Net Sales Surge by 8.7%, Driven by 9.0% Organic Growth

Reiterates Positive Organic Net Sales Forecast, Tightens Adjusted EPS and EBITDA Predictions for Fiscal 2022

SHELTON, Conn., Aug. 4, 2022 /PRNewswire/ — Edgewell Personal Care Company (NYSE: EPC) has reported its financial outcomes for the third fiscal quarter of 2022, concluding on June 30, 2022. 

Key Highlights of the Financial Results

• Net sales reached $623.8 million, representing an increase of 8.7% compared to the same quarter last year.
• Organic net sales grew by 9.0% year-over-year, reflecting robust performance without the influence of the Billie acquisition or adverse currency exchange effects.
• GAAP Diluted Earnings Per Share (“EPS”) stood at $0.57, down from $0.74 in the same quarter last year.
• Adjusted EPS was reported at $0.86, slightly lower compared to $0.89 in the previous year’s quarter.
• The company ended the quarter with $182 million in cash, along with access to an additional $298 million from a revolving credit facility, resulting in a net debt leverage ratio of 3.5x.
• During this quarter, Edgewell repurchased $35 million worth of its common stock and distributed $8 million in dividends, aligning with its capital allocation strategy.
• The Board of Directors declared a cash dividend of $0.15 per common share on July 29, 2022.
• The company maintains its organic net sales outlook, indicating sustained strong demand and incremental pricing adjustments while refining the range for adjusted EPS and EBITDA.

Edgewell reports and projects its financial results according to both GAAP and non-GAAP standards, reconciling non-GAAP metrics to the most comparable GAAP measures later in this document. Please refer to the non-GAAP Financial Measures section for detailed explanations and definitions of the non-GAAP terms included herein. All comparisons made in this document are against the same period from the previous fiscal year unless noted otherwise.

“Our fiscal third-quarter results illustrate the successful execution of our strategic initiatives, showcasing strong organic net sales growth and solid earnings, both of which surpassed our expectations despite a challenging macroeconomic environment,” stated Rod Little, President and Chief Executive Officer of Edgewell. “The quarter’s growth was fueled by significant volume increases and pricing power, evident across both our North America and International markets, and in all segments, particularly with accelerated growth in Sun Care and Feminine Care. Importantly, we achieved yet another quarter of market share gains in the U.S., indicating that our brand-building initiatives resonate well with consumers. Looking forward, we are firmly positioned to deliver a second consecutive year of mid-single-digit organic net sales growth.”

Detailed Fiscal 3Q 2022 Operating Performance (Unaudited)

Net Sales Performance for the quarter amounted to $623.8 million, marking an 8.7% increase, which includes a net contribution of $21.1 million or 3.7% from the Billie acquisition and a $22.4 million or 4.0% negative impact from foreign currency exchange. Organic net sales surged by 9.0%, driven by enhanced volumes and pricing during the quarter. In North America, organic net sales rose by 9.3%, while International markets experienced an 8.4% increase.

Gross Profit Analysis showed a total of $240.6 million, compared to $270.3 million in the prior year period, resulting in a Gross Margin percentage of 38.6% for the third quarter of fiscal 2022, down from 47.1%. The adjusted gross margin was 42.2%, a decrease of 500 basis points from the prior year quarter, primarily due to a net impact of 440 basis points from elevated commodity and transportation costs, partially offset by productivity savings. Additionally, a combination of negative mix effects, increased trade spending, and unfavorable currency impacts contributed 190 basis points to the decline, only slightly mitigated by pricing benefits.

The company incurred a pre-tax charge of $22.5 million related to inventory write-offs for certain Wet Ones SKUs and associated production contract termination costs, which were excluded from the adjusted gross margin calculation.

Advertising and Sales Promotion Expenses (“A&P”) decreased by $1.0 million to $80.9 million, representing 13.0% of net sales, compared to $81.9 million or 14.3% of net sales in the prior year quarter. Increased spending to support Billie, Feminine Care, and sun season execution was counterbalanced by reduced spending in International markets due to COVID-19 and a shift toward trade-related expenditures in North America.

Selling, General and Administrative Expenses (“SG&A”) totaled $92.7 million, which is 14.9% of net sales, down from $97.5 million or 17.0% of net sales in the prior year quarter. Adjusted SG&A as a percentage of net sales decreased by 40 basis points, with improved sales leverage, operational efficiency gains, and favorable currency translation more than compensating for the Billie acquisition’s impact, including amortization and increased compensation expenses.

During the quarter, the company recorded pre-tax restructuring and other non-recurring expenses of $3.9 million, largely for severance and outplacement costs, alongside $0.9 million attributed to acquisition and integration expenses related to the Billie acquisition. Additionally, the company recognized a favorable legal settlement gain of $7.5 million, which was excluded from the adjusted SG&A.

Operating Income was reported at $49.9 million, compared to $71.1 million from the previous year quarter. Adjusted operating income stood at $70.3 million, which is 11.3% of net sales, compared to $80.6 million in the prior year quarter.

Interest Expense Related to Debt during the third quarter of fiscal 2022 totaled $18.0 million, an increase from $16.4 million in the same quarter last year, primarily due to an elevated overall debt balance resulting from draws on the Revolving Credit Facility in fiscal 2022, mainly financing the Billie acquisition.

Other Income/Expense, Net showed income of $4.4 million for the third quarter of fiscal 2022, contrasting with an expense of $0.8 million in the prior year quarter. This increase was driven by favorable foreign currency hedge settlements compared to the previous year period, helping to offset other negative operational impacts from currency fluctuations.

The Effective Tax Rate for the initial nine months of fiscal 2022 was 18.5%, compared to 26.1% in the same period last year. The adjusted effective tax rate for the first nine months of fiscal 2022 was 20.0%, down from 24.8% in the prior year period. The tax rates reflect a beneficial mix of earnings in lower tax jurisdictions along with a favorable impact from changes to prior estimates.

GAAP Net Earnings for the quarter were $30.5 million, or $0.57 per share, compared to $40.8 million, or $0.74 per share in the third quarter of fiscal 2021. Adjusted net earnings for the quarter were $45.8 million, or $0.86 per share, against $49.2 million, or $0.89 per share in the prior year, with adjusted EBITDA at $97.1 million, compared to $101.2 million in the previous year.

Net Cash from Operating Activities amounted to $72.4 million for the nine months ending June 30, 2022, a decline from $155.9 million in the prior year period, primarily due to an increase in net working capital.

Effective Capital Allocation Strategies

On July 29, 2022, the Board of Directors declared a quarterly cash dividend of $0.15 per common share for the third fiscal quarter. This dividend is scheduled for distribution on October 5, 2022, to shareholders of record as of the close of business on September 2, 2022. Throughout the third quarter of fiscal 2022, the company paid out total dividends of $8.0 million to shareholders.

During this quarter, the company repurchased approximately 1.0 million shares at a total cost of $34.7 million. For the first nine months of fiscal 2022, Edgewell completed share repurchases totaling around 2.9 million shares at a total cost of $110.1 million. As of June 30, 2022, the company has 6.9 million shares of common stock authorized for future repurchase under the Board’s 2018 authorization.

In-Depth Analysis of Fiscal 3Q 2022 Operating Segments (Unaudited)

Wet Shave Segment Performance (Men’s Systems, Women’s Systems, Disposables, and Shave Preps) saw a net sales increase of $21.4 million, or 7.0%. Organic net sales rose by $19.1 million, or 6.3%, propelled by growth in Men’s and Women’s Systems, Disposables, and Shave Preps. In North America, organic net sales climbed by 5.2%, attributed to increased volumes and pricing, while International organic net sales surged 7.1%, predominantly driven by enhanced volumes.

Sun and Skin Care Segment Performance (Sun Care, Wet Ones, Bulldog, Jack Black, and Cremo) reported a net sales increase of $21.0 million, or 10.8%. Organic net sales grew by $24.6 million, or 12.6%, primarily due to approximately 15% growth in Sun Care, reflecting distribution and market share expansions in North America, coupled with stronger-than-expected early season consumption and the ongoing recovery in International travel. Additionally, Grooming organic net sales increased by 7.5%, driven largely by 14% growth in International markets, and Wet Ones organic net sales returned to positive growth at 7.4%. Segment profit improved by $1.6 million, or 3.6%, with organic segment profit rising by $2.2 million, or 4.9%, largely fueled by higher sales.

Feminine Care Segment Performance (Tampons, Pads, and Liners) experienced a net sales increase of $7.7 million, or 10.5%, reflecting increased category consumption and pricing, as well as enhanced product availability and shelf replenishment. However, the segment profit decreased by $4.9 million, or 35.8%. Organic segment profit also fell by $4.8 million, or 35.1%, primarily due to reduced gross profit stemming from elevated commodity and transportation costs, along with increased A&P support.

Comprehensive Financial Outlook for Full Fiscal Year 2022

The Company is revising its previously given outlook assumptions for fiscal 2022 to incorporate the effects of third fiscal quarter results and anticipated impacts from the strengthening of the U.S. dollar against most major currencies.

• Reported net sales are expected to rise approximately 4%.
• This estimate includes an anticipated 340-basis point increase from the Billie acquisition, net of Edgewell sales to Billie.
• Updated estimates now reflect an expected 310-basis point negative impact from currency translation (previously estimated at 200-basis points).
• Organic sales are projected to increase by about 4%.
• GAAP EPS guidance is anticipated to fall in the range of $1.83 to $1.93 (previously $1.93 to $2.21).
• This includes costs related to restructuring, SKU rationalization, acquisition and integration expenses, Sun Care reformulation costs, value-added tax settlements, and income from a legal settlement.
• Adjusted EPS is expected to range between $2.50 and $2.60 (previously $2.38 to $2.66).
• This range is adjusted to reflect year-to-date performance, the estimated negative effect of unfavorable foreign exchange, and the incremental benefit of share repurchases not included in previous forecasts. The fiscal year adjusted gross margin is now projected to decline by 390 basis points (previously a 350 basis point decline), equally affected by adverse currency impacts and negative channel and category mix.
• The EPS forecast reflects the effect of total fiscal year-to-date share repurchases through June 30, 2022.
• Adjusted EBITDA is anticipated to range from $335 to $340 million (previously $330 to $345).
• The adjusted effective tax rate is estimated to be between 21% and 22%.
• Total depreciation and amortization expense is expected to be around $91 million (previously $91.5 million).
• Expected capital expenditures are projected to be approximately 2.7% to 3.0% of net sales.
• Free cash flow is expected to exceed 100% of GAAP net earnings.

*In fiscal 2022, the Company is implementing targeted actions to enhance its operational model, simplify its organizational structure, and boost manufacturing and supply chain efficiency and productivity. Consequently, the Company anticipates incurring one-time charges of about $15 million, including $9.8 million already incurred in the first nine months of fiscal 2022.

Webcast Information for Investors

To coincide with this announcement, the Company will conduct an investor conference call starting at 8:00 a.m. Eastern Time today. All interested parties can access a live webcast of this conference call on the company’s website at www.edgewell.com, under the “Investors” and “News and Events” sections or by using the following link:  http://ir.edgewell.com/news-and-events/events

For those unable to participate in the live webcast, a replay will be available on the company’s website, under the “Investors,” “Financial Reports,” and “Quarterly Earnings” sections. This release contains references to the Company’s website and additional information and materials available there. However, the Company’s website and such materials are not incorporated by reference in, nor are they a part of, this release.

About Edgewell Personal Care

Edgewell is a prominent consumer products company with a diverse and appealing portfolio of well-known brands, including Schick®, Wilkinson Sword®, and Billie® for men’s and women’s shaving systems and disposable razors; Edge and Skintimate® shave preparations; Playtex®, Stayfree®, Carefree®, and o.b.® feminine care products; Banana Boat®, Hawaiian Tropic®, Bulldog®, Jack Black®, and CREMO® for sun and skin care; and Wet Ones® products. The Company has a significant global presence, operating in over 50 markets worldwide, including the U.S., Canada, Mexico, Germany, Japan, the U.K., and Australia, employing approximately 6,900 personnel globally.

Forward-Looking Statements Disclaimer: This document contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Reliance on these statements should be limited. Forward-looking statements typically include words such as “believe,” “expect,” “anticipate,” “may,” “could,” “intend,” “estimate,” “plan,” “target,” “predict,” “likely,” “will,” “should,” “forecast,” “outlook,” or other similar expressions. These statements are not historical facts but rather reflect the Company’s expectations, estimates, or projections regarding future outcomes, including Edgewell’s future earnings and performance and the integration of the Billie acquisition along with the expected benefits from this transaction, including growth opportunities and cost savings. Numerous factors beyond our control could affect the realization of these estimates. These statements are not performance guarantees and carry inherent risks, uncertainties, and assumptions that are challenging to predict, which could result in actual results differing significantly from those suggested by these statements. The Company cannot guarantee that any of its expectations, estimates, or projections will be fulfilled. The forward-looking statements in this document are made as of the date of this document, and the Company disclaims any obligation to update any forward-looking statement to reflect subsequent events or circumstances, except as mandated by law.  You should not place undue reliance on these statements.

Additionally, other risks and uncertainties not currently known to the Company or deemed insignificant could significantly impact the accuracy of any forward-looking statements. These risks and uncertainties are detailed from time to time in the Company’s publicly filed documents, including in Item 1A. Risk Factors of Part I of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on November 19, 2021.

Non-GAAP Financial Measures Explanation: While the Company presents its financial results in line with generally accepted accounting principles (“GAAP”) in the U.S., this discussion also incorporates non-GAAP measures. These non-GAAP measures, termed “adjusted” or “organic,” exclude items such as restructuring costs, acquisition and integration expenses, and other non-standard items.  Reconciliations of these non-GAAP measures, including those related to the Company’s fiscal 2022 financial outlook, are provided within the Notes to Condensed Consolidated Financial Statements included with this release.

This non-GAAP data is presented as a supplement, not a substitute for, or as superior to, measures of financial performance prepared according to GAAP. The Company utilizes this non-GAAP information internally for operational decision-making and believes it is valuable for investors because it allows for more meaningful comparisons of ongoing operating results over different periods. It can also facilitate analyses and better identification of operational trends that might otherwise be obscured or distorted by the types of items excluded. This non-GAAP data also plays a role in determining management’s compensation. Finally, the Company views this information as enhancing transparency. The following clarifies the Company’s non-GAAP measures:

• The Company assesses its net sales and segment profit on an organic basis to enhance comparability of results across periods. Organic net sales and organic segment profit exclude the effects of foreign currency fluctuations and the Billie acquisition.