Energizer (ENR) 6 Feb 242024 Q1 Earnings call transcript

Good morning, and welcome to Energizer's First Quarter Fiscal 2024 Conference Call.

Joining me today are Mark LaVigne, President and Chief Executive Officer; and John Drabik, Executive Vice President and Chief Financial Officer. A replay of this call will be available on the Investor Relations section of our website, energizerholdings.com.

In addition, a slide deck providing detailed financial results for the quarter is also posted on our website.

During the call, we will make forward-looking statements about the company's future business and financial performance, among other matters. on uncertainties expectations results which materially these based to are to are in and risks may statements. statements management's and current subject differ These cause actual update forward-looking to undertake not do statements. We these statements could cause file to from reports Other factors are SEC. actual in that included the differ results materially these with we

information which presentation our Unless press financial to and year refer on measures. categories Information comments measures the from we and GAAP same period We analysis is Energizer's quarter release comparable to estimates otherwise and regarding categories data, market of fiscal to and the earlier Energizer's to shown to and industry reconciliation and based on all to we our data where year share this e-commerce retail is also both our comparisons is noted, A includes concerning our prior to discussed brick-and-mortar XXXX. compete battery all non-GAAP sales. the be in website. year call issued today, fiscal internal measures available category non-GAAP pertain estimated financial believe relates reasonable. on in The relate

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

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

across our drive against in without across margin, our are consumer an to investments execution seeing our batteries strong the with the we both the around priorities improving to these you of are to of gains markets line momentum main customers steadily healthy balance world, top consumer trends, we sentiment. strategic combine positioned indicators growth engagement including trends, improved share When business, bottom key response our and the over the addition In and category priorities, improving impeding year. excellent to and

the down volume ] the quarter. was by largely value to This international the review than later low single price category impacts battery elasticity performed Globally, go Let's with driven ongoing expected, [ and which first digits. both of as occurred increases, from comping increased energy to curve narrow in category as When fall, the surge the of view which the category demand roughly the was in well U.S. as X% in a you our last XXXX. first quarter volumes quarter. in U.S.,

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

to pricing approach rounds promotion. in the pricing engage investments consumers of been to price these We have and higher designed prudent multiple are bridge category. after strategically while results to achieving points These a maintaining important and

the that the category, On in but promotion the prior promotion of percent a sold year-over-year on quarter, meaningfully the year. was basis, for depth the was than up less

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

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

Moving auto care. to

versus growth growing sales appearance, delivered fragrance year. in we season entering nearly double-digit growth a are across the smallest the and the fast for is start, X% quarter December critical subcategories: of and X our We peak X our internationally. sales of business, the terms While refrigerants prior saw of auto by organic

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

The total Momentum $XX generated in savings delivering. million finally, to And over date. the $XX savings quarter, program program to in Project is million over taking

our announced continue million of today, to target we we areas $XX and to we million, $XXX the savings by million. total $XXX to As find increased opportunity program range taking savings

and up the has working free cash Our nearly management on also helped spot. capital cash from to of of basis combination been ] XXX improvement flow flow year. [ over of a prior points net free strong bright sales, continued The margin generate progress XX%

our will expand towards to John our make reducing As debt us sheet. helped strengthening free on and progress moment, flows in balance cash a significant

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

of and Project update on for good and provide fiscal Mark, will I of everyone. and Thanks, Momentum detailed additional more summary rest the morning, a color for 'XX. expectations quarter our the some

organic X%. down quarter, with down for for the sales our were decline revenue to results X% the reported X.X%, between The net and For sales quarter were outlook within X.X%. organic

last we earlier benefited quarter in fourth which of the As our XXXX. fiscal our driver shipments, in call, largest holiday out called was the decline

Our sales further this weaker impacted continued in performance nontracked by channels. were quarter

$X.X XX.X%, costs on increased to Adjusted mix impacts the in Project rate well flat product by gross primarily slight rising Adjusted XX partially environment, a was to and year-over-year as were labor costs SG&A margin driven increased increased but quarter. fees Pricing savings. a basis Momentum factoring by mainly relatively offset million, headwinds Momentum. in related as basis, modestly and points Project benefit

paydown. efforts Interest during decreased lower average X.X%, due A&P have to million consistent investments debt $X.X holiday expense debt we our as as outstanding to continued focus prioritize to season. of percentage the critical was a sales with

newly in our As month. press December. XX% devaluation the by exchange of devaluation of quarter. recorded The economic administration, Argentine reforms in result was also noted recognizing peso morning, in devalued the we elected peso loss in earlier the which issued the release the by million noncash was this of $XX broad introduced a a the in

the earnings $XXX.X of extraordinary per million impact flow combination management. nature EBITDA million the we working on free devaluation, of through and We the the capital $X.XX, from share $XXX share. and progress adjusted our continued a margin per of of was delivered also adjusted in improvement cash generated excluded Given and earnings quarter adjusted

We $XXX paying fiscal strong subsequent first end cash total $XX quarter to $XX directed during we've X debt million the flows an these pay months in this and down by of quarter, additional a year. the to first for of million million progress the of continued off

outstanding of $XXX paid Since the fourth have we million debt or our to debt. 'XX, total of over quarter date off of almost fiscal XX%

debt no stay our a valuable is for asset of maturities higher XXXX. capital weighted structure around fixed longer, and cost a of remains we as XX% until meaningful which rates debt X.X%, have As average

of Mark quarter. estimates, savings to calling continues portion noted program million. million quarter [ by Project acquire our opportunistically A in were for outlook $XX last program important in earlier, full this assets, approximately total savings million Belgium. we be able Based focus an $XXX million of to [ are $XXX our As up and to the ] for on we Momentum us $XX ] contributed of

to costs XX% the roughly for program at We also to cash expect XX% savings. of onetime the projected run

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

to down softness through X% as For be we in between X% the cycle and second net quarter, channels. organic sales we nontracked expect

prior improve $X.XX quarter the midpoint margin points EPS same basis We in in adjusted of the quarter digits the in also and the to the anticipate XXX $X.XX, up for gross to versus year. mid-single by be year-over-year, range and at

Over few the back half expect of we by to factors. a key the top to return driven year, growth line

First, where than category taking the the pricing adjusted in actions later continue expect in as U.S. to previous volumes markets improve in years, over to X we international especially the the consumers pricing

recovery last expect comp the declines should some and We channels, nontracked in wins expect sales. back battery we both begin which auto spring. half also to across began drive And large that distribution help of to finally,

For million the $XX savings full million. year, to to Momentum expect fiscal $XX continue of we Project

to Xx pay leverage. and $XXX fiscal We down $XXX year end debt of million 'XX also to to below for expect the million

outlook battery share our of auto Adjusted to and million adjusted X%, points $XXX EBITDA $X.XX net are million basis $XXX range We be to $X.XX. the in organic to gross of adjusted sales of and per earnings reaffirming XXX to with care. for both across margin improvement down flat improvement

remarks. With that, I'll to closing turn it for Mark back over

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

initiatives. navigate momentum and We the market have the conditions cash cost and savings the particularly discipline flexibility of to generation across light in our strong

our remain We growth, delivering delivering value. shareholder laser-focused advancing strategic priorities will on and

open call let's Now for the questions.

question first line our from Barclays. And at comes go Instructions]. Please Lieberman Lauren of the ahead. [Operator

open. is Your line

just of savings? more And we Or that of Momentum bit First was still more anything us Belgium on hoping evaluated really to facility driving offer you forward? if tell can uptick was little I the move And just how that you what acquired? Project kind something maybe in thing could be about the was as you much that is that? is, a

relatively we including savings facility. driving to the low across was improvements, everything allows in in you've up And know based an great improvements do today, further year, call was the that price to program, and million. the is region late Momentum. as for able Belgium gotten to came of for factoring opportunistic Laura, ranges level of we've continue it pivot capital investment. that was our million the Project purchase is And we've the $XXX current X.X on to evaluate we seen, and acquisition EUR us as roughly last cost a assets take it been $XXX to opportunity region The working million

just commentary this And step did but constructive a then auto fantastic. top That's margins Great. take line, on care, quarter. on

thinking of gross we was for about the of the year? curious about that should be to quarter full and So just discrete how opportunity kind anything margin kind

the as profit the anticipating margin I pretty and year. us that not help expect first full go was should deliver well. We're of the we would performance as we still segment say, significant, for improvement Yes. Lauren, what bottom on line year, perspective throughout reflective a quarter gross

amended, is that changes you auto if there stuff. curious the being made that partially -- you I'm sort in I just macro, guess, are Okay. like were. there kind operational control raw within versus And of still mat, versus anything in sure I'm same your project of but what

it's far. quarter no, smallest the No, obviously by

got to some re-rolling you've you full cost and when kind the year business, indirect the that rate. at come reflective not allocate of So you the it's run a of really year into standards, look

that. build to on just Lauren, And

is have level we under of plans acquired margin Project improvement, including 'XX. And when is the in where we achieve lot this I continued standpoint back gross think is get will one improvement I we we're that's questions to a that business auto And then care, the there margin in out when from think expecting anticipation gross year. we Momentum were that of we our it. we'll a

come All and right. I'll pass on on. back

And line our next of the Bill comes Securities. of Chappell from Truist question

Talk maybe up. more or a always endure commentary volumes elasticity little bit impulse/commodity or And about of been kind business understand just your line visibility [ terms to kind I'm picking commentary of of has in of terms trying priced. the of you ] kind in battery your into

pick haven't even it's lower-priced You in label. a private though share, really seen Rayovac or up product

to adjust trying how Or consumers they already start something more up? pick back it to is understand haven't missing? if if there's else I'm So and or volumes

No, me Bill, let start.

say a from the on category. I would overall So standpoint

we we Let from are trends. where like category me -- really a

to deliver positioned we're year. well very think I the

start in overall the of category. the by me it breaking component down part Let

volume channels, is track -- in U.S., improving. consistently And when so this is talk the you

go [ morning latest numbers came from numbers down year-over-year single this of then and were positive. in us X.X% the and saw volume that been out down You the ] have down kind digits, X.X% even high

tracked working working continue to couple that So gone you a into Then break [ quarters, channel, over that into the we and of we all down are you that source That's terms elasticity the sort omni it pure a ]. to in through -- of the in the to continue. surge growth. the and that. in factors of That's great play volume last and both expect of consistent point online been growth impact of channels pandemic positive sign seeing inflection demand have through

into home center get nontracked we Then channels OEM. with

We the expect center. kind those it was last to in that April, recall home of of we May, trends saw when saw some stable. declines I we

We work way those. expect our to through

have which from stabilize. those later trends the International, occurred should impact U.S. you elasticity so in pricing, And

Europe, with through those. anomaly that you bit America, signs work already to the crisis you Pacific, year. expect seeing Latin of particular. We energy In are. Asia a We're there had in last an

seeing top back specific those business which on both some just of year. standpoint. to half of we distribution all, batteries the we in just hold all trends take So well basic a expect executing, positive in are wins from the as are in And category to our then auto, as in

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

Okay.

So I more it's up. seems thought more just is of whereas comfortable adjusting behavior. type post-COVID to pricing, greater a thing. to back your elasticity? it's to is getting it mean more on or It consumer normalization seems relative that we're I former that follow like like guess, of a is pricing the you're the normal It

X you behavior. current have pricing I significant of back last want trends the COVID on the that a long that. It's fairly couple over getting think consumer to years. are very parse difficult from the a I mean we looking cycle and of increases impacts related. to then did you wouldn't through some had to price more name I

there to just overall work as consumers well. the plus was through, backdrop So lot there impact a for

So patterns that the our U.S. through are normal we I point into standpoint are from to would way volume inflection back going to accordingly. a consumers say you're as more really see you reacting is category in when work QX

I Energizer, of Rayovac in are as of and you where question the premium talked of consumers, to and opportunity are capture business offerings gains increased sort that, some with Rayovac interest it value-oriented Your we've an be. leaning at seeing seen the want obviously that's Rayovac, been more in as able continues interest share in mean in the on and of have to some we with to end stay to there retailers we've some Rayovac bulk retailers, our

Capital Our from Markets. RBC next line the question Nik comes at of Modi

of couple a just So questions.

clarify that was nontrack anything last solely to Was like there wanted quarter, the was Just home the right? weakness, centers else? it

majority it. of the It's

the getting up benefits just If in could context following Project of guess have on X Lauren's out some provide I I some plant. follow-up. else driving then upside just And you're But the question what program? Momentum. this on Okay. on Obviously, is And that? you just

Momentum just really to program the and since of drive procurement if now, SG&A. I able it and Sure, us. organization mean, successful the $XXX distribution network down you in then $XXX Nick. footprint, the has dug XX% as the look, million Project organization. savings Right We then, in an take been been to launched breaks range, savings XX% to for it million incredibly and has XX% roughly sort throughout

program. that Those has we uncover of moved inclusion in the a with the ranges as new little have design we the bit we've with as through been around continued to SG&A, the same found Belgium. the we facility true additional work But network opportunities

be by $XXX coming terms hit are So to I period. in X-year very been broad-based where say organization the from. it's of it's And over would additional a savings tremendous work the to million able just $XXX to million

a now. you little Am I And I'm sensing things you cautionary where that just Have more Mark. consumer and Are better the color, more seen had Helpful is? improve? bit really correctly? about feeling quarter, consumer. reading the you much then commentary on Last optimism

think sentiment. improving I seeing are you consumer

from trends I categories, expectations exceed think and our right our continue trajectory. in volume you're to an have and auto seeing the the both batteries

I to it's in one all direction. go in, think in dangerous sort environment to of this

very and be November. that how invest there, we need an compared it products. you back consumer sentiment, engaged their is to to We're So doing improving sure say with backdrop improving make what doing the expected still that. some you We're and how successfully. in choiceful continue consumers stay to categories your out still and engage you of terms I caution would in to But

line the Ottenstein And our question Rob of Evercore. of from next comes

in the then increased I is more around you in of distribution up sense the increased a give Can particular to that distribution terms half channel, that terms batteries. that of how second key in products? confidence and Any much from a of and the is of improvement helpful. bit And one be us would the little wanted follow just details distribution the mentioned color your the on of year. both auto for you increased of drivers of

Well, let Robert. started, me get

breaks think it laid it of trends the really across track. I improving how which into is sort down on confidence, before, the category I out in

growth online. nice have potential You

stabilization You and a nontrack. have

both progresses. And hear on as incremental year more of driving the kind some international as gain to retailers that's international. to last move able of both are in have distribution well you're aggressively and out And So with I that distribution we push then [ the auto batteries, as U.S. that those footprint, retailers retailers. for then on top partnerships foundation. some of to call. additional losses. our We distribution true continue we care the with new our themes some across going the key say in that that, we're some would That's existing about claw distribution to in back ] called of

as a balance year, so and you headwind to we half not tailwind distribution the we And as wins of of be and into expect the to back look QX. the QX a get

So I see to in and work QX don't want and you'll into the specific them shelves hard of certain in distribution. a products, but here lot hit QX. get customers

from comes of Teixeira JPMorgan. question of the next Our line Andrea

on for performance batteries. online So channel your you can comment

the a You areas same it quarters, past where saw I mentioned recently sort token the obviously increase deceleration an remember in private like or the most the way, increased online channel. had most you that you -- and against label. few one that the just is opportunity but was by in of competition And some augmented of also

in your thinking can now So model. how share how on if your comment right you're and you stands

what continuing healthy it, is this an received limited we're think But and we're seeing that is lot to see online from the volume to information to we of I in describe online. the growth a standpoint. way best

You're online able see past -- match both value continuing terms the November, the were around growth growth, healthy in December value. online. we in of to In and quarter, to quarter, volume

So We're quarter in know, our this estimates gaining is our a at in losing quarter you share. think online really But solid for which very probably critical a as moment. from for flat. not share share holiday, was, the channel not We're I us us.

in included can go ] And just I August, I as Momentum program. that's can, you you encouraging. $X if I had like -- Project [ million then raised the back the believe to if And XXXX into and

one, when should and from million million the where, I where where -- thinking assuming change did and But $XX we 'XX. come you lending. is it from wondering the came So I'm that where in be the to was the additional amount XXXX. can $XX I should of mention number if you think that's we didn't be going extra

certainly So keep $XX $XX program million million the 'XX, the 'XX of we 'XX. extra end in did The savings. to between of balance and of

we program, one the the little to of started, third throughout on broad-based but mentioned of I It's benefit deliver XX-XX. the across questions, SG&A. previous momentum sort really That's XX-XX earnings it's business. gross provide opportunities about split a the We a different excited which and year As did was continue us for as in when ability really the than the program additional find to margin, add to our it's program. ongoing going a

in margin, with the so in would 'XX with say the And next SG&A against $XX work teams $XX I gross It's program. and broad-based. work. and XX% year. balance million million continue tremendous and hard XX% the The to

you pushing Rayovac you, of That's see additional shelf but for do bricks, entry-level and like see market was if positioning -- or And just market to can of growing positioning as the obviously, of need for been, at level kind always you Do as a you which looking of an has to more repositioning. you're see you the I do you're when shelf not? because, premiumizing. in the bit Rayovac be entry the just space great. to protect battery this And then squeeze space kind if need gain the

they're And of think we're positioned and retailers battery go that really of I unique to Andrea, connect is consumers with portfolio, premium Well, to all a super to category advantage with offerings solve strategies we would trying the any or the with our that perfectly value bring. say in I issues fact the sort way on. that lithium full in lean we from the up

it Rayovac plays. the will of branded I we brand to from that volume is make business. to we retailers say role. our but side to impact issues distribution the that outsized plays think an Rayovac we leverage it share financials, sure but any on in Obviously, Energizer private key take to continue asset our that would solve be flagship an be as to the and overall the we don't that and I label keep -- it solve. emphasis our of or goal element work an important to tactically consumers continue they're outsize have continue important will with to our a very the looking That's of have that bulk source is that that

of next Hale the line from And question our Holden Barclays. at comes

Could us it environment out for prices on update change the market and seeing or environment however deflationary inflationary or on you what the overall to any or give year? fall may input you're

Yes. Yes.

for going of improvement. points coming this forward. lithium, margin, RXXXa. a We're rest slightly basis specifically calling was from And the pretty benefit looking materials, full quarter, to about but XX negative is improvement steel the we're the of really year, in and consistent gross it For biggest year for zinc,

from costs. input in So coming have we direct some do wins

And comes our Carla of line the next question JPMorgan. at from Casella

Or all just debt the like they're I'm you after target on in [ paving the and well, discount? at is quarter would what's you And loan? paid I'd a ] as ] back bonds that that the given going debt focus down you expect forward? look what that wondering term to to [ paydown. And

loan couple going the the mean so go It of to evaluate I continue, we far much as forward. over term to was think, after option for loan to pay term continue down years. next what's this I that But can year. as Yes. all we'll best us we'll

[Operator we Barclays. Lauren Instructions]. question this. one question at the in further currently next And And is Lieberman have from

all I in was I'm but sorry. set outlook up ended the the ask half, I'm the it. because incremental you about distribution actually going back in to answering

So all am set. I

at further through, that's Brian No problem. one come ahead. Canaccord question Please And Genuity. and we've go had McNamara

year-over-year -- year QX. I earnings volume with much broadly back of holiday that when pretty impact the flat the QX shipments in throughout excluding still year? believe for case Is that you November, earlier the expected in the the

looking to Yes. the be flat roughly from We're still full volume a year for perspective.

I think if you the look at it, XXX obviously, it points basis was quarter. down in about first

it of the QX We of kind flattish half be in to get in the turnaround us a expect to flat. and then to see back year back

Great. paydown. on debt secondly, And then

you're the down You, over a in with -- of It's any kind last to, quarters. debt amount brands, already. to you, kind things I'm and we that, of maybe of whether sticking there process, involved like smaller speak guys, guys, point good just that's get it table? kind to that is divestitures anything on curious, that be several can the kind aren't investors hasten that or have of the do considering of

on I performance. the we'll continue to No, think operational focus

about we the operations. of really So 'XX, able We significant the after at through end We've back last quarters been working to X cash part that. went capital to over flow of started as talk generate momentum.

to debt continue our then capital there. to focus I allocation. think going as primary we'll pay forward down we'll And look

at time. queue this Thank are currently, in questions you. And further there the no

the I'll floor closing for back Mark to comments. hand So the

in of a day, joining rest I and the us for everyone has Thanks, your this hope Energizer. morning. great everyone, thanks interest for

This for all much concludes Thank the conference. now very attending. you

You may your now lines. disconnect