Good day, and welcome to the Edgewell Personal Care Company First Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. To withdraw your question, please note this event is being recorded. I would now like to turn the conference over to Chris Gough, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning for Edgewell Personal Care Company's first 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. 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 full year outlook. We will then transition to Q&A. This call is being recorded and will be available for replay via our website 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 in 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 first quarter fiscal 2025 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 trends. 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 worsened planned foreign exchange headwinds, as Fran will discuss later in the call, for the full 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, staying disciplined in our investments, and management of cost 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,…

Thanks, Rod, and good morning, everyone. As Rod mentioned, this was a solid start to the year. 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 Billy and Cremo 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 we have 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 of 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 lap 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…

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 2025. 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 femcare 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% of net sales, up approximately 20 basis points versus last year. Overall, higher people costs in outside services were offset by lower incentive compensation expense, lower bad debt, and unfavorable 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. GAAP diluted net earnings per share were a loss of $0.04 compared to earnings of $0.09 in the first quarter of fiscal 2024. And adjusted earnings per share were $0.07. Currency movements had…

Thank you. We will now begin the question and answer session. To ask a question, you may press * then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. The first question today comes from Kate Grafton 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 Stayfree 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 this 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. That's where we're most challenged at the moment. And so if you step back, and then go back nine months or so ago, we looked to consolidate our pads and liners under the Carefree master brand. And so we had Stayfree 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 Stayfree pads into Carefree pads. Are we making progress? Absolutely. We are. So we're on that journey. Liners performed as we expected. Playtex 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. Yes. 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 Stayfree consumer along. We did activate above-the-line marketing late in the quarter. 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 Stayfree consumer, and it's obviously where we'll stay focused. Thank you, Kate. Operator, 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 gonna be seeing atypically or that have been seeing atypically negative performance and when those businesses start to lap that performance, thinking about the shave prep transition, femcare transition, when do those businesses start to encounter or start to lap that really difficult, atypically difficult performance? And I guess I asked that in the context of the acceleration that's embedded here. It's some challenged businesses that are gonna 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 of 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 better compares. If you think about this, the supply chain issues we had last year with our manufacturing plant for Wet Ones, was happening last fall. And so as we start to lap that, as we come back on in full production, we can mode. Where are we seeing that we come back? Wet Ones was about 15% in the quarter that we just finished. So that one's back online 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 periods again as we get into the back half of this fiscal year, so out of the summer. And then I mentioned femcare in Kate's question earlier. That's one where one of the issues we've had is we had a delayed planogram reset, which was targeted for February, March last year. Actually didn't happen until the summer. And so where I think sequentially as you go here, you'll see us improve. But the easiest comparison, more like-for-like compares are really in Q3 to Q4 of this year. 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 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. Our expectation is still for 2025 that that 70% of our business will grow mid-single digits.

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

Yeah. I'll just I think 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 profile was more shipments into the second quarter ahead of some of those big resets. And from a planning basis as we look at it, that is a driver of the shift.

Yeah. I'm pretty sure 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 shift.

If I said fem care, I meant the sun care business. So yeah. No. Of course. It is sun care. I mean, look, we just have to remember 80% of the season's consumption happens between April and September. So whether shipments go in late March or in the first week of April always 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 phasing.

And I'll add a data point, Chris. We were down in Florida last week with the board and out the shelf and some formats. And the shelves look great. We are, I think, at the right place from an activation standpoint this year. We feel really good about that. And yeah. 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 that what we've seen here in the early couple of months.

Okay. Thanks.

Thanks, Chris. Operator, 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 originally anticipated. So can you talk about some of the offsets that you've planned? Do you have any pricing plans or are evaluating that?

Hey, Olivia. It's Dan. I'm sorry. This 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, you know, 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. 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. Doesn't mean we can't reconsider. I think the areas that we typically will go to just in good operation 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. And 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. 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 now that in the back half of the year as we start to look out to fiscal 2026. 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 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 it starts with the fact that we've got a healthy category. 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 our three 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 this sequential improvement as we 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 just got line of sight to what's required and the lab gets easier from here.

Thank you.

Thanks, Olivia. Operator, next question please.

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

Thanks, operator. Good morning, everyone. Maybe just a few on just the top line and maybe specifically to Chris' 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 U.S. weekly scanner data maps what the company is doing as a whole just given the strong international performance. But how are you seeing U.S. 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 U.S.?

Yeah. So good morning. The scanner data that you see, we look at this obviously, is 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 U.S. So we've got good line of sight to that, and I think, you know, we have a good level of confidence that will be successful from here and be back in growth territory for the balance of the year. Related to the sun care question, timing, I'll put 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 a point and a half from what we originally contemplated. So if I were to size it, I would put it in the $6 to $7 million range as an impact that now slides into Q3. 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 have profiled it. And the drivers of this growth 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 Mohsenian 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 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?

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 are also market leader. So 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 in fem care at a heightened level, particularly in fem care. 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 fem care as 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 cost is another one. But it'll 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 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 sun care came up a couple times. Obviously, there's some near-term shipment timing. But just maybe taking a step back, 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. But 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. Eighteen degrees on my right end this morning, Dara. So you're right. It is cold up north here. We feel really good about how we're set for the sun season. We think we're ready early for what I think in the south, southeast, we're optimistic. 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. And so I think as we look at the distribution outcomes domestically here in the U.S., really solid as expected. 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. 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 out, 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 a 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 end market performance. We won share in dollars and units in Australia at the heart of the season. And we won share in 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. And then the other thing I would say on NPD, Rod mentioned a couple of the big ones. I would also add there's a complete mineral restage happening here in the U.S., which we think is going to be super impactful and we're launching the Banana Boat baby line, which has been really well received from retail as well. So 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. Operator, 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 Billy 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, gonna have some puts and takes across body where you'll see, you know, 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. 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-cal refill is the number one SKU volume SKU in the entire category across the top five retailers. Number one on volume. Despite having just over a ten share nationally, it increased 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 shave and building that out because that ultimately is a credential 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 today.

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 eighteen-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. So I think we're in a much healthier position eighteen months later. 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 the valuation we have now is a really good use of capital. And I think, you know, that's always something we look at 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 than the year here.

Okay. Great. That's really helpful. Thanks so much. Good luck for 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.

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. So 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 future results. See you then. Thank you.

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