Edgewell Personal Care Company

Good day and welcome to the Edgewell Personal Care Q3 2023 Earnings Conference 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 a touchtone phone. To withdraw your question, please press star then two. Please note this event has been recorded. I would now like to turn the conference over to Chris Goff, 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 2023 earnings call. 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 and 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 for 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 10Q, 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 section 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 Rod.

Thank you, Chris. Good morning, everyone, and thanks for joining us on our third quarter earnings call. This was another strong quarter in which we continued to make progress against our strategic priorities. Organic net sales increased 4.5%, largely in line with our expectations and making nine consecutive quarters of growth. Adjusted earnings per share and adjusted EBITDA increased 14% and 12% respectively. and we expand a gross margin by 80 basis points or 185 basis points at constant currency. This strong bottom line performance was delivered despite facing a 17 cent headwind from unfavorable currency and taxes and over 300 basis points of gross inflationary headwinds in cost of goods. Our strong performance this quarter illustrates both the advantages of operating a broad and global brand portfolio as well as the impact of strong commercial execution. Organic net sales growth in the quarter was led by international markets, which contributed nearly 9% organic net sales growth. This growth was broad-based across segments and driven by both higher volumes and price. In North America, organic net sales increased just over 2%, driven by price, as category growth slowed sequentially, most notably in Sun and Femcare. Since the initiation of our new growth strategy two and a half years ago, our business has delivered consistent structural top-line growth, fueled by a stronger portfolio of brands and underpinned by the strides we have made across brand building, product innovation, and retail execution. While the growth this quarter once again exceeded our long-term algorithm, the composition of our growth was very consistent with our long-term view. as our right-to-win brands, which include Sun, Skin, and Grooming, grew organic net sales double digits, driven by both volume and price. And our right-to-play brands were essentially flat in the quarter, as higher pricing offset lower volumes. As I've discussed previously, in what continues to be a challenging operating environment, it's critical that we control the controllables. I am proud of the team's strong operational executions. that enabled us to deliver better in-stock positions, good on-shelf performance, a stable market share, and strong e-commerce performance. We again delivered against our productivity and efficiency initiatives, which coupled with price execution, served to more than offset inflationary headwinds, leading to healthy gross margin expansion in the quarter. And as you saw in our international performance, we are realizing the benefits from our revised go-to-market approach. better execution, and improved in-market capabilities. In the quarter, we also released our fiscal 22 sustainability report, highlighting the good progress we have made against our commitments across all three of our sustainability pillars, namely our brands, our operations and supply chain, and our people and communities. Our sustainable care 2030 strategy underpins all that we do and aligns with our values as a modern and responsible, progressively sustainable consumer goods company. I'm proud of our accomplishments today, including being recognized as one of USA Today's climate leaders in the United States, as well as the meaningful gain in rankings up to number 37 overall in Newsweek's annual list of the most responsible companies. With respect to our outlook for the business, we continue to navigate this challenging environment well. And despite persistent inflation and broader macroeconomic headwinds, the consumer remains largely resilient. This said, we have seen some impactful changes within the sun care category in North America since our last earnings call in early May. After a solid start to the season, beginning around Memorial Day, consumption has been negatively impacted by unfavorable weather conditions across most of the United States, which has subsequently affected replenishment order flow for most retailers in the current quarter. And although we are still in the midst of the season, and recent category consumption trends in July have improved, we now anticipate that our United States sun care sales, while still projected to grow mid-single digits for the year, will be lower than previously expected. which is reflected in our revised sales outlook that Dan will take you through shortly. We remain confident in the underlying fundamentals of our business, and we expect to deliver organic net sales growth slightly above the midpoint of our previous outlook range. This puts us on track to deliver our third consecutive year of 4% or more organic net sales growth, and we expect adjusted earnings per share and adjusted EBITDA to be at or above the high end of the previously provided ranges. Importantly, we've seen a return to gross margin accretion through the realization of price actions, the ongoing execution of our productivity initiatives, and some moderation in inflation. I'm confident that we are taking the right actions to deliver sustained value creation over the long term. And as I said a quarter ago, 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 continued top-line growth, gross margin expansion, and free cash flow generation. And now I'd like to ask Dan to take you through our third quarter results and also to provide additional details in our outlook for fiscal 2023. Dan?