Energizer Holdings, Inc.

Good morning. My name is Lara, and I'll be your conference operator today. At this time, I would like to welcome everyone to Energizer's third quarter fiscal year 2024 conference call. After the speaker's remarks, there will be a question and answer session. Should you have a question, please press the star followed by the number one on your touchstone phone. To decline from the polling process, please press star followed by the number two. As a reminder, this call is being recorded. I would now like to turn the conference call over to John Polden, Vice President, Treasurer, and Investor Relations.

Good morning, and welcome to Energizer's third quarter fiscal 2024 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 in 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 2023. With that, I would like to turn the call over to Mark.

Good morning, everyone, and thanks for joining our third quarter earnings call. It is always rewarding to highlight the tremendous work of this organization, particularly when it shows up in the financial results as it did this quarter. We made several strategic decisions over the past couple of years, and we are at the early stages of seeing tangible dividends from that focus. We started with Project Momentum, designed to accelerate margin recovery, free cash flow restoration, and debt reduction. Once we made significant progress against those objectives and established a healthy pipeline to ensure ongoing improvement, we turned our attention to growth. This quarter demonstrates progress in each of those areas. Let me start by summarizing a very good third quarter. Highlights include 1.2% organic net sales growth, adjusted gross margin expansion of 270 basis points, 46% adjusted earnings growth, and debt paydown for the eighth consecutive quarter, bringing our total debt paydown to $150 million year-to-date and reducing net leverage to five times. Both batteries and auto care generated great results throughout the P&L, starting with batteries. Organic net sales were up roughly 60 basis points, supported by solid category fundamentals and distribution gains. We also drove expansion in segment profit, improving by 160 basis points in the quarter. And the overall battery category continues to perform well, as global volume and value both grew in the latest three-month data. In the U.S., category volume increased over 4% in the latest 13 weeks. Value declined roughly 1% as pricing and promotional investments are driving healthy demands. In addition to the positive trends we are seeing in digital commerce and measured channels, trends in not-in-track channels are improving as we lab softness, which began in the spring last year. Consumers are continuing to select brands in the category. Private label value and volume share declined globally in the quarter. with value share now declining in eight of the last 10 months globally and volume share declining in seven of the last 10. Moving to auto care, where we are seeing continued momentum. Organic net sales increased nearly 3% in the quarter as the June heat wave in the US drove strong replenishment in our refrigerants business. This was complimented by a strong quarter internationally, up 19% organically as we continue our expansion plans. And segment profit margin increased by an impressive 470 basis points. This business is hitting its stride. We have grown the top line by over 20% since our first full year of ownership, delivered organic growth for four consecutive quarters, and expanded segment profit by over 700 basis points relative to fiscal 2022. Also, during that time, we have developed a healthy pipeline of innovation, the strongest we have seen in many years, to generate margin accretive growth in both the US and international markets. The success in auto care is just one of the reasons we are so confident about the future. As I stated at the top of the call, we have also made tremendous progress over the past two years rebuilding our margins, restoring our free cash flow, and strengthening our balance sheet, all while investing in our business to deliver sustainable growth over the long term. If we take a step back, I would like to reflect on not only where we are today, but where we've been, where we are headed, and why we are so confident in our ability to deliver growth and shareholder value over the long term. First, let me summarize where we are. Our categories have proven to be healthy and resilient. This quarter, we delivered organic growth and expect to achieve the back half growth we provided in our outlook at the beginning of the year, even with the caution we are seeing with the consumer. Our execution of Project Momentum has delivered nearly $120 million in savings to date, driving adjusted gross margins to 40.3% in the trailing 12 months, an expansion of 300 basis points when compared to fiscal 22. We have also resumed top tier free cash flow generation and expect to deliver between 10% to 12% for the second consecutive fiscal year. We have reduced leverage by over a full turn in the last two years and remain on track to end the year under five times net leverage. Having paid down debt in eight consecutive quarters, totaling over $430 million, we have prioritized allocating cash flow to debt reduction as a key driver in our investment thesis. All of this progress provides us with the flexibility to invest in long-term growth and value creation. As we turn to where we are going, I want to highlight areas of future growth where we have and will invest in order to drive it consistently. There are some emerging areas where we see healthy opportunities. First, market expansion. Energizer's global platform and broad distribution network position us to identify, and strategically accelerate growth in a number of developing markets across the globe where we can expand our business. In addition, as we mentioned before, we have shown healthy growth in our international auto care business and expect to continue to roll that out more aggressively, particularly now that we have improved the margins. Second, innovation. With the investments and health of our innovation pipeline, we have plans to deliver industry-leading innovation across each of our categories. We expect to generate healthy growth over the next couple of years as we introduce these products to our customers and consumers. In addition, we have invested in already strong foundational areas to accelerate growth even further. Several areas to highlight. First, digital commerce. This channel continues to grow in size and importance, and we are increasing our investment to realign and enhance our organizational structure to accelerate growth in both existing and new digital commerce platforms in North America and international markets. There are also distribution opportunities. As a core strength of this organization, we are investing to improve the placement and mix in existing customers while also aggressively pursuing new white space opportunities. We will do so without compromising our focus on maintaining healthy margins. And finally, pricing and mix management. Fueled by our investments in digital transformation, we are leveraging improved analytic capabilities to identify opportunities and action more quickly, enabling us to drive growth through enhanced mix management. As you can tell, we are very pleased with where we are and excited about what's ahead. Now let me turn the call over to John to provide more detail on the third quarter and our fourth quarter outlook.