Energizer Holdings, Inc.

Good morning. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to Energizer's second quarter fiscal year 2021 conference call. After the speaker's remarks, there will be a question and answer session. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, you may press star, then two. As a reminder, this call is being recorded. I would now like to turn the conference over to Ms. Jackie Berwitz, Vice President, Investor Relations. Ms. Berwitz, the floor is yours, ma'am.

Thank you. Good morning, and welcome to Energizer's second quarter fiscal 2021 conference call. Joining me today on the call are Mark Levine, President and Chief Executive Officer, Tim Gorman, Chief Financial Officer, and John Drabik, our Controller and Chief Accounting Officer. A replay of this call will be available on the Investor Relations section of our website, energizerholdings.com. In addition, a slide deck providing detailed financial results for the quarter is also posted on our website. During the call, we will make forward-looking statements about the company's future business and financial performance, among other matters. These statements are based on management's current expectations and are subject to risk and uncertainties, including those resulting from the ongoing COVID-19 pandemic, which may cause actual results to differ materially from these statements. We do not undertake to update these forward-looking statements. Other factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in the reports we file with the SEC. We also refer in our presentation to non-GAAP financial measures. A reconciliation of non-GAAP financial measures to comparable GAAP measures is shown in our press release issued earlier today, which is available on our website. Information concerning our categories and market share discussed on this call relates to markets where we compete and is based on Energizer's internal data, data from industry analysis, and estimates we believe to be reasonable. This quarter, e-commerce data is not included in our category overview as the data is not currently available. It is uncertain when that data will become available in the future. Unless otherwise noted, all comments regarding the quarter and the year pertain to Energizer's fiscal year and all comparisons to prior year relate to the same period in fiscal 2020. With that, I'd like to turn the call over to Mark.

Thanks, Jackie, and good morning, everyone. Today, I am pleased to share our second quarter 2021 results, which build on the momentum from our first quarter as we benefited from elevated demand, expanded distribution, and strong execution, all of which led to robust earnings growth. As we look specifically at the results for the quarter, We maintain top line momentum with organic sales of 12.7%, with strong sales across categories and markets around the globe. We were able to meet that demand while also demonstrating improved cost control and delivering synergies, which partially offset the inflationary headwinds from transportation, tariffs, and product input costs. Our adjusted earnings per share were 77 cents, more than double the prior year. driven by strong organic sales growth, synergy realization, favorable currencies, and lower interest expense. Given our performance in the first half, we are increasing our full fiscal year outlook to the following. Net sales growth to 5% to 7%, adjusted earnings per share to a new range of $3.30 to $3.50, and adjusted EBITDA to a new range of $620 million to $640 million. Tim will provide more information on both the quarterly results and the revised outlook in a moment. Turning to category trends, consumer demand in our categories remains elevated. As a reminder, the category data I'm about to provide does not include e-commerce, as Jackie indicated in her opening comments. Starting with batteries, two changes in consumer behavior that have emerged since the beginning of COVID drove the battery category globally. First, an increase in the number of devices owned per household, and second, an increase in the amount of time devices are being used, which has led to more frequent battery replacement. During the three months ending February, our brands grew faster than the category and we gained 2.1 SharePoints globally as we benefited from the previously discussed distribution gains. In the most recent four weeks through March, in markets like the US, Australia, and the UK, the category experience year-over-year declines as we lap the initial spike in COVID-related buying. We anticipated these year-over-year declines, including a 13.9% decline in the US during that four-week timeframe. However, if you look at those same markets on a two-year basis, there is robust growth when compared to the pre-pandemic levels. In the U.S., for example, the category was up 14.1% for that four-week period when you compare 2019 to 2021. Across both the most recent four weeks and the two-year basis, Energizer significantly outpaced the category. Looking at the U.S. auto care category, in the 13 weeks through February, we saw healthy category growth of 7.4%. as the category experienced both an increase in household penetration and existing consumers spending more on cleaning and maintaining their cars. Given the seasonality of our portfolio, the cold weather, and the short-term constraints on our wipe supply, which have recently been resolved, Energizer lagged category growth in the U.S. Similar to batteries, we are seeing category growth in the latest four weeks and on a two-year basis with Energizer outpacing the category. Finally, while we don't have e-commerce category data this quarter, our net sales have increased 70% across our combined portfolio, a reflection of our investments and ongoing focus, which are paying off and positioning us to leap well into the future. The environment remains dynamic, and we can't predict the impact of vaccines, the virus variants, or the resulting consumer habits. However, in surveys with consumers, many expect their pandemic influence habits to continue, including the increased use of devices such as home health and home office equipment, as well as increased focus on their auto cleaning habits. During the quarter, we faced inflationary headwinds from transportation, tariffs, and input costs. However, we were able to offset a significant portion of these through the delivery of synergies. As we look to the future, we do not believe that these costs are transitory and have initiated productivity and revenue management efforts to offset them. Our revenue management efforts are focused in three main areas, channel and mix management across our markets, brands, and pack sizes, including leveraging the breadth of our strong battery brands from premium to value, resetting our promotional framework, including the frequency and depth of promotion, and price increases based on a longer-term outlook of product input costs, our innovation pipeline and currency impacts. As an example of this work, we recently announced price increases in the U.S. in our auto care portfolio to offset the headwinds we are experiencing. Going forward, we will evaluate a number of factors, including macroeconomic conditions, product input costs, transportation costs, market dynamics, innovation, and currency to assess the need for additional pricing actions across the balance of our portfolio. Our internal initiatives designed to reshape our organization and to ensure we are poised for future growth are all progressing well. Specifically, we are on track to deliver over $120 million in synergies by the end of fiscal 2021, a portion of which is being reinvested in the business through innovation and brand building activities. We have significantly increased production in the Indonesian plant that we acquired in the first quarter, which provides us with a source of high-quality products at lower costs. We have built an impressive innovation pipeline for our auto care business and have advanced our international growth plans, with international auto care organic growth for the second quarter at 24%. Our global product supply team has made significant strides in reshaping our network, which we expect will result in greater efficiency, effectiveness, and supply chain resiliency. And finally, we have launched projects to advance our organization's data and analytics capabilities. Creating a seamless data flow which starts with the consumer and weaves its way through our organization in a more automated manner will ensure that we are positioned to meet the demands of consumers in a rapidly changing operating environment. With that, I will now turn things over to Tim, who will dive deeper into our financial performance for the quarter and provide more details about our updated outlook for the fiscal year.