Edgewell Personal Care Company

Good morning and welcome to the Edgewell Personal Care Q2 2023 earnings conference call. All participants will be in the 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 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 Mr. Kuiskov, Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning for Edgewell's second quarter fiscal year 2023 earnings call. With me this morning are Rod Little, our President and Chief Executive Officer, and Dan Sullivan, our Chief Financial Officer. Todd will kick off the call, then hand it over to Dan to discuss our results and update to the full year 23 outlook before we 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, acquisitions and integrations, changes to our working capital metrics, currency fluctuations, commodity costs, category value, future plans of return of capital to shareholders, and more. Any such statements are forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to future events, plans, or prospects. 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, 2022, as may be amended in our quarterly reports on Form 10-Q, which is on file with the SEC. 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 is shown in our press release issued earlier today, which is available at the investor relations sections of our website. This non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. However, management believes these non-GAAP measures provide investors with valuable information on the underlying trends of our business. With that, I'd like to turn the call over to Rob.

Thank you, Chris. Good morning, everyone, and thanks for joining us on our second quarter earnings call. This was a very strong quarter as organic net sales increased over 11%. Our growth was broad-based, coming from all major geographic regions and all segments of the business. Growth was also balanced, coming in equal parts from higher volumes and price execution, enabled by better brand resonance and stronger presence on shelf. Our operational execution also improved, enabling us to deliver better in-stock positions and meet accelerated retailer demand in the quarter. We delivered against our productivity and efficiency initiatives. which, coupled with price execution, served to mostly offset significant inflationary headwinds. And we continued to realize the benefits from our ongoing efforts to strengthen our commercial teams and capabilities, most notably in our international markets. This strong top-line performance translated to the bottom line as well. In what continues to be a challenging operating environment, adjusted earnings per share increased 12%, despite facing a 16-cent headwind from currency and over 500 basis points of gross inflationary headwinds in cost of goods. On a constant currency basis, adjusted earnings per share increased over 40 percent. Looking to the drivers of our performance this quarter, we saw further evidence of meaningful progress in our transformation demonstrated by fundamental improvements across our brands. which reinforces our confidence going forward. This structural improvement is most evident in our ability to generate consistent top-line growth as we delivered our eighth straight quarter of year-over-year organic sales gains. Our ability to consistently, sustainably grow the top line is fueled by the strides we have made across brand building, product innovation, and retail execution. There's probably no better example of this than in our FemCare business. It doesn't get as much attention as some other segments, but the turnaround in FemCare has been instrumental to our success. With a focus on better innovation, consistent investment, and better shelf outcomes, we've seen meaningfully better sales and share results, and our position in the category in the U.S. has strengthened. In the quarter, both North America and international markets delivered double-digit organic net sales growth, driven in equal parts by volume and price. And while healthier categories and favorable phasing of demand were contributors, the fundamental change in our business trajectory is a result of better execution on-shelf. Our retail relationships are stronger, our commercial execution and on-shelf positioning is better, and our innovation is more centered on the consumer. As I mentioned last quarter, our brands are healthier and better represented on shelf than at any point since we began as an independent company. Our focus on consumer-centric innovation and new product development is playing a vital role in our strengthened portfolio, with the acquired disruptive brand-building capabilities of the Cremo and Billy teams now benefiting our broader portfolio. Importantly, growth this quarter was also underpinned by better supply chain execution. We improved stock levels in FemCare, particularly in tampons. And in SunCare, we were able to meet increased retailer demand across the United States, Australia, and Mexico, largely due to our strategic decision to build product early in the cycle in anticipation of another strong season. Market share performance across the total portfolio was solid, supported again by meaningful share gains in key markets for our leading women's shave portfolio. Importantly, the Billy brand has now expanded across the retail landscape here in the United States, and early results are very positive. While our efforts to improve service levels are critical, Equally important is the work our teams are doing to simplify our business and to deliver meaningful gross cost reduction across both cost of goods and overheads. This quarter, we delivered $18 million in gross savings, providing a significant offset to the inflationary headwinds we faced in the quarter. This work is not only important to help deliver on our earnings commitment, but also strengthens our business over the longer term. We continue to operate in a challenging and uncertain marketplace. Inflationary and foreign exchange pressures, though easing, remain significant headwinds to our business. The labor market remains tight, and perhaps most importantly, we are closely monitoring the market for signs of weakening consumer sentiment in the face of likely economic challenges ahead. We therefore remain cautious as we consider the balance of the year, act with urgency, and continue to focus on controlling the controllables. This being said, we are increasingly confident in the underlying fundamentals of our business. And with the benefit of a strong second quarter, we are increasing our full-year outlook for organic net sales growth to the high end of our range, or 5%. Importantly, we still see our fiscal third quarter, the April to June period, as being an inflection point for gross margin accretion. And through the realization of price actions, the ongoing execution of our productivity initiatives, and some moderation in inflation, we continue to expect gross margin accretion for the full fiscal year. I'm confident that we are taking the right actions to deliver sustained value creation over the long term. And as we move beyond this period of significant inflation and foreign exchange headwinds, as well as other supply chain challenges, I believe we will realize the full potential of our fundamentally improved business model, driven by top-line growth, gross margin expansion, and free cash flow generation. And now I'd like to ask Dan to take you through our second quarter results and also to provide additional details on our outlook for fiscal 2023. Dan? Thank you, Rod.