Energizer Holdings, Inc.

Good morning. My name is Betsy and I will be your conference operator today. At this time, I would like to welcome everyone to Energizer's fourth quarter and fiscal year 2021 conference call. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. As a reminder, this call is being recorded. I would now like to turn the conference call over to Jackie Burwitz, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us. During the call, we will discuss our results for the fourth quarter and fiscal 2021, as well as our outlook for fiscal 2022. Joining me today on the call are Mark Levine, President and Chief Executive Officer, and John Drabik, Chief Financial 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 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 shares 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. Unless otherwise noted, all comments regarding the quarter and year pertain to Energizer's fiscal year, and all comparisons to prior year relate to the same period in fiscal 2020. With that, I would like to turn the call over to Mark.

Thanks, Jackie, and good morning, everyone. Despite operating in what remains an incredibly volatile environment, we delivered on our previously provided 2021 outlook for net sales, synergies, adjusted earnings per share, and adjusted EBITDA. 2021 was our sixth consecutive year of organic revenue growth behind elevated demand and distribution gains. This top line growth, combined with synergies we achieved from the spectrum acquisitions and interest expense savings, translated into strong adjusted EPS and EBITDA growth. In a few moments, John will provide details on the fourth quarter and full year. However, before he does, some key headlines from our fiscal 2021 performance. For the first time, our company exceeded $3 billion in net sales. We also maintain top-line momentum with organic sales growth of 7.3%, including growth of nearly 17% in our auto care business. Our battery and auto care businesses benefited from elevated demand and distribution gains in North America. Auto care further benefited from the expansion in our international markets, reaching $100 million in sales in those markets for the full year. We also delivered synergies of $62 million for the year, resulting in total synergies from the spectrum acquisitions in excess of $130 million, 30% higher than our initial estimate. And we continue to invest in our brands, resulting in strong brand preference globally. With more consumers selecting our battery brands, we gained 2.2 share points in the last 12 months. This performance is a tribute to our team and their resiliency. Since the beginning of the pandemic, we have consistently adapted in real time to ensure business continuity and repositioned Energizer for the future. The hard work of our global colleagues produce and deliver products to our customers and consumers in a time of heightened demand and significant disruption has been impressive to witness on a daily basis. In a moment, I will provide headlines for our 2022 outlook. However, before I do, I want to provide an update on a few key topics that will set the stage for the future. First, our categories remain healthy and are showing solid growth when compared to pre-pandemic levels. and we expect the consumer behaviors supporting that demand will continue for the foreseeable future. Specifically, in batteries, there are two drivers. Devices owned per household are up mid-single digits in the U.S., and an increase in the amount of time those devices are being used. Consequently, consumers are using more batteries, which has resulted in new buying patterns versus a year ago, including increased purchase frequency and spending per trip. As a result, on a two-year stack basis without e-commerce, the global battery category has grown by 2.9% in value and 3.7% in volume. In the near term, we will see the category decline, as it did in the three months ending August 2021, where it was down 6.9% in value and 5.3% in volume due to comping elevated demand from a year ago. However, as we look to the long term, we anticipate the category to experience flat to low single-digit growth, albeit on a higher base as the category has increased in size due to consumers' behavior during the pandemic. Within the category, our iconic brands remain well-positioned. Our brands outpaced the category, resulting in a 2.2 SharePoint gain versus last year as we increased distribution in the U.S., and internationally with share gains in those markets representing 70% of our total battery revenues. Turning to the auto care category. Over the last five years, the auto care category has shown consistent growth, a trend that continued in the latest 13 weeks with category value of 3.5% versus a year ago and 16.3% versus 2019. The growth is being driven by consumers continuing the do-it-yourself behaviors established during the pandemic, including higher levels of cleaning and renewed interest in car care as a hobby, a higher number of cars in the car park, and an increase in the age of vehicles, given the shortage of new vehicles, and a recovery in miles driven, given the increase in personal travel. All of this increased U.S. household penetration to nearly 75%, with a resulting buy rate that is up 20% as consumers are buying the category more frequently and spending more per trip. As we look ahead, we anticipate the auto care category will settle in at low single-digit growth once it has cycled through the COVID-related demand. In the U.S., we continue to be the market leader in this large and growing category, driven by our Armor All brand, which continues to have positive momentum due to the strength of our innovation and brand-building activities. As I mentioned earlier, our efforts to leverage our geographic footprint and expand our auto care brands internationally are proving successful. While the categories are showing resilience, the macro environment in which we are operating is volatile, which leads me to the next important topic around operating costs. Costs related to commodities, transportation, and labor continue to rise. We saw a significant escalation in these costs during the fourth quarter, and we expect these headwinds to continue throughout 2022, resulting in over $140 million of increased input costs versus 2021. In order to mitigate the impact of these costs, we have executed or planned pricing against roughly 85% of our business. In addition to raising prices to cover input cost inflation, we have also strategically redefined our battery pricing architecture to reestablish relative value across pack sizes, resulting in a progressive rate increase on larger pack sizes. Currently, we are exploring the opportunity for additional pricing opportunities across our business. We expect these pricing actions, improved mix management, and cost reduction initiatives to partially offset the impact on our gross margin rate. As you all know, in addition to the challenges companies are experiencing related to increased costs, the global supply chain network is under pressure from increased demand and pandemic-related disruption. Earlier this year, we made the decision to proactively build inventory to ensure we have product for the peak battery selling season and upcoming auto care resets. The change is in response to both the potential for supply disruption we have seen in recent quarters and the higher level of in-transit inventory versus historical levels due to shipping delays and port congestion. As such, our inventory at the end of fiscal 21 was up 42% versus the prior year. This action has given us flexibility to avoid disruption and ensure we service our customers as reliably as possible in this environment. With that backdrop, I'll turn to a high-level overview of our 2022 outlook. The two headwinds I mentioned earlier, the decline in demand to more normalized levels and inflationary cost trends, have impacted our outlook. In fiscal 2022, organic sales will be roughly flat, with auto care growth and pricing actions across our businesses offset by volume declines in battery as we comp prior year elevated demand in the first half of the year. Despite our cost reduction initiatives and pricing actions, we expect to see gross margin rate erode given the escalating costs resulting in year-over-year declines in EBITDA and EPS. Given the macro environment, we are proactively exploring additional options to reduce our costs, enhance our mix, as well as evaluate additional pricing to further offset these cost headwinds. Now let me turn the call over to John to provide additional details about our financial performance and outlook.