Edgewell Personal Care Company

Good morning, everyone, and thank you for joining us this morning for Edgewell's second quarter fiscal year 2025 earnings call. With me this morning are Rod Little, our President and Chief Executive Officer, Dan Sullivan, our Chief Operating Officer, and Fran Weissman, our Chief Financial Officer. I will kick off the call and hand it over to Dan to discuss our second quarter commercial and operational highlights, followed by Fran, who will discuss our Q2 financial results and 2025 full year outlook. We will then transition to Q&A. This call is being recorded and will be available for replay on 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 caption risk factors, in our annual report on Form 10-K for the year ended September 30, 2024, as amended November 21, 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 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 second quarter fiscal 2025 earnings call. Our execution was solid this quarter. We acted with urgency, discipline, and purpose in an environment that became increasingly challenging and volatile. delivering adjusted earnings per share and EBITDA in line with our expectations. This was driven by continued top-line growth across our international markets, compelling consumer-centric innovation in wet shave, sun care, and grooming, and accelerated productivity savings that underpinned another quarter of meaningful year-on-year gross margin accretion. Importantly, we remained in investment mode, across our business to support exciting new brand campaigns and ensure strong support for our newly launched innovation. Organic net sales were below our expectations in the quarter, primarily due to a slower-than-expected recovery in our U.S. femcare portfolio and a slower start to the sun season in the United States, as consumption declined year-over-year due mostly to poor weather across the country. While overall consumption across our categories remain mostly in line with 26 and 52-week trends, escalating uncertainty appears to be weighing on consumers and negatively impacting overall sentiment. We, like others, are operating in a volatile global environment, requiring maximum focus on execution and controlling what we can control. As we take stock of the progress we are making in the transformation of our business, I'm very pleased with the work done across much of the business, with clear proof points of sustained success. Equally, there is more that needs to be done in North America, where we are on a path, and I am increasingly confident in, as a result of new leadership, which has brought enhanced modern brand building capabilities and a refreshed assessment of our portfolio strategy. To date, we have acted with purpose and urgency, reshaping our business and providing the foundation for sustainable top and bottom line success. The proof points of our progress are seen clearly in four areas. First, we've replatformed our international business, and under Dan's direction, we've meaningfully improved in-market leadership and commercial capabilities, empowered our teams to win locally, and strengthened our brands and relative market share performance. Now representing 40% of our net sales profile, this business has delivered consistent mid to high single-digit organic growth over a four-year period and become a strength of our broader business. Second, our innovation platform now delivers both renovation and revolution for the portfolio with a consumer-centric foundation and a locally-led mindset. In just the last year, we've expanded the Billy Brand offering in geographic reach, We've taken Bulldog into premium skincare, broadened the Cremo range, we've brought the consumer new formulations and formats in Banana Boat and Hawaiian Tropic, and we've expanded into the everyday skin and sun market in Latin America, just to name a few. And the impact of our new innovation model is perhaps best evidenced in Japan. Whereas the market leader, we've reshaped Men's Shave with the launch of Chic First Tokyo, taken the Schick brand to premium skincare with the launch of the Prochista brand and premium channels, and expanded our range in women's shave with the trendy launch of the Salon Plus product lineup. Third, we've made productivity and efficiency the cornerstone of how we operate, demonstrating the ability to consistently deliver over 200 basis points a year and realize cost-of-good savings, and applied a relentless approach to simplification in all that we do. And fourth, our commercial capabilities are meaningfully better than at any point in my tenure as CEO, in large part based on the success we've had internationally, as I just highlighted. We focused on improving how we architect the portfolio, we've employed a more modern brand building approach, and we are activating our brands with a combination of award-winning campaigns, rich digital content design, and better omnichannel execution. All of these points reinforce the progress we've made and underpin the confidence that I have that we are absolutely on the right track as a business. Equally, we are not where we need to be with respect to our North American business, and here lies our biggest focus and also our greatest opportunity. Jess is now in month six of her tenure, and she has acted with pace focusing her and her team's effort in three key areas. First, spending considerable time with our U.S. retail customers to restore and improve critical elements to our working partnership. Second, making important leadership changes in key commercial roles that have provided a needed step change in talent and capabilities. And third, she and the team are acting with purpose and urgency in a strategic effort to both assess and address our business. A broad strategic review, equally focused on rigorous analysis and understanding of all of the underlying drivers of our performance, and at the same time, rapidly designing actionable solutions for both the near and longer term. With the assessment work almost complete, we are moving forward to capitalize on both the near term and longer term opportunities. This has led us to incrementally invest in the United States, largely in sun care and shave, with focus on strengthening brand equity and solidifying our place on shelf. Dan will share more about these specifics shortly. The success we've had in repositioning our international business combined with the early read on progress in the U.S. provides us with confidence that we can deliver similar success in North America. Importantly, recent results are encouraging, as both consumption and market share performance strengthened in our U.S. business as we exited the quarter. There's more to do, but I'm confident that we are on the right track in North America, and I believe we'll see continued sequential top-line improvement in the second half of this year. So this leads me to our outlook for the full year. Underpinning our view for the second half of our fiscal year is the belief that that the uncertainty of the macro environment will increasingly be felt by the consumer, dampening confidence and ultimately negatively impacting spending behaviors. We are already seeing this impact in travel and leisure spend, which we anticipate will impact our sun care category, both in the U.S. and in key tourism markets internationally. Therefore, we've adjusted our top line outlook to reflect a more modest expectation for consumption across categories, and most notably in SunCare. On the bottom line, a revised outlook includes the impact of this lower sales growth, increased brand investments in North America, and the estimated impact of incremental costs associated with tariffs, which Dan will discuss shortly. So in summary, the backdrop notwithstanding, I am pleased with the progress we are making across our business. We have more work to do in North America, but I'm convinced that we have the leadership in place to execute the needed change successfully. We believe our strategic priorities and near-term actions will further our ongoing transformation and fortify the business for the longer term. And now I'd like to ask Dan to take you through our operational and commercial performance highlights in the quarter.

Dan? Thanks, Rod. Good morning, everyone. Before discussing performance in the quarter, let me start by sharing perspective on the broader operating environment. The macroeconomic environment is evolving fast with increasing pressure on the consumer. Consumer confidence has dropped since we last met. We've started to see the implications as consumption levels have slowed, promotional levels have increased, including in certain international markets, and there are growing signs of broader consumer caution that is likely to increase in the near term. The topic of tariffs, and in many ways the uncertainty of specific policy in this area, has served as the catalyst for this challenging environment for consumers, while also causing added strain on sourcing and global supply chain functions. The in-year cost impact of tariffs for fiscal 2025 contemplated in our outlook is estimated to be approximately $3 to $4 million and assumes current tariff rates hold for the balance of the year, and there are no material changes in the inbound or outbound flow of materials and finished goods. The impact of tariffs on COGS is seen across three dimensions. The first relates to the procurement of raw materials imported to the U.S., and most notably related to sun chemicals, aluminum and steel, and certain wovens and fibers. Our global procurement organization has been very active exploring alternatives, including identifying alternative sourcing locations and the negotiation of tariff splits with suppliers, and this work continues with urgency. We're also subject to import tariffs related to the inbound shipment of finished goods to the US, mostly related to certain wet shave products. And finally, in terms of responsive tariffs, the primary impact is mostly associated with the shipment of finished goods from the US to Canada across the wet shave and sun and skin segments. While the impact of tariffs in fiscal 2025 is modest, in part due to our efforts to quickly mitigate some of the near-term impacts through inventory pre-buys and other supply chain actions, as well as the in-year benefit of cost trapped in inventory, the tariff landscape remains highly uncertain, and at current levels, tariffs would have a more material impact on an annualized basis. We will continue to explore all of the opportunities to mitigate the potential impact of tariffs with a continued focus on productivity while also considering some level of consumer pricing in certain markets and categories. In the quarter, the dollar weakened further than expected, providing some relief for our P&L, though its direction from here remains difficult to project. Commodity costs in the main are relatively unchanged, with upward pressure from supply constraints for aluminum and pulps, mostly offset by softness and resins, as oil and natural gas prices moderate. Across our manufacturing footprint, the labor environment remains mostly stable, with limited added sequential wage pressure from last quarter. Now let's move to the commercial and operational highlights for Q2. Commercial execution in the quarter centered around our innovation platform with notable launches across our international markets, where we brought the Billy brand to Australia, deployed the new mini razor in Europe, expanded our sun care presence on shelf in Mexico, and deepened our penetration in the male grooming categories through Bulldog range expansion and the launch of the Progista brand in Japan. More broadly, We've remained focused on retail execution and the new shelf sets in the U.S. Promotional effectiveness improved in the quarter, and in certain international markets, we initiated select price increases. Overall, the teams continue to perform very well in a dynamic and challenging environment. Organic net sales decreased 1.5% in the quarter. Growth in international markets continued, with a 3% organic growth driven by both price and volume gains. This represents our 12th growth quarter in the last 13. Double-digit organic growth in Greater China and mid-single-digit growth in both Japan and Europe fueled our results. And market share performance was strong, with noteworthy gains across wet shave in Greater China, both shave and sun in Latin America, and grooming and sun in Europe. Organic sales in North America declined about 4%, reflecting declines in sun due to Easter holiday timing and poor weather, as well as across disposables, shave preps, and femcare. Now, turning to segment performance, wet shave organic net sales were down about 1%. International wet shave grew 3% with both price and volume gains, reflecting continued category health, good innovation execution, and strong in-market brand activation. In Japan, new product innovation supported mid-single-digit organic growth in the market, while in China, our double-digit growth was underpinned by strong digital execution and included the launch of the Schick First Tokyo product in Taiwan. Our private brands business remained a meaningful competitive advantage and source of growth, hosting mid-single-digit gains, fueled in part by new business across many key retailers, including Aldi and Lidl. Our women's private brands branded business grew almost 50% internationally, despite cycling over 60% growth a year ago. In North America, wet shave organic net sales declined about 5%, as gains in women's systems were more than offset by declines in shave preps, men's systems, and disposables. Consumption in the U.S. razors and blades category was down 30 basis points in the quarter, with continued heightened declines in the drug channel. Our market share decreased 90 basis points for the quarter, and we saw solid results in women's systems with meaningful gains for the Billy brand on shelf, gaining an additional 190 basis points in market share, and now standing at a 15% share of the category at Walmart, 14% share at Target, and over an 11% share nationally. Importantly, Billy continues to have the number one skew in women's refills in units, and is the number two brand in dollars across the top five retail and landscape. Our women's disposable business returned to share gains in the quarter, in large part a result of the new Skintimate rebranding. Sun and skincare organic net sales were essentially flat, as double-digit growth in skin and high single-digit growth in grooming were more than offset by declines in North America's sun, primarily a result of order phasing associated with the Easter shift, poor weather, and lapping double-digit growth a year ago. In the U.S., sun care category consumption decreased a point in the quarter. Our total market share was down 60 basis points, a reflection of strong gains for Hawaiian Tropic, offset by a decline in Banana Boat. Hawaiian Tropic's full point of share growth was the most in the top 10 brands in the set, reflecting velocity and distribution gains as well as impactful MPD. Incrementally investing behind this brand in half two to accelerate its momentum on shelf is a core component of our plans, and I'll speak more about this shortly. Share losses in Banana Boat were largely driven by sluggish performance at Costco and Target, in part due to year-over-year shifts in the brand's promotional calendar. In international markets, we saw notable value and volume market share gains in Mexico and several key European markets, and ended the season well in Australia where we held share in a growing category. Grooming organic net sales increased 9% in the quarter, most notably led by 20% organic net sales growth for Cremo. Our new Sense King campaign for the brand continues to resonate with the antiperspirant deodorant launches and body wash expansions driving incremental distribution on shelf and good initial consumption results. Wet One's organic net sales increased 15% for the second consecutive quarter, fueled by better in-stock positions, and our share was approximately 68%. Femcare organic net sales were down approximately 9%. The decline was largely driven by tampons and pads. Consumption in the category was up 3%, though driven by over 6% growth in pads, where our penetration is the lowest. In the categories where we primarily compete, tampons and liners, consumption was down approximately 2% and up 1%, respectively. Activating our carefree master brand strategy remains our focus. And while we are encouraged by early results, we also recognize that this will take more time as we drive awareness and ultimately conversion. Importantly, in the quarter, we saw strong share gains for carefree pads in both Walmart and across drivers. Turning to our operational performance, Q2 was an excellent quarter, reflecting a step up in realized productivity savings and further strengthening of our service levels across the markets. Productivity savings were 380 basis points and provided the tailwinds for our 110 basis points constant currency gross margin accretion in the quarter. Productivity savings did include the pull forward of certain one-time benefits associated with global contract negotiations. and otherwise were realized from a full collection of programs, including global sourcing and indirect savings, labor automation, and broader plant efficiency efforts. Importantly, in the face of a more challenging global supply chain environment, we sustained our strong service performance from a quarter ago and saw unit fill rates and OTIF measures above target levels across most categories and markets. Importantly, we further executed our plans to mitigate the negative effects of global tariffs, successfully buying forward and unlocking alternative sourcing options for key raw materials. And finally, let me provide some further perspective on the investment stance reflected in our outlook. As you heard Rod discuss, we think this is an important moment to take steps to begin to restore momentum in our North America business. In Q3, we are therefore leaning in across Suncare and Women's Shave, building on recent success and leveraging seasonality tailwinds that offer near-term opportunity. The first area of focus is in support of the Hawaiian Tropic brand, which as I mentioned earlier, is delivering outsized consumption and share growth and remains a critical component of our portfolio strategy in Suncare. In time for the start of the season, we have finalized a new campaign that will be the largest investment for the brand in the U.S. in the last five years, supported by a heavy-up digital media plan, in-store shopper programs, and promotional efforts to drive enhanced feature and display activation. The campaign will feature leading influencer Alex Earle, who has proven credentials for driving brands, particularly with Gen Z cohorts, and will ensure that we maximize the impact and prominence on social media. The second area of focus is our women's shave branded systems and disposable portfolios. For our disposables business, we will launch the Billy brand disposable and relaunch Skintimate disposables as part of a category refresh perfectly timed to a likely more cost-conscious shopper. For our branded women's business, we will support the recent repackaging efforts for HydroSilk with a national media plan, strong social media activation, enhanced retailer media, and increased in-store promotional activity to reignite trial on the brand as we enter the crucial summer peak season for women's shave. In support of these exciting programs, we will incrementally invest above and below the line in the third quarter, adding just over a point in A&P investment rate of sale to the total company profile. In summary, we've developed strong brand campaigns that we believe we can execute through the lines and that will solidify near-term performance and serve as important foundations for the brands moving forward. Now, let me turn it over to Fran to discuss the financial results for the quarter and our full year outlook.