Newell Brands(NWL) - 2025 Q2 - Quarterly Results

Executive Summary Newell Brands achieved Q2 2025 net sales, core sales, normalized operating margin, and normalized EPS within guidance, marked by significant gross margin expansion and successful debt refinancing Q2 2025 Performance Highlights The company met its Q2 2025 financial guidance, demonstrating strong gross margin expansion and enhanced financial flexibility through debt refinancing - Achieved net sales, core sales, normalized operating margin, and normalized EPS within guidance ranges[1] - Gross margin expanded by 100 basis points year-over-year to 35.4%, marking the eighth consecutive quarter of 100+ basis point expansion and the highest rate in four years[1][4] - Refinanced $1.25 billion of debt, which was four-times oversubscribed, indicating strong investor support for the new corporate strategy[1] Management Commentary CEO Chris Peterson and CFO Mark Erceg highlighted the company's strategic progress, operational agility, and improved financial health - CEO Chris Peterson stated the company is on track to improve core sales growth, drive margin improvement, and generate strong cash flow amidst a challenging macroeconomic environment[1] - CFO Mark Erceg highlighted the 100 basis point gross margin expansion and enhanced financial flexibility through the oversubscribed $1.25 billion debt refinancing[1] Second Quarter 2025 Financial Results Newell Brands reported a decline in net sales but achieved improved gross and operating margins due to productivity and restructuring savings, while managing increased interest expenses Operating Results Net sales declined in Q2 2025, but gross and operating margins improved due to cost management, while net income saw a slight increase and normalized EPS decreased | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------- | :------ | :------ | :--------- | | Net Sales | $1.9B | $2.033B | (4.8)% | | Core Sales Decline | 4.4% | - | - | | Gross Margin | 35.4% | 34.4% | +1.0 pp | | Normalized Gross Margin | 35.6% | 34.8% | +0.8 pp | | Operating Margin | 8.8% | 8.0% | +0.8 pp | | Normalized Operating Margin | 10.7% | 10.6% | +0.1 pp | | Net Income | $46M | $45M | +2.2% | | Normalized Net Income | $101M | $148M | (31.7)% | | Diluted EPS | $0.11 | $0.11 | 0% | | Normalized Diluted EPS | $0.24 | $0.35 | (31.4)% | | Normalized EBITDA | $280M | $282M | (0.7)% | - Operating margin improved to 8.8% (normalized 10.7%) primarily due to savings from restructuring actions and lower restructuring-related charges[6] - Net interest expense increased to $82 million from $78 million in the prior year period[7] Balance Sheet and Cash Flow The company experienced a year-to-date operating cash outflow, refinanced debt, and ended Q2 2025 with increased debt and reduced cash | Metric | YTD Q2 2025 | YTD Q2 2024 | Change | | :-------------------------------- | :---------- | :---------- | :----- | | Operating Cash Flow | $(271)M | $64M | $(335)M | | Debt Outstanding (End of Q2) | $5.1B | $5.0B | +$0.1B | | Cash & Cash Equivalents (End of Q2) | $219M | $382M | $(163)M | - Operating cash outflow was impacted by a large use of working capital, cash tariff costs, and a lower cash bonus payout in the prior year[10] - Refinanced senior unsecured notes due 2026 with $1.25 billion of 8.50% senior unsecured notes due 2028[11] Operating Segment Results Segment performance varied in Q2 2025, with Home & Commercial Solutions seeing a significant decline, Learning & Development remaining stable, and Outdoor & Recreation improving from a loss to a profit Home & Commercial Solutions Home & Commercial Solutions experienced a decline in net sales and a significant drop in normalized operating income and margin | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------- | :------ | :------ | :--------- | | Net Sales | $892M | $962M | (7.3)% | | Core Sales Decline | 6.0% | - | - | | Normalized Operating Income | $44M | $70M | (37.1)% | | Normalized Operating Margin | 4.9% | 7.3% | (2.4) pp | - Core sales increased in Home Fragrance but declined in Commercial and Kitchen businesses[12] Learning & Development Learning & Development reported a slight net sales decline and a modest decrease in normalized operating income and margin | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------- | :------ | :------ | :--------- | | Net Sales | $809M | $813M | (0.5)% | | Core Sales Decline | 0.5% | - | - | | Normalized Operating Income | $207M | $212M | (2.4)% | | Normalized Operating Margin | 25.6% | 26.1% | (0.5) pp | - Core sales increased in the Writing business but decreased in the Baby business[13] Outdoor & Recreation Outdoor & Recreation experienced the largest net sales decline but significantly improved its normalized operating income from a loss to a profit | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------- | :------ | :------ | :--------- | | Net Sales | $234M | $258M | (9.3)% | | Core Sales Decline | 10.9% | - | - | | Normalized Operating Income | $13M | $(1)M | NM | | Normalized Operating Margin | 5.6% | (0.4)% | +6.0 pp | - Core sales decline of 10.9% was partially offset by favorable foreign exchange[14] Outlook Newell Brands provided its Q3 and updated full-year 2025 guidance, reflecting anticipated tariff costs and projecting continued sales declines with stable normalized margins Q3 and Full Year 2025 Guidance The company initiated Q3 2025 and updated full-year 2025 outlooks, projecting sales declines and specific ranges for normalized operating margin and EPS | Metric | Q3 2025 Outlook | Updated Full Year 2025 Outlook | | :---------------------- | :-------------- | :----------------------------- | | Net Sales | (4%) to (2%) | (3%) to (2%) | | Core Sales | (4%) to (2%) | (3%) to (2%) | | Normalized Operating Margin | 9.1% to 9.5% | 9.0% to 9.5% | | Normalized EPS | $0.16 to $0.19 | $0.66 to $0.70 | - Updated full year 2025 operating cash flow outlook to a range of $400 million to $450 million due to higher tariff costs on inventory[16] Tariff Impact The updated 2025 outlook incorporates significant incremental cash tariff costs and a substantial gross profit impact before mitigation - Estimated incremental cash tariff cost for full year 2025 is approximately $155 million compared to 2024[15] - Gross profit impact from tariffs, prior to mitigating actions, is estimated at approximately $105 million, or $0.21 per share after tax[15] Non-GAAP Financial Measures This section explains the company's use of non-GAAP financial measures to provide a clearer view of underlying business performance and outlines recent changes in normalization practices Explanation and Use Newell Brands utilizes non-GAAP measures to offer a consistent view of underlying sales trends and core operational performance, excluding non-recurring or non-operational