Edgewell Personal Care Company

Good morning and welcome to the Edgewell Personal Care Company first quarter fiscal year 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Chris Goff, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning as we discuss Edgewell's first quarter fiscal year 2021 earnings. With me this morning are Rod Little, our President and Chief Executive Officer, and Dan Sullivan, our Chief Financial Officer. Rod will kick off the call. Then he will hand it over to Dan to discuss our results, and we will then transition to Q&A. This call is being recorded and will be available for replay via our website, www.edgewell.com. During the call, we may make statements about our expectations for future plans and performance. This might include future sales, earnings, advertising and promotional spending, product launches, savings and costs related to restructurings, changes to our work and capital metrics, currency fluctuations, commodity costs, category value, future plans for return of capital to shareholders, and more. Any such statements are forward-looking statements which reflect our current views with respect to future events. These statements are based on assumptions and are subject to various risks and uncertainties, including those described under the caption risk factors in our annual report on Form 10-K for the year ended September 30, 2020, as may be amended in our quarterly reports on Form 10-Q. These risks may cause our actual results to be materially different from those expressed or implied by our forward-looking statements. We do not assume any obligation to update or revise any of these forward-looking statements to reflect new events or circumstances, except as required by law. During this call, we will refer to certain non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures are shown in the press release issued earlier today, which is available at the investor relations section of our website. Management believes these non-gap measures provide investors with valuable information on the underlying trends of our business. With that, I would like to turn the call over to Rod.

Thanks, Chris. Good morning, everyone, and thank you for joining us on our fiscal first quarter earnings call. Before we review our results and outlook, I want to acknowledge the difficult times we're living through. At Edgewell, we are a people-first organization that infuses joy into all we do. And at times like these, it is important that we stay true to our purpose and values to guide all of our decisions while ensuring that we maintain our commitment to the safety and well-being of all of our team around the world. In November, we held our Investor Day and outlined our five strategic priorities designed to transform Edgewell into a growing, sustainable, and consumer-centric company focused on delivering stable top-line growth and predictable profit and cash generation. We have defined a clear go-forward strategy, and the results we saw this quarter, as well as our outlook for the full year, are consistent with this strategy. We delivered flat organic net sales, expanded gross margins, realized $16 million in in gross project fuel savings and continued to invest in our key growth initiatives, all versus a pre-COVID-19 base period and showing significant sequential improvement versus the beginning of the pandemic when our net sales declined by nearly 15% in the April to June 2020 quarter. We delivered 43 cents in adjusted earnings per share and $72 million in adjusted EBITDA. We also return cash to shareholders, initiating a 15 cent per share quarterly dividend in repurchased shares. COVID-19 continues to present challenges across our businesses. Global consumption in our key categories of wet shave, sun care, and feminine care all decreased on a year-over-year basis across all of our core markets, with personal hygiene being the exception. Looking ahead with expanded lockdowns in many parts of the world, we see increased near-term headwinds, particularly in the second fiscal quarter. And importantly, we continue to expect a stronger second half as vaccine distribution grows and we lap the COVID headwinds of a year ago, particularly in the sun care category. Despite these mounting challenges, we maintain continuity of operations yet again reinforcing the strategic importance of our global operations and supply chain. All of our global manufacturing plants and distribution centers remain open and fully operational, although heightened COVID-19 infection levels have created some minor intermittent strain on operations. We do see increasing challenges across the supply chain in the near term, particularly across our distribution network. which could pressure costs and product availability. Our teams are tackling these issues, and they remain nimble and flexible to meeting the challenges of this COVID-19 environment. Now let's turn to a few segment highlights. As we shared at our Investor Day, we are taking a more strategic approach to managing our portfolio by working to accelerate growth and share gains in the categories where we have a clear right to win with consumers. This includes men's grooming, sun care, and personal hygiene. Additionally, we are focused on stabilizing our profit pool in wet shave and fem care, where latent brand equity and strong technology provide us a clear right to play. In the sun and skin care segment, which includes our right-to-win offerings, organic net sales increased by 14% in the quarter. More specifically in personal hygiene, Wet Ones organic net sales increased over 100%, driven by ongoing demand for this trusted brand, with increased capacity supporting channel as well as geographic expansion. Consistent with our efforts to more broadly leverage this brand to meet consumers' needs, we also expanded our portfolio range, launching a new Wet Ones hand sanitizer and Wet Ones Plus alcohol wipes near the end of the quarter. Men's grooming net sales increased by nearly $20 million, driven by the addition of the newly acquired Cremo business plus 12% organic growth in the combined Bulldog and Jack Black businesses. All three of these businesses posted strong e-commerce growth in the Amazon e-retailer channel as well as direct-to-consumer. In Suncare, organic net sales declined over 20%. However, seasonally, this is our smallest quarter. It is highly dependent on tourism and broad travel destinations, which continue to be significantly impacted by COVID-19. Now let's turn to our right-to-play businesses. Wet shave organic net sales decreased 1.5% in the quarter, marking another quarter of sequential improvement and further demonstrating signs of stabilizations. Wet shave market share performance in the U.S. was solid and encouraging. The Schick brand gained share overall, reflecting share gains in women's systems and disposables. Men's system share trends improved versus a quarter ago, and we again gained meaningful wet shave share on Amazon. In feminine care, our business is not yet stabilized, and our work continues. Our results reflect category declines, and intense competitive environment and previously discussed distribution losses largely at Walmart related to last year's planogram resets. Across our businesses, we're seeing the results of good execution against our strategic initiatives, which I will now review. First, we're expanding our presence in growing categories, including personal hygiene and men's grooming. We added to our internal manufacturing capabilities and secured additional third-party sourcing for wet ones. We successfully launched new products across wipes and hand sanitizers, broadened our e-commerce presence, and expanded geographically in both grooming and wet ones. Importantly, the integration efforts behind the recent Cremo acquisition remain on track, providing us not only with an important grooming brand for our portfolio, but also helping to infuse the organization with a disruptor mindset and unique brand building skills. Second, our digital and e-commerce capabilities continue to strengthen. E-commerce net sales, which now represent approximately 8% of total company net sales, increased 40% in the quarter, reflective of increased digital advertising spending and strong executions. Next, we are strengthening our brands in both men's and women's wet shave, underpinned by stronger branding and positioning, more effective execution, and consumer-centric innovations, like the recently launched stubble eraser for our Hydro franchise. Our focus on strengthening key retail relationships and partnerships continues, and we see the initial results of these efforts in the improved planogram outcomes in both wet shave and sun care. And finally, we're investing behind our strategies, including e-commerce and digital, brand marketing and R&D. In the second fiscal quarter, you'll see a meaningful increase in brand marketing behind new campaigns in wet shave and the rollout of exciting new products in both wet shave and personal hygiene. As I mentioned a quarter ago, and as you saw in our Investor Day presentation, Our teams continue to demonstrate an unrelenting commitment to transformation and improvement. That commitment is reflected in our full-year outlook. For the fiscal year, we are maintaining our previous full-year outlook, including organic sales growth in the low single-digit range, a strengthening gross margin profile, an investment stance in priority brands, markets, and capabilities, adjusted operating profit growth, and another year of healthy free cash flow generation. As I mentioned previously, we are seeing some additional near-term COVID-19-related headwinds, especially across our international markets, the impact and duration of which remain difficult to predict. Despite these ongoing challenges, we continue to manage the business with urgency, strong discipline, and agility, and remain ready to pivot as conditions necessitate. and as the year progresses. Dan will take you through all the specifics related to our outlook shortly. Before turning the call over to Dan, and as I have done for nearly a year now, I want to recognize our teams and the extraordinary efforts they are making across the company and once again extend my gratitude to each and every team member. It is their resiliency and effort which underpin our results to date. with continuity across our operations, enhanced digital and brand building capabilities, and better execution at the shelf. While the macro environment remains challenging, our business is on far more stable footing, and we are positioned well to deliver the sustainable top-line and profit growth discussed at our Investor Day. And now I'd like to ask Dan to take you through our fiscal first quarter results and provide more detail on our full fiscal year outlook.