Edgewell Personal Care Company

Good morning and welcome to Edgewell's fourth quarter and fiscal year 2025 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. 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 Chris Goff, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning for Edgewell's fourth quarter and fiscal year 2025 earnings call. With me this morning are Rod Little, our President and Chief Executive Officer, and Fran Weissman, our Chief Financial Officer. Ron will kick off the call, then hand it over to Fran to discuss our 2025 results and full year fiscal 2026 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. Also, please refer to our website for a separate press release detailing the company's plan to divest its feminine care business. 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, brand investment, organizational and operational structures and models, cost mitigation, productivity efficiency efforts, 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, our planned disposition of our feminine care business, 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 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 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 fourth quarter and fiscal 2025 year-end earnings call. Before we begin, I would point you to another important press release we issued yesterday afternoon detailing our intent to divest our feminine care business. This divestiture is a key step forward as we continue to transform Edgewell into a more focused, agile, and consumer-driven personal care company. We believe that by focusing our attention and resources on the categories where we have clear competitive advantages and strong momentum, that's shave, sun and skincare, and grooming, we are positioning Edgewell to deliver sustainable growth, stronger margins, and long-term value for our shareholders. Together with changes we have made in the U.S. commercial organization, including elevating our talent pool, we are actively strengthening our portfolio and building a better and more durable business. I'll spend most of my time this morning addressing the actions we're taking in our core businesses and provide a clear roadmap for how we are evolving Edgewell for the future. Now, turning to our performance. In Q4, we generated organic net sales growth of 2.5%. This result was in line with our expectations in both international markets where we saw expected acceleration and in North American markets where relatively flat sales performance demonstrated significant progress towards stabilizing the business. Importantly, we've seen improvements in both consumption and market share performance in North America on a value and a unit basis and are encouraged to see that business begin to stabilize. Although we continue to drive strong productivity savings, Earnings were significantly impacted by several transitory items related to inventory, trade, and foreign exchange. Fran will discuss this in detail shortly. As we close out fiscal 2025, I want to acknowledge that it's been a difficult year. We face significant external pressures, tariffs, foreign exchange volatility, geopolitical tensions, and consumer uncertainty. that impacted our financial performance and stressed our global supply chain. We faced internal challenges as well, including weaker than expected sun care seasons in North America and parts of Latin America, and a slower than expected recovery in fem care. However, we still delivered strong results across several important areas of our business, including international markets, our innovation program, and productivity. We believe this performance is durable and provides a solid foundation moving forward. Let me give you an update on these drivers. First, durable international growth. Our international markets, which represent approximately 40% of our global sales, delivered strong growth for the fourth consecutive year, with strengthening share across shave and sun. Europe generated its third straight year of growth, and Greater China delivered double-digit growth. We believe our international markets are poised to deliver mid-single-digit growth again in fiscal 26. Second, compelling innovation. We are committed to delivering consumer-led, locally designed innovation across our portfolio. In fiscal 25, we expanded Billy to Australia. Bulldog entered premium skincare across Europe. In Japan, we took Schick into premium skincare with the launch of Progista. and we broadened Cremo's range in the United States and Europe, driving significant sales growth. In Suncare, we saw strong growth in Hawaiian Tropic as a result of a successful marketing campaign, updated formulations, and on-trend branding. Across all markets, we're seeing the benefits, as approximately 70% of our measured markets in the quarter are now growing or holding market share, compared to less than 50% one year ago. We are implementing our learnings from Europe and Asia globally and are excited about our multi-year innovation roadmap. Third, productivity through supply chain optimization. In fiscal 2025, our team delivered over 270 basis points in gross savings, and we expect approximately 310 basis points in fiscal 26, inclusive of tariff mitigation. Building on our foundation of productivity, efficiency, and service, we are navigating tariffs in a dynamic global environment by reducing complexity, improving customer service, shortening lead times, and lowering inventory across the value chain. In fiscal 26, we will further optimize our North American wet shave business and manufacturing footprint, streamlining operations, reducing duplication, and unlocking working capital. By investing in blade excellence and embracing next-generation automation and digital tools, we are building a more agile, resilient, and customer-focused supply chain. These actions will enable faster responses to consumer demand, drive innovation, and position us for sustained margin improvement. Importantly, these operational enhancements will not only deliver meaningful productivity savings, but will also support reinvestment in our core brands and innovation pipeline, strengthening our leadership in a highly competitive market. These increased investments in fiscal 25 and 26 position us to achieve productivity savings in fiscal 27 and beyond at a pace that exceeds recent years. While we believe these areas of strength are enduring and foundational, it is unlocking the potential of our North America commercial business that represents a significant opportunity for our company. As we shared last quarter, we are executing a bold transformation in the U.S. focused on returning the business to profitable, sustained, top-line growth over time. In the last year, we have conducted a thorough strategic review and identified our core strengths as well as key areas that have hindered performance. Our category positions are structurally attractive. We are a leader in sun care, a fast-growing upstart in men's grooming, and have a unique branded and private label position in shave. Our brands have established solid awareness and are backed by robust product delivery capabilities. We have strong technical know-how and capabilities with owned assets and a deep R&D bench. And we run the business with a commitment to discipline across operations, cost management, and capital deployment. Our transformation plan is based on leveraging our strengths while addressing the three key areas of opportunity identified in the strategic review. First, our portfolio expanded to include a wide variety of SKUs, some of which did not deliver optimal margins or performance. We are now sharpening our focus on our strongest offerings. We are recommitting to our shade business where we have a differentiated position across branded and private label. underpinned by solid brand awareness and excellent product performance. While we recognize that it takes time to rebuild distribution and share, our immediate focus is to begin stabilizing performance and setting the foundation for future growth. Second, our approach to marketing investment prioritized certain tactics that, while effective in the short term, did not fully support sustainable growth and led us to underinvest in core brands, To address this, we are taking decisive action to increase investment in our five focus brands, Schick, Billy, Hawaiian Tropic, Banana Boat, and Cremo. By shifting our strategy towards sustained brand building and a balanced marketing mix, we are committed to restoring brand equity, driving deeper consumer engagement, and positioning our portfolio for durable growth. Third, our U.S. structure was too complex. creating duplication, slow decision making, and underinvestment in key capabilities. We simplified our structure to enable faster decisions, greater investment and growth capabilities, and increased ownership and accountability. We've implemented significant organizational redesign. We launched a streamlined U.S. commercial organization, bringing together a new, talented, proven leadership team and we are ramping up new teams dedicated to improving our capabilities in insights and analytics, brand building, and revenue growth management. As we look ahead to fiscal 26, this is a year of transition and solidifying foundations for longer-term growth. We anticipate that we will begin to realize the benefits of this ongoing work in the form of stabilization of our North America business as we simultaneously set the stage for renewed growth in 2027 and beyond. So this leads me to our outlook for the full year. As we look ahead to fiscal 2026, we believe our plan is balanced and achievable. We also anticipate the macro environment will remain challenging with muted category growth and the consumer continuing to be cautious around discretionary spending. We also expect increased inflation stemming from the current view of tariffs. Fran will provide all of the details shortly, but I would like to summarize the key pillars of our plan. First, our top line expectation is for a return to organic net sales growth, driven by continued mid single digit growth in international markets and a more stable profile in the North America business. Second, gross margin is expected to increase. driven by productivity gains that are partially offset by inflation headwinds, inclusive of $25 million or nearly 55 cents in pre-tax earnings per share of headwind from tariffs, net of our mitigation efforts. These mitigation efforts have proven to be more challenging as many of the tariffed items like steel, aluminum, and certain chemicals cannot be sourced elsewhere, at least in the near term. And although we've already implemented pricing in certain international markets, broadly speaking, the U.S. market to date has not been conducive to price increases. We will continue to actively pursue further mitigation efforts to lower the impact beyond fiscal 26, but commercial pricing in the U.S. would have to play a role to fully offset. To be clear, our outlook does not assume this offset. So if it were to occur, it would represent potential upside to this outlook. Third, our plan includes significant investment in both trade spend as well as advertising and promotional dollars to support the changes in the U.S. Fuel key brands in international markets and drive increased household penetration and brand awareness. These investments, in part, are expected to be funded by the gross margin gains I just outlined. Fourth, we will prioritize free cash flow generation through working capital improvements while capital allocation will emphasize debt repayment. Finally, I am truly energized by the outstanding team we have assembled. We have record high engagement scores across the organization in a dynamic U.S. commercial organization led by a refreshed leadership team that is already executing effectively. This group brings together exceptional talent and proven expertise from leading companies positioning us for success. Our team is highly motivated and their achievements, as well as their compensation and mine, are directly tied to the value we create. So to wrap up, fiscal 2025 was a year of challenge and transformation. While both external and internal pressures impacted our results, We exited the year with momentum, a step up in sales and share trends, and a revitalized brand portfolio. We've reshaped our structure, sharpened our strategy, and built a foundation for growth. As we enter fiscal 26, we're focused on execution, margin recovery, and delivering sustainable shareholder value. And now I'd like to ask Fran to take you through our results and outlook for fiscal 26. Fran?