Energizer Holdings, Inc.

Good morning. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to Energizer's second 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 1 on your telephone keypad. To withdraw your question, please press star then 2. As a reminder, this call is being recorded. I would now like to turn the conference over to Jackie Berwitz, Vice President, Investor Relations. You may begin your conference.

Good morning, and welcome to Energizer's second quarter fiscal 2022 conference call. Joining me today are Mark Levine, President and Chief Executive Officer, and John Drabek, Chief Financial Officer. A replay of this call will be available on the Investor Relations section of our website, energizerholdings.com. During this 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 conflict between Russia and Ukraine, as well as the 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 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 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. The battery category information includes both brick and mortar and e-commerce retail sales. 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 2021. With that, I'd like to turn the call over to Mark.

Thanks, Jackie, and good morning, everyone. As you saw in our release posted earlier today, we delivered a strong second quarter, which is a testament to our team's dedication and resilience. Due to the hard work of our colleagues around the world, we are very well positioned and excited about the prospects for our business. Let me start by highlighting some key themes and headlines to take away from today's call. First, we successfully executed pricing actions and growth plans, which generated healthy organic top-line growth. As a result of our performance in the first half of the year and the benefits of pricing, we are increasing our top-line guidance to low single-digit growth for the full year. Second, while we remain focused on preserving gross profit dollars, the combination of our pricing efforts and internal cost savings initiatives should begin to drive gross margin expansion in the back half of the year. From a category standpoint, we operate in categories that are meaningfully larger than pre-pandemic levels with both volume and value up considerably on a two-year stack. And finally, the investments we are making in our global supply chain are paying off. Bill rates are steadily improving, and we have enhanced visibility and connectivity from our digital transformation. These improvements are designed to drive efficiencies to reduce working capital, allowing us to return to normalized free cash flow generation in the back half of the year. Let me take each of these in turn. First, we delivered organic growth of 1.3%, driven by a combination of global price increases and strong growth in auto care. This is over and above the almost 13% organic growth we saw in the prior year quarter. In the battery segment, we experienced normalization in net sales as volumes declined as compared to the elevated prior year period. This volume decline was partially offset by pricing as well as distribution growth in key markets. Our auto care business delivered organic sales growth of nearly 20% in the quarter, with double digit growth across both North America and international, more than offsetting the organic decline in battery. This growth was driven by a combination of pricing, timing of refrigerant shipments, and expanded distribution, particularly internationally, as we continue to execute our international growth plans behind ArmorAll and our portfolio of iconic auto care brands. Turning to margins, the macro environment in which we are operating remains volatile. We recognize the need to generate improved insights early in the pandemic, and our investments in data and analytics have enabled steadily improving fill rates. That improved connectivity is now allowing us to see the inflationary impacts earlier and take quick action on pricing to ensure we are offsetting the dollar costs of these headwinds. Those insights are also highlighting areas where we can be even more efficient, which will drive margin expansion over the balance of the year. Our latest round of broad-based pricing actions took effect in each of our categories toward the end of the quarter. We also announced another round of targeted pricing in areas that continue to experience cost inflation. In general, these pricing actions have lagged the impact of the cost increases we have seen, and as they take full effect, we anticipate meaningful margin improvement in the second half of the fiscal year. Third, our categories continue to perform well and remain larger than pre-pandemic levels. In the battery category, both volume and value remain up double digits on a two-year stack basis. While we saw declines in the latest three-month data, we expect price increases executed across the category will drive an increase in value over the balance of the year. Our iconic brands outpace the category, resulting in a 2.8 share point gain versus last year, with growth across each region in total batteries. In particular, we experience growth in the U.S., driven by expanded distribution, as well as strong performance internationally, including share gains in 17 of our top 20 markets. Turning now to auto care, where the fundamentals of the category remain healthy. The number of cars in the car park, the average age of vehicles, and the number of miles driven are all growing compared to pre-pandemic levels. As we look ahead, we are excited about the growth engine we are creating in auto. Our business continues to grow rapidly, and the platform is designed to support our future growth aspirations while also improving margins. The growth will come from a robust innovation pipeline, which is full of products containing new, exciting technology designed to deliver the performance, value, and convenience expected by our consumers. We are also connecting with consumers through marketing communication and efforts to drive engagement with our brands. A great example of how all of this comes together is our Armor All partnerships with the Formula One champion Red Bull racing team, and Formula One racing legend Jenson Button. Formula One is truly a global sport and resonates in every market, and our sponsorship has led to millions of impressions through everything from new in-store displays to presence in social media in markets around the world. We have the right combination of product innovation, marketing efforts, and operational excellence to continue to grow this business in the years ahead. And finally, we are starting to see some early dividends from our investments in digital transformation. I talked earlier about the benefits of greater visibility and faster insights on our margins. We also expect these investments to enable us to maintain acceptable fill rates while prudently reducing our inventory levels as we continue to see stability in the global supply chain. While our heightened inventory levels remain important to serving our customers and consumers, We believe this combination of a stabilizing global supply chain and better data and analytics will enable us to decrease inventory toward the end of the fiscal year, unlocking free cash flow to continue to invest in our business and reduce debt. As you can see from our results, our business is strong and our strategy is paying off. We have overcome significant challenges, and the investments we have made position us well for the future and will allow us to emerge stronger than before the pandemic. I am incredibly proud of our colleagues around the world and the results we delivered this quarter, which are a testament to our team's commitment to success. Now let me turn the call over to John to provide additional details about our financial performance.