the seasonality of the business. With a stronger than anticipated start to the year we remain confident in our full year outlook.'

Executive Summary

Net sales were $1.7 billion, a decline of 8.4 percent compared with the prior year period. Core sales declined 4.7 percent compared with the prior year period.

Reported gross margin increased to 30.5 percent compared with 26.7 percent in the prior year period. Normalized gross margin increased to 31.2 percent compared with 27.1 percent in the prior year period.

Reported operating margin increased to 1.0 percent compared with negative 2.0 percent in the prior year period. Normalized operating margin increased to 4.6 percent compared with 2.4 percent in the prior year period.

Reported net loss was $9 million compared with $102 million in the prior year period. Normalized net loss was $2 million compared with $26 million in the prior year period. Normalized EBITDA increased to $143 million compared with $109 million in the prior year period.

Reported diluted loss per share was $0.02 compared with $0.25 in the prior year period. Normalized diluted loss per share was $0.00 compared with $0.06 in the prior year period.

Operating cash flow increased by $109 million to $32 million compared with the prior year period.

The company affirmed its full year 2024 outlook.

First Quarter 2024 Operating Results

Net sales were $1.7 billion, an 8.4 percent decline compared with the prior year period, reflecting a core sales decline of 4.7 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 30.5 percent compared with 26.7 percent in the prior year period, as the benefits from productivity savings, mix and pricing more than offset the impact of inflation and slightly higher restructuring-related charges. Normalized gross margin was 31.2 percent compared with 27.1 percent in the prior year period, which represents the third consecutive quarter of year-over-year improvement.

Reported operating income was $16 million compared with operating loss of $36 million in the prior year period. Reported operating margin was 1.0 percent compared with negative 2.0 percent in the prior year period, as the contribution from mix, pricing and savings from productivity, Project Phoenix and organizational realignment, as well as lower restructuring and related costs, more than offset the impact of lower net sales, inflation and higher advertising and promotion expense. Normalized operating income was $76 million, or 4.6 percent of sales, compared with $43 million, or 2.4 percent of sales, in the prior year period.

Net interest expense was $70 million compared with $68 million in the prior year period.

Reported tax benefit was $51 million compared with $14 million in the prior year period. The normalized tax provision was $5 million compared with a benefit of $1 million in the prior year period.

Reported net loss was $9 million compared with $102 million in the prior year period. Normalized net loss was $2 million compared with $26 million in the prior year period. Normalized EBITDA was $143 million compared with $109 million in the prior year period.

Reported diluted loss per share was $0.02 compared with $0.25 in the prior year period. Normalized diluted loss per share was $0.00 compared with $0.06 in the prior year period.

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

Operating cash flow increased by $109 million to $32 million compared with outflow of $77 million in the prior year period, with the improvement mostly driven by working capital and an increase in operating income. Inventories decreased nearly $550 million versus the prior year period.

At the end of the first quarter, Newell Brands had debt outstanding of $5.0 billion and cash and cash equivalents of $372 million, compared with $5.6 billion and $271 million, respectively, at the end of the first quarter of 2023.

First Quarter 2024 Operating Segment Results

The Home & Commercial Solutions segment generated net sales of $893 million compared with $971 million in the prior year period, reflecting a core sales decline of 4.3 percent and the impact of unfavorable foreign exchange and certain business exits. Core sales growth in Commercial, primarily driven by pricing in international markets, was more than offset by declines in the Kitchen and Home Fragrance businesses. Reported operating income was $16 million, or 1.8 percent of sales, compared with operating loss of $37 million, or negative 3.8 percent of sales, in the prior year period. Normalized operating income was $41 million, or 4.6 percent of sales, versus a loss of $4 million, or negative 0.4 percent of sales, in the prior year period.

The Learning & Development segment generated net sales of $559 million compared with $564 million in the prior year period, as core sales growth of 1.8 percent was more than offset by the impact of unfavorable foreign exchange. Core sales increased in both the Writing and Baby businesses, with growth in Writing primarily driven by pricing in international markets. Reported operating income was $94 million, or 16.8 percent of sales, compared with $72 million, or 12.8 percent of sales, in the prior year period. Normalized operating income was $104 million, or 18.6 percent of sales, compared with $82 million, or 14.5 percent of sales, in the prior year period.

The Outdoor & Recreation segment generated net sales of $201 million compared with $270 million in the prior year period, reflecting a core sales decline of 20.3 percent and the impact of unfavorable foreign exchange and certain business exits. Reported operating loss was $18 million, or negative 9.0 percent of sales, compared with $1 million, or negative 0.4 percent of sales, in the prior year period. Normalized operating loss was $10 million, or negative 5.0 percent of sales, compared with normalized operating income of $13 million, or 4.8 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 quarter 2024, the company incurred restructuring and related charges of $22 million related to the Realignment Plan.

Outlook for Second Quarter and Full Year 2024

The company initiated its outlook for second quarter 2024 and affirmed its full year 2024 outlook.

See full results at: https://ir.newellbrands.com/news-releases/news-release-details/newell-brands-announces-first-quarter-2024-results

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