CHD - Earnings call transcript Q2 2019 | Church & Dwight Co., Inc.

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Operator

Good morning, ladies and gentlemen. Welcome to the Church & Dwight Second Quarter 2019 Earnings Conference Call.

Before we begin, I have been asked to remind you that on this call the company's management may make forward-looking statements regarding, among other things, the company's financial objectives and forecasts. These statements are subject to risk and uncertainties and other factors that are described in detail in the company's SEC filings.

I would now like to introduce your host for today's call Mr. Officer & Executive Chief Farrell, of Dwight. Church Matt go ahead. Please

Matt Farrell

then Good Okay. comments for and when call Rick morning, up CFO. joining we'll call Dierker, you. to on turn Rick over us quarter is few Thanks And a for everyone. Thank questions. our the provide today. the open finished, I'll the I'll

Our company. QX was another outstanding quarter for our

Organic and reported news per lots higher our than X.X%. X%. growth of sales X%. the sales In QX growth. good of including by organic growth outlook which earnings have share X.X%, share sales We organic per outlook exceeding was exceeded grew sales grew expected U.S., $X.XX. was our $X.XX, earnings Adjusted

Our are categories growing.

and X were as share. In XX of our fact, of XX our growing market quarter evidenced healthy our or by categories power the XX brands during holding shares grew

success continue sales of annual sales rapidly XXXX X% to XXXX. grow Online to online And compared sales We expect trade. XX% quarter. have class of of to our continue exceed this X% we a in at in the clip to online

in spot international Church is which business our Our and U.K., quarter We is bright a Dwight. another international. with quarter. & on growth as our subscale Mexico our exited consumer strong driver terrific unlike referred perennial the a many growth. organic formally one our Group, Global This note and business final export consumer X.X% delivered quarters. Markets to we of business, International But had Brazilian particularly peers. for

X.X%. another to as Specialty sales quarter, declined turning QX was challenging Now Products, organic

rise be prices June, are the recent in second dairy for from demand April, May, milk to prices prices. forecasts half. throughout lower Milk products experiencing increased our are low customers, industry milk continue to who continue by productivity to hurt projecting and and We animal

non-dairy represents approximately feel this cattle as our serving XX% businesses result Non-dairy still approximately like and now business our business other that right poultry, species to long-term algorithm year. X% sales and animal a grow productivity about organic acquisitions swine. good our sales expect We of of of we XX%

Let's and call of HAMMER a laundry X.X%, we was points. the ARM up go a in quarter. bright back business which for category, couple gained the X.X% margin X.X In the & Consumer to moment grew U.S. out consumption lights and share

QX. promotional the anticipated, laundry As in to in continued muted be environment

For HAMMER laundry part, percentage by ARM our growth. maintaining reduced & points, basis XXX promotion we while

reducing our the We spend year-over-year half. second continue expect to in promotional

the expectations. sales BATISTE has shop ARM the FADE is personal in & care, line new shop Over meeting that, Our our HAMMER the particular, hair in in dollar new shampoo Hair I DEFENSE of number the dry new care shampoo, our category ability product by well Benefits one benefit. for to doing growth the skew way broader same in BATISTE dry and mean consumers the given In QX. category. was volumizing they By

hydrating Our well. with new doing for BATISTE product fine also hair is women

number the quarter. one BATISTE for a than XXth growth more continues the BATISTE to category dry doubling growth in shampoo XX%. dry consumption consecutive share gain XX% with the is of category, shampoo the

expectations of talk Next that high about out Rick have is point is we're generating. consumers want Colorado. brand to our with to new LEG MASK. to dollar WATERPIK We're is business the spending a a been and product momentum NAIR SONIC-FUSION hit team that LEG XX.X% MASKS I with driving firsthand are great example XXXX. now share right exceeding seeing I and time in great in NAIR launch WATERPIK record is QX. Collins, for depilatories Fort A that this

and of both dental interest consumers. from professionals levels We have high

key SONIC-FUSION was retail may the accounts. time. month model at same at can And of brush best-selling recall in And the consumers with and June SONIC-FUSION ordepic you floss our

price Let's talk increases now. about

the you were on expansion. We contributed to the last in As and our April and to expected the quarter and XXXX late brands than better we continues price XXXX said gross margin price impacts know, which took be that volume we case. were increases executed in in

of In for five health track. took despite is late and positive we closed showing categories all where pricing five integration year, category on acquisition category in terms the May categories the growth impacts. We volume are plan FLAWLESS last the

which we We complements leader business we to removal in sales grow hair women's hair of In in the care our fast-growing a model We XXXX. are terrific growth is about to electric long-term own We're FLAWLESS year. really conclusion, our and both and expect our to quarter. higher on annually the good domestically evergreen market FLAWLESS excited business products. feel and specialty a XX% contribute or brand track exceed had rest international. the to

Rick you the quarter and full QX the is up to Next on improved the give second for details outlook and year.

Rick Dierker

Thank and you, morning with We'll Matt good EPS. everyone. start

compared our lower QX XX.X%. share exceeded XXXX, $X.XX $X.XX and margin, EPS better up of tax. to to Second due improved adjusted $X.XX outlook EPS quarter was shift $X.XX. topline, in The $X.XX marketing in per largely reported gross was a

adjusted We three EPS. have adjustments to get to

to First our This in consumer is is sale business Brazil. charge or was non-cash. million a of largely related that $X.XX $X the

the entry million with Passport $X business. safety We're business in our food Second, and the SPD offers diversification our $X.XX within to favorability or relation SPD for acquisition reducing division. the that our we earnout had of our it happy still approximately to

X.X%. last X%. outlook QX attached of the the quarter, and fourth our Lastly, FLAWLESS Reported earnout was largely FLAWLESS an than price and fifth quarter growth exceeding will business, booked mentioned organic earnout QX positive adjustment consecutive was based quarter and product of we X.X%, mix. quarterly. up of X% greater time. for These the adjustments consecutive continue to up we Organic as approximately were revenue sales

Now the let's segments. review

liquid, spending and promotional and sales laundry volume by cat volume ARM litter, pumping slightly increased scent the laundry HAMMER increase. with announced of a to care Organic ARM boosters. expected WATERPIK lower & by price products, & associated liquid by drove HAMMER Domestic. offset oral as X% was Vitamins, Gummy VITAFUSION price stain increases. Consumer & X.X% fighters, ARM Growth was due OXICLEAN This decline First, positive mix detergent HAMMER OXICLEAN led XTRA negative and X.X%

International organic driven power up ARM HAMMER, primarily and by & X.X%, VMS growth brands. our BATISTE was

X.X%. a demand sales SPD organic products for dairy For And continue our industry in demand declined the although industry, be in division, to poultry continues grow to the challenge.

now Turning margin. to gross

gross to XX.X%, XX offset performance a exceeded represents our of costs. as basis Our once up quarter programs, the gross a point This by increase margin and impact XX point XX as second due acquisitions gross increases, is basis points. manufacturing ago impact our and year margin of forecast was previous partially a full again year commodities productivity commodity well and increase expect from to to price higher more expectation be now and on This favorable acquisitions. attributable basis we to the margin outlook a

of to that are one mind XXXX. example will the information of that have commodity over margin forecast down side, key would've now commodities. change Keep months the on latest hedged to The we we be XX% most the Three our be On compared back year-over-year. of XXXX gross indicates up largely half is upwind. we prices flat in to that recent expected ago,

half. we expense year-over-year. pushed retail as XX%. to a down the in have -- the percent some second is have decreased some $X.X expected basis This year. spend points sales of as later shifted XXX as Marketing million resets Moving largely to And now to been

For example litter. and additives

since basis We expectations an points with flat are increase raising year sales XX XXXX, percent full our of of as outlook. a our marketing for to be last

would For been reported Brazil onetime earnout points from have increased sales year-over-year. adjustments. the flat basis of the excluding impact SG&A, FLAWLESS as QX as acquisition previously as discussed and SG&A percent well such as the XXX items SG&A

our margin driven profit. increase income basis was XXX higher XXXX. primarily quarter XXXX, points And was XX XX.X% Operating operating of for compared for XX.X% million. Other point XX.X%, expense quarter net was rate options number effective $XX.X stock the the over to a by for decrease in of basis QX all-in tax, exercised. Adjusted representing

to now And cash.

increase million, a the by year $XX.X net earnings. million activities For first cash operating from half higher of prior was the XXXX, from $XXX cash driven

are ago. Now one our up metric year-to-date note a cash earnings year XX% to is versus

expect that be X.X% end points. now now to the for EPS and We now to of be reported of growth X%, extent international XX% The of from of margin the And outlook. organic continue growth the or approximately approximately is outlook XX up expect the at continue prior up our this our expect to increase look outlook full upper And for We We divisions per X.X%. are to expect to for of the for to X%. This X.X% for We X%. the we sales now points. now XXXX sales year full organic XX growth outperforms margin to adjusted years the we range will share guidance, SPD. our reinvest previous slightly Similar year. business EPS domestic, previous operating adjusted down year gross basis $X.XX earnings momentum. to basis of expect full

be And any happy and Matt to with take that, I will questions.

Operator

our from Grundy from [Operator question line Jefferies. Instructions] comes first And the Kevin of

begin. may You

Kevin Grundy

quarter. guys. Hey on good Congrats morning, the

Matt Farrell

Kevin. Hey

Rick Dierker

Kevin. Hi

Kevin Grundy

on pricing. start Let's

HPC. in moderation potential cost of very also now become the you I start favorable. investments that price. assess conversations promotional to more So, fronts. manufacturers. right is commodity on open retailers around one, then Rick And begin a see on a commodity this from up and curious in Number it's you Matt, for two, couple And follow-up. the mentioned good risk excuse outlook me And to -- how more trade obviously, competitors as potential more then have

Matt Farrell

Okay.

had big that get companies but it, being other cost and the quarters are had four us. accumulated that higher about of price were increases And is I the follow increases the necessarily only always cost Here's way the many over same it by CPG be there some input that prices left effect But many of don't input decreasing. costs appeared justified commodities would think flattening We've from trends. true including in or years to headlines Kevin.

on category that in. you're So product it depends

I'd respect that's may may price for all caution abating increases. the I'd to So be again resin and justified barometer and say the put a costs down, paper pulp that be

to also got You've too. are money retailers keep making mind now more in

as the So a making penny price increases. result of profit more

everybody to there's extent innovation reasonable might as it profit I the would categories be reinvesting jumped maybe appear wouldn't in on abating, help expect to So more input much compete some cost to healthy gross innovation. price be because a

changes respond course, to we'll it. the Of

Kevin Grundy

it right. question One Matt. pass there. I'll Laundry all follow-up two-part a Thanks, liquid unit and so Okay, on and on one on. one

and same that to share has market course, to between down take but you are time started down guys about you're the have levels. like promo It levels talked promo looks the So following opportunity taking at bit. getting how little levels you're a here market to slow objectives? with down that a balance essentially promo increase to bit price share little Maybe right factor trying strike the speak

talk And going I hasn't dose really that the promotion. share” maybe category second pulling on company Matt given part you in you're the “your opportunity you seven unit is years played out the to the perhaps company's for the or hoped. at guess where potentially that but fair as then start about pace get back slow would the least also back ago, have six at And

why more unit it share XX% we've still & Thanks. I'll at rapid And in So you ARM don't from P&G think pass dose seen market sitting share. HAMMER on. there gains with market

Matt Farrell

ARM dose growth But Well, has right virtually it had launched. quarter unit now. would say grew quarter. grow. XX% XX%, HAMMER. been grew since to the slowed continues categories growing X.X% only for dose the It's that dose I it & We The ARM exceptional unit XX%. were this category dose double-digits every around HAMMER unit & unit

down because still climbing quite unit the on that well OXICLEAN we're the we cut was OXICLEAN of bit. dose, We but course year-over-year had look a that's back did So only component promotion. as of here. ladder as abated significantly

So remember premium end. the at that's

going & so If you ARM HAMMER in at and year-over-year pulled look see on quarter. the simply value detergent the everybody's at second for if on Tide Purex what's back -- look laundry you

for now pretty that's four consecutive a quarters. So much seen we've trend

that expect our and is in we'd plan now. right second So that continue the half

Of course can react if that quickly. changes, we

Rick Dierker

Really with And where I right? in the add share, share laundry Oxi ARM would is back to to that there's just back Kevin some pull & maybe pull HAMMER even find. continues gain

Matt Farrell

is bps the second & XX up ARM pretty HAMMER laundry and XX% mean, share now quarter, category of it's we're in so significant. the I Yeah,

Kevin Grundy

Good guys. Thanks Okay. luck.

Operator

line the from from And our Parikh question next Oppenheimer. comes of Rupesh

You begin. may

Rupesh Parikh

Good my Also, next morning, congrats the on and question. quarter. thanks for taking

will So that saw we we pricing, as your if quarter, volume at off the look in look price with so at expectations? the line that during trade you

Matt Farrell

company X.X% the record was have for mean, strip you price/mix I and Oxi been flat, we if was. talked pull X.X%. down out for it about positive. business positive volume was Yeah, on and And volume relatively is laundry would domestic X.X% it back price/mix volume the

like my QX quarters mind. the the So few in probably looks a year lot full next

Rupesh Parikh

Great. a category grew that it categories Okay. more like And from perspective, had actually then this sounds you quarter.

your prior as can what quarters? So category the the the areas at data, growth you look blended you maybe see versus in was

Matt Farrell

Yeah. X%. It's pretty consistent. about It's

Rupesh Parikh

And you've the owned acquisition then question in any far on what that my final Great. few surprises the Okay. it FLAWLESS a you're as now business? months in seeing

Rick Dierker

Really terrific a it's Yeah. Only business. good surprises.

percent and that exceed we expected growth We sales target easily XX-plus XXXX. should in

Rupesh Parikh

Thank Okay. Great. you.

Rick Dierker

Rupesh. right, All

Operator

the line next comes question Jason And from Sachs. our Goldman of from English

You may begin.

Cody Ross

Cody actually for Jason is Thank for this questions. taking you morning. on This our everyone. morning Good Hi.

$X.X approximately our this in FLAWLESS came in below bit. there about relative your for little our a by for performance does boosted the full business? quarter, only the year for this And normal FLAWLESS compare How ago suggesting expectations? to what's was $XX quarter were the seasonality and but million. on its sales stick with to a two expectations. This million sales want On net Just math months also

Matt Farrell

retail it more hit We're two, Number ago, that they sales we on very sales generally we year can do we they you one. that as Remember gain brand optimistic number a own number specific to not I comment a full QX. tell didn't expected within year or about in continue traditional quarter. distribution. on factor

Rick Dierker

seasonality business, And business. it the the there's probably of lot numbers we are that said of like it's is there's year, little stronger bit half The Matt we bit only on. the a the in add the little a momentum in back would think I thing but a expecting behind of that right hit

Cody Ross

as dealt quarter. you Thank this of as buy you the far buybacks, XXXX, then much. very repurchased Last you just And Great. acquisitions. integrating year stock in any you as only quarter didn't Okay. stock also first stock the with

think You roughly two still and your balance we the stands just capital priorities year? times. $XXX you. allocation about in Thank million at authorization have should the leverage for of How

Matt Farrell

M&A that's back we've continue might would thought is Yeah. been we time capital at allocation do the we number said do. priority for far announced one, And buyback that that what said, going away, we've to to Well acquisition we all doing, not FLAWLESS, what we're we And and when previously that's right? do. the we

dry with buyback the we this to So for continue debt as future for EBITDA we done are our effectively year, manage powder ratios just acquisitions. have

Cody Ross

on it. the very Congrats you pass Thank great quarter. much. I'll

Matt Farrell

Thank you, Cody.

Operator

our And Steve Deutsche Bank. from the question you. Powers Thank comes from next line of

You may begin.

Steve Powers

outlook back and year Look, your with and that's your been morning. you good just peer a mean board. from results quarter any guess seems me, if Good the set, good your Not the the start this question results, less to I great a a upbeat is Thanks. step and fantastic. have more for take I across or to is, and bit across

to do there is, place we're get finally brands protect I here? you fend drivers step after Are is think competition? spot price or would as sweet specific out? a and industry sustainable, of that as you are big back it And going across this me falling off do margin for the just this guess, you you things call to through struggling year the why see that is question the But years

Matt Farrell

of could mind or of a been many years be a fear the prices many they in across as probably I would keep And to to in there has that whether got was CPG. not you actually and categories stick. raised think, for Well, increases that many, price lot there lot

have. they consequently so, And

been certainly years. maybe a are as does it surprise what that's And of a maybe before next the it's companies. is CPG as investor’s, of as prices, to next happen, price to raised a their raised we have long in think long time lot maybe won't the increases costs companies surprise I fact suggest some the that round But justified. maybe We haven't prices that wait

as I don't kind to worked magical But year. any have this answers of it why

that I economy far we strong. expect you in a were economy. it. helps that I is the do is think strong have time weaker if We’d When much that's got a one a to the result, consumer thing different

Steve Powers

Yes.

Okay.

for on the guess mix? quarters is, the I of makeup And seeing that versus trade-up couple do you're price more to next the you and a I as maybe look pure mix follow so how of price questions that growth. over on have the to organic right out two in now is, sense guess, you of much quarter,

next drivers do you and bit? versus as those balance to maybe how expect and of of you over look mix volume to the quarters, rebalance price And out out shake the couple a put

Matt Farrell

Price it price, only that's mix, that largely questions we Yes. that's with for was for but -- company the Thanks and mix price. of the I Steve. mean right? X.X%, like price said parse largely between

said And X.X% for And previously, balance Rupesh, positive maybe looks continue domestic, trend point. the to down that for of we like a QX was almost volume the it I for for year. and believe to price/mix very

think And going continue trend's early well. that so to next And we lap year. as we'll that

Steve Powers

Okay. there one squeeze the Okay. -- could If sorry? to specific I trends in more litter, seemed

trend there you're category litter, or the just just I that that degradation that deceleration with still in trends call you’re there the and syndicated would there to for? positive. on is So that you starting data, Nestlé seemed and beneficiaries. broadly see private guess anything on some watch some the Is share label shifting in

Matt Farrell

grew litter Yes. in you it I at to HAMMER ARM But X.X%. Rick cat quarter second got look too. the the XX.X%. in grew if category want a comment chime & maybe And

XX XX.X%. the So quarter our to share in was second bps up

number the cat now. right we're two So litter

sold isn't points on the category the bps shelf the I category basis to actually private It XX.X%. is label year-over-year. by XX -- the XX promotional. deal that picked up within true reduced in quarter mean And

around private XX% some definitely of there's private label been historically But to the strength in X% category. has So label.

So I wouldn't private label be at alarming say that XX.X%. that would necessarily

Rick Dierker

Yes. add And I would Steve. just

expect little got raised benefit the competition second to the price bit You volume Remember half. litter a slow did, little should in the early of than in business we've second a bit half. our we earlier so

stack strong, number. volume just, but still it's a comping on growth So, higher basis we're we're

Steve Powers

Yes.

Okay, perfect. Thanks guys.

Operator

Thank question Strycula will from comes Steve line from from next -- you. the And UBS. our come of

begin. may You

Steve Strycula

Hi, good morning.

business, on a Why consumer the quarter different? organic would little XQ how aren't down it question. of step part does back anything materially there we about throughout That lower decelerating? the solid really in two-year So bit sales think first my half? do be the the sequentially stacks Is

Rick Dierker

stack the not two-year We implies this average down talked is X.X% at a is points. back No, a half the really. first which little The about The it. in different, X.X% half right? of XXX is about year basis that

strong So second first of in the versus XX X.X% of was bps so XXXX X% because XXXX. just was the half half

bps Matt in trade promotional really and XXX through detail comps. we've both bps couponing. just XX it in went So of spending been what the just talking then And lower general is is about other XXX

Steve Strycula

in really then mind a margin past various off you Okay. components. like just gross Rick quickly quarters the rattling for take the us? that And put kind you've of for and given us nice Would

Rick Dierker

problem. No Yeah.

manufacturing, year other includes it includes other tariffs, plus basis then includes basis Price the we plus change XXX basis with prior the and really up points, basis for accounting have in points. right minus volume includes a number strong points, plus So benefit and the XXX stuff. mix XXX again it inflation XX commodities, inflation basis points. and fact impact one-time it was strong productivity that That points, quarter acquisition XX we're

lot but a that that's the in number So detail.

Steve Strycula

integrated out, way But view your close know core business strategic Matt a Products, Thanks. a term? On How operations? with it performed your Specialty the into quite the why –to-date. it's really year I Okay. you. And is is long-term is taking the you'd And for doing which maybe consumer like is synergistic question arm long right well for it why core has to this now?

Matt Farrell

chain supply of plants going integrated that's that of it It's where the you Yeah. have has that side operations, our destination side or business by our to of because consumer we baking the core a to bulk business centralized meaning sodium soda specialty have bicarbonate. into the our produced chemical the

particularly is each is HAMMER animal & of we like these long labeled fully number separate & name in HAMMER. So And within are ARM for ARM is why doing one the this integrated. products the it reason has businesses. a We're dairy. plants industry The fabulous business term productivity

my Product, that then are you and growing animal of the one two-thirds past Specialty things year. is non-dairy over in the double years. the we We VI-COR represents which the business is bought Passport. upfront Agro the mentioned of productivity, business And look if those that, businesses acquired at I BioSciences digits this few And remarks,

it's billion So the side is going going the is we seven and nice challenge us. to is grow be think grow to to XX growth. the you going dairy proteins of billion significant a population because next feed less demand business going population long-term to to Non-dairy got from and to is of short the nine And XX grow over people. got story years to for because

being good So I a move the company. for cattle and think poultry is swine

feel we it. long-term good about So,

Operator

of comes Raymond And the Altobello question from James. Thank you. our Joe line from next

begin. may You

Joe Altobello

Good guys. morning. Hey, Thanks.

Matt Farrell

Hey, Joe.

Joe Altobello

Sales be first do continue on So personal sluggish. care. question

think which of categories, despite of FLAWLESS but it were in some to having was of we I seems expecting it's the the more really quarter. what some structural a of your below portion same for

it care respond? these think has of to some turnaround really So you what been that do categories slow personal

Matt Farrell

Yeah.

to look then numbers. obviously WATERPIK us. is BATISTE FLAWLESS one. to are another be growers going got You for the good in And at and what's

then some have example condoms, condoms as category, issues diaphragms of some our CRITTERS struggle intense So as point birth other of we well. declining competition couple L'IL IUDs Then, rates the in SPINBRUSH, And the had a are in because that going gummy for for vitamins there. of that's being B. have example, a for beyond category kids alternatives forward, struggles condom help which struggling going lot contraception numbers children's Plan SPINBRUSH you definitely competition again categories structural in out, for to just overall is

to a in someone which have entrant new be with. going is to dealing have We we're that quip, called

yeah, a up a care digits, growing declining quarter add brands lot they all this low-single or was personal we up of brands of you single so maybe So X%. small in because But the and have lot only digits have there.

Rick Dierker

And announced I right? the that year. X% on I would price just had add early to Rick. got that maybe was a say bit, would in increases Joe, depressed little that We its some

And so whether it's TROJAN or ORAJEL, some retailers did QX. buy in a couple of weeks into

QX I So, a we've But little our lower. of looks bit sort think and met by large expectation.

Joe Altobello

Got it.

mentioned I you been we on but now or just be wholesale And categories, these on at XXXX on that they're like secondly are some like in a in been the do on XXXX Okay. unchartered what guys has promotion promo earlier, lot it have this look to like has to but side always side understand levels, it's the the level looking seems particularly, this promo seem industry least. thinking pricing to this household of territory in an at disciplined early, say you guys point. about

Matt Farrell

quarters Joe. we're looking No, at couple a of really ahead

next happen what made at are future. So, on in six the their the I that's months. considering haven't around any to we going turn increase only profits to don't people fighting But how expect least that expect commentary we hard to year-over-year. in

Joe Altobello

Thank guys. Okay. you

Operator

from And Bonnie of next Thank you. the question Wells Herzog line Fargo. our comes from

You may begin.

Bonnie Herzog

on spend as and why more question QX the lower to a quarter. Thank I'd expense well. marketing in happened in QX the you. about actually actually your was have morning. like below I hear Good

of guys in but delayed? this on innovation touch your pipeline suggests You did was did any this, way

is will ramp Also by to from suggests sales, marketing to of as based spend year percentage and second the your of on flat would half a need be your percentage spend about XX% be up as that maybe first much guess I as full half. a in which under it sales XX.X% think XX% for guidance, as really I about

I if wanted that So, understand Thanks. really just is to realistic.

Rick Dierker

Yes, thanks Bonnie.

was QX down give points. that basis right? marketing said of color We XXX to the just QX, Part Just impact. spend FLAWLESS on some accounting was you

line. it to in you bps. net and marketing in FLAWLESS the going XX If is right, the strip spend out dollar impact, their sales was worth marketing happening just That

expected I'd and reset XXX. an that retail say down really the litter for we for additives XXX, We as shifted half right? of So, the the back example be to year. knew down in

So, you yes quarter. really be to do our tell third probably will we in up fourth bps quarter to outlook we back by in quarter intend didn't in some XX the would that. marketing's go give that the big or and be balance pretty you just to the half into and supposed in the the I confidence detail XX don't up

Matt Farrell

cat would Yes. And just Cloud of add They retailers resets our second the is the litter. new OxiClean be major got for something to happening to We Dark that. a Protect are a products half. in couple some and also Control which

going on a second to the towards we So, have ACV, low not advertising we're turn half. so right now

Bonnie Herzog

same up and long-term? over your Is do medium And trending? we should inching forward, then been marketing stay kind think the spend over spend about years. of looking expect maybe They've the on they've where or to been you this the level that how topic,

Rick Dierker

We've the range it's in XX.X, for us, said range this whether category XX.X, results. right? And been you the see has right share growth we're see that could XX.X this can at good where results, that really you in

we're So, a spot. sweet we in think

Bonnie Herzog

circle you wanted is to I to then mentioned something back Okay. just And may M&A. which if

on it. briefly You touched

just the hoping FLAWLESS for acquisition. was how strong you your after now right a to completed is I could as especially you give appetite acquisition, So, sense us guys

you mentioned the building kind And dry then you're powder. of

M&A? have So, enough? do environment the And you competitive how do you current view for

Matt Farrell

you acquisition. platform despite number for as is of destination many a acquisition flow. the active one FLAWLESS leverage process. ratio are now. we look serial over cash we have the Well, and Yes. we acquirer to in is acquisition what disciplined And be our know And through can very our continue right you Rick take

acquisition We criteria have step up and we will criteria. our for meet that opportunities

Just since is we've our year for to business XXXX. important the XX done how model, of illustrate kind acquisitions this

doing our to have can next chime So, on with in that. no respect we restraints acquisition. actually But Rick right now

Rick Dierker

Yes, I sub of be end mean to going the by leverage times XXXX. two ratio is our

So, of plenty room.

way looking we the nothing And are think the did busy we for as I Matt help said next struck FLAWLESS but deal, the that. deal.

Bonnie Herzog

What's now last changed the guys? environment year for like right instance? since dramatically it Has you

Matt Farrell

for to the we anything in as simply generally to think that particularly respond way a the that's where sale, aware of. buyer. is we're that's are that U.S. I regarded because And best

say, lot was a like would in no us than So a But it it's get people of different process. year the to I ago.

Bonnie Herzog

All right. Thank you.

Operator

line Bill question the comes Chappell And from Thank next from you. of our SunTrust.

begin. may You

Bill Chappell

Good morning. Thanks.

Matt Farrell

Bill. Hey,

Bill Chappell

up Just to as couple would delayed, give those you products and terms innovation we on half of a of second that a comments. And where of being in to pipeline innovations? kind move of the your to was? where follow ideas from some expect lift maybe On

Rick Dierker

that's - the No clothing. And CLUMP dark mentioned one a Yes. there is OXICLEAN CONTROL, CLOUD which was so dark for other is cat & I've new protect, SEAL the our litter. additive

are those pick now, major in of ACV second expect distribution. quite a So And to the low low the we two we up that's the with resets half, some where right have going bit.

Bill Chappell

a dollars? of bigger see the I safe cat the the innovations bit say mean, litter it seems And little more smaller? would to that OXI be where marketing you is

Matt Thomas

been bigger Yes, that's has to fair, be I more right? us, litter -- think, for

Bill Chappell

pricing back. benefiting Is more we a see And pricing, Are of we being then, into it to it in starting move is -- into lot terms XXXX? you years been you some as past. that it's the be deal in can seeing the of there what and or dealt as are rational your competitors it fall, expectation It backs the than much from seems move not seems round -- of outlook? are and you all the another

Rick Dierker

Yes.

I four been to only prices. everybody's remind got so less think -- of it's you higher remind, got to or quarters

So something been were under it's new umbrella. remember price justified. those living And increases cost we've all like now price this

many maybe I muscle for time to think for maybe future or So, sprung companies some life. think, atrophied really the that at was years that now, who do the just I dormant in has CPG

Without requirement that, go is you with cost for price there likely won't I So people increases. price justification. have more to increases. think be may still forward cost justified But the

Matt Thomas

the that actually the remember that are is And that this XXXX, and till up go if to you wait to retailers Right? XX% to is happened. what forecast prices So have in says, is go even you because what can't conversation. happens got expect to commodity, same first say,

Bill Chappell

a Got to trying further conversation get I that, any it. to aggressive. certainly of other P&G. trying there's And the thoughts. laundry, Henkel's be comments competitor more about on know just But in of lot terms the of

the low-end and high-end seeing If mid-tier the more products? type that on feel or that's -- might more that if Brazil, you Sun on if you're priced at like be

Matt Thomas

year-over-year. Well, is guess, if deals earlier as for and I on just same both said down, rolled Simply, Sun section I QX look an The Purex at value sold you Persil. indication, that Tide true

there. on might pulled suggest coupon sold we or there's that on have back been on But deal transferred So would over that's price. pull-back

been for is absent side back of this that, many came unit year, coin years. having market at the least Purex other The dose with the into

and innovation of good on compete people it. see rather example that much would be So a

Bill Chappell

Got it Thank you.

Operator

next from And America. Bank question Olivia of the of you. line Tong Thank our from comes

You may begin.

Olivia Tong

you since business. if the was team you're WATERPIK, a color bit at you. on Thank with provide could Great. that more I wondering

Just into adjacent potential sort of other expand brand. opportunity with higher to just penetration that your consumer, Thanks. categories of ahead, well as beyond

Matt Thomas

since people up Collins is out been in people This XXXXs. experts there's a XXX wonderful Colorado, Fort Yes. here, business in business. technology. are WATERPIK And has around the water-jet the

the invented WATERPIK. they So

-- as In a and to [ph] American the of fact, a back a of fact, the foreign gave ingenuity Lyndon kind fun in as dignitaries 'XXs, Johnson it's WATERPIK innovation. sign

fact Olivia. So a for fun you,

that business a off consumers. really of learn bunch United communicating the it dentists program to in benefits States result four years turnaround a years started as maybe is to WATERPIK about the of ago; and this it a hygienists really and three ago, recommended to instituting take and then But of

a runway business. So for this there's ahead lot of

household If toothbrushes. the battery-operated would water say toothbrush in XXs, at the are you more look low-XXs. in the XX% penetration have And powered what's flosses

And international today. if the opportunity we're far of A size grow So big of really XX% business why the the business. the of what to is the be opportunity U.S. only of we a U.S. were the There's is opportunity. in reason should business lot going exceed then no for. shooting that there's the lot U.S. International outside see to

now you the and and the health. greater water opportunity interest Colgate all on in and that directed flosses category, behind Crest flosses that that think water So toothpaste. we and with both just gum these the even focusing in And had are that's see science toothpaste have products gum towards health

be the into in that want categories. really now other to to have we branching don't I nail going So front We need say opportunity of us. no right there's think to we're

Olivia Tong

you a dramatically in household helpful. growth year. That's you spread pretty And view talk How could if in to whole total portfolio about the lot better on guys, pricing house bit and assess consumer you side? M&A while do we what brand a portfolio. the what's do between But household. care Maybe their the with other about line about it. and personal talk and company? proportionately the contribution review your and Obviously, the go forward? often is The the Got this a

Rick Dierker

as I Rick. you're the to balanced of household personal say the that between more would be business, year. just going back is on care this in see narrow should we the Olivia, pull household half growth back it our gap and more

Matt Farrell

line on we we We long the algorithm we're that. term. And to that grow our X%; grow that our line But true been term it is longer acquisitions ability that -- bottom Olivia over care a think do the than And we optimistic household Yes. and X%. about side We've can longer of has around care personal lot top time. personal lot our -- on been is have business. our a have bigger portfolio

have don't steady we we're a a flash, lot company. So as of but

bet company year revenues And of that And year today hit So have. with XX XX that people invest have portfolio year brands we're and add those we can't profits. it. we to XX make tomorrow. going to to going after to And the numbers today, our continue XX% up the after in we to are

we to is the so cash, a flywheel, which portfolio. We have such can brands continue to add good

Olivia Tong

you. Thank

Operator

Thank you. of the line Teixeira JPMorgan. next Andrea question our from And comes from

begin. may You

Andrea Teixeira

Thanks, good morning.

is question the So organic my growth sales bridge. on

a And had related because expecting delivery. pull your heard bps deceleration online. And second just X% from that, has Given in some levels quarter, the of competitors of service to you have that occurred? about growth match why inventory to are XX calling one-day of forward the you the of we the

So into in XX, be particular, and X%, say in down? if slow you as you you're precise the continue to you X.X% grow impact you in quarter faster saw to call your heard did XX, a similar in a that e-commerce banking as had for that we we

algorithm? I And update you a kind on also above -- follow-up Rick's long-term a also squeeze the bit on please obviously gross can can can showing international also a sequential commentary still you little your but And if on deceleration, of just it's margin.

about the you're better, Thank said inflation seeing to hedges But starting XXX commodity quarter, outlook but have next you you or so basis the COGS. is You in on fourth like points you the if saying obviously just benefit the are you. that year?

Rick Dierker

Andrea. my going a long It's do to best. I'm Okay, list.

the implied of the for stack that. I X% first the the half year. second the So growth kind on half. basis was first already we're growth deceleration half, It for X.X% points. and comp down of it is half X% of half in because in bps XX from of the XXX number first second half, the XXXX. back full XXXX was of X.X% the It's touched getting sales X.X% was

the as We relative condoms. for retail QX couponing. in could well did I anything and tell said out a way not or anything on inventory. call spending to you bit XXX Another trade e-commerce. if about there's as inventory out anything would gone promotional of never call we We little have basis and other points retail both pre-buy

large right but that's one-day And shipping, call a e-commerce it never material. so small that that would to going impacted there's or maybe, us is out negatively we in you're impact QX. But by and call

on you it's we model, the guys three the excess the time think again X.X%, think year proven margin, have outlook is I slight Again, our tell that would for evergreen again have time you're those that to but there for international. Number So deceleration, business. is delivering outlook I raised a of saying deceleration. we or a maybe full right? just that they're and I in

commodities. up incentive and tariffs that one-time QX, the XXX and to up fourth that we through big in number was QX, in The half. a but of points I coming of move are having bucket were in comp And well. we're increases. XXX we in cost That of one largely, and where points basis going basis it's points the means, the commodities, there, XXX bucket implies prior We inflation/manufacturing in really there's points that's But said as fourth not right. I at QX a coming in there's basis big also if manufacturing second to then are we're up accelerate bucket XX as from year, also costs in you're other basis because some be going basis margin There's it down, increases. labor a year we're points big but down about XX gross that, commodities one there was think benefit.

little gives that more clarity. a bit you hope I So

Andrea Teixeira

No. That's helpful. Thank you.

Operator

from our Mark And of Astrachan comes you. question next the Thank line from Stifel.

begin. maybe You

Mark Astrachan

first we of spend half It done increase kind when the into marketing back do you've to morning, impact specific to your historically ask everybody. through the that Is to way Thanks. cadence next guidance. guidance any get on don't there certainly to flow the number business? kind to the or think year? half head for be the next going expectations innovation given Wanted things in of directionally want any I Good you just about looking some there's given into thought in benefits of kind like the this without how material directionally year, think for about seems maybe year. spend of but as of at

Matt Farrell

Yeah.

We're mentioned of so get I've Olivia. We in in of points long XX.X. generally, earnings of and we're have are we basis response that going an you and We evergreen the operating gross But not earlier X% kind growth contributor business And earlier, margin term. organic generally, know, XX.X, X%. to around XX.X, a the model marketing of to to a growth sweet expansion as is that share said as per Rick said XX spot. expansion mean annually. I on margin

to ask after, between So you that? working and what it a be as next to were XX.X% percentage us. say, year been XX%. after year, marketing probably always the us, your if the it's do spend That's for someone going think We'd year

the as power XX money? far lots of We choices. where in we brands. we're of have we We -- put As and a got categories got lot

know Rick not do are in on I to more the R&D, And one mentioned flexibility brand also for reinvest we intend innovation. have I the or things We of just brand half. we focused second but don't health, said So always in in marketing we do health. but that it,

areas of So R&D, cybersecurity. go, even to sustainability lots marketing, analytics, automation,

we and have we've that's second evergreen So in got our how I we drive of we'd fact, the But more of lots this half we exceed long-term, to drive materialize. money important should business -- to the the -- places the too. made company reference That's we're like return? year, year how, that total going model put shareholder to

Mark Astrachan

through I terms the spend incremental guess, on revenue how -- marketing in about look. growth, the just market would of I Yes, the more thinking impact flow was

maybe sort of So, that? on any have color you if

talk Asia, I China just far. Southeast most in distribution in of ask unrelated That the to are on gone would brands figure and have kind the could international, question or traction an that what so about helpful. market trying Maybe far if to sign just a wanted seen gaining product? acceptance especially brand so have out Then you be bit how new distribution you've the

Rick Dierker

When we liner model. evergreen marketing, just spend. our incremental Yes just marketing on a one it bulletproofs the spend

the expect. hopefully for investments we or that's beat hope what marketing, what for we hit model we organic incremental yes because that's of revenue and on evegreen So potentially our

Matt Farrell

Yes.

public As China to year the far By on a some toothpaste and acceptance we a -- with hygiene. signed dry that company good. off and Southeast the a large the Shanghai, Jahwa. we're with that are is ago. really CPG Asia, start as China entered with categories good soda, we company shampoo and And baking That's

flossers gummy outs also Southeast call would particular in and water Asia that be vitamins. in in and Two China

So Chinese and consumer. they Asian seem Southeast to the be really a the with hit

China think I can So our be got is part the Asia big think Southeast going We story -- forward. strategy and working. a of I

Operator

further And closing turn at no to this I'd remarks. for I'm the time. call showing to like over Matt questions

Matt Farrell

folks. right All Okay.

terrific a to and talking quarter. to at quarter looking had everybody we of the end forward third the So

Operator

for disconnect. Ladies and may a you This great day. today's participating Everyone gentlemen and conference. thank program does in all you conclude have the

Church & Dwight (CHD) 31 Jul 192019 Q2 Earnings call transcript