Edgewell Personal Care(EPC) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 Fiscal 2025 Highlights Edgewell's Q2 Fiscal 2025 saw a decline in net sales amidst a challenging market, offset by gross margin improvements and continued shareholder returns, leading to moderated full-year expectations Q2 Fiscal 2025 Performance Overview In the second quarter of fiscal 2025, Edgewell faced a challenging market, resulting in a 3.1% decrease in net sales and a 1.5% decline in organic net sales. Despite this, the company achieved a 100 bps increase in gross margin through productivity initiatives. Management acknowledged weakness in the U.S. market and will continue an investment stance, particularly in Wet Shave and Sun Care, while moderating full-year top-line expectations due to anticipated negative consumer sentiment Q2 Fiscal 2025 Key Financial Metrics | Metric | Value | Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $580.7 million | -3.1% | | Organic Net Sales | - | -1.5% | | GAAP Diluted EPS | $0.60 | -$0.12 | | Adjusted EPS | $0.87 | -$0.01 | | Gross Margin | - | +100 bps | - Management is focused on executing strategic priorities in a volatile environment, highlighting top-line growth in the International business and accelerated gross margin expansion. However, they recognize the need for further investment to improve performance in the competitive U.S. market, especially for the Wet Shave and Sun Care portfolios[3] - The company maintained a solid liquidity position with $170 million in cash and access to a $229 million revolving credit facility, with a net debt leverage ratio of 3.8x[4] - Edgewell returned $42.7 million to shareholders in Q2, consisting of $35.4 million in share repurchases and $7.3 million in dividends. A quarterly cash dividend of $0.15 per share was declared for the second quarter[4] Detailed Financial Performance This section provides an in-depth analysis of Edgewell's Q2 2025 operating results, including sales performance, profitability, and capital allocation strategies Overall Operating Results For Q2 2025, net sales fell 3.1% to $580.7 million, with organic sales down 1.5%. International growth of 2.9% was insufficient to offset a 3.9% decline in North America. Gross margin improved by 100 bps to 44.1%, driven by 380 bps in productivity savings which countered inflation and unfavorable mix. Operating income decreased to $58.9 million from $70.1 million, and GAAP net earnings fell to $29.0 million from $36.0 million in the prior year - Net sales were negatively impacted by a $9.8 million unfavorable currency effect. The organic sales decline of $8.9 million was driven by volume decreases in North America's Wet Shave, Feminine Care, and Sun Care categories, which overshadowed price and volume gains in international markets[5] - Gross margin expansion was a key positive, increasing 100 bps (110 bps at constant currency). This was primarily due to productivity savings of 380 bps, which more than offset 195 bps of core inflation/absorption and 85 bps of unfavorable mix and promotions[6] - Operating expenses increased as a percentage of sales. A&P rose to 11.3% of net sales from 10.5% a year ago, and adjusted SG&A increased by 60 bps to 18.0% of net sales[7][8] Q2 2025 Profitability Summary | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Operating Income | $58.9 million | $70.1 million | | Adjusted Operating Income | $76.7 million | $80.7 million | | GAAP Net Earnings | $29.0 million | $36.0 million | | Adjusted Net Earnings | $41.8 million | $44.0 million | | GAAP EPS | $0.60 | $0.72 | | Adjusted EPS | $0.87 | $0.88 | Capital Allocation The company continued its commitment to shareholder returns in the second quarter. The Board of Directors declared a quarterly cash dividend of $0.15 per common share. During the quarter, Edgewell repurchased approximately 1.1 million shares for $35.4 million, leaving 1.1 million shares available for future repurchase under the existing authorization - A quarterly cash dividend of $0.15 per share was declared on May 7, 2025, payable on July 9, 2025[14] - In Q2, the company executed $35.4 million in share repurchases and paid $7.3 million in dividends[4][14] Segment Performance This section details the Q2 2025 financial performance of Edgewell's key operating segments: Wet Shave, Sun and Skin Care, and Feminine Care Wet Shave The Wet Shave segment experienced a 2.6% decline in net sales (0.9% organic decline), as growth in international markets was offset by volume declines in North America. Despite lower sales, segment profit increased by a strong 15.3% (16.5% organic), driven by higher gross margins that outweighed increased marketing expenses Wet Shave Q2 2025 Performance | Metric | Value | Change vs. Q2 2024 | | :--- | :--- | :--- | | Net Sales | $285.5 million | -2.6% | | Organic Net Sales | - | -0.9% | | Segment Profit | $46.6 million | +15.3% | | Organic Segment Profit | - | +16.5% | Sun and Skin Care Sun and Skin Care net sales decreased by 2.0% (0.1% organic decline), with growth in Grooming and Wet One's offset by declines in North America Sun Care. Segment profit fell 6.6% (2.2% organic decline), impacted by an unfavorable currency effect of 4.4%, lower gross margin, and higher SG&A expenses Sun and Skin Care Q2 2025 Performance | Metric | Value | Change vs. Q2 2024 | | :--- | :--- | :--- | | Net Sales | $231.1 million | -2.0% | | Organic Net Sales | - | -0.1% | | Segment Profit | $50.8 million | -6.6% | | Organic Segment Profit | - | -2.2% | Feminine Care The Feminine Care segment saw a significant downturn, with net sales falling 9.1%, primarily due to declines in Pads and Tampons. This sales drop led to a sharp 64.4% decrease in segment profit (65.5% organic decline), driven by lower gross profit and higher marketing expenses Feminine Care Q2 2025 Performance | Metric | Value | Change vs. Q2 2024 | | :--- | :--- | :--- | | Net Sales | $64.1 million | -9.1% | | Organic Net Sales | - | -8.8% | | Segment Profit | $3.1 million | -64.4% | | Organic Segment Profit | - | -65.5% | Full Fiscal Year 2025 Outlook Edgewell has revised its full-year fiscal 2025 outlook downwards, citing a challenging economic environment and the impact of incremental investments. The company now expects lower organic net sales growth, a decrease in adjusted operating margin, and reduced ranges for both Adjusted EBITDA and Adjusted EPS. Restructuring charges are now expected to be higher at approximately $33 million Updated Outlook The company has lowered its full-year 2025 guidance. Organic net sales growth is now projected to be flat to 1%, down from 1% to 3%. Adjusted EBITDA is expected to be in the range of $329 million to $341 million, a significant reduction from the previous range of $356 million to $368 million. Similarly, adjusted EPS is now forecasted between $2.85 and $3.05, down from the lower end of the prior $3.15 to $3.35 range Fiscal 2025 Outlook Revision | Metric | New Outlook | Previous Outlook | | :--- | :--- | :--- | | Organic Net Sales Growth | Flat to 1% | 1% to 3% | | Adjusted EBITDA | $329 - $341 million | $356 - $368 million (lower end) | | GAAP EPS | $2.09 - $2.29 | $2.54 - $2.74 | | Adjusted EPS | $2.85 - $3.05 | $3.15 - $3.35 (lower end) | | Free Cash Flow | $130 - $140 million | $185 million | - The outlook for adjusted gross margin is now an increase of approximately 10 bps (70 bps at constant currency), down from a previously expected 55 bps increase, reflecting increased investments and incremental tariffs[21] - Adjusted operating margin is now expected to decrease by approximately 65 bps, a reversal from the previously anticipated 10 bps increase[21] - Expected pre-tax charges from restructuring and repositioning actions have been increased to approximately $33 million for the full fiscal year, up from the previous estimate of $29 million[19] Outlook Reconciliation The company provides a reconciliation from its GAAP outlook to its non-GAAP adjusted outlook for fiscal 2025. For Adjusted EPS, total adjustments amount to a net positive impact of $0.76 to $0.96 per share. For Adjusted EBITDA, total positive adjustments from GAAP Net Income are approximately $49 million to $59 million FY2025 GAAP EPS to Adjusted EPS Reconciliation | Description | Per Share Impact (approx.) | | :--- | :--- | | Fiscal 2025 GAAP EPS | $2.09 - $2.29 | | Restructuring and repositioning costs | $0.70 | | Sun Care reformulation costs | $0.11 | | Commercial realignment | $0.06 | | Vendor bankruptcy | $0.04 | | Other costs | $0.11 | | Income taxes on adjustments | ($0.26) | | Fiscal 2025 Adjusted EPS | $2.85 - $3.05 | FY2025 GAAP Net Income to Adjusted EBITDA Reconciliation (in millions) | Description | Amount (approx.) | | :--- | :--- | | Fiscal 2025 GAAP Net Income | $100 - $110 | | Income tax provision | $22 | | Interest expense, net | $72 | | Depreciation and amortization | $87 | | EBITDA | $280 - $292 | | Restructuring and repositioning costs | $33 | | Other adjustments (Sun Care, Commercial, etc.) | $16 | | Fiscal 2025 Adjusted EBITDA | $329 - $341 | Financial Statements & Reconciliations This section presents Edgewell's condensed consolidated financial statements, including statements of earnings, balance sheets, cash flows, and detailed reconciliations of GAAP to non-GAAP measures Condensed Consolidated Statements of Earnings For the three months ended March 31, 2025, net sales were $580.7 million, down from $599.4 million in the prior year. Net earnings decreased to $29.0 million ($0.60 per diluted share) from $36.0 million ($0.72 per diluted share). For the six-month period, net sales also declined, and net earnings fell to $26.9 million from $40.8 million Statement of Earnings Summary (in millions, except per share data) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $580.7 | $599.4 | $1,059.1 | $1,088.3 | | Gross profit | $256.2 | $258.1 | $447.8 | $455.8 | | Operating income | $58.9 | $70.1 | $79.2 | $96.2 | | Net earnings | $29.0 | $36.0 | $26.9 | $40.8 | | Diluted EPS | $0.60 | $0.72 | $0.55 | $0.81 | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $3.77 billion, a slight increase from $3.73 billion at September 30, 2024. Cash and cash equivalents decreased to $170.1 million from $209.1 million, while long-term debt increased to $1.43 billion from $1.28 billion. Total shareholders' equity decreased to $1.51 billion Balance Sheet Summary (in millions) | Metric | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $170.1 | $209.1 | | Total current assets | $1,012.4 | $936.0 | | Total assets | $3,772.8 | $3,730.9 | | Long-term debt | $1,433.1 | $1,275.0 | | Total liabilities | $2,258.9 | $2,146.8 | | Total shareholders' equity | $1,513.9 | $1,584.1 | Condensed Consolidated Statements of Cash Flows For the six months ended March 31, 2025, net cash used for operating activities was $70.5 million, a significant negative swing from the $56.1 million provided by operating activities in the prior-year period. This was driven by lower net earnings and unfavorable changes in working capital. Net cash used for investing activities increased, while financing activities provided a net inflow of $72.5 million, primarily from debt issuance Cash Flow Summary (in millions) | Metric | Six Months Ended Mar 31, 2025 | Six Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(70.5) | $56.1 | | Net cash used for investing activities | $(33.0) | $(19.7) | | Net cash provided by (used for) financing activities | $72.5 | $(59.4) | | Net decrease in cash and cash equivalents | $(39.0) | $(20.2) | | Cash and cash equivalents, end of period | $170.1 | $196.2 | Notes to Financial Statements The notes provide detailed segment data, GAAP to non-GAAP reconciliations, and breakdowns of net debt and EBITDA. For Q2 2025, total segment profit was $100.5 million, down from $103.5 million year-over-year. Reconciliations clarify adjustments for items like restructuring, Sun Care reformulation, and commercial realignment to arrive at adjusted figures like Adjusted Operating Income of $76.7 million and Adjusted EBITDA of $99.3 million for the quarter Q2 2025 Segment Profit Summary (in millions) | Segment | Q2 2025 Profit | Q2 2024 Profit | | :--- | :--- | :--- | | Wet Shave | $46.6 | $40.4 | | Sun and Skin Care | $50.8 | $54.4 | | Feminine Care | $3.1 | $8.7 | | Total Segment Profit | $100.5 | $103.5 | Q2 2025 GAAP to Non-GAAP Reconciliation Summary (in millions) | Metric | GAAP | Adjustments | Non-GAAP (Adjusted) | | :--- | :--- | :--- | :--- | | Gross Profit | $256.2 | $3.5 | $259.7 | | Operating Income | $58.9 | $17.8 | $76.7 | | Net Earnings | $29.0 | $12.8 | $41.8 | | Diluted EPS | $0.60 | $0.27 | $0.87 | EBITDA Reconciliation Summary (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net earnings | $29.0 | $36.0 | | EBITDA | $82.7 | $89.1 | | Adjustments | $16.6 | $10.6 | | Adjusted EBITDA | $99.3 | $99.7 |