MORGAN STANLEY GLOBAL CONSUMER & RETAIL CONFERENCE DECEMBER 3, 2019 - Seeking Alpha
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MORGAN STANLEY GLOBAL
CONSUMER & RETAIL CONFERENCE
DECEMBER 3, 2019
This presentation and some of our comments contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of Edgewell Personal Care Company (“Edgewell”, “we” or “the Company”) or any of our
businesses. These statements are not based on historical facts, but instead reflect our expectations, estimates, or projections concerning future results or events, including, without limitation, the future earnings and
performance of the Company, the anticipated benefits of the proposed acquisition of Harry’s, and the timing of consummation of such acquisition. These statements are not guarantees of performance and are
inherently subject to known and unknown risks, uncertainties, and assumptions that are difficult to predict and could cause our actual results to differ materially from those indicated by those statements. We cannot
assure you that any of our expectations, estimates or projections will be achieved. You should not place undue reliance on these statements. Forward-looking statements generally can be identified by the use of
words or phrases such as “believe,” “expect,” “expectation,” “anticipate,” “may,” “could,” “intend,” “belief,” “estimate,” “plan,” “target,” “predict,” “likely,” “will,” “should,” “forecast,” “outlook,” or other similar
words or phrases and relate, in this presentation, without limitation, to: statements, beliefs, projections, and expectations regarding the proposed acquisition of Harry’s; the timing for completion of the transaction;
the ability of the Company to close the transaction, on the anticipated terms or at all; key terms and anticipated benefits of the transaction; availability and terms of financing related to the transaction; and the
transaction’s impact on the Company’s business and financial results, including its go-forward management vision and strategy.
In addition, other risks and uncertainties not presently known to us or that we presently consider immaterial could significantly affect the forward-looking statements, including, but not limited to: the occurrence of
any event, change or other circumstances that could give rise to the termination of the definitive agreement to acquire Harry’s, Inc.; the risk that the necessary regulatory approvals may not be obtained or may be
delayed or obtained subject to conditions that are not anticipated; the risk that the transaction will not be consummated in a timely manner; the risk that the Company will experience unanticipated delays or
difficulties and transaction costs in consummating the transaction; the risk that any of the closing conditions to the transaction may not be satisfied in a timely manner or at all; the risk related to disruption from the
transaction and the related diverting of management’s attention making it more difficult to maintain business and operational relationships; the failure to realize the benefits expected from the transaction or other
related strategic initiatives; the impact of the transaction on the Company’s share price and market volatility; the effect of the announcement of the transaction on the ability of the Company to retain customers and
suppliers, retain or hire key personnel, and maintain relationships with customers, suppliers and lenders; the effect of the transaction or the announcement and completion of related transactions on the Company’s
operating results and businesses generally; the impact of any future acquisitions or additional divestitures, restructurings, refinancings, and other unusual items, including the Company's ability to raise or retire debt
or equity and to integrate and obtain the anticipated benefits, results and/or synergies from these items or other related strategic initiatives; and the possibility of more attractive strategic options arising in the
future. Additional information concerning these and other factors that could cause the Company’s actual results to vary is, or will be, included in the Company’s periodic and other reports filed with the Securities and
Exchange Commission. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Neither Edgewell nor any of its affiliates, representatives or advisors assumes any responsibility for, or makes any representation or warranty (express or implied) as to, the reasonableness, completeness, accuracy or
reliability of the estimates and other information contained herein, which speak only as of the date identified on the cover page of this presentation. Edgewell and its affiliates, representatives and advisors expressly
disclaim any and all liability based, in whole or in part, on such information, errors therein or omissions therefrom. Neither Edgewell nor any of its affiliates, representatives or advisors intends to update or otherwise
revise the estimates and other information contained herein to reflect circumstances existing after the date identified on the cover page of this presentation, including to reflect the occurrence of future events even
if any or all of the assumptions, judgments and estimates on which the information contained herein is based change or are shown to be in error.
Industry, market and competitive position data described in this presentation were obtained from the Company’s own internal estimates and research, as well as from industry and general publications and research,
surveys and studies conducted by third parties. While the Company believes its internal estimates and research are reliable and the market definitions are appropriate, such estimates, research and definitions have
not been verified by any independent source. You are cautioned not to place undue reliance on this data.
This presentation includes Non-GAAP financial measures, as defined under SEC rules. Reconciliations of these measures to the most directly comparable GAAP financial measures are included at the end of this
presentation.
While the Company reports financial results in accordance with accounting principles generally accepted in the U.S. (“GAAP”), this discussion also includes Non-GAAP measures. These Non-GAAP measures are
referred to as “adjusted,” “organic” or “underlying” and exclude items such as impairment charges, costs associated with the acquisition and integration of Jack Black, L.L.C. (“Jack Black”), costs associated with the
acquisition and integration of Harry’s, restructuring charges and amortization of intangibles. Reconciliations of Non-GAAP measures, including reconciliations of measures related to the Company’s fiscal 2020
financial outlook, can be found in the Company’s earnings releases for the fourth quarter of fiscal 2019 and full year fiscal 2019. This Non-GAAP information is provided as a supplement to, not as a substitute for, or
as superior to, measures of financial performance prepared in accordance with GAAP. The Company uses this Non-GAAP information internally to make operating decisions and believes it is helpful to investors
because it allows more meaningful period-to-period comparisons of ongoing operating results. The information can also be used to perform analysis and to better identify operating trends that may otherwise be
masked or distorted by the types of items that are excluded. This Non-GAAP information is a component in determining management’s incentive compensation. Finally, the Company believes this information
provides a higher degree of transparency. For definitions of these terms and reconciliations to GAAP measures, refer to the Company’s earnings release for fiscal year 2019 and other materials that can be found on
its Investor Relations website at http://ir.edgewell.com.
1
Today’s Speakers
Rod Little Dan Sullivan
President and Chief Chief Financial Officer
Executive Officer
2
Agenda
• The Edgewell Business: Foundational efforts & Strengthening
Performance
• The Harry’s Business: Unmatched Consumer Focus & a Proven
Playbook
• The Combination of Edgewell & Harry’s: Uniquely Compatible
Strengths
• Integration Planning: Day 1 Readiness and A New Operating
Culture
• Looking Forward: Sustainable Value Creation for the Future
3
THE EDGEWELL BUSINESS:
Foundational Efforts and Strengthening
Performance
HIGHLY CONFIDENTIAL
Edgewell Business at a Glance
EDGEWELL’S PORTFOLIO OF BRANDS
WET SHAVE FEMININE
CARE
SUN & SKIN INFANT
CARE CARE
FY 2019 REVENUE MIX BY SEGMENT FY 2019 REVENUE MIX BY PRODUCT
Infant Skin Care
& Other Infant Products
& Other
6% 6%
Femcare Shaving Gels
& Creams 6%
14%
7%
Tampons, Pads
& Liners 14% 52%
Razors & Blades
58%
Sun & Skin 22% Wet Shave
15%
Sun Care Products
FY 2019 Revenue: $2,141M
Geographical Mix: 56% United States & 44% International
5
Strong Global Infrastructure and Valuable IP
Leading Edge Innovations Global Reach Advanced Technology
– 2,900+ granted global patents – Global research and technology – Vertically integrated R&B operations
centers – Advanced manufacturing technology
– 450+ pending patent applications
– Over 5,000 dedicated colleagues – Automated, AI learning technology
– Best-in-class Industrial design
– Operations in 20+ countries – Proven quality and consistency
– Award winning formulations
– Manufacture of 10+bn blades annually – Productivity and efficiency focus
Global
Manufacturing 8 2 1 3
Edgewell Shave Sun & Skin Harry’s R&D Centers
and R&D sites
6
A Focused Strategy
New Edgewell Global Strategy – Playing to Win
7
Project Fuel at the Core of our Strategy
TOTAL ESTIMATED COSTS AND CAPEX ESTIMATED GROSS SAVINGS
■ Project One-Time Costs: $130M - $140M
DELIVERING A RAPID RETURN $225-240M Annual
■ Incurred through 9/30/19: $96M ON ONE-TME COSTS Gross Savings
■ Timing:
− Began implementation in 2018
− 80%+ incurred by end of FY 2020
APPROACH ON INVESTMENT AND MARGIN
■ Overcome rising inflation and other
commodity costs
■ Increase Brand investment
■ Margin expansion and value creation
FISCAL 2019 FISCAL 2020(1) FISCAL 2021
Ops & Supply Chain SG&A/R&D A&P
(1) Timing of project fuel savings between the 2020 and 2021 fiscal years may be refined as project plans are completed
8
2019 Highlights:
Meaningful Progress on Key Objectives
Met Company’s fiscal 2019 business and financial objectives, with
improving topline trends heading into Fiscal 2020
Refreshed senior leadership team -- new CEO and CFO
Exceeded Gross Project Fuel Savings Targets
1
Incrementally invested in compelling brands and growth
opportunities, increasing our participation in attractive and
growing categories
Improved execution at the shelf, with increased trade investments
in key categories
Simplified portfolio with the pending divestiture of the Infant and
Pet Care business
6
Announced transformative combination with Harry’s
Made significant progress on Harry’s integration planning and
NewCo culture development
9A Proven Business Model
A Critical Step Forward in 2019 Topline Performance
Improved Fiscal 2019 Top-Line Trends in
Strong Underlying Business Qualities
all Segments
Organic Fiscal 1H Fiscal 2H
Leading brands in highly attractive Segement Sales (1) 2019 2019
categories Wet Shave -6.7% -1.7%
Sun and Skin -5.9% 5.2%
Strong gross margin profile
Fem -8.1% -4.5%
Track record of strong FCF growth Infant / Other -2.9% 0.7%
Total EPC -6.5% -0.6%
Strong Project Fuel Execution Disciplined Capital Allocation
$122 million incremental gross Disciplined approach to de-leveraging
savings realized in 2019 Strong FCF generation ($180m-
On track to deliver $225 - 240 $200M)
million gross savings by fiscal 2021 Under 3x net leverage
Optimized capex (~3% net sales)
10
(1) 1H organic net sales changes exclude the impact of foreign currency, acquisitions, and dispositions (Jack Black and the
Playtex gloves business). 2H organic net sales changes exclude the impact of foreign currency.THE HARRY’S BUSINESS:
Unmatched Consumer Focus & a Proven
Playbook
HIGHLY CONFIDENTIALHarry’s Has Built a Formidable Platform to Disrupt the CPG
Industry and the Retail Channels
MODERN AND RELATABLE BRANDS FULLY INTEGRATED OMNI-
PRODUCT DEVELOPMENT
BUILT FROM SCRATCH FOR CHANNEL EXPERIENCE TO MEET
DRIVEN BY REAL CONSUMER PAIN POINTS
TODAY’S CONSUMER CONSUMER NEEDS
Create differentiated, well Understand modern consumers, Use DTC to build strong
designed products, taking their values and beliefs in a customer awareness and
stagnant categories and world where legacy brands no relationships that fuel
returning them to growth longer resonate the success at retail
12Driven by a Relentless Focus on what the Consumer
Wants and an Imagination to Deliver Beyond
BUILD PRODUCTS AND DRIVING DEEP RELATIONSHIPS
GET TO KNOW CUSTOMERS
BRANDS THAT RESONATE AND STRONG ADVOCACY
Brands that are relatable Connect directly with customers Percent highly likely to
and everyday aspirational and understand their needs recommend to a friend
51%
21%
Leading
Competitor
Source: Shaving Market – Consumer Survey (3rd party research)
13Harry’s Playbook Has Been Proven Across
New Markets and Categories
U.K. BODY & BAR WOMEN’S
Indexed Post-Launch Cumulative Customers Acquired(1)
U.K.
U.S.
Months Since Launch
#1 body wash and bar SKU at Strong omni-channel start;
Continued successful launch at #1 cartridge sku for past 5
Target; Achieved 10% share as
Boots; 30% share of handles months at Target
of Nov 2019
Source: Nielsen xAOC
(1) Comparison of June 2017 to March 2018 for U.K. and March 2013 to December 2014 for U.S., normalized for populations (000’s)
14Reversed Category Declines at Its Retail Partners
Our retailers are growing their categories and taking share
Retailer Category Growth Pre and Post Harry’s Launch (1) (2)
48.1%
(3.3%)
Launched 10.7%
4.5%
Aug 2016 (6.1%)
RETAILER 1 (8.0%) (7.5%)
(9.0%)
Total Shave Razors Cartridges Shave Prep Total Shave Razors Cartridges Shave Prep
29.8%
(3.4%)
(4.6%) (4.6%)
Launched
1.9%
May 2018
RETAILER 2 (9.8%) (1.8%) (2.7%)
Total Shave Razors Cartridges Shave Prep Total Shave Razors Cartridges Shave Prep
Source: Nielsen
(1) Retailer 1’s category reflects overall (excl. skincare and aftershave). Pre-launch reflects trailing 52W from 8/13/16; Post-launch reflects next 52W to 8/12/17
(2) Retailer 2’s category reflects Men’s Wet Shave. Pre-launch reflects trailing 52W from 1/14/18; Post-launch reflects next 26W to 7/14/18
15Significant Brick and Mortar Runway Remains
Despite initial success in bringing
growth to the Wet Shave category in
key Mass retailers in the US and Drug in
the UK, significant further
opportunities exist:
• Grocery and Drug channels in the US
account for approx. 40% of the US
Wet Shave category, currently
unpenetrated
• European expansion opportunities
• Further assortment expansion, lead
by soft goods
16COMBINATION OF EDGEWELL AND HARRY’S:
Uniquely Compatible Strengths
HIGHLY CONFIDENTIALEdgewell and Harry’s Bring Together the
Capabilities to Better Meet Consumer Needs
WORLD-CLASS PRODUCT MODERN BRAND BUILDING
TECHNOLOGY AND PRODUCT DESIGN
GLOBAL SCALE AND STRONG DTC CAPABILITIES AND
INFRASTRUCTURE TECHNOLOGY COMPANY
COST DISCIPLINE AND CASH FLOW PERFORMANCE MARKETING
TO DRIVE INVESTMENT AND DATA ANALYTICS
PORTFOLIO OF WELL-ESTABLISHED DISRUPTIVE OMNI-CHANNEL
BRANDS APPROACH
COMBINATION IS HIGHLY COMPLEMENTARY AND
TRANSFORMS EDGEWELL INTO A NEXT GENERATION CONSUMER PRODUCTS PLATFORM
18Power of an Edgewell and Harry’s Combination
A Leading Portfolio of Brands with
Strong Market Positions…..
World class Technology, Global
Manufacturing & Distribution
Shave
#1 Japan Wet Shave
#2 W. Europe Wet Shave
#2 U.S. Women’s Razors and Blades
#2 U.S. Men’s Razors and Blades
Skin
#1 U.S. Men’s Pre / Post Shave
#1 U.S. Women’s Pre / Post Shave Consumer focused brand building that
wins at Retail
Sun
#1 U.S. Sun Care
19Increasing our Participation in Attractive, Growing
Categories
Global Growth in Men’s Grooming Global Growth in Sun Care
Categories
2014 – 2018 2018 – 2022 2014 – 2018 2018 – 2022
2.1% 4.0% 4.0% 5.0%
SOURCE: EUROMONITOR PASSPORT
20Opportunity to Accelerate International
Expansion Through Edgewell’s Global Reach
21Well-Positioned to Win in Core Categories and
Launch New Products or Brands in Adjacencies
2018 US Category Sales (in $B)
+$75 $100
$25
Current Categories Adjacent Total Addressable
Personal Care Categories
–Men’s Razors and Blades –Men’s Anti-Perspirant and
–Men’s Shave Preps and Deodorant
Associated Lotions –Additional Women’s Soft
–Body Wash and Bar Soaps Products, including Lotions
–Men’s Hair Products &
Women’s Shave Products, Preps,
Waxes (Launched in 2019) LABS
Significant opportunity to address unmet needs across the personal care spectrum and
distribution channels
Source: Euromonitor
22A Refreshed Senior Leadership Team Focused on
Execution and Creating Value New to EPC
Key Leadership Changes Over the Past 18 Months…
..More to Come
Rod Little Dan Sullivan Colin Hutchison
President and Chief Financial Chief Operating
Chief Executive Officer Officer Jeff Raider Andy Katz-Mayfield
Officer
Harry’s Co-Founders and Co-CEO /
Co-President North America
Anne-Sophie Gaget Paul Hibbert John Hill Marisa Iasenza
VP, Global Strategy VP, Global Supply Chief Human Chief Legal Officer
And Innovation Chain and Operations Resources Officer
Katie
Childers
Harry’s Chief People OfficerINTEGRATION PLANNING:
Day 1 Readiness and a New Operating Culture
HIGHLY CONFIDENTIALFocused Integration Planning Efforts
Organizational Planning & Day 1 Designing the Culture to Unlock Value
Readiness for Newco
• Quickly established 14 cross-organizational • Establishing a new culture and ways of
workstreams governed by an operating working that will enable a next-gen CPG
Steerco businessWe laid out 3 steps for the combination; today we are in
the Design phase and will soon move to Execution
We will soon
complete Design
and move to
Execution
Design: Workstreams Execution: Delivering on
Mobilization: Major framing of
designing NewCo aspiration of the combination
the combination
and how to get there (some elements starting in design)
~1 month ~6 months ~2 years
• Establish critical elements of • Develop Commercial plans Deliver seamless Day 1
go-forward business model in support of growth
Execute growth plans
objectives
• Define workstreams to
Transition organization (incl.
prepare designs / plans for • Design organization for
assessment / selection where
NewCo and establish NewCo,
appropriate), processes and
governance model
• Prepare plans for Day 1 systems
• Define Day 1 scope (what to delivery/readiness
Track delivery vs. financial
prioritize)
aspirationWe are aligned in our vision for the future
• Building brands people love
Building a next
• Innovating new categories and
brands—and disrupting ourselves
generation • Being a trusted, strategic
partner to retailers
CPG company • Simplifying & driving efficiency
across the business and how
we operate
• Being a company people
rave about working forA LOOK FORWARD:
Sustainable Value Creation
HIGHLY CONFIDENTIALOur Combined Growth And Margin
Profile Will be Industry-Leading
REVENUE GROWTH PROFILE GROSS MARGIN PROFILE
“Mid-
Single “ High 40s”
Digits”
44%
2.5%
(1) CPG Average (2)
(1) CPG Average (2)
(1) Reflects fiscal year-end estimates
(2) Average based on S&P 500 Consumer Staples index, excluding Food & Staples retailing. Revenue based on calendar year 2018 to 2020E CAGR; margin based on 2019E
29Meaningful Growth and Synergy Opportunity
ESTABLISH THE FOUNDATION EXECUTE ON ADDITIONAL
OPPORTUNITIES
■ Bring together key functions and teams ■ Leverage Edgewell’s footprint
■ Understand best practices across both ■ Accelerate Harry’s international expansion
companies
■ Increase Edgewell’s value proposition, using
■ Positon brand portfolio for maximum impact Harry’s core capabilities
■ Production and supply chain optimization ■ New brand and product category launches
■ Benefits from joint purchasing and distribution ■ Upgrade Harry’s and Flamingo products
scale
■ Capital expenditures savings leveraging
available Edgewell capacity and established
distribution channels
EBITDA impact of ~$40mm from Significant additional upside from
run-rate revenue and cost synergies future revenue synergies
Note: Reduction in Harry’s capital expenditures excluded from cost synergy estimate
30Closing Thoughts
• Edgewell is executing against its fundamentals, and we are
seeing improved topline trends and strengthening underlying
performance
• The Harry’s business reflects unmatched core competencies in
consumer-lead brand building and disruption across retail
• This transformational combination brings uniquely compatible
expertise, positioning the business for industry leading
performance
• We are well-positioned to win, creating a new and exciting CPG
2.0 organization
31+
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