Edgewell Personal Care Company

Good day, and welcome to the Edgewell Personal Care Q3 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. 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 Goss, Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning for Edgewell's third 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 updated full year outlook, 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 working 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 in Form 10-K for the year ended September 30th, 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 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 our press release issued earlier today, which is available at the investor relations section of our website. Management believes these non-GAAP 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 third quarter earnings call. This was a strong quarter. Organic net sales increased 12.5% with growth across all segments. This broad-based performance was driven by good execution across the business, and underpinned by consumption growth in all three segments in North America, as many of our categories continued to strengthen as we cycled last year's COVID-19 headwinds. We saw particular strength in sun care, where global organic net sales increased nearly 50%, exceeding our own expectations in the quarter. We also saw improved consumption in our international markets, where organic net sales increased 9%, despite ongoing uncertainty and further COVID restrictions in many of our core markets. Adjusted operating profit in the quarter increased $23 million, driving 35% adjusted earnings per share growth, and we generated $163 million of free cash flow in the quarter. We are pleased to increase our full-year outlook. driven by our strong performance to date and expectations for continued sun care category strength over the remainder of the season. Our organization continued to execute well against our strategic priorities, making meaningful investments in our brands and products, incrementally investing in our innovation roadmap, both near and longer term, driving increased digital engagement and activation, and importantly, delivering $19 million in gross project fuel savings in the quarter, helping to mitigate significantly higher commodity and other input costs. In July, we also issued our 2020 Sustainability Report, which reflected strong progress to date and set increasingly ambitious goals as part of our Sustainable Care 2030 efforts. Before we review our segment results, I want to make a comment on the broader operating environment. While the demand environment is clearly benefiting from initial reopening and other stimulus efforts, our success this quarter demonstrates the focus of our global teams to execute our strategic initiatives, including a commitment to invest commercially in growth and to remain agile and resilient in the face of a supply chain environment that is increasingly challenging and volatile. We continue to see accelerated cost pressures across most commodity categories, especially resins and resin derivatives, as well as higher wages and transportation costs. Growth savings from Project Fuel year-to-date of $52 million have enabled the business to offset many of these unprecedented increases. We have built a strong core competency of continuous improvement, as seen in the success of Project Fuel. This discipline is embedded in our go-forward plan, as discussed at our Investor Day last November. Our teams will continue to execute on productivity and efficiency efforts, and the entire business will work all cost and revenue levers at our disposal to mitigate the effects of these cost headwinds. Now let me take you through a few of our segment highlights. Our wet-shave business delivered another quarter of growth, with organic net sales increasing nearly 6%, reflecting growth in North America and international markets with strong growth in women's systems and disposables. In the sun and skin care segment, organic net sales increased by almost 30% in the quarter, primarily driven by nearly 50% organic net sales growth in sun care, fueled by very strong consumption gains in North America and 17% organic net sales growth in men's grooming, driven by Jack Black. In personal hygiene, wet ones organic net sales decreased 32% against a 50% year-over-year increase in Q3 last year. Consumption for wet ones continues to be impacted by high levels of inventory at retail, particularly in the food and drug channels. while consumption at mass retailers increased in the quarter as we began to see a return to more normalized branded product distribution profile on shelf. We remain confident both in the underlying category demand over the mid to longer term and the desire of both retailers and consumers to choose trusted category-leading brands like Wet Ones. In feminine care, organic sales increased 6%. reflecting increased consumption compared to a year ago as the category begins to gain traction after a prolonged period of declines cycling the COVID pantry load effects last year. I'm encouraged by our performance this quarter and to see our core categories starting to return to growth, although largely not yet back to pre-COVID-19 levels. While the past year has been unprecedented with COVID-19 negatively affecting all of our key categories, as well as ongoing supply chain challenges, our teams have worked relentlessly to execute against our initiatives to transform the company. Our strong profit growth and cash generation in the third quarter is a testament to their disciplined execution. I want to thank each and every one of our Edgewell teammates for their valuable contributions in helping us reach this inflection point for the company. In summary, with three quarters of the fiscal year behind us, And as our key categories are now showing initial signs of returning to growth, we are increasingly confident in our full-year sales outlook and our ability to deliver on our updated profit outlook. Importantly, back in November of 2020, we outlined a bold path forward for Edgewell, reflective of sustainable top-line growth, healthy free cash flow generation, and accelerated adjusted EBITDA and EPS growth. Despite being faced with unprecedented challenges associated with COVID-19, our 2021 results line up well against this ambition. The progress we've made this year as an organization will continue to position us well to deliver on our long-term financial objectives. And now I'd like to ask Dan to take you through our fiscal third quarter results and provide detail on our updated full-year outlook.