Q3 2026 Newell Brands Inc Earnings Call

October 30, 2026

Operator: Good morning, and welcome to Newell Brands Q3 2026 Earnings Conference Call. At this time, all participants are in the listen-only mode. After a brief discussion by management, we will open up the call for questions. In order to stay within the time scheduled for the call, please limit yourself to one 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. Ms. Freiberger, you may begin.

Speaker #1: Good morning, and welcome to NEWELL BRANDS Q4 2026 earnings conference call. At this time, all participants are in the listen-only mode. After a brief discussion by management, we will open up the call for questions.

Speaker #1: And in order to stay within the time scheduled for the call, please limit yourself to one question during the Q&A session. Today's conference call is being recorded.

Speaker #1: A live webcast of this call is available at ir.newelbrands.com. I will now turn the call over to Joanne Freiberger, Senior Vice President of Investor Relations and Chief Communications Officer.

Speaker #1: Ms. Freiberger, you may begin.

Joanne Freiberger: Thank you. Good morning, everyone, and welcome to Newell Brands Q3 2026 Earnings Call. Joining me today are Chris Peterson, our President and CEO, and Mark 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-K, 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.

Speaker #2: Thank you. Good morning, everyone. And welcome to NEWELL BRANDS Q4 2026 earnings call. Joining me today are Chris Peterson, our President and CEO, and Mark Erceg, our CFO.

Speaker #2: 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.

Speaker #2: Please refer 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 websites for a further discussion of factors affecting forward-looking statements.

Speaker #2: 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.

Joanne Freiberger: 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. With that, I'll turn it over to Chris.

Speaker #2: 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.

Speaker #2: And with that, I'll turn it over to Chris.

Chris Peterson: Thank you, Joanne. Good morning, everyone, and welcome to our Q3 earnings call. Top line growth accelerated sequentially as Newell Brands delivered a 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 two of three segments, four of six businesses, seven top 10 brands, and seven top 10 countries growing during Q3. The US continued to grow, and international returned 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.

Chris Peterson: Thank you, Joanne. Good morning, everyone, and welcome to our Q3 earnings call. Top line growth accelerated sequentially as Newell Brands delivered a 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 two of three segments, four of six businesses, seven top 10 brands, and seven top 10 countries growing during the Q3. The US continued to grow, and international returned 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.

Speaker #3: Thank you, Joanne. Good morning, everyone, and welcome to our Q4 earnings call. Top-line growth accelerated sequentially as NEWELL BRANDS delivered its second consecutive quarter of year-over-year sales growth, driven by broad-based market share gains.

Speaker #3: Net sales increased 3.7% and core sales grew 3.3%, with both results exceeding the high end of our 2% to 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.

Speaker #3: The U.S. continued to grow and international returned 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.

Chris Peterson: Stronger sales and productivity drove expansion in Newell's normalized gross and operating margin. In another positive sign, normalized operating margins expanded on five of six 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 a year ago. With two 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 three years.

Speaker #3: 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.

Speaker #3: 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 a year ago.

Speaker #3: 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.

Speaker #3: 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 U.S.

Speaker #3: back-to-school POS growth in 3 years. Sharpie, Expo, Elmer's, and Prisma Color 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.

Chris Peterson: 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 was roughly flat in Q3, with growth in the US offset by lower sales in Canada. Within the business, Graco delivered core sales growth during Q3, building on strong year-to-date consumer takeaway and car seat share gains. Our rotating car seat platforms, including Turn2Me and EasyTurn 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, NUK also delivered positive US POS and gained market share during the quarter as we continued to invest behind this year's full brand relaunch.

Chris Peterson: 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 was roughly flat in the Q3, with growth in the US offset by lower sales in Canada. Within the business, Graco delivered core sales growth during the Q3, building on strong year-to-date consumer takeaway and car seat share gains. Our rotating car seat platforms, including Turn2Me and EasyTurn 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, NUK also delivered positive US POS and gained market share during the quarter as we continued to invest behind this year's full brand relaunch.

Speaker #3: Baby core sales was roughly flat in the third quarter, with growth in the U.S. offset by lower sales in Canada. Within the business, Greco delivered core sales growth during the third quarter, building on strong year-to-date consumer takeaway and car seat share gains.

Speaker #3: Our rotating car seat platforms, including turn-to-me and easy-turn 360, continue to resonate with consumers. Recent results included low double-digit growth in POS and share gains at key mass retailers.

Speaker #3: And Baby Care, Nook also delivered positive U.S. POS and gained market share during the quarter, as we continued to invest behind this year's full brand relaunch.

Chris Peterson: Turning to Home and Commercial, core sales increased 6%, with all three businesses growing for the first time in five 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 US 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.

Speaker #3: 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 U.S.

Speaker #3: B2B and DIY channels recorded gains. Innovation contributed to the improvement, including the new 34-gallon Brut container and an expanded Brut cleaning lineup featuring push brooms designed to tackle different surfaces and types of debris.

Speaker #3: The 34-gallon Brut 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.

Speaker #3: and Latin America. Rubber-made 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 combined everyday functionality with colors inspired by current design trends.

Chris Peterson: Our collaboration with Valspar builds on that innovation by pairing six new Crock-Pot colors with complementary paint palettes to help consumers personalize their kitchens. While we don't 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 US POS and sales growth in Latin America during Q3.

Speaker #3: 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. And while we don't usually comment on current quarter sales trends, October was, we believe, Crock-Pot's largest sales month ever.

Speaker #3: Oster is another great illustration of how sustained investment can build a stronger innovation platform over time. We previously discussed our extreme mixed performance blender, which laid the foundation for a broader lineup designed to address different consumer needs and price points.

Speaker #3: 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 quiet pro blender addresses consumers' noise concerns associated with blending and our new Titan Blender combines high-performance blending with a glass jar.

Speaker #3: Oster blenders delivered positive U.S. POS 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.

Chris Peterson: Home Fragrance delivered very strong core sales growth against a favorable prior-year comparison. Yankee Candle returned to double-digit growth in the US 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 Q2, Outdoor and Recreation core sales declined in the Q3, 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 Q3, and we grew share in the important hydration segment. In addition, Coleman Snap 'N Go was recently recognized among TIME's Best Inventions of 2026. Demand continues to significantly exceed our initial expectations, and we are expanding availability ahead of the holiday gifting seasons since Snap 'N Go makes large-capacity coolers easier to store, transport, and use.

Speaker #3: 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.

Speaker #3: 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-N-Go was recently recognized among Time's best innovations of 2026.

Speaker #3: Demand continues to significantly exceed our initial expectations, and we are expanding availability ahead of the holiday gifting seasons since Snap-N-Go makes large-capacity coolers easier to store transport and use.

Chris Peterson: Starting with only one 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 two 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.

Speaker #3: Starting with only one 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Chris Peterson: 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 Q3, which was consistent with what we experienced during the Q2, but slightly better than contemplated in our July outlook. Consumer conditions were stronger in the US 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Consumer conditions were stronger in the U.S. and Latin America, while EMEA and APAC remained more challenged amid ongoing macroeconomic pressures and the direct and indirect effects of the Middle East situation.

Chris Peterson: Based on that result and what we are seeing so far in the Q4, we now expect the categories in which we compete to be flat to down 1% for the full year, which is one to two 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 about $100 million. We increased that estimate by an additional $50 million during our Q1 and Q2 earnings calls respectively, and today we are raising it by another $20 million.

Speaker #3: Based on that result and what we are seeing so far in the fourth quarter, we now expect the 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.

Speaker #3: 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.

Speaker #3: At the start of the year, we expected an input cost inflation headwind of about $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.

Chris Peterson: 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 IEEPA tariff refunds recorded during the Q2, and very selectively and reluctantly used limited pricing actions, covering less than 10% of our portfolio, to help offset these inflationary impacts.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Chris Peterson: 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 line 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 the $220 million in 2026.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Our base plan assumes global category growth remains roughly in line 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.

Speaker #3: We expect inflation of about $150 million which is above normal levels, but below the $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.

Chris Peterson: Given the cumulative two-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. One notable area that might be excluded from these pricing actions is baby gear, where we are cautiously optimistic that the US-China 30-for-30 initiative could bring relief to this product category. However, the scope, timing, and extent of any relief remain unconfirmed since we need the 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.

Speaker #3: One notable area that might be excluded from these pricing actions is baby gear. Where we are cautiously optimistic that the U.S.-China 30-for-30 initiative could bring relief to this product category.

Speaker #3: However, the scope, timing, and extent of any relief remain unconfirmed since we need the formal implementation details from the administration before we can quantify the impact on nual.

Speaker #3: 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.

Speaker #3: 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.

Chris Peterson: 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 Wied, 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, center 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 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.

Speaker #3: 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 Bied, who joined nual this week as Chief Operating Officer.

Speaker #3: 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.

Speaker #3: I look forward to working with Guillermo 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.

Chris Peterson: 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.

Speaker #3: Their focus on our consumers and customers and their determination to deliver in a challenging environment is helping us build positive sales momentum across nual.

Speaker #3: I'll now turn the call over to Mark to walk through our financial results and updated outlook.

Mark Erceg: Thanks, Chris. Good morning, everyone. During our time together this morning, I will comment on Q3 results and a few notable business accomplishments achieved during the quarter before sharing our outlook for Q4 and the full year. Q3 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 four 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.

Speaker #2: Thanks, Chris. 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Mark Erceg: 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 Q3 cash conversion cycle improved by four 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.

Speaker #2: A&P remained at approximately 6.9% of sales and normalized overheads decreased 20 basis points. Net interest expense was 86 million dollars compared with 83 million dollars in the prior year period, and the normalized effective tax rate was 9.5% versus 7.9% last year.

Speaker #2: Taken together, these results yielded 20 cents of normalized diluted earnings per share versus 17 cents a year ago. Turning to cash flow, year-to-date operating cash flow is 93 million dollars compared with 103 million dollars in the prior year period.

Speaker #2: 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.

Speaker #2: Nual'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.

Speaker #2: 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.

Mark Erceg: Capital expenditures totaled $131 million through the first nine 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 Q2 and 5.3x a year ago. During Q3, 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 five times oversubscribed.

Speaker #2: 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 dollars year over year to $1.03 billion and net leverage declined to approximately 4.5 times.

Speaker #2: This compares favorably with 4.8 times at the end of the second quarter and 5.3 times 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.

Speaker #2: In addition, our senior notes offering with a 2031 maturity attracted strong demand with an order book approximately 5 times oversubscribed. This allowed us to upsize the offering to 600 million dollars at a coupon of 6.25%.

Mark Erceg: This allowed us to upsize the offering to $600 million at a coupon of 6.25%, which was an eighth 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 Q3, 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 continued to advance our One Newell operating model during Q3 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 four countries in 2024.

Speaker #2: Which was an eighth 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.

Speaker #2: During the third quarter, Moody's also revised their outlook on nual from negative to stable while affirming our overall credit rating. Importantly, we ended the quarter with no short-term debt outstanding.

Speaker #2: We also continue to advance our one nual operating model during the third quarter by simplifying how we operate across businesses within each country. All 10 of our largest non-U.S.

Speaker #2: countries now operate with a single ERP system and a common organizational structure. Compared with only 4 countries in 2024. This multi-year effort reduces complexity, supports more coordinated execution across nual, and after many long years of painstaking work, effectively represents the end of nual's ERP consolidation journey.

Mark Erceg: This multi-year 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. Let's turn to the outlook for the remainder of the year. For Q4, 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.

Speaker #2: 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%.

Speaker #2: 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 17 to 19 cents with a low single digit effective tax rate.

Speaker #2: 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.

Mark Erceg: 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 from $0.73 to $0.77, now that only one 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 one-time out-of-period recovery of IEEPA tariff costs expensed in 2025, which was recorded during Q2 2026.

Speaker #2: 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 74 to 76 cents from 73 to 77 cents, now that only one quarter remains in the year, we are keeping the midpoint of our normalized diluted earnings per share outlook unchanged at 75 cents using an effective tax rate of about 20%.

Speaker #2: Just as a reminder, please note that this updated full-year outlook continues to include approximately 100 million dollars or 17 cents per share from the one-time out-of-period recovery of IEPA tariff costs expensed in 2025.

Speaker #2: 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.

Mark Erceg: 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 two one-time non-operational 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 two changes in greater detail. First, as previously discussed, the termination of our non-qualified defined benefit plans is expected to generate approximately $60 million of net cash benefit, which is clearly a positive development. However, the underlying cash flows associated with this transaction are reported in different parts of the cash flow statement.

Speaker #2: Moving to cash, we expected full-year operating cash flow have been up about 50% versus year ago. However, after accounting for 2 one-time non-operational items, we now expect full-year operating cash flow approximately $150 million.

Speaker #2: Since there's an understandable focus on operating cash flow as we continue to deleverage the company, let me explain these two changes in greater detail.

Speaker #2: First, as previously discussed, the termination of our non-qualified defined benefit plans is expected to generate approximately $60 million of net cash renewal, which is clearly a positive development.

Speaker #2: However, the underlying cash flows associated with this transaction 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.

Mark Erceg: 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's 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 from $500 million to $600 million.

Speaker #2: Reporting the payments and related cash taxes in operating activities reduces our operating cash flow outlook by approximately 85 million dollars. Even though this presentation does not change the transaction's total $60 million net cash benefit to the company.

Speaker #2: 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 from 5 to 600 million dollars.

Mark Erceg: As stated earlier, excluding these two one-time non-operational 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 two quarters of consecutive sales growth, expanded normalized gross and operating margins, and 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.

Speaker #2: As stated earlier, excluding these two one-time non-operational 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.

Speaker #2: 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 4.5 times.

Speaker #2: In closing, we delivered two quarters of consecutive sales growth, expanded normalized gross and operating margins, and have a clear line of sight to what we expect to be a third consecutive quarter of positive sales growth.

Speaker #2: 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.

Mark Erceg: 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.

Speaker #2: Operator, please open the call for questions.

Operator: Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Again, please limit yourself to one question. Our first question will come from Olivia Tong with Raymond James. Your line is now open.

Operator: Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Again, please limit yourself to one question. Our first question will come from Olivia Tong with Raymond James. Your line is now open.

Speaker #1: Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 11 again.

Speaker #1: Again, please limit yourself to one question. End our first question. We'll come from Olivia Tong with Raymond James. Your line is now open.

Olivia Tong: 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 how you think about sell-in versus sell-through. 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.

Speaker #3: Great. Thanks. Good morning. A couple of questions here. First, I was wondering if you could talk about the moderation and the Q4 core sales relative to Q3, and how much of that Q3 growth came from volume versus pricing mix, and how you think about selling versus sell-through.

Speaker #3: And then on and then you mentioned that pricing and baby. Is that primarily due to the potential legislation relief that you see? Would you have raised baby pricing if not for that?

Speaker #3: Or is it a function of perhaps some price sensitivity amongst consumers, particularly in baby? Thanks.

Chris Peterson: Sure. Let me start with the vast majority of the core sales growth in Q3 is being driven by volume. Pricing was effectively close to zero 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 zero. 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. We feel very good about the core sales delivery in the third quarter.

Speaker #2: 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 zero.

Speaker #2: 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.

Speaker #2: We had a couple of categories that were highly resin-dependent that we took price up. The net of those was effectively zero. The other thing I would say about core sales in Q3 is that this was really driven by consumer demand and retailer demand.

Speaker #2: For the products, there was not a significant change or any change of note in retail inventories. So the so we feel very good about the core sales delivery in the third quarter.

Chris Peterson: 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 said our implied guide was sort of flat to modest growth. Given the strength that we are seeing from consumers in responding to the innovation that we put in the market and the marketing 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. What we have been telling the team internally is that, hey, the first quarter we got the core sales growth, it is a data point. The second quarter, it is a straight line. When we get to the third quarter, then we will have a trend.

Speaker #2: Relative to the fourth quarter guide of 1 to 3 percent, we're excited about having our second quarter, of course, sales growth. And we're 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 flat to modest growth.

Chris Peterson: Given the strength that we are seeing from consumers in responding to the innovation that we put in the market and the marketing 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. What we have been telling the team internally is that, hey, the first quarter we got the core sales growth, it is a data point. The second quarter, it is a straight line. When we get to the third quarter, then we will have a trend.

Speaker #2: Given the strength that we're seeing from consumers, in responding to the innovation that we've put in the market and the marketing that we're putting in the market, that's what gives us the confidence to effectively raise the outlook for Q4 to the 1 to 3 percent range.

Speaker #2: And what we've been telling the team internally is that, hey, the first quarter we get to core sales growth, it's a data point. The second quarter, it's a straight line.

Speaker #2: And when we get to the third quarter, then we'll have a trend. And so we're very focused on delivering positive core sales in the fourth quarter.

Chris Peterson: We are very focused on delivering positive core sales in the fourth quarter, and then sustaining that, as I mentioned, into next calendar year. On the baby piece, the government created a body called the Board of Trade, which is a sort of an organized approach for the current administration to negotiate trade policy with China specifically. In the latest visit with President Xi and President Trump, there was an announcement from the administration that there were $30 billion of goods where the US 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.

Speaker #2: And then sustaining that, as I mentioned, into next calendar year. On the baby piece, the government created a body called the Board of Trade which is a sort of an organized approach for the current administration to negotiate trade policy with China specifically.

Speaker #2: And in the latest visit, with President Xi and President Trump, there was an announcement from the administration that there was 30 billion dollars of goods where the US was going to reduce tariff rates in exchange for China reducing tariff rates on 30 billion dollars of goods.

Speaker #2: 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.

Chris Peterson: 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. In that environment, we would not take pricing. We have been in a wait-and-see mode on the baby products. That is one 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.

Speaker #2: And in that environment, we would not take pricing. So we've been sort of in a wait-and-see mode on the baby products. That's one of the ones that we're waiting for further details on the specific implementation timing, amounts, and details.

Speaker #2: But we believe it's an encouraging sign because that would significantly reduce our tariff exposure headed into 2027 once the details become known.

Olivia Tong: Great. Thanks. Just following up, you had about 25 tier 1, tier 2 innovations this year. You mentioned probably about the same next year. As you think about that, can you talk about the opportunity for the next tranche of launches, whether the margins are similar, the productivity of those relative to 2025, 2026 launches? Then, you added Guillermo in the COO role. How does he help 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?

Speaker #3: Great. Thanks. And then just following up, you mentioned you had about 25 in a tier one, tier two innovations this year. You mentioned probably about the same next year.

Speaker #3: So as you think about that, can you talk about the opportunity for that next tranche of launches, whether the margins are similar? The productivity of those relative to 25, 26 launches?

Speaker #3: And then you added Guillermo to in the COO role. How does he help sort of ensure the success of that next tranche of launches in addition to building on the first tier?

Speaker #3: And what decisions will be moved to him in terms of sales marketing supply chain?

Chris Peterson: Yeah, sure. On the innovation side, as I mentioned in the 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 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 a three-year life cycle. 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. It is a very robust set of innovation for us to talk about with consumers.

Speaker #2: Yeah, sure. So on the innovation side, as I mentioned in the prepared remarks, we think 25 launches tier one, tier two launches is about the right number to sustain strong momentum because there's a limit with 25 brands to how to focusing your investment dollars and your communication dollars from a consumer standpoint.

Speaker #2: 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 three-year life cycle.

Speaker #2: And so as we go into next year, and we have 25 launches next year, we're not only supporting the 25 launches next year, but we're supporting year two of the 25 from this year.

Speaker #2: And I think the 18 or 19 that we had from the year before. And so it's a very robust set of innovation. For us to talk about with consumers, we believe that we're on the right cadence from a product life cycle management.

Chris Peterson: 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 have a bigger impact, individually and in total, and 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, one of the things that we saw, Mark alluded that we implemented our last major SAP conversion across Europe primarily, 1 October, and it has gone very well. We are now complete effectively with those ERP changes, and we are operating with one 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.

Speaker #2: Now, obviously, what we're trying to do is drive the innovations to be bigger, to have a bigger impact. Individually and in total. And that's a continuous process that we're focused on.

Speaker #2: But I think the pacing that we're on, I now feel like is good. And so that's the piece on the innovation. Relative to Guillermo, one of the things that we saw so Mark alluded that we implemented our last major SAP conversion across Europe primarily October 1st.

Speaker #2: And it has gone very well. And so we're now complete effectively with those ERP changes. And we're operating with sort of one global ERP system around the world, which is very exciting.

Speaker #2: Because that's going to allow us not only to reduce capex going forward, but it's also going to really allow us to leverage scale more effectively.

Chris Peterson: 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. 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.

Speaker #2: 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.

Speaker #2: And so that's really the focus of the role. And I think he's 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've had, the margin improvements, and strong cash generation.

Olivia Tong: Thanks, Chris. Best of luck.

Speaker #3: Thanks, Chris. Best of luck.

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

Speaker #1: Thank you. And our next question is going to come from Peter Graham with UBS. Your line is open.

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

Speaker #4: Great, guys. Thank you so much. Good morning. So there was you guys gave some pretty helpful color on 27, expectations around category growth, core sales, inflation.

Speaker #4: Mark, I was curious how we should be thinking about your ability to kind of offset the incremental 150 million of inflation through those pricing actions.

Speaker #4: 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 dollar assumption, that would be helpful.

Mark 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 has been about $220 million. Next year, we are thinking about $150 million. We have been using our FUEL productivity efforts and other means to control overhead to allow us to expand our margins. If we go back to 2023, you will recall our normalized operating margin was 6%, all right? In 2024, we took that up to 8.2%. 2025, we took it up to 8.4%, despite all those challenges, including tariffs. Then for 2026, right now, we have a normalized operating margin guidance range of 10% to 10.4%. Now, that does include the $100 million about a period tariff recoveries, but if you strip that out, you would be at 8.6% to 9%, with center lines at 8.8%.

Speaker #2: Yeah, I think we feel pretty good about that. Look, in 2025, inflation was about 90 million dollars. As Chris indicated, this year in '26, it's been about 220.

Speaker #2: Next year, we're thinking about 150. We've been using our fuel productivity efforts and other means to control overhead to allow us to expand our margins.

Speaker #2: If we go back to 2023, you'll recall our normalized operating margin was 6. Right? In 2024, we took that up to 8.2. 2025, we took it up to 8.4 despite all those challenges, including tariffs.

Speaker #2: And then for 2026, right now, we have a normalized operating margin guidance range of 10 to 10.4. Now, that does include the 100 million dollars about a period tariff recoveries.

Speaker #2: But if you strip that out, you'd be at 8.6 to 9, which centerlines at 8.8. Well, 8.8 compares pretty good to 8.4 in the prior year.

Mark Erceg: Well, 8.8% compares pretty good to 8.4% in the prior year. So we are going to be up about 50 bps this year, despite massive challenges, and we think things will start to roll over next year, and we will have another year, as Chris said, of higher levels of A&P support, better and stronger innovation, better go-to-market capabilities, et cetera, et cetera. So, we 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.

Speaker #2: So we're going to be up about 50 bips this year, despite massive challenges and we think things will start to roll over next year and we'll have another year, as Chris said, of higher levels of A&P support, better and stronger innovation, better go-to-market capabilities, etc., etc.

Speaker #2: So we feel very good about our algorithm and are very confident that we'll be able to deliver against our financial evergreen targets into next year.

Chris Peterson: The last thing maybe I would say to your question is on pricing. We feel pretty good about where we are headed. 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 zero. All of our growth has been driven by volume and mix, and we have used this very strong productivity to offset the $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 two-year cumulative inflation represents about 8%. We can offset a big part of that with productivity and cost containment actions, but not all of it.

Speaker #5: Well, the last thing maybe I would say to your question is on pricing, we feel pretty good about where we're headed. We've held off on pricing this year.

Speaker #5: So if you look at pricing as a contribution to our core sales this year, it's effectively zero. And all of our growth has been driven by volume and mix.

Speaker #5: And we've used this very strong productivity to offset the 220 million of inflation as I mentioned in the prepared remarks. When you look at the 150 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 two-year cumulative inflation represents about 8%.

Speaker #5: We can offset a big part of that with productivity and cost containment actions, but not all of it. And so what we're looking at is modest pricing that we would put in next year.

Chris Peterson: What 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 have a plan that is not a sticker shock plan that we will be able to implement relatively smoothly.

Speaker #5: We believe that the cost justification is there. And we believe we will have a plan that's not a sticker shock plan that will be able to implement relatively smoothly.

Peter Grom: That is super helpful, guys. Chris, you touched, or you mentioned to Olivia that you were pleased with organic sales growth in Q3. 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 looked to be strong, Learning and Development was positive. Tax, albeit on a bit of a tougher concept. Characterize how the quarter played out relative to your expectations. Are there any puts and takes or notable call-outs that we should be aware of as we think about Q4 and into 2027?

Speaker #4: That's super helpful, guys. And then, Chris, you touched or you mentioned to Olivia that you were pleased with organic sales growth in the third quarter.

Speaker #4: 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.

Speaker #4: At least from an outsider's perspective, commercial looked to be strong, learning and development was positive. Excellent, I'll be on a bit of a tougher concept.

Speaker #4: Characterize how the quarter played out relative to your expectations. And then are there any puts and takes or notable callouts that we should be aware of as we think about 4Q and 27?

Chris Peterson: Yeah. I think, 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, up mid-single digits. We had a great back-to-school season, and it is always important in Q3. Writing is one of our most important businesses because we have the replenishment orders, which are a little bit hard to predict. 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, 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 H1 of the year where we were up almost double digits through the first 6 months.

Speaker #2: Yeah. So I think 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.

Speaker #2: Up mid-single digits. We had a great back-to-school season and it's always important in the third quarter, writing is one of our most important businesses.

Speaker #2: Because we have the replenishment orders, which are a little bit hard to predict. But the POS was stronger, if anything, than we expected. Going in to the back-to-school season and coming out of it.

Speaker #2: And that resulted in stronger replenishment orders. So 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.

Speaker #2: And Baby, if you recall, was coming off the first half of the year where we were up almost double digits. Through the first six months.

Chris Peterson: 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 Q3 at 6%. We had double-digit core sales growth in Home Fragrance. We had Kitchen up nicely, and we had Commercial returning to core sales growth for the first time. That was exciting to see. Outdoor and Rec, which had turned positive in Q2, which is important because Q2 is the biggest Outdoor and Rec season, did flip back to a decline in Q3.

Speaker #2: And so the Baby core sales is not really reflective of the underlying performance from a consumer standpoint. It's more a shipment timing pattern piece.

Speaker #2: That's driving that. Year-to-date, Baby is still up high mid-single digits on core sales growth. And continuing to the innovation we've got on that business is continuing to resonate.

Speaker #2: I think the home and commercial segment was probably the standout in the third quarter at 6%. We had double-digit core sales growth in home fragrance.

Speaker #2: We had kitchen up nicely. And we had commercial returning to core sales growth for the first time. And so that was exciting to see.

Speaker #2: 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.

Chris Peterson: That was probably the one that we were the most negatively surprised at. The combination, when you put all of that together, was that we came in above our 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.

Speaker #2: That was probably the one that we were the most negatively surprised at. But the combination, when you put all of that together, was that we came in above our forecast, above plan, and above the high end of our guidance range.

Speaker #2: Really driven by, I think, the home and commercial and the writing business primarily.

Mark Erceg: Yeah, and if I could, it is really encouraging that we have had such a broad-based build-out. It is also notable that this is the first time since Q2 2022 that both the US and international were positive. So, it is not just a segment build-out, it is also happening geographically. Chris mentioned the fact that seven of our top 10 brands grew, but also 15 of our top 25 grew. So, we feel like we are pushing out broadly now.

Speaker #3: Yeah. And if I could, it's really encouraging that we've had such a broad-based build-out. But it's also notable that this is the first time since the second quarter of '22 that both the US and international were positive.

Speaker #3: So it's not just a segment build-out. It's also happening geographically. And Chris mentioned the fact that seven of our top 10 brands grew, but also 15 of our top 25 grew.

Speaker #3: So we feel like we're pushing out broadly now.

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

Speaker #4: Awesome. Thank you both for that. Best of luck.

Operator: Thank you. The next question will come from Lauren Lieberman with Barclays. Your line is open.

Speaker #1: Thank you. And the next question will come from Lauren Lieberman with Barclays. Your line's open.

Lauren Lieberman: Great, thanks. Good morning, guys. Couple of questions. I do not know if I missed it, if you had updated leverage targets for the end of the year, just with the change in operating cash flow. I was just hoping we could get a little bit more color on the reduction in factoring, which is definitely a positive to see. How should we think about that into 2027? Is there a further headwind from reducing reliance on that? So, 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.

Speaker #6: Great. Thanks. Good morning, guys. A couple of questions. I don't know if I missed it if you had updated leverage target for the end of the year, just with the change in the operating cash flow.

Speaker #6: And I was just hoping we could get a little bit more color on the reduction in factoring, which is definitely a positive to see.

Speaker #6: But how should we think about that into '27? Is there a further headwind from reducing reliance on that? So improving quality, I think, from a Wall Street standpoint, it's a good thing to see.

Speaker #6: But just a good thing to have our arms around in terms of magnitude as we look into next year. Thanks.

Mark Erceg: Yeah, great question, Lauren. We are still comfortably targeting to be below 4.5 times 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 6.5 times, so we feel really good about what we have been able to do with respect to that. As far as the specific question on cash, 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 going to have about another $150 million of cash EBITDA this year.

Speaker #2: Yeah, great question, Lauren. So we're still comfortably targeting to be below four and a half times levered at the end of this year, which, as you know, will represent a meaningful reduction as we continue on our de-leveraging journey.

Speaker #2: When we first began, we were six and a half times. And so we feel really good about what we've been able to do with respect to that.

Speaker #2: As far as the specific question on cash, 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 dollars or something to that effect.

Speaker #2: If you build up from there, we're going to have about another 150 million dollars of cash EBITDA this year. We're going to have between lower bonuses paid and less cash taxes, like another 150 million dollars.

Mark Erceg: We are going to have between lower bonuses paid and less cash taxes, like another $150 million, which is operational in effect. Then there is about $150 million that comes off the top for working capital, principally inventory, because at the end of the day, our sales base is growing, and we also want to get ahead of the next shoe that might drop on the Section 301 tariffs. So, we think that is a prudent thing to do. You put all that together, we were on pace to deliver against that $400 million of operating cash flow. Then we have these two one-time non-operating elements. I think people understand what happened with respect to the COLI liquidation. That is pretty straightforward. That is $60 million in net cash in the door. Everything there works out really well. On the factoring side of the house, we did renegotiate our factoring facilities.

Speaker #2: Which is operational in effect. And then there's about 150 million that comes off the top for working capital principally inventory. Because at the end of the day, our sales base is growing.

Speaker #2: And we also want to get ahead of the next shoe that might drop on the 301 tariffs so we think that's a prudent thing to do.

Mark Erceg: You put all that together, we were on pace to deliver against that $400 million of operating cash flow. Then we have these two one-time non-operating elements. I think people understand what happened with respect to the COLI liquidation. That is pretty straightforward. That is $60 million in net cash in the door. Everything there works out really well. On the factoring side of the house, we did renegotiate our factoring facilities.

Speaker #2: If you put all that together, we were on pace to deliver against that 400 million of operating cash flow. Then we have these two one-time non-operating elements.

Speaker #2: I think people understand what happened with respect to the Coley liquidation. That's pretty straightforward. That's 60 million dollars of net cash in the door.

Speaker #2: Everything there works out really well. On the factoring side of the house, we did redeem I'm 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.

Mark Erceg: When we did that, we did end up with a little less capacity because of interest rates going up. We also ended up with just a little bit less capacity, just based on the way that those negotiations went, and given where our current credit rating is set. That said, we said we ended the quarter with no short-term debt. We expect to finish the year with effectively no short-term debt. We took an extra $100 million in when we refinanced the 2027s. What we have now is the opportunity to use that money at 6.25 instead of factoring. Basically, if you look at the economics of it is effectively a push. When you factor, you also have a little bit more in the way of restrictions, where the money we took in through the upsizing has no restrictions.

Speaker #2: We also ended up with just a little bit less capacity just based on the way that those negotiations went. And given where our current credit rating sit.

Speaker #2: But that said, we said we ended the quarter with no short-term debt. We expect to finish the year with effectively no short-term debt. And we took an extra 100 million dollars in when we refinanced the '27s.

Speaker #2: So what we have now is the opportunity to use that money at six and a quarter instead of factoring and basically, if you look at the economics of it, it's effectively a push.

Speaker #2: When you factor, you also have a little bit more in the way of restrictions where the money we took in through the upsizing has no restrictions.

Mark Erceg: Economically, we are a little bit indifferent to all of that. As we think about next year, while it is still early days, we do not see any reason why we wouldn't be projecting out somewhere in the $400 million plus range for the operating cash flow based on all the pieces of the puzzle that we see, because we will have strong underlying EBITDA growth again. We are going to have less restructuring charges as we continue to move forward. We think our CapEx is running much better now that we have completed the ERP integrations and all the supply chain elements. Used to be $250 million, we are going to 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 our cash position overall.

Speaker #2: So economically, we're a little bit indifferent to all of that. Now, as we think about next year, next year, while it's still early days, we don't see any reason why we wouldn't be projecting out somewhere in the 400 plus range for the operating cash flow based on all the pieces of the puzzle that we see.

Speaker #2: Because we'll have strong underlying EBITDA growth again. We're going to have less restructuring charges. As we continue to move forward, we think our capex is running much better now that we completed the ERP integrations and all the supply chain elements.

Mark Erceg: We are going to have less restructuring charges as we continue to move forward. We think our CapEx is running much better now that we have completed the ERP integrations and all the supply chain elements. Used to be $250 million, we are going to 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 our cash position overall.

Speaker #2: Used to be 250. We're going to be below 200 this year. We would expect that to continue next year. So we're confident we'll be able to continue our de-leveraging into '27 and actually feel really very good about our cash position overall.

Mark Erceg: 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. These are 2 non-operating, one-time events that I don't think too much should be read through on.

Speaker #2: We took four days out of the cash conversion cycle this year. Continue to show real operational discipline as it relates to all of that.

Speaker #2: So again, these are two non-operating one-time events that I don't think too much would be read through on.

Lauren Lieberman: Okay. Great. Thank you. Just wanted to follow up again on Outdoor & Rec. 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 Q3. I know seasonally it's not the most important period, but you did mention still positive trends on hydration, and then clearly with Coleman and Snap 'N Go. Just wondering if it's often to Q4, and kind of anything more specific on what fell short this quarter?

Speaker #6: Okay. Great. Thank you. And then just want 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 the third quarter.

Speaker #6: I know seasonally it's not the most important period, but you did mention still positive trends on hydration and then clearly with Coleman and Snap and Go.

Speaker #6: So just on our thoughts into 4Q, and kind of anything more specific on what fell short this quarter.

Chris Peterson: Yeah, I think it's more of a shipment timing issue than a POS issue. Our forecast for Q4 has O&R bouncing back in Q4 and turning back to positive for sales growth. We obviously don't guide at that level, but when you see that, when you see a business that goes positive and then goes negative and then comes back to positive, you've got to sort of look at a little bit of longer-term trend to really get a sense of what's going on. As I said, that was the one business that sort of, from a shipment standpoint, did come in a little below what we thought. But we believe we're on track to get that business back to growth sustainably. It's just a little choppy as we move into that.

Speaker #5: Yeah. I think it's more of a shipment timing issue than a POS issue. So our forecast for Q4 has O&R bouncing back in Q4 and turning back to positive core sales growth.

Speaker #5: We obviously don't guide at that level. But when you see that, when you see a business that goes positive and then goes negative and then comes back to positive, you've got to sort of look at a little bit of longer-term trend to really get a sense of what's going on.

Speaker #5: So as I said, we were that was the one business that sort of from a shipment standpoint did come in a little below what we thought.

Speaker #5: But we believe we're on track to get that business back to growth sustainably. It's just a little choppy as we move into that.

Lauren Lieberman: That's great. Thanks so much, Chris.

Speaker #6: All right. Great. Thanks so much, Chris.

Operator: Thank you. Our next question will come from Steve Powers with Deutsche Bank. Your line's open.

Speaker #4: Thank you. And our next question will come from Steve Powers with Deutsche Bank. Your line's open.

Steve Powers: Hey, thank you very much. Chris, I wanted to talk a little bit more about the pricing into next year, really the kind of more of the philosophy that you are using to guide that pricing. I do not know if it is focused in any particular segment or if it is more just 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 two things. One, just through the elasticity assumptions around some of that pricing, and then also the durability of that pricing. If we got some cost relief, are you pricing in such a way that you think you could hold that pricing through any cost relief, or is it really tied to the inflation itself, if that makes sense?

Speaker #7: Hey, thank you very much. Chris, I wanted to talk a little bit more about the pricing into next year and really the kind of more of a philosophy that you're using to guide that pricing.

Speaker #7: In terms of I don't know if it's focused in any particular segment or if it's more if it's in areas where the costs are hitting you hardest or it's more focused behind some of your innovation.

Speaker #7: I'm curious in the context of I guess two things. One, just through the elasticity assumptions around some of that pricing. And then also, the durability of that pricing.

Speaker #7: If we've got some cost relief, are you pricing in such a way that you think you could hold that pricing through any cost relief?

Speaker #7: Or is it really tied to the inflation itself, if that makes sense?

Chris Peterson: Yeah. First of all, I would say that when we talk about pricing, we are trying to be much more strategic as we head into the pricing plan for next year. There are different ways you can take pricing. We can take pricing by taking a straight list price increase. We can drive assortment mix to take pricing. We can pull back on promotional depth or frequency, or we can reduce customer programming, are all options to do that. Or we can drive pricing up through new product innovation. 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 right execution of moving the pricing up to effectively deal with that underlying cost pressure.

Speaker #5: Yeah. So first of all, I would say that when we talk about pricing, we're trying to be much more strategic. As we head into the pricing plan for next year.

Speaker #5: And so there's different ways you can take pricing. We can take pricing by taking a straight list pricing piece. We can drive sort of assortment mix to take pricing.

Speaker #5: 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.

Speaker #5: And I think the answer is what we're 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're seeing.

Speaker #5: And then 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.

Chris Peterson: 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. We are trying to take all of that into account as we go forward. As I mentioned, I also do not want to overstate this pricing impact because, if you think about it, we are generating FUEL productivity savings that are 4% of COGS or something like that. We are doing a lot of work to do that. We have a two-year cumulative impact of inflation of 8%. So it is not like we need to take significant pricing here.

Speaker #5: 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.

Speaker #5: The exposure of different businesses because of where they're manufactured and because of the competitive environment is also different. And so we're trying to take all of that into account as we go forward.

Speaker #5: As I mentioned, I also don't want to overstate this. Pricing impact. Because if you think about it, we're generating fuel productivity savings that are 4% of cost of goods sold or something like that.

Speaker #5: Now we're doing a lot of work to do that. We have a two-year cumulative impact of inflation of 8%. So it's not like we need to take significant pricing here.

Chris Peterson: On average, if we got a low single-digit number, 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 what we are talking about here, which I think 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, one of the things we are also seeing is we are seeing some of our competitors are already taking pricing. 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.

Speaker #5: But on average, 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 in another categories, we may not take any pricing.

Speaker #5: That's sort of what we're talking about here. Which I think we can do in a way that I think can actually grow the categories be fully cost supportive.

Speaker #5: And be durable. And not put us really at a competitive disadvantage. By the way, one of the things we're also seeing is we're seeing some of our competitors have already taken pricing.

Speaker #5: So this is not a situation where in many cases we need to lead pricing. In particular, we're seeing private label pricing in the categories where we compete against private label move up right now.

Chris Peterson: 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.

Speaker #5: So our price gaps are narrowing because we're seeing some of the retailers move on their own private label before we move on our branded products.

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

Speaker #7: Perfect. You actually preempted my follow-up on competitive pricing. So thank you very much. Very holistic answer. And I'll leave it there. Thank you.

Operator: Thank you. Our next question is going to come from Andrea Teixeira with JP Morgan. Your line is open.

Speaker #4: Thank you. And our next question is going to come from Andrea Teixeira with JP Morgan. Your line's open.

Andrea Teixeira: Yes, good morning. Thank you. The question was exactly that same question regarding price sensitivity and competitors. I was just hoping if, Chris, you can talk about 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. What are the learnings you have had in terms of that affordability? What are the things you are doing now, and if you can explain the price increase you were saying. 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, and taking pricing on those vis-à-vis the more price-competitive ones.

Speaker #8: Yes. Good morning. Thank you. The question was exactly that same question regarding sensitivity price sensitivity and competitors. I was just hoping if Chris, you can talk about when you took pricing ahead of your competitors which is not the case now.

Speaker #8: But thinking about the price gaps, but more importantly, how the consumer can absorb what are the learnings you've had in terms of that affordability?

Speaker #8: And what are the things you're doing now? And if you can kind of explain the price increase that you're seeing. I'm assuming when you say very selectively, the magnitude or if you're doing any RGM to the price points that are less sensitive.

Speaker #8: And taking pricing on those vis-à-vis the more price competitive ones.

Chris Peterson: Yeah. I think this is a very different situation, and it is exactly the way your question is phrased is the way we have been thinking about it. If you go back to 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 a 15% price increase. We also, when tariffs first came into effect in 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.

Speaker #5: Yeah. So I think this is a very different situation. And it's exactly the way your question is phrased is the way we've been thinking about it.

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: We also when tariffs first came into effect in a year and a half or two years ago, we took significant pricing there. And we led the pricing up.

Speaker #5: And those price increases might have been 10% or 12% or something. And where we led the pricing and we got ahead of people, we did see a significant negative volume reaction until competitors caught up.

Chris Peterson: Where we led the pricing and we got ahead of people, we did see a significant negative volume reaction until competitors caught up. When we were talking about 2025, we were talking about being scraped effectively by the competitive set. This year, we have not done that. As I said, when you think about 2026, our pricing on average has been about zero, and we have really driven the core sales growth driven by the innovation, volume growth, mix improvement, et cetera. 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.

Speaker #5: And so when we were talking about 2025, we were talking about being scraped effectively by the competitive set. And so this year, we haven't done that.

Speaker #5: And as I said, when you think about 2026, our pricing on average has been about zero. And we've really driven the core sales growth driven by the innovation volume growth mix improvement, etc.

Speaker #5: As we go into next year, I don't think there's any business or any category where we're talking about price increases to anywhere where we expect the magnitude to be close to what happened in 2023 or '24.

Speaker #5: These are much more modest price increases and importantly, I think they're going to be timed such that they're likely to happen when the competitive set moves.

Chris Peterson: 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. I think that positions us in a very different way, and I also think it allows us to do it 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. That is why we are excited about it. That is the way we are approaching it. We are also 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. We are pricing less than inflation, is what we are talking about here over the 2-year period.

Speaker #5: 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.

Speaker #5: And so that's why we're sort of excited about it. That's the way we're approaching it. And we're also excited that we're 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.

Speaker #5: So we're pricing less than inflation. Is what we're talking about here over the two-year period.

Andrea Teixeira: Yeah, that is super helpful. Then a question to Mark. The operating cash flow, the $400 million, 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. Then the other impact of the pension would be definitely non-recurring. Thinking about how you now do not need as much as, from what I understand, you do not need the factoring of receivables as much as you do now. What is the normalized, if you did in the past, what is the normalized free cash? Should we think about into 2027 something in the order of $250 million, or is that a good kind of guardrail?

Speaker #8: Yeah. That's super helpful. And then a question to Mark. The operating cash flow the 400, then you take out I believe you mentioned the factoring of receivables was a decline of about 150.

Speaker #8: Correct me if I'm wrong. That would and then the other impact of the pension would be definitely non-recurring. But thinking about how you now don't need as much as from what I understand, you don't need the factoring of receivables as much as you do now.

Speaker #8: What is the normalized you did in the past? What is the normalized free cash? I mean, should we think about into 2027, something in the order like 250 or is that a good kind of guardrail?

Mark Erceg: Well, I think what I would say is if you think about having an operating cash flow number of approximately $400 million, as we have talked about our CapEx programs, having historically been in the $250 million range, this year will be below $200 million. I think it is reasonable to assume that next year will be below $200 million as well. We do not see a need for that to creep up over the next several years. So, I think at the end of the day, we will have the ability to pay down some measure of debt each year going forward. Obviously, we are going to be driving our EBITDA growth. As Chris indicated, our trailing 12-month adjusted EBITDA is up 20% for the quarter we just printed.

Speaker #5: Well, I think what I would say is if you think about having an operating cash flow number of approximately 400 million, as we've talked about, our capex programs having historically been in the 250 range, this year will be below 200.

Speaker #5: I think it's reasonable to assume that next year will be below 200 as well. And we don't see a need for that to creep up over the next several years.

Speaker #5: So I think at the end of the day, we will have the ability to pay down some measure of debt each year going forward.

Speaker #5: Obviously, we're going to be driving our EBITDA growth. As Chris indicated, our trailing 12-month adjusted EBITDA is up 20% for the quarter we just printed.

Mark Erceg: We have taken two turns off our leverage ratio over the last couple years whilst we have had to deal with basically a top-line compression situation and then bleeding out excess inventory. Now that we start having the positive flywheel on the sales line, we can monetize that through the P&L and increase our rate of EBITDA delivery, and hopefully take our leverage ratios down even faster. We have talked about this $2 billion investment we have made in our manufacturing network, and we have talked about the marginal economics that come off each of those automated lines. On a gross margin basis, it is effectively $0.50 on the dollar, and on a net margin basis, it is about $0.45 on the dollar.

Speaker #5: We've taken two turns off our leverage ratio over the last couple of years. Whilst we've had to deal with basically a top-line compression situation and bleeding out excess inventory.

Speaker #5: And now that we start having the positive flywheel on the sales line, we can monetize that through the P&L and increase our rate of EBITDA delivery.

Speaker #5: And hopefully take our leverage ratios down even faster. We've talked about this two billion dollar investment we've made in our manufacturing network. And we've talked about the marginal economics that come off each of those automated lines.

Speaker #5: And on a gross margin basis, it's effectively 50 cents on the dollar and on an op margin basis, it's about 45 cents on the dollar.

Mark Erceg: So, we think the flywheel is now starting to move, and we are very comfortable that we are going to be able to continue to deleverage the company in the years ahead like we have done in the past.

Speaker #5: So we think the flywheel is now starting to move. And we're very comfortable that we're going to be able to continue to deleverage the company in the years ahead like we've done in the past.

Chris Peterson: Yeah. If you look at this year, to Mark's point, if you were to, say, exclude the pension item, which 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 the 400. We are not changing our operational underlying guidance of 400 for this year. These are the two items explain 100% of the difference in the guide. Neither one 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 and debt in total to be down $200 million. There is no change on our end-of-year leverage of being comfortably below 4.5x.

Speaker #2: Yeah. If you look at the this year, to Mark's point, if you were to say exclude the pension item, which we actually believe is a positive, as Mark mentioned, and you were to exclude the impact of the factoring reduction, our guidance says we're still on track with the 400.

Speaker #2: So we're not changing our operational underlying guidance of 400 for this year. These are the two items explained 100% of the difference in the guide.

Speaker #2: And so in neither one 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.

Speaker #2: Because we expect factoring and debt in total to be down 200 million. And there's no change in our end-of-year leverage of being comfortably below 4 and a half times.

Chris Peterson: This is a little bit of I know it can be a little bit confusing, but we are going to get $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 going to use to pay debt down. We think that is a positive because it delevers the company, even though the way the accounting works, it looks a little funny because it reduces operating, and it does not give you credit for the $145 that is coming in next week on the investing side.

Speaker #2: So this is a little bit of I know it can be a little bit confusing, but we're going to get 145 million dollars of inflow in investing from the pension settlement.

Speaker #2: And we're going to have 85 million of outflow in operating. That results in 60 million dollars that we're going to use to pay debt down.

Speaker #2: We think that's a positive because it delevers the company. Even though the way the accounting works, it looks a little funny because it reduces operating and it doesn't give you credit for the 145 that's coming in next week on the investing side.

Mark Erceg: Yep. We took an extra $100 million with the refinancing that we did recently, and so that money is now being effectively used versus having to then factor where there is a fee associated with it.

Speaker #5: And we took an extra 100 million with the refinancing that we did recently. And so that money is now being effectively used versus having to then factor where there's a fee and associated with it.

Andrea Teixeira: Absolutely. The cost of factoring obviously is higher than when you raise, right, the money. It is kind of improving your overall capital structure by.

Speaker #8: Absolutely. And then the cost of factoring obviously is higher than when you raise, right? The money. So it's kind of improving your overall capital structure by.

Mark Erceg: Yeah, it is close to

Andrea Teixeira: or your overall cost.

Speaker #5: Yeah.

Mark Erceg: It is close to a push.

Speaker #8: Or your overall cost.

Speaker #5: It's close to a push. Yeah. It's close to a push given where we are. But that six and a quarter money was, I think, prudent for us to take in to just improve the company's overall liquidity position.

Chris Peterson: Yeah.

Mark Erceg: Yeah, it is close to a push given where we are. That 6.25% money was, I think, prudent for us to take in to just improve the company's overall liquidity position. We are very comfortable with what we have been able to achieve on the deleveraging side of the house. Again, now that the positive flywheel is coming through the sales line and pushing through the P&L, we feel even better about our prospects going forward.

Speaker #5: But we're very comfortable with what we've been able to achieve on the leveraging side of the house. And again, now that the positive flywheel is coming through the sales line, and pushing through the P&L, we feel even better about our prospects going forward.

Andrea Teixeira: Very helpful. Thank you both. That is all.

Speaker #8: Very helpful. Thank you both, Professor.

Operator: Thank you. The next question is going to come from Filippo Falorni with Citi. Your line is now open.

Speaker #3: Thank you. And the next question is going to come from Flippo Filorni with Citi. Your line is now open.

Filippo Falorni: Hi. Good morning, everyone. I 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 lower-income consumers feeling more the pressure of higher gas prices. How do you think that will play out in the upcoming holiday season, and any initial expectation from your retail partners as you head into the important season of the year? Thank you.

Speaker #7: Hi. Good morning, everyone. I wanted to get your perspective on the holiday season which is upcoming and especially just general health of the consumer in your categories.

Speaker #7: We hear from a lot of your peers about some income, some lower income consumers feeling more the pressure of higher gas prices. How do you think that will play out in the upcoming holiday season?

Speaker #7: And any initial expectation from your retail partners as you head into the important season of the year? Thank you.

Chris Peterson: Yes, good question. From a consumer standpoint, it is actually interesting. I mentioned on the prepared remarks that our category growth in Q3 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 -1%. Part of what is driving that is the US was actually positive on category growth. Europe was negative, and those were the two biggest things that were different from the flat. In the US, 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.

Speaker #2: Yes. Good question. So from a consumer standpoint, it's actually interesting. I mentioned on the prepared remarks that our category growth in the third quarter was about flat globally.

Speaker #2: Which was a little better than we had thought coming into the quarter. We had sort of thought it might be minus one. And part of what's driving that is the US was actually positive on category growth.

Speaker #2: Europe was negative. And those were the two biggest things that were different from the flat. In the US, what's happening is the low-income consumer last year recall had been pulling back on consumer purchases of durable and discretionary general merchandise items.

Speaker #2: What's happening now is they've sort of bottomed out. So the trend among the low-income consumers actually getting better. Because they're not declining their spend as much.

Chris Peterson: 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 5%. So, it's 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. And 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's sort of broadly what's happening from our view of the consumer environment. Relative to the holiday season, we think it's going to be a decent holiday season.

Speaker #2: 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 5%.

Speaker #2: So it's 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.

Speaker #2: And the middle-income consumer has been sort of hanging in there around flat line. And 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 consumer is declining less than they were a year ago.

Speaker #2: So that's sort of broadly what's happening from our view of the consumer environment. Relative to the holiday season, we think it's going to be a decent holiday season.

Chris Peterson: 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 a year ago. We believe that we're well-positioned for the holiday season. We continue to expect in Q4 significant distribution gains this year versus last year, for the Newell portfolio. And we think that, importantly, as we've launched new product innovation, we're not seeing really any barrier to consumers responding to that new product innovation when we come with a product that has great features and benefits under a leading brand name at a good value proposition. And so that's what we're focused on, and I think we're well-positioned. But obviously, the next 2 months are going to be critical as we head into the Turkey 12 and the holiday season coming up.

Speaker #2: 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.

Speaker #2: We believe that we're well positioned for the holiday season. We continue to expect in the fourth quarter significant distribution gains this year versus last year.

Speaker #2: For the Newell portfolio. And we think that importantly, as we've launched new product innovation, we're not seeing really any barrier to consumers responding to that new product innovation.

Speaker #2: When we come with a product that has great features and benefits under a leading brand name, at a good value proposition. And so that's what we're focused on.

Speaker #2: And I think we're well positioned. But obviously, there's the next two months are going to be critical as we head into the Turkey 12 and the holiday season coming up.

Chris Peterson: Right.

Speaker #2: Right.

Speaker #7: Right. Thanks so much, Chris. That was very helpful. And then maybe one quick follow-up for Mark. In the 150 million that you mentioned in terms of cost inflation, for next year, for '27, can you give us a breakdown of how much is resins, versus transportation, and maybe what's your underlying assumption for oil prices?

Filippo Falorni: Thanks so much, Chris. That was very helpful. And then maybe one 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's your underlying assumption for oil prices? Thank you.

Speaker #7: Thank you.

Mark Erceg: Yeah. Right now, as far as diesel is concerned, which is the principal variant, we're going to assume that where we are today is where we are tomorrow, generally speaking. I think that's the most conservative approach that we could take as it relates to that. As far as breaking down the specifics within the 150, I think what I'd prefer to do is rather give you a general sense of how we are looking at the current year, 220, because that's a 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 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.

Speaker #5: Yeah. Right now, as far as diesel is concerned, which is the principal variant, we're going to assume that where we are today is where we are tomorrow.

Speaker #5: Generally speaking. I think that's the most conservative approach that we could take as it relates to that. As far as breaking down the specifics within the 150, I think what I'd prefer to do is rather give you a general sense of how we are looking at the current year 220.

Speaker #5: Because that's a 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.

Speaker #5: And then labor and overhead. Because again, this is 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.

Mark Erceg: And then about 10% comes from metals and packaging and glass and other commodities. I would expect it to be somewhat similar, based on the fact that we're going to be assuming that oil remains elevated, so therefore resin remains elevated, diesel remains elevated, therefore transportation remains elevated. And of course, there's always typically somewhat wage inflation across your supply chain. I would think those percentages would stay somewhat comparable as it relates to the 150.

Speaker #5: And then about 10% comes from metals and packaging and glass and other commodities. So I would expect it to be somewhat similar. Based on the fact that we're going to be assuming that oil remains elevated, so therefore resin remains elevated, diesel remains elevated, therefore transportation remains elevated.

Speaker #5: And of course, there's always typically someone wage inflation across your supply chain. So I would think those percentages would stay somewhat comparable as it relates to the 150.

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

Speaker #7: Great. Very helpful. Thank you, guys.

Operator: Thank you. 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.

Speaker #3: Thank you. 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.