Q1 2024 Energizer Holdings Inc Earnings Call

Operator: Other factors that could cause actual results to be different material from these statements are included in reports we file with the SEC. We also refer in our presentation to non-GAAP financial measures. A reconciliation of non-GAAP financial measures to comparable GAAP measures is shown in our press release issued earlier today, which is available on our website. Information concerning our categories and an estimated market share discussed in this call relates to the categories where we compete and is based on Energizer's internal data. Data from industry analysis and estimates that we believe to be reasonable. The battery category information includes both brick-and-mortar and e-commerce retail sales. Unless otherwise noted, all comments regarding the quarter and year pertain to Energizer's fiscal year, and all comparisons to the prior year relate to the same period in fiscal 2023. With that, I would like to turn the call over to Mark.

<unk> actual results to differ materially from these statements are included in reports, we file with the SEC.

We also refer in our presentation to non-GAAP financial measures.

A reconciliation of non-GAAP financial measures to comparable GAAP measures is shown in our press release issued earlier today, which is available on our website.

Information concerning our categories and estimated market share discussed on this call relates to the categories, where we compete and is based on Energizer is internal data.

Data from industry analysis, and estimates, we believe to be reasonable.

The battery category information includes both brick and mortar and e-commerce retail sales.

Unless otherwise noted all comments regarding the quarter and year pertained to energize our fiscal year.

And all comparisons to prior year relates to the same period in fiscal 2023.

With that I would like to turn the call over to Mark.

Mark Stephen LaVigne: Good morning, everyone, and thank you for joining us on our fiscal 2024 first quarter earnings call. We started the fiscal year with the same priorities as we had in FY23, improving margins, generating free cash flow, and paying down debt. In our first quarter, we delivered on our outlook and made great progress in each of these areas. Gross margin improved to 39.5% for the quarter as a result of the benefits from Project Momentum. We generated free cash flow of over 21% of net sales and paid down $78 million in debt, solidifying our path to achieve below five times debt-to-EBITDA by the end of the fiscal year.

Mark: Good morning, everyone and thank you for joining us on our fiscal 2024 first quarter earnings call.

We started the fiscal year with the same priorities as we had in FY2023.

Mark: Proving margins generating free cash flow and paying down debt.

Mark: And our first quarter, we delivered on our outlook and made great progress in each of these areas.

Mark: Gross margin improved to 39, 5% for the quarter as a result of the benefits from project momentum.

Mark: We generated free cash flow over 21% of net sales.

Mark: And paid down $78 million in debt solidifying our path to achieve below five times debt to EBITDA by the end of the fiscal year.

Mark Stephen LaVigne: In addition to the strong execution against our main priorities, we are seeing healthy indicators across our business, including an excellent response to our investments to drive improved consumer engagement without impeding margin improvement, steadily improving category trends, share gains, and batteries across key customers and markets around the world, and improving consumer sentiment. When you combine the momentum of our strategic priorities with these trends, we are positioned to deliver both top and bottom line growth over the balance of the year. Turning to a review of the first quarter, Globally, battery category volume and value performed as expected, with both down in low single digits.

Mark: In addition to the strong execution against our main priorities, we are seeing healthy indicators across our business.

Mark: Including an excellent response to our investments to drive improved consumer engagement without impeding margin improvement.

Mark: Steadily improving category trends.

Mark: Share gains in batteries across key customers in markets around the world and improving consumer sentiment.

Mark: When you combine the momentum of our strategic priorities with these trends we are positioned to deliver both top and bottom line growth over the balance of the year.

Mark: Turning to a review of the first quarter.

Mark: Globally battery category volume and value performed as expected.

Mark: With both down low single digits.

Mark Stephen LaVigne: This was largely driven by ongoing elasticity impacts from international price increases, which occurred later than in the US, as well as the impact of the energy crisis in Europe last fall, which caused a surge in category demand in our first quarter of 2023. When you narrow the view to the U.S., category volumes increased roughly 6% in the quarter. We expect international category trends to follow roughly the same recovery pattern as the U.S. as they cycle through the impact of price increases with positive global volume trends in the back half of the year. We are achieving these results while maintaining a prudent approach to pricing and promotion. These strategically important investments have been designed to engage and bridge consumers to higher price points after multiple rounds of pricing in the category. On a year-over-year basis, the percent sold on promotion for the category was up in the quarter, but the depth of that promotion was meaningfully less than the prior year. Importantly, the investments are having the intended impact without sacrificing gross margin.

Mark: This was largely driven by ongoing elasticity impacts from international price increases, which occurred later than in the U S.

Mark: As well as Comping the energy crisis in Europe last fall, which caused a surge in category demand in our first quarter of 2023.

Mark: When you narrow the view to the U S category volumes increased roughly 6% in the quarter.

Mark: We expect international category trends to follow roughly the same recovery pattern as the U S. As they cycle through the impact of price increases with positive global volume trends in the back half of the year.

Mark: We are achieving these results, while maintaining a prudent approach to pricing and promotion.

Mark: These strategically important investments have been designed to engage in British consumers to higher price points after multiple rounds of pricing in the category.

Mark: On a year over year basis, the percent sold on promotion for the category.

Mark: It was up in the quarter, but the depth of that promotion was meaningfully less than the prior year.

Mark: Importantly, the investments are having the intended impact without sacrificing gross margin, we drove volume in the category and for our brands, while preserving our pricing and expanding gross margin in the quarter.

Mark Stephen LaVigne: We drove volume in the category and for our brand while preserving our pricing and expanding gross margin in the quarter. As we look ahead, we will be disciplined in our pricing and promotion strategy with a focus on driving the overall health of the category and our brand. Moving to auto care, while the December quarter is the smallest in terms of sales for our auto business, we are entering the critical peak season with a fast start, growing organic sales by nearly 5% versus the prior year. We saw growth across three of our four subcategories, appearance, refrigerants, and fragrance, and delivered double-digit growth internationally.

Mark: As we look ahead, we will be disciplined in our pricing and promotion strategy with a focus on driving the overall health of the category and our brands.

Mark: Moving to auto care.

Mark: While the December quarter is the smallest in terms of sales for our auto business.

Mark: We are entering the critical peak season with fast start growing organic sales by nearly 5% versus the prior year.

Mark: We saw growth across three of our four subcategories appearance refrigerants and fragrance and delivered double digit growth internationally.

Mark Stephen LaVigne: Importantly, we are set up well to deliver low single-digit organic growth for the full year in auto care while also expanding margin. And finally, Project Momentum is delivering. The program generated over $20 million in savings in the quarter, taking total program savings to over $75 million to date.

Mark: Importantly, we are set up well to deliver low single digit organic growth for the full year in auto care, while also expanding margins.

Mark: And finally project momentum is delivering.

Mark: The program generated over $20 million in savings in the quarter, taking total program savings to over $75 million to date.

Mark Stephen LaVigne: As we announced today, we continue to find areas of opportunity, and we increased the total program savings target by $30 million, taking our savings range to $160 to $180 million. Our strong free cash flow has also been a bright spot. The combination of margin improvement and continued progress on working capital management helped to generate free cash flow of over 21% of net sales, up nearly 150 basis points from the prior year.

Mark: As we announced today, we continue to find areas of opportunity and we increased the total program savings target by $30 million, taking our savings range to $160 million to $180 million.

Mark: Our strong free cash flow has also been a bright spot.

Mark: The combination of margin improvement and continued progress on working capital management helped to generate free cash flow of over 21% of net sales up nearly 150 basis points from the prior year.

John: As John will expand on in a moment, our free cash flows have allowed us to make significant progress towards reducing debt and strengthening our balance sheet. Now, I turn it over to John for more details on the quarter and the full year outlook. Thanks, Mark, and good morning, everyone. I will provide a more detailed summary of the quarter, an update on project momentum, and some additional color on our expectations for the rest of fiscal 24. For the quarter, reported net sales were down 6.3%, with organic revenue down 7.4%.

Mark: As John will expand on in a moment our free cash flows.

Mark: Have allowed us to make significant progress towards reducing debt and strengthening our balance sheet let's.

Mark: Let's turn it over to John for more details on the quarter and the full year outlook.

John: Thanks, Mark and good morning, everyone I will provide a more detailed summary of the quarter an update on project momentum and some additional color for our expectations for the rest of fiscal 'twenty four.

For the quarter reported net sales were down six 3% with organic revenue down seven 4%.

John: The results for the quarter will be within our initial outlook for organic sales to decline between 6 and 8%. As we called out in our last call, the largest driver of the decline was earlier holiday shipments, which benefited our fourth quarter in fiscal 2020. Our sales were further impacted this quarter by continued weaker performance in non-track channels. However, adjusted gross margin increased 50 basis points to 39.5%, mainly driven by project momentum. Pricing was relatively flat on a year-over-year basis, but mixed impacts and modestly increased product costs were slight headwinds in the quarter. Suggested SG&A increased $3.7 million, primarily related to labor and benefit costs, as well as factoring fees in a rising rate environment, partially offset by project momentum. AMP is a percentage of sales, with 6.6% consistent with our efforts to focus investments during the critical holiday season.

John: The results for the quarter well within our initial outlook for organic sales to decline between 6% to 8%.

John: As we called out on our last call. The largest driver of the decline was earlier holiday shipments, which benefited our fourth quarter and fiscal 2023.

John: Our sales were further impacted this quarter by continued weaker performance in non tracked channels.

John: Adjusted gross margin increased 50 basis points to 39, 5%, mainly driven by project momentum.

John: Pricing was relatively flat on a year over year basis, but mix impacts and modestly increased product costs were slight headwinds in the quarter.

John: Adjusted SG&A increased $3 $7 million, primarily related to labor and benefit costs as well as factoring fees in a rising rate environment.

John: Really offset by project momentum savings.

John: A&P as a percentage of sales was six 6% consistent with our efforts to focus investments during the critical holiday season.

John: Interest expense decreased $2.2 million due to lower average debt outstanding as we have continued to prioritize debt paydown. As noted in our press release issued earlier this morning, we also recorded a non-cash exchange loss of $21 million in the, recognizing the devaluation of the Argentine peso in December. The devaluation was a result of broad economic reforms introduced by the newly elected administration, in which the peso was devalued by 50% during the month. Given the extraordinary nature of the devaluation, the impact was excluded from our adjusted earnings per share.

John: Interest expense decreased $2 $2 million due to lower average debt outstanding as we've continued to prioritize debt paydown.

John: As noted in our press release issued earlier. This morning, we also recorded a noncash exchange loss of $21 million in the quarter.

John: Recognizing the devaluation of the Argentine peso in December.

John: The devaluation was a result of broad economic reforms introduced by the newly elected administration in which the peso was devalued by 50% in the month.

John: Given the extraordinary nature of the devaluation the impact was excluded from our adjusted earnings per share.

John: We delivered Adjusted EBITDA and Adjusted Earnings Per Share of $132.9 million and $59,000, respectively. We also generated $153 million of free cash flow in the quarter through a combination of margin improvement and continued progress on working capital management. We directed these strong cash flows to pay down $78 million of debt during the first quarter, and we've continued this progress by paying off an additional $58 million subsequent to quarter end, for a total of $136 million in the first four months of the fiscal year. Since the fourth quarter of fiscal 22, we have paid off over $400 million of debt to date, or almost 12% of our total outstanding debt.

John: We delivered adjusted EBITDA and adjusted earnings per share of $132 9 million and 59.

John: We also generated $153 million of free cash flow in the quarter through a combination of margin improvement and continued progress on working capital management.

John: We directed these strong cash flows to pay down $78 million of debt during the first quarter and we've continued this progress by paying off an additional $58 million subsequent to quarter end.

John: For a total of $136 million in the first four months of the fiscal year.

John: Since the fourth quarter of fiscal 'twenty, two we have paid off over $400 million of debt to date or almost 12% of our total outstanding debt.

John: As rates stay higher for longer, our debt capital structure remains a valuable asset as we have a weighted average cost of debt of around 4.7%, which is 94% fixed and no meaningful maturities until 2027. As Mark noted earlier, Project Momentum continues to be an important focus for us and contributed approximately $22 million of savings in the quarter. As we look forward, we've identified additional opportunities to drive savings, including by leveraging production assets we were able to opportunistically acquire last quarter in Belgium. Based on our latest estimates, we are calling up our full program outlook by $30 million for total program savings of $160 million to $180 million. We also expect one-time cash costs for the program to run at roughly 80 to 90 percent of the projected savings. Finally, I would like to provide some additional color on our outlook for the remainder of the year. For the second quarter, we expect organic nut sales to be down between 2% and 3% as we cycle through softness in non-track channels.

John: As rates stay higher for longer our debt capital structure remains a valuable asset as we have a weighted average cost of debt of around four 7%, which is 94% fixed.

John: And no meaningful maturities until 2027.

John: As Mark noted earlier project momentum continues to be an important focus for us and contributed approximately $22 million of savings in the quarter.

John: As we look forward, we've identified additional opportunities to drive savings, including by leveraging production assets, we were able to opportunistically acquire last quarter in Belgium.

John: Based on our latest estimates we are calling up our full program outlook by $30 million for total program savings of $160 million to a $180 million.

John: We also expect one time cash cost for the program to run at roughly 80% to 90% of the projected savings.

Speaker Change: And finally, I would like to provide some additional color on our outlook for the remainder of the year for.

Speaker Change: For the second quarter, we expect organic net sales to be down between 2% and 3% as we cycled through softness in non tracked channels.

John: We also anticipate gross margin in the quarter to improve by 150 basis points year over year and for adjusted EPS to be in the range of 65 to 70 cents, up mid-single digits at the midpoint versus the same quarter in the prior year. Over the back half of the year, we expect to return to top-line growth driven by a few key factors. First, we expect volumes to continue to improve in the category as consumers adjust to the pricing taking effect over the previous two years, especially in international markets where pricing actions occurred later than in the U.S. We also expect recovery in some of the non-track channels, which should begin to compensate for large declines that began last spring. And finally, we expect distribution wins across both battery and auto to help drive back half-sales. For the full fiscal year, we continue to expect project momentum savings of $55 to $65 million. We also expect to pay down $150 to $200 million of debt for the year and to end Fiscal 24 below five times leverage.

Speaker Change: We also anticipate gross margin in the quarter to improve by 150 basis points year over year.

And for adjusted EPS to be in the range of 65 to 70.

Speaker Change: Up mid single digits at the midpoint versus the same quarter in the prior year.

Speaker Change: Over the back half of the year, we expect a return to topline growth driven by a few key factors.

Speaker Change: First we expect volumes to continue to improve in the category as consumers adjust to the pricing taking over the previous two years, especially in international markets, where pricing actions occurred later than in the U S.

Speaker Change: We also expect a recovery in some of the non tracked channels, which should begin to comp large declines that began last spring.

Speaker Change: And finally, we expect distribution wins across both battery and auto to help drive back half sales.

Speaker Change: For the full fiscal year, we continue to expect project momentum savings of $55 to $65 million.

Speaker Change: We also expect to pay down $150 million to $200 million of debt for the year end to end fiscal 'twenty four below five times leverage.

John: We are reaffirming our outlook for organic net sales to be flat to down 2%. Adjusted Gross Margin Improvement of 100 Bases, with improvement across both battery and auto care. Adjusted EBITDA in the range of $600 to $620 million and adjusted earnings per share of $3.10 to $3.30.

Speaker Change: We are reaffirming our outlook for organic net sales to be flat to down 2%.

Speaker Change: Adjusted gross margin improvement of 100 basis points with improvement across both battery and auto care.

Adjusted EBITDA in the range of $600 million to $620 million and adjusted earnings per share of $3 10 to $3 30.

Mark Stephen LaVigne: With that, I'll turn it back over to Mark for closing remarks. In summary, our first quarter performance sets us up well for the remainder of the year. We have the flexibility and discipline to navigate market conditions, particularly in light of the strong momentum across our cost savings and cash generation initiatives. We will remain laser-focused on delivering growth, advancing our strategic priorities, and delivering shareholder value. Now, let's open the call for questions. Thank you. If you wish to ask a question, please dial star 1 on your telephone keypad now to enter. Once your name is announced, you can ask a question.

Speaker Change: With that I'll turn it back over to Mark for closing remarks.

Mark: In summary, our first quarter performance sets us up well for the remainder of the year.

Mark: We have the flexibility and discipline to navigate the market conditions.

Mark: Particularly in light of the strong momentum across our cost savings and cash generation initiatives.

Mark: We will remain laser focused on delivering growth advancing our strategic priorities and delivering shareholder value now lets open the call for questions.

Speaker Change: Thank you if you wish to ask a question. Please dial star one on your telephone keypad now to enter the queue. Once you're names announced you can ask a question <unk> answer before so to speak you can Dol stance to counsel. Please.

Lauren Rae Lieberman: If you find that it's answered, before it's your turn to speak, you can dial star 2 to ask one question, followed by one final question. And our first question comes from the line of Lauren Lieberman at Barclays. Please go ahead. Your line is open.

Speaker Change: Please see filings we request that you ask only one question followed by one the follow up just in the interest of time.

Speaker Change: And our first question comes from the line of Lauren Lieberman.

Lauren Rae Lieberman: Barclays. Please go ahead your line is open.

Mark Stephen LaVigne: Great, thanks so much. The first thing I was hoping you could just tell us a little bit more about the Belgium facility you acquired and kind of, you know, anything you can offer on that and how much of that was really driving the uptick in momentum savings or is that something that's still maybe, you know, maybe more to be evaluated as we move forward? Lauren, we continue to evaluate project momentum, and as you've seen, as we've gotten further in the program, we've been able to take the ranges up to 160 to 180. That is, our current call based on everything we know today, including the acquisition of the Belgian facility. And that was an opportunistic opportunity that came across late last year; it allows us to pivot and do region for region manufacturing, driving great working capital improvements and cost savings improvements. And it was a relatively low-level investment, you know; the purchase price for the assets was roughly three and a half million euros.

Lauren Rae Lieberman: Great. Thanks, so much and first thing I was hoping is if you could just help a little bit more about the Belgium facility, you acquired and kind of.

Lauren Rae Lieberman: Anything you can offer on that and how much of that was really what was driving the uptick in momentum savings or is that is that something as Phil maybe maybe more to be evaluated as we move forward.

Phil: Laura we continue to evaluate project momentum and as you've seen as we've gotten further in the program we've been able to take the ranges up at 160 to 180 is our current call based on everything we know today, including the acquisition of the Belgium facility and that was an opportunistic.

Phil: Opportunity that came across late last year. It allows us to pivot and do in region for region manufacturing is driving great working capital improvements cost savings improvement and it was a relatively low level of investment the purchase price for the assets was roughly $3 5 million euros.

Laura: Okay great.

Mark Stephen LaVigne: And then just on auto care, constructive commentary on the top line, but margins did take a step back this quarter. So just kind of curious about anything that was discreet to the quarter and how we should be thinking about kind of gross margin opportunity for the full year. Yeah, I would say Lauren, the first quarter was not reflective of what we expect for the full year.

Speaker Change: Thank you and then just.

Speaker Change: On auto care.

Speaker Change: Constructive commentary on top line, but margins did take a step back this quarter. So just kind of curious that anything that was discrete to the quarter.

Speaker Change: How we should be thinking about kind of gross margin opportunity.

Speaker Change: For the full year.

Speaker Change: I would say Laura in the first quarter was.

Speaker Change: Not reflective of what we expect for the full year, we're still anticipating gross margin improvement as we go throughout the year pretty pretty significant and that should help us deliver.

Mark Stephen LaVigne: We're still anticipating gross margin improvement as we go throughout the year, pretty, pretty significant. And that should help us deliver, you know, bottom line performance on a segment profit perspective as well. Okay. And is there anything within there that, you know, you're just, again, I guess I'm sure it's still partially project amended, but like operational changes that are being made in auto versus, you know, raw max and pricing kind of stuff. I'm curious about what sort of the in your control versus the macro, if you will. No, no, it's obviously the smallest quarter by far.

Speaker Change: Bottom line performance on a segment profit perspective as well.

Speaker Change: Okay and is there anything within there that you just I guess im sure.

Speaker Change: Partially project amendment, but like operational.

Is that are being made in auto versus raw mats and pricing kind of staff I'm curious, what's sort of the in your canal versus the macro.

Speaker Change: It's obviously the smallest quarter by far so.

Mark Stephen LaVigne: So when you kind of come into the year and look at all the rolling standards, you have some indirect costs that you allocate to the business. It's really not reflective of the full year run rate. And Lauren, just to build on that, I think from a gross margin standpoint in auto care, we're expecting improvement this year. And then I think one of the questions that's out there is when will we get that business back to where we were when we acquired it, and our anticipation is we continue to see gross margin improvement, including a lot of the plans we have under project momentum as we'll achieve that level in 25. All right, thanks. I'll pass it on and come back.

Speaker Change: When you.

Speaker Change: Come into the year and look at and Rerolling standards, you got some indirect costs that you allocate to the business, it's really not reflective of the full year run rate.

Speaker Change: And Lauren just to build on that I think from a gross margin standpoint out of here, we're expecting improvement this year and then.

Lauren Rae Lieberman: One of the questions. That's out there is when we get that business back to where we were when we acquired it and our anticipation is with continued gross margin improvement, including a lot of the plans we have under project momentum as we will achieve that level in 'twenty five.

Speaker Change: Alright, Thank you I'll pass it on and come back on.

Speaker Change: Thanks Lauren.

Speaker Change: Thank you Al next question comes from the line of Bill Chappell of Truth Securities. Please go ahead. Your line is open.

William B. Chappell: Thanks, Lauren. Our next question comes from the line of Bill Chappell. Please go ahead. You're live.

William B. Chappell: Thanks, Good morning.

William B. Chappell: Thanks. Good morning, talk a little bit more about your kind of commentary or maybe your visibility into battery volumes picking up. And I'm just trying to understand kind of the elasticity commentary in terms of, The business has always been kind of an impulse slash commodity in terms of you endure a seller line price. You haven't seen Rayovac really pick up and share even though it's a lower priced product or private label. So try and understand why.

William B. Chappell: I'll talk.

Talk a little bit more about your kind of commentary or maybe your visibility into battery volumes picking up and I'm, just trying to understand kind of the elasticity.

William B. Chappell: Commentary in terms of.

William B. Chappell: The businesses has always been kind of impulse slash commodity in terms of you endurance solar line priced you haven't seen.

William B. Chappell: <unk> really pickup in share, even though it's a lower priced product where private label so trying to understand.

William B. Chappell: How.

Mark Stephen LaVigne: Consumers will adjust if they haven't already and volumes start to pick back up, or is it more, or if there's something else I'm missing? No Bill, let me start. So I would say from an overall standpoint on the category, let me tell you, we really like where we are from a category trends point of view. I think we're positioned very well to deliver this year. Let me start by kind of breaking it down into the component parts of the overall category.

William B. Chappell: Consumers adjust if they haven't already and volumes start to pick that goodbye or is it more.

William B. Chappell: Or if there's something else I'm missing.

William B. Chappell: Nobel Let me start so I would say from a overall standpoint on the category. Let me, we really like where we are from a category trends I think we're positioned very well to deliver the year, let me start by kind of breaking it down into component parts of the overall category and this is so in the U S. When you talk track channels volume is consistently.

Mark Stephen LaVigne: And this is, you know, so in the U.S., when you talk about track channels, volume is consistently improving. You saw us go from kind of down high single digits down, you know, percent and a half year over year, and then the latest numbers have been down 0.5 in volume, and even the numbers that came out this morning were positive. So you are seeing that inflection point in track channels for positive volume growth. That's a great sign in terms of working through the elasticity impacts, working through the, you know, the pandemic surge in demand and all of the factors that have gone into that. Then you break it down into sort of the online channel, both PurePlay as well as Omni.

William B. Chappell: Improving.

William B. Chappell: You saw us go from kind of down high single digits down.

William B. Chappell: <unk> in the half year over year, and then the latest numbers have been down five in volume and even the numbers that came out. This morning were positive. So you are seeing that inflection point in tracked channels to positive volume growth. That's a great sign in terms of working through the elasticity impacts working through the pandemic surge in demand in all of the factors that have gone into that then you break it down into.

William B. Chappell: Sort of on the online channel both pure play as well as omni that's been a consistent source of growth over the last couple of quarters and would continue we'd expect that to continue and when you get into non tracked channels with home center and OEM, we expect those trends to stabilize if you recall it was kind of last April may when we saw some of the declines that we saw in homes.

Mark Stephen LaVigne: That's been a consistent source of growth over the last couple of quarters and we expect that to continue. Then, when you get into non-track channels with Home Center and OEM, we expect those trends to stabilize. If you recall, it was kind of last April-May when we saw some of the declines that we saw in Home Center.

Mark Stephen LaVigne: We expect to work our way through those, and so those trends should stabilize. Internationally, you have elasticity impacts from pricing which occurred later in the U.S. We expect to work through those. We're already seeing signs that you are, you know, Latin America, and Asia Pacific, in particular.

William B. Chappell: We expect to work our way through those and so those trends should stabilize international.

William B. Chappell: Elasticity impacts from pricing, which occurred later in the U S. We expect to work through those we're already seeing signs that you are.

William B. Chappell: Latin America Asia Pacific in particular in Europe, you had a bit of an anomaly with the energy crisis. There last year. So all in all of those trends are positive just from a category standpoint, and then specific to our business on top of just basic execution. We are seeing some distribution wins in both batteries as well as in auto, which we expect to take hold in the back half of the year.

Mark Stephen LaVigne: In Europe, you had a bit of an anomaly with the energy crisis there last year. So, all in all, those trends are positive just from a category standpoint. And then specific to our business, on top of just basic execution, we are seeing some distribution wins in both batteries as well as in auto, which we expect to take hold in the back half of the year. So all of those factors, both from a category as well as from our business specifically, give us great confidence in the back half of the year returning to growth. Okay, so just to follow up, I mean, is your thought that it's, it's, it's greater on the normalization post COVID? Or is it elasticity?

William B. Chappell: So all of those factors both from a category as well as our business, specifically give us great confidence in the back half of the year returning to growth.

Speaker Change: Okay. So just to follow up I mean is your thoughts.

Speaker Change: Its greater on a normalization.

Post COVID-19 or is it an elasticity it seems like it's more of the former.

Mark Stephen LaVigne: It seems like it's more of the former. Whereas pricing, I guess, adjusting to pricing is more of a relative thing. It seems like you're more comfortable that we're getting back to normal consumer behavior. I think we are getting back to more normal consumer behavior. It's very difficult to parse those out.

Speaker Change: Where is pricing.

Speaker Change: I guess adjusting the pricing is more of a relative type thing.

Speaker Change: It seems like Youre more comfortable that we're getting back to a normal consumer behavior.

Speaker Change: I think we are getting back to a more consumer behavior, it's very difficult to parse does not I wouldn't want to claim some of the current trends are on Covid related I mean, you did have a long cycle of working through that and then you had the pricing impacts from two fairly significant price increases over the last couple of years. So there was a lot there for consumers to work through plus just the overall backdrop impac.

Mark Stephen LaVigne: I wouldn't want to blame some of the current trends related to COVID. I mean, you did have a long cycle of working through that. And then you had the pricing impacts from two fairly significant price increases over the last couple of years. So there was a lot there for consumers to work through, plus just the overall backdrop impact, as well. So I would say you are back to, you know, more normal category patterns as we work our way through to Q3. That's when you're really going to see that inflection point from a volume standpoint in the US, and consumers are reacting accordingly. Your question on Rayovac, I mean, we are seeing interest in Rayovac, you know, sort of increased interest in Rayovac, as we've talked to retailers, you have seen some share gains in Rayovac. Some of the more value-oriented offerings, and retailers are leaning in with consumers.

Speaker Change: As well so I would say you are back to more normal category patterns as we work our way through into Q3 is when you're really going to see that inflection point from a volume standpoint in the U S.

Speaker Change: Consumers are reacting accordingly.

Speaker Change: Your question on Rayovac, I mean, we are seeing interest in rayovac sort of.

Speaker Change: Increased interest in <unk> as we've talked to retailers you have seen some share gains and rayovac as.

Speaker Change: Some of the more value oriented offerings and retailers are leaning in with consumers. So there is an opportunity there and we've been able to capture some of that obviously, we want the bulk of our business to stay at the premium end with Energizer and Thats, where it continues to be.

Mark Stephen LaVigne: So there is an opportunity there, and we've been able to capture some of that. Obviously, we want the bulk of our business to stay at the premium end with Energizer, and that's where it continues to be. Great, thanks for the color.

Nik Modi: Thanks, Bill. Thank you. Our next question comes from the line of Nik Modi at RBC Capital Markets. Please go ahead with your line. Thank you, good morning everyone. So just a couple questions. Just wanted to clarify the non-track weakness. Was it solely the home centers like it was last quarter, right? Was there anything else?

Speaker Change: Great. Thanks for the color.

Speaker Change: Thanks Bill.

Speaker Change: Thank you. Our next question comes from the line of Nik Modi RBC capital markets. Please go ahead your line is item.

Nik Modi: Okay. Thank you good morning, everyone. So just a couple questions just wanted to clarify that and non tracked weakness that was all fully the home centers like it was last quarter right.

Nik Modi: Was there anything else, it's the majority of it.

Nik Modi: It's the majority of it. And then, I guess, following up on Lauren's question, just on Project Momentum, obviously you're getting some benefits out of this plan, but what else is driving the upside of the program? If you could just provide some context on that, and I have just one follow-up. Sure, Nick.

Nik Modi: Okay.

Nik Modi: And then I guess following up on Lauren's question, just from project momentum, obviously, youre getting some benefits out of this plant.

Els is driving the upside in the program. If you could just provide some context on that and I have one.

Nik Modi: One follow up.

Mark Stephen LaVigne: I mean, look, Project Momentum has been an incredibly successful program for us. We launched it, and since then, the organization has really dug in and been able to drive savings throughout the organization. Right now, if you take the 160 to 180 as the savings range, it breaks down to 55% roughly in sort of network distribution footprint, 15% procurement, and then 30% SG&A. That those ranges have moved around a little bit as we've continued to uncover SG&A, and we found additional opportunities as we've worked through the program, but same, it's been true with the network design with the inclusion of the new facility in Belgium. So I would say it's very broad in terms of where the additional savings are coming from, and it's just been tremendous work by the organization to be able to hit 160 to 180 million savings over a three-year period. Applical color mark.

Nik Modi: Sure.

Nik Modi: Look I project momentum has been an incredibly successful program for us.

Nik Modi: We launched it and since then the organization has really dug in and been able to just.

Nik Modi: Drive savings throughout the organization right now if you take the 160 to $1 80.

Nik Modi: The savings range, it breaks down to 55% roughly and sort of network distribution footprint, 15% procurement and then 30% SG&A.

Nik Modi: That those ranges have moved around a little bit as we've continued to uncover SG&A we found additional opportunities.

Nik Modi: We've worked through the program, but the same has been true with the network design with the inclusion of the new facility in Belgium, So I would say, it's very broad based.

Nik Modi: In terms of where the additional savings are coming from and it's just been tremendous work by the organization to be able to hit the $160 million to $180 million savings over a three year period.

Speaker Change: Helpful color, Marc and then just on the consumer last quarter, you had much more cautionary commentary.

Mark Stephen LaVigne: And then just on the consumer, you know, last quarter, you had much more cautionary commentary, and I'm sensing a little bit more optimism now. Am I reading that correctly? Have you seen things really improve? Are you feeling better about where we are? I think we are. I think you are seeing improving consumer sentiment. I think you're seeing the volume trends in our categories, both from the auto and batteries, exceed our expectations and continue to have the right trajectory. I think it's dangerous in this environment to go too all-in in sort of one direction, so I would say improving consumer sentiment.

Speaker Change: <unk>.

Speaker Change: Bit more optimism now.

Speaker Change: Am I reading that correctly have you seen things really improve are you feeling better about where the consumers.

Marc: I think we are I think you are seeing improving consumer sentiment I think youre seeing the volume trends in our categories. Both from an auto and batteries exceeded our expectations and continue to have the right trajectory.

Marc: I think it's dangerous in this environment to go to all in in sort of one direction. So I would say improving consumer sentiment.

Mark Stephen LaVigne: There is still some caution out there, and you still need to be very choiceful in terms of how you engage and how you invest to make sure that the consumers continue to stay engaged with your categories and your products. We're doing that, we're doing it successfully, but it is an improving backdrop compared to what we expected back in November. Excellent. Thanks so much, Mark.

Marc: Phil some caution out there and you still need to be very choice will in terms of how you engage in how you invest.

Marc: To make sure that the consumers continue to staying engaged with your categories and your products, we're doing that we're doing it successfully.

Marc: But it is it is an improving backdrop compared to what we expected back in November.

Excellent: Excellent Thanks, a lot mark.

Robert Ottenstein: Thank you. And our next question comes from the line of Rob Ottenstein of Evercore. Please go ahead.

Excellent: Thank you Al next question comes from the line of Ross <unk> of.

All of Evercore. Please go ahead your line is open.

Mark Stephen LaVigne: Great, thank you very much. I just wanted to follow up a little bit on your confidence in the second half of the year. And I think, you know, you mentioned one of the key drivers of that is the increased distribution for both auto and battery. Can you give us a sense of how much of the improvement is from the increased distribution and then more details on that increased distribution in terms of channel, products, any particular color around that would be helpful. Well, let me get started, Robert.

Ross: Great. Thank you very much.

Ross: Wanted to follow up a little.

Ross: But in terms of your confidence in the second half of the year.

Ross: And I think you mentioned one of the key drivers of that.

Ross: Is the increased distribution.

Ross: For both auto and batteries.

Ross: Can you give us a sense of how much of the improvement is from the increased distribution and then more details on that increased distribution in terms of channel products.

Ross: Any particular color around that.

Speaker Change: Would be helpful. Thank you.

Speaker Change: Well, let me just start Robert I think on the on the sort of the confidence it really breaks down into how I laid it out before which is improving trends across the category and tracked you have nice growth potential online you have a stabilization in non tracked so thats kind of the foundation and then on top of that we have been able to.

Mark Stephen LaVigne: I think on the sort of confidence, it really breaks down into how I laid it out before, which is improving trends across the category and tracked. You have nice growth potential online, you have stabilization and non-track. So that's kind of the foundation.

Mark Stephen LaVigne: And then on top of that, we have been able to gain incremental distribution in, you know, in auto care with some of our key retailers, with some partnerships that we're driving that you're going to hear more about as the year progresses. And then in batteries, we continue to push for additional distribution across our footprint, both existing retailers as well as some new retailers. That's true in both the U.S. and international markets.

Speaker Change: <unk>.

Speaker Change: Incremental distribution.

Speaker Change: <unk>.

Speaker Change: In auto care with some of our key retailers.

Speaker Change: With some partnerships that were driving that youre going to hear more about as the year progresses and then in batteries, we continue to push for additional distribution across our footprint both existing retailers as well as some new retailers that's true in both the U S and international.

Mark Stephen LaVigne: We called out international distribution on the last call, and I would say that teams have aggressively moved to claw back some of those distribution losses. And so as you look to the balance of the back half of the year, we expect distribution to be a tailwind and not a headwind as we get into Q3 and Q4. So a lot of hard work in distribution.

Speaker Change: We called out international distribution on the on the last call I would say the teams have aggressively.

Speaker Change: Move to to claw back some of those distribution losses, and so as you look to the balance of the back half of the year, we expect distributions when to be a tailwind not a headwind as we get into Q3 and Q4. So a lot of hard work and the distribution I don't want to get into specific customers and products, but youll see them hit shelves here in Q3.

Mark Stephen LaVigne: I don't want to get into specific customers and certain products, but you'll see them hit shelves here in Q3 and Q4. Terrific. Thank you very much. Thanks, Robert.

Speaker Change: In Q4.

Terrific. Thank you very much thanks.

Speaker Change: Thanks Robert.

Andrea Teixeira: Thank you. Our next question comes from the line of Andrea Teixeira of J.P. Morgan. Please go ahead. Thank you. Good morning, everyone.

Speaker Change: Thank you. Our next question comes from the line of insurance et cetera. All of Jpmorgan. Please go ahead. Your line is open.

Jpmorgan: Thank you good morning, everyone. So can you comment on your online channel performance for batteries. You mentioned just recently that you saw an opportunity online but by the same token is also the most fragmented channel and I remember.

Mark Stephen LaVigne: So, can you comment on your online channel performance for batteries? You mentioned just recently that you saw an opportunity online, but that, by the same token, is also the most fragmented channel. And I remember in the past few quarters, it was one of the areas where you had the most deceleration or, in a way, some sort of increased competition against private labels. So if you can comment on how your share stands right now and how you're thinking in your model. Thank you. Good morning, Andrea. I think the best way to describe it, and a lot of this is limited by the information that we receive from an online standpoint, but what we're seeing is we're continuing to see healthy volume growth online, and you're continuing to see healthy value growth online. In the past quarter, in the October, November, and December quarter, we were able to match online growth, both in terms of volume and value.

Jpmorgan: Past two.

Jpmorgan: Quarters.

Jpmorgan: One of the areas, where you had the most deceleration or.

Jpmorgan: In a way some sort of like increase.

Jpmorgan: Please competition against private label. Thanks, you can comment on how.

Speaker Change: Sure stands right now and how Youre thinking in your model. Thank you.

Speaker Change: Good morning, Andreas I think the best way to describe it in a lot of this has limited the information that we received from an online standpoint, but what we're seeing is we're continuing to see healthy volume growth in online youre.

Speaker Change: <unk> to see healthy value growth online.

Speaker Change: In the past quarter in the October November December quarter, we were able to match online growth both in terms of volume and value to our share from our.

Andrea Teixeira: So our share, you know, from our estimates is probably flat. We're not losing share, we're not gaining share at this moment, but I think a really solid quarter for us in the online channel during the holiday, which was, as you know, a very critical quarter for us. And if I can, that's encouraging, and then I can just go back to the project momentum as you raised the $30 million. And I believe in August you had included 2025 into the program. So, number one, where did the $30 million come from, the additional $30 million? And when should we, I think you didn't change the amount that is going to be in 2024, but I was wondering if you could mention where it came from and where we should be thinking of the extra $30 million lending. I'm assuming that it's 2025.

Speaker Change: <unk> is probably flat we are not losing share we're not gaining share at this moment, but I think a really solid quarter for us in the online channel and holiday, which was as you know a very critical quarter for us.

Speaker Change: Mhm and if I can that's encouraging and then if I can just like go back to the project momentum as you've raised $30 million.

Speaker Change: And I believe in August you had included 2025 into the program.

Speaker Change: So we are number one with the 30 million come from the additional <unk>.

Speaker Change: And when should we.

Speaker Change: I think you didn't change.

Speaker Change: The amount that is going to be in 2024, but I was wondering if you can mention where it came from and where we should be thinking of the extra 30 minute landing I'm, assuming that's <unk> 25.

Mark Stephen LaVigne: The extra is certainly in 25. We did keep 24 between 55 and 65 million of savings. The balance of the program is to hit in 25. As I mentioned in one of the previous questions, it's really broad-based across the program. It's a 70-30 split gross margin SG&A. That's a little different than when the program started, which was 80-20.

Speaker Change: So the extra the extra is certainly in 'twenty five we did keep 24 between 55 and $65 million of savings the balance of the program to hit into in 'twenty five.

Speaker Change: As I mentioned on one of the previous questions is really broad based across the program. It's 70 30 split gross margin SG&A, that's a little different than when the program started which was 80 20, we did add a third year as we continue to find additional opportunities throughout the program.

Mark Stephen LaVigne: We did add a third year as we continue to find additional opportunities throughout the program, but I'm really excited about the benefit it's going to provide for us and our ability to deliver ongoing earnings momentum in the business. Tremendous work. It's broad-based.

Speaker Change: But really excited about the benefit it's going to it's going to provide for us and our ability to deliver ongoing earnings momentum in the business and so tremendous work its broad based the teams continue to work hard and execute against the program I would say, 70% gross margin and 30% in SG&A.

Mark Stephen LaVigne: The teams continue to work hard and execute against the program. I would say 70% gross margin, 30% in SG&A. With the 55 and 65 million in 24 with the balance next year, that's great. And then I can just squeeze a bit of the Rayovac kind of repositioning.

And with the $55 to $65 million and 24 with a balanced next year.

Speaker Change: That's great and then if I can just squeeze a bit of the rayovac.

Speaker Change: Kind of repositioning and as you gain more shelf space in brakes.

Mark Stephen LaVigne: And as you gain more shelf space in Briggs, do you see the need for kind of pushing, because obviously when you're growing and the market is immunizing, do you see the need for positioning Rayovac as like an entry level for you, which has always been, but just to see if you're looking at this additional shelf space to be positioning and to protect the entry level battery market or not? Well, Andrea, I think we're perfectly positioned in the battery category to really lean in with retailers and solve any of the sort of strategies or issues that they're trying to connect with consumers on. And I would say our full portfolio, the fact that we go from value offerings all the way up to super premium with lithium is a unique advantage that we bring. You know, I would say the goal is to source Rayovac volume from private label and to make sure that we continue to keep consumers in the branded side of that business. That's an important element that Rayovac plays.

Speaker Change: Do you.

Speaker Change: Do you see the need for kind of pushing because obviously when you're growing end market with premier Nizing do you see the need of positioning.

Speaker Change: <unk> is like an entry level.

Speaker Change: <unk>, which has always been but just to see if youre looking at.

Speaker Change: This additional shelf space to be positioning and to protect the entry level battery market.

Speaker Change: Got it.

Speaker Change: Well, Andrea I think were perfectly positioned in the battery category to really lean in with retailers.

Speaker Change: And.

Andrea: Solve any of this sort of strategies or issues that theyre trying to connect with consumers on and I would say our full portfolio. The fact that we go from value offerings, all the way up to Super premium with Lyft lithium has a unique advantage that we bring.

Andrea: I would say the goal is to source rayovac volume from private label and to make sure that we continue to keep consumers in the branded side of that business. That's an important element that rayovac plays obviously, our flagship Energizer brands.

Mark Stephen LaVigne: Obviously, you know, our flagship Energizer brand will continue to be our emphasis and continue to be the bulk of the distribution that we see, but it plays an important role. I don't think it will have an outsized impact on our overall share or our financials, but it is a key asset that we have that we leverage very tactically as we work with retailers to solve any issues that they're looking to solve. Thank you all. Thank you, and our next question comes from the line of Hale Halton. Good morning.

Andrea: We will continue to be our emphasis and continued to be the bulk of the distribution that we see but it plays an important role I don't think it will take outsize.

Andrea: Have an outsized impact on our overall.

Andrea: Share or our financials, but it is a it is a key asset that we have that we leverage very tactically as we work with retailers or solve any issues that they are looking to solve.

Speaker Change: Thank you I'll pass it on.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Hale Holden.

Hale Holden: Barclays. Please go ahead your line is open.

Operator: Could you give us any change or update to what you're seeing on input prices and the overall inflationary market or environment or deflationary environment, however it may fall out for the year? Yeah, for the rest of the year, specifically for materials, you know, it was slightly negative in this quarter, but we're looking for pretty consistent improvement going forward. We're calling for about 80 basis points of gross margin full year improvement, and the biggest benefits are really coming from lithium, zinc, steel, and R134a.

Hale Holden: Hi, Good morning could you give us any change or update to what youre seeing on input prices overall inflationary market or environment or deflationary environment.

Speaker Change: Fallout for Cherokee here, yes.

Hale Holden: For the rest of the euro specifically to materials.

It was slightly negative in this quarter, but we're looking for pretty consistent improvement going forward, we're calling for about 80 basis points of gross margin full year improvement and the biggest benefit is really coming from lithium zinc steel and our 134, a so so we do have some tailwind coming in from a direct input costs.

Operator: So we do have some tailwinds coming in from a direct input cost. Thank you very much. Thank you. And our next question comes from the line of Carla Casella at J.P. Morgan. Hi, I'd like to focus on the debt paydown and... What is the debt that you paid down in the quarter and, after all,?

Speaker Change: Thank you very much.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Carla Casella Jpmorgan. Please go ahead. Your line is open.

Hi, I'd like to focus on debt pay down and I'm just wondering what's the debt that you paid down in the quarter and after all term loan and is that what you expect to target going forward or would you look to buy back bonds as well.

Operator: Is that what you expect to target going forward? Thank you. Thank you. Thank you. Yeah, it was all on term loans so far this year.

Speaker Change: Trading at discounts.

Speaker Change: Yes. It was all term loan so far this year I mean, we will continue to evaluate what's the best option for us to pay downs going forward.

Operator: I mean, we'll continue to evaluate what's the best option for us to pay down going forward. But you know, we'll continue, I think, to go after that term loan as much as we can over the next couple of years. Thanks. Thank you, and we currently have one further... If you wish to ask any further questions, please dial star 1. And that next question is from Lauren. Hey, I'm sorry, I'm actually all set, because I was going to ask about the incremental distribution and the outlook in the back half, but you went. I am all set.

Speaker Change: But we'll continue I think to go after that term loan as much as we can over the next couple of years.

Speaker Change: Okay, great. Thanks.

Speaker Change: Thanks.

Speaker Change: We currently have one further question then is key so just as a reminder, if you do wish to ask any further questions. Please call star one now.

Speaker Change: And that next question is from Lauren Lieberman Barclays. Please go ahead. Your line is open.

Lauren Rae Lieberman: Okay, I'm, sorry, I'm actually I'm actually all set because that was going to ask about the incremental distribution in the outlook in the back half for you in terms of answering it.

Lauren Rae Lieberman: Thank you. Great, and we've had one further question. This is Brian McNamara at CannaCordia News. Go ahead, y'all.

Lauren Rae Lieberman: Thank you.

Speaker Change: Great. Thanks Lauren.

Speaker Change: No problem and we have one further question comfort and that's Brian that tomorrow at the Canaccord Genuity. Please go ahead. Your line is open.

Brian McNamara: Hey guys, thanks for taking the question. I believe that you expected flat year-over-year volume pretty much throughout the year with Q4 earnings back in November, excluding the impact of the earlier holiday shipments in Q1. Is that still the case broadly for the year?

Brian: Hey, guys. Thanks for taking the question I believe that you expected flat year over year volume pretty much throughout the year when.

Brian: With Q4 earnings rack in November excluding the impact of the earlier holiday shipments in Q1 is that still the case broadly for the year.

Operator: Yeah, we're still looking for the full year to be roughly flat from a volume perspective. I think if you look at it, obviously, it was down about 700 basis points in the first quarter. We expect it to be kind of flattish in Q2 and then see, you know, turn around in the back half of the year to get us back to flat. And then secondly, on debt paydown. You guys have paid down a good amount of debt over the last several quarters. It's kind of the sticking point with, you know, any investors we speak to to kind of, you know, get involved in the name that aren't already.

Brian: Yes, we're still looking for the full year to be roughly flat from a volume perspective.

Speaker Change: I think if you look at it obviously it was down about 700 basis points in the first quarter we.

Speaker Change: We expect it to be kind of flattish in Q2, and then see turnaround in the back half of the year to get us back to flat.

Speaker Change: Great and then secondly on debt Paydown that you guys have paid down a good amount of that over the last several quarters, it's kind a sticking point with any investors kind of we speak to to kind of get involved in the name that arent already I'm. Just curious is there anything you guys can do to kind of hasten that process, whether it be divestiture.

Brian McNamara: I'm just curious, is there anything you guys can do to kind of hasten that process, whether it be divestitures of maybe smaller brands, things like that, that you're considering and that's on the table? No, I think we'll continue to focus on operational performance. So back, you know, at the end of 22, we started to talk about momentum, and we really went after working capital as part of that. We've been able to generate, you know, significant cash flow over these last six quarters through operations. I think we'll focus there. And then we'll continue to look to pay down debt, you know, going forward as our primary capital outlay.

Speaker Change: Maybe smaller brands things like that that Youre, considering and thats on the table.

No I think we will continue to focus on the operational performance. So back at the end of 'twenty two.

Speaker Change: We started to talk about momentum, we really went after working capital as part of that we've been able to generate significant cash flow over the last six quarters through operations I think we will focus there and then we will continue to look to pay down debt going forward as our primary capital allocation.

Operator: Thank you. Best of luck. Thank you. Thank you, and currently, there are no further questions. Thanks, everyone, for joining us this morning. Hope everyone has a great rest of the day and thanks for your interest in Energizer. That now concludes the conference. Thank you all very much for attending.

Speaker Change: Thank you best of luck.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you and currently there are no further questions in the queue at this time, so I'll hand, the floor back to Mark for closing comments.

Mark: Thanks, everyone for joining us. This morning hope everyone has a great rest of xenon and thanks for your interest in Energizer.

Mark: This now concludes the conference. Thank you all very much for attending you may now disconnect your lines.