Newell Brands Inc. (NWL) Q3 2026 Earnings Call Transcript

Operator: Good morning, and welcome to Newell Brands Third Quarter 2026 Earnings Conference Call. At this time, all After a brief discussion by management, we will open up the call for questions. And in order to stay within the time schedule for the call, please limit yourself to 1 question during the Q&A session. Today's conference call is being recorded. A live webcast of this call is available at ir.newellbrands.com. I will now turn the call over to Joanne Freiberger Senior Vice President of Investor Relations and Chief Communications Officer. Miss Freiberger, you may begin.

Joanne Freiberger: Thank you. Good morning, everyone. And welcome to Newell Brands Third Quarter 2026 Earnings Call. Joining me today are Christopher H. Peterson, our President and CEO and Mark J. Erceg, our CFO. 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. Please refer to the cautionary language and risk factors available in our earnings release our Form 10 ks, Form 10 Q and other SEC filings available on our Investor Relations website. For a further discussion of factors affecting forward looking statements. Today's remarks will also refer to 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 the non GAAP measures and reconciliation between GAAP and non GAAP measures can be found in today's earnings release and tables that were furnished to the SEC. And with that, I will turn it over to Christopher.

Christopher H. Peterson: Thank you, Joanne. Good morning, everyone, and welcome to our third quarter earnings call. Top line growth accelerated sequentially as Newell Brands delivered second consecutive quarter of year-over-year sales growth driven by broad based market share gains. Net sales increased 3.7% and core sales grew 3.3% with both results exceeding the high end of our 2% to 3% guidance range. Growth was broad based with 2 of 3 segments 4 of 6 businesses, 7 top 10 brands, and 7 top 10 countries growing during the third quarter. The U. S. Continued to grow and international return to growth with positive core sales growth across Latin America, EMEA and Asia Pacific. This breadth provides further evidence that the capabilities we have built over the past several years are translating into better business performance. Stronger sales and productivity drove expansion in Newell's normalized gross and operating margin, and in another positive sign normalized operating margins expanded on 5 of 6 businesses. Normalized earnings per share came in at the high end of our guidance range despite inflation that exceeded going in expectations. Trailing 12 month normalized EBITDA was up meaningfully, having grown 20% versus year ago. With 2 consecutive quarters of top line growth, it is becoming increasingly clear that investments in consumer understanding, innovation, brand building, marketing, and go to market capabilities are expanding distribution and driving growth. Let's share a few examples beginning with learning and development which delivered its third consecutive quarter of core sales growth. Writing delivered mid single digit core sales growth supported by our strongest US back to school POS growth in 3 years. Sharpie, Expo, Elmer's and Prismacolor all performed particularly well as consumer relevant innovation distribution expansion and better back to school execution on both sell in and on replenishment orders, drove category expansion and market share gains. Baby core sales were roughly flat in the third quarter, with growth in the U.S. offset by lower sales in Canada. Within the business, Tracy delivered core sales growth during the third quarter, building on strong year to date consumer takeaway and car seat share gains. Our rotating car seat platforms, including Turn2Me and EZ Turn 360, continue to resonate with consumers. Recent results included low double digit growth in POS, and share gains at key mass retailers. In Baby Care, Nook also delivered positive US POS and gained market share during the quarter, as we continued to invest behind this year's full brand relaunch. Turning to Home and Commercial. Core sales increased 6% with all 3 businesses growing for the first time in 5 years. Commercial posted solid core sales growth as both US B2B and DIY channels recorded gains. Innovation contributed to the improvement, including the new 34 gallon brute container and an expanded brute cleaning lineup featuring push brooms designed to tackle different surfaces and types of debris. The 34 gallon BRUTE container also earned a 2026 Pro Tool Innovation Award. Kitchen delivered its second consecutive quarter of core sales growth with positive momentum in the U.S. and Latin America. Rubbermaid Brilliance glass food storage continued to see strong demand consistent with consumers increasing preference for glass storage options. Crock Pot also delivered growth supported by our design series, slow cookers, which combine everyday functionality with colors inspired by current design trends. Our collaboration with Valspar builds on that innovation by pairing 6 new Crock Pot colors with complementary paint palettes to help consumers personalize their kitchens. While we do not usually comment on current quarter sales trends, October was, we believe, Crock Pot's largest sales month ever. Oster is another great illustration of how sustained investment can build a stronger innovation platform over time. We previously discussed our extreme mix performance blender, which laid the foundation for a broader lineup designed to address different consumer needs and price points. More recently, our new Vortex blender uses proprietary, reversible, motor technology and customized built in pre programmed settings which make consistent results easier to achieve. Oster's QuietPro blender addresses consumers' noise concerns associated with blending, and our new Titan blender combines high performance blending with a glass jar. Oster blenders delivered positive USPOS and sales growth in Latin America during the third quarter. Home Fragrance delivered very strong core sales growth against a favorable prior year comparison, Yankee Candle returned to double digit growth in the U.S. and gained market share driven by growth in Yankee Candle retail stores, strong B2C performance and distribution gains in the grocery channel. Following a return to growth in the second quarter, outdoor and recreation core sales declined in the third quarter even as consumers continued to respond well to our 2026 relaunches of Bubba and Contigo. Bubba contributed positively Contigo delivered core sales growth in the third quarter, and we grew share in the important hydration segment. In addition, Coleman Snap and Go was recently recognized among Times best innovations of 2026. Demand continues to significantly exceed our initial expectations and we are expanding availability ahead of the holiday gifting seasons since Snap and Go makes large capacity coolers easier to store transport, and use. Starting with only 1 tier 1 and tier 2 innovation in 2023, we are on pace to launch about 25 this year. Which we believe is a big part of our positive sales inflection these past 2 quarters. Now that we have rebuilt our innovation funnel, it is important to point out that we do not expect the number of new Tier 1 and Tier 2 innovations we launch each year to increase further because with 25 brands accounting for over 90% of the company's sales and profits, we believe we have achieved a steady state or going rate of innovation. That said, we will continue to focus on bringing differentiated new consumer preferred products to market. While simultaneously building on the innovations we have already launched. Consistent with that, we opened a new Atlanta Design Center in September at our corporate headquarters. This facility brings design, consumer insights, brand marketing, innovation, and research and development together to co collaborate in a new state of the art dedicated consumer research environment. With advanced prototyping capabilities, which we believe has the potential to translate into higher rates of future growth. Before turning the call over to Mark, I want to provide some perspective on the consumer environment and the actions we are taking to protect profitability while continuing to invest in growth despite persistent inflationary pressures. The categories in which we compete were roughly flat globally in the third quarter. Which was consistent with what we experienced during the second quarter, but slightly better than contemplated in our July outlook. Consumer conditions were stronger in The U. S. And Latin America, while EMEA and APAC remain more challenged, amid ongoing macroeconomic pressures and the direct and indirect effects of the Middle East situation. Based on that result and what we are seeing so far in the fourth quarter, we now expect categories in which we compete to be flat to down 1% for the full year which is 1 to 2 points better than when we first started the year. Inflation, excluding tariffs, has continued to run above expectations particularly diesel fuel and transportation costs. With broader pressures across commodities like resins, purchased products, and labor. At the start of the year, we expected an input cost inflation headwind of $100 million We increased that estimate by an additional $50 million during our first and second quarter earnings calls respectively and today we are raising it by another $20 million That means we are being forced to contend with a total in year inflationary headwind of $220 million, which equates to approximately 4.6% of our total cost of goods sold. Our primary response to this significant inflation challenge has been to increase productivity, Our fuel productivity program is now on track to deliver savings well above its original budget and ahead of our stretch target this year. These savings reflect improvements across procurement, product design and value engineering manufacturing and distribution. We have also leveraged higher sales growth, maintained disciplined overhead cost management, used the 2026 in-year portion of IEPA tariff refunds recorded during the second quarter and very selectively and reluctantly used limited pricing actions covering less than 10% of our portfolio to help offset these inflationary impacts. The net result is we are raising our sales outlook for 2026 while maintaining the midpoint of our operating margin and EPS guidance for the year, despite the higher inflation outlook. Turning to 2027, the macro environment remains volatile and difficult to predict. As such, we are planning the business in an agile manner so that we can adjust quickly to different scenarios. Our base plan assumes global category growth remains roughly in with this year. We expect to maintain positive core sales growth, by growing faster than the category driven by a strong portfolio of innovation, distribution gains and marketing activation. We expect inflation of about $150 million, which is above normal levels but below $220 million in 2026. Given the cumulative 2 year impact of inflation of $370 million, or about 8%,. We plan to take modest pricing early in 2027 as we cannot offset this level of impact from productivity alone. 1 notable area that might be excluded from these pricing actions is baby gear. Where we are cautiously optimistic that The U. S.-China 301 for 301 initiative could bring relief to this product category. However, the scope, timing and extent of any relief remain unconfirmed since we need the firm. Formal implementation details from the administration before we can quantify the impact on Newell. Relative to margins, we expect normalized operating margin to be down versus 2026 reported level given the $100 million of tariff refund benefit in 2026 results related to 2025, Excluding this impact, we expect normalized operating margins to be up by more than our 50-basis-point evergreen target. Finally, we expect a strong operating and free cash flow year with continued deleveraging. Navigating this environment while sustaining profitable growth requires strong execution across our commercial and operational teams. With that in mind, I want to welcome Guillermo G. Bede, who joined Newell this week as chief operating officer. Guillermo brings more than 30 years of global leadership experience at SC Johnson PepsiCo, and Unilever. Guillermo will lead our sales, central marketing, and supply chain functions globally building on the capabilities we have established and bringing greater connectivity across these teams. I look forward to working with Guillermo G. as we build on our momentum to drive sustainable, profitable growth in the years ahead. Finally, before I close, I want to thank our employees around the world. Their focus on our consumers and customers and their determination to deliver in a challenging environment is helping us build positive sales momentum across Newell. I will now turn the call over to Mark to walk through our financial results and updated outlook.

Mark J. Erceg: Thanks, Christopher. Good morning, everyone. During our time together this morning, I will comment on third quarter results, and a few notable business accomplishments achieved during the quarter before sharing our outlook for the fourth quarter and the full year. Third quarter 2026 net sales increased 3.7% to approximately $1.9 billion, while core sales increased 3.3%. Both exceeded the top end of our guidance ranges and year to date core sales growth was nearly 1% following more than 4 years of declines. Favorable foreign exchange generally accounted for the difference between net and core sales growth. Normalized gross margin was 35.2%, up 70 basis points versus prior year, as higher sales and productivity more than offset inflation and tariffs in the quarter. Normalized operating margin was 9.8%, up 90 basis points from 8.9% last year. Higher sales and improved gross margin drove this improvement despite inflation running above our going in expectations. A&P remained at approximately 6.9% of sales and normalized overheads decreased 20 basis points. Net interest expense was $86 million compared with $83 million in the prior year period and the normalized effective tax rate was 9.5% versus 7.9% last year. Taken together, these results yielded $0.20 of normalized diluted earnings per share versus $0.17 a year ago. Turning to cash flow. Year to date, operating cash flow is $93 million compared with $103 million in the prior year period. The modest decline versus year ago primarily reflects higher inventory levels to support anticipated sales growth largely offset by higher accounts payable and tariff refund collections. Newell's third quarter cash conversion cycle improved by 4 days year over year primarily reflecting higher accounts payable as purchasing patterns normalized following last year's tariff related pauses. Partially offset by higher inventory to support higher sales growth. Capital expenditures totaled $131 million through the first 9 months of 2026, compared with $177 million last year. We now expect full year capital expenditures to be below our prior estimate of approximately $200 million Trailing 12 month normalized EBITDA increased approximately $173 million year over year to $1.03 billion and net leverage declined to approximately 4.5x. This compares favorably with 4.8x at the end of the second quarter and 5.3x a year ago. During the third quarter, we entered into a new $800 million asset based revolving credit facility replacing our secured revolver and extending its maturity to 2031. In addition, our senior notes offering with a 2031 maturity attracted strong demand with an order book approximately 5x oversubscribed. This allowed us to upsize the offering to $600 million at a coupon of 6.25%. Which was 1/8 of a point better than the notes they replaced. The proceeds were then used to fully redeem the June 2027 notes and repay a portion of our revolving borrowings under the new ABL facility. During the third quarter, Moody's also revised their outlook on Newell from negative to stable while affirming our overall credit rating. Importantly, we ended the quarter with no short term debt outstanding. We also continue to advance our 1 dual operating model during the third quarter by simplifying how we operate across businesses within each country. All 10 of our largest non US countries now operate with a single ERP system and a common organizational structure. Compared with only 4 countries in 2024. This multiyear effort reduces complexity, supports more coordinated execution across Newell, and after many long years of painstaking work, effectively represents the end of Newell's ERP consolidation journey. Now let's turn to the outlook for the remainder of the year. For the fourth quarter, we now expect positive year over year growth in both net and core sales of 1% to 3%. Which would, if achieved, mark our third consecutive quarter of positive sales growth. Normalized operating margin is expected to be between 8.4% and 9% and normalized diluted earnings per share are expected to range from $0.17 to $0.19 with a low single digit effective tax rate. Based on our year to date performance and updated expectations for the balance of the year, we are raising our full year outlook for both net and core sales. Specifically, we now expect full year net sales growth of 2% to 3% and core sales growth of 1% to 2%. Despite significantly higher inflation, we are maintaining our normalized operating margin outlook of 10% to 10.4%, and after tightening the range to $0.74 to $0.76 $0.73 to $0.77, now that only 1 quarter remains in the year, we are keeping the midpoint of our normalized diluted earnings per share outlook unchanged at $0.75, using an effective tax rate of about 20%. Just as a reminder, please note that this updated full year outlook continues to include approximately $100 million or $0.17 per share from the onetime out of period recovery of our EIPA tariff cost expensed in 2025. Which was recorded during the second quarter of 2026. At that time, we raised our full year normalized EPS guidance on both the top and bottom end of our ranges by that full amount. Moving to cash, we expected full year operating cash flow of approximately $400 million, which would have been up about 50% versus a year ago. However, after accounting for 2 onetime nonoperational items, we now expect full year operating cash flow of approximately $150 million Since there is an understandable focus on operating cash flow as we continue to deleverage the company, let me explain these 2 changes in greater detail. First, as previously discussed, the termination of our nonqualified defined benefit plans is expected to generate approximately $60 million of net cash renewal which is clearly a positive development. However, the underlying cash flows associated with this are reported in different parts of the cash flow statement. The proceeds from the liquidation of the insurance assets are classified as investing inflows while the benefit payments to participants are treated as operating outflows. Reporting the payments and related cash taxes in operating activities reduces our operating cash flow outlook by approximately $85 million Even though this presentation does not change the transaction total $60 million net cash benefit to the company. Second, we now expect receivable factoring programs to contribute approximately $165 million less operating cash flow than in the prior year. This primarily reflects reduced capacity under the amended agreements and the benefit of having upsized the recent debt refinancing $500 million to $600 million. As stated earlier, excluding these 2 onetime nonoperational items, we were tracking well against our previous operating cash flow guidance because we remain laser focused on disciplined working capital management cash generation, and debt reduction, since deleveraging the company remains a top priority. Consistent with that, we expect total debt and outstanding factored receivables combined to decline by a couple hundred million dollars versus year-end 2025 and we continue to expect net leverage to finish 2026 comfortably below 4.5x. In closing, we delivered 2 quarters of consecutive sales growth expanded normalized gross and operating margins, have a clear line of sight to what we expect to be a third consecutive quarter of positive sales growth None of this would have been possible absent the resourcefulness and professionalism of our team Their tireless dedication gives us confidence in our ability to build on this progress and sustain profitable growth in the years ahead. Operator, please open the call for questions.

Operator: Thank you. To ask a question, please press 1-1 on your telephone and wait for your name to be announced. And to withdraw your question, please press 1-1 again. Again, please limit yourself to 1 question. And our first question will come from Olivia Tong Cheang with Raymond James. Your line is now open.

Olivia Tong Cheang: Great. Thanks. Good morning. A couple of questions here. First, I was wondering if you could talk about the moderation in the Q4 core sales relative to Q3. And how much of that Q3 growth came from volume versus pricing mix? And you think about sell in versus sell through? And then on and then you mentioned that pricing in baby. Is that primarily due to the potential legislation relief that you see Would you have raised baby pricing if not for that? Or is it a function of perhaps some price sensitivity amongst consumers, particularly in baby? Thanks.

Christopher H. Peterson: Sure. So let me start with the vast majority of the core sales growth in Q3 is being driven by volume. Pricing was effectively close to 0. For the company in the third quarter. Recall that we had a couple of categories at the beginning of this year that we took price down. We had a couple of categories that were highly resin dependent that we took price up. The net of those was effectively 0. The other thing I would say about core sales in Q3 is that this was really driven by consumer demand and retailer demand. For the products. There was not a significant change or any change of note in retail inventories. So the we feel very good about the core sales delivery in the third quarter. Relative to the fourth quarter guide of 1% to 3%, We are excited about having our second quarter of core sales growth and we are excited that we were able to guide Q4 to positive core sales growth, which I think last quarter, we set our implied guide was sort of you know, flat to modest growth. Given the strength that we are seeing from consumers, in responding to the innovation that we have put in the market and the marketing that we are that we are putting in the market that is what gives us the confidence to effectively raise the outlook for Q4 to the 1% to 3% range. And what we have been telling the team internally is that The first quarter we get the core sales growth, it is a data point. The second quarter, it is a straight line. And when we get to the third quarter, then we will have a trend. And so we are very focused on delivering positive core sales in the fourth quarter. And then sustaining that, as I mentioned, into the next calendar year. On the baby piece, the government created a--a body called the Board of Trade which is a sort of an--an organized approach for the current administration to negotiate trade policy with China specifically And in the latest visit, with president Xi and president Trump, there was an announcement from the administration that there was $30 billion of goods where the U.S. was going to reduce tariff rates in exchange for China reducing tariff rates on $30 billion of goods. We were very excited to see and had been actively lobbying for baby, gear products to be part of that list. And in fact, they were included in that list. Which means that if the list gets. Or when the list gets finalized and actually implemented, we would expect baby gear tariffs, to reduce And in that environment, you know, we would not take pricing. So we have been sort of in a wait and see mode on the baby products. that is 1 of the ones that we are waiting for further details on the specific implementation timing amounts and details. But we believe it is an encouraging sign because that would significantly reduce our tariff exposure headed into 2027. Once the details become known. Great. Thanks. And then just following up, you mentioned you had about 25 in a tier 1, tier 2 innovations this year. You mentioned probably about the same next year. So as you think about that you know, can you talk about the opportunity for the next tranche of launches, whether the margins are the sim. Are similar? Are similar, the productivity of those relative to 2025, 2026 launches. And then you know, you added Guillermo to. In the COO role. You know, how does he help sort of ensure the success of that next tranche of launches in addition to building on the first tier and what decisions will be moved to him in terms of sales, marketing, supply chain. Yeah. Sure. So on the innovation side, you know, we. As I mentioned in prepared remarks, we think 25 launches, tier 1, tier 2 launches, is about the right number to sustain strong momentum because there is a limit with 25 brands to how--to focusing your investment dollars and your communication dollars from a consumer standpoint. Also, the other important thing to remember here is generally when we launch an innovation, we think about the innovation as having sort of a 3 year life cycle. And so as we go into next year, and we have 25 launches next year, we are not only supporting the 25 launches next year, but we are supporting year 2 of the 25 from this year And I think, the 18 or 19 that we had from the year before. And so it is a it is a very robust set of innovation. for us to talk about with consumers. We believe that we are on the right cadence from a product life cycle management. Now, obviously, what we are trying to do is drive the innovations to be bigger to have a bigger impact, individually and in total. that is a continuous process that we are focused on. But I think the pacing that we are on I now feel like is good. And so that is the piece on the innovation. Relative to Guillermo, 1 of the things that we saw--so Mark alluded that we implemented, our last major SAP Conversion Across Europe primarily October 1st, and it has gone very well. And so we are now complete effectively with those ERP changes and we are operating with sort of 1 global ERP system, around the world, which is very exciting. Because that is going to allow us not only to reduce CapEx going forward, but it is also going to really allow us to leverage scale more effectively. So as we think about the next journey over the next several years, we saw an opportunity to bring together our front end marketing capability, center marketing capability, our go to market teams in each of the regions around the world, and our supply chain and procurement organization to drive faster and more effective operations relative to how we bring products to market, supply products through retailers, and connect to both consumers and retail customers. And so that is that is really the focus, of the role. And I think he is going to be a great addition to the team that allows us to sustain strong top line growth in addition to continuing the fuel productivity program that we have had the margin improvements, and strong cash generation. Thanks, Christopher. Best of luck.

Operator: Thank you. And our next question is going to come from Peter Grom with UBS. Your line is open.

Peter Grom: Great, guys. Thank you so much. Good morning. You know, so there was a you guys gave some pretty helpful color on 2027, know, expectations around category growth, core sales, inflation. Margaret, I was curious how we should be thinking about your ability to kind of the incremental $100 million of inflation through those pricing actions? And productivity just based on what you know today. And then, obviously, the cost environment remains very volatile. So if you can maybe just what underpins that $150 million assumption, that would be helpful.

Mark J. Erceg: Yeah. I think we feel pretty good about that. Look. In 2025, inflation was about $90 million As Chris indicated, this year in 2026 it is been $220 million. You know, next year, we are thinking about $150 million. You know, we have been using our fuel productivity efforts and other means to control overhead. To allow us to, you know, expand our margins. If we go back to 2023, you will recall our normalized operating margin was 6% Alright? In 2024, we took that up to 8.2%. 2025, we took it up to 8.4% despite all those challenges, including tariffs. And then for 2026, right now, we have a normalized operating margin guidance range of 10% to 10.4%. Now that does include you know, the $100 million about a period tariff recoveries. But if you strip that out, you would be at 8.6% to 9%, which centerlines at 8.8%. Well, 8 compares pretty good to 8.4% in the prior year. So we are gonna be up about 50 bps this year despite massive challenges and we think things will start to roll over next year. We will have another year, as Christopher said, of higher levels of A&P support, you know, better and stronger innovation, better go to market capabilities, etcetera, etcetera. So feel very good about our algorithm. And are very confident that we will be able to deliver against our financial evergreen targets into next year.

Operator: The last thing maybe I would say to your question is on price We feel pretty good about where we are headed.

Christopher H. Peterson: You know, we have we have held off on pricing this year. So if you look at pricing as a contribution to our core sales this year, it is effectively 0. And all of our growth has been driven by volume and mix. And we have used this very strong productivity to offset $220 million of inflation. As I mentioned in the prepared remarks, when you look at the $150 million next year, which is really being driven by transportation, and sort of the annualization of the commodity move up. Which is driving the above normal element of it. That 2 year cumulative inflation, which represents about 8%. We can offset a big part of that with productivity and cost containment actions, but not all of it. And so we are looking at is modest pricing that we would put in next year. We believe that the cost justification is there, and we believe we will we will have a plan that is not a sticker shock plan. That we will be able to implement relatively smoothly.

Peter Grom: that is super helpful, guys. And then, Christopher, you touched know. Or you mentioned to Olivia that you were pleased with organic sales growth in the third quarter. I was wondering if we could maybe get a report card, if you will, just on how the quarter played out across your various segments versus your expectations, at least from an outsider's perspective, commercial to be strong. Learning and development was positive. I will be on a bit of a tougher comp just, you know, characterize, you know, how the quarter played out relative to your expectations? And then are there any puts and takes or notable call outs that we should be aware of as we think about 4Q and 2027?

Christopher H. Peterson: Yeah. So, I think, you know, relative to the quarter, if I just go through sort of the reporting units, as I mentioned, writing had a very strong core sales growth. You know, up mix. Mid single digits. We had a we had a great back to school and it is always you know, important in the third quarter. Writing is 1 of our most important businesses. Because we have the replenishment orders, which are a little bit hard to predict. But the p o. The POS was stronger, if anything, than we expected. Going in. To the back to school season and coming out of it, and that resulted in stronger replenishment orders. So you know, we grew writing significantly faster than what we, had thought coming into the quarter. Baby was interesting because baby, the core sales were roughly flat. And Baby, if you recall, was coming off the first half of the year where we were up almost double digits. Through the first 6 months. And so the baby core sales is not really reflective of the underlying performance from a consumer standpoint. it is more a shipment timing pattern piece. that is driving that. Year to date, baby is still up high mid single digits. On core sales growth and continuing to. The innovation we have got on that business is continuing to resonate. I think that the home and commercial segment was probably the standout in the third quarter at 6%. You know, we had double digit core sales growth in home fragrance. We had kitchen, you know, up nicely. And we had commercial returning to core sales growth for the first time. And so that was exciting to see. And then, outdoor and rec, which had turned positive in the second quarter, which is important because the second quarter is the biggest outdoor and rec season, did flip back to a decline in Q3. That was probably the 1 that we were the most you know, negatively surprised at. But the combination, when you put all of that together, was that we came in and, you know, above our 4 forecast, above plan, and above the high end of our guidance range. Really driven by I think, the home and commercial and the writing business primarily.

Mark J. Erceg: Yep. And if I could, you know, it is it is really encouraging that we have had such a broad based build out But it is also notable that this is the first time since the second quarter of 22 that both The US and international were positive. So it is not just a segment build out. it is also happening geographically. And Chris mentioned the fact that 7 of our top 10 brands grew, but also 15 of our top 25 grew. So we feel like we are pushing out broadly now.

Peter Grom: Awesome. Thank you both for that. Best of luck. Thank you.

Operator: And the next question will come from Lauren Lieberman with Barclays. Your line is open.

Lauren Lieberman: Great. Thanks. Good morning, guys. Couple of questions. I do not know if I missed it, if you had updated leverage target for the end of the year. So the operating cash flow. And I was just hoping we could get a little bit more color on reduction in factoring, which is definitely a positive to see. But how should we think about that into 2027? Is there further headwind from reducing reliance on that yeah, improving quality, I think, from a Wall Street standpoint is a good thing to see. But just a good thing to have our arms around in terms of magnitude as we look into next year. Thanks.

Mark J. Erceg: Yeah. Great question, Lauren. So we are still comfortably targeting to be, you know, below 4.5x. Levered at the end of this year, which as you know, will represent a meaningful reduction as we continue on our deleveraging journey. When we first began, we were 6.5x, and so we feel really good about what we are being able to do with respect to that. As far as the specific question on cash, you know, look. I think we feel really good about the underlying cash delivery of the business. If you go back to 2025, our operating cash flow was, call it, $265 million or something to that effect. If you build up from there, we are gonna have about another $150 million of cash EBITDA this year. We are gonna have between you know, lower bonuses paid and less cash taxes, like another $150 million, you know, which is operational in effect. Then there is about $150 million that comes off the top for working capital, principally inventory. Because the end of the day, our sales base is growing. We also wanna get ahead of the next shoe that might drop on the 301 tariffs. You know? So we were. We think that is a prudent thing to do. You put all that together, you know, we were on pace to deliver against that $400 million of operating cash flow. Then we have these 2, you know, onetime nonoperating elements. I think people understand what happened with respect to the COLI liquidation. You know, that is pretty straightforward. $60 million in net cash in the door. Everything there works out really well. On the factoring side of the house, you know, we did redeem, I am sorry. We did renegotiate our factoring facilities. When we did that, we did end up with a little less capacity because of interest rates going up. Also ended up with just a little bit less capacity. Just based on the way that those negotiations went. And given where our current, you know, credit rating sit. But that said, you know, we said we had ended the quarter with no, you know, short term debt. We expect to finish the year with effectively no short term debt. And we took an extra $100 million in when we refinanced the 20 seventh. So what we have now is the opportunity to use that money at 6.25% instead of factoring. And, basically, if you look at the economics of it, it is effectively a push. When you factor, you also have, you know, a little bit more in the way of restrictions where the money we took in through the upsizing, has no restrictions. So economically, we are a little bit indifferent to all of that. Now as we think about next year, you know, next year, while it is still early days, we do not see any reason why we would not be projecting out you know, somewhere in the $400 million, you know, plus range for the operating cash flow based on all the pieces the puzzle that we see because we will have strong, you know, underlying EBITDA growth again, You know, we are gonna have less, you know, restructuring charges. As we continue to move forward. We think our CapEx is running, you know, you know, much better now that we completed the ERP integrations and all those supply chain elements. Used to be 52. We are gonna be below $200 million this year. We would expect that to continue next year. So we are confident we will be able to continue our deleveraging into 2027. And actually feel really very good about, you know, our cash position overall. You we took 4 days out of the cash conversion cycle this year. Continue to show real operational discipline as it relates to all of that. So, again, these are 2 nonoperating you know, onetime events. That I do not think too much to be read through on.

Lauren Lieberman: Okay. Great. Thank you. And then just wanted to follow-up again on outdoor and rec. So just curious about POS versus ship. I know broadly, there were no big inventory dynamics in the quarter, but just curious on POS trends for outdoor in third quarter. I know seasonally, it is not the most important period, but you did mention still positive trends on hydration and then Clearly with Coleman and Snap and Go. So just let her soften to 4 q. And kind of anything more specific on what fell short this quarter.

Christopher H. Peterson: Yeah. I think it I think it is it is more of a shipment timing issue than a POS issue. So, you know, our forecast for Q4 has o and r bouncing back in Q4 and turning back to positive core sales growth. You know, we obviously do not guide at that level. But when you when you see that, when you see a business that goes positive and then goes negative and then comes back to positive, you have gotta sort of look at a little bit of longer term trend to really get a sense of what is going on. So I. As I said, we were that was the 1 business that sort of, from a shipment standpoint, did come in a little below what we thought. But we believe we are we are on track to get that business back to growth sustainably it is just a little choppy as we as we move into that.

Lauren Lieberman: Great. Thanks so much, guys. Thank you.

Operator: And our next question will come from Steve Powers with Deutsche Bank. Your line is open.

Stephen Robert Powers: Hey, thank you very much. Christopher, I wanted to talk a little bit more about the pricing into next year, really the kind of more of philosophy that you are using to guide that pricing? In terms of. I do not know if it is if it is focused in any particular segment or if it is more if it is in areas where the costs are hitting you hardest or it is more focused behind some of your innovation? I am curious in the context of, I guess, 2 things 1, just through the elasticity assumptions around some of that pricing. And then and then also, you know, the durability of that pricing, you know, if we got some cost relief, are you are you pricing in such a way that you think you could you could hold that pricing through any cost relief? Or is it is it really tied to the inflation itself, if that makes sense?

Christopher H. Peterson: Yeah. So first of all, I would say that you know, when I. When we talk about pricing, we are trying to be much more strategic. As we head into the pricing plan for next year. And so there is different ways you can take pricing. We can take pricing by taking a straight list price increase We can drive sort of assortment mix to take pricing. We can pull back on promotional depth or frequency and or we can reduce sort of customer programming are all options to do that. Or we can drive pricing up through new product innovation. And I think the answer is what we are trying to do is look at each business and each geography somewhat independently to understand what are the underlying cost trends given this elevated inflation that we are seeing And then what is the what is the right execution of moving the pricing up to effectively deal with that underlying cost pressure. And the answer is going to be different by business and by geography. The US is subject to much more inflation. Than many of the other regions around the world. Because of the impact on transportation cost here is higher than in some other countries. Where the transportation is subsidized. The exposure of different businesses because of where they are manufactured and because of the competitive environment is also different. And so we are trying to take all of that into account as we go forward. As I mentioned, I also do not wanna overstate this pricing impact. Because you know, if you think about it, we are generating fuel productivity savings you know, that are you know, 4% of cost of goods sold or something like that. Now we are doing a lot of work to do that. We have a 2 year cumulative impact of inflation of 8%. So it is not like we need to take you know, significant pricing here. But on average, you know, if we got sort of a low single digit number, by maybe in some categories, we take mid single digit pricing that are significantly impacted. And in other categories, we may not take any pricing. that is sort of the. What we are talking about here. Which I think we can we can do in a way that I think can actually grow the categories be fully cost supportive, and be durable. And not put us really at a competitive disadvantage. By the way, 1 of the things we are also seeing is we are seeing some of our competitors have already. Are already taking pricing. So this is not a situation where, in many cases, we need to lead pricing. In particular, we are seeing private label pricing in the categories where we compete against private label move up right now So our price gaps are narrowing because we are seeing some of the retailers move on their own private label before we move on our branded products.

Stephen Robert Powers: Perfect. You actually preempted my follow-up on competitive pricing. So thank you very much. Very hold. Very holistic answer, and I will leave it there. Thank you. Thank you.

Operator: And our next question is going to come from Andrea Teixeira with JPMorgan. Your line is open.

Andrea Teixeira: Yes. Good morning. Thank you. The question was exactly that. Same question regarding, sensitivity. Price sensitivity and competitors. I was just hoping if, Christopher, you can talk about, like, when you took pricing ahead of your competitors, which is not the case now. But thinking about the price gaps, but more importantly, how the consumer can absorb. Like, what are the learnings you have had in terms of that you know, affordability And what are the things you are doing now? And if you can, you know, kind of explain the price, the price increase that you are saying, like, I am assuming when you say very selectively, the magnitude or if you are doing any RGM, to the price points that are less sensitive in taking pricing on those vis a vis, like, the more price competitive ones?

Christopher H. Peterson: Yeah. So I think this is a very different situation, and it is and it exactly the way the way your question is phrased is the way we have been thinking about it. So if you go back to when we did. When we put the new strategy into effect in 2023, if you recall, at that point in time, we took a pretty significant price increase on parts of our business where we were not making any money, where we were gross margin zero or negative. And that was, like, a 15% price increase. We also When tariffs first came into effect in you know, a year and a half or 2 years ago, we took significant pricing there and we led the pricing up. And those price increases might have been 10% or 12% or something. where we led the pricing and got ahead of people, we did see a significant negative volume reaction until competitors caught up. And so when we were talking about 2025, we were talking about being scraped effectively by the competitive set. And so this year, you know, we have not done that. And as I said, you know, when you think about 2026, our pricing on average has been about 0. And we have really driven the core sales growth driven by the innovation volume growth, mix improvement, etcetera. As we go into next year. I do not think there is any business or any category where we are talking about price increases to anywhere where we expect the magnitude to be close to what happened, in 2023 or 2024. These are much more modest price increases And importantly, I think they are going to be timed such that they are likely to happen when the competitive set moves. Including in the categories where we compete with private label where the retailers move. And so I think that positions us in a very different way And I also think it allows us to do it sort of strategically where we get to logical price points and price pack architectures that it may wind up not really even being consumer noticeable in many cases. And so that is why we are sort of excited about it. that is the way we are approaching it. And we are also ex. Excited that we are able to, with our fuel productivity program and our overhead cost containment program, not be forced into a situation where we have to price fully for inflation. So know, we are we are we are pricing less than inflation is what we are talking about here over the 2 year period.

Andrea Teixeira: Yeah. That. that is super helpful. And then a question to Mark. The operating cash flow $400 million,000,000 then you take out, I believe you mentioned the factoring of receivables was a decline of about $150 million. Correct me if I am wrong. That and then the other impact of the of the patient would be definitely nonrecurring But thinking about, like, how you now do not need as much as. From what I understand, like, you do not need the factoring of receivables as much as you do now. What is the normalized. Because you did in the past what is the normalized free cash? I mean, should we think about, like, into 2027 something in the order of $250 million or is that is that a good kind of guardrail?

Mark J. Erceg: Well, I think what I would say is if you think about, you know, having an operating cash flow number of approximately 400 million you know, as we talked about our CapEx programs, having historically been in the $250 million range, year will be below $200 million. I think reasonable to assume that next year will be below $200 million as well. And we do not see a need for that to, you know, creep up over the next several years. So I think at the end of the day, you know, we will have, you know, the ability to pay down you know, some measure of debt. You know, each year going forward. Obviously, we are gonna be driving our EBITDA growth As Chris indicated, our trailing 12-month adjusted EBITDA is up 20%. For the quarter we just printed. You know, we have taken 2 turns off our leverage ratio over the last couple years whilst you know, we have had to deal with, you know, basically a top line compression situation and then bleeding out excess inventory. And now that we start having the positive flywheel on the sales line, know, we can monetize that through the p and l and increase our rate of EBITDA delivery. And hopefully take our leverage ratios down, you know, even faster. You know, we have talked about this 2, you know, billion dollar investment we have made in our manufacturing network. We talked about the marginal economics that come off each, you know, of those automated lines. And on a gross margin basis, it is, you know, effectively 50¢ on the dollar, and on an op margin basis, it is about 45¢ on the dollar. So we think the flywheel is now starting to move. And we are very comfortable that we are gonna be able to continue to deleverage the company in the years ahead like we have done in the past.

Christopher H. Peterson: Yeah. If you if you look at the this year, to Mark's point, if you were to say, exclude the pension item we actually believe is a positive, as Mark mentioned, and you were to exclude the impact of the factoring reduction, our guidance says we are still on track with $400 million. So we are not changing our operational underlying guidance of 400 for this year. These are the 2 items explain 100% of the difference in the guide. And neither 1 of those do we believe is recurring into next year. We also, as Mark mentioned, expect this year to not only reduce factoring but to pay down debt. Because we expect factoring in debt in total to be down $200 million And there is no change in our in our end of year leverage of being comfortably below 4.5x. So know, this is a little bit of I know it can be a little bit confusing, but, know, we are gonna get a $145 million of inflow in investing from the pension settlement, and we are going to have $85 million of outflow in operating that results in $60 million that we are gonna use to pay debt down. We think that is a positive because it de levers the company even though the way the accounting works at looks a little funny because it reduces operating.

Mark J. Erceg: It does not give you credit for $145 million that is coming in next week on the investing side. Took an extra $100 million with the refinancing that we did recently, and so that money is now being, you know, effectively used versus having to then factor where there is a fee and associated with it.

Andrea Teixeira: Absolutely. And then the cost of factoring, obviously, is higher than when you raise. Right? The money. So it is kind of improving your overall capital structure by Yeah.

Mark J. Erceg: it is your overall to a push. Yeah. Yeah. it is close to a push given where we are, but you know, that 6.25% money, you know, was, I think, you know, prudent for us to take in to just improve the company's overall liquidity But we are very comfortable with what we have been able to achieve on the deleveraging side of the house. And, again, now that the positive flywheel is coming through the sales line, and pushing through the p and l, know, we feel even better about our prospects going forward.

Andrea Teixeira: Very helpful. Thank you both. Thank you.

Operator: And the next question will come from Filippo Falorni with Citi. Your line is now open.

Filippo Falorni: Hi. Good morning, everyone. Wanted to get your perspective on the holiday season, which is upcoming, and especially just general health of the consumer in your category as we hear from a lot of your peers about some income. Some lower income consumers feeling more pressure of higher gas prices. How do you think that will play out in the coming holiday season? And any initial expectation from your retail partners as you head into the important season of the year? Thank you.

Christopher H. Peterson: Yes. Good question. So from a consumer standpoint, it is actually interesting. I mentioned on the prepared remarks that our category growth in the third quarter was about flat globally. Which was a little better than we had thought coming into the quarter. We had sort of thought it might be minus 1. And part of what is driving that is The US was actually positive on category growth Europe was negative, and that. Those were the 2, you know, biggest things that were that were different, from the from the flat. In the U.S., what is happening is the low income consumer last year recall, had been pulling back on consumer purchases of durable and discretionary general merchandise items. what is happening now is they have sort of bottomed out. The trend among the low-income consumer is actually getting better Because they are not declining their spend as much. So if last year, their spend of the bottom third of US households was down 10 to 15%. This year, it might be only down, you know, 5%. So it is a material improvement in the year over year trend from that low income consumer. At the same time, the high income consumer continues to spend more because they continue to benefit from higher equity prices, higher home values, the middle income consumer has been sort of hanging in there around flatline. So when we look at that consumer picture, the biggest difference year over year in terms of why the category growth is improving is the low income consumers declining less than they were a year ago. So that is sort of broadly what is happening from our view of the consumer environment. Relative to the holiday season, we think it is going to be a decent holiday season. You know, we certainly are not expecting with higher gas prices and higher cost of living a blowout holiday season. But we do think holiday spending will be up versus year ago. You know, we believe that we are well positioned for the holiday season. We continue to expect in the fourth quarter significant distribution gains this year versus last year for the Newell portfolio. And think that importantly, as we have launched new product innovation, we are not seeing really any barrier to consumers responding to that new product innovation. When we come with a with a product that has great features and benefits under a leading brand name, at a good value proposition. So that is what we are focused on. And you know, I think we are we are we are well positioned. But, obviously, there is the next 2 months are going to be critical as we head into the Turkey 12 and the holiday season coming up.

Filippo Falorni: Right. Thanks. Thanks so much, Christopher. That was very helpful. Then maybe 1 quick follow-up for Mark. In the $150 million that you mentioned in terms of cost inflation, for next year for 2027, can you give us a breakdown of how much is resins, versus transportation? And maybe what is your underlying assumption for oil prices? Thank you.

Mark J. Erceg: Yeah. Right now, as far as, you know, diesel is concerned, which is, you the principal variant, you know, we are gonna assume that, you know, where we are today is where we are tomorrow. Generally speaking. I think that is the most conservative approach that we could take as it relates to that. As far as breaking down the specifics within the $150 million, what I would prefer to do is rather give you a general sense of how we are looking at the current year 2026. Because that is a lot more lot more definitive. And if you look at that, what I would tell you is resin and source finished goods accounts for about 45% of that. And then labor and overhead, because, again, this is, you know, basically COGS inflation, runs around $50 million as does transportation Both of those collectively put together labor and overhead and transportation is equal to about another 45% And then about 10% comes from metals and packaging and glass and other commodities. So I would expect it to be somewhat similar, you know, based on the fact that we are gonna be assuming that oil remains elevated, so, resin remains elevated, diesel remains elevated, therefore transportation remains elevated. Of course, there is always typically, you know, somewhat wage inflation across your supply chain. So I would think those percentages would stay somewhat comparable as it relates to the $150 million.

Filippo Falorni: Great. Very helpful. Thank you, guys. Thank you.

Operator: And this concludes today's conference call. A replay of today's call will be available later today on the company's website at ir.newellbrands.com. Thank you for your participation. You may now disconnect. And have a great day.