EDGEWELL PERSONAL CARE Co Q4 FY2024 earnings call

Rod Little:

• Fiscal '24 showed progress in business transformation with slight organic net sales growth, expanded adjusted gross margins, and double-digit adjusted earnings per share growth.
• Accelerated organic growth in international businesses, introduced category-leading innovation in U.S. Sun Care, deepened participation in men's and women's grooming.
• Announced leadership team and organizational changes to strengthen operating model, streamline decision-making.
• Priorities include strengthening U.S. shave and fem categories, fortifying consumer-centric innovation platform, leveraging international growth, improving supply chain operations, and focusing on people.

Dan Sullivan:

• Fiscal '24 key highlights: mid-single-digit top line growth across international, U.S. right to win portfolio, and Billie Brand; 140 basis points gross margin gains; adjusted operating margin expansion; $175 million free cash flow generation.
• Q4 detailed results: organic net sales down 2.8%; international growth 2.4% better than expected; North America down about 6%; Sun and Skin Care down 3.5%; Wet Ones down 22%; Fem Care down 9%.
• Full year results: organic net sales up 0.2%; adjusted gross margin rate up 140 basis points; adjusted operating profit increased $21.3 million.

International markets grew over 7% and now make up about 40% of total revenue. North America's right to win portfolio grew over 3% with leading Sun Care and Grooming portfolios mid-single digits. The Billie brand gained 260 basis points of share in women's shave. Organic net sales in Q4 decreased 2.8% with international growth of 2.4% better than expected, North America down about 6%, Sun and Skin Care down 3.5%, Wet Ones down 22%, and Fem Care down 9%. Full year organic net sales increased 0.2% with international up over 7% and North America down about 4%.

Fiscal '25 Outlook:

• Organic net sales growth expected 1%-3% excluding 70 basis points currency tailwinds; Q1 growth down just under 1%, low single-digit growth in final 3 quarters.
• Right-to-win portfolio to continue mid-single-digit growth; right-to-play portfolio flat to slightly down.
• International markets mid-single-digit organic sales growth; North America flat to slightly positive.
• Adjusted gross margin expected about 75 basis points year-over-year rate accretion at constant currency; Q1 gross margin to decline ~110 basis points due to trailing absorption charges and transactional currency, but flat on constant currency excluding 100 basis points currency headwinds.
• A&P expected to increase in dollars and rate of sale, with rate increasing by 50 basis points to ~10.8%.
• Adjusted EPS expected $3.15-$3.35, inclusive of ~$0.18 per share currency headwinds; adjusted EBITDA expected $356 million-$368 million inclusive of estimated $11 million currency headwinds.

Risks:

• Consumer remains cautious.
• Currency environment volatile, expected headwind to earnings in 2025.
• Supply chain challenges in prior year impacted results.
• Inflation, though moderating, remains and is driven by labor and commodities.
• Competitive landscape and promotional dynamics in certain categories.

Q: Can you go through your confidence levels on organic sales growth for fiscal '25?

A: Dan Sullivan and Rod Little discussed confidence in international growth due to brand activation, innovation, and team performance; U.S. Sun, grooming, and Billie contributing to mid-single-digit growth; and confidence in Shave and Fem in U.S. with new leader and retailer support.

Q: Just want to follow up on Sun Care and both from the quarter and the health of the category.

A: Dan Sullivan explained Sun Care quarter performance, category health, and future expectations; Rod Little reinforced strong innovation pipeline, category bullishness due to consumer interest in sun protection and trade up.

Q: I wanted to ask about your visibility and the building blocks on your fiscal '25 sales outlook for 1% to 3% organic.

A: Rod Little talked about innovation pipeline with local market model driving better results, examples like Wilkinson Sword campaign in Europe and Shick First Tokyo brand launch in Japan; Dan Sullivan mentioned sequential improvement in Q1 due to cycling factors and timing of growth drivers.

Q: Question on the gross margin. So you did a lot of good work this year, next year, another 75 bps. Is there anything structural though, that's changed between now and before the pandemic to get to that mid-40s range?

A: Dan Sullivan discussed controlling productivity and price as levers, inflationary picture for '25 similar to '24, and confidence in returning to pre-COVID gross margin levels.