Spectrum Brands Holdings, Inc.

Good day and thank you for standing by. Welcome to the Spectrum Brands first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Joanne Chomak, Senior Vice President of Tax and Treasury. Please go ahead.

Thank you. Welcome to Spectrum Brands Holdings Q1 2024 earnings conference call and webcast. I'm Joanne Chomak, Senior Vice President of Tax and Treasury, and I will moderate today's call. To help you follow the comments, we have placed a slide presentation on the event calendar page in the investor relations section of our website. at www.spectrumbrands.com. This document will remain there following our call. Starting with slide two of the presentation, our call will be led by David Mora, our Chairman and Chief Executive Officer, and Jeremy Smeltzer, our Chief Financial Officer. After opening remarks, we will conduct the Q&A. Turning to slides three and four, our comments today include forward-looking statements which are based upon management's current expectations, projections, and assumptions, and are by nature uncertain. Actual results may differ materially. Due to that risk, Speck & Brands encourages you to review the risk factors and cautionary statements outlined in our press release dated February 8, 2024, our most recent SEC filings, and Speck & Brands Holdings' most recent annual report on Form 10-K, and quarterly reports on Form 10-Q. We assume no obligation to update any forward-looking statement. Also, please note that we will discuss certain non-GAAP financial measures in this call. Reconciliations on a GAAP basis for these measures are included in today's press release and 8-K filing, which are both available on our website in the Investor Relations section. Now I'll turn the call over to David Mora. David?

Hey, thanks, Joanne. Good morning, everyone, and welcome to our first quarter earnings results for 2024. Thanks to everybody for joining us today. I'm going to start the call with an update on our operating performance and our strategic initiatives. Then I'll turn the call over to Jeremy, and he'll provide a more detailed financial and operational update, including a discussion on the specific business unit results. If you remember during our last call, I talked about how the actions we took in fiscal 23 that put us in a strong position as we entered fiscal 24, and I talked about our readiness to pivot into the opportunities that our strong balance sheet and improving margins now present us with. Today, I'm happy to report that the first quarter is showing that we're beginning the journey back to winning again. If I could have you turn your attention to slide six and our financial performance. Net sales for our first quarter were down 3% in line with our expectations overall. Retailer and consumer demand are behaving as we had expected heading into the year. We anticipated a continued challenging macroeconomic environment across our businesses and a competitive retail marketplace. In our home and personal care segment, we expected suppressed demand, particularly in small kitchen appliances. In our home and garden segment, we expected home center retailers to be cautious in their pre-season build of inventory. And in our global pet care segment, we expected continued softness in our global aquatics business and slowing growth in our treats and chews businesses. Each of those expectations have come to be true, and our top line performance came in generally as we had anticipated, With an especially strong performance, however, from our global e-commerce sales group, they grew sales at 28.3% year over year. We are encouraged now that retail inventory levels are healthier than they were last year, which means that our top line should now be more aligned and consistent with our retail customers' point of sale. Including $23 million of investment income from our large cash balance, Our adjusted EBITDA was $84.3 million in the first quarter, which is up $44.5 million from the period a year ago, with strong improvement in all three business units. Our earnings power is getting back on track, and our commercial and operational performance is improving. Gross margins are up 710 basis points over the first quarter of fiscal 23, and our adjusted EBITDA margins doubled compared to last year. This quarter's results benefited from lower cost inventory as compared to last year, as we predicted. The fixed cost reductions we took in prior years and our productivity initiatives are also improving gross margins and our bottom line. Our balance sheet is stronger than it's ever been in the history of this company. A year ago, our pro forma net leverage had climbed over 6.2 times, and we had over $3.1 billion of net debt on our balance sheet. We ended this quarter essentially net debt free, with less than $20 million of net debt. Our strong balance sheet is a competitive advantage that we are now leaning into, and we're using it to fuel investments back into our businesses to drive top-line growth. We have now pivoted from managing this business for cash to focusing on the long-term growth of all of these businesses and driving operational efficiencies. If I could now have everyone turn to slide seven on the investor presentation. The improvement in our performance and our journey towards winning again is being driven by three core areas of focus. One, we are investing behind our people. to improve commercial capabilities and drive a culture of accountability. Our revamped leadership teams in both our home and garden and HPC businesses are reinvigorated and they're developing new growth opportunities for us every day. The recent key hires in senior sales and marketing positions are making a difference in our culture and how we work together with our retail partners. Our investments in bolstering our commercial operations innovations, and sales and marketing capabilities are starting to pay dividends. Two, we are investing behind our brands and new product roadmaps to continue to focus on bringing fewer, bigger, but better innovations to the marketplace. This quarter, the team started to ramp up their investments in brand marketing, advertising, and innovations. As the teams develop their plans, we expect these investments to increase in the coming quarters. In HPC, our appliance segment, we had a much healthier start to the year, including a solid holiday selling season, with all international regions delivering core sales growth. Given the improved performance of this business and our healthier outlook for it now, we are starting to accelerate the process to separate HPC via a sale, merger, or a spin in hopes to have a transaction announced later this year. From an operations perspective, we are investing to drive efficiency and reduce cost. We have completed the implementation of a comprehensive five-step S&OP process across all three businesses that is helping ensure that we are sourcing and producing the right product at the right time. Our Q1 fiscal 24 inventory is down $360 million from the high point in the third quarter of fiscal 22, and it's down $245 million from the first quarter of fiscal 23. This lower investment in inventory helps not only our cash flow, but it also helps our supply chain operations be much more efficient. Our fill rates across all three businesses have increased, however, an average of 600 basis points since last year, despite the massive inventory reductions. These higher fill rates are helping to improve customer relationships, reduce the risk of lost POS, and provide cost savings from reduced customer fines and penalties. We can now turn to slide eight. Since the close of the HHI transaction, We've been very judicious about returning capital to our stakeholders. We have returned over $825 million to our shareholders since June of last year through our various share repurchase programs. We've reduced our share count by 26% to just 30.2 million shares outstanding. We closed the ASR we had in place in November, and we very actively repurchase shares in the open market during the first quarter of this fiscal year. In December, we entered into a new $200 million 10 plan that's subject to certain parameters will trade through November 15 of this year or until the cap is reached. As of today, there's approximately $140 million remaining on that plan. As we keep delivering on our commitments, grow our earnings, and shrink our share count, we believe our share price will eventually react positively. Turning to slide nine, or page nine, sorry. We are encouraged by the first quarter results this year, but we remain prudent in our full year expectations. We're facing new geopolitical and macroeconomic headwinds, for instance, like the Suez Canal and the Red Sea terrorist attacks. And we continue to see economic uncertainty as we look into the year ahead. We know that one quarter simply does not make the year. However, we are encouraged by our strong start to fiscal 24. We are a company now operating from a position of strength again, and we are looking forward to continuing the improvement in our commercial and operational performance in the coming quarters. Before I turn the call over to Jeremy, I would like to sincerely thank each and every one of our global employees who are absolutely at the center of helping us start to win again. Thank you. Now you'll hear more from Jeremy on the financials and additional business unit insights. I'll turn the call over to you now, Jeremy. Thanks, David.