Energizer Holdings, Inc. Q3 FY2025 earnings call

• Strong third quarter with results ahead of expectations, reflecting work to strengthen the business over the past few years.
• Categories resilient despite cautious consumer; solid performance in batteries and lights; Auto Care softer but Podium Series off to good start.
• Tariff impact improved significantly; current tariff rates lower than prior guidance, with a plan to fully offset earnings impact from tariffs in fiscal 2025 and 2026 via pricing, cost initiatives, and production credits. Production credits expected to contribute $35M-$40M annually to gross margin, net earnings, and free cash flow through 2032.
• Acquired Advanced Power Solutions in May, expanding manufacturing and European business; expected to contribute $40M-$50M in net sales for fiscal year.
• Returned $84M to shareholders through dividends and share repurchases; repurchased $27M in July.
• Increased outlook: adjusted EPS $3.55-$3.65 and adjusted EBITDA $630M-$640M.
• Organic sales growth, gross margin improvement, and earnings growth in Q3; fiscal year expected growth, with 7%-10% EPS growth.
• Acquired Panasonic Europe battery business, transitioning customers, expecting $40M-$50M revenue for full year.

The company had a strong third quarter. Key segments include batteries, lights, and Auto Care. Batteries and lights performed solidly. Auto Care was softer due to mild weather, but the Podium Series is off to a great start. No specific revenue contribution percentages were provided, but batteries are a major segment contributing significantly to the business.

• Increased adjusted EPS outlook to $3.55-$3.65 and adjusted EBITDA to $630M-$640M for fiscal 2025.
• Expect growth in gross margin and 7%-10% EPS growth for fiscal year.
• Production credits from U.S. production expected to contribute $35M-$40M annually to gross margin, net earnings, and free cash flow through 2032.
• Acquired business expected to contribute $40M-$50M in net sales for fiscal year.

• Tariffs initially posed an impact, but mitigated through pricing, cost initiatives, and production credits.
• Consumer cautiousness affecting purchasing patterns, which can vary by category.
• Retailer inventory levels varying, which was considered in Q4 guidance.

Q: Lauren Lieberman asked about key fundamental underlying drivers for the quarter, next, organic sales, profitability, stepping away from production credits, then follow-up on credits.

A: Mark and John discussed organic growth, gross margin improvement, earnings growth, tariff impact improvement, production credits, and acquisition contribution.

Q: Rob Ottenstein asked about Advanced Power Solutions acquisition in framework of manufacturing footprint, capital allocation, CapEx.

A: Mark and John talked about manufacturing network changes, capital allocation prioritizing debt reduction and share repurchases, CapEx expected to be ~2% of net sales.

Q: Bill Chappell asked about competitive landscape, Duracell, holiday season.

A: Mark discussed stable shares, strong brand portfolio, well-positioned in competitive landscape.

Q: Dara Mohsenian asked about production credits allowing incremental spending, investment areas.

A: Mark and John talked about leveraging 5 growth areas, production credits adding to investment, higher base earnings in 2025.

Q: Andrea Teixeira asked about Q4 consumption trends, pricing, private label pricing, Europe trends.

A: Mark discussed Q3 pull forward due to 4th of July and Prime Day, pricing offsetting tariffs, private label pricing movement, Europe market health.

Q: Peter Grom asked about Q4 organic guidance, segment composition of growth.

A: Mark and John talked about shipment timing, category resilience, battery and Auto Care performance in Q4.

Q: Brian McNamara asked about battery inventories, consumer health.

A: Mark discussed consumer inventory levels, retailer inventory levels, consumer cautiousness and value-seeking.

Q: William Reuter asked about leverage target, M&A, pack size trade down.

A: John discussed leverage target below 4x, M&A focus, pack size trade down impact on margins.