Church & Dwight Company, Inc.

among other things, the company's financial objectives and forecasts. These statements are subject to risk and uncertainties and other factors that are described in detail in the company's SEC filings. I would now like to introduce your host for today's call, Mr. Rick Durker, President and Chief Executive Officer of Church & Dwight. Please go ahead, sir.

All right. Thank you. Good morning, everyone. Thanks for joining the call. I'll begin with a review of Q2 results. I'll speak to the touchdown closing, strategic actions, and some thoughts on the macro environment. Then I'll turn the call over to Lee McChesney, our CFO. When Lee is done, we'll open the call up for questions. First, I'll begin with Q2 results. Organic sales grew 0.1%, exceeding our outlook of minus two to flat. Adjusted gross margin was down 40 basis points, also exceeding our outlook range. Adjusted EPS was 94 cents, which was 9 cents higher than our 85-cent outlook. Lee will take you through the rest of the numbers shortly, but first some highlights from the quarter. When we gave our outlook back in May, we were seeing category consumption data that was showing a deceleration from strong growth early in the year to turning negative in early April. The good news is that since then, things have begun to improve with categories finishing positive in April and Q2 category consumption for our largest categories finishing around 2.5%. The macro environment has been volatile and uncertain with tariff policies changing frequently. The consumer uncertainty showed up in early Q2 when consumer confidence hit a 12-year low. Since then, consumer confidence levels have started to recover as tariff policy appeared to stabilize. Not surprisingly, given that backdrop, our second quarter sales finished slightly ahead of our outlook, which gives us confidence in achieving our full year organic outlook of 0% to 2%. Our brands continue to perform well in this dynamic environment. We continue to drive both dollar and volume share gains across most of our brands. Our balanced portfolio of value and premium products and our relentless focus on innovation continues to position us well for the future. International continues to take share across the globe. Further, we continue to grow the online class of trade with online sales as a percentage of global sales now reaching 23%. In July, we closed our most recent acquisition, Touchland. Touchland is the fastest growing brand in the hand sanitizer category in the U.S. and is the number two hand sanitizer in the category. Touchland experienced strong growth in Q2, outpacing the category and gaining share. We're excited to add Touchland as our eighth power brand. and even more so, excited to officially welcome the Touchstone team to Church and Dwight. Now let's discuss the strategic actions we outlined last quarter. To drive shareholder value, management team assessed each of our brands on a regular basis. As a result of these reviews, we often accelerate and increase investments in our strongest brands and move with speed to address opportunities for value creation. That review is what led to the strategic decision to exit Flawless, Spin Brush, and Waterpik, a showerhead business. Today, we're providing an update on our vitamin business. We remain focused on our revitalization efforts with multiple innovation and branding programs underway in 2025. While it's still too early to fully evaluate results, we can share at this time that we're seeing mixed results. There are some green shoots. We see our multivitamin business improving week over week, and our innovation is seeing strong consumer reviews. And of course, we remain focused on executing our improvement actions. In addition, we are undertaking a strategic review of the business, including streamlining our supply chain to strengthen our core business, potential JV and partnership opportunities, and investiture options. The gummy vitamin business continues to be a drag on the company's organic growth. The good news is the gummy vitamin category grew almost 4%, which is the third consecutive quarter of growth. The bad news is our consumption was down around 25% as our TDPs declined. Now I'm going to turn my comments to each of the three businesses and the improved results from our teams in the second quarter. First up is the U.S. consumer business. Organic sales declined 1%, with volume growth being offset by negative price mix. Volume growth was muted by continued retail destocking in Q2. We continue to expect slight impacts moving forward. Consumption was positive in the quarter for the U.S. business, with momentum improving, and we grew share in five of our seven power brands. me provide a bit of color for a few of our important categories first with water detergent arm and hammer liquid laundry detergent consumption grew 3.2 percent in contrast to 1.3 percent category growth arm and hammer share in the quarter reached 15 percent moving to litter arm and hammer litter consumption grew 3.4 percent while the category was up 4.1 as we saw heightened competitive promotions next is batiste batiste continues to be the global leader in dry shampoo and while consumption was down Almost 7% in the quarter were confident in Batiste's return to consumption growth in the future. There are a couple of factors contributing to consumption decline, such as competitive price increases, economic pressure driving trade down, and we had some supply issues that are now resolved. This year, we're launching Batiste Lite. As a leading brand, our innovations continue to attract new users to the category and increase household penetration. Over in mouthwash, TheraBreath continues to perform extremely well. While the mouthwash category was down in Q2, TheraBreath consumption grew 22.5% and continues to be the number two mouthwash with a 21% share. Remember, we believe there's a lot of runway here. Our household penetration for TheraBreath currently sits around 11% versus the category of 65%. Here I once again outpaced the category with consumption growth of 11.4% compared to the acne category growth of 1.5%. and remains the number one brand in acne care with a 22 share. Equally important is Hero continues to gain share in acne patches. And similar to the TheraBreath story, we believe household penetration growth is key for this brand. It sits at 9% versus the category of 28%. Hero continues to launch innovative solutions and patches and is entering the growing body care segment in 2025 with the Mighty Patch Body. Looking ahead, we're excited about our pipeline of new products, which remain a key driver of our success. In 2025, we expect continued innovation to power our growth and build on momentum, especially in several core categories where we're leading the way. Now turning to international SBD, our international business delivered sales growth of 5.3% in the quarter. Organic increased 4.8% due to a combination of higher volume, price, and mix. Growth was led by Hero, TheraBreath, and FemFresh and was broad-based with all of our subs delivering growth. We were able to grow share in all of our power brands in the quarter, which is a great achievement. Finally, SBD organic sales increased 0.1% due to a combination of higher price and product mix offset by volume. We continue to be excited about the growth opportunities in this business. Looking ahead, our full year organic growth outlook continues to be 0 to 2%. While category consumption has improved, there remains uncertainty around the US consumer and global economy. We expect our Q2 brand share momentum to continue, supported by our new product launches, our distribution gains, and sustained full-year investment in marketing. Adjusted EPS, we continue to expect 0% to 2% growth, which includes the touchline acquisition, the cost of the product recall, and the wind down of the three exited businesses. I'll close by saying that category consumption is looking a bit better than three months ago, and our brands are strong. They're doing well. We're gaining both dollar and volume share across much of the portfolio. We have a healthy mix of value and premium offerings, and we're well-equipped to navigate the current environment. The strategic actions we're taking will position the company well for the future, and we continue to be on the hunt for the right acquisitions. I'd like to thank all the Church & Dwight employees for executing well in a volatile environment, and now I'll hand it over to Lee for more detail on the quarter.

Thank you, Rick, and good day to everyone. Well, as Rick just mentioned, we've just concluded a very productive quarter from our teams across the globe. As we shared during our first quarter call, we remain focused on what we control in the second quarter, and this positions us well as we look forward to the second half of 2025. Let's dive into the second quarter and our outlook. We'll start with EPS. Second quarter adjusted EPS is 94 cents, up 1% from the prior year. The 94 cents was better than our 85 cent outlook, driven by a stronger sales performance and some good resiliency with gross margin. Reporter revenue was down 0.3%, and organic sales were up 0.1%. The organic sales were on the high side of our May 1st outlook, and it reflects the improvements we saw in category growth and the strength of our brands. Our second quarter adjusted gross margin was 45.0%, a 40 basis point decrease from a year ago. Productivity and higher margin acquisition business mix drove 170 basis points of margin growth, and offset a negative 140 basis points from inflation and tariffs, 40 basis points from the combination of volume, price, and mix, and 30 basis points from the Zycam or JL swab recall. I'd also note that a portion of our original tariff estimate, about 20 to 30 basis points we expected in the second quarter, shifted to the third quarter as the tariff rates and the shipment timing evolved. Moving to marketing. Our marketing expense as a percentage of sales was 10.4%, or 30 basis points higher than 2Q of last year. And for the year, we continue to target 11% of net sales in line with our evergreen model. We are encouraged with our share results in the first half of the year. For SG&A, Q2 adjusted SG&A decreased 80 basis points year over year. And other expense decreased by 5.2 million due to higher interest income. And we now expect Other expense for the full year to be approximately $65 million on an adjusted basis, reflecting a lower investment income following the Touchland acquisition. In 2Q, our effective tax rate was 23.8% compared to 24% in Q2 of 2024, a 20 basis point year-over-year decrease. The expected adjusted effective tax rate for the full year continues to be 23%. And now to cash. For the first six months of 2025, cash from operating activities was $416.5 million, a decrease of $83 million versus last year due to working capital timing and lower cash earnings. Capital expenditures for the first six months were $39 million, a $37.6 million decrease from the prior year. And we continue to expect capex of approximately $130 million as we return to historical levels of 2% of sales in 2025. And in the second quarter, the company executed a $300 million share repurchase via open market transactions through an accelerated share repurchase program. Okay, let's now spend a few minutes on our outlook. For the full year, we expect reported sales growth of approximately 0% to 2%, which includes the addition of a touchline acquisition and the impact of lower sales from the businesses we are exiting. And to quantify that for you, that's about $70 to $80 million of touchline coming in, and $78 million going out for the businesses being exited. We continue to expect organic revenue growth of approximately 0% to 2%. The sales outlook reflects our brand and category growth momentum and reflects a balanced macro view around the uncertainty in the US and global economies. We continue to expect four-year gross margin to contract 60 basis points versus 2024 from elevated input costs and tariffs, the recall expense, unfavorable price and mix, to outpace incremental productivity, and higher margin acquisition impacts. And looking forward, Touchstone is margin rate positive, but for this year, the business exits mitigate that benefit. And we're maintaining our adjusted EPS outlook for 2025. We expect full year adjusted EPS to be 0% to 2%, which includes the key elements we highlighted after the first quarter, but also includes the Touchstone, which is neutral EPS for 2025, the wind down of the free business exits, and the cost of the product recall. And for 3Q, we expect reported organic sales growth of approximately 1% to 2%, adjusted gross margin contraction of approximately 100 basis points, primarily from inflation and tariff costs and the lower margins of the exited businesses. Marketing will be higher sequentially compared to last year. And as a result, we expect adjusted EPS of $0.72 per share, which is a decrease of 9% versus last year adjusted EPS. Cash flow from operations for the full year remains $1.05 billion. In July, we also expanded our revolver facility from $1.5 billion to $2 billion. And the combination of this cash flow and the expanded credit facilities provides us excellent flexibility. Our M&A team accordingly continues to pursue accretive acquisitions that meet our strict criteria with an emphasis on fast-moving consumer products similar to our recent acquisitions. To conclude, Back on May 1st, we communicated our proactive set of actions to navigate 2025. And as Rick and I just highlighted, we've made great progress and we're focused on sustained execution for the remainder of the year. So with that, we're happy to take your questions. So Eric, we'll turn it to you.