Energizer Holdings, Inc.

Good morning. My name is Anthony. I will be your conference operator today. At this time, I'd like to welcome everyone to Energizer's first quarter fiscal year 2022 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 your telephone keypad. 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 Berwert, Vice President of Investor Relations You may begin your conference.

Good morning, and welcome to Energizer's first quarter fiscal 2022 conference call. Joining me today are Mark Levine, President and Chief Executive Officer, and John Dravik, Chief Financial Officer. A replay of this call will be available on the investor relations section of our website, energizerholdings.com. 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 uncertainty, 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 reports we filed 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 estimated market share discussed on this call relates to categories where we compete and is based on Energizer's internal data, data from industry analysis and estimates we believe to be reasonable. This quarter, the battery category information includes both brick-and-mortar and e-commerce retail sales. 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 2021. With that, I would like to turn the call over to Mark.

Thanks, Jackie, and good morning, everyone. I am pleased to be here this morning to share our first quarter's 2022 results. In our first quarter, strong demand, expanded distribution, and execution in the holiday season led to a solid start to our fiscal year. While the operating environment remains challenging, our first quarter results are a testament to our team's preparation, resilience, and commitment. Before I go into detail on the quarter, there are three key points to take away from our call today. First, our team delivered in the critical holiday season, and our categories remain strong. Second, we continued to manage through a very challenging cost environment with increases in transportation, commodity, and labor costs, as well as ongoing supply chain disruption. And third, as a result of our additional pricing actions and cost containment measures, we are reaffirming our outlook for net sales, adjusted earnings per share, and adjusted EBITDA for the full year. As we look specifically at the results for the quarter, we maintain strength in our top line, delivering revenue of $846 million. This was roughly flat the prior year on an organic basis. Global price increases and expanded distribution in the battery business were offset by an expected decline in volumes as we comp elevated COVID demand from the prior year. Adjusted gross margin decreased 320 basis points as increased input costs were partially offset by price increases, synergies, and the comping of prior year COVID costs. On a sequential basis, gross margin was roughly flat for the prior quarter. consistent with our view for the start of the year. With our solid top line performance and lower interest expense, we partially offset the gross margin decline and delivered adjusted earnings per share of $1.03 in the quarter. Before John provides more details on the quarter, I want to provide some additional color on the performance of our categories, the rising cost environment, the resiliency of our supply chain, and other actions we have taken to operate with excellence in an uncertain environment. First, our categories remain healthy, with both battery and auto care showing robust demand versus pre-pandemic levels. Specifically, the battery category benefited from two drivers, the increase in devices owned per household and an increase in usage of those devices, resulting in higher battery replacement frequency. These trends have resulted in consumers using more batteries. On a two-year stacked basis, the global battery category has grown by 9.7% in value and 7.8% in volume. As anticipated, we saw the category decline in the three months ending November 2021, which was down 3.5% in value and 8.4% in volume. This was due to comping elevated demand in the prior year. As we look to the long term, we anticipate category value to experience flat to low single-digit growth off a higher base, as the category has increased in size due to consumers' behavior during the pandemic. Our iconic brands outpaced the category, resulting in a 1.2 sharepoint gain versus last year, with expanded distribution in the U.S. being the key driver. As we turn to the auto care category, in the latest 13 weeks, Category value was up 9% versus a year ago and 20.6% on a two-year stack basis. As with batteries, the growth is being driven by changing consumer behavior, including do-it-yourself habits, which were established during the pandemic, such as 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 by car. As we look ahead, we anticipate that auto care category value will grow at low single digits once it has cycled through the COVID-related demand. Energizer continues to be a leader in the auto care category through our strong portfolio of brands, specifically in appearance, the largest subsegment in which we compete. Our Armor All brand outpaced the category in the U.S. due to distribution gains and the strength of our innovation. In addition, our international auto care growth plan has resulted in growth ahead of the category in key markets, including Australia, Germany, New Zealand, the U.K., and Mexico. While our categories are healthy, the macro environment in which we are operating remains difficult. This leads me to the next important topic, operating costs. Commodities, transportation, and labor costs continue to rise, resulting in increased cost pressures that are incremental to the outlook we provided in November. We have moved quickly to offset these pressures through additional pricing actions, cost reduction initiatives, and improved mix management. Pricing actions in both our segments were announced within the last couple of weeks and are incremental to the increases discussed in November. They will become effective late in the second quarter for North America and in the third quarter for international markets. We expect the cumulative effect of these actions to offset the inflationary cost pressures on a dollar basis. In addition to inflationary pressures, the global supply chain network remains stressed from pandemic-related disruptions, which includes port congestion and transportation delays, as well as availability challenges with respect to labor, source product, and raw materials. As a result of this dynamic, we took a proactive approach by investing in incremental inventory in the prior year and also in the current quarter. This decision paid dividends as we were positioned to meet our customers' and consumers' needs and deliver a successful first quarter. We expect to operate with elevated safety stock for the foreseeable future while we monitor the supply network, for signs of stability. As you can see, the business is operating on solid footing and the underpinnings of our categories remain healthy and in a stronger position than before the pandemic. Even with the difficulties we experienced, we delivered strong results and are on track to deliver another successful year. Now let me turn the call over to John to provide additional details about our financial performance in the quarter.