Church & Dwight Co., Inc. (CHD) Earnings

Management highlights

### Overall Performance • Church & Dwight delivered a strong Q2 and first half 2026, with broad-based growth across all three segments, outperforming original internal and market expectations. Total net sales increased 1.6% year-over-year, organic sales grew 5.8% (vs. 3% original outlook), driven by 4.3% volume growth and 1.5% positive price/mix. Adjusted gross margin was 45.4% (up 40 bps year-over-year), and adjusted EPS was $0.89 (above the $0.88 outlook). • The company completed the acquisition of Miss Mouth, the leading stain remover brand on Amazon, in early June 2026. Post-acquisition, Miss Mouth consumption grew over 50% and gained 3.5 share points, with significant remaining growth headroom: current household penetration is just 2.5% (vs. 50% for the stain remover category), and ACV distribution is 35% (vs. 80% for the category). ### Innovation and Growth Drivers • Innovation and distribution gains remain core competitive advantages. New product launches in 2026 are expected to contribute approximately 50% of full-year organic growth. Overall category consumption grew 2.7% in Q2, exceeding the company's 2% expectation. • Key brand updates: - TheraBreath gained 4.5 share points to reach 25.3% share of the total U.S. mouthwash category, solidifying its number two position, with 14% household penetration (vs. 65% category penetration) leaving significant growth room. The new TheraBreath toothpaste launch, which only recently completed full brick-and-mortar rollout, already holds 1 share of the total toothpaste category. - Hero outperformed the overall acne patch category, with the new facial cleanser launch underway; the U.S. facial cleanser category is a $650 million market representing 30% of total acne category sales, and Hero has just 10% household penetration (vs. 30% category penetration). - Touchland delivered Q2 sales growth, with back-half weighted innovation, new collaborations, and marketing activations planned to drive further growth in H2 2026, with international and new category expansion planned for 2027. - Batiste is a tale of two geographies: international Batiste delivers double-digit growth and is a core international growth driver, while U.S. Batiste has slightly underperformed category growth, with new product and pricing architecture initiatives planned for late 2026/early 2027 to reverse recent minor share losses. ### Strategic Updates • 2025 portfolio optimization actions have freed up management and operational resources to focus on core growth initiatives. The company recently restructured its international M&A process to give regional management ownership of deal sourcing, which has significantly accelerated deal flow, with over 100 international deals filtered in the past 6-12 months. • The recently completed North American ERP upgrade has enabled faster, more seamless integration of new acquisitions: the Miss Mouth acquisition is on track to be fully integrated by the end of August 2026, just under three months post-close.

Guidance

Management raised full-year 2026 guidance across all key metrics based on strong first-half performance and sustained momentum: • Full-year organic sales guidance raised to 4% to 5% growth, from the prior 3% to 4% range • Adjusted gross margin expansion guidance maintained at 100 to 120 basis points for the full year • Marketing spend is now expected to be at or above 11% of net sales, as the company reinvests upside results behind growth initiatives • Adjusted EPS growth guidance raised to 6% to 8%, from the prior 5% to 8% range (the upper bound of the range was maintained to reflect increased reinvestment) • Cash from operations guidance raised to approximately $1.175 billion, from the prior $1.15 billion • Full-year capital expenditures are still expected to total approximately $130 million, equal to roughly 2% of net sales • Q3 2026 guidance calls for ~3% organic sales growth and ~$0.89 adjusted EPS (10% year-over-year growth), with marketing spend expected to equal ~12% of net sales for the quarter • Guidance incorporates approximately $30 million in transitory cost pressure from raw materials, transportation, and premiums tied to the Middle East conflict, based on an assumed $90 per barrel crude oil price; management notes all of this headwind has already been fully mitigated via productivity improvements this year • The company expects to receive approximately $15 million in Phase II tariff refunds in H2 2026, which will be invested in consumer-facing business activities

Segment performance

1. U.S. Domestic Segment: Organic sales grew 5.1% year-over-year, driven by both volume growth and favorable price mix. Key outperforming brands include TheraBreath (mouthwash/toothpaste), Hero (acne care), Arm & Hammer Cat Litter, and Zycam. Arm & Hammer laundry maintained record total category share, with 1% consumption growth even amid increased competitor promotions; Arm & Hammer Cat Litter delivered 7.5% consumption growth, gained 0.8 share points to reach 24.5% share, and the new Dual Defense Microbond Clumping Litter launch performed well. Global e-commerce (included in U.S. results) grew 22.7% in Q2, and now represents 25.5% of total company net sales. 2. International Segment: Organic sales grew 9.1% year-over-year, outperforming local GDP growth across regions. Growth was broad-based across Europe, Asia, and Latin America, with recent U.S. acquisitions (TheraBreath, Hero) driving strong international expansion, and Batiste also delivering double-digit international growth. 3. Specialty Products Segment: Net sales grew 2.8% year-over-year, driven by a combination of higher volume, higher pricing, and favorable product mix.

Risks & headwinds

• Transitory cost pressures totaling ~$30 million from higher raw materials, transportation, and conflict-related premiums linked to the Middle East have emerged, though management notes these have been fully mitigated via productivity improvements for 2026 • Increased promotional activity from competitors in the laundry category, with competitors returning promotion spending to historical high levels after a period of lower promotion during prior commodity inflation • Consumer spending sensitivity remains elevated in the current macro environment, with higher price elasticity observed during promotional periods • Batiste has underperformed category growth in the U.S. market, resulting in minor share losses in 2026, though new strategic initiatives are already planned to address this

Analyst Q&A

• Q: What drove the significant organic sales upside in Q2, and what are the expected long-term growth rates for the newly acquired Miss Mouth brand?

  A: Q2 organic growth upside was broad-based across U.S. home care, personal care, and the international segment, with 9.1% organic growth across all major regions (Europe, Asia, Latin America). It is too early to provide detailed long-term growth targets for Miss Mouth, as integration is still ongoing; management notes very low current penetration and distribution that gives massive room for growth, with strong early retailer enthusiasm for the brand. Full growth targets will be shared in early 2027.

• Q: How is Arm & Hammer Laundry performing across pricing tiers, and how is the TheraBreath toothpaste expansion tracking?

  A: Arm & Hammer Laundry maintained its total share despite a large increase in competitor promotion spending, and all three tiers (good, better, best) of the Arm & Hammer portfolio are performing well, with laundry detergent sheets already ranking as the number two product in the segment and growing 30% year-over-year. TheraBreath is now the number two mouthwash brand with 25.3% share, and the new toothpaste launch is off to a strong start, already holding 1 share point, enabled by strong shelf space gained from mouthwash success, with significant long-term growth headroom from low penetration.

• Q: Why did management keep the upper end of the EPS growth range unchanged after raising guidance, and where are the incremental reinvestments being directed?

  A: Per the company's longstanding strategy, when performance exceeds expectations, the company reinvests the upside rather than capturing it as incremental EPS to build long-term growth. Incremental investments are focused on increased marketing spending behind new and existing brands, and accelerated artificial intelligence (AI) initiatives designed to improve the company's existing speed and agility as a competitive advantage.

• Q: What changed to accelerate international M&A after years of planning, and what structural adjustments unlocked this momentum?

  A: The original model used a centralized M&A center of excellence that was disconnected from regional management teams, which slowed progress. Six to eight months ago, the company shifted ownership of deal sourcing to regional management teams, with the central M&A team providing support, which unlocked deal flow. Over 100 international deals have been filtered in the past 6-12 months, with management remaining disciplined in targeting high-quality opportunities.