Church & Dwight Company, Inc.

Okay, so next up this afternoon, we're pleased to welcome Church and Dwight here today in his first presentation at our conference as CEO. Not his first presentation, but his first presentation as CEO of the company as Rick Durker. And we're also pleased to have CFO Lee McChasney, who's joined us, joined Church and Dwight in March, and also Chuck Raup, who runs the consumer domestic business. So the team's going to give a presentation. If there's some time for Q&A, we will do that. But generally speaking, the floor is yours.

All right, thanks, Lauren. It's always good to be back in Boston. So here's our safe harbor statement. Please, if you have any questions, read that on our website. So the message today is we remain really confident in our future. We're living, and everyone is, in a volatile environment. We have a balanced portfolio. We're driving share gains on many of our brands. Our latest acquisition brings additional opportunities for growth. Online channels experiencing steady growth. A long track record of success there. Innovation remains a key growth driver, and we're seeing strong international performance, so we're confident about the strength of our Evergreen model as we look forward. For those of you who may not follow Church and Dwight every day, we're about a $6.1 billion company, 77% of our sales are in the US, 18% are national, and the rest is our SPD division. We have eight power brands. Those eight power brands represent 75% of our sales and profits. And we have a balanced portfolio. About half of our business is household. About half of it is personal care. And about 36% is value. And about 64% is premium. So really resilient in most any economic condition. But it all started back in 1846 with Arm & Hammer. And this was Dr. Church and Mr. John Dwight. And they started Church & Dwight. And it all started with the yellow box. And if you fast forward time, Arm & Hammer is such a unique brand. It plays across so many different categories. It's premium in some categories. It's value in other categories. It's known for cleaning, personal care, laundry, deodorizing, cooking. And this is where the brand is today. It's a $2 billion brand globally out of our $6 billion. So long track record of success. If you rewind the clock and look back in 2020, we only had one power brand. It was Sorry, in 2000, we only had one power brand. It was Arm & Hammer. And since then, we've acquired many different brands and businesses, but one constant remains. It's the growth and the strength of Arm & Hammer over a long period of time. Let me talk for a few minutes about categories. So we're driving share gains across most of our categories. Here is a look at just the categories. We are eight power brands in nine categories. And more often than not, if you look back at the track record for categories, they've grown around 3% a year. And here's a little bit more detail. So in 2024, category growth, this isn't our growth, this is category, this is the macro. First half of 2024, categories were growing 4.5%. Back half, they were growing 2.5%. The world seemed to be in a lot of turmoil early in 2025, and categories were only growing 1.5%. Q2 they grew closer to two and a half percent and I would say kind of year to date quarter to date they're growing around two two and a half percent as well so they're better than they were when we when we spoke in April and they're still not back to historical averages now that's just one piece of the story our category growth is important but how we gain share determines how fast our brands are growing And in general, we're very successful. Six of our eight power brands are gaining share on a year-to-date basis. And now let me turn it over to Chuck, who leads our U.S. business. He's going to talk about each of the categories and give you some confidence in those businesses.

Thanks, Rick. We'll kick things off by taking a look at our fabric care business. As we take a look at the liquid laundry category, we see that in Q1, things were about flat, and then Q2, we rebounded a bit. and got to about a 1.4% growth rate, which is about what we expected. Now, Arm & Hammer was able to outpace the category and grow at a solid rate and consequently grow share. And the share gain is really part of a longer track record that Arm & Hammer has. And we have this history of bringing consumers into our portfolio and also retaining those consumers in our portfolio. So if you look at where we were in 2006, we were at a five share. And we've nearly tripled that by 2025. Now, why are we able to do this? Well, we believe it's because we deliver a superior value to our consumers, and we're always delivering meaningful innovation. And a great example of this approach is our good, better, best strategy. So if we look at our slide, the good is the yellow and white bottles. And then we add value as we move up the tiers. And so we add things like OxiClean in our better tier, and then our newest innovation, DeepClean, in our best tier adds greater stain-fighting efficacy. And what we've seen from DeepClean is that it really is able to attract new users into our business. Moving on to cat litter. Cat litter, the performance of the category has been strong throughout the year. It started off at about 2% and then accelerated to 4%. And we were right there with the category, just a little bit under through the front half, and we're down just a shade in share. But the good news is, in Q3, things have picked up, and we're back to year-to-date share growth. Now, cat litter is also a great share story. And so if we look over the last five years, we have increased our share about 150 basis points. And why is that? Well, the reasoning is similar to what we talked about in liquid laundry detergent. We deliver a great value to consumers, and we deliver meaningful innovation. And so, for example, this year, key drivers of our growth are performance in our black box, which is in our medium tier or our better tier. And we've also had solid performance in our hardball innovation, which is our entry into the light litter segment, which is a $400 million segment. And we've grown our share from about 4% to 8%. Now, as Rick discussed, Arm & Hammer is this tremendous mega brand that spans many categories. And it offers us the ability to connect with consumers across many occasions throughout their day. And so what I'm going to share is an update to our advertising, which really shows the empowerment that Arm & Hammer brings to consumers, enables them to get the job done during their day and realize a great value.

A helping hand. We show up with the whole darn arm. With the elbow grease. the roll them up the muscle with the strength of dollar saved and jobs done well we show up with the whole darn arm arm and hammer more power to you so we're very excited about this campaign and we think it really captures the essence of arm and hammer

and it will be a cornerstone as we look to drive our $2 billion megabrand forward. Now moving on to another area of momentum, and that's our Hero Acne category. So as we look at the acne category, it was down in Q1 and rebounded a bit in Q2 and grew about 1.7%. Hero was able to maintain double-digit growth and outpace the category. And Hero is a great share story. So as we look at Hero, it was about a 1% in 2020, and we've grown that share to about 22%. And what's significant about that is not only is Hero the number one acne patch brand, but it's also the number one brand in acne. Now, the reasoning behind this is Hero delivers a great value to consumers. And so when we look at the Hero consumer, this is a younger consumer that wants to bring out that inner Hero in themselves and feel confident. And they really can feel this way about themselves when they're in control of their acne. And so what I'll share is a video that's from some of our influencers and also people who really use the product. And it really demonstrates the power of the Hero Patch.

Oh, my God. Oh, my God.

So as we like to say, it really does get the gunk. Now, the great news on Hero is that there's tremendous runway for growth. So when we look at the penetration of Hero and the penetration acne category, we're well below. So we're at a 9% penetration and the acne category is at 28%. So a tremendous opportunity to bring new users into the category. Additionally, we have significant upside in our share of shelf. So we've been doing a good job growing our distribution, and we've increased our average weekly TVPs about 35% over the last year. But if we look at where we are relative to the second leading competitor, they have about 2x the average weekly TVPs. So as we drive penetration of the brand, and as we innovate across the Acne journey, so from pre, during, and post, we feel that there's a lot of opportunity to connect with consumers and grow our shelf space. Another area of momentum is our TheraBreath business. So as we look at the mouthwash category, it was down in the front half, largely driven by alcohol-based mouthwash. Now, TheraBreath was able to still put up tremendous double-digit growth and outgrow the category. And what's significant about this growth is, one, we're at an all-time share, and we've grown to about a 21 share from about a four over just five years. Additionally, this growth... has made us the number two mouthwash in the category. And we're the number one non-alcohol mouthwash. And that's significant because non-alcohol mouthwash is about 54% of the category. And it's growing at a better rate than the alcohol mouthwash. And we take a look at how we're going to grow TheraBreath. The story is similar to where we were at with Hero. There's tremendous upside in growing penetration. So when we look at TheraBreath, we're at 11 and 1 half penetration. versus a category penetration of over 68. That's a ton of runway. Additionally, we have the same opportunities in shelf space that would really match our performance. And so if we look at our growth in our average TDPs, we're growing at about 25% over last year. But when we look at our competitors, Crest has about 1.5% more average TDPs versus TheraBreath, and Listerine is at two. So this is going to be a definite area of focus as we move forward and we grow our brand. Moving on to Batiste and our dry shampoo. Now admittedly, Batiste is an area where we want to be completely open. We have work to do. So as we look at the front half, the category was growing and Batiste was down. And that's from competitive pressures from smaller players and also significant distribution gains for our competitors. But here's the thing with Batiste. We're the leader in dry shampoo with a 42 share. And our job and our task moving forward is to act like a leader in this category. And so what you'll see from us is emphasizing the core benefits of Batiste. We know we have the best performing dry shampoo in the category. We are going to ensure that we have the right price pack architecture to deliver the right value And we need to innovate against new consumer occasions and deliver more delighters to our category. And so that's what you'll see from us moving forward in Q4 and to begin next year. Now let's talk about a couple of growth factors that can really accelerate our growth. First is our acquisitions. And we have a very aggressive M&A model. And we're really excited about our latest M&A. And that's Touchland. And what is TouchLint? Well, it's this really cool hand sanitizer, and there's also a body mist. And what's different about TouchLint? Well, it kind of spans between personal care and beauty. And so it's got this great innovative packaging. It's a non-alcohol smell and these great fragrances. It's not sticky. It hydrates your hands, and it goes on evenly. So really a breakthrough in hand sanitizers. I'm going to share a video with you that I think really captures TouchLint. the touch land experience. Pretty cool, huh? What else is cool about Touchland is it's the fastest-growing brand in the hand sanitizer category, and it's number two in its core distribution channels. Additionally, it's a great online brand. So about 30% of the sales are online, and it has significant social media followings with over a million consumers following the brand on Instagram and TikTok. And as Rick said, we're really focused on making this our eighth power brand. And the really exciting thing about Touchland is we know how to grow a brand like this. So if you look at what we did with Hero, we tripled the business and we're still going. If you look at what we're doing with Herobreath, we're tripling the business and we're still going. And that's the goal with Touchland, is to do at least that. And we think this brand has just tons of upside potential. Moving on to another area for accelerated growth, and that's our e-commerce business. And clearly, we have to be focused on this growth because this is where our consumers are shopping more and more. And we've made tremendous progress in our e-commerce business. So if you take us back to just 2016, we were at a 2%. 2% of our sales was in e-commerce. We've now grown that 10 times, and it's at 23% of our business. And we're not done yet, and we'll continue to grow. Additionally, five of our eight power brands are growing online share. And as far as Arm & Hammer Laundry, Cerebreath, Nair, and Zycam, they had record online sales. So we're going to continue to drive that momentum forward. Additionally, as we've been growing online, we've been increasing our global footprint. And so if you look at Cerebreath, it is the number one mouthwash and key retailers in China, South Korea, Canada, and Mexico. And then we've had top product launches in our categories for TheraBreath, MightyPatch, and PowerSheets across Canada, Mexico, and some other regions as well, too. So really strong progress in our e-commerce business in the U.S. and also expanding our footprint globally. And then to close things out, let's talk about innovation. As Rick talked about, innovation is a significant part of our growth algorithm. And in fact, half of our 4% growth in 2024 came from innovation. And so as we look at some of our new product launches, they're always grounded in a very meaningful consumer insight. So if we look at our laundry business, free and clear detergent for our deep clean and our power sheets fragrance-free, because we know that there's a group of consumers who want that really great clean, but without any fragrances or perfumes. For Batiste, Batiste Light is about reducing the residue that is a dissatisfier for many consumers who participate in a dry shampoo category. And then for VitaFusion, our Multivites Power Plus, what that offers is 100% of the daily value of 10 nutrients. And we have specific formulas for both men and women. So a strong lineup of innovation. And I'm going to close with pretty fun and our biggest innovation that's going out the door right now. And that's Trojan Goat, the greatest of all Trojan. And what's really great about this launch is it's our best entry into the non-latex category, which is a big deal. That's about 28% of the category and it's a segment that's growing. It is the first new material that's been introduced into this category in about 10 years. which is also significant. And we really believe that versus the competition, it delivers a superior experience, a more intimate connection through heat transfer. So as we look at this brand, excuse me, this new product launch, we really have high hopes for what it's going to do for the category and what it's going to do for Trojan. And now I'll share a commercial. This is our launch commercial that shares how excited we believe consumers will be for this launch.

His profile said he uses Trojan goat condoms.

They are the softest.

Most flexible.

Oh, non-latex Trojan there is.

Check, please.

Trojan goat condoms. Be that couple.

So I think this is an excellent point for me to turn things back over to Rick.

Good luck topping that.

All right, thanks, Jack. I don't think the goats are in the package, but maybe next year. Okay, Consumer International, just want to give you a flavor on why that business is growing so well and the confidence we have in it. Remember, international, in our Evergreen model, is about 8% algorithm from a net sales perspective. And just for a backdrop, it's about a $1.1 billion business these days, pretty broad-based. Global Markets Group is where we go through distributor, and then we have subs all over the world. And organically, we've had great performance, great track record performance. Mike Reed and his team have been very consistent over a long period of time. Even in the first half of this year, 5.8% and 4.8% growth in the kind of macro world we're living in is just fantastic. And remember, 18% of our sales are outside the U.S., but many of our peers are in the high 50s. And so there's just a lot of room to run there. And we can do that through a few different levers. Number one, we have some U.S. brands that can continue to go global, like Arm & Hammer, like OxyClean, like Waterpik. We have brands out there like Batiste, Darimar, and FemFresh that are global international brands already that can continue with distribution opportunities. And then we have TheraBreath and Hero in recent acquisitions. And the good news is we're already in 50 countries by the end of 2025. That is Lightning speed for us in terms of all the regulatory hurdles that you have to overcome and partners and distributors. So that's just fantastic tailwind for international. We're investing while we grow. We acquired Grafico in Japan. They were a OxyClean distributor. There's 90% brand awareness of OxyClean in Japan. Implemented a global ERP system for our GMG business. As we scale... How do we become more efficient and work through that complexity of countries and brands? We've widened our regulatory and IT infrastructure globally. We have new offices and expanded offices in Panama, China, and Singapore. And then, of course, we talked about Hero and TheraBreath. And probably even more important for the future is we've added an M&A presence in Europe and Asia. We are in the deal flow in the U.S. Almost every deal that happens, we know what's going on. That's not as true in Europe and Asia, so we're really focused on doing one of the next acquisitions outside the U.S. And then moving to specialty. Again, this is our third division, about a 5% evergreen organic growth rate is the expectation. This business is made up of about two-thirds animal nutrition and one-third specialty chemicals. And then the small sliver is commercial and professional, and that's really the B2B business of our CPG businesses. And just to give you a little bit more color, there's a bunch of verticals that that business can play in, hospitality, food service, laundry, office. And we're laser-focused on adding some resources for packaging and for R&D and from a sales perspective because many of our peers have businesses that are multiples the size that we are here. So I have a lot of faith in the team to drive that. And then you may be aware that SBD was established typically a cyclical business over a long period of time. We did some portfolio choices. We divested and shut down a couple businesses. And so that curve that goes up and down over time we think is not going to do so anymore. It's going to be pretty consistent because of the global expansion opportunities and because of the marketing and innovation we have behind that business. And now I'm going to turn it over to Lee to wrap up with the evergreen model.

Okay, so thank you, Rick and Chuck, and a big thank you to Lauren and the Barclays team for hosting us. So I'll start off with, as I noted in our August earnings call, our teams across the globe have been very productive despite the many challenges and distractions in the macro environment. And really, over the past decade, our business has seen many macro challenges. But for us at Church & Dwight, we remain focused on what we can control and executing our plan with urgency. So the foundation for our actions is our evergreen model. Each day we make decisions with these objectives in mind. Our associates across the globe know this model, where we want to grow, our focus on margin rates, and providing the right solutions to the customers and earning their loyalty. So let's spend a few minutes with our results over the past decade, and then I'll give you an update on how we're tracking this year. So goal number one from our Evergreen model is a clear alignment on delivering a steady stream of 4% organic volume growth, 3% for U.S. domestic, 8% for international business, and 5% for the SBD business. And how have we done over the past decade? Quite well. We've averaged over 4%, a broadly consistent performance, and on top of that, we've added a steady stream of high-quality acquisitions that further fuel results in the short and long term. Linked to our growth goals is our mindset around gross margin. Each year, we bring forward actions that have the potential to expand our margins 25 to 50 basis points. We believe that clear gross margin objectives ensure our teams make the right business decisions. Margin rates are integrated into incentive plans, and as a result, our employees across the globe focus here as well. And the clarity around growth and margin rates ensures we drive dollar growth and ultimately drives cash flow. which is what really creates valuation expansion. We also discreetly call it our marketing in our Evergreen model. We invest approximately 11% of sales. We do this because it ensures our brands remain top of mind in the marketplace and it fuels market share growth. It's a short and long-term investment. Mindset and our history demonstrates our commitment no matter the macro environment. For SG&A, we continue to increase our invested dollars in growth areas like international and e-commerce, but we also target leverage each and every year. Interactions enable 8% EPS growth. When we look back to 2017, we've delivered above that objective despite all that has happened in the world. It's a strong track record of execution. So, let's turn to 2025. Yes, the year has brought some challenges to everyone. The tariff news uncertainly drove consumer sentiment to decline, and there's been an assortment of challenges for our retailers. However, as Rick, Chuck, and I have noted, and our historical results demonstrate, we remain focused, again, on what we can control. After the first quarter, we communicated our action plans for the second quarter and the second half of the year. We knew our categories would eventually improve, as they are resilient categories, and we have a growing share position across our balanced portfolio. Our international SBD business continued to grow, and we run our business and do not get distracted by the macro. Our job is to win share and execute in all markets. This year, we're delivering incremental productivity, we've jumped into managing tariffs, and we remain focused on additional innovation and investing in marketing to drive share growth. So what does that all mean? For 2025, we're still on track to deliver reported and organic sales growth of 0% to 2% and to grow our adjusted EPS 0% to 2% as well. The EPS growth outlook includes the touch and acquisition, the cost of the Zycam Origel swab recall, and the wind down of the three exited businesses. And on our August earnings call, we reiterated that we are confident that we would grow 2.5% organically in the second half of the year to drive this outlook. Today, we remain confident in that outlook and are encouraged with our sales results through the third quarter. We look forward to closing out the quarter strongly and sharing our final results in late October. I also want to remind everyone of our portfolio actions to drive shareholder value. We regularly review our brands. Often that leads to making increased investments in many of our brands and sometimes leads to targeted actions to drive value creation. Earlier this year, we shared that we were discontinuing or divesting the SpinBrush, Flawless, and Waterpik showerhead business. Those processes remain on track. In August, we also provided an update on our vitamin business. We're focused on a series of revitalization actions to improve the performance of the business. Those efforts have now expanded to include a strategic review of the business that includes streamlining our supply chain to further strengthen our core business. And we're also exploring JV and partnership opportunities as long as the best of your options as well. We expect to reach a conclusion from this review by the end of the year. And as I mentioned earlier, we've moved quickly in 2025 to manage tariffs. While gross margin tariff pressure was as high as $190 million, Our action plans to date have reduced this exposure to $50 million today. And as we look forward, we believe we can reduce this exposure significantly over the next 12 months through a balanced mix of all the mitigation approaches noted here. So let's now look and think about free cash flow for a second. On a 10-year average of 119% free cash flow conversion, it really speaks to the strength of our portfolio and the execution capabilities of our team. Our investment-grade balance sheet continues to progress forward, and as a result, it provides us tremendous flexibility. We stand today with the financial capacity to invest in our business with over $5 billion of dry powder. And at Church & Dwight, we've been very consistent with how we're going to utilize this cash flow. Number one, consistent, disciplined investments in a creative TSR-enhancing M&A. Hero, TheraBreath, and Touchland are our most recent examples. Number two and three, it really speaks to our investments in our core business in line with our evergreen model. Number four is debt reduction. Number five is finally about returning cash to shareholders. Our top quartile dividend track record and our recent $300 million share of purchase reflects the sustained commitment here as well. So let's wrap up our presentation. Remain confident in 2025 and beyond. We have a balanced portfolio, strong brands, and we're earning share gains in the majority of our categories, and a team consistently delivers our evergreen model. Credibility, consistency, no matter the environment. Thank you for taking the time to learn about Church and Dwight, and Lauren, maybe we have a few minutes for Q&A.

We can also pass the mic around, so if people have questions, definitely feel free to raise your hand. So I wanted to just clarify one quick thing, Lee. You mentioned, the way I'd phrased my question and planned to ask it was that second quarter consumption was around 2.5%, and your expectations, I believe, were for that to come back down to a sort of 1.5% to 2% range for the balance of the year. And we have seen some slowing in Nielsen that would be consistent with that. But I think you just said still around 2.5%. So I just wanted to kind of clarify what the expectation was if it's a little bit better than expected or if it's trending in line with what the expectation was, which was a little bit of a de-self.

Yeah, so the 2.5% is obviously the global organic growth, so we got the benefits from SBD and international. As we did say, the categories, you know, we thought it would be in this 1.5 to 2 level back in August. And, you know, I'd say to date they've been performing at that level, even potentially slightly better. It just depends on the week. It still moves around a bit.

Yeah, our outlook for the back half of the year was 2.5% organic growth, really.

Okay, great.

I'm looking around.

Hi, thanks. Obviously 5 billion plus in M&A capacities a lot. So just wondering how we should think about the types of businesses you're interested in and maybe the return on investment hurdle?

Yeah, I think we're a little unique on the way we do M&A. We've been very successful for a very long time. We say no a lot, is what I would tell you. We have a team that works on M&A, kind of led by Brian Buechert, but the whole executive leadership team spends a lot of their personal time on it. We don't sit around thinking about, oh, we wish we could go into this category or that category. We really believe you can only buy what's for sale. So we typically ramp up very quickly once we're in the deal flow for any acquisition And we had no aspiration to go into mouthwash. We had no aspiration to go into Mighty Patch or to hand sanitizer or to Orogel or to OxyClean, any of those. But the team ramps up really quickly to learn the category, to understand the dynamics. And a lot of times you walk away from a deal because of private label exposure or claims or something we don't like when we learn about what they're doing from an R&D perspective or for the consumer. And so I will never sit up here and say, oh, I wish we were in this category or that category. I would just say our competitive advantage, I think, is to learn a category very quickly, understand what the dynamics are, and then make a decision whether we want to own a brand that we feel like is going to be around for forever, for decades, not for for two years or five years. In terms of hurdles, there's a whole host of ways you can do that. I would tell you, you know, if I translate it into like an EBITDA multiple perspective, typically I don't care what we pay for something as long as kind of synergized we get to around 10 times and that kind of leads itself and we've done that on every deal that we've kind of pursued.

I think we can go into breakout. So please join me in thanking Church and Dwight for being here again, and we can continue in the breakout.