Good day, ladies and gentlemen and welcome to The Clorox Company First Quarter Fiscal Year 2021 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session. As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference call, Ms. Lisah Burhan, Vice President of Investor Relations for The Clorox Company. Ms. Burhan, you may begin your conference.

Thank you, Sharon. Welcome, everyone and thank you for joining us. We certainly hope you and your family continue to remain safe and healthy in what remains a challenging environment. As usual, we have a few reminders before we go into results. We are broadcasting this call over the Internet and a replay of the call will be available for 7 days at our website, at cloroxcompany.com. Today’s discussion contains forward-looking statements, including statements related to the expected or potential impact of COVID-19. These statements are based on management’s current expectations, but may differ from actual results or outcomes. In addition, we may refer to certain non-GAAP financial measures. Please refer to the forward-looking statements section, which identifies various factors that could affect such forward-looking statements and the non-GAAP financial information section, which includes the table that reconciles non-GAAP financial measures to the most directly comparable GAAP measures, both of which are located at the end of today’s earnings release, which has also been posted on our website and filed with the SEC. Turning to today’s discussion of our results, I will start by covering our usual top line commentary with highlights in each of our segments. Kevin will then address our total company results, as well as our FY ‘21 outlook. Finally, Linda will offer her perspective and we’ll close with Q&A. For the total company, Q1 sales increased 27%, reflecting about a point of benefit from the acquisition of majority interest in our joint venture in the Kingdom of Saudi Arabia, and about a point of headwinds from unfavorable foreign exchange impact. This quarter’s 27% organic sales growth is supported by double digit sales growth in eight of our 10 businesses. I will now go through our results by segment. In our Health and Wellness segment, Q1 sales were up 28%, reflecting double digit growth in all three businesses. Our Cleaning business had another quarter of double digit growth behind continued strong demand for our disinfecting products. While we continue to make progress expanding supply, we’re still not at a point where we can fully meet ongoing elevated demand. Despite those constraints, our Clorox brand continues to see increases in both household penetration and repeat rates. We’ve been investing behind this momentum to convert new users to loyal consumers, and we’ve been seeing very strong return on our investment. On the innovation front, our bleach replenishment effort is now complete. The Clorox fabric sanitizer platform and Clorox disinfecting wet mopping cloth both continue to show strong growth. On a related note, our wet mopping cloth, along with our Clorox and Clorox Scentiva branded disinfecting wipes and Pine-Sol multi-surface cleaner, all recently received approval from the EPA for kill claims against the virus that causes COVID-19 on hard non-porous surfaces. Our professional products business also had double-digit sales growth behind strong shipments across all of our disinfecting product lines. A key driver of growth this quarter was the total Clorox Total 360 system, which uses an electrostatic technology to deliver disinfectants to large, hard-to-reach areas. To support sales and continued momentum in this business, we’re bringing online new production capacity this month for the disinfectant used in these devices. In addition, we’ve created a dedicated out-of-home team that focuses on growth opportunities in new channels and spaces, to further build on strategic alliances with already established partners, such as Uber Technologies, United Airlines, AMC Theaters and Cleveland Clinic. Lastly, within this segment, our Vitamins, Minerals and Supplements business grew sales by double digits this quarter. This strong growth was driven by shipments to replenish retail inventories, following the recent supply disruptions, and by shipments in support of our RenewLife brand re-launch. Our priorities this year are to continue to improve service levels, in order to capture the strong consumption trend, execute the RenewLife brand re-launch with excellence, and deliver consumer-meaningful innovation. Turning to the Household segment, Q1 sales were up 39% with growth in all three businesses. Grilling sales more than doubled this quarter, due mainly to strong consumption behind the grilling occasions and increased household penetration. Sales growth this quarter was also driven partly by customer replenishment of inventory. We’ve been very pleased to see the strong turnaround of this business, reflected in our continued share growth, strong collaboration with the retailers, and successful entry into the pellet category, with our Kingsford pellets continuing to build distribution and share. With recent increases in grilling occasions and new households, including millennials, we’re optimistic about the prospects of this business, and will invest behind this momentum to drive long-term profitable category growth. Glad sales were up by double-digits in Q1, behind ongoing strong demand for our products, as consumers continue to spend more time at home. We’re building on this momentum with a consistent stream of innovation, including our new Glad ForceFlex with Clorox trash bags, which launched in September. This product eliminates food and bacterial odors throughout the trash bags, and has already earned more than 1,000 five-star ratings online from consumers. Our Glad ForceFlex trash bags with unique fragrances and colors, which launched in Q3, also continue to perform well, and are among top-selling new items at major retailers. Cat Litter sales grew in Q1, driven mainly by strong online shipments and innovation, supported by higher advertising investments. We’re encouraged by our return to share growth in Fresh Step, behind the continued strong performance of the Fresh Step Clean Paws innovation platform and the strong start of Fresh Step with Gain Original Scented Litter with the power of Febreze. In our Lifestyle segment, Q1 sales increased 17% with double-digit growth in two of three businesses. Brita sales were up by double-digits for the third consecutive quarter. The growth is driven mainly by continued strong consumption, especially in larger sized systems and Longlast systems and filters. Sales growth was also driven partly by customer replenishment of inventory, an effort our team has been very focused on. Household penetration for Brita continues to grow, which gives us more reason to invest further. We’ll be introducing a new and improved LongLast Plus filter that allows water to flow faster and captures more contaminants, along with a new pitcher. The Food business also saw double-digit sales growth, behind ongoing strong consumption of our Hidden Valley Ranch products, which continues to benefit from more at-home eating occasions. This is another business where we’re seeing household penetration growth. We will continue to invest in innovation, and are encouraged to see a strong start to our new Hidden Valley Ranch secret sauce dressing. Finally, Burt’s Bees sales decreased this quarter, as the business continued to be impacted by lower store traffic, especially in parts of the store where Burt’s Bees products are typically found. We have since accelerated our online strategy and strengthened our presence in the fast-growing cough and cold category, with the launch of a new line of Rescue Balm with turmeric. While we expect the category-wide challenges to persist in the short term, we have strong confidence in the Burt’s Bees brand and its long-term growth prospects, supported by a robust innovation platform. Now turning to International, Q1 sales grew 18%, driven by ongoing elevated demand for our disinfecting products and essential household products, across nearly every geography. Organic sales grew 17%, reflecting about 9 points of benefit from the Saudi JV acquisition and about 8 points of unfavorable foreign currency headwinds. Our international business has very strong momentum and we are looking to build on that through investments that accelerate our IGNITE Strategy. Increasing the stake in our Saudi JV is just an example of that. Another example is the international expansion of our Clorox disinfecting wipes, which are now being supported by a dedicated supply chain, separate from that in the U.S. This will allow us to better meet ongoing elevated demand in our existing international markets where we currently offer wipes, and to launch this consumer-preferred form into new geographies. Now, I will turn it over to Kevin, who will discuss Q1 performance, as well as our updated outlook for FY ‘21.

Thank you, Lisah and thank you everyone for joining us today. I sincerely hope you and your families are well. I am pleased with our very strong start to the fiscal year, reflecting broad-based strength across our portfolio, with double-digit volume, sales and profit growth in each of our reporting segments. Additionally, each reporting segment delivered gross margin expansion, contributing to our eighth consecutive quarter of gross margin expansion for the company. As you saw in our press release, we raised our fiscal year ‘21 outlook, given the strength of our Q1 results and our expectations for a higher top line growth over the balance of the fiscal year. Turning to our first quarter results, first quarter sales were up 27%, driven by 22 points of organic volume growth and 5 points of favorable price mix. Sales results also included one point of growth from acquiring majority control of our Saudi joint venture, offset by one point of FX headwinds. On an organic basis, sales grew 27%. Gross margin for the quarter increased 400 basis points to 48% compared to 44% in the year ago quarter. First quarter gross margin included the benefit of strong volume growth, as well as 170 basis points of cost savings and 150 basis points of favorable mix. These factors were partially offset by 300 basis points of higher manufacturing and logistics costs, which were similar to last quarter and included temporary COVID-19 spending. Selling and administrative expenses as a percentage of sales came in at 12% compared to 14% in the year ago quarter, primarily from increased operating leverage. Advertising and sales promotion investment levels as a percentage of sales came in at about 9%, equal to the year ago quarter. We’re spending for our U.S. retail business came in at 11% of sales. Importantly, this represented about a 30% increase in advertising support this quarter compared to the year ago period, reflecting stronger investments to support our ambition to accelerate long-term profitable growth. Our first quarter effective tax rate was 21%, compared to 22% in the year ago quarter, primarily driven by the impact of our increased ownership of our Saudi joint venture. Net of all these factors, we delivered diluted net earnings per share of $3.22 versus $1.59 in the year ago quarter, an increase of 103%. Excluding the contribution from our Saudi joint venture acquisition, Q1 diluted EPS grew 66%. As you also saw in our press release, Q1 net cash provided by operations was $383 million versus $271 million in the year ago quarter, an increase of 41%. Our strong cash flow was due to profitable sales growth, partially offset by higher employee incentive compensation payments made in the first quarter, which were related to our fiscal year ‘20 performance. Turning to our fiscal year outlook, we now anticipate fiscal year sales to grow between 5% to 9%, reflecting our strong Q1 results as well as our raised expectations for the balance of the fiscal year, including double-digit growth in Q2. And as we noted last quarter, we continue to anticipate deceleration in the back half of fiscal year ‘21, as we lap double-digit growth in the same period in fiscal year ‘20, when we saw the initial spike in COVID-19. Importantly, we continue to assume our back half sales results will be significantly stronger relative to pre-pandemic sales levels. We also continue to anticipate about 1 point of contribution from our Saudi joint venture, offset by one point of foreign exchange headwinds. On an organic sales basis, our outlook assumes 5% to 9% growth. We expect fiscal year gross margin to be about flat, reflecting the benefit of strong cost savings and higher sales, offset by rising commodity and transportation costs, as well as temporary costs related to COVID-19. For perspective, we expect gross margin expansion in the front half, followed by a contraction over the balance of the fiscal year, as we lap gross margin expansion of 250 basis points delivered in the back half of fiscal year ‘20, driven by strong operating leverage from robust shipment growth during the initial phase of the pandemic. We continue to expect fiscal year selling and administrative expenses to be about 14% of sales, as we continue to invest aggressively in long-term growth initiatives. Additionally, we continue to anticipate fiscal year advertising spending to be about 11% of sales, spending closer to 10% in the front half of the year and 12% in the back half, in support of our robust innovation program. We now expect our fiscal year tax rate to be between 21% to 22%. Net of these factors, we now expect fiscal year ‘21 diluted EPS to increase between 5% to 8%, or $7.70 to $7.95 reflecting our assumption for stronger top line performance, partially offset by a rising cost environment. As we shared last quarter, our fiscal year diluted EPS outlook continues to include a contribution of $0.45 to $0.53 from our increased stake in our Saudi Arabia joint venture, primarily driven by a one-time non-cash gain. Excluding the impact of the Saudi acquisition, our fiscal year diluted EPS reflects strong investments behind the robust momentum we’re seeing broadly in our portfolio. We’re engaging new consumers, supporting back half innovation plans and expanding our portfolio into new channels and markets, all in support of our ambition to accelerate long-term profitable growth. In closing, I am pleased with our very strong start to fiscal year ‘21, both top and bottom line performance across our reporting segments. This provides a strong foundation for continued momentum, which we plan to drive through aggressive investments in our IGNITE Strategy, in support of creating long-term shareholder value. And with that, I will turn it over to Linda.

Thanks, Kevin. Hello everyone and thank you for being with us today. I hope you are well and in good spirits, as we continue to navigate this pandemic. It’s great to be joining you on my first call as CEO, especially after the tremendous first quarter we delivered. Our results show what Clorox does best. We serve people who count on our brands, especially during a time when they need to feel safe, and when their home is the center of their world. This reinforces my first message: our outstanding results are a reflection of our team’s dedication to serving consumers and communities. I am incredibly proud to see the broad-based strength in our portfolio, with double-digit sales and profit growth in all reporting segments. In the last eight months, all eyes have been on Clorox disinfecting products, and our brands delivered once again this quarter, with double-digit sales growth in our Cleaning and Professional Products businesses, reflecting continued higher usage of products in homes, businesses and healthcare settings. And now, we’re also shining a brighter light on the terrific performance delivered by other parts of our portfolio, with double-digit sales growth in eight of 10 businesses, demonstrating the important role our brands play in addressing people’s everyday needs. It’s particularly gratifying to see great results from our Grilling and Glad businesses, as the team has been relentless in driving progress on our business plans, including meaningful innovation. Based on double-digit top line increases and significant margin expansion in our first quarter, we delivered very strong earnings growth for our shareholders and I’m happy we were able to raise our fiscal year outlook. These results would not be possible without the passion and commitment of our Clorox teammates around the world. I’m thankful and proud of how they live by our values, and take to heart our role in supporting consumers and communities. While I feel good about our financial performance for the quarter, there is one thing that continues to keep me up at night: our ongoing focus to meet unprecedented demand for much of our portfolio. We are certainly encouraged by the progress we’re making in a number of businesses, including having Clorox Bleach mostly back on store shelves, but there is more work to be done. I can assure you that our teams are leaving no stone unturned across all businesses experiencing elevated demand. We’re continuing to focus on products that can be made faster, and investing significantly in third-party supply sources in an effort to expedite our products to retailers. Our consumers, retail partners and communities are counting on us, and I want people to know that maximizing supply continues to be a top priority. Next, the Clorox team and I will play offense behind our strong portfolio of leading brands consumers love, in support of our ambition to accelerate long-term profitable growth. I feel privileged to be CEO of this special company and I have my sights set on extending our momentum longer term. In this uncertain environment, people are turning to brands they trust, and we’re proud to have trusted brands in our categories. We’re seeing this play out in household penetration, not just in our disinfecting products, but in many parts of our portfolio. For perspective, the percentage of our total portfolio that is stable or growing household penetration has more than doubled year-over-year, and as I look beyond the pandemic and try to answer the question of whether or not we can sustain our strong results, I’m encouraged by the trends we’re seeing, particularly consumer behaviors formed during the last seven months. They are good indicators our brands will continue to play a meaningful role in people’s daily life. For example, people are prioritizing health and wellness, drinking more water and taking vitamins and supplements, focusing on safety and hygiene, cleaning and disinfecting in and out of their homes. Staying home more, including cooking, grilling, spending time with family and adopting a pet. Spending more time online with about 90% of people saying they’ve shopped online since the pandemic. There are strong signs these behaviors will stick over the long term, as people have been building these habits for three times longer than it normally takes routines to form. And while early, we are encouraged by the strong repeat rates we are seeing across our portfolio, among core and new consumers. This is the time for full offense and that means investing significantly behind our global portfolio, including through advertising and market-leading innovation. Increasing capital spending to expand production capacity in the near and long term and partnering with retailers to enhance shopping experiences and grow our categories. With the strength of our global portfolio, the sustained consumer behaviors we are seeing and our significant investments to drive growth, Clorox is in a great position to keep winning with consumers. And finally, the defining opportunity for Clorox is simple: to serve even more people around the world with the strategy that helps us make the most of who we are and where we have strategic advantage. Our IGNITE Strategy puts people at the center of everything we do, and fundamentally we will address consumer needs and follow them in the most meaningful ways we can. Here is what I would highlight: Clorox is a health and wellness company at heart. With the strength of our brands and capabilities in disinfecting, we’re in a great position to extend our role in public health. We will continue to lean into the strategic alliances we’ve established with leading brands to keep their customers safe and we will certainly pursue more of these types of relationships with other organizations to increase our support for people outside of their homes. I am also excited about expanding Clorox disinfecting wipes in International, supported by a dedicated supply chain that will allow us to scale this business in our existing markets and enter new geographies. More than ever, people are online and we believe digital behavior is here to stay. Clorox has leaned into e-commerce and digital marketing early, so that people can engage with our brands in a more personal and relevant way. As people navigate a tough economy with pressures from unemployment and less discretionary spending, they’ll continue to turn to brands they trust, and we’ll continue to earn their trust and loyalty by focusing on superior value. And what’s also important to me is that we continue to be committed to growing the right way, guided by our values and with ESG embedded into our business. It’s how we help our people, our communities and our planet thrive now and in the future. Operator, you may now open up the line for questions.

First question comes from Andrea Teixeira with JPMorgan.

Hi, thank you and congrats everybody for the results. Linda, I was just following up from your comments and also Kevin on the momentum of the portfolio, and obviously you raised your guide for organic. But it does look like your EPS could have some room here. I was just trying to see if you can help us gauge the level of investment or perhaps some of the mix effect that we should be seeing, so that you kept your EPS relatively under control given the gain that you had, just to kind of parse out what part of it is investment in promo or just a mix effect? Thank you.

Hi Andrea, this is Kevin. I can talk about our EPS, as you think about the balance of the year. So as you mentioned, we’ve raised our expectations for the year 5% to 8% off to a very strong start to the year. If you think about the impact of the balance of the year, as I’m sure you’ve done the math, we are projecting we will be down in the back half of the year on our EPS year-over-year. That’s primarily driven by the impact of the prior year. If you recall, we grew EPS about 30% in the back half of fiscal year ‘20 from the initial impact of COVID-19, the pantry loading, very strong results in the back half of the year. We have to lap that and in addition to lapping that, as we’ve spoken in the last couple of calls, we are leaning in and investing behind the additional growth opportunities we see in front of us. And you may have heard in my prepared remarks, we think that advertising investment will be back-half loaded. So we would expect to be spending about 12% of sales in the back half: one, supporting a very robust innovation program we have teed up for the back half of the year, as well as pursuing a number of new growth initiatives, both our partnerships and some of the international opportunities we are spending behind. And maybe just a last comment I’d make, Andrea, and I think you know this about us. We are certainly not looking to maximize one quarter, but making sure we’re taking the right investments that generate long-term value. And so, we think there is a good opportunity for us to do that, and we will certainly do it in the back half of the year.

That’s fair. And if I can just ask about Professional, where do you think this business can become, as you are progressing with all these investments and new partnerships?

Yes. Professional has been a strong part of our portfolio for a number of years, with high-single digit increases up to this point, and we continue to see a long runway for the business, both in the businesses that are established well today, in the healthcare and industrial customer settings, but also we’re setting our sights on expanding the reach this business can have as consumers start to leave their home and we can create environments, partnering with businesses to keep them safe. So that’s what we’re focused on right now: investing in the people to support that future growth, investing in the innovation to support that future growth, and of course investing in the brand so that people continue to turn to the most trusted cleaning and disinfecting brand with Clorox.

Thank you, both.

Next question comes from Wendy Nicholson with Citi.

Hi, my first question is just sort of a follow-up to that. Totally get the difficult comparison year-over-year in the March and June quarters, up 100%. But I also heard you call out higher commodities and maybe freight. And I just wanted to ask what your thoughts were on pricing: whether you plan to take price increases to offset some of those commodity increases, or whether you feel like the market is tentative and shaky enough, where it’s better to potentially hold off on pricing?

Yes, Wendy. Thanks for the question. We are committed to not taking pricing during the pandemic; it’s the right thing to do and we want to make sure consumers have our products at the right value. And so what we’re focused on right now is a continued lean into our aggressive cost savings program that we’ve had for a number of years, to ensure that we have the fuel to manage the investments that we have and of course to manage any bumpiness we expect in commodities. But we do expect cost increases through the back half as you said, and we’re monitoring that environment closely. But again we are committed to ensuring that consumers have our brands during a recessionary time at the right value, not taking pricing during a pandemic and leveraging our cost savings program to manage through short-term ups and downs.

Got it. And that actually leads into my second question, which is kind of thinking strategically, but also very much with an eye toward the dollars that you’re investing in capacity. I mean clearly there is a surge right now and the fact that you are signing so many agreements with the airlines or whatever, I mean clearly there is just a huge demand for disinfecting products and wipes in particular. But there will be a day when that passes. I’m kind of curious just as you think about capital spending, are you hurrying to build capital to support demand that is huge for some time to come but is eventually going to fade? How do you think about that conceptually so that you don’t end up with a lot of capital that ends up not being needed two years or three years down the road?

Got it, Wendy. I think it would be helpful to step back and just talk a little bit about what we’re seeing in the macro environment, and why we have strong belief that we’re going to see a lot of these behaviors continue well into the future. We’re seeing consumers in the U.S. and around the world cleaning much more frequently, cleaning new surfaces and of course cleaning both in and outside of the home and that is true for business customers as well, where they’re having to welcome people back to their businesses with safe environment. From our research with consumers, they are telling us that they expect many of these behaviors to stick, regardless of whether or not there is a vaccine or how long COVID goes on, because it’s a way to reassure their health and wellness and for them to feel safe. So we’re hearing from consumers that this is here to stay and we’ve seen evidence of that in past pandemics, as well as just bad cold and flu seasons, where people have adopted new behaviors. The other thing I would tell you, in addition to capacity supporting just that change in behavior, we also see significant growth opportunities that are brand new to our business. Expanding Clorox Disinfecting Wipes in International: if you step back, we’re in about 100 countries around the world with very little presence in disinfecting wipes. That’s a big opportunity for us, complete white space that as we build capacity, we can lean into that even further. And the other thing that I would talk about is in the industrial space, there’s new technologies that we have, and we think those cleaning behaviors will need to change on a more permanent basis to reassure people that it’s safe to enter those businesses. And so that’s the other thing I would just put in perspective. We can shift supply to the opportunities that are most poignant at the moment as we move forward. And then of course Wendy, as you always know, we’re really good at balancing and spending capital in a disciplined way, and we can make adjustments to our network, whether that be through in-housing or working with third-party manufacturers as we move forward, and we’ve been very balanced in how we’ve approached this so that we can do just that.

Great, thanks. Sounds terrific.

Next question comes from Kevin Grundy with Jefferies.

Thanks. Good afternoon, everyone and congrats on a really strong result. Just kind of building on Wendy’s question a little bit. I wanted to dig into the organic sales growth guidance. So not expecting it’s a wide range, but understandably so, up 5% to 9% core sales coming up from what was previously flat to up low-single digits in August. So can you dimension for us a bit what’s changed since early August? Retail is carrying higher inventory levels now in some of the higher demand categories; an extremely strong quarter that was not anticipated in early August, with Kingsford as an example. Maybe just dimension for us a bit, because the magnitude of the upward revision is noteworthy. Maybe just kind of dimensionalize for us a bit, what’s driving the more bullish outlook? And then I have a follow-up for Kevin on cash flow.

Hey Kevin, this is Kevin. I can take your first question as well as it relates to sales. And to your point, we’ve taken up our expectation for the balance of the year pretty materially. I think there are a number of things we are seeing that give us even more confidence for this year. The first is we continue to see growing household penetration. So we are now three quarters into the pandemic in Q1, and it continued to grow. Additionally, we’re seeing increased repeat purchase rates with both new and existing consumers, and so growing household penetration and accelerating repurchase rates are both giving us more confidence. And as you know, we’ve been exploring a number of additional growth opportunities, both our partnerships as well as expanding our disinfecting portfolio outside the U.S., and we’re seeing more and more opportunity in both those spaces that will start to contribute in the back half of the year. And then maybe the last thing I’d mention is while we knew we’d have a very strong year as it relates to our disinfecting portfolio, we’re seeing very strong results outside of disinfectant. I mean you clearly saw our results in our Household segment. Again, we’re seeing more users coming into those categories, they’re increasing their frequency of usage, and we think that’s going to continue through the balance of the fiscal year. So I’d say those are the key drivers that led to us taking up the outlook for the full year.

Got it. Alright, thanks Kevin. That’s helpful. I have a number of questions, but I’ll just one more if I may. Just on with respect to balance sheet and cash flow: so the cash balance is higher than you are normally carrying and the business typically needs from a working capital perspective. Understanding there is a lot the business is considering now with respect to additional capacity and so forth, but between the higher-than-normal cash balances, the business is throwing off a significant amount of cash from operations. Talk a little bit about if you were, just in terms of intentions with respect to capex and is there any intention to return to share buybacks as well, something that the company has kind of gotten away from a little bit in recent quarters, but now as we sort of move through the pandemic and there is greater visibility, it could be something that’s potentially on the table. So thanks for all that and I will pass it on.

Sure. Happy to, Kevin, talk about cash. And as you mentioned, Kevin, we are seeing a pretty significant acceleration in the cash we are generating. Last year, our cash provided by operations was up about 56%. In Q1, it was up about 40%. We’re sitting on just a little under $900 million of cash on the balance sheet, which to your point is more than we typically hold. That really gives us quite a bit of financial flexibility. So for Linda and I, job one will be to continue to look for opportunities to invest in our base business. We know that’s where we can continue to create very strong returns for our shareholders. So we will do that, including investing more in capacity to the extent we think that’s required. Additionally, we will continue to look for targeted M&A. We still have an interest in pursuing strategic acquisitions. The good news is they don’t feel like we have to do it to be successful; we’ve got plenty of cash to pursue acquisitions to the extent we find a good opportunity. And then Kevin, you mentioned share buybacks: we actually restarted our share buybacks very modestly in the fourth quarter toward the end of the quarter, and in this quarter, we returned about $240 million to shareholders, combination of our dividend plus about $100 million in share buybacks that we assigned all to our dilution management program. So we are back in the market; I do expect that to continue. I expect this year we will return around $900 million to shareholders, both in the form of our dividend and our share repurchase program. But I think the key takeaway you should have is the company continues to generate a significant amount of cash, and that gives us a lot of financial flexibility to pursue growth both organically and inorganically.

Got it. Very helpful. Good luck.

Next question comes from Jason English with Goldman Sachs.

Hey, good afternoon folks. Thank you so much for spotting me in, very much appreciate it. A couple of quick questions. First, based on your prepared remarks, it sounds like you’re still running behind demand in Health and Wellness, effectively selling everything you can make. In that context, the $800 million revenue you’ve been able to reduce to and sell to the last few quarters, any reason to believe that would drop off as we go into the second quarter?

Jason, this is Kevin. We expect to still continue to have very strong Q2. As you heard, we think we will be up double-digits. The one thing I’d point to is if you look at our Q1, we delivered 27% revenue growth. About 2 to 3 points was related to rebuilding retailer inventories. That was on Kingsford, our vitamins, minerals and supplements, as well as our Clorox liquid bleach. We’ve made pretty good progress on catching up with demand on Clorox bleach, and so we rebuilt some capacity in Q1. So I’d expect to have some impact on Q2. But beyond that I expect to see continued very strong performance in our cleaning portfolio, and that’s my comment as a global comment, not just in the U.S., but globally.

Got it. So maybe not, but we are probably not too far off is what I heard. Your full year guidance from a reinvestment perspective suggests that, if I look at A&P and I just compare it to a clean year in fiscal ‘19, you’re looking to spend roughly $180 million more in A&P than you did two years ago, and SG&A is expected to be up around $150 million than it was two years ago. As we think forward, how much of those costs do you expect to stick, and how many of them do you think you’ll have the flexibility to retract when and if demand begins to subside?

Yes. Thanks Jason. I’ll start with that. You know these investment levels are not a mandate in our business; they are a choice. And we’re choosing to lean into the momentum we see in our portfolio right now, behind some of what Kevin covered. Household penetration has more than doubled the amount of our portfolio that’s stable or growing. We have the highest-ever consumer value measures, so the percentage of people deem our products as superior. We are seeing people enter our categories at rates we’ve never seen before, and we are seeing repeat, although it’s early, strong. And so what we are trying to do by increasing our advertising and sales promotion spending, by increasing our admin spending, is about accelerating the long-term performance of the company, and that is what we are aspiring to do. And so it’s a choice; it’s not something that we have to do or that’s dictated by the market, and we think it’s a smart choice, because what it allows us to do is hold on to new households. Customer acquisition is one of the toughest things we do in established categories that have high share. So we want to make sure that we’re doing that. We see additional places where we can grow household penetration in the U.S. and beyond in our categories, and we want to ensure we’re doing that. And then we want to support the behavior change that we see with consumers, whether it be in Health and Wellness—the fact that they’re drinking more water or taking more supplements—in hygiene, the fact that they are cleaning more, the fact that they are cleaning new surfaces and they are doing it inside and outside of the home, supporting behaviors as people stay home. People have been delighted by the fact they get to cook and they are actually enjoying more time around the family meal table and they are able to use different methods of cooking like grilling during the week, not just on the weekend or a special occasion. So we think of this investment in both administrative spending and in advertising and sales promotion as supporting keeping those new consumers in, bringing additional people into our franchise, in hopes that we can accelerate the long-term performance. But I just want to be clear, it’s a choice, and it’s always a choice that we can revisit if these behaviors are not as sticky, and we can optimize. One other fact I’d give you, Jason, because I think it’s important: we went back and looked at our spending. Recall that we put about $70 million of incremental spending in the back half of fiscal year ‘20, and the return on investment was extremely strong, and it gave us confidence to lean in in fiscal year ‘21 that this is both a good short-term spend and long-term spend.

Super helpful. Thank you so much.

Next question comes from Olivia Tong with Bank of America.

Thanks. Good afternoon. My first question is around the impact of volume growth and mix to gross margin that you called out because of volume growth. Could you talk about why it was such an outsized contributor this quarter versus last? Because volume was strong obviously, but only a point different versus Q4, and then on mix, I understand the aggregate benefit, but I suspect you saw gross margin improvement in each of your segments as well. So can you talk a little bit about promotion, whether that was a factor or lack thereof was a factor?

Hi Olivia. Yes, I can talk about those questions. Let me start with the benefit of volume to gross margin. It was more impactful in Q1 as you said versus Q4. We got a little over 400 basis points of benefit to margin in the Q1. If you go back to Q4, it is about 350 basis points of benefit. And so, as we have seen our volume continue to grow, we delivered about 22% volume growth last quarter, and were up stronger this quarter. So we are seeing a little bit incremental benefit. And then on the mix side, the mix was really driven by business unit mix, as we shared with you in our prepared remarks. We saw a very strong growth from our Household segment, and that tends to have a higher revenue and higher margin in those businesses relative to the average for the company. So we had five points of favorable price mix. It was mostly all mix and it was mostly driven by the strength of certain ones of our businesses growing at an accelerated rate.

That’s helpful. And then on consumption trends in your key categories, obviously there are moving parts we see still catch up to demand in the Health and Wellness segment. But then you are obviously going to have some volatile comps in Household, but specific to Household, can you just talk about the drivers of the acceleration there, because the comp was easier, but it was two points easier versus Q4 and you accelerated growth by over 20 points. So how much of this is related to exogenous factors like COVID and more time at home or an active outdoor season, versus attracting new consumers to the categories of your brands. And what do you think is sort of a sustainable growth rate for the Household business going forward?

Olivia, I will highlight two businesses: Grilling and Glad as good examples of what we have done and what our expectations are moving forward. So grilling more than doubled sales, as we talked about, and this was due mainly to strong consumption. We did see some inventory replenishment, but that was about a third of what we saw from a sales growth perspective. And what’s going on are two factors that are coming together really nicely. We spoke about in our Investor Day in October the fact that we were rebuilding our business plan on Grilling from the ground up. And that was based on business plans that we are in partnership with retailers to grow categories, and fundamentally reinventing our innovation program on grilling. And that has worked very well. Combine that with new behaviors we are seeing in the grilling category and that’s really where we got to the place where we experienced double-digit sales growth. What we are seeing from consumers is this: about three quarters of people, even as mobility has increased in the U.S., are continuing to cook at home and expect to continue to cook at home as they move forward. We are seeing 50% of charcoal grillers grill more during COVID, and the vast majority of those expect to continue to grill more, regardless of whether or not COVID is around in the near future or farther ahead. And the most exciting thing for us is we are seeing grilling occasions become everyday meal occasions. So before, most of the time when people were grilling it was for the weekends, gatherings outside for holidays, and now we are seeing the grill being used for everyday occasions, and we expect that trend to continue. So those two things coming together—a revival of our business plans, having the right merchandising plans in place—and there was very little price discounting during this entire period of COVID, and we still saw the volumes hold steady and the sales increase that we experienced. So we think that behavior is here to stay, and based on the innovation we have planned over the coming years, we anticipate that we will be able to meet these consumer behavior changes and continue to grow the grilling category. If we look at Glad, it’s a similar story. We were back focusing on the fundamentals of price gaps, innovation, ensuring that we have the right distribution, and that has paid off for us in addition to the consumer trends we’re seeing. Glad was up double digits behind strong consumer demand, and this is really about consumers staying home more and cooking more. What we have heard is people are using more trash bags because they’re generating more trash. So purchase frequency is up for Glad in particular and about a third of households claim to be using at least one full bag of kitchen trash per week. And as people have told us, they continue to cook at home in the future; we expect that to continue. The other thing I would call out on Glad is the innovation supporting people through this time. As Lisah highlighted in her prepared comments, we launched Glad ForceFlex with Clorox and that’s doing extremely well. It’s early days, but we’re seeing really good consumer acceptance, as well as the Glad bags we launched in Q3 that are experiential with both fragrance and color; those continue to have very strong velocities and are supporting consumers during this time. One other thing I would call out, which I think is exciting for this business, is we have seen household penetration increases in Glad, and we’ve seen higher household penetration increases from low-income consumers. So we are offering them the right value at the right time as they stay home. If we look to the future and we think about what these businesses can do, we certainly see additional room for us to grow household penetration and for us to continue to retain those consumers, and that’s why we’re leaning in and investing in innovation and leaning in and investing in advertising. But what we would expect in the back half, as we lap a strong comp, is we would see that growth rate come down. If you compare this period versus pre-COVID, say fiscal year ‘19, we’re still experiencing very strong growth.

Thanks. Congrats on a great quarter.

Next question comes from Steve Powers with Deutsche Bank.

Yes. Hey, thanks. A couple of quick follow-ups, if I could, and then I actually really want to ask about the international supply chain in wipes, but just to clean up what you were just talking about to Olivia: The Household and Lifestyle, you mentioned the inventory catch-up. Can you just confirm whether those inventories were back in balance actually in the quarter, or whether there are any lingering pockets of dislocation we should be aware of?

For Grilling, we have mainly gotten back to a point where we are in supply, and given this is the smaller quarter for Kingsford coming up, just given seasonality, we think we are in a good position moving forward. We still have some work to do on Glad, and still have additional work to do on Vitamins, Minerals and Supplements and Brita. So we are not out of the woods yet and what we will say is it will be a staggered recovery across those businesses that we have remaining over the next two quarters.

Okay. That helps. And then on the international supply chain in wipes, can you give us a little bit more detail as to what that looks like as we stand here today? How expensive it is? How much is in-sourced versus, I presume, most of it outsourced, but just some color there? And then how is that likely to change over time as you build out against the opportunities that you spotlighted?

Happy to. Yes, this supply chain was incredibly important for us to build it local, in-market, so that we could react to the opportunities we saw quickly, and we stood the supply chain up in just a matter of months, and we already have product shipping into countries today. We do have locations around the world where we are supplying because again we have business in Latin America and Asia, and so we are thinking about that expansion, ensuring that we have distribution availability in that market. We also have designed this product from the ground up specifically for the consumer in those markets. So the needs can be a little bit different depending on the country that you are in: the size of the wipe, the way that they want the lotion to feel. So we did that within a matter of months and stood it up. We will continue to be flexible. Just as we have built this business in the U.S. over the last 20 years, as we expand internationally, we will have all of those things under consideration: how much makes sense for us to have in-house, how much makes sense to have with third-party suppliers. But the good news about this is we find the supply chain to be scalable, and we will lean in and pursue this opportunity aggressively because we think our products can help so many more people around the world.

Okay. Thanks Linda. Appreciate it. I will leave it there.

Next question comes from Lauren Lieberman with Barclays.

Great, thank you. I guess I wanted first off to talk about untracked channel dynamics because you were helpful in sharing that about two to three points of the sales growth this quarter was related to restocking retail inventories. But there is still kind of even outside of that a number of these businesses that really don’t tie to what’s showing up in Nielsen. So I was curious if there is new distribution we should be aware of for Glad or for Kingsford in particular, and if not, is the performance offline dramatically different than tracked?

Sure Lauren. Happy to start on that one. So I think it’s safe to say that the relationship in our performance in tracked channels and untracked is going to be less linear over time and is certainly less linear in Q1. But I think it would be helpful to back up and just set the backdrop for what we’ve seen in fiscal year ‘20 and then specifically get into Q1 and then our expectations moving forward. So if you back up in fiscal year ‘20 tracked channels for us as a total company, including international and our professional products business, represented about 60% of total company sales. Eighty percent of total U.S. retail is in tracked channels. What happened this quarter is we had strong growth in professional products and international and that accounts for about a quarter of our sales growth, which of course is not accounted for in Nielsen as you highlighted. But if you looked at tracked and non-tracked channels, those growth rates were about the same at about 20%, and that makes sense because we have been on allocation for a number of our businesses, so you would expect to see both of those at about the same rate. But as you mentioned, Kevin called out inventory, and as we started to replenish inventory in businesses like Kingsford, Brita, Bleach and Vitamins, Minerals and Supplements, that accounted for about two to three points this quarter of the disconnect. We also had a year ago inventory effect: if you think about grilling, because last year we had the inventory, this year we have low inventory and heavy sales that we were replenishing consumption, and you saw a disconnect in Grilling. And then the one other thing I would call out for you Lauren is promotional periods versus year ago and I would really caution everybody against using narrow time periods like a week or four weeks, because those periods have changed year-over-year and it causes noise in the data, as well as the fact that we were not merchandising anything in our cleaning and disinfecting portfolio given our supply. So those two factors—both inventory and promotional—also contributed. And then going forward we’d expect this disconnect to continue because we expect strong growth from international, strong growth from professional products. And then as more consumers move online, more of that will be tracked.

Okay, that’s super helpful. And then the other question that was a little bit longer term: historically a key mantra for Clorox was big share brands in mid-sized categories, and that’s still in your investor slide deck and still kind of how you talked about your business. The thing though is that your previously mid-sized categories are becoming really big categories where everybody wants to participate. So I guess, Linda, wanted to talk a little bit about how you may be factoring that change in—whether it’s competitive dynamics, overall category size, attention being paid to these businesses where you’ve kind of been able to operate at a very high level but arguably with a bit less competitive intensity historically than may be the case going forward?

Sure Lauren. Let me try to take that in a couple of buckets and start first with just your portfolio question. I feel terrific about our portfolio. If you look at the broad-based growth we had—eight out of 10 businesses with double-digit sales growth—growing market share and household penetration, strong consumer value measure across those businesses. I think our portfolio is in a terrific place to be competitive. And then if I answer your question around big share brands in mid-sized categories, I do think that’s what we are still about. These categories, even though there is a lot of attractiveness, are still relatively small to some of the categories in store, and even with the growth rates we have been experiencing, we would still consider them to be mid-sized. And then if I think about competition, maybe I would disagree a little bit, Lauren. I think our categories have been competitive for quite a long time. We have had national players, if you think about Cleaning in that business, certainly internationally for a long time, people have entered in our space and wipes before several times. So I think that’s going to continue to be competitive, and to your point will be more competitive in the near future because it’s a very attractive place to play right now. What we turn back to is really what separates us and how we think we can win, and that starts with having strong brands that consumers love and that they are loyal to. As I highlighted at the beginning, those factors around the health of the portfolio—our household penetration, our consumer value measure scores, how we’re seeing people enter our categories—give us reassurance that we have the right brands to win in that space. Ignite really elevates the role of innovation, and I think that’s going to be critical for us to win in the future in these categories. People’s needs are changing and their behaviors are changing, and we need to innovate to meet those new needs and we’re feeling terrific about the innovation program we have in place now. About the innovation you can expect to see in the back half of fiscal year ‘21 and then well beyond that, we’re feeling great about that. So for us, again, the moment is about investing right now and leaning into the strength of those brands, knowing it’s going to be more competitive, focusing relentlessly on superior consumer value, and ensuring that people know that our brands offer them the very best when it comes to meeting their needs today as they deal with COVID and staying home more. Does that help answer your question Lauren?

It does. Yes, thank you so much Linda.

I have a question from Jonathan Feeney with Consumer Edge. Jonathan, your line is open.

Hey thanks for fitting me in and sorry about that. I had some technical difficulties. Great quarter. Just—and I apologize if this has been asked—does your 27% organic sales gain, in your opinion, represent any data you have, a share gain on a weighted basis versus your categories? Because I am trying to figure out where you stand, particularly in cleaning but broadly. And then as a related question, what’s your current share of sales right now in e-commerce, which would probably be your fastest growing and highest contributive non-measured sales? Thanks very much.

Sure. Jonathan, I think we can’t answer the question for all categories because we have categories that don’t have relevant tracked share data that we can quantify—professional products is a good example and international. But I think if you look at all outlets, we are in a place where share is about flat right now and most of that is due to supply constraints and we would anticipate, if we were in a position to better supply across those categories, to see improvement on that. We hold all of our businesses accountable to growing share. So that’s what I would say about the first part of your question. Then what I would say about how we are anticipating looking at this is we are trying to see in the very narrow buckets that we compete in—whether that be online or out of home—how are we doing in that individual space, because it’s hard to aggregate this and understand what we’re doing broadly. So we’re looking country by country. We are looking at specific channels in our professional business to see how we are doing, and then we are looking at online. Online specifically: about two-thirds of our brands are number one share online, which lines up nicely with the rest of our portfolio, and we’re doing very well there. That has to do with the early investments we made in e-commerce. We were one of the first to stand up a fully dedicated team on e-commerce pure play customers, as well as standing up integrated teams on our brick-and-click customers. So we’re in a very good position online and as consumers continue to move online, we will continue to invest there. The other thing I would point out is we have been spending over 60% of our media dollars online for a number of years. So we are where shoppers are today, and that has helped contribute to that share expansion.

Okay, thank you very much.

This concludes the question-and-answer session. Ms. Rendle, I would now like to turn the program back over to you.

Thank you so much, Sharon. I feel great about our strong start to fiscal year ‘21 and look forward to another year of delivering value to all our stakeholders. Thank you so much everyone, and we will speak again on our next call in February. We hope you all stay well. Take care.

This concludes today’s conference call. You may now disconnect.