Edgewell Personal Care Company

Good day and welcome to the Edgewell first quarter 2025 earnings conference call. All participants will be in a 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 touch tone 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 Goff, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning for Edgewell's first quarter fiscal year 2025 earnings call. With me this morning are Rob Little, our President and Chief Executive Officer, Dan Sullivan, our Chief Operating Officer, and Fran Weissman, our Chief Financial Officer. Rod will kick off the call and hand it over to Dan to discuss first quarter commercial and operational highlights, followed by Fran who will discuss our financial results and 2025 four-year outlook. 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 this 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, impacts from tariffs and other recent developments, changes to our working capital metrics, currency fluctuations, commodity costs, inflation, 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 captioned risk factors in our annual report on Form 10-K for the year end of September 30th, 2024, as amended November 21st, 2024, and as may be amended in our quarterly reports on Form 10-Q filed 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 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 first quarter fiscal 25 earnings call. I'm pleased to welcome Fran Weissman, our new CFO, to the call this morning. Fran knows our business well and is more than ready for her expanded responsibilities. We delivered solid results this quarter, despite an external environment that has become increasingly more volatile and uncertain, largely driven by the strengthening of the U.S. dollar. Organic net sales were down slightly versus last year, but in line with our expectations with a sequential improvement over recent trend. Importantly, we saw continued growth in international markets with gains across wet shave, sun care and grooming and global growth in our right to win portfolio. Gross margin at constant currency was again strong in the quarter and served as an important catalyst for year over year incremental brand investments. Despite the worse than planned foreign exchange headwinds, as Fran will discuss later in the call, for the whole year, we still expect to deliver organic net sales, adjusted EBITDA, and adjusted earnings per share within our previously provided outlook ranges. This reflects our continued focus on driving operational performance, being disciplined in our investments, and management of costs and controlling the controllables. It also assumes the current macro conditions do not materially deteriorate. Importantly, we believe our performance demonstrates traction against our broader strategic priorities and gives us confidence in our ongoing efforts to further transform the business. Putting our first quarter performance in the context of our broader strategy, there are three important themes that underpin our performance to date, as well as the broader outlook for the full year. First, The categories we compete in remain mostly healthy and consumption trends are in line with our expectations. While organic growth remains mostly a result of price, volume gains have returned in many markets and consumer sentiment related to experiential spend and personal travel continues to be positive. Consumers remain resilient and at the same time cautious. Though in our categories, which are mostly non-discretionary, In everyday use, we see no material signs of purchasing hesitancy nor trade-down behavior. Having said that, the U.S. wet shave and femcare categories remain highly competitive and promotional. Importantly, we have no material indications of a similar trend across international markets. We will continue to actively participate as needed in support of our brands on shelf making our outsized productivity savings and gross margin expansion even more important as it unlocks our ability to remain in an investment stance commercially. The second comment I would make relates to our international business. I am extremely pleased with our results here. And as Dan will discuss, the underlying drivers of our performance further reinforce the durability of our top-line growth. Of course, in the absence of weekly scanner data, the success is not as readily visible. But for international, the first quarter was our fifth consecutive quarter of organic sales growth, and 11th in the last 12 quarters, delivering a three-year kegger of nearly 8%. Importantly, share results were also strong, especially in leading sun care markets like Australia and Mexico, and also high-growth wet shave markets like China. Now representing 40% of our global business, we've never been in a better position internationally, and I'm increasingly confident in the future of this business. Relatedly, we're also seeing the initial benefits of our rebuilt innovation platform. As I've shared, we are committed to a more consumer-centric, locally driven new product development model, and we spent much of last year taking the appropriate organizational steps necessary to deliver on these objectives. While work remains, our consumer insights are better, we're more locally focused and informed, and we're faster in bringing new products to market, some of which are already having an impact. Our strong international results this quarter include contribution from the highly successful and disruptive launch of Schick First Tokyo in Japan, the broadening of our Bulldog range to deepen our skincare penetration in Europe, and meaningful new forms and formats in Suncare that supported strong share gains in Australia and Mexico. Third and finally, our business transformation continues to be most dependent on our talented people. I've said from the beginning, we are equally committed to both a business and a cultural transformation, as we will not have one without the other. Our team is highly motivated and continues to perform with excellence, in the face of an increasingly challenging environment. Having been recently recognized as the number two best midsize company to work for out of 400 ranked, our efforts are clearly being recognized externally and our ability to attract and retain top talent is a key catalyst for continued strong performance. Over the past six months, we've announced a series of leadership changes and organizational changes designed to strengthen our capabilities and operating model, streamline decision-making, and improve enterprise execution. In the quarter, we saw notable improvements in commercial and operational performance. Dan will share more about this shortly. Last quarter, I announced the appointment of Jeff Spence to the role of president of our North America business. At that time, I noted my desire to both continue the strong performance across our right to win portfolio, while equally accelerating our recovery and our right to play portfolio in the US market. And I'm excited about our early progress. Jeff and the team are moving with pace to confirm the strategic clarity and commercial baseline for the path forward for our North American business. We've already begun to enhance our talent profile in the US market, and we are better connected with our top retail partners. We're very excited about the path forward and the opportunity we have here. Finally, Jess and team are raising the bar on brand building, and I expect our portfolio, brand plans, and our in-market activations will be significantly improved over the coming quarters. I'm confident in Jess and the team's ability to have impact and create a lot of value in our North American business as we move forward. So in summary, I'm pleased with our performance in the quarter and more broadly expect continued stability across our categories as we move through the fiscal year. Our strategy is clear and we remain committed to its successful execution with our global teammates at the core of our success. And while the macro environment remains challenging, we will stay focused on controlling the controllables, delivering products that our consumers love and ultimately winning on shelf and online. And now I'd like to ask Dan to take you through our operational performance highlights. Dan?

Thanks, Rod, and good morning, everyone. As Rod mentioned, this was a solid start to the year, with organic net sales in line with our expectations, constant currency gross margins stronger than planned, improved operational execution, and solid market share performance across our international businesses as well as the billion promo brands in the U.S. As the macro environment grew increasingly volatile, we remained highly focused on executing in areas of the business that are under our direct control, with focus on maintaining our growth momentum in international markets and global right-to-win categories, continuing to drive our productivity and enterprise efficiency initiatives, improving service levels and partnerships with retailers, and strengthening commercial execution behind our brands to drive share gains in market. This quarter demonstrated that we had the right leadership in place Our innovation pipeline is robust, and our broader categories are largely healthy. As we move forward, we will continue to be relentless on commercial and operational execution, and that's why underpinning all of our strategic priorities is a deep organizational commitment to executional excellence across the enterprise. This is a key priority for me in my role as COO, and we believe it will provide further unlock of value going forward as we execute better in everything that we do. Now let's move to the commercial and operational highlights for the quarter. Organic net sales decreased 1.3% in line with our expectations. Growth was driven by international markets and our right to win businesses globally. International growth of 2% was slightly better than expected, driven by both price and volume gains. This growth rate was slightly lower than trend as we lapped strong growth in international a year ago. largely related to last year's surge in orders ahead of the holiday period in Japan. Organic sales in North America declined about 4%, reflecting declines in our right-to-play businesses, wet shave, and femcare. Before discussing segment specifics, let me offer some commercial highlights in the quarter. In North America, organic growth was strongest across our grooming portfolio, and in particular, the Cremo brands. We saw double-digit segment organic growth with Cremo growing 20%, driven by range expansion and good retail execution. The Billy brand was also a strength in the quarter, gaining an additional 230 basis points in women's shave market share, and now stands with a 15% share of the category of Walmart and over a 10% share nationally. Importantly, in a clear sign of growing consumer loyalty, the strength of its refills business is noteworthy. as Billy is now the number one brand in women's refills in units and number two brand in dollars across the top five retailer landscape. In terms of U.S. market share performance, we saw solid performance in grooming behind the accelerated growth for Cremo and, as discussed, meaningful gains for the Billy brand. The remainder of our shave portfolio and femcare business share results were largely in line with trends. Internationally, we delivered 2% organic growth while cycling 16% growth last year. As Rod mentioned, this was our fifth consecutive quarter of organic growth and 11th out of the last 12. Commercial execution across the markets was very strong, and both our innovation and strong brand activation were core to our results. Schick First Hydro in Japan has achieved almost 130% of its targeted distribution since its launch in August last year. and has quickly scaled to a two-share in the category. Our Wilkinson Sword brand relaunch continues to be disruptive in Europe, where we were also awarded three Best Product of the Year honors, including the new Hydro 5 Razor in the grooming category. And our private brands business remains a meaningful competitive advantage, posting double-digit organic growth fueled in part by new business across many key retailers, including Aldi and Lidl. Market share across international was solid, with noteworthy gains in sun care across both Australia and Mexico, and good performance in the grooming category in Europe, where the Bulldog brand now sits at the number two men's grooming brand in the UK. Now, turning to our segment performance. Wet shave organic net sales were down 1.3%. International wet shave grew 3%, with both price and volume gains, reflecting continued category health, impactful innovation, and strong in market activation. In North America, wet shave organic gut sales declined just under 7%, as gains in men's systems and disposables were more than offset by declines in shave preps and women's systems. Women's systems continue to be negatively impacted by weakening channel dynamics and a highly competitive and promotional environment. Consumption in the U.S. Rages and Blades category was down 80 basis points in the quarter, with continued heightened declines in the drug channel. Our market share decreased 100 basis points, consistent with 26 and 52-week trends. Sun and skin care organic net sales increased approximately 5%, as double-digit growth in skin and grooming more than offset declines in North America's sun care, primarily as a result of a shift in phasing in some customer orders in what is our lightest sales quarter of the year. In the U.S. sun care category, consumption increased about 1.6% in the quarter, led by increased e-commerce sales, and our market share was down slightly. In our two most noteworthy international markets, we saw strong sun season performance, with both value and volume market share gains in Australia and Mexico. Grooming organic net sales increased 13% in the quarter, with growth across each brand, as mentioned, most notably led by 20% organic net sales growth in Cremo and growth from the national rollout of Billy's Body Care. Wet One's organic net sales increased 15%, fueled by better in-stock positions, and our share was approximately 71%. FemCare organic net sales were down approximately 12%. The decline was largely driven by our pads business, as we continued to ramp conversion from stay-free to care-free. Consumption in the category was up 4%, though continues to be driven mostly by 7% growth in pads where our penetration is the lowest. In the categories where we mostly compete, tampons and liners, consumption was down 1% and up 3% respectively. Overall, the category remains highly promotional. And finally, turning to our operational performance in the quarter, Q1 reflects a continuation of our cost excellence strength paired with meaningful improvements in broader service levels and much improved in-stock positions. Productivity savings were 340 basis points and provided the tailwinds for our approximately 80 basis points of constant currency gross margin accretion in the quarter. Productivity savings were realized from a full collection of programs, including global sourcing and indirect savings, labor automation, and broader plant efficiency efforts. Importantly, we also delivered meaningful service games, saw unit fill rates above target levels across most categories and markets, and addressed the supply challenges referenced last quarter in our grooming, creps, and skin businesses. Lastly, we were very pleased with our supply levels and in-stock positions as we prepare for the critical sun season in the U.S. and northern Latin American markets. While we continue to see some modest inflationary pressures, largely driven by labor, and more modest increases in commodities, there is no material change to our inflation expectations for the full year. The same cannot be said on the FX front. Given a significant strengthening of the dollar against most major currencies, gross margin in the quarter was negatively impacted by an incremental 40 basis points of currency headwinds. On a full year basis, FX is now expected to be an incremental 20 basis point headwind to gross margin. So while I'm pleased with the progress we're making in the areas of the business that are in our direct control, these external factors certainly make for a more challenging operating environment. Going forward, we will continue to be proactive, act with urgency and discipline, and prioritize executing our strategies and focusing on the operational elements of the business that will lead to durable growth and broader value creation. Now, let me turn it over to Fran to discuss the financial results for the quarter and our full year outlook.

Thank you, Dan. Good morning, everyone. I'm excited to be here in my new role, and I look forward to getting to know many of you in the weeks and months ahead. Now let's jump into a quick review of the first quarter, followed by our updated outlook for fiscal 25. As previously discussed, organic net sales decreased 1.3%. International growth of 2%, driven by both price and volume gains, were more than offset by a 4% decline in North America. due to lower volumes in fanfare and wet shave. Adjusted gross margin rate decreased 60 basis points, but increased approximately 80 basis points in constant currency, exceeding our expectations. We realized approximately 340 basis points of productivity savings, which was partially offset by increased promotions net of price of 40 basis points, 200 basis points of core growth inflation and volume absorption, and 20 basis points of unfavorable mix and other headwinds. A&P expenses were 10.5% of net sales, up from 9.9% last year. Adjusted SG&A was 21.2% in rate of sales, up approximately 20 basis points versus last year. Overall, higher people costs and outside services were offset by lower incentive compensation expense, lower bad debt, and favorable currency impacts. Rate of sale increase was impacted by lower net sales in the quarter. Adjusted operating income was $27 million compared to approximately $36 million last year. Adjusted operating margin decreased 170 basis points almost entirely due to the net unfavorable impact from currency. Importantly, on a constant currency basis, adjusted profit margin was nearly flat, despite the incremental brand investments driven by strong gross margin accretion. Gas diluted net earnings per share were a loss of 4 cents compared to earnings of 9 cents in the first quarter of fiscal 24, and adjusted earnings per share were 7 cents. Currency movements had an approximately $0.17 per share unfavorable impact in the quarter due to translational currency headwinds to operating profit and higher year-over-year hedge and balance sheet remeasurement losses within our other income and expense. At constant currency, adjusted earnings per share were flat to prior year. Adjusted EBITDA was $45.9 million, inclusive of an $11 million unfavorable currency impact compared to 57.2 million in prior year. At constant currency, adjusted EBITDA was flat to prior year. Net cash used by operating activities was 115.6 million for the quarter, compared to 72.9 million in the prior year period. Shifts in seasonal inventory bills versus last year drove the increased use of cash in the quarter. We ended the quarter with $176 million in cash on hand, access to the $221 million undrawn portion of our credit facility, and, as anticipated due to cash flow seasonality, a net debt leverage ratio of 3.8 times. In the quarter, share repurchases totaled $30 million. we continued our quarterly dividend payout and declared another cash dividend of 15 cents per share for the first quarter. In total, we returned approximately 38 million to shareholders during the quarter. Now turning to our outlook for fiscal 25. As Ron and Dan mentioned earlier, we are pleased with our operational performance in the quarter and we have strong underlying fundamentals in place to continue to execute and deliver on our previously provided outlook ranges. However, the current macro environment remains challenging, particularly across currency markets. And as such, we have updated our outlook for the full year, primarily to reflect the impact of unfavorable currency movements compared to our prior outlook. On a constant currency basis, our outlook is essentially unchanged from a quarter ago. For the fiscal year, we still anticipate organic net sales growth to be in the previously provided range of 1% to 3%. Looking ahead, our growth assumptions for second quarter are now approximately 1%, reflecting an expected shift in Suncare orders into third quarter. On a reported basis, currency is now expected to negatively impact reported sales by 160 basis points. versus our prior expectation of a positive 70 basis points impact. While our outlook for a 90 basis point increase in gross margin on a constant currency basis is unchanged, we now expect full year adjusted gross margin accretion of 55 basis points, inclusive of 35 basis points of FX headwinds, 20 basis points worse than our previous outlook. Our outlook for adjusted EPS and EBITDA are now expected to be towards the lower end of their respective ranges, essentially flowing through the incremental FX headwinds, partly offset by slightly improved below-the-line items, including a favorable pension TRUA. Adjusted earnings per share are now anticipated to be towards the lower end of our 315 to 335 outlook range. inclusive of approximately $0.36 per share of currency headwinds, an increase of $0.18 versus our prior outlook. Adjusted EBITDA is also now expected to be towards the lower end of our $356 million to $368 million outlook range, inclusive of approximately $23 million in currency headwinds versus the $12 million currency headwind contemplated in our prior outlook. Due to our revised FX expectations, we now expect approximately 70% of adjusted net earnings to be generated in the second half of the fiscal year, slightly higher than our previous outlook. On a constant currency basis, our half-one and half-two phasing expectations are essentially unchanged. As outlined in our earnings release, this outlook does not reflect the potential impact from the U.S. or retaliatory tariffs given their rapidly evolving nature. For more information related to our fiscal 25 outlook, I would refer you to the press release that we issued earlier this morning. And now, I'd like to turn the call over to the operator for the Q&A session.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Kate Grafstein with Barclays. Please go ahead.

Thanks. So Femcare sales took another step back this quarter, and you've talked about consolidating the brand portfolio with stay-free and carefree and simplifying the portfolio, but it seems like there's still some work to do. So if you could just talk a little bit about why the business is still so weak and maybe if the spring resets will help this time around. Thanks.

Good morning, Kate. So on Femcare, look, the category is healthy overall. And if you look at where the growth in the category is, it's being driven by pads in the most recent quarter. And that's where we're most challenged at the moment. And so if you step back and go back nine months or so ago, we looked to consolidate our pads and liners under the Carefree Master Brand. So we had Stay Free in the base being shipped, and today we don't have that. And it's taking us longer than we had anticipated to transition consumers from stay-free pads into care-free pads. Are we making progress? Absolutely, we are. So we're on that journey. Liners performed as we expected. Plate tech sport performed as we expected, slightly weaker in pads. That's the story. Final thing I'll say, and Dan, if you want to comment, you can, is you will see our results. improve sequentially from here as we go throughout the year, if nothing else, from easier compares. And then the work we're doing to convert consumers will continue. So I think we get better from here. But, Dan, I don't know if you had anything.

Yeah, I would only add we're actually pleased with Carefree's performance. So we're seeing, actually, traction here in terms of the brand itself. We saw low single-digit growth in liners. We saw mid-single-digit growth in pads. As Rod pointed out, the challenge, and this is what certainly takes time, is bringing the state-free consumer along. We did activate above-the-line marketing late in the quarter. We'll continue that in Q2. So the work remains. It will take time. I think we have to separate sort of carefree's performance, which we're actually seeing traction on, which is helpful, but the work remains on the state-free consumer, and it's obviously where we'll stay focused.

Thank you, Kate. Next question, please.

The next question comes from Chris Carey with Wells Fargo. Please go ahead.

Hi, everyone. Can you maybe just provide some context on the collection of your businesses that are going to be seeing atypically or that have been seeing atypically negative performance and when those businesses start to lack that performance? thinking about the shape prep transition, sudden care transition, when do those businesses start to encounter or start to lap that really difficult, atypically difficult performance? And I guess I ask that in the context of the acceleration that's embedded here. It's some challenge businesses that are going to get beyond this, you know, this current one-year cycle, if you will, and then what are you embedding for the rest of the business from a sort of acceleration standpoint from here? I can reframe that if that doesn't make sense, but curious your thoughts.

Yeah, good morning, Chris. Look, I think it's primarily as we get into the second half of the year is when we start to have the better compares. If you think about the supply chain issues we had last year, The fire in our manufacturing plant for wet ones was happening last fall, and so as we start to lock that, as we come back on in full production rate and mode, we're already seeing that one come back. Wet ones is about 15% in the quarter that we just finished. So that one's back online and in a relatively good spot. If you then look at EDGE, and Cremo and some of the areas where we had some constraint. We'll start to lap those and get into those periods, again, as we get into the back half of this fiscal year, so out in the summer. And then I mentioned FinCare in Kate's question earlier. That's one where, you know, one of the issues we've had is we had a delayed planogram reset, which was targeted February, March last year. actually didn't happen until the summer. And so I think sequentially as you go here, you'll see us improve. But the easiest comparison, the more like-for-like comparison, are really in Q3 and Q4 of this year.

Yeah, and the only thing I would add, Chris, just to ladder back up, you know, we said last quarter 70% of our business is growing at mid-single digits, and we expect that to continue growing. for the fiscal year 2025. We still have a line of sight to that. Now, remember that's made up of international and our global right to win portfolio. And our expectation is still for 2025 that that 70% of our business will grow in single digits.

Okay. You mentioned some shifts in some care orders, I believe. Can you expand on that please? Thanks.

Yeah, I'll just, I think there's, There's a single driver here around Easter timing. I mean, there's a couple things, but there's a big driver where Easter is three weeks later. This year, as you get out into mid-April last year, it was earlier, and what you had profiled was more shipments into the second quarter ahead of some of those big Easter resets. And from a planning basis, as we look at it, that is a driver.

Yeah, just to be clear, you said FEM. I think you meant sun because Rod was answering sun.

That's what we called out as an order. If I said FEM care, I meant the sun care business.

Yeah, no, of course. It's sun care. Look, we just have to remember 80% of the season's consumption happens between April 1st. and September. So whether shipments go in late March or in first week of April, always tough to profile. We're as bullish on the season here in the U.S. as we were when we initiated our guide back in November, just some order phase.

And I'll add a data point. Chris, we were down in Florida last week with the board and out looking at the shelf and some formats, and the shelves look great. We are, I think, at the right place from a From an activation standpoint this year, we feel really good about that. And, you know, weather's better already at this point down in South Florida than it was at this point last year, where it was rainy and wet for most of the season. So it's early to Dan's point, but I think we're excited about the start, what we've seen here in the early couple of months.

Okay, thanks. Thanks, Chris. Up our next question, please.

The next question comes from Olivia Tong with Raymond James. Please go ahead.

Great. Thanks. Good morning. FX is obviously a much bigger hit for you this year than you had originally anticipated. So can you talk about some of the offsets that you've planned, if you have any pricing plans or are evaluating that?

Hey, Olivia. It's Dan. I'm sorry. It was a bit muddled. Could you repeat the question?

Sure. My question was around FX, and it's obviously a bigger hit this year. So just if you have any – what the plans are to offset that, if you have any plans for pricing or potentially evaluating incremental pricing in some of the categories.

Yeah, look, it is a bit of a heavier FX hit for us in the quarter, and we discussed that. We flowed that through for the full year or so. Certainly, the FX headwinds have increased from when we spoke back in November. Now, we've held to the lower end of the guide within our original ranges on profit. As far as how we solve for that, yeah, look, we have executed the pricing that was planned in our 2025 business. It doesn't mean we can't reconsider. I think the areas that we typically will go to just in good operational hygiene are going to be around revenue management and how do we make sure Promotional dollars are most effective. Trade terms are optimized. Mix is managed well, which you actually saw in the first quarter. It was a tailwind for us in margin. And then, of course, on the productivity side, while we delivered a healthy 340 basis points of productivity savings in the quarter, the team's DNA, of course, is always to push for more. So not committing to either one of those, but the team will continue to look at all levers, I don't know that I would say price at this point. There's a lot of factors going in right now, tariff and otherwise. We are certainly looking at it, but nothing that we would say today is firm.

And Olivia, I would add, one thing we're not going to do is to cut our brand investment as a way to offset this. We're going to stay leaned in. As you saw in the quarter, we've invested in supporting our brands. We like the campaigns. We like the activation. and what we have coming, and we're going to keep that in because we think operationally that's the right thing to do, and that sets us up for success not only in the back half of the year, but as we start to look out to fiscal 26. And so I think that's an important point of what we're not going to do.

Got it. Thanks. And then just following up on FemCare, understand, you know, the delayed planogram from winter to spring, to summer last year, but it's been quite challenged for some time, and there have been a number of different reasons for that. So as you think about the plan for this year, what gives you confidence that that is the right plan, you know, for this year and that you can, you know, the consolidation of the master brand does help stabilize the business?

I think, Olivia, it starts with the fact that we've got the healthy category. All right, so the category after a couple of years of being very choppy, a lot of noise in the printed results and consumption data around demand spikes, around inability to supply against those demand spikes, that's behind us now. And so we've got a stable, I would call it traditionally normal operating category that is growing. We've talked about R3 segments, pads, liners, tampons, We have good line of sight to what's happening in each one of those. I think we feel good about our plans and the execution for the year. We'll see the sequential improvement as we've talked about. And so whether or not we're right at that category growth rate or slightly below, I think part of what makes us feel good about it is we've just got line of sight to what's required and the lap gets easier from here.

Thank you.

Thanks, Olivia. Operator, next question, please.

The next question comes from Peter Graham with UBS. Please go ahead.

Thanks, Operator. Good morning, everyone. Maybe just a few on just the top line, and maybe specifically to Chris's question. I apologize if I missed this, but can you quantify how big of an impact this timing shift is having on the second quarter organic sales outlook? And then maybe, you know, just on the growth from here. So I hear you completely that the US weekly scanner data masks what the company is doing as a whole, just given the strong international performance. But how are you seeing US versus international growth evolving from here? And I guess what I'm trying to understand just, you know, as we look at the data, you know, would you expect to see some improvement here in the US?

Yeah. So, you know, good morning. The scanner data that you see, we look at this, obviously, as 35% to 40% in what's U.S. available to read. It's 35% to 40% of our business. So it's a relatively small piece of the overall global total. But it's an important piece, right? It's out there every week, and it's roughly more than a third of the business. We expect to see sequential improvement. in our North American results. I think we went from minus six in quarter four to minus four organic here in quarter one. We're going to continue to see improvement as we go across the year in North America. And we're going to continue to see strength in international. And I think Dan mentioned it earlier, we have 70% of our business in mid-single digits growth between the international business and the right to win categories here domestically in the US. So we've got good line of sight to that, and I think we have a good level of confidence that we'll be successful from here and be back in growth territory for the balance of the year. Related to the SunCare question, timing, I'll flip that to Dan, but it's a mechanical piece of what we had guided to initially. It's just not how the execution is happening from a quarterly phasing.

Yeah, so we've taken our thinking for Q2 down to the lower end of our outlook, so call it 1% growth is our thinking. That's down 0.5 from what we originally contemplated. So if I were to size it, I would put it in the $6 million, $7 million range as an impact that now slides into 3Q. Just to ladder back up, I do want to make the point We always contemplated a sequentially improving organic growth profile across the year. Q1 came in literally exactly as we had profiled it. And the drivers of this growth, we continue to see international at mid-single digits. Remember, we just cycled our strongest quarter of a year ago, 16% growth last year in Q1. Sun season U.S. coming off a flat season last year. Consumption, we think there'll be underlying growth there. The Billy brand and other grooming strength here, you saw double-digit growth in the quarter. So it is a sequentially improving growth story. We have a good line of sight to the drivers of it, and all of that sort of ladders back into the range that we contemplated on organics, improving, as Rod said, quarter over quarter as the year plays on.

That's super helpful. Thank you very much. I'll pass it on. Thank you, Peter. Operator, next question, please.

The next question comes from Dara Mosinian with Morgan Stanley. Please go ahead.

Hey, good morning. So I just wanted to touch on pricing. Maybe we could just start with the U.S. Wanted to understand the promotional environment you're seeing from a category standpoint, but also as you look to reinvigorate your top line thoughts on forward pricing from here, particularly given the muted category environment. and the industry landscape. And then internationally, I know we touched on this with Olivia's question, but just how do you think conceptually about pricing relative to FX? Is it just this year you're not sort of making the decision to be too aggressive on pricing and look to offset it? Is it that FX has moved substantially? Just how should we think about how you guys manage pricing typically internationally relative to FX from a longer-term perspective? Thanks.

Yeah, good morning, Dara. Thanks for the question. So let me take a step back. What is in our plans for this year from a pricing standpoint? Price increases are entirely outside of the U.S., so international is where you will see us taking price. You've seen it show up in, not surprisingly, for the most part, in Japan Shave, where we're market leader, or in various aspects of our sun care business, Australia and Mexico, where we're also market leader. So that's That's where we've taken price. There is a bit of carryover price from last year that plays in as well, but all of our pricing outside of the U.S. has been executed already, so I'll put a pin in that. I think in the U.S. itself, as I mentioned earlier, I think our focus right now is much more on revenue management, not necessarily list price increase. We are seeing promotional intensity continue in women's shave and in femcare. At a heightened level, particularly in femcare, so Rod mentioned it's a healthy category. It is, but it is still quite promotional. And although we thought perhaps that would ease seasonally as we came out of the summer and fall, we haven't yet seen that. We are participating in that, and so we're not getting sort of out-executed on shelf. That's a bit of what is also a headwind within femcare is it had increased promotional levels behind it. As far as our broader thinking, yeah, the team is always going to be looking at opportunistic pricing. FX is one of the variables that could affect that. Tariffs is another one. Rising costs is another one. But it will ultimately be thought of as a commercial decision. Where do we have the opportunity and the right to take price? Where can our brands withstand the price? Where are we a market leader and therefore will lead with price? All of these things go into pricing. our calculus here commercially. And while I said earlier we won't commit to further price at this point, we also haven't ruled it out.

Great. And then Suncare came up a couple times. Obviously, there's some near-term shipment timing. But just maybe taking a step back, how do you think your position from a consumer takeaway standpoint as we head into the peak season? It's pretty cold in New York here today. We're moving ahead to the spring and summer. So just thoughts around market share, innovation pipeline as you look at the sun care business both in the U.S. and internationally would be helpful. Thanks.

Yeah, I'll start and then throw it to Dan for some international flavor because I think that's important. 18 degrees on my writing this morning, Darrell. So you're right, it is cold up north here. Yes, sir. Look, we feel really good about how we're set for the sun season. We have... I think we're ready early for what I think in the south-southeast we're optimistic if you look at weather forecast patterns for it to be sunnier and relatively warmer than last year on the start, and we've got all the distribution we had expected. I think as we look at the distribution outcomes domestically here in the U.S., really solid as expected. We feel really good about the innovation pipeline, what's to come. We're in year two of Banana Boat 360 and the activations that go with that. We've got really good innovation coming on Hawaiian Tropic again with some new products. And I think from an innovation standpoint, we're set. And I think as we look at the relative competitive set, we feel good about our positioning and who we are. We know what we are. We're occasion-based, outdoor, beach, sport, fun, active type of brands, and that's where we win. And so I think that combined with the fact that leisure, travel still appears to be robust as you look at not only domestically here in the U.S., but globally, that is a key driver of what drives our brands and our business. And so I think Feel good overall. That's the U.S. perspective. Dan, I don't want you to add international.

Yeah, look, we're coming off perhaps our best single quarter of international sun care in terms of in-market performance. We won share in dollars and units in Australia at the heart of the season, and we won share dollars and units in Mexico as we ready up for the season. So I think we feel really good. I was in Mexico before the holidays with the team, I can tell you, The travel, the leisure, the destination tourism is on fire and that bodes well for us for sure as we enter spring break and holy week and then kick off the season. The only other thing I would say on NPD, Rob mentioned a couple of the big ones. I would also add there's a complete mineral restage happening here in the US, which we think is going to be super impactful. We're launching the banana boat baby line, which has been really well received from retail as well. Good distribution outcomes, good innovation. We need sunshine, obviously, but good in stock position. We're certainly bullish on the season itself.

Great. Thanks, guys.

Thank you, Dara. Next question, please.

The next question comes from Susan Anderson with Canaccord Genuity. Please go ahead.

Hi. Good morning. Thanks for taking my question. I guess maybe first I wanted to ask about Zilli Body and how it's doing. It sounds like it did help to drive growth. Maybe if you could talk about how the products are performing versus your expectations. And then I think historically you had mentioned national expansion for the categories in 2025. Just curious if that's still in the works.

Yeah, good morning, Susan. Thanks for the question. Yeah, look, overall we feel really good about the total grooming portfolio. Obviously, You're going to have some puts and takes across body where you'll see some examples of velocity that are at or above threshold, some that are below, still very much in activation mode. So overall, we feel good. I think the data point we're most excited about is now as we begin the national launch, we're getting terrific retailer support, most notably Target, who's really gotten behind this brand and sees a really good connection with the Target shopper, especially on body wash. And so good opening at Walmart performed largely as we expected it would, and now we'll bring the offering to a national level. And I think Target, a really, really exciting retailer behind the launch. Rod, anything you would add?

I would just add this is all a logical adjacency brand expansion, Susan, off of what is and has to be a healthy and rock-solid core shave business. And Billy is exactly that. We are the number one. The Billy four-count refill is the number one SKU, volume SKU, in the entire category across the top five retailers, number one in volume, despite having just over a 10 share nationally and increasing 200 basis points quarter on quarter. So that's the other piece of this that we're really focused on, is driving the growth that's there in Shea and building that out because that ultimately is a credentialer to the body piece as we go forward. So it's definitely a both strategy as we play forward with Billy, but very, very happy with the progress to date.

Okay, great. That sounds good. And then maybe if you could talk about any updated thoughts around capital allocation plans, any potential M&A down the road, Billy's obviously been pretty successful, so just curious if you'd consider buying another DTC brand like Billy in one of your segments to help drive growth. Thanks.

Yeah, look, I think it's a really good question. We've been on about an 18-month journey prioritizing delevering, debt pay down, and share buyback given what we think is a very undervalued share price. We expect to end the year right around three times levered. We think we've done the good hygiene in that, and so certainly M&A will remain an important part of our growth story and our portfolio shaping efforts here going forward. We've always been quite active, Susan, in the market. We've looked at a lot of assets. It's difficult right now on value for sure, but we certainly wouldn't shy away from acquisition if we thought it would be meaningful to our growth and to the portfolio. I think we're in a, you know, 18 months later, we're in a much healthier position. We have certainly optionality for ourselves given our free cash flow generation, and M&A will continue to be, you know, sort of top of mind for us from here pending valuation and opportunity.

But it's not lost on us, Susan, that with the valuation we have now, repurchase is a really good use of capital. And I think, you know, that's always something we look at it It's relatively where can you get return. We're more convinced than ever that we can get a good return on the repurchase, which is why we're leaning in earlier in the year here.

Okay, great. That's really helpful. Thanks so much. Good luck the rest of the year.

Thank you. Operator, next question, please.

At this time, there are no further questions in the queue. I would like to turn the conference back over to Rod Little for any closing remarks.

Yeah, thank you, everybody. Look, I think it's important to stay focused on the fundamentals and the basics with a lot of uncertainty and noise around us. We're focused on controlling what we can control, building our brands, investing behind our brands, and are confident in our path forward here. So we look forward to speaking with you in early May when we talk about the results. See you then. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.