Earnings Transcript for EPC - Q1 Fiscal Year 2025

Operator: 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.

Chris Gough: 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.

Rod Little: 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, volume gains have returned in many markets. Consumer sentiment related to experiential spend and personal travel continues to be positive. Consumers remain resilient and at the same time cautious. Though in our categories, which are mostly nondiscretionary and everyday use, we see no material signs of purchasing hesitancy nor trade-down behavior. Having said that, the U.S. wet shave and fem care categories remain highly competitive and promotional. Importantly, we have no material indications of a similar trend across international markets. We will continue to actively participate as needed in support of our brands on shelf, making our outsized productivity savings and gross margin expansion even more important, as it unlocks our ability to remain in an investment stance commercially. The second comment I would make relates to our international business. I am extremely pleased with our results here. And as Dan will discuss, the underlying drivers of our performance further reinforce the durability of our top-line growth. Of course, in the absence of weekly scanner data, the success is not as readily visible. But for international, the first quarter was our fifth consecutive quarter of organic sales growth and eleventh in the last twelve quarters, delivering a three-year CAGR of nearly 8%. Importantly, share results were also strong, especially in leading sun care markets like Australia and Mexico and also high-growth wet shave markets like China. Now representing 40% of our global business, we've never been in a better position internationally and I'm increasingly confident in the future of this business. Relatedly, we are also seeing the initial benefits of our rebuilt innovation platform. As I've shared, we are committed to a more consumer-centric, locally driven new product development model and we spent much of last year taking the appropriate organizational steps necessary to deliver on these objectives. While work remains, our consumer insights are better, we're more locally focused and informed, and we're faster in bringing new products to market, some of which are already having an impact. Our strong international results this quarter include contribution from the highly successful and disruptive launch of Shik First Tokyo in Japan, the broadening of our Bulldog range to deepen our skin care penetration in Europe, and meaningful new forms and formats in sun care that supported strong share gains in Australia and Mexico. Third and finally, our business transformation continues to be most dependent on our talented people. I've said from the beginning, we are equally committed to both a business and a cultural transformation, as we will not have one without the other. Our team is highly motivated and continues to perform with excellence in the face of an increasingly challenging environment. Having been recently recognized as the number two best midsize company to work for out of 400 ranked, our efforts are clearly being recognized externally. And our ability to attract and retain top talent is a key catalyst for continued strong performance. Over the past six months, we've announced a series of leadership changes and organizational changes designed to strengthen our capabilities and operating model, streamline decision making, and improve enterprise execution. In the quarter, we saw notable improvements in commercial and operational performance. Dan will share more about this shortly. Last quarter, I announced the appointment of Jeff Spence to the role of president of our North America business. At that time, I noted my desire to both continue the strong performance across our right-to-win portfolio while equally accelerating our recovery in our right-to-play portfolio in the U.S. market. I'm excited about our early progress. Jeff and the team are moving with pace to confirm the strategic clarity and commercial baseline for the path forward for our North American business. We've already begun to enhance our talent profile in the U.S. market, and we are better connected with our top retail partners. We're very excited about the path forward and the opportunity we have here. Finally, Jeff and the team are raising the bar on brand building, and I expect our portfolio brand plans and our in-market activations will be significantly improved over the coming quarters. I'm confident in Jeff and the team's ability to have impact and create a lot of value in our North American business as we move forward. So in summary, I'm pleased with our performance in the quarter and more broadly, expect continued stability across our categories as we move through the fiscal year. Our strategy is clear and we remain committed to its successful execution, with our global teammates at the core of our success. And while the macro environment remains challenging, we will stay focused on controlling the controllables, delivering products that our consumers love, and ultimately winning on shelves and online. And now I'd like to ask Dan to take you through our operational performance highlights. Dan?

Dan Sullivan: 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 about 4%, reflecting declines in our right-to-play businesses, wet shave, and fem care. Before discussing segment specifics, let me offer some commercial highlights in the quarter. In North America, organic growth was strongest across our grooming portfolio and in particular, the Cremo brand. We saw double-digit segment organic growth, with Cremo growing 20%, driven by range expansion and good retail execution. The Billy brand was also a strength in the quarter, gaining an additional 230 basis points in women's shave market share, and now stands with a 15% share of the category at Walmart, and over a 10% share nationally. Importantly, in a clear sign of growing consumer loyalty, the strength of its refills business is noteworthy. As Billy is now the number one brand in women's refills in units, and number two brand in dollars across the top five retailer landscape. In terms of U.S. market share performance, we saw solid performance in grooming, behind the accelerated growth for Cremo, and as discussed, meaningful gains for the Billy brands. The remainder of our shave portfolio and fem care business share results largely in line with trends. Internationally, we delivered 2% organic growth while cycling 6%. As Rod mentioned, this was our fifth consecutive quarter of organic growth and eleventh out of the last twelve. Commercial execution across the markets was very strong. And both our innovation and strong brand activation were core to our results. Shik First Hydro in Japan has achieved almost 130% of its targeted distribution since its launch in August last year, and has quickly scaled to a 2 share in the category. Our Wilkinson Sword brand relaunch continues to be disruptive in Europe, where we were also awarded three best product of the year honors, including the new Hydro 5 razor in the grooming category. And our private brands business remains a meaningful competitive advantage, posting double-digit organic growth fueled in part by new business across many key retailers, including Aldi and Lidl. Market share across international was solid, with noteworthy gains in sun care across both Australia and Mexico, and good performance in the grooming category in Europe. The Bulldog brand now sits as the number two men's grooming brand in the UK. Now turning to our segment performance. Wet shave organic net sales were down 1.3%. International wet shave grew 3% with both price and volume gains, reflecting continued category health, impactful innovation, and strong in-market activation. In North America, wet shave organic net sales declined just under 7%, as gains in men's systems and disposables were more than offset by declines in shave preps and women's systems. Women's systems continue to be negatively impacted by weakening channel dynamics and a highly competitive and promotional environment. Consumption in the U.S. razor blades category was down 80 basis points in the quarter, with continued heightened declines in the drug channel. Our market share decreased 100 basis points consistent with 26 and 52-week trends. Sun and skincare organic net sales increased approximately 5%, as double-digit growth in skin and grooming more than offset declines in North America sun care, primarily as a result of the shift in phasing in some customer orders in what is our lightest sales quarter of the year. In the U.S. sun care category, consumption increased about 1.6% in the quarter, led by increased e-commerce sales. And our market share was down slightly. In our two most noteworthy international markets, we saw strong sun season performance, with both value and volume market share gains in Australia and Mexico. Grooming organic net sales increased 13% in the quarter with growth across each brand, as mentioned most notably led by 20% organic net sales growth in Cremo, and growth from the national rollout of Billy's Body Care. Wet Ones organic net sales increased 15% fueled by better in-stock positions, our share was approximately 71%. Femcare organic net sales were down approximately 12%. The decline was largely driven by our pads business as we continue to ramp conversion from Stayfree to Carefree. Consumption in the category was up 4%, though continues to be driven mostly by 7% growth in pads, where our penetration is the lowest. In the categories where we mostly compete, tampons and liners, consumption was down 1% and up 3%, respectively. Overall, the category remains highly promotional. And finally, turning to our operational performance in the quarter. Q1 reflects a continuation of our cost excellence strengths, paired with meaningful improvements in broader service levels and much improved in-stock positions. Productivity savings were 340 basis points and provided the tailwinds for our approximately 80 basis points of constant currency gross margin accretion in the quarter. Productivity savings were realized from a whole collection of programs including global sourcing and indirect savings, labor automation, broader plant efficiency efforts. Importantly, we also delivered meaningful service gains, saw unit fill rates above target levels across most categories and markets, and addressed the supply challenges referenced last quarter in our grooming and skin businesses. Lastly, we were very pleased with our supply levels and in-stock positions as we prepare for the critical sun season in the U.S. and Northern Latin American markets. While we continue to see some modest inflationary pressures, largely driven by labor, and more modest increases in commodities, there is no material change to our inflation expectations for the full year. The same cannot be said on the FX front. Given a significant strengthening of the dollar against most major currencies, gross margin in the quarter was negatively impacted by an incremental 40 basis points of currency headwinds. On a full-year basis, FX is now expected to be an incremental 20 basis point headwind to gross margin. So while I'm pleased with the progress we're making in the areas of the business that are in our direct control, these external factors certainly make for a more challenging operating environment. Going forward, we will continue to be proactive, act with urgency and discipline, and prioritize executing our strategies and focusing on the operational elements of the business that will lead to durable growth and broader value creation. Now let me turn it over to Fran to discuss the financial results for the quarter and our full-year outlook.

Fran Weissman: 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 an approximately $0.17 per share unfavorable impact in the quarter due to translational currency headwinds to operating profit and higher year-over-year hedge and balance sheet remeasurement losses within our other income and expense. At constant currency, adjusted earnings per share were flat to prior year. Adjusted EBITDA was $45.9 million inclusive of an $11 million unfavorable currency impact, compared to $57.2 million in prior year. At constant currency, adjusted EBITDA was flat to prior year. Net cash used by operating activities was $115.6 million for the quarter compared to $72.9 million in the prior year period. Shift and seasonal inventory builds versus last year drove the increased use of cash in the quarter. We ended the quarter with $176 million in cash on hand, access to the $221 million undrawn portion of our credit facility, and as anticipated due to cash flow seasonality, a net debt leverage ratio of 3.8 times. In the quarter, share repurchases totaled $30 million. We continued our quarterly dividend payout and declared another cash dividend of $0.15 per share for the first quarter. In total, we've returned approximately $38 million to shareholders during the quarter. Now turning to our outlook for fiscal 2025. As Rod and Dan mentioned earlier, we are pleased with our ability to continue to execute and deliver on our previously provided outlook ranges. However, the current macro environment remains challenging, particularly across currency markets, and as such, we have updated our outlook for the full year primarily to reflect the impact of unfavorable currency movements. Compared to our prior outlook, on a constant currency basis, our outlook is essentially unchanged from a quarter ago. For the fiscal year, we still anticipate organic net sales growth to be in the previously provided range of 1% to 3%. Looking ahead, our growth assumptions for the second quarter are now approximately 1% reflecting an expected shift in sun care orders into the third quarter. On a reported basis, currency is now expected to negatively impact reported sales by 160 basis points, versus our prior expectation of a positive 70 basis points impact. While our outlook for a 90 basis point increase in gross margin on a constant currency basis is unchanged, we now expect full-year adjusted gross margin accretion of 55 basis points, inclusive of 35 basis points of FX headwinds, 20 basis points worse than our previous outlook. Our outlook for adjusted EPS and EBITDA are now expected to be towards the lower end of their respective ranges, essentially flowing through the incremental FX headwinds partly offset by slightly improved below-the-line items, including a favorable pension true-up. Adjusted earnings per share are now anticipated to be towards the lower end of our $3.15 to $3.35 outlook range, inclusive of approximately $0.36 per share of currency headwinds, an increase of $0.18 from our prior outlook. Adjusted EBITDA is also now expected to be towards the lower end of our $356 million to $368 million outlook range, inclusive of approximately $23 million in currency headwinds versus the $12 million currency headwind contemplated in our prior outlook. Due to our revised FX expectation, we now expect approximately 70% of adjusted net earnings to be generated in the second half of the fiscal year, slightly higher than our previous outlook. On a constant currency basis, our half-one and half-two phasing expectations are essentially unchanged. As outlined in our earnings release, this outlook does not reflect the potential impact from the U.S. retaliatory tariffs given the rapidly evolving nature. For more information related to our fiscal 2025 outlook, we refer you to the press release that we issued earlier this morning. And now, I'd like to turn the call over to the operator for the Q&A session.

Operator: 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.

Kate Grafton: 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.

Rod Little: 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.

Dan Sullivan: 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.

Operator: The next question comes from Chris Carey with Wells Fargo. Please go ahead.

Chris Carey: 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.

Rod Little: 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.

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

Rod Little: 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.

Dan Sullivan: 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.

Chris Carey: 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.

Rod Little: 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.

Chris Carey: Okay. Thanks.

Rod Little: Thanks, Chris. Operator, next question please.

Operator: The next question comes from Olivia Tong with Raymond James. Please go ahead.

Olivia Tong: 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?

Dan Sullivan: Hey, Olivia. It's Dan. I'm sorry. This was a bit muddled. Could you repeat the question?

Olivia Tong: 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.

Dan Sullivan: 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.

Rod Little: 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.

Olivia Tong: 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.

Rod Little: 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.

Olivia Tong: Thank you.

Rod Little: Thanks, Olivia. Operator, next question please.

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

Peter Grom: 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.?

Rod Little: 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.

Dan Sullivan: 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.

Peter Grom: That's super helpful. Thank you very much. I'll pass it on.

Rod Little: Thank you, Peter. Operator, next question please.

Operator: The next question comes from Dara Mohsenian with Morgan Stanley. Please go ahead.

Dara Mohsenian: 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?

Dan Sullivan: 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.

Dara Mohsenian: 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.

Rod Little: 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.

Dan Sullivan: 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.

Dara Mohsenian: Great. Thanks, guys.

Rod Little: Thank you, Dara. Operator, next question please.

Operator: The next question comes from Susan Anderson with Canaccord Genuity. Please go ahead.

Susan Anderson: 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.

Rod Little: 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?

Rod Little: 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.

Susan Anderson: 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.

Rod Little: 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.

Susan Anderson: Okay. Great. That's really helpful. Thanks so much. Good luck for the rest of the year.

Rod Little: Thank you. Operator, next question, please.

Operator: 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.

Rod Little: 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.

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