Edgewell Personal Care Announces First Quarter Fiscal 2023 Results; Maintains 2023 Constant Currency Outlook
Edgewell Personal Care Company (NYSE: EPC) reported its first fiscal quarter 2023 results, achieving a 1.3% increase in net sales to $469.1 million. Organic net sales rose 3.0%, marking the seventh consecutive quarter of growth. GAAP diluted EPS improved to $0.23 from $0.20 year-over-year, while adjusted EPS fell to $0.31 from $0.42, impacted by unfavorable currency effects. The company ended the quarter with $184 million in cash and announced a dividend of $0.15 per share. Full fiscal year 2023 outlook remains positive with expected organic net sales growth of 3% to 5%.
- Net sales increased by 1.3% to $469.1 million, with organic sales growth of 3.0%.
- Achieved seventh consecutive quarter of organic sales growth.
- GAAP diluted EPS rose to $0.23 from $0.20 year-over-year.
- Maintained fiscal 2023 outlook for organic net sales and adjusted EPS.
- Reported strong performance in international markets, particularly in sun care.
- Adjusted EPS declined to $0.31 from $0.42 due to currency impacts.
- Gross margin decreased by 70 basis points to 40.3%.
- Interest expense increased to $19.9 million from $17.3 million due to higher rates.
Net Sales Increase of
7th Consecutive Quarter of Organic Net Sales Growth
Maintains Fiscal 2023 Outlook for Organic
Executive Summary
- Net sales were
$469.1 million 1.3% compared to the prior year period. - Organic net sales increased
3.0% (Organic basis excludes the impact of the Billie acquisition through November and the negative translational impact from currency.) - GAAP Diluted net Earnings Per Share ("EPS") were
$0.23 $0.20 - Adjusted EPS were
$0.31 $0.05 $0.42 - Ended the first fiscal quarter with
$184 million $164 million - Returned
$23.3 million $15.0 million $8.3 million - Board of Directors declared a cash dividend of
$0.15 February 3, 2023 for the first fiscal quarter.
The Company reports and forecasts results on a GAAP and non-GAAP basis and has reconciled non-GAAP results and outlook to the most directly comparable GAAP measures later in this release. See non-GAAP Financial Measures for a more detailed explanation, including definitions of various non-GAAP terms used in this release. All comparisons used in this release are with the same period in the prior fiscal year unless otherwise stated.
"We had a good start to the fiscal year as we delivered our 7th consecutive quarter of growth, and our team continued to perform well in a challenging environment. International growth was a highlight, driven by volume and price gains, and reflective of a strong start to the sun season. In
Fiscal 1Q 2023 Operating Results (Unaudited)
Net sales were
Gross profit was
Advertising and sales promotion expense ("A&P") was
Selling, general and administrative expense ("SG&A") was
The Company recorded pre-tax restructuring and other non-recurring expenses of
Operating income, inclusive of a
Interest expense associated with debt was
Other income, net was income of
The effective tax rate for the first three months of fiscal 2023 was
GAAP net earnings were
Net cash used by operating activities was
Capital Allocation
On
During the first quarter of fiscal 2023, the Company completed share repurchases of approximately 0.4 million shares at a total cost of
Fiscal 1Q 2023 Operating Segment Results (Unaudited)
Wet Shave (Men's Systems, Women's Systems, Disposables, and Shave Preps)
Net sales decreased
Sun and
Net sales increased
Feminine Care (Tampons, Pads, and Liners)
Net sales increased
Full Fiscal Year 2023 Financial Outlook
The Company is providing the following outlook assumptions for fiscal 2023:
- Reported net sales expected to increase in the range of
2% to4% (previously flat to2% ) - Includes an estimated 60-basis point (previously 50-basis point) inorganic benefit from two months in net sales of the acquisition of Billie, net of prior year Edgewell sales to Billie and an estimated 150-basis point (previously 360-basis point) negative impact from currency translation
- Organic net sales expected to increase in the range of
3% to5% - GAAP EPS expected to be in the range of
$1.90 $2.10 - Includes: Restructuring charges, acquisition and integration costs and
Sun Care reformulation costs - Adjusted EPS expected to be in the range of
$2.30 $2.50 - Includes an estimated
$30 million $0.45 $33 million $0.48 - Adjusted EPS at constant currency expected to increase
12% at the mid-point of the range - Gross margin is expected to increase approximately 30-basis points, with margin accretion expected in the second half of the fiscal year
- Operating margin is expected to increase slightly (previously decline 30-basis points)
- Interest expense is expected to be approximately
$79 million $74 million - Other Income, net is expected to be approximately
$1.0 million $11.5 million - Change reflects lower than anticipated hedge gains and higher pension expense
- The EPS outlook reflects the impact of estimated share repurchases
- Adjusted EBITDA expected to be in the range of
$320 $335 million - Includes an estimated
$30 million $33 million - Adjusted EBITDA at constant currency expected to increase
8% at the mid-point of the range - Adjusted effective tax rate expected to be approximately
24% - Total depreciation and amortization expense expected to be approximately
$91 million - Capital expenditures expected to be approximately
3.0% of net sales - Free cash flow expected to be approximately
$140 million
* In fiscal 2023, the Company will take specific actions to strengthen its operating model, simplify the organization and improve manufacturing and supply chain efficiency. As a result of these actions, the Company expects to incur charges of approximately
Webcast Information
In conjunction with this announcement, the Company will hold an investor conference call beginning at
For those unable to participate during the live webcast, a replay will be available on www.edgewell.com, under the "Investors," "Financial Reports," and "Quarterly Earnings" tabs. This release includes references to the Company's website and references to additional information and materials found on its website. The Company's website and such information and materials are not incorporated by reference in, and are not part of, this release.
About Edgewell
Edgewell is a leading pure-play consumer products company with an attractive, diversified portfolio of established brand names such as Schick®,
Forward-Looking Statements. This document contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. Forward-looking statements generally can be identified by the use of words or phrases such as "believe," "expect," "expectation," "anticipate," "may," "could," "intend," "belief," "estimate," "plan," "target," "predict," "likely," "will," "should," "forecast," "outlook," or other similar words or phrases. These statements are not based on historical facts, but instead reflect the Company's expectations, estimates or projections concerning future results or events, including, without limitation, the future earnings and performance of Edgewell or any of its businesses, and the integration of the Billie acquisition and expected benefits from this transaction, including growth opportunities and cost savings. Many factors outside our control could affect the realization of these estimates. These statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause the Company's actual results to differ materially from those indicated by those statements. The Company cannot assure you that any of its expectations, estimates or projections will be achieved. The forward-looking statements included in this document are only made as of the date of this document and the Company disclaims any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. You should not place undue reliance on these statements.
In addition, other risks and uncertainties not presently known to the Company or that it presently considers immaterial could significantly affect the accuracy of any such forward-looking statements. Risks and uncertainties include those 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-Q filed with the
Non-GAAP Financial Measures. While the Company reports financial results in accordance with generally accepted accounting principles ("GAAP") in the
This non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The Company uses this non-GAAP information internally to make operating decisions and believes it is helpful to investors because it allows more meaningful period-to-period comparisons of ongoing operating results. The information can also be used to perform analysis and to better identify operating trends that may otherwise be masked or distorted by the types of items that are excluded. This non-GAAP information is a component in determining management's incentive compensation. Finally, the Company believes this information provides a higher degree of transparency. The following provides additional detail on the Company's non-GAAP measures:
- The Company utilizes "adjusted" non-GAAP measures including gross profit, SG&A, operating income, income taxes, net earnings, diluted earnings per share, and EBITDA to internally make operating decisions. The following items are excluded when analyzing non-GAAP measures: restructuring and related costs, acquisition and integration costs,
Sun Care reformulation charges, and non-standard items. - Constant currency measures are calculated by removing the impact of translational and transactional foreign currencies changes net of foreign currency hedges compared to the prior year. Transactional foreign currency changes are driven by foreign legal entities transactions not denominated in local currency.
- The Company analyzes its net sales and segment profit on an organic basis to better measure the comparability of results between periods. Organic net sales and organic segment profit exclude the impact of changes in foreign currency and the impact of the Billie acquisition.
- Organic net sales will be unfavorably impacted in October and November of fiscal 2023 by the Billie acquisition as sales that were previously reported as third party sales to Billie are now included as inter-company sales.
- Segment profit will be impacted by fluctuations in translation and transactional foreign currency. The impact of currency was applied to segments using management's best estimate.
- Free cash flow is defined as net cash from operating activities less capital expenditures plus collections of deferred purchase price of accounts receivable sold and proceeds from sales of fixed assets. Free cash flow conversion is defined as free cash flow as a percentage of net earnings adjusted for the net impact of non-cash impairments.
- Net debt leverage ratio is defined as total debt less cash divided by adjusted EBITDA.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited, in millions, except per share data) | |||
Quarter Ended | |||
2022 | 2021 | ||
Net sales | $ 469.1 | $ 463.3 | |
Cost of products sold | 280.1 | 273.4 | |
Gross profit | 189.0 | 189.9 | |
Selling, general and administrative expense | 95.7 | 96.9 | |
Advertising and sales promotion expense | 45.9 | 46.2 | |
Research and development expense | 13.4 | 12.8 | |
Restructuring charges | 2.7 | 2.2 | |
Operating income | 31.3 | 31.8 | |
Interest expense associated with debt | 19.9 | 17.3 | |
Other income, net | (5.0) | (1.7) | |
Earnings before income taxes | 16.4 | 16.2 | |
Income tax provision | 4.5 | 5.0 | |
Net earnings | $ 11.9 | $ 11.2 | |
Earnings per share: | |||
Basic net earnings per share | $ 0.23 | $ 0.21 | |
Diluted net earnings per diluted share | $ 0.23 | $ 0.20 | |
Weighted-average shares outstanding: | |||
Basic | 51.6 | 54.4 | |
Diluted | 51.9 | 55.0 | |
See Accompanying Notes. | |||
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in millions) | |||
|
| ||
Assets | |||
Current assets | |||
Cash and cash equivalents | $ 184.1 | $ 188.7 | |
Trade receivables, less allowance for doubtful accounts | 123.1 | 136.9 | |
Inventories | 540.2 | 449.3 | |
Other current assets | 160.1 | 167.3 | |
Total current assets | 1,007.5 | 942.2 | |
Property, plant and equipment, net | 348.6 | 345.5 | |
1,332.3 | 1,322.2 | ||
Other intangible assets, net | 996.8 | 996.6 | |
Other assets | 111.8 | 106.6 | |
Total assets | $ 3,797.0 | $ 3,713.1 | |
Liabilities and Shareholders' Equity | |||
Current liabilities | |||
Notes payable | $ 25.2 | 19.0 | |
Accounts payable | 245.0 | 237.3 | |
Other current liabilities | 231.1 | 291.7 | |
Total current liabilities | 501.3 | 548.0 | |
Long-term debt | 1,492.0 | 1,391.4 | |
Deferred income tax liabilities | 140.9 | 140.4 | |
Other liabilities | 176.1 | 173.6 | |
Total liabilities | $ 2,310.3 | 2,253.4 | |
Shareholders' equity | |||
Common shares | $ 0.7 | 0.7 | |
Additional paid-in capital | 1,577.8 | 1,604.3 | |
Retained earnings | 935.6 | 931.7 | |
Common shares in treasury at cost | (850.9) | (860.9) | |
Accumulated other comprehensive loss | (176.5) | (216.1) | |
Total shareholders' equity | $ 1,486.7 | 1,459.7 | |
Total liabilities and shareholders' equity | $ 3,797.0 | $ 3,713.1 | |
See Accompanying Notes. | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in millions) | |||
Three Months Ended | |||
2022 | 2021 | ||
Cash Flow from Operating Activities | |||
Net earnings | $ 11.9 | $ 11.2 | |
Depreciation and amortization | 22.5 | 21.4 | |
Share-based compensation expense | 6.5 | 5.5 | |
Loss on sale of assets | 0.7 | 0.3 | |
Deferred compensation payments | — | (0.5) | |
Deferred income taxes | (0.1) | (0.1) | |
Other, net | (1.8) | 1.7 | |
Changes in operating assets and liabilities | (126.0) | (118.5) | |
Net cash used by operating activities | $ (86.3) | $ (79.0) | |
Cash Flow from Investing Activities | |||
Capital expenditures | $ (11.3) | $ (9.4) | |
Acquisition of Billie | — | (308.8) | |
Infant Sale | — | 5.0 | |
Collection of deferred purchase price on accounts receivable sold | 0.4 | 0.8 | |
Other, net | (0.3) | (0.3) | |
Net cash used by investing activities | $ (11.2) | $ (312.7) | |
Cash Flow from Financing Activities | |||
Cash proceeds from debt with original maturities greater than 90 days | $ 241.0 | $ 291.0 | |
Cash payments on debt with original maturities greater than 90 days | (141.0) | (93.0) | |
Net increase in debt with original maturities of 90 days or less | 5.5 | 1.4 | |
Cash dividends paid | (8.3) | (8.5) | |
Repurchase of shares | (15.0) | (24.5) | |
Net financing inflow (outflow) from the Accounts Receivable Facility | 8.8 | (9.7) | |
Employee shares withheld for taxes | (8.1) | (1.6) | |
Other, net | — | 0.4 | |
Net cash from financing activities | $ 82.9 | $ 155.5 | |
Effect of exchange rate changes on cash | 10.0 | (3.2) | |
Net decrease in cash and cash equivalents | (4.6) | (239.4) | |
Cash and cash equivalents, beginning of period | 188.7 | 479.2 | |
Cash and cash equivalents, end of period | $ 184.1 | $ 239.8 | |
See Accompanying Notes. | |||
EDGEWELL PERSONAL CARE COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited, in millions, except per share data) | |||
Note 1 — Segments | |||
The Company conducts its business in the following three segments: Wet Shave, Sun and | |||
The Company completed the acquisition of Billie on | |||
Segment net sales and profitability are presented below: | |||
Three Months Ended | |||
2022 | 2021 | ||
Wet Shave | $ 275.3 | $ 286.1 | |
Sun and | 112.9 | 104.8 | |
Feminine Care | 80.9 | 72.4 | |
Total net sales | $ 469.1 | $ 463.3 | |
Segment Profit | |||
Wet Shave | $ 35.4 | $ 51.5 | |
Sun and | 13.1 | 3.7 | |
Feminine Care | 11.8 | 8.4 | |
Total segment profit | 60.3 | 63.6 | |
General corporate and other expenses | (15.9) | (10.8) | |
Restructuring and related costs | (2.8) | (2.2) | |
Acquisition and integration costs | (2.1) | (6.0) | |
(0.5) | (3.3) | ||
Value added tax settlement costs | — | (3.4) | |
Amortization of intangibles | (7.7) | (6.1) | |
Interest and other expenses, net | (14.9) | (15.6) | |
Total earnings before income taxes | $ 16.4 | $ 16.2 | |
Refer to Note 2 GAAP to Non-GAAP Reconciliations for the income statement location of non-GAAP adjustments to earnings before income taxes. |
Note 2 — GAAP to Non-GAAP Reconciliations | |||||||||||||
The following tables provide a GAAP to Non-GAAP reconciliation of certain line items from the Condensed Consolidated Statement of Earnings: | |||||||||||||
Three Months Ended | |||||||||||||
Gross Profit | SG&A | Operating | EBIT | Income | Net | Diluted EPS | |||||||
GAAP — Reported | $ 189.0 | $ 95.7 | $ 31.3 | $ 16.4 | $ 4.5 | $ 11.9 | $ 0.23 | ||||||
Restructuring and related costs | — | 0.1 | 2.8 | 2.8 | 0.7 | 2.1 | 0.04 | ||||||
Acquisition and integration costs | — | 2.1 | 2.1 | 2.1 | 0.5 | 1.6 | 0.03 | ||||||
— | — | 0.5 | 0.5 | 0.1 | 0.4 | 0.01 | |||||||
Total Adjusted Non-GAAP | $ 189.0 | $ 93.5 | $ 36.7 | $ 21.8 | $ 5.8 | $ 16.0 | $ 0.31 | ||||||
Adjusted Non-GAAP Constant Currency | $ 0.36 | ||||||||||||
GAAP as a percent of net sales | 40.3 % | 20.4 % | 6.7 % | GAAP effective tax rate | 27.1 % | ||||||||
Adjusted as a percent of net sales | 40.3 % | 19.9 % | 7.8 % | Adjusted effective tax rate | 26.4 % | ||||||||
Adjusted Constant Currency as a percent of net sales | 41.6 % | 9.3 % | |||||||||||
Three Months Ended | |||||||||||||
Gross Profit | SG&A | Operating | EBIT | Income | Net | Diluted EPS | |||||||
GAAP — Reported | $ 189.9 | $ 96.9 | $ 31.8 | $ 16.2 | $ 5.0 | $ 11.2 | $ 0.20 | ||||||
Restructuring and related costs | — | — | 2.2 | 2.2 | 0.5 | 1.7 | 0.03 | ||||||
Acquisition and integration costs | 0.3 | 5.7 | 6.0 | 6.0 | 0.3 | 5.7 | 0.11 | ||||||
3.3 | — | 3.3 | 3.3 | 1.0 | 2.3 | 0.04 | |||||||
Value-added tax settlement costs | — | 3.4 | 3.4 | 3.4 | 1.1 | 2.3 | 0.04 | ||||||
Total Adjusted Non-GAAP | $ 193.5 | $ 87.8 | $ 46.7 | $ 31.1 | $ 7.9 | $ 23.2 | $ 0.42 | ||||||
GAAP as a percent of net sales | 41.0 % | 20.9 % | 6.9 % | GAAP effective tax rate | 30.9 % | ||||||||
Adjusted as a percent of net sales | 41.8 % | 19.0 % | 10.1 % | Adjusted effective tax rate | 25.3 % | ||||||||
Note 3 - | |||||||||||||||
Operations for the Company are reported via three Segments. The impact of acquisition includes the operations of Billie which was acquired in quarter ended | |||||||||||||||
Quarter Ended | |||||||||||||||
Wet Shave | Sun and Skin Care | Feminine Care | Total | ||||||||||||
$ 286.1 | $ 104.8 | $ 72.4 | $ 463.3 | ||||||||||||
Organic | (5.3) | (1.9) % | 10.6 | 10.1 % | 8.7 | 12.0 % | 14.0 | 3.0 % | |||||||
Impact of Billie acquisition, net | 11.6 | 4.1 % | 0.4 | 0.4 % | — | — % | 12.0 | 2.6 % | |||||||
Impact of currency | (17.1) | (6.0) % | (2.9) | (2.8) % | (0.2) | (0.3) % | (20.2) | (4.3) % | |||||||
$ 275.3 | (3.8) % | $ 112.9 | 7.7 % | $ 80.9 | 11.7 % | $ 469.1 | 1.3 % | ||||||||
Organic net sales were impacted in the first quarter of fiscal 2023 by the change in classification of sales from third party to intercompany as a result of the Billie acquisition in fiscal 2022. The impact of the Billie acquisition, net is calculated as Billie net third party sales from
Segment Profit | |||||||||||||||
Quarter Ended | |||||||||||||||
Wet Shave | Sun and Skin Care | Feminine Care | Total | ||||||||||||
Segment Profit - Q1 FY22 | $ 51.5 | $ 3.7 | $ 8.4 | $ 63.6 | |||||||||||
Organic | (8.2) | (15.9) % | 10.0 | 270.3 % | 3.8 | 45.3 % | 5.6 | 8.8 % | |||||||
Impact of currency | (7.9) | (15.4) % | (0.6) | (16.2) % | (0.4) | (4.8) % | (8.9) | (14.0) % | |||||||
Segment Profit - Q1 FY23 | $ 35.4 | (31.3) % | $ 13.1 | 254.1 % | $ 11.8 | 40.5 % | $ 60.3 | (5.2) % | |||||||
The impact of currency to segment profit includes both the translational and transactional currency changes during the quarter. |
Note 4 - EBITDA | |||
The Company reports financial results on a GAAP and adjusted basis. The table below is used to reconcile Net earnings to EBITDA and Adjusted EBITDA, which are Non-GAAP measures, to improve comparability of results between periods. | |||
Three Months Ended | |||
2022 | 2021 | ||
Net earnings | $ 11.9 | $ 11.2 | |
Income tax provision | 4.5 | 5.0 | |
Interest expense, net | 19.6 | 17.2 | |
Depreciation and amortization | 22.5 | 21.4 | |
EBITDA | $ 58.5 | $ 54.8 | |
Restructuring and related costs | 2.8 | 2.2 | |
Acquisition and integration costs | 2.1 | 6.0 | |
0.5 | 3.3 | ||
Value added tax settlement costs | — | 3.4 | |
Adjusted EBITDA | $ 63.9 | $ 69.7 | |
Adjusted EBITDA Constant Currency | $ 67.5 | ||
Note 5 - Outlook | ||
The following tables provide reconciliations of Adjusted EPS and Adjusted EBITDA, Non-GAAP measures, included within | ||
Adjusted EPS Outlook | ||
Fiscal 2023 GAAP EPS | ||
Restructuring and related costs | approx. | 0.36 |
Acquisition and integration costs | approx. | 0.14 |
approx. | 0.04 | |
Income taxes(1) | approx. | (0.14) |
Fiscal 2023 Adjusted EPS Outlook (Non-GAAP) | ||
(1) Income tax effect of the adjustments to Fiscal 2023 GAAP EPS noted above. | ||
Adjusted EBITDA Outlook | ||
Fiscal 2023 GAAP Net Income | approx. | |
Income tax provision | approx. | 30 |
Interest expense, net | approx. | 79 |
Depreciation and amortization | approx. | 91 |
EBITDA | approx. | |
Restructuring and related costs | approx. | 19 |
Acquisition and integration costs | approx. | 7 |
approx. | 2 | |
Fiscal 2023 Adjusted EBITDA | approx. | |
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