Morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to Energizer Holdings, Inc.'s Fourth Quarter and Fiscal Year 2025 Conference Call. After the speakers' remarks, there will be a question and answer session. As a reminder, this call is being recorded. I would now like to turn the conference over to Jonathan P. Poldan, Vice President Treasurer and Investor Relations. You may begin your conference. Good morning.

And welcome to Energizer Holdings, Inc.'s Fourth Quarter and Fiscal 2025 Conference Call. Joining me today are Mark S. LaVigne, President and Chief Executive Officer, and John J. Drabik, Executive Vice President and Chief Financial Officer. In just a moment, Mark will share a few opening comments, and then we will take your questions. A replay of this call will be available on the Investor Relations section of our energizerholdings.com. In addition, please note that our earnings release, prepared remarks, and a slide deck are also posted on our website. During the call, we will make forward-looking statements about the company's future business and financial performance, among other matters, and are subject to risks and uncertainties. These statements are based on management's current expectations, which may cause actual results to differ materially from these statements. We do not undertake to update these forward-looking statements. Other factors that could cause actual results to differ materially from these statements are included in reports we file with the SEC. We also refer in our presentation to non-GAAP financial measures. A reconciliation of non-GAAP financial measures to comparable GAAP measures is shown in our press release issued earlier today, which is available on our website. Information concerning our categories and estimated market share discussed in this call relates to the categories where we compete and is based on Energizer Holdings, Inc.'s internal data, data from industry analysis, and estimates we believe to be reasonable. The battery category information includes both brick-and-mortar and e-commerce retail sales. Unless otherwise noted, all comments regarding the quarter and year pertain to Energizer Holdings, Inc.'s fiscal year, and all comparisons to the prior year relate to the same period in fiscal 2024. With that, I would like to turn the call over to Mark. Good morning, and thanks for joining us today.

We delivered strong earnings in fiscal 2025 by staying agile and focused in the face of a disruptive environment and shifting trade policies. We moved quickly, capitalized on opportunities, and executed with discipline to achieve outstanding results. Our decisive actions to reshape our operational footprint, combined with strategic investments and strong execution, have established an elevated earnings base positioning Energizer Holdings, Inc. to win as we close 2025 and move into 2026. Let me share a few highlights that define our progress in 2025. We grew net sales in a challenging environment driven by significant growth in e-commerce, international expansion, and meaningful innovation in auto care. We made necessary changes to our network and executed targeted pricing to mitigate tariffs and preserve margins. Project Momentum achieved over $200 million in savings to date. As we announced this morning, we have extended it into a 2.3% to nearly $3 billion. Adjusted earnings per share increased 6% to $3.52, supported by organic growth, disciplined cost management, and manufacturing production credits, enabled by our investments in U.S. production. We also returned $177 million to shareholders in fiscal 2025 through dividends and share repurchases, reducing our outstanding shares by roughly 5%. The macro environment continues to evolve. Tariffs have increased our costs, consumer demand softened late in the year, and supply chains required rapid rebalancing. We responded quickly, realigning our manufacturing footprint to minimize tariff exposure and executing pricing actions to protect margins. These steps were not easy, but they were necessary and created a solid foundation for future growth. As we enter fiscal 2026, we know the first quarter will reflect a challenging sales comparison, transitional tariff-related costs, and moderating consumer sentiment. But beyond Q1, the benefits of our actions, including network realignment, accelerated APS integration, and Project Momentum savings, will build. And we expect these initiatives to drive double-digit adjusted earnings per share growth over the final three quarters of the year. In short, fiscal 2025 was a year of resilience, agility, and progress. We faced a challenging environment head-on, made bold decisions, and strengthened our foundation for the future. I want to thank our colleagues, suppliers, and customers for the collaboration that helped us overcome these headwinds and deliver. This year-over-year growth reflects disciplined execution and the strength of the partnerships built on trust and shared commitment to solving challenges together. Thank you for your continued confidence in Energizer Holdings, Inc. Together, we are ready to compete, win, and grow. With that, let's open the call for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. We do ask that you limit yourself to one question and one follow-up. You may certainly re-queue if you have additional questions. The first question comes from Peter K. Grom at UBS. Please go ahead.

Great. Thank you. Good morning, guys. Hope you are doing well. So I wanted to pick up on that last point and just on the phasing at the end of the year, specifically just kind of the ramp needed to hit the full year following a challenging first quarter. So can you maybe just speak to the degree of confidence or maybe the visibility you have on the implied ramp just given how difficult and dynamic the operating environment continues to be? And then just related, I mean, what is the level of flexibility or cushion you have kind of embedded in the outlook at this stage? Thanks.

Thanks, Peter. Look. Let me start. I am going to hand it to John, and then I will maybe finish and kind of how we approach providing outlook for the year. I mean, look, we acknowledge that we expected a stronger Q4. But I still think we want to take a step back at least as we get started. And really reflect and be proud of what the organization achieved in '25. And to do that, I think you have to go back to we launched Project Momentum three years ago, and the objective behind that was to restore gross margins, enhance free cash flow, strengthen the balance sheet. We have delivered across all of those metrics over that three-year period with $200 million in savings. We have recovered 350 basis points in gross margin. And momentum has enhanced free cash flow played a part in enhancing free cash flow. We delivered more than $740 million in free cash flow during that time period. The result over that time period is nearly 5% EPS growth on average over that time period. And over 3% EBITDA growth. As we started momentum, we understood the need for supply chain agility. And in FY 2025, put that to an early test. And with the tariff and trade policies, we needed to adjust fast, and we did. We overhauled our network. We preserved margins in '25, and this will get Peter to your question. Essentially do that in '26 once you incorporate kind of the APS margin integration that we are going to go through. So there is a transitional period which we saw in Q4, you are going to see in Q1, but the pieces are in place and the plans are mostly complete. For the ramp that John's going to describe. So it has really been a remarkable transformation and, as you said, in a really disruptive volatile environment over the last three years, which ended in a sort of six-month sprint. Where we needed to rebalance our network to make sure that we took into account new trade policy. So as we exit that sprint at the '1, we are really set up from Q2, three, and four to get back to more historical well performance from a financial perspective. So, John, you want to talk to Durant?

Yeah. Yeah. Let me start with the first quarter and then we can kind of go into what we see Q2 through Q4. So on the top line in the first quarter, we are getting we have got both that storm comp and the shift in display timing that we called out. Both of those we view as one-time or timing in nature. And then kind of as you look at the rest of it, the category overall we are calling down for the quarter about 300 to 400 basis points, but we see that improving as we kind of go throughout the quarter and then into the rest of the year. So our outlook for the full year on the category you know, kind of contemplates back to, you know, roughly flat in the back half. And then we are going to lean into other areas for growth that have been driving us for the last year or two. And that is really international markets, as well as transitioning that APS business into our Energizer Holdings, Inc. branded portfolio. That is a big driver in the back half of our fiscal year. And then we are going to continue to see growth in e-commerce and some of the innovation that we expect to launch this year. So when you put those in place, I think we are going to get past the first quarter and start to see better growth in the back half of the year, really starting in Q2. Then gross margin is also getting impacted in the first quarter. So as we get past the first quarter, we should benefit from getting past the transitional operational inefficiencies that we really generated over the summer and into fall. As we kind of moved our supply chain around to offset the tariffs. Then we will further benefit from transitioning the APS business to our branded portfolio think that will help us on the margin side. So as we look at kind of Q2 through Q4, I think low single-digit top-line growth normalized gross margins with some of the momentum savings should allow us to generate that EPS growth of kind of low double digits. And then Peter, to wrap up on your final question, how do we approach '26? I mean, look. There is a lot of stuff we cannot control. And so what we tried to do is be really clear-eyed about what we are seeing in the environment today. We did not rely on anything necessarily changing except for the progression that we will talk about it from a category standpoint. But we basically said the battery category is going to be down roughly 2% for the year. Trade policies are going to stay in place. Things that are macro factors, we basically took them as they are and rolled them forward. And so if you look at our EPS call, there is growth at the higher end of our range. And as we were contemplating it, we felt it was appropriate to build in some downside just so that we can absorb some shocks to the system, which we have seen over the last couple of years and not having to change our outlook. So we were a little bit conservative in terms of the EPS growth. We did not build in anything out of our control to cooperate over the year. And so I think we feel like it is an appropriate call and one that we can achieve as we go through the year. Yeah. That is going to inevitably change along the way.

Got it. That makes a ton of sense. I will pass it on. Thank you so much.

Thanks, Peter.

Thank you. The next question comes from Lauren Rae Lieberman at Barclays. Please go ahead.

Great. Thanks so much. Good morning. Just wanted to take a step back maybe and like, a bigger picture look. You know, consumer slowdown softening, just wanted to get your perspective on maybe what has changed since we last spoke, you know, both August and then you were at our conference sort of what has changed, what has not, and how are you thinking about the consumer and cost environment from here? Thanks.

Laura, I think so if I start with gross margin, we saw the landscape changing we had plans in place. So I would say the gross margin projection largely as we expected. We knew Q4 was going to get hit by some of these costs. We expected them to continue into '26. They have, but we have also executed the plans to make them go away as we exit Q1. Would say the biggest changes we have just seen is softening consumer sentiment. You have heard it from a lot of our peers. You have certainly seen it in some of the macro data that as we progress from August September and into October, you really did see softening consumer sentiment. And we are seeing it in the category data for batteries. We are seeing some of the more recent time periods, some improvement in that. But we did not feel like it was appropriate to rely on that continuing to ramp up long term. We are still very bullish on the battery category. We expect it to be kind of a low single-digit grower, but we are going through a disruptive time. And I think it is important to call that from a consumer standpoint as we have. Gross margin, we have controlled what we can. Overall for the year, again, I just mentioned in Peter's question, down 2% is our call for value. But we are going to be able to offset that with some growth in other areas of our business.

Okay. Okay. Great. So just Oh, one other thing, Laura. I am sorry to cut you off. I just as we progress through the year, this is one thing I failed to mention. So the category we are assuming is down 3% to 4% in the first quarter. As we progress, we are expecting stabilization in the category. We are going to start to lap some softer comps that you saw in '25. I failed to mention that.

Yes. Okay. Okay. Great. Alright. I will pass it on. Thank you so much. Thanks, Lauren.

Thank you. The next question comes from Robert Edward Ottenstein at Evercore. Please go ahead.

Great. Thank you very much. I was just wondering if you could talk a little bit about channel dynamics. Obviously, weaker consumer, how is the consumer responding in this environment in terms of which channels they are going to and shopping? What is going on at Amazon with you and the category, and how are you responding to these different changes in consumer dynamics and shopping patterns? Thank you.

Good morning, Robert. Consumers are certainly seeking value. They are cautious. They are very comfortable shifting channels to be able to find the value of the product and to meet their needs. That manifests itself in a lot of different ways. You have got brands, pack sizes, as you mentioned channel, Certainly e-commerce is a big part of that channel shift that is going on. It has been a point of emphasis for us to make sure that we win in e-commerce. We had a really strong Q4 in e-commerce. We saw our e-commerce business grow more than 35%. In Q4, we saw it grow 25% for the year. As we look ahead to '26, we expect 15% growth off of that. As we go into '26. So it has been an area we have invested in. It is an area where we are winning. And, you know, over that time period, if I look in the aggregate, over a four, thirteen, and fifty-two week period, we are winning with consumers because Energizer Holdings, Inc. is gaining share over each of those time periods. So as consumers are seeking value, our broad portfolio of premium and value brands are there to meet consumers where they are. And we are capturing consumers.

Great. Thank you very much.

Thanks, Robert.

Thank you. The next question comes from Andrea Faria Teixeira at JPMorgan. Please go ahead.

Hi, this is Shovana Chowdhury on for Andrea. Thanks for taking our question. Your management commentary, one of the levers to restore gross margin includes optimizing US manufacturing to your future benefits from production credits. As such, can you give us a sense of magnitude of incremental benefit from your prior estimate of $35 to $40 million annually?

Yeah. We are continuing to invest in domestic production to drive those credits. We think there could be upside $15 million to $20 million over what we have generated to date per year. So that is where we will continue to focus and try to recoup those.

Thank you. And quickly, just to clarify, and is that something that would be a benefit starting fiscal 2026 possibly, or is that, like, more of fiscal 2027 onwards story if you get this incremental benefit?

Yeah. That is we anticipate that in '26. So kind of that level.

Sounds good. Thanks. I will pass it on.

Thank you. The next question comes from William Michael Reuter at Bank of America. Please go ahead.

Hi. My first question on the weakness that you are seeing in consumers, do you expect that they are just reducing the amount of product that they have in their pantries, or do you believe that their behavior is changing such that they are utilizing devices that need batteries less? I am just kind of trying to dig a little more into your expectation that the category is down. By two or three or 4% this year, and then it bounces back in for future years.

Consumers are changing. I mean, what we see is consumers will typically drain household inventory. Consumers will typically maybe skip a purchase cycle. And so what you see that play out over a multiple quarter period, but then everything stabilizes and consumers go back to that historical low single-digit growth that we expect to see out of the category. So we believe these are temporary behaviors out of consumers. It will you know, it also manifests itself with channel shifting, pack size changes, and other things that come through in the category data. But we do expect a reversion back to more normalized behavior as we head into '26.

Got it. And then just a follow-up for me. I think that there had been an algorithm of an expectation of kind of half a turn of deleverage annually. And if I kind of look back over the last handful of years, leverage really has not moved a whole lot. So I guess, what is your expectation for that deleveraging path? And, I guess, in that context, will you think about allocation relative to share repurchases, which you guys did $90 million this year?

Yeah. Look. First priority is going to be to pay down debt. We think we can get back to the resumption of normalized cash in twenty-five or cash flow twenty-five you know, we were down and that was really largely due to our press plastic-free packaging transition in North America. We invested in both inventories, so working capital was way up for the year. We invested in a lot of CapEx, frankly, to make that product. That should normalize both of those as we head into '26. So we think that we can get that kind of somewhere north of 10% on free cash flow we would focus on paying down $150 to $200 million of debt. I think the, you know, the offset from a leverage perspective will be where the earnings ends up. So we will, you know, we will have to see where that comes in, but it will not probably be all the way to half a turn. It would be something less than that if the earnings fall off. I will say that, you know, we generated decent cash as we finished up the fourth quarter. And we paid down about $80 million of debt so far in the quarter. So we are making good progress and will continue to push there.

Great. That is all for me. Thank you.

Thank you.

Thank you. Ladies and gentlemen, as a reminder, if you have any questions, please press 1. The next question comes from Brian Christopher McNamara at Canaccord Genuity. Please go ahead.

Good morning, guys. Thanks for taking the question. I am curious how your retail partners are behaving as it relates to channel inventories. We have heard a variety of takes from other companies but the predominance has generally been they have been pretty tight on inventories heading into the holiday season. I am curious how your categories are being impacted by that.

Good question, Brian. I think that plays a part in kind of Q4, Q1 dynamic that we were highlighting today. So we saw displays going at the end of that we thought were going to go in Q1. And then obviously with some softening in the consumer sentiment in the category, you have seen lighter replenishment as we have gotten into Q1 simply because they are managing inventory more tightly. We have expected that, you know, for purposes of what the outlook we are providing, we are expecting that to continue for the balance of this year. I think we do expect tighter inventory management as we progress through '26.

Great. And my other question was already asked, so thanks. Appreciate it.

Thanks, Ryan.

Thank you. We have no further questions. I will turn the call back over to Mark S. LaVigne for closing comments.

Thanks, everyone, for joining today. Have a good rest of the day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your line.