Church & Dwight(CHD) - 2024 Q1 - Quarterly Results

Q1 2024 Performance Highlights The company reported strong first-quarter results, exceeding outlooks with robust growth in sales, gross margin, and adjusted earnings per share across all divisions Overall Financial Performance Church & Dwight exceeded Q1 2024 outlook, reporting strong growth in net sales, gross margin, and adjusted EPS Q1 2024 Key Financial Metrics | Metric | Q1 2024 Result | YoY Growth | Note | | :--- | :--- | :--- | :--- | | Net Sales | $1,503.3 million | +5.1% | Exceeded Outlook | | Organic Sales | - | +5.2% | Driven by Volume (+3.7%) and Price/Mix (+1.5%) | | Gross Margin | 45.7% | +220 basis points | Due to Productivity, Volume, Mix, and Pricing | | Reported EPS | $0.93 | +13.4% | - | | Adjusted EPS | $0.96 | +12.9% | Exceeded Outlook of $0.85 | - The strong performance was broad-based, with all three divisions (Domestic, International, Specialty Products) delivering robust organic growth[9][35] - Global online sales grew to 20.5% of total consumer sales in Q1, representing a 14.9% dollar increase compared to Q1 2023[35] Segment Performance All consumer segments and Specialty Products delivered strong organic sales growth, contributing to overall company performance Consumer Domestic Consumer Domestic net sales increased 4.3% to $1,165.2 million, driven by volume and price/mix, led by key brands Consumer Domestic Q1 2024 Performance | Metric | Value | Growth Drivers | | :--- | :--- | :--- | | Net Sales | $1,165.2 million | +4.3% | | Organic Sales Growth | +4.3% | Volume (+3.3%), Price/Mix (+1.0%) | | Leading Brands | - | THERABREATH™, HERO™, ARM & HAMMER™ Cat Litter & Baking Soda, XTRA™, BATISTE™ | Consumer International Consumer International net sales grew 10.6% to $255.0 million, with 8.8% organic growth driven by volume and price/mix Consumer International Q1 2024 Performance | Metric | Value | Growth Drivers | | :--- | :--- | :--- | | Net Sales | $255.0 million | +10.6% | | Organic Sales Growth | +8.8% | Volume (+5.4%), Price/Mix (+3.4%) | | Leading Brands | - | STERIMAR™, HERO, THERABREATH | Specialty Products Specialty Products net sales increased 1.0% to $83.1 million, with strong 7.2% organic growth from price/mix and volume Specialty Products Q1 2024 Performance | Metric | Value | Growth Drivers | | :--- | :--- | :--- | | Net Sales | $83.1 million | +1.0% | | Organic Sales Growth | +7.2% | Price/Mix (+4.2%), Volume (+3.0%) | Financial Position and Operations The company expanded gross margins, increased strategic investments, and maintained a solid financial position with healthy cash flow Margins and Expenses Gross margin expanded 220 basis points to 45.7%, with increased marketing and adjusted SG&A reflecting strategic investments - Gross margin increased 220 basis points to 45.7% due to improved productivity, volume, mix, and pricing, net of higher manufacturing costs[5] - Marketing expense increased by $29.7 million to $152.0 million, representing 10.1% of net sales (a 150 basis points increase)[38] - Adjusted SG&A was $222.7 million, or 14.8% of net sales, an 80 basis point increase due to investments in International and R&D[12] Cash Flow and Balance Sheet Cash from operations was $263.0 million, with $349.7 million cash and $2.2 billion total debt, and increased capital expenditures - Cash from operations was $263.0 million, a slight decrease from the prior year as higher earnings were offset by higher working capital[7] - Capital expenditures were $46.3 million, a $21.3 million increase from the prior year[7] - As of March 31, 2024, the company held $349.7 million in cash and had total debt of $2.2 billion[14] Strategic Initiatives The company is expanding its global footprint through strategic acquisitions and driving growth through continuous product innovation Acquisitions The company signed an agreement to acquire Graphico for $35 million, aiming to expand its business in Japan and APAC - Signed a definitive agreement to acquire Graphico, its Japan-based distributor, for approximately $35 million[3] - The acquisition is expected to facilitate greater expansion in Japan and the APAC region by bringing more Church & Dwight brands to Japanese consumers[36] 2024 New Products Product innovation drives growth with successful 2024 launches across ARM & HAMMER™, THERABREATH™, HERO™, and BATISTE™ - ARM & HAMMER™ launched Power Sheets™ laundry detergent, now expanding to brick & mortar retailers, and a new premium Deep Clean™ liquid and unit dose detergent[43][16] - THERABREATH™ entered the antiseptic mouthwash segment with its Deep Clean Oral Rinse, formulated to kill 99.9% of germs without the burn[44] - HERO™ continues to innovate in the acne category with new patch solutions and adjacent products like the Dissolve Away Daily Cleansing Balm[45] - BATISTE™ introduced Sweat Activated and Touch Activated dry shampoos with advanced fragrance-release technology[18] Outlook for 2024 The company raised its full-year gross margin and EPS outlook, while providing specific guidance for Q2 2024 sales and earnings Full Year 2024 Outlook The company raised its full-year gross margin and Adjusted EPS outlook, maintaining sales growth forecast and projecting record cash flow Updated Full Year 2024 Guidance | Metric | Full Year 2024 Outlook | Previous Outlook | | :--- | :--- | :--- | | Reported & Organic Sales Growth | ~4% to 5% | Unchanged | | Gross Margin Expansion | ~75 basis points | 50 to 75 basis points | | Adjusted EPS Growth | 8% to 9% | 7% to 9% | | Reported EPS Growth | 9.5% to 10.5% | - | | Cash from Operations | ~$1.05 billion | ~$1.0 billion | - SG&A as a percent of sales is now expected to be flat compared to 2023, reflecting investments in International, e-commerce, and costs related to the Graphico acquisition[19] - Capital expenditures are expected to be approximately $180 million for 2024, returning to historical levels of ~2% of sales in 2025[20] Q2 2024 Outlook Q2 2024 outlook projects 3.5% reported sales growth and 4.0% organic growth, with moderate gross margin expansion but a decline in Adjusted EPS due to higher costs and tax rate Q2 2024 Guidance | Metric | Q2 2024 Outlook | YoY Change | | :--- | :--- | :--- | | Reported Sales Growth | ~3.5% | - | | Organic Sales Growth | ~4.0% | - | | Reported EPS | $0.81 | -9.0% | | Adjusted EPS | $0.83 | -9.8% | - The expected EPS decline is attributed to increased marketing, higher SG&A, and a significantly higher tax rate (24% vs. 17.9% in Q2 2023)[49] Financial Statements & Non-GAAP Reconciliations This section provides detailed consolidated financial statements and reconciliations of non-GAAP measures for transparent performance analysis Condensed Consolidated Statements of Income Net Sales for Q1 2024 increased to $1,503.3 million, with Gross Profit rising to $687.0 million and Net Income to $227.7 million Q1 2024 vs Q1 2023 Income Statement (in millions, except per share data) | Account | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net Sales | $1,503.3 million | $1,429.8 million | | Gross Profit | $687.0 million | $622.0 million | | Income from Operations | $305.0 million | $291.9 million | | Net Income | $227.7 million | $203.2 million | | Diluted EPS | $0.93 | $0.82 | Condensed Consolidated Balance Sheets As of March 31, 2024, Total Assets were $8,561.5 million, with Cash at $349.7 million, Total Liabilities decreasing, and Stockholders' Equity increasing Balance Sheet Highlights (in millions) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $1,534.3 million | $1,529.7 million | | Total Assets | $8,561.5 million | $8,569.2 million | | Total Current Liabilities | $1,151.1 million | $1,422.0 million | | Long-Term Debt | $2,202.8 million | $2,202.2 million | | Stockholders' Equity | $4,100.7 million | $3,855.4 million | Condensed Consolidated Statements of Cash Flow Net cash from operating activities was $263.0 million, with $46.8 million used in investing and $209.1 million used in financing Cash Flow Summary (in millions) | Account | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $263.0 million | $273.1 million | | Net cash (used in) investing activities | $(46.8) million | $(29.6) million | | Net cash (used in) financing activities | $(209.1) million | $(311.7) million | | Net change in cash and cash equivalents | $5.2 million | $(67.5) million | Non-GAAP Reconciliations The company provides non-GAAP measures like adjusted EPS and organic sales to offer a clearer view of underlying business trends - Management uses non-GAAP measures like organic sales growth to assess performance on a consistent basis, excluding impacts from acquisitions, divestitures, and foreign exchange[29][52] Q1 2024 EPS Reconciliation | Metric | Value | | :--- | :--- | | Diluted EPS - Reported | $0.93 | | Hero Restricted Stock Adjustment | $0.03 | | Diluted EPS - Adjusted (non-GAAP) | $0.96 | Q1 2024 Organic Sales Growth Reconciliation | Segment | Reported Sales Growth | Organic Sales Growth | | :--- | :--- | :--- | | Total Company | 5.1% | 5.2% | | Consumer Domestic | 4.3% | 4.3% | | Consumer International | 10.6% | 8.8% | | Specialty Products | 1.0% | 7.2% |