Edgewell Personal Care Company (EPC) Earnings

Management highlights

### Top Line Performance - Branded Wet Shave returned to growth in Q3 after transitory private label supply headwinds, confirming U.S. commercial initiatives are gaining traction. - Cremo delivered its seventh consecutive quarter of 20%+ growth, becoming a top three men's grooming brand in North America and tripling in size in recent years, with continued expansion on track. - Hawaiian Tropic gained 110 bps of U.S. sun care market share year-to-date, rising from the 6th to 4th largest sun care brand with the category's largest household penetration increase. - U.S. branded unit market share has held steady or increased in 39 of the past 43 weeks, showing broad underlying strength in core markets. ### Profit and Cash Flow Performance - Adjusted gross margin declined 30 bps year-over-year, in line with expectations. Higher-than-expected commodity and input inflation was largely offset by modest tariff refunds and 200 bps of productivity savings, with 40 bps of favorable currency impacts offset by unfavorable mix, promotional levels, and net tariff impacts. - Advertising, marketing and promotion (AMP) expenses reached 14.6% of net sales (up from 13.6% last year), in line with planned investment for new campaign launches; full-year AMP spending expectations remain unchanged. - Adjusted operating income was $53 million (9.3% of net sales), down from $63.6 million (11.3% of net sales) last year, reflecting lower gross margins and higher planned investment. - Adjusted diluted earnings per share (EPS) from continuing operations was 72 cents, flat year-over-year with a 4 cent favorable currency impact. Adjusted EBITDA was $78.9 million, compared to $81.2 million last year. - Year-to-date net operating cash flow was ~$47 million, up from ~$44 million last year, driven by working capital improvements. The firm maintained its quarterly $0.15 per share dividend, returning $7 million to shareholders via dividends in the quarter. ### Operational Progress - Private label supply chain disruptions that impacted Q3 performance in Europe and LATAM have largely been resolved, with July data confirming a return to expected growth trends. - The FemCare divestiture is complete, removing a lower-margin, capital-intensive business from the portfolio to free up resources for higher-margin core brands. - The firm achieved net distribution gains across core brands in fiscal 26, with further gains expected in fiscal 27.

Guidance

- Full fiscal 26 organic net sales guidance is narrowed to a range of flat to +50 bps, maintaining the original outlook framework after Q3 transitory headwinds. - Full fiscal 26 adjusted EPS guidance is maintained at $1.80 to $2 per share. - Full fiscal 26 adjusted EBITDA guidance is maintained at $250 to $260 million. - Adjusted free cash flow (excluding FemCare divestiture impacts) is expected to be $80 to $110 million, and adjusted net debt leverage is expected to end the year at 3.3x to 3.4x. - Full fiscal 26 gross margin rate guidance was modestly lowered to reflect a more challenging cost environment and lower Q3 international sales, but management still expects full-year gross margin expansion compared to fiscal 25, with material gross margin expansion expected in Q4 driven by productivity savings, lapping one-time prior-year costs, and favorable foreign exchange. - Management expects organic sales growth to accelerate in Q4, with international returning to mid-single-digit growth as supply chain issues resolve, and North America continuing its branded growth trend. - Management expects low single-digit organic sales growth for fiscal 27, with gross margin expected to rise year-over-year driven by portfolio changes, productivity savings, and moderating inflation, though official fiscal 27 guidance will be provided next quarter.

Segment performance

Wet Shave: Organic net sales declined 1.9% year-over-year. Private label supply disruptions offset branded portfolio growth, but branded Wet Shave returned to growth in the quarter, growing nearly 1% while private label shave fell 10%. U.S. razors and blades category consumption increased 160 bps, but overall share remained pressured by private label availability constraints, with branded share down 40 bps. This segment contributed the majority of the firm's core shave revenue, with branded products now driving positive growth after transitory headwinds. Sun and Skincare: Organic net sales increased 5% year-over-year, driven by mid-single-digit sun growth in North America, strong global grooming performance, and continued skincare growth. Key brands including Hawaiian Tropic, Cremo, and Wet Ones delivered strong results, with Cremo achieving its seventh consecutive quarter of ~20%+ growth, growing 70%+ at the top U.S. retailer in the quarter. U.S. sun care category consumption declined ~2% in the quarter, with overall value share down 60 bps (a 110 bps gain for Hawaiian Tropic offset by an expected decline for Banana Boat); year-to-date through mid-July, category consumption is up 1.4% and overall market share is flat, in line with expectations. This segment contributed approximately 30-40% of total organic net sales growth in the quarter. International: Organic sales declined 1.4% year-over-year, impacted by the Middle East conflict, temporary private label supply disruptions, and a weaker-than-expected start to the sun season in Europe and LATAM. Excluding transitory impacts, the segment's underlying run rate was ~3% growth, in line with original expectations. Nearly 70% of international markets grew or maintained dollar market share year-to-date.

Risks & headwinds

- Global operating environment remains dynamic, with volatile commodity prices (particularly oil) creating uncertainty for input cost and gross margin outlooks. - Consumer demand overall has shown modest slowing and increased volatility, with category growth remaining uneven across regions and segments. - Promotional competition in core categories remains heightened, creating pressure on market share and margins. - Transitory supply chain disruptions impacted near-term results, though management expects these headwinds to be fully resolved by Q4. - Geopolitical conflict in the Middle East created negative pressure on international sales in Q3.

Analyst Q&A

• Q: Management expressed confidence in Q4 organic sales acceleration following weak Q3 international and wet shave performance. What is the basis for this confidence? /

  A: Management noted Q3 weakness stemmed from transitory private label supply chain disruptions, which reduced international growth by 350-400 bps, leaving an underlying run rate of 3% growth in line with original expectations. These supply issues have been resolved, and July early data confirms the expected return to growth. Management also shifted planned AMP spending from Q3 to Q4, providing additional support for Q4 sales, with all branded segments already growing in Q3 and expected to continue that trend into Q4. International is projected to return to mid-single-digit growth in Q4.

• Q: Can you comment on whether gross margins will rise in fiscal 27 following the FemCare divestiture and the expected strong Q4 gross margin performance? /

  A: Management confirmed the FemCare divestiture was done specifically to eliminate a gross margin and profit dilutive, capital-heavy business, reallocating investment to higher-margin core brands. Structurally, gross margin should rise year-over-year in fiscal 27 driven by productivity savings, moderating inflation, and improved brand mix, though full guidance will be provided next quarter. The large Q4 gross margin uptick is mostly driven by lapping one-time prior-year inventory adjustments and costs, with the underlying structural gross margin run rate already healthy and consistent with Q3 levels.

• Q: What is the source of international weakness in Q3, how did Schick/branded perform in Japan, and what is the outlook for the Billy brand? /

  A: Q3 international weakness was entirely limited to private label shave in a small number of European and Latin American markets, while branded shave grew in line with expectations. Japan continues to perform well, with expected mid-to-high single-digit growth for the combined H1 period, supported by strong innovation on core Hydro lines and upcoming new product launches. The Billy brand's core shave business grew low-to-mid single-digit in Q3, continued gaining market share, and increased household penetration, with growth naturally moderating from its earlier hyper-growth phase. New multi-year innovation cycles with breakthrough shave technology are planned for the brand starting in 2027, and performance is in line with expectations.