Edgewell Personal Care Company

Hello and welcome to the Edgewell Personal Care Fourth Quarter 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 your touchtone phone. Please note this event is being recorded. I would like now 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 fourth quarter and 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. Ron will kick off the call and hand it over to Dan to discuss our results and full year fiscal 2024 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 restructuring and repositioning actions, 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 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 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 Rob.

Thanks, Chris. Good morning, everyone, and thanks for joining us on our fourth quarter in fiscal 2023 year-end earnings call. 2023 provided further evidence of progress in the transformation of our business. It was evidenced by a stronger portfolio of brands, markedly better retail presence, and improved commercial activation and execution. In 2023, we delivered our third consecutive year of mid-single-digit organic net sales growth. once again outpacing our long-term algorithm. We remain disciplined in the face of rising macroeconomic challenges, accelerated our cost savings efforts, realized meaningful price gains across the business, and generated healthy cash flow. We continue to operate with both focus and urgency, all of which positions us for another year of top and bottom line growth in fiscal 24. For fiscal 23, our organic growth was broad-based, as we grew in all segments of the business and across both North America and international. Amidst the challenging macro environment, we again focused on controlling the controllables, further driving costs out of the business, and investing with discipline, all of which underpinned constant currency, adjusted earnings per share, and adjusted EBITDA growth of 14% and 9%, respectively. We generated $170 million in free cash flow, enabling the continued investment in the business, supporting our capital allocation strategy, and meaningful debt repayment. The fourth quarter played out as expected. The consumer remained resilient, and as we exit the fiscal year, our categories are largely healthy. Aggregate consumption across our U.S. segments increased 5.5% in the quarter. Market share performance was solid. As we held share across the portfolio in the U.S., highlighted by gains in our women's systems, men's systems, and disposables businesses, while we held share in SunCare. In the quarter, we delivered organic net sales growth in line with our expectations and adjusted earnings per share and adjusted EBITDA growth ahead of our outlook. Since the initiation of our growth strategy in November of 2020, our business has delivered consistent top-line growth. fueled by a stronger portfolio of brands and underpinned by the strides we have made across brand building, product innovation, retail execution, and e-commerce activation. We have fundamentally reshaped our leadership team and organization. We've strengthened our critical capabilities in areas like digital, brand building, and retail execution. Our focus on consumer-centric innovation and new product development has improved with the acquisition of the disruptive brand building capabilities of the Cremo and Vili teams. And more recently in international markets, we are realizing the benefits from our revised, simplified go-to-market approach with better capabilities and execution. Overall, we exit fiscal 2023 with a stronger, more capable team that is better equipped to drive the next phase of our transformation. Over that same three-year time horizon, organic net sales growth has been driven by a healthy combination of growth from both unit volume and price. Importantly, the composition our growth has been consistent with our long-term profile, as we benefit from the portfolio shift towards higher growth categories. Our right-to-win businesses, which include sun care, grooming, and skin care, have increased organic net sales by double digits on a three-year CAGR basis. With those businesses now approaching one-third of total company sales, compared to just 25% of sales when we launched the strategy three years ago. We've also made good progress with our right-to-play portfolio, taking a historically declining subset of our business in shave and femcare and delivering organic net sales growth of over 1% on a three-year CAGR. These results and the progress we've made since outlining our long-term vision and growth goals in 2020 demonstrate that our strategy is working. And though our transformation is not complete, we believe we are firmly on the right trajectory and have confidence that we can continue to drive sustained growth and lasting value creation. Before moving to our outlook for 2024, I'd like to thank our teams across the globe for their dedication and for their continued focus on delighting our consumers and executing our strategy over the past three years. This has been an incredibly difficult period to deliver on a transformation as we face significant macroeconomic challenges, including a global pandemic, supply chain disruption, once-in-a-generation levels of cost inflation, currency headwinds, and more. Despite this, our team's focus and resilience has put us in the improved position we are in today. Now I'd like to turn to the new fiscal year and provide some insight into our plans, and then Dan will take you through the detailed assumptions. Our outlook for fiscal 24 calls for further top and bottom line growth, reflecting four core drivers. First, continued organic sales growth. Our outlook is for organic net sales growth in the range of plus two to plus 4%, with growth again expected across both North America and international markets, and driven by a mix of higher volumes and price and revenue management. Second, further gross margin accretion, driven by our productivity initiatives and further price and revenue management, which is expected to more than offset continued cost of goods inflation and currency headwinds. Third, we plan to increase investment in our brands and organization capabilities. with advertising and promotion spending expected to increase in a disciplined and prioritized cadence, growing both in dollars and as a rate of sale. We plan to prioritize our incremental investments across critical brand initiatives, including supporting the Billy Brands move into adjacent body categories, compelling innovation in sun care, and the replatforming of our FemCare Master Brand strategy. And lastly, we anticipate improved operating margin driven by gross margin expansion and improved SG&A as a rate of sale, which will benefit from operational leverage as we improve efficiency across the organization. This outlook calls for strong earnings growth, substantial free cash flow generation, and a disciplined approach to capital allocation and continued deleveraging of the business. We are confident we can deliver on this outlook given our improved go-to-market position across our portfolio of brands and the markets in which we operate, creating, we believe, a very compelling value proposition for shareholders. And now I'd like to ask Dan to take you through our fourth quarter and full-year results and also provide some additional detail on our outlook for fiscal 24. Dan?