Energizer Holdings, Inc.

Good morning. My name is MJ 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 2022 conference call. After the speaker's remarks, there will be a question and answer session. To ask a question, please 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 back over to Jackie Berwitz, Vice President, Investor Relations. You may begin your conference.

Good morning, and welcome to Energizer's fourth quarter and 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. In addition, a slide deck providing a 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 uncertainty, 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 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. We finished the year strong and delivered our outlook, despite an incredibly challenging environment. I want to thank the Energizer team for their commitment to excellence and their continued dedication to serving our consumers and customers across the globe. Before turning it over to John for a more detailed discussion, let me start with a few headlines. First, we delivered a solid fiscal 2022, but more importantly, laid the foundation for significant value creation in 2023 and beyond. Second, we have launched a series of internal initiatives under a program called Project Momentum. which is expected to generate $80 to $100 million in savings over the next two years. And third, the vast majority of our portfolio has proven to be resilient, and that strength, when combined with the benefits of project momentum, is expected to drive double-digit constant currency EPS and EBITDA growth while generating 10% to 12% free cash flow for the full fiscal year. A few more details on each of these. Despite significant headwinds from persistent inflation on our input costs and appreciating U.S. dollar and our exit from the Russian market, we delivered on the outlook we provided last November. Just as important, we returned to generating strong free cash flow with $95 million in the fourth quarter, and we deployed a significant portion of this cash to begin paying down debt. In addition to returning to our historical free cash flow generation, Another focus for the organization has been to restore the earnings power of our businesses. As you may recall, early in fiscal 2022, we implemented a series of initiatives designed to offset the inflationary headwinds we were experiencing. As part of that undertaking, we identified a substantial pipeline of incremental initiatives that are expected to further rebuild gross margins, improve working capital efficiency, and support long-term growth. Based on the scope, timing, and investment level, we consolidated these initiatives into a standalone program, Project Momentum. Project Momentum is designed to improve margins across each of our businesses and is expected to ultimately generate incremental savings of $80 to $100 million over the next two fiscal years. These savings are independent of any changes to the inflationary environment and are coming from a broad range of projects. including operational and distribution network efficiencies, procurement savings, and SG&A reduction. We have learned a great deal over the past two and a half years, and those lessons have helped us identify more effective and efficient ways to operate our businesses. We're confident these efforts will not only help restore our margins over the long term, but also provide us the flexibility to navigate a dynamic environment with excellence. Beyond the improvement in our earnings, Project Momentum will help optimize our balance sheet to drive more than $100 million in working capital improvement. A more efficient balance sheet combined with expanded operating margins will reestablish Energizer as a leading cash flow generator. The success we have had in 2022 and the benefits of Project Momentum make us very confident heading into 2023. Our categories are meaningfully larger than pre-pandemic levels. Batteries are considered essential product to consumers and we continue our work to serve our consumers when and where they need us. Consumers are using 15% more batteries than they were pre-pandemic. We expect this demand to be resilient even as economic conditions impact consumers. Against this backdrop, we expect to drive low single digit organic top line growth across both of our businesses in fiscal 23. This growth combined with sequentially improving gross margins from targeted pricing and cost savings initiatives, is expected to deliver double-digit, currency-neutral growth in both EBITDA and EPS. Furthermore, we expect to generate 10% to 12% free cash flow for the fiscal year, allowing ongoing debt reduction and deleveraging, driving an important part of the equity return story for our shareholders. Fiscal 22 was a solid year and one that we are proud of. As we look ahead, the environment in which we are operating remains challenging. By enhancing our long-term algorithm with projects like Momentum, we have positioned ourselves for success not only this year, but future years as well. Now let me turn the call over to John to provide additional details about our financial performance, Project Momentum, and our 2023 outlook.