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 fourth quarter fiscal year 2023 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 over to John Polden, Vice President, Treasurer, and Investor Relations. You may begin your conference.

Good morning, and welcome to Energizer's fourth quarter fiscal 2023 conference call. Joining me today are Mark Levine, President and Chief Executive Officer, and John Drabik, Executive Vice President and 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 risks 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 2022. With that, I would like to turn the call over to Mark.

Good morning, everyone, and thank you for joining us on our year-end earnings call. As we close out our fiscal 2023, let's start today by reviewing the priorities we established coming into the year. Restoration of gross margin, return to healthy free cash flow generation, and paying down debt. Over the course of the year, we've made excellent progress across each one, including year-over-year improvement in gross margin of 170 basis points, free cash flow generation of $340 million, and debt pay down of $225 million. We also delivered adjusted earnings per share and adjusted EBITDA within our original guided ranges, despite the impacts of persistent inflation and macroeconomic pressures. I would like to thank our teams across the globe as these results are a reflection of their dedication, execution, and focus on fundamentals. As we look ahead, There are several areas which are influencing our plans for 2024. First, we have a macroeconomic backdrop where higher interest rates, resumption of student loans, and the end of emergency pandemic benefits are just a few of the areas which have taken a toll on consumer sentiment. That shift in consumer confidence has been exacerbated by persistent inflation forcing consumers to shop more cautiously and to reallocate their household spending across discretionary and non-discretionary products. In terms of the impact on our categories, let's start with batteries. It is important to look at the category over the long term to understand the impact that the pandemic and broader inflationary trends have had on value and volume. On a global basis, the battery category experienced a spike in volume growth over the course of the pandemic as consumers spent more time at home and with their devices. As consumers return more closely to their pre-pandemic routines, Volume normalized from the peak levels experienced in 2020 and 2021. In addition, inflation across the store, as well as several price increases within the battery category, added to the volume decline. As we have begun to lap these impacts, we have seen category volume growth resume in the U.S. in recent periods. The end result is a category which is 5% larger today than pre-pandemic. at roughly 20 billion cells versus 19 billion cells in 2019. Since 2015, global category volume has experienced compounded annual growth of approximately 1.5%. Over that same time period, US category volume grew roughly at 1% annually. The strength and stability of the category stems from device ownership, which is a primary driver of consumption. The number of devices per U.S. household has increased by more than 5% since 2015. The incorporation of the smartphone into our daily lives has enabled a world of connected devices, with over 50% of those taking primary batteries, including connected home devices such as security cameras, doorbells, and smart tags, and health devices, including blood pressure monitors and pain relief devices. The future pipeline of devices is also strong. where we anticipate global consumer devices will continue to grow, with many of those taking primary batteries as they do today. Our long-term outlook for the category remains at flat to low single-digit volume growth, supported by these healthy category fundamentals. Moving to auto care. The auto care category remains an attractive area for growth, supported by strong category dynamics. Miles driven exceed pre-pandemic levels over 6% higher than 2019. The age and size of the car park is also increasing. The average age of vehicles in the U.S. has steadily increased and now exceeds 12 years. And the size of the fleet has grown by over 3 million vehicles over the last year. As vehicles continue to age and consumers feel the impact of economic pressures, more of them are stating that they are performing car care themselves versus do-it-for-me options. With that as the general landscape in our categories, here is how we are thinking about FY24. The continuation of our strategic priorities underpins our plan. Continue margin recovery, generate free cash flow, and pay down debt. Those objectives ensure we can invest in our business and achieve the financial algorithm, both of which drive significant value for our shareholders. Project momentum is a key driver. With $50 million realized in fiscal 23, We will add an incremental $80 to $100 million of savings over the next two years, which provides the flexibility to operate in this environment. We will look to accelerate investments throughout this downturn with a focus on innovation and brand building to drive consumer engagement and long-term consumer preference. In batteries, we will be disciplined in balancing our pricing and promotion strategies with the need to engage consumers, deliver top line, and take advantage of the improving volume trends. When balancing these factors, we focus primarily on driving overall health of the category and continuing to improve the earnings power of the business. In a healthy category with improving earnings, we will not prioritize share at the expense of those two objectives. In auto care, we are proud of the growth we have achieved. Top line is up over $90 million since 2020. This represents a 6% compounded annual growth rate and is consistent with our low to mid single-digit growth expectations over the long term. As we look ahead, we have an exciting slate of innovation launching this year and will continue to invest behind new product development and launches. Fiscal 23 was a pivotal year for AutoCare. We made tremendous progress restoring profitability, increasing operating margins by almost 500 basis points over last year, while maintaining stability in the top line. This focus on pricing, innovation, and cost control will generate further margin improvement over the course of fiscal 2024. Now let me turn the call over to John to provide additional details about our financial performance and fiscal 2024 guidance.