Energizer Holdings, Inc.

Good morning. My name is Joe, and I will be your conference operator for today. At this time, I would like to welcome everyone to Energizer's third quarter fiscal year 2022 conference call. Should you need any assistance today, please signal a conference specialist by pressing the star key followed by zero. 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 a question, please press star, then two. 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 third quarter fiscal 2022 conference call. Joining me today on the call 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 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 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 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 estimated market share discussed on this call relates to the 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. I want to start the call by thanking the Energizer team for their continued commitment and passion to serving our consumers and customers across the globe. Starting with a few headlines on our results in the quarter, where our business performed at a high level and we delivered another solid quarter. On the top line, our pricing actions and operational execution generated 4% organic revenue growth. The combination of our pricing, productivity, and digital transformation initiatives are also creating momentum in gross margin, driving 120 basis points of expansion in the quarter. And adjusted earnings per share were 77 cents, an increase of 4% from the prior year. Our strong earnings are a testament to our relentless focus on delivering results in a challenging environment. Before turning it over to John for details on the quarter, I want to provide some color on three areas, macro trends influencing consumer demand, the health of our category, and our key focus areas for the balance of the year and into fiscal 23. Starting with the macro trends which emerged in the quarter, rising interest rates and increasing prices in virtually every aspect of consumers' lives have led to declining consumer sentiment and shifting shopping habits. Consumers started to prioritize their spending in the third quarter, putting critical categories like rent, food, gas, and utilities first, and then moving to essential categories like batteries, while deprioritizing categories they deem nonessential. More specifically in our categories. In batteries, while category value decreased approximately 4.5% in the latest 13 weeks, the long-term fundamentals remain strong. Today, consumers own more devices than pre-pandemic, and the average number of batteries a typical consumer purchases has increased in that time. As a result, the category is meaningfully larger than prior to the pandemic. with value up over 14% on a three-year stack basis. In the most recent data, the category trends are being impacted by the macro environment I just mentioned, although value is outpacing volume as a result of pricing taken across the category. Our business continues to outpace the category, resulting in a 2.5 share point gain versus the prior year. During that same period, we experienced value growth driven by pricing, expanded U.S. distribution, and strong performance across our key international markets. As we begin to lap these distribution gains in the fourth quarter, we anticipate our performance to roughly mirror the category on both a volume and value basis. Now turning to auto care, where the long-term fundamentals of category health are also strong. With growth in both the number and average age of vehicles in the car park, resulting in category value growth of nearly 26% on a three-year stack basis. In the most recent three-month period, the category grew 4% in value, primarily from pricing in refrigerants and growth of performance chemicals. Volumes in the quarter were impacted by some of the same macroeconomic factors I previously mentioned, which caused consumers to defer certain types of vehicle maintenance. As an example, our refrigerant segment experienced a volume impact from consumers deferring maintenance. When you combine this trend with the cool start to the selling season, we saw lower than expected replenishment. This drove nearly all of the year-over-year decline in our auto care net sales. Looking at our other auto care segments, we experienced strong growth in performance chemicals as consumers looked to products to extend vehicle mileage and performance. Appearance Chemicals, our largest subsegment, also grew in the quarter behind our Armor All brand. This is on top of 16% organic growth in the prior year. Fragrance declined as consumers prioritized spending away from this discretionary category in favor of more essential needs. And finally, our international auto expansion plans continue to pay dividends, where we have driven double-digit growth in the quarter. While we expect volatility to continue, we have the right portfolio of iconic brands to maintain our connections with consumers. Our broad range of offerings in batteries and auto extend from value brands like Rayovac and Tough Stuff to premium brands like Energizer and Armorall. While private label is growing across many consumer categories, we saw private label declines in both batteries and auto appearance in the quarter. Now turning to the progress we have made in the focus areas we highlighted last quarter. As we previously noted, we redoubled our efforts to address gross margin across our business and regions. This program has generated an extensive list of initiatives to drive improved gross margin while continuing to capitalize on growth opportunities. It has shown early signs of success and we expect additional gross margin expansion in fiscal 23. Equally important, the reduction of our working capital has begun. With our improved visibility from our digital investments, as well as stability in the global supply chain, we reduced our levels of inventory over the last two months by $50 million from the peak in May to the end of July. We expect this trend to continue, resulting in a resumption of our historical free cash flow generation beginning in the fourth quarter. With that, I will now turn the call over to John, who will dive deeper into our financial performance for the quarter and provide more details about our outlook for the fiscal year.