CHD - Earnings call transcript Q3 2020 | Church & Dwight Co., Inc.

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Operator

Good morning, ladies and gentlemen. And welcome to the Church & Dwight Third Quarter 2020 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 risks 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, sir. Please

Matt Farrell

We turn joining We We morning, we to the to as I'll people shifted I'll HAMMER done, of our to moved for to we'll we've messages. with HAMMER everyone. for Rick our company. & Good important opportunity the The set And us our QX And and soda. call CFO. & Rick, laundry class a records investments Thanks trade. and retailers. that open of Okay. consumers. changed focus an most increased production is review are pandemic VITAFUSION, agility on for categories today. has display when ARM And us online baking over our a ARM marketing begin results, call communications up the to new questions. with given the

the Church our manufacturing and crisis in their the and opportunities of hard employees proactive by been for new with team work. all externally in showing we've capacity to is of co-packers. I our the efforts The paying seizing agility So Dwight in off. thank presented resilience are want increasing & our Their up are and plants results.

to retailers, of continue our employee helping priorities brands. live be needs ensuring and the strength the Our the safety, we of consumers meeting and communities where

has safe, chain. warehouse done to and keeping exceptional which ability contributed plant to Our laboratory have our employees our job operate supply an

doing running company. employees continue a and to super office work job are Our remotely the

many $X.XX. last by X% higher X%, our were Reported products. higher sales about and driven X. QX in operating cash significantly for by sales XX. flow of Organic was in the exceptional Revenue, QX talk another and results. consumption. quarter. the let's than demand increase driven now earnings So adjusted grew significant year, EPS was all growth was

by online. year sales QX, XX% have grown. In be online. of also full sales online, strong gummy were targeting e-commerce, to One COVID Regarding our as positioned year it be online X% This of sales. example we and retailer.coms and pre QX our sales XXXX, well consumer would was increased year In XX% were began already In online the all we XX% as XX% XX%. year, we online. a global expect QX, Recall, percentage full X% about vitamins. QX

full year to the expect XX% be we close So as actually to well.

Soda, OXICLEAN, categories and in With respect positive double-digit consumption pregnancy another & gummy HAMMER is our X%. in FLAWLESS, laundry There Response shopping L'IL spot, continued We will a First Water issues. XX stock of There was litter was and consumption our conduct that consolidating consumers. out ensure bright in on Consumers NAIR, of remain delivery is at the run year-to-date that cleaners. as actually. based continue kits have of ORAJEL, will to in generally We CRITTERS cat vitamins, balance up they flossers broad trips Baking time. couple growth consumption weeks shipment continue saw had patterns, growth and Household, In face are and a turned HAMMER websites a our X% & enough surprises consumer QX. to business ARM consumption If brands, stockpile purchasing we report and at to is in we slightly product which research here, habits up VITAFUSION U.S. QX. the consumption ARM concern no stores they for brands in look compete. to and we that

advertising. address Although to this with our learn to lunch intend activity curtailed, and significantly continues to we incremental be continue

with improved shampoo flossers down down sequentially consumption XX%, down we of health and dry social CRITTERS sequentially greatest heightened QX. remains focus our compared consumer made water L'IL but to were TROJAN consumption consumption in gummy and The VITAFUSION vitamins from to is QX, distancing, expect VITAFUSION growth up was and wellness. the was consumption priority. X% higher. was any have saw L'IL but addition when to when and XX% even doubt BATISTE QX another we also brand of In XX%. health impacted in wellness XX%. down that improved on benefit There's consumers category consumption the QX, no by of CRITTERS, categories

also And third-party well days but have consumption. to But and if heard positioned. recent of high. they And XX health to may habit. levels grooming all form will of tell, expectation advantage new in consumer translate demand on you capacity higher conference, takes behaviors cooking gummy online only home it that a new into Our are wellness, we will endure routines. consumer will is new take of believe coming are vitamins late focusing new and research that time time, these for this we a investor suggests QX cleaning, permanently remain have we Consumers me trend. over if cite do At

words label. Now few private a about

exposure have for label second first, and the limited generally Private to third quarters remained our is And categories. you international. this unchanged As to know, now of five private label year. shares

of business. in GMG GMG international October, in and Group growth and and double-digit by our quarter, to Our our due our the X.X% poultry primarily Markets through driven off the came growth continue Specialty Products start, is business Canada That's After contracted QX, to quarters consecutive another with In business Global segment. business Europe. see Canada. strong POS to organic in strong strong growth, in three our we recovery

half, to compared products. & ARM ingredients clumping Innovative typical lighter increased HAMMER We've POWER regular launched turning Gummies. vitamins described Simple, second And which which consumer HAMMER release. gummy we've products, a to XX new new litter. in launched our XX we new press litter, liquid even ARM number XXXX, plus a capitalize And for new cat Now six immunity, VITAFUSION launched many has to Elderberry In consumers AbsorbX of economy. launched which XX% is interest on new ingredients in attract this ZINC detergents. than are to and & & we litter, launched Clean in products. the our continue products only water, in will to

Now full let's evergreen growth X% of outlook. EPS year We're adjusted We an the growth. XX%, now target our having to XX% exceptional is EPS year. above expect to of turn which far annual

to to performance, X%. approximately sales strong year our be approximately sales Given be for full we raised and outlook have our XX% growth organic growth

mentioned in to spend increase As behind second in our the company. the marketing evergreen the the past, long take Church order model. sustain we incremental took products in our new we opportunity made to In managing we our times view in & Dwight, and the many investments half,

It's up XXXX. we'll wind degree our safe putting say detailed have model we In together year. a high provide outlook XXXX to meet our are we confidence As plan. that February, for of evergreen that next in we we the year, our will

both a essential And to current conclusion, are great remind times. from confidence we about Now positioned in stand well would have Dwight. largely categories thing The everyone our in reasons & company in do to have in environment. I many is few play which we The categories like the benefit bad Church that we to consumers. of economic good the and to are to

of We have products. balance a premium and value

growth well our common resources, And with TSR-accretive coming We're to power we be to we've best exposure the the finally, categories. in we ever. private off have Our than to label. company of low have are ever strong continue balance that our the brands two perform and number acquiring open the we believe had. number some sheet, stronger a in quarters ambition is one or ensure the businesses. sense And We to agile brands future. more our and And

you Rick third the quarter. is details Next on up to give

Rick Dierker

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

an Third adjustment, $X.XX quarter excludes X.X% compared XXXX. to grew acquisition-related in adjusted to EPS, which $X.XX earnout

continue previous X.X% Stronger-than-expected increase reflecting earnout and by unfavorable sales earnout As by primarily continued partially consumer by support. spend calls, sales X.X%, the quarterly of our Organic incrementally volume mix product consumption. XX.X%, in Reported demand performance we up up for marketing. will new a XX.X%, discussed driven the was pricing, growth products. revenue offset of of was increase Volume by until higher product the was driven the to a driven in period. company conclusion allowed on adjustment

the let's segments. Now review

higher WATERPIK oral vitamins, organic organic stain by liquid Domestic, largely increased Consumer was gummy fighters. asked XX.X%, Nielsen results. HAMMER to products, OXICLEAN laundry & sales our growth Overall, reporting led CRITTERS to ARM volume. get We due to First, care the and L'IL VITAFUSION and bridge commonly detergent by

shipments consumption offset lower in good news untracked both inventory. Global X.X% case. XX.X%. The a to XX.X% basis for higher basis from great couponing this In due is, quarter, and one growth to price flat low channels, for recessionary We primarily point increase double support volume, are international driven by help sales growth might recovery that delivered is points not was consumption XXX drag to QX. of our Matt, That Group digits. was of product Consumer business as and tracked organic our a and International This by was from in strong Markets organic in is products. primarily an you Canada. compared online, heard new assume mix. This environment, the the XXX from balance, had Growth retailer brands from

and was offset by by in production food primarily X.X% lower sodium lower business. business, our animal volume, sales For The organic decreased SPD due non-dairy to volume pricing. driven bicarbonate the higher

gross Turning margin. now to

XX Our ago. accounting. XXX and acquisition third drag a was XXX gross quarter from point point from impacted a decrease margin Gross year basis point a margin XX.X%, impact basis by tariffs from was basis

the points points of a well a gross inflation higher costs, plus price, higher manufacturing XXX points points and In from of mix, a XX QX, addition, drag out COVID XXX programs, margin is by from distribution as offset productivity costs, to volume basis as XX for basis round basis basis of drag costs. bridge plus

now was of $XX.X invested behind points expense percentage our million to up marketing. we Marketing net brands. Moving year-over-year increased XX.X%. as to sales basis XXX a as Marketing

XXX our primarily SG&A to due to And points by a decline million decrease higher to lower And benefits cash. $X.X adjusted from income expense for SG&A, to quarter exercises. rate year-over-year, stock compared lower the effective sales driven turning was for tax, to expense due leverage basis growth. primarily now was million in interest from XX.X% of points, strong XX.X% related For basis Other option tax interest XXXX, in QX all rates. $XX.X and XX decreased

cash operating increased in XX% the $XXX due cash nine months first XXXX, For higher activities capital. million to of from significantly improvement earnings an and to working

As was XX, cash of $XXX million. on September hand

CapEx primarily we be began to laundry, approximately to year capacity, Our manufacturing on expand plan continues million focused and vitamins. litter full $XXX distribution as and

sales of September, Barclays investments. mentioned next X.X% the expect in back the for step-up couple capacity-related a we conference these to at of As years over CapEx do in I approximately

addition, In release, as resume future. read position, you in the strong to company due cash the repurchases the the may in stock

approximately we QX, approximately expect sales our of Matt strong reported have For categories. organic we of sales X%. mentioned, as And consumption X%, across growth many of growth

We Turning half. margin. contraction to in the previously XXX gross basis second called point

Now primarily is nonrecurring down basis due change costs. we're chain The points. to saying XXX supply

significant for We sales, year expense, terms also of have and step-up which called implies percent the flat QX. we of a expect in in

tax lower a anticipate rate. also We

year approximately full result, X% for now up versus our sales expect X% adjusted And We outlook, which the $X.XX million, with to share, our our as previously operations to $XXX to previous year raised for up range. growth we we now our cash a sales ago. is earnout We're XX% year X% to EPS above to per growth, As we outlook to and approximately acquisition organic year raising exit excluding X%, outlook. XXXX is be from QX XXXX adjustment XX% from which also XX% full the expect $X.XX momentum.

Turning to gross margin.

distribution basis the incremental We and WATERPIK. impact expect be costs, the XX due investments down to to points higher and of acquisition gross capacity year, primarily accounting, margin COVID tariffs the on for manufacturing

we was That to extended As XXXX. and were not XXXX. X back tariffs XXXX, exemption tariffs, QX exemption up Tier remember of for as caught granted got in in expired we in which

to work continue that on mitigating impact. We

margin. said on points gross basis gross plus of the half was down two I or margin. points basis XXX the year XXX was Previously, Another and the word first gross have half on second margin on

our of capacity, a investments half Examples were walk heard so of logistics as as to for second the quarter surge and the through you in engineering provider, inventories, year. last also VMS then quarter, And flat storage automation, on investments was last we outside XXXX. me outlook other well analytics. consumer making third-party here new research around included handle costs outsourcing preliminary as And

or half calling that the points XX for the down XXX we're the year, for implies now points XXX changed what quarter. So basis down basis back down points and basis for

nonrecurring costs. supply some have chain We

Here are few examples. a

adding XPL mentioned sales. distribution the growth, such, wasn't quarter, quarter, And First, XPL outside that because the center. a we're of as outsized locations stronger In and again last distribution duplicative I center storage our operational. had new we new had

costs. So through going in for had we couple a will trigger We're And buy that write-offs make-first period also decisions. likely in duplicative process of of time, asset the of a QX.

have due to higher And We plants. year, COGS. that incentive the finally, results the training comp across through lean cost great flow this

So raised to XX% year our XX%, tax to are our and full also rate XX%. expectations growth adjusted EPS we

through we're spend to I outlook, that the FLAWLESS. a want Now on also minute

adjusted movements the an of quarter the reported we As earnout any million the in in exclude earnout release, in in had We you $XX saw earnings. benefit EPS. approximately of

color on that Some swing.

business earnout excess that million upfront XXXX target That represented for CAGR year-end sales. XX% of of for million to trailing of sales. $XXX we a off baseline bought $XXX a As tied a $XXX X years in million of and sales backdrop,

Our for growth closer CAGR future. on And revised And consumption X this strong is such, past as the indicator earnings still the this liability months X-year comes and We're a the great business. down business up. positive to go earnout X%. the for is

As would company any enter as be you is heard XXXX. I And well from and take questions. that, with to Matt, Matt happy positioned the we

Operator

Bank [Operator ahead. Olivia Tong first go Instructions] question America. from Our Please comes with of

Matt Farrell

Hi, Olivia. Are there? you

Olivia Tong

you hear Can Hi. me?

Matt Farrell

you I Yes, hear now.

Olivia Tong

Great. Okay. Good morning.

about a the some talk to expenditures. want I bit First, little of

brands about you a just about it the the little and of advertised, and more marketing, e-commerce you're buckets Thanks. key spending as making of bit talk depth is can more whether that being on investment mediums frequency, First, well?

Matt Farrell

our advertising moving now and XX% Yeah. accelerated online. year moving of year-after-year. because this And it that's right been digital, Olivia, of more is about consumers was up

now. where as a we of big far couple right As invest, have to launches

new HAMMER typical laundry I It's we platform the future. script. and in ingredients us. in plus ARM to a & got can to six in It's think ingredients be SIMPLE, platform have & the CLEAN the that's many the build opening as a We also and for described comments compared water detergent, going on for we

SEAL And second is spending & a & So behind cat the we've been it. ARM litter. HAMMER That's ABSORBx. new CLUMP

over had a haven't growth the been years. strong category. litter We cat of the in there There's a lot

existing brand-new a lighter XX% we different that came So cat litter That's litter. has with a up cat substrate. than our

getting So behind that in second half. we're the

FLAWLESS of is It's salons that are volumes. at-home lower and FLAWLESS. are a obviously brand be closed would going have acquired that of we instead and third The people to new last an year. solution. to spas lot devices A generally turning

be have been well. money we've behind past which money on other building, we've putting spend. just typically to again, ability as in we done when And So FLAWLESS would the the the brand

Rick Dierker

growing comment stronger it's the last have quarter think brands be seven Yes. And and going were Olivia, to as did we I this our such, as is share would but just that, brand-building X quarter, to we right that ago, we a add, some even than of the exit year. stocks as quarter met of maybe of

Olivia Tong

seeing strong, a follow top obviously but organic Can the just a it in Because that maybe peers getting growing the they're line, flow SG&A? lot I'm too, I sales, but up, it to and off XX%, margin the on not does strength are of that through. on better seem close bit in very

bit Thank a you. talk can So SG&A? you little just about the

Rick Dierker

the transpired about you're investments. might we're that across line. last quarter, we getting growth P&L. the you Yeah, also SG&A, the think phenomenal because making we're right. When investments that not getting leverage talked sure. No, We're on top maybe

chain marketing We're we're investments, step-up. SG&A about talking talking investments. about and supply talking So investment about

we IT that to is we the so analytics years look at as company And bulletproof look or just can cybersecurity at or things to or come, we factor. one do many SG&A for

Matt Farrell

invest which across Yeah. a we there's Olivia, lean things no in can of Dwight shop, Church run & we very company. good so the shortage

R&D. Rick a and but the initiatives, all said, test are SG&A new in where These we plants, lot do just IT projects, office environment, product projects, items. So automation of learns, not as we got

Rick Dierker

Olivia, you still there?

Olivia Tong

Thank you.

Rick Dierker

Okay.

Operator

question next ahead. Kevin Jefferies. Grundy is with Our Please go from

Kevin Grundy

Great. just in a investing for on exceptional congrats the Matt, top mean, I an the morning, question on company. on is clearly year perspective. term you're planning in strong the guys. company's And clearly you organic strongest capacity. And Thanks. longer this guidance. I mean, Good quarter. probably year, the this history a from for line growth X%

to et going demand sustainably recognition here that your co-manufacturers, categories, higher with So in there's relationships key some expanding cetera. is be of

point. to expect you for this next year guide So I don't at

expect in the clearly, number, in well? that the should would is to I X% do algorithm You'll in longer-term February. numbers. appropriate it mean, investors or seem sell-side stock not as what's company like think discounted I do nor But that's revisit the

just could follow-up margins. then comment a And on you that. on maybe So I have for Rick

Matt Farrell

at-home comments, my details - was number also as into safe of right there's now, in at-home going for year, we the you or - the our numbers give next we the say year, know. next lot cleaning and the don't hit but typically being and Well, wellness, health to cooking. a biggest it's we'll tailwinds but grooming wellness in have But

the down of those brands next improvement an PC that's have do in also mobility tailwind up And brands those expect year, year. us. are an consumer that going All year for we this and to things are help for

Rick Dierker

during did high want know we we on confidence that Yeah, you XX evergreen hitting a heard sure read that to material we I year. our have of model Kevin. the of Matt through say degree I have make pages that, next call.

Kevin Grundy

of of With costs. higher and well the spending, increasing see you, a would then attention bit I'll be as as investors or that data. for clear. freight promotion, in return trade Got Rick, to respect A the one pass to couple getting we're starting from normalization little that it. are Very areas quick along. Nielsen

litter spending just talk even expectations be a a Thank household. you. And to appear a what and and then, your pass about Rick, planning Can laundry well, intentions, and it as you talk with I'll about freight from broadly guys little bit maybe You to cost respect you're that seeing maybe and perspective, behind little competitively? bit on.

Rick Dierker

go thinking is When litter. environment, and have the household, promotional Yeah. laundry household to and you about to

if was for deal laundry points. sold points So in you if you XXXX, QX, down deal basis was QX litter XXX like were down look sold back litter QX to sold litter, on and basis QX XXXX, Kevin, go at look on XX% and laundry and year-over-year, at X,XXX on XX%. deal was you laundry The and numbers

go at go laundry you laundry XX% deal, XX%. litter and going to at to at QX to you If look see sold on and litter you're and

So, But if a year-over-year, gap. in they've a is and laundry up litter. you look stepped still bit still at this huge

laundry for QX XX%. XXXX on deal So, was XX% It's QX. sold in

it's look QX, still So, XX% if you sold on it's This at on then XXX-point deal. also an XX% year, similar. litter, gap. And year sold Last deal.

gap XXX-point an both and litter. in So, laundry

as levels have still returned it's slowly normal, to has activity promotional well So, below in-stock but the improved, normal.

Matt Farrell

Yes. And impact right. add gross I is, that the would what just margin to of

promotional new stocks. to exacerbate XX points we we're on show the points we number In year, the [Technical remember, price, us half our [Technical half first good pulled first of closer back levels to a mix basis have to for points, volume of And second of XXX this the guy Difficulty] that a year, where out just would as products. average, or mix because that at trade return on positive want if normal ton the to up, started for was, of basis so. basis and XXX a Difficulty] supporting didn't is half, was The look and couponing price/volume you because

a contributor positive, still as margin. while So, a deceleration maybe Difficulty] [Technical on just

XX% all loads the [Technical And Your were way. industry up of second in all be - being question rejected. are was distribution. spot to wouldn't another up of [Technical spot or now rejected Difficulty] about loads that's picked Difficulty]

up. we some is have lanes, - right? good large the We a do are that have customers dedicated thing us, that part big a is significant For pick that -

the impactful And it's costs tight. I good are and end are we've But the more not network. of done day, managing or would supply distribution it's our a on us for so at tell you, as of their increasing. dedicated Brokerage Costs is because increasing. that just lanes. job But

Kevin Grundy

Thanks for the color guys. Good luck.

Matt Farrell

Kevin. Thanks, Okay.

Operator

you. Thank

is from Andrea question and with next Teixeira Our JPMorgan.

Andrea Teixeira

Hi, you. morning. good Thank Yes.

the margin of half believe, now. back as to on takes? assume tariffs, the mentioned the gave flow up especially you gross more to of the flossing? by that the seeing following least have as on water that you fair the puts Is in I the you to had into you're or be the in year, the in been hit assume Just gross the tariffs you just in now go tariffs the margin pressures, that first it lingering right, given were, - some and at of should commentary fair we that some year, Is that going Or it mitigating to some half of especially pricing started XXXX?

Matt Farrell

fair a it's No, Yes. Andrea. question,

in Of that there'll of is the tariffs in more that Matt's half, we're said XXXX, of year. would you to model. course, we half tried come to if outlook the give back next evergreen an hit the then back believe I we kind put pressure and comment But going the just of kind first be into to

can because manufacture margin an increase mitigate that things so job like where it's And whether as - we productivity. from, that, have mean how our to expansion, we does we to example, it's

has chain this an of supply fantastic all-time a in job. We terms hit year Our done high productivity.

great trend, program. to we think, is And that going to continue. good Our

Rick Dierker

Yes.

going there's way. be COVID the going keep in is the we always because mind, Andrew, of to tend you But pressure got The what to - can other tariffs initially. focus on always you say, to it's you. thing, on other hurt But also some to yes, remember

those So that versus in COVID XXXX high, be XXXX. as costs, won't

offsets. always there's So

Matt Farrell

could a if to COVID on just happens early ship me incremental in big as as let And trying we cost example Yes. you for part back cove us say, give much COVID an was up might product Well, of spikes to XXXX? you customers. what because

now built inventory, And that sure we so were have run flexibility we full we've more that Right to now than issue same out trucks. into capacity, building shipping that less that again. we we're don't make

Andrea Teixeira

obviously, distribution it's And thing the which, centers, right - then you're do. on to the

You're that, having a of hit you're the you're you're from on you you through to capacity and distribution? and trying when to those investing of think be also in lot get to those own money coming standpoint as the think third and end, you going production your all going that and parties alleviate a capacity, targets also would said called When out pressures non-recurring. that you on

Matt Farrell

the Yes. week. our we Well, this great the just news XPL from shipments is new did past first

almost so believe running be next of is year, full in and fantastic. And we'll QX board which we up

our capacity in So the overall That's that's of meaningful network. terms shipping distribution. a difference for

small to going in-house, For go the manufacturing, And we're it for as example, outside. for in going really be months. vitamins the up already QX an takes beginning that always that's do right, ramped if is specifically then about at something we you some XXXX. to But quickly XX of quantities good news and said outside

Andrea Teixeira

much. Great. Thank you so on. Okay. pass I'll it

Operator

you. Thank

Our next Oppenheimer. question Rupesh from with is Parikh

open. Your line is

Rupesh Parikh

quarter. Good morning. Also on a congrats my for question. Thanks taking nice

Matt Farrell

Rupesh. Hey,

Rupesh Parikh

forward? M&A some front. on out pandemic want given right the opportunities of I Matt, - start you perspective, what does guess now anything terms M&A. guys And change see going starting so in from new looking are you what just the to maybe seeing an just and the M&A at Curious just I you're hey

Matt Farrell

thought that's Rupesh, the next deal change. to the market come guess the as year Well, the in and of do criteria mid-November that the We half of for the looming. years, you time same be back December. there expect a election week a we in we've it to I I we don't end many did so that by point, know, At properties end a when the one started of year. that more as had between upon possible closed was still once may

respect hasn't that's But changed. would with to know it we say, criteria, I possible. So

Rupesh Parikh

then you And guys share mentioned that Great. buybacks. you resume Okay. also may

So fair is debt near-term? prioritize assume share it over you buybacks that to may paydown

Rick Dierker

you times got end net in mean, debt-to-EBITDA point Rupesh, X X.X levels by that still mind, our I EBITDA to are is - Well, year. keep to the of debt

So can no my both, problem. we in mind, do

Rupesh Parikh

last Okay. then question. maybe one Great. And just

thinking So just about margins there's been some around forward. question gross going

So headwinds year. this clearly, you have some

margin basis Like We decline I or promotional more? you it to tailwinds modestly do More that year? know. the depressing XX think right a is new level guess, base point we be is about look I gross level think margins? to from are year gross that as - it next flat? that the this also first guess, in have I headwinds base of lower Is How environment. artificially there way about don't could level, the base in quarter. a

Rick Dierker

next this year. Matt, heard January, February, mean, in through again, and we'll about you margin when high we guys achieving won't costs model, want to evergreen I as that detail. Well, and go outlook, you just COVID talked that are it gross be Today, we high with our our through that we go But confident we're in means extraordinarily in year example that expansion. the leave as an we think

Rupesh Parikh

Okay, you. great. Thank

Rick Dierker

Rupesh. Thanks, right. All

Operator

Thank you.

question Our from Lauren with is next Barclays. Lieberman

Lauren Lieberman

vitamin lap knowing, don't can using of growing, Consumer talk I line a in least that not of the the XXXX at has Domestic I assuming morning. sticky I I look being it in bit Good all be is XX% at wanted performance channel. top growth Thanks. to guys business. Great. to key high about Vitamins have right Nielsen, the I And is a a as look a growth of confidence know the have you full this it, with you think, habit. Because outlook. now. little the expressed maybe in degree part year contributing the taking of both

BMS for business So cyclical fairly the has I been mean, historically, industry. a overall

helpful time little outlook. that about different, from talk belief that perspective immunity is be this just why comes is people's the taking really degree vitamins you think maybe vitamins? So why really of can a persists you bit Thanks. I would that just to to that think pretty critical think that you be feels as going something

Matt Farrell

Yes.

high I think bit in estimate. a you're the XX% little

Lauren Lieberman

I Nielsen. using why to just Am clarify. try Okay. That's

Matt Farrell

Yes.

line You're a over the bit there.

I of grown time. result business, BMS. when this gummy think as pandemic. of discovered people you obviously, over have we to remember vitamins that's And And Gummies that, have were think bought a a the X% lot of I

have consumers in past. oriented a towards the than lot gummy were more they you vitamins So

not Lauren, So in QX, average, growing the that's one. XX% we're and XX%, In and QX. and category. consumption, QX. grew XX%. in XX% QX the category, as Number We grew And fast number we two grew is is on this as

consumers product. number one sold We're So we're are for We're brand, the capacity constrained. looking and out.

does don't possibility, as remarks, to return I So for back out while online, we right business I to my which capacity levels. get now. take said we're get would expect the to our the and If it on share, to a stick. anybody this in missing third-party I habit we expect new we're governor going is And a to soon current as like fair to thinking that off take the XXXX a But that's levels worry. steal

Rick Dierker

it. about X.X% out VMS, - to do X/X. you question do asked the just you usually this is don't we color, was of the since and on organic, give it some And directly, Lauren, we'll this, but

WATERPIK XX%. XX%, So the was XX%. the baking company's out was about was was XX%. Laundry growth XX%. about OXICLEAN, was soda about X/X of growth. about of it Litter

my quarter. in mind broad-based pretty this was it So

Lauren Lieberman

just the Okay. And Great. color. CapEx… on super helpful helpful, That's then

Rick Dierker

respect to with water wellness, WATERPIK that got keep health and to in think, mind, I too, thing, flossers. you other also The

the the a big second So sales as hit being they quarter took down as far year-over-year. in

- is a grow growing but that perennial is XX% year-over-year been year that bought business grower. have So versus XXXX. XXXX since a not we going is business this in it. That's And a to this

growth got you this both for of there's But the So get ahead WATERPIK. much reset kind so restarted us year and That's U.S. a internationally. in going year. of just next to

and So that's focus going long one on from to term, this another that's benefit wellness. health

Lauren Lieberman

for the and like couple missed vitamin, think and spoken about great. usual it, sales, a of you're That's X% it's - more X% And to the maybe is I've and the just sounds I to on party. years. It run going know X% Okay. of around be the rate specifics, of third CapEx, I though you've kind then but over up next going to

wanted I is think CapEx And was extra of higher for how just laundry a some think this year, to going more understand I continues? where you long CapEx because added lot color. of rate So get just that to this

Rick Dierker

approximately Yeah. I in X.X%. is my said remarks

in extremely many our So we - last I time or we and or were better the come growth categories. line and I That good, fully for be how well. already that's I said its late years, first within quarter - laundry, And utilized is line to and April. your we we a brand-new have four had just for about about right? had plans say it so talked X% but I no business think X% vitamins, doing about on there's publicly utilized. for one X.X% in just sometimes and did it's three laundry, think conference, early then, are at two We four we experiencing years And months, than - of lucky six year mean, litter just exception. is I not to March, laundry of fully in laundry. great And - we really, and a

there. example, to think know was I add you from Matt, in capacity we we X% consumption. the that on heard so quarter, as think have And it I Litter, an up

have products. great some new We

the we lay So for litter. groundwork need to again,

we For outside, you vitamins, volume within you're going you're said to if have but to go outside, months. go right, initially need you

want that those one businesses manufacturing. Over in-house the because expertise of have long in gummy term, have of course, to we that's we

Lauren Lieberman

for I Okay. That's great. it. time. the appreciate all Thanks

Rick Dierker

Okay.

Operator

Thank you.

question Kaumil with Suisse. Credit next from Gajrawala is Our

Kaumil Gajrawala

mind sales your pulling on to maybe Good - back how net this here into percentage XQ? spend also some given year, half a much you're spend, maybe plans you P&L the forward XXXX giving ad afternoon. increase Would context of into increase spend And the of of on ad the maybe more of year-to-date? the from your little us strength of

Rick Dierker

we that said full on the as year necessarily had because pull a Remember, have XXXX. I it we're QX comparable going think we basis, lots back of in wouldn't a in to Rick way It's stocks. to just of that be pulled forward.

sale XX% around and obviously was be So we the QX. of quarter, XX% fourth We're QX then level. we'll higher, change. in XX.X%. XXs, a a in as were percentage at And XX% spending our meaning

big So we at it's fourth launches. have product time. these new We to of coming have And again, coinciding two spending ones lot quarter. just a same behind in big the the happen

the our so in concentrating And effort we're second half.

Matt Farrell

have Yes. at And full we're to on The year XX.X% that you only we're said, And is it we lower ago. the XX%, everything of you the is, do sweet I from our it based now 'Hey, thing the where kind closer quarter, three if even to I'd And that last full said, put would margin marketing, a implies outlook math said - which on year, I range. end to add spot?' 'Yes, step-up gross months the and thought when that maybe was for I of outlook for at XX.X% is.' else, somebody saying asked,

Kaumil Gajrawala

of margins talked Okay. Got the putting more lot, us year. pressure like might pressure some half storage much they is duplicative And in temporary. a information to as next such I it about like to temporary? first But could much if sound to the some little continue the of from sounds understand I place? how such on and it. you're try Can better of the gave things, relates you it of margin gross some a bit we maybe give it - How gross into are just us a you is, the as of will permanent read some know but be of

Matt Farrell

costs be shipped, of that, rolling accounting. of of on acquisition I to go going headwind those say that good especially would first a been The a talked a year. no XX The No, a how right? couple lapped through We the COVID, there's inefficiencies just be drag half. it's out will FLAWLESS point all noise, I basis we're kind in we And accounting, and front accounting, has different - news that the on some which from acquisition be tariffs, we We've terms in should back the the of of probably Yes. this is would WATERPIK impact next question. year about in lines. fair early half.

few us, for significant. last few Commodities, So and has have actually resins us, - we've last that's been quarters. and up calls discussed the fairly ethylene, for this

a So nothing just a tailwind said, going will I kind offset That to productivity an headwind. year and will record was be be that. program, really new of which bit there. hit likely But a all-time is of this then our

just walk onetime quarterly not investments cadence. you going margin year. gross you would this at QX non-recurring for And of heard specifically, me next through, I'm into get we're point the tell discrete for to a I time that So are confident of in items. expansion those lot

Kaumil Gajrawala

Thank it. you. Got Okay.

Operator

Thank you.

Joe Altobello James. is Our question next Raymond from with

Joe Altobello

Hey, guys. Good morning. Thanks.

So have been very clearly that targets hitting Matt, net-net extremely which first in on your talked lot changes next clear evergreen guys permanent a of you habits, question about you. you to year. I consumer going you're beneficial confident in are know,

targets, I into on you top least the evergreen beyond? XXXX at need see to heading what those rethink do guess, line guys So to maybe and

Matt Farrell

the want give just us come intact everybody in assurance to a February next give year. evergreen Yes, few mean, We Joe, typically you got models we months. for with I these that out numbers. to

have come as how we - we'll is to As February. far high, with in high that out

Joe Altobello

said you days. XX Well,

you just period, think were kidding. that I So but beyond

on FLAWLESS. Secondly,

that but factors? How how of revised is is much much other a that terms coming delta from outlook, In still it's not the XX%. number, good X% COVID-related? of of And is obviously

Matt Farrell

strong. point, to that, know you I is business of And mean, So going but especially consumption that months. been it into is baseline were has retailers look strong get see now, the if right But the But consumption we're for for Yes. right, six closed right? time, depressed. and I for last jumping-off at just guys that. a that not was really mean, you this, period just really

it's a indicator. good So

Joe Altobello

Okay. last just could. And one, if one I

you online up, it last this I think, think terms mentioned In XX% of quarter, XX% sales, was was up quarter. it I

a do step think you we XX% do base that could forward? is increase plateau new year? that Or So you and think going this of penetration a takes off next back

Rick Dierker

the think sounds there - Yeah. I get is we more this people Well, rarely look, a not consumers thing that people use things get online is we it. could discovered months, as more and and more used of the going resurgence, and many discovering more found are now order it one that have and COVID it. like And be winter away, into it. are of there that And

and big because have just where XXXX think do year-over-year But quarter, this X% sales growth may I QX And is as continue, a had just QX. one online, much to didn't XXXX. time. QX of think do will more as spike you have I - So March X%. of this to Joe, QX to over We back going it you'll it's going be XX%. our went year, We

Now XX%. last going X% this to X%, X% year was or

had we - year, significant in our basis to going this is a online part So fully a be of future. XXX that but big expect this the pop we sales points, sales

few years. XXXX be we'll over a well in So

Joe Altobello

it. Got

Thank Okay. you, guys.

Operator

you. Thank

Our next question is from go Bill Chappell with Truist Securities. ahead. Please

Bill Chappell

Thanks. morning. Good

Matt Farrell

Bill. Hey,

Bill Chappell

FLAWLESS. question I on guess, first

it the outlook numbers there weak is around of that couldn't And change Or you COVID color else get the of in is payout? that something the on the you that to guess, were of, because and a start? any I need they the Just now? just the three-year - timing you seeing change to related where part make

Matt Farrell

Bill. Joe say just number, an in And question, our would extremely was it excess XX%-plus. a of methodology growth XX%. aggressive asked that It was was similar right? I original

So feel and confident good had had we've for sign really I of we because current as choppy little some like yeah, every right-size We Joe, consumption. bit that an a we in of business business economic those the said environment. closer we through and CAGR, XXXX, of it's gets week. to go X% plus have been end time to But that to expectations. the And up that day

Rick Dierker

be not contemplated, might as bright. business are for initially but earnout It the as been may big prospects the

to think acquisition the is going be a us. going it's for real good is we So math This work to - out.

Bill Chappell

spiking back that of other or to Well, at-home grow you. thinking, questioning, until contract it years at for Or need for even vitamins Got sense which makes are it of type year come couple But manufacturing contract on this categories continue up the you're internal in you in certainly, budget earth. XXXX know there Joe's would step categories more? your figure it we this to now, do of next how expansion where same areas maybe some CapEx for would mean vein at like you're they are we seem rate. the changing I like point out versus to look, next you the manufacturing faster?

Rick Dierker

tell the that, plans I'd company, good are a It's are question, in those the had growth question. place. for we've right? And the Those capacity a drivers. of fair those you It's keystones Bill. businesses,

We not outlook plans five-year It's just capacity it's forecast. And place. new those fast-forwarding on in like volume it's four, a demand. were of and have three, an that some already

Bill Chappell

Okay.

CapEx year budget you did for past change next over So, the your year?

Rick Dierker

for capacity laundry, reemphasize I as litter and Yes. and we're I for announced Barclays, today approximate that in next distribution years well. the and sales we going it Yes. of two at X.X% capacity that invest to as vitamins

Bill Chappell

you. Thank Okay, great.

Operator

is next Thank you. Astrachan And Please our from Stifel. Mark question go ahead. with

Mark Astrachan

I of of morning or in talked And just step-up it sort helpful. the XXXX, uncertainty, that pushing you good everybody. the it who's being retailer? you've is at that do of done looking of promotions So, could a about, you've any kind the Is promotional with out Is of that's it not think seem out be numbers, greater it some least to than Is of companies? would marketing, or of that both? but obviously, to on year, all ask anything know curiosity, because, got as how I upside in there? this sale activity, some CPG absolute? but lot about increasing activity, and to point goes promotional reinvest, Wanted into Thanks want to know

Matt Farrell

down earlier comments year-over-year. that significantly were sequentially, versus Yes. QX, looked that QX still you at if has deal increased but on it's My sold

litter to is laundry lower of deal XXXX. and on shorthand is sold both XXXX compared basis the points in QX QX XXX So,

So - of is a levels. and in-stock recovered the bit reason for that's because

from on doesn't of or be is XXXX, as but you're in could it up our the we a for obviously, thinking going creeping period trying what's figure it keep deal stay and opposed on on with benefiting that get to it's - out to where look, about affecting speculate update But XXXX possible when are because, everybody as the it February, deal to far happen lower right I time soon all that. to it's sold think promotion As now competitors too consumption. we'll just sold we'll seem year-over-year, to to

Mark Astrachan

Got it.

Okay. back And then just quickly to FLAWLESS.

payout maybe in at the legacy which you I standpoint, at-home closings focus terms given does consumption recent and your about quarter from more M&A all categories last seeing now why meaning this other versus you've times? guess, in especially So kind HPC the acquired on of businesses on increasing that of the the hardware thinking an changing of change salon picture, business some the building and such? questions, commentary given CAGR, And about your bigger maybe

Rick Dierker

impact take we quarter when and now guidance every quarters, - can tough macro part, at last of the are COVID accounting two in the go it says to need M&A. to it's do or is we I'll reason about Yes. the the through look then the environment it the last Maybe But first a quarter. Matt when there's haze closed. really, And retailers the - last talk

while And it And and little from happening consumption for trends. by, so you to just the of at bit as some because get actually retailers positive, start of closed of a prudence and baseline a the waiting a more trend. going goes being consumption we're time demand some - on lower was have to what's consumer is

didn't be, we a my every So, last now. because big baseline like we would into do we the make quarter. didn't the at quarter visibility answer adjustment it We look guess, I have

Matt Farrell

Yes.

As be far could of thought lot categories itself, investments made category there the in as tailwind. a we we've a

that's And device, important time. proven was and past over this be was that's to transition we bought back go XXXX to And gummies and health true. WATERPIK. we vitamins that true, you believed gummy to happened consumers gum become time. from thought be think if would because what's I be from so in but capsules And obviously a obviously we over we to And benefited we there a It more bought proved year. going we say to

stigma think women there's And there's going hair, solution. using and lot closed, the helped and COVID both been a going face a has time. forward. the devices it brows. at-home device. facial over hair devices pass with a we was to attached salons business that that the has When spas FLAWLESS, there of people opportunity - we discovered using We have So to remove removal because And being because using historically thought FLAWLESS think - is to comes

paid So seller to the out, a well all for for criteria buyer, high and how criteria we hasn't investments brand, & that's going got as it. work meet competitive of going multiple have will work be far far to the gross But same got you've both our either number one advantage. Dwight, able grow, to asset-light that changed, be Church as and to be the those the that's as a to margin, ultimately as and and have the

Mark Astrachan

you. Thank

Matt Farrell

Okay.

Operator

I Thank would you. And in I'm Farrell to to his call like for Mr. remarks. the turn not the queue. showing back any final further questions

Matt Farrell

tell Hey, for and everybody, we joining when plans. us you Yes. February, about looking thanks, to forward our XXXX we're today,

So thank you.

Operator

ladies you, Thank participating in gentlemen, and for today's conference.

day. disconnect. Have You now wonderful a may

Church & Dwight (CHD) 29 Oct 202020 Q3 Earnings call transcript