The operator introduces the Church & Dwight First Quarter 2024 Earnings Conference Call and reminds listeners of potential risks and uncertainties. Matt Farrell, CEO, reviews the company's Q1 results, including strong sales growth, increased market share, and the acquisition of Graphico, a Japanese distributor. CFO Rick Dierker will provide further details and the call will then be opened for questions.

Graphico has been working with Church & Dwight since 2008 to make OxiClean the top powder pre-wash additive in Japan. The acquisition will help expand their business in Japan and the APAC region. The U.S. consumer business had 4.3% organic sales growth, with volume growth for the third consecutive quarter. ARM & HAMMER Liquid Laundry Detergent saw share gains after a decrease in promotional activity. Other laundry products, such as ARM & HAMMER Unit Dose and Scent Boosters, also saw growth and share gains. The new products, ARM & HAMMER Deep Clean and Power Sheets, were launched in August 2023.

ARM & HAMMER's Power Sheets, a new unit dose form, has been successful both online and in brick-and-mortar stores. Their litter consumption grew 5% in Q1, and their new lightweight litter is expanding nationally. BATISTE dry shampoo is the global leader and has launched new sweat and touch activated versions. THERABREATH and HERO mouthwashes are performing well, with THERABREATH now the number one alcohol-free brand and HERO driving growth in the acne category.

HERO, a consumer products company, has been launching innovative solutions and patches to meet consumer needs, including the recently released Dissolve Away Daily Cleansing Balm. However, two of their businesses, Gummy Vitamins and WATERPIK, had a negative impact on total organic growth in Q1. This was due to lower flosser shipments and declining consumption in the Gummy Vitamin category. Despite these challenges, the company still achieved a 5% organic sales growth, highlighting the strength of their portfolio. Their International and Specialty Products divisions also saw strong growth, thanks to successful subsidiaries and global expansion efforts. Overall, the company is performing well and the CEO thanks their employees for their hard work.

The company has had a successful first quarter, resulting in a raised outlook for gross margin and EPS growth. The first quarter saw an increase in adjusted EPS, reported revenue, and organic sales. Gross margin also increased due to productivity, volume, mix, and pricing. Marketing expenses were higher, leading to share gains, and SG&A expenses also increased. Other expenses decreased, and the effective tax rate was lower due to a high level of stock option exercise.

The company expects a 23% growth rate for the full year and a cash flow from operations of $1.05 billion. Capital expenditures for the first three months were $46.3 million, but are expected to return to historical levels in 2025. The company also expects a 4-5% growth in sales and an 8-9% growth in EPS for the full year. Gross margin is expected to expand by 75 basis points and marketing as a percentage of net sales to be around 11%. SG&A is expected to be flat compared to the previous year due to investments in infrastructure and costs related to an acquisition. Q2 is expected to have a strong performance with a 3.5% reported sales growth and 4% organic sales growth.

The company had a strong April in terms of consumption, but their organic growth outlook for the quarter is only 4%. This is due to higher coupons and trade promotions for new products, lapping price increases from the previous year, and lapping distribution gains for a specific product. They also expect moderate gross margin expansion, increased marketing spending, higher SG&A expense, and a significantly higher tax rate. This will result in a 10% decrease in adjusted EPS compared to the previous year. The first question from an analyst is about the drivers of the lower organic sales outlook, which include lapping distribution gains and not getting any contribution from pricing.

The company has fully implemented pricing actions for 2023 and expects higher coupons and trade to support new products. They have seen an improvement in laundry volumes and expect this trend to continue. They are also launching Deep Clean, which they believe will provide growth in the mid and high mid-tier.

The paragraph discusses the growth and success of unit dose and scent booster products, as well as the promotional activity in the liquid laundry and litter categories. The company's sold-on deal has increased in these categories, but is still lower than pre-COVID levels. The company's focus is on promoting their lightweight litter product, which has a lot of potential.

In this paragraph, the operator introduces a question from Rupesh Parikh of Oppenheimer regarding the vitamin category. Matt Farrell, the speaker, responds by explaining that the category has seen a decline of 5% in both Q4 and Q1, possibly due to the lingering effects of COVID-19 and a shift in consumer preferences. He also mentions the launch of a new chewable product and increased marketing efforts in hopes of stabilizing the business and seeing growth in the second half of the year. Rupesh follows up with a question for Rick regarding the company's guidance, which has been raised for the bottomline but remains the same for topline despite a Q1 beat and strong momentum in April.

Rick Dierker and Matt Farrell are discussing the company's outlook for the year. They explain that after a strong first quarter, they adjusted their outlook to reflect the strong gross margin and earnings. They will likely talk more about the outlook in July. In response to a question about WATERPIK, they clarify that the 100-basis-point issue in Q1 will not significantly impact the full year and they still expect the business to be up. They also mention their excitement for innovation in the U.S. market and the positive reception from trade and consumers.

Rick Dierker and Matt Farrell discuss the high consumption and inventory levels for WATERPIK and their expectations for the year, including 4-5% organic growth driven by new product launches. They mention specific products such as Deep Clean, ARM & HAMMER Litter, THERABREATH, and BATISTE that are performing well and meeting expectations. They also address the dynamics of setting up shelves and any potential pull-forward in shipments and consumption. While the first quarter was strong, they are guiding more conservatively for the second quarter.

The speaker, Rick Dierker, responds to a question from Andrea Teixeira about the company's performance in the market compared to its competitors. He mentions that there have been changes in net sales due to a new product, changes in couponing and trade promotion, and lapping of price increases. He also notes that almost all of the company's future growth will be volume-driven. He adds that the company's shares in the litter market remain strong, despite some supply difficulties for competitors. Another speaker, Matt Farrell, adds that the company may benefit from these difficulties and retain some new customers, but some may be tempted back by promotions. The next question is from Nik Modi.

Rick Dierker and Matt Farrell discuss the company's marketing and inflation strategies. They plan to continue investing in marketing, but may decrease spending in the fourth quarter. They also have a strong productivity program to combat potential inflation.

The company has found that HERO and THERABREATH are performing well despite any decline in consumer sentiment. They are among the company's top growers, and the company believes they are well-positioned for the remainder of the year. In terms of organic sales growth, volumes are expected to drive most of the growth, with minimal price increases. The company expects a similar mix for the full year. Additionally, WATERPIK is expected to rebound and grow for the year.

The company beat their quarterly sales outlook despite challenges and is optimistic about the year. They have seen solid volume growth and some benefit from trade-down, particularly in laundry. The company does not see any significant changes in consumer health, although there may be some disappointment with interest rates and pressure from student loans.

The company's credit card debt and delinquencies are rising, but this has not affected consumer spending on their products. The company is well-positioned for the rest of the year, with growth in laundry and litter products. Consumers may be trading down to lower-priced brands, but the company's ARM & HAMMER and XTRA brands are still performing well. The company is focused on balancing share and profitability in the laundry category, and is curtailing ineffective promotions.

In the fourth quarter of last year, the company did not repeat some unsuccessful promotions, which had a positive impact on sales in January. The company is now returning to a more normal level of trade spending and is not increasing it beyond category levels. The international business saw strong growth in the first quarter, driven by a selective approach to brand and retailer partnerships and the use of revenue growth management. The subsidiaries, rather than the Global Markets Group, were the main drivers of this growth.

The company has made two new acquisitions, HERO and THERABREATH, which have received a positive response from international distributors. These brands are expected to continue to grow throughout the year. The company recently acquired Graphico, a public company in Japan with a strong team and successful track record in the market. This acquisition will allow the company to introduce its other products into Japan and consolidate its brands under one subsidiary. The company may continue to pursue similar acquisitions in other markets.

The company is excited about their acquisition in Japan and sees it as a great opportunity for growth in Southeast Asia. They have a strong team coming on board as a result. The company is always on the lookout for potential acquisitions and has a significant amount of cash allocated towards them. The company expects promotion and trade spend to continue to increase, driven by new product launches and stable category growth. The recent price increases in the industry were unusual for consumer goods and food companies.

The company's gross margin is expected to be impacted by higher product costs and slower sales growth due to distribution gains from HERO. However, the company is not factoring this into their gross margin forecast, which is primarily driven by less carryover pricing and increased fixed costs for capacity reasons.

The speaker is asking about the gap between reported domestic retail sales and the actual numbers, specifically in relation to the company WATERPIK. The speaker also asks about the drivers of the better-than-expected gross margin, and the response mentions higher volumes and favorable mix as contributing factors.

The speaker is discussing the distribution gains for THERABREATH and HERO in the US, stating that while THERABREATH will likely plateau in terms of number of doors, there is potential for growth through more facings and innovation. For HERO, there are still distribution gains to come, but the company plans to expand into adjacent consumer needs such as skin care. Additionally, both brands will be launched in 40 countries in 2024, with sales growth expected in future years. Both products are considered high ring products.

The speaker discusses the growth potential for a high ring product with a growing brand in the retail industry. They believe that the dynamics of the brand will lead to growth in 2024 and 2025. The speaker also mentions the HERO business in the U.S. and its significant distribution gains, which have contributed to sales growth. They note that the business is not driven by price and that there is still room for growth in awareness and household penetration. Additionally, the speaker mentions the potential for growth in adjacencies and the brand's positive performance in all channels, even in declining ones.

The operator ends the question-and-answer session and hands over to Mr. Farrell for any final comments. Mr. Farrell thanks the participants for joining and announces that the next meeting will be in July. The operator then officially ends the call and thanks everyone for their participation.

This summary was generated with AI and may contain some inaccuracies.