Edgewell Personal Care Company 2026 Q3 Earnings Call

Thank you for joining us this morning for Edgewell's third quarter fiscal year 2026 earnings call. With me this morning are Rod Little, our President and Chief Executive Officer, and Fran Weissman, our Chief Financial Officer. Rod will kick off the call, then hand it over to Fran to discuss our third quarter 2026 results and full year fiscal 2026 outlook. We will transition to Q&A. This call is being recorded and will be available via replay on our website, www.edgewell.com. During this call, we may make statements about our expectations for future plans and performance.

This might include future sales, earnings, advertising and promotional spending, product launches, brand investment, investments in technology, advanced analytics and AI-enabled capabilities, organizational and operational structures and models, cost mitigation and productivity efficiency efforts, savings and costs related to restructuring and repositioning actions, impacts from tariffs and other recent developments, such as the conflict in the Middle East, changes to our working capital metrics, currency fluctuations, commodity costs, inflation, future plans for return of capital to shareholders, the disposition of our Feminine Care business, and more. Any such statements are forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to future events, plans, or prospects.

These statements are based on assumptions and are subject to various risks and uncertainties, including those described under the caption Risk Factors in our annual report on Form 10-K for the year ended September 30th, 2025, and as may be amended in our quarterly reports on Form 10-Q filed with the SEC. These risks may cause our actual results to be materially different from those expressed or implied by our forward-looking statements. We do not assume any obligation to update or revise any of these forward-looking statements to reflect new events or circumstances, except as required by law. During this call, we will refer to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.

Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is shown in our press release issued earlier today, which is available at the investor relations section of our website. This non-GAAP information is provided as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP. However, management believes these non-GAAP measures provide investors with valuable information on the underlying trends of our business and allows more meaningful period-to-period comparisons of ongoing operating results. With that, I'd like to turn the call over to Rod.

Thank you, Chris, and good morning, everyone. We delivered a solid third quarter that represented an important step forward in our FY 2026 progression. Organic net sales returned to growth, driven by a meaningful improvement in North America, where performance exceeded our expectations. We saw strength across sun care, grooming, and branded Wet Shave, reflecting improved execution across the business. Adjusted earnings per share and adjusted EBITDA were ahead of our expectations. While adjusted gross margin performance was in line with the outlook we outlined last quarter. At the beginning of the year, we anticipated that FY 2026 would be a back-half story, and that the company would return to both organic sales growth and earnings growth for the full year at the midpoint of our ranges. Despite market uncertainty and increased pressure, we have stayed the course, and the destination remains unchanged. We grew sales in the third quarter.

We expect stronger overall growth in Q4. With growth across international markets in North America, our outlook for the full year adjusted earnings per share and adjusted EBITDA is unchanged at the midpoint. Importantly, the quarter provides encouraging evidence that the investments we have made and the actions we have taken are strengthening our brands and capabilities and are beginning to translate into improved business performance. While the operating environment remains dynamic and challenging, consumption trends remained relatively stable during the quarter. North America returned to growth, and our priority brands continued to gain traction. Together, these results reinforce our confidence in the underlying trajectory of the business and our ability to deliver against our commitments. Before turning the call over to Fran, I'd like to take a step back and share why we believe Edgewell is becoming a stronger business.

We believe Edgewell today is stronger, more focused, and better positioned than it was just a few years ago. Our confidence is not based on any single quarter. Rather, it is based on a series of actions and investments that have strengthened the business and we believe position us to deliver improved performance over time. There are four factors in particular that give us confidence in the path ahead, including our setup heading into FY 2027. First, we have fundamentally improved our ability to execute. Over the last several years, we have strengthened our leadership team, improved commercial capabilities, enhanced our analytics and Revenue Growth Management tools, simplified the organization, and increased accountability throughout the business. These investments have strengthened how we plan, execute, and allocate resources across the business.

Sustainable performance ultimately depends on consistent execution. We believe the capabilities we have built are beginning to show up more clearly in our results. Second, we've become a more focused company. Following the Feminine Care divestiture, our portfolio is simpler and allows us to direct a greater share of investment towards our highest return growth opportunities. In particular, we have increased investment behind our global focus brands, concentrating advertising, innovation, and commercial resources where we believe they can create the greatest long-term value. In addition to the campaigns we outlined last quarter for Schick, Billie, and Cremo, this quarter saw another step-up in investment, including year two of our Hawaiian Tropic campaign. We believe this focus is helping create a stronger foundation for sustainable growth, profitability, and cash generation. Third, we are seeing encouraging evidence that our U.S. business is improving. The U.S. remains our largest value creation opportunity.

During the quarter, North America returned to growth as commercial execution improved, distribution gains increased, and a number of our strategic initiatives gained traction. Importantly, we are seeing encouraging proof points across several of the areas where we have been concentrating investment. Hawaiian Tropic delivered strong growth during the quarter, supported by positive brand momentum, increased distribution, and continued retailer support. Cremo continued to gain traction across mass retail through expanded distribution and strong consumer demand. While Schick delivered encouraging performance across key portions of the portfolio. We also continue to see positive momentum across the Billie shave portfolio, which delivered continued share growth despite a highly competitive category environment. Notably, the progress we're seeing is not limited to sales results alone. Across many of our priority brands, awareness metrics are improving.

Branded search activity has increased this quarter. Our recent brand lift studies indicate strengthening consumer engagement and brand relevance. While these indicators may not immediately translate into marketplace results, we believe they provide additional evidence that the investments we are making behind our brands are resonating with consumers. The progress we are seeing is becoming increasingly broad-based. It is not being driven by a single initiative, customer, or brand. Rather, we are seeing positive indicators across distribution, brand performance, and category execution, which gives us increasing confidence that our focused investments are beginning to translate into improved marketplace results. While we still have work to do and recognize that performance will not improve in a straight line every quarter, we believe the results we delivered in North America this quarter reflect meaningful progress and are consistent with the trajectory we expected to see.

Fourth, we are accelerating the transformation of our operating model. As we look ahead, we see meaningful opportunities to further simplify the organization, improve speed and agility, enhance decision-making, and create a structurally lower cost base. These actions are intended to help offset stranded costs associated with the Feminine Care divestiture while positioning Edgewell to become what we believe will be a faster, more efficient, and more responsive organization. An important part of this effort is increased investment in technology, advanced analytics, and AI-enabled capabilities. We see significant opportunities to leverage these tools to improve consumer insights, accelerate innovation, enhance commercial execution, and drive productivity across the enterprise. We believe these initiatives, together with our broader transformation and productivity efforts, will help create a simpler, more agile organization that is better positioned to deliver more consistent growth, profitability, and cash flow over time, even in a dynamic external environment.

We look forward to providing additional details on these initiatives and our broader fiscal 2027 priorities during our year-end earnings call in November. One important example of this transformation is our wet shave manufacturing consolidation, which is the largest operational initiative we have undertaken since becoming a standalone company in 2015. The project's objectives are straightforward: simplify our manufacturing network, modernize our capabilities, improve service levels, and create a structurally lower cost position. As we discussed previously, the project has created some temporary disruption as we transition production across the network. While those impacts extended longer than originally anticipated and affected supply greater than expected in certain international markets during the third quarter, we continue to make meaningful progress against the implementation plan.

Network performance improves, we expect to further strengthen production volumes, service levels, and overall operational effectiveness, positioning the business to deliver meaningful productivity, margin, working capital, and free cash flow benefits over time. Finally, disciplined capital allocation remains central to our strategy. We plan to continue investing behind the business where we see the highest returns. Strengthening the balance sheet, reducing net debt leverage, and maintaining the flexibility necessary to create long-term shareholder value. Taken together, these actions give us confidence that Edgewell is moving on to a better performance path.