Good morning and welcome to the Edgewell Personal Care First Quarter Fiscal 2018 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. I would now like to turn the conference over to Chris Gough, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us for Edgewell's first quarter fiscal 2018 earnings conference call. With me this morning are David Hatfield, our President and Chief Executive Officer and Chairman of the Board; and Elizabeth Dreyer, our Interim Chief Financial Officer. David will kick off the call then hand the call over to Elizabeth for the earnings and outlook discussion, followed by Q&A. This call is being recorded and will be available for replay via our website edgewell.com. During the call, we may make statements about our expectations for future plans and performance. This might include future sales, earnings, advertising and promotional spending, product launches, savings and costs related to restructurings, changes to our working capital metrics, currency fluctuations, commodity costs, category value, future plans for return of capital to shareholders, and more. Any such statements are forward-looking statements, which reflect our current views with respect to future events. These statements are based on assumptions that are subject to various risks and uncertainties, including those described under the caption Risk Factors in our annual report on Form 10-K for the year-ended September 30, 2017. These risks may cause our actual results to be materially different from those expressed or implied by our forward-looking statements. We do not assume any obligation to update or revise any of these forward-looking statements to reflect new events or circumstances. During this call, we will refer to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures are shown in our press release issued earlier today, which is available in the Investor Relations section of our website. Management believes these non-GAAP measures provide investors valuable information on the underlying trends of our business. With that, I'd like to turn the call over to David.

Thanks. Thanks, Chris, and good morning, everyone. Before Elizabeth takes you through the financial results, I'll briefly comment on the first quarter results, address our full year outlook and conclude with some comments about our recent acquisition of Jack Black. Our results in the first quarter came in generally as we expected with declines in both net sales and operating profit, reflecting continued challenging category trends, competitive pressure as well as certain cost pressures that impacted us in the first quarter. Given that we do not provide quarterly outlooks, we recognize that this was a difficult quarter for you to assess. And although these first quarter headwinds were in line with our previously provided first half fiscal 2018 outlook, we'll spend some time this morning addressing the details within the quarter as well as our rationale for improvement over the remainder of the year. From a top-line perspective, sales were impacted by declines in Wet Shave and the Feminine Care. Sun and Skin Care net sales grew and the Infant was flat versus the prior year. In the Wet Shave, continued competitive promotional and pricing pressures deflated the overall razor and the blades category, which was down over 6% in the U.S. and down over 4% globally as measured by Nielsen. Although we continue to compete well and have held Nielsen share, we were also impacted by lost promotional presence in unmeasured club channels in the U.S. Our recently launched innovation was – it was not a factor in the quarter as most of the benefits began in the second quarter. As a result, our organic net sales were down 5%. Turning to profitability, adjusted operating profit in the quarter declined nearly $30 million due to lower sales and gross margin, but was generally in line with our expectations and…

Good morning. Let me turn to the first quarter business performance. Reported net sales in the quarter were $468 million, down 3.4% or 5.2% on an organic basis. Organic net sales excludes benefit from the Bulldog acquisition, the impact on the Playtex gloves divestiture and a benefit from currency. From a geographic perspective, organic net sales in North America declined 7% and 2% in international. The organic net sales decline was largely driven by volume and unfavorable price mix in Wet Shave, where the razors and blades category continued to decline; and in Feminine Care due to volume declines and competitive intensity. I'll discuss these segments in more detail in a moment. Gross margin declined 420 basis points, or 450 basis points, excluding favorable currency and the combined impact of Bulldog and gloves. Gross margin in the quarter was in line with our previous outlook, and was impacted by a unique combination of factors in the quarter, including unfavorable volume and mix, unfavorable price mix and higher cost. Let me walk you through each of those drivers and why we believe margin will return to more historical norms in the second quarter and for the full year. About 100 basis points of the gross margin decline was due to unfavorable product mix in Wet Shave and Feminine Care. With new product launches starting in Q2 and more favorable comparisons in the second half, product mix is expected to be neutral for the full year compared to 2017. Next, about 100 basis points of the gross margin decline was due to unfavorable price mix. This was driven by Wet Shave, specifically, higher coupon activity in the U.S., and higher promotional support in Asia; and also in Sun and Skin Care, due to high higher promotional activity in North America to close…

We will now begin the question-and-answer session. Our first question comes from Wendy Nicholson of Citi Research. Please go ahead.

Hi. Good morning. My first question has to do with the launch of the new women's product, the one that goes back and forth. I can't wait to try it. But what's the response been from retailers on that? It seems like it's a pretty different product relative to what you've seen before. How much incremental marketing spending, how much promotion do you think you need to do to kind of show consumers what it is and have that be successful once it launches?

Thanks, Wendy. Yeah, it is different and we're really excited about it. I think that customers really look forward to it because it's a chance to really bring the value to the category. But we like it and all the testing we have done is has kind of indicated that there's product benefits that are obvious and are perceptible. So we're really optimistic about it. Early days, but the trade reaction's been good. And we're really going to certainly support it with the media, digital media and the trial promotions.

Thank you, Wendy.

And as you think about...

Yeah. Go ahead, Wendy.

No, my – just question was also just thinking about the razor blade category, it's just been so tough for both you and Gillette. And I know Dollar Shave Club is now launching in the UK. Are you doing anything different in that market to sort of stave off maybe bigger inroads from Dollar Shave Club as they launch in that market? Obviously, it's much, much, much smaller in the U.S. but I'm just wondering if there is anything that you would do differently now going forward either with your own direct-to-consumer offering for at point-of-sale to prevent that from being another troubled market? Thanks.

Thank you, Wendy. In the UK, we've actually been supplying several shave clubs for the last two to three years. So, it's a market that's actually fairly mature. And we play in the Shave Club business in that market. We also grew our e-commerce sales in the UK by almost 50% for the quarter. So, we're well represented in that channel and we're going to continue to focus on it. We're also working with our bricks-and-mortar customers to launch Hydro Sense, to launch Intuition and all of the other innovation that we've been talking about.

Okay. Thank you, Wendy. Operator, next question please.

Our next question comes from Kevin Grundy of Jefferies. Please go ahead.

Thanks. Good morning, guys. David, I wanted to start on the guidance for the year and then weave that into sort of your longer-term outlook. So, I guess I'm struggling a bit. The target now implies sort of flattish organic sales growth versus the down 5% in the first quarter. And what's your level of visibility with that? Why should we be confident that things get that much better here for the balance of the year? And then, similarly, with margins – and some of the components that you broke out were helpful. I think one of them was unfavorable price mix of like 100 basis points in the quarter. If I'm not mistaken, sort of back of the napkin, your guidance implies like 150 basis points of margin improvement for the balance of the year. So, what drives that? What gives you confidence in this environment that the trade promotion environment gets materially better? And then, I'll just throw this in now and then hop back in the queue. But David, the 2% to 3% organic sales growth guidance longer term and 50 basis points of margin improvement, it's – looks a little bit ambitious, I guess, relative to what the company has been able to do, I guess, in recent years and certainly the target for this year. Is that something you're going to revisit? And then, what do you think is more reasonable now in the current environment? So, thanks for both of those.

All right. Thanks, Kevin. First of all, from an outlook point of view, let me preface this by saying that we acknowledge that given our reluctance to give quarter-to-quarter outlook, this was a tough quarter to model, and gross margin was a big reason, but also some of the untracked sales decline that we had for the quarter. But it fully met our expectations and we continue to focus on bringing in the year as we've indicated. To do so, first of all, we believe in our innovation. It's consumer-centric with obvious product benefits and we believe that that will help along with the increased marketing support. I will say also that while we don't believe that the competitive environment will get better, we also don't project that P&G will double down on their reset – the pricing and the product reset. And if that plays out like that, then we should see some of the category negative price mix moderate in the back half. So when you add that up, when you look at the quarter to the year remaining, the negative comp versus year ago promotional waves in the unmeasured club channel, that will moderate and then go away as the year progresses. We have innovation rolling in all price tiers around the world and we should see some moderation in the category negative pricing mix. So, that's Wet Shave. Certainly, we're gaining share and we're growing within Sun, both in the U.S. and also internationally. And we should see a solid year on that front behind innovation and more distribution. Bulldog is in our in our base now and we grew that 48% for the quarter and we see continued growth at that rate around the world. And our e-commerce efforts also, I mean, generated a sizable growth. So you add that all up, and we remain confident in our year's outlook. But I think that you asked also about gross margin, I think we could touch on that in a minute later. But you also asked about the medium-term algorithm.

Right.

Certainly, that looks challenging at the moment. But we've just gone through a huge competitive reset from a pricing and a product point of view. When that settles, what we have here is a different market than it was. And it's more of a normal category characterized by consumer segments, by product segments and the pricing tiers. Frankly, it's a model that we've been actually competing in and executing. And I think we're well-positioned to compete in that kind of a market. We think when it gets there, I think we will get back to a point where innovation's valued within each of the product tiers, and there is room to actually grow within each of those pricing tiers. When that happens? I can't forecast, but I think we will get back to where that's the category. To win in that market, though, we believe that we can't just execute the way that we've been doing it. We need to really reconfigure both our organization and our capabilities against some of the new growth opportunities, like e-commerce, like digital marketing, international growth, and all of that. So, that's one of the reasons that we're really looking to accelerate on our track record of cost reduction and productivity. And we're going to look to accelerate that across the company-wide look to generate more funds, to provide margin flexibility, but also to fund brand building, but also to build capabilities against those growth opportunities.

Okay. Thank you. And if...

Thank you, Kevin. Operator, next question...

Thanks.

Thanks, Kevin. Operator, next question, please.

Our next question comes from Ali Dibadj of Bernstein. Please go ahead. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Hey, guys. So, I want to go back to this just the quarter, to start as a jumping off point, you mentioned a couple of times it's generally as expected for the quarter, you said that it was a tough quarter to model. How wide is that generally berth, I guess? I'm just trying to think – look, we're not perfect, obviously, on the sell side, but it was like a massive, massive miss, top line and bottom line. And so, I'm just trying to understand like is this precisely what you thought would happen three months ago. Is there anything that got a little bit worse? I'm just trying to get underneath the generally as expected for the quarter?

I know it was generally where we saw it. And Chris, I don't know, if you wanted to comment on that at all?

No, there was a – on an operating profit level, gross margin level, it was right where we modeled it. There was a little bit of headwind from tax and a little bit of headwind from other expense due to currency. But from an operating level, it was right on our target. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Okay. Okay. And then, as you go forward, you talk a little bit about the share positioning you expect in Wet Shave. It sounds like you're effectively saying, look, we're going to lap these price declines that Gillette took, and that plus innovation, we should be okay. I'm assuming innovation you have a very clear kind of guaranteed placement and planogram already set. So I guess that should be something that you're anticipating in the number given the modeling. But from a share perspective, I want to get the sense of where you guys think you'll be in Wet Shave over the course of rest of the year?

Okay. Yeah. We are confident about the trade plans and we're rolling out as we speak. Generally, we're forecasting modest share growth in the back half, where we still see North America Men's category down 5% to 10%, we see our sales down mid-single digit; women's and then disposables categories flat to down mid-single digit, and we see growth there. In international, we see a fairly flat total market and we see modest growth, so modest share growth there as well. Ali Dibadj - Sanford C. Bernstein & Co. LLC: Okay. Okay. And then the last question, if I can just throw one in is a different topic, which is the share purchase, the new authorization. Can you give us a sense of what timeframe – I apologize if I missed it, but what timeframe that share authorization is for? And how you think about, actually, executing that share authorization? I know you said before, look, we're opportunistic. I never really like that word. I don't really know what it means. Is there a better process now in terms of how you think about when to actually trigger repurchases? I mean, gosh, if you guys – this was exactly on point in terms of what your quarter was expecting – what we were expecting on the quarter and we're the ones making a mistake here. The market's potentially making a mistake here. It seemed to me that you might be more aggressive in buying back. So, I just want to get a sense of what the mechanics or the process are to decide to use that incremental $10 million in authorization. Thank you.

Yeah, I don't think there is a time period or I'm not aware of the answer to that. So, I think there isn't one set. And we really don't want to give a forward-looking algorithm to when we buy shares. And I think opportunistic is sort of the word that I'd use. But we look to buy back shares to create value for our long-term shareholders and we balance that with other uses of cash, like putting cash back into the business, M&A, and we balance that against debt levels, ratios and liquidity. So, I can't really give you a better algorithm than that at the moment.

Okay. Thank you. Ali Dibadj - Sanford C. Bernstein & Co. LLC: (46:01).

Thanks.

Thanks, Ali. Operator, next question, please.

Our next question comes from Bill Chappell of SunTrust. Please go ahead.

Thanks. Good morning.

Good morning.

As you were walking through the different hits to gross margin, one was pricing due to increased couponing on the Wet Shave side. The comments were we expect that to improve or be offset in the back half, and didn't really know why that would be the case or what you're seeing to be the case. I guess, the bigger question is, I think, when P&G initially cut list prices, the thought was they were just going down to kind of coupon or promotional price points and it shouldn't have as big of an impact. But now appears that there is more couponing going on in the category. So, didn't know if that is an extra – kind of double down, but an extra leg of pricing in the category that we'll see this year, or if you see that actually ending, and so that's maybe a cushion?

Well, we think that it won't go away. But I don't see it accelerating any. We've been couponing a lot, so have they. And we see it anniversarying as we get farther into the year in the back half.

Okay. And just also to understand on the commodity increases that you see this year – or actually, I'll just make it even simpler. Can you quantify what destock had in terms of an impact on the quarter?

Okay. From a – inventory...

Inventory sale. Yeah, exactly.

Inventory, it was actually modest, Bill. It was only – it impacted us only modestly in disposables. But it – what, a couple million.

Yeah.

Yeah, it was about that. So, it was a modest impact. The only relatively big change if you look at consumption versus sales was that we – as we mentioned, we didn't anniversary a large promotional wave in the unmeasured club channel. That was a relatively major impact in the quarter. It will be a little bit of a hurt for the next couple of quarters, but not nearly to the same degree, and that's in our outlook, so – yeah.

Got it. Thanks so much.

Thank you, Bill. Thanks. Operator, next question, please.

Our next question comes from Faiza Alwy of Deutsche Bank.

Yes. Hi. Thanks. Good morning. So, two questions for me. One is just on your outlook for the remainder of the year. Has anything changed, because I think since you last talked about your outlook, P&G came out with some new innovation? So I'm just curious have that changed your outlook at all with respect to share gains or the category growth or just anything related to the Wet Shave business?

We were aware of those new items and they were in our outlook. So, nothing has changed on that front.

Okay. And then just my second question is, it's curious to me that you decided to apply sort of the tax savings to the extent that there are cash tax benefits to, it looks like, share repurchase versus sort of investing in the business, just given the difficult sort of category and competitive environment. So, could you talk about that decision? And as you do that, maybe how you think about ROI on some of the investments that you've made? And do you think you wouldn't have gotten a good return if you decided to reinvest those savings in the business?

Yeah. Thank you. We're actually comfortable with the marketing pressure that we're putting against the brands, and the innovation that we're launching. We're comfortable with our plans and we're executing. I think the outlook range that we've given you gives us flexibility as the year progresses to modify spends, if we need to. But right now we're just planning to execute our annual plans.

Thank you, Faiza. Operator, next question, please?

Our next question comes from Iain Simpson of SocGen. Please go ahead. Iain E. Simpson - Société Générale SA (UK): Thank you very much. A couple of questions from me, if I may. Firstly, at the full year 2017 stage, you talked about delivering 40% of your adjusted EPS this year in the first half. Now, you've talked about how the first quarter unfolded pretty much as you expected. That leaves you, on my math, just taking the midpoint of your guidance, something like $1.80 or thereabouts to do in the second quarter. That's up 50% year-on-year, if you were to – sorry $1.60, up 30% year-on-year. I was just interested if that's the number you kind of feel comfortable with and what's going to drive that big expansion in EPS in the second quarter? More generally, you're always pretty clear that the second quarter is where we'd see a blockbuster innovations land. Well, we're five weeks into that quarter. I was just wondering if you could provide any color on how they're doing. And finally, your consumer-facing website, schickhydro.com, that's been up and running for a little while now. Is there anything you can share on its performance? Thanks very much.

All right. Yeah. Thank you, Iain. First of all, what I'll say about phasing is that our outlook for the first half remains intact. For the most part, I think that that remains, and as it is for the year. In terms of the new product roll out, it's early days, but we're seeing a traction and we're working the plan. So, we're pleased with how things are rolling out. And then, finally, for the website, the goal wasn't to drive – or we didn't expect to drive a lot of top line. But we did use it as a laboratory to learn. We've been building the organization, and I think that the new team has been doing a great job. We've been testing EA (54:26) mix, different marketing approaches. They're working now on the Version 2.0 that I think will work even stronger, both for the Hydro brand, but also for our other product lines, in that we can take that technical platform and also use it for our new men's grooming lines and also move it internationally. So, I think we're making lot of progress on the platform.

So, just to add a little bit more color about your first question on the first half, I would say that 40% split, it would be slightly less than that. We're really operationally on track for what we guided to originally, but things like tax changed it a bit, but look for that to be slightly less. Iain E. Simpson - Société Générale SA (UK): Okay. That's very helpful. And if I could just clarify your comment on the consumer-facing website, you're saying that it's more of laboratory than anything that's expected to drive revenue at this stage. When do you expect your online presence in the U.S. to start being a meaningful source of incremental revenue? Is this the Version 2.0 that you're talking about? And if so, when is that launching, please?

I think it won't be nearly as meaningful over the medium term as our efforts with other online partners. So a pure play e-commerce customers, we've been growing there very rapidly. And it's several order of magnitudes larger than the DTC, and I see that remaining over the medium term.

Thank you, Iain. Operator, next question, please.

Our next question comes from Olivia Tong of Bank of America Merrill Lynch. Please go ahead.

Thanks. Good morning. I understand why you think things don't get worse because of moves by Gillette and your response to that. But your outlook is for things to get materially better. And I guess I'm still struggling with what drives that material improvement as opposed to things simply just stabilizing. You talked about the new products, and it seems like your second half outlook or at least your rest of year outlook seems fairly reliant upon those. But since then, obviously, you're not alone in terms of introducing some new products, so have you been allocating any incremental shelf space? How do the price points compare to your existing line? And then, of course, the other issue, while that helps in terms of price or at least stabilizes price, is there anything that you can do or is there anything that you're doing to influence the issues driving the volume drag in the category? Can any of these innovations that you've made help stem the downward pressure, not just on price, but just on fewer units moving in general too? Thanks.

Thank you, Olivia. Let's talk about it this way. Within Nielsen, we've been seeing trends where units are down – are down 2%, 3%, 4%, but the category value has been down 8%, 9% due to the competitive reset that – what we're saying is it'd be reasonable to believe that that gap of 3%, 4%, 5% of a negative price mix ought to moderate toward the end of the year. So, we're not really saying that things will get better. It's just they're going to stabilize and that negative price gap should moderate. Also, what we're doing, almost all of our innovation that we've been talking about are premium products, at least higher than the category average. So, we think that we'll be delivering value to both consumers and our trade partners. And I think that that's pretty unique versus what's out there now. And that's why we're getting the support that we are. On the unit question, I don't know that we will be driving more consumption, per se. But as we look to the total market, we see that the e-commerce and shave clubs slowing down in their growth, and that's – and we see unit declines in the measured market slowing down. So, that's a scenario. That's not really in our outlook. But that would be the way that units would come back to the category.

Thank you, Olivia. Operator, next question, please.

Our next question comes from Bonnie Herzog of Wells Fargo Securities. Please go ahead.

Hi. It's actually Joe Lachky on for Bonnie. So, correct me if I'm wrong, but you pointed out a tax benefit of $0.10 and obviously raising your EPS range by $0.10 as well, so essentially dropping the entire tax benefit to the bottom line. And I guess given that you're reinvesting a significant portion of the cost savings this year to support growth initiatives, why not similarly reinvest significant portion of the tax benefits, right, I guess, considering we have a heightened competitive environment, to support the new innovation?

Thanks, Joe. We've built our plans from the bottom up, from the brand level, we've built the marketing plans with the proper share of voice trial generation and all of that. So, we're comfortable with our plans. We're going to execute those plans. There's lead time for the market, for customers, and to change them suddenly, I think, you get a lot lower ROI. So, we really think just executing the plan makes the most sense. What I'll say is, if we see changes in the marketplace and we need to adjust plans, I think there's room in the range for us to do so.

Thank you, Joe. Operator...

And then – thanks.

Thank you, Joe. Operator, next question, please.

Our next question comes from Kate Grafstein of Barclays. Please go ahead.

Thanks. So, I was wondering if maybe you can talk a little bit about and quantify your ongoing costs productivity savings program outside of ZBS. What are the major cost savings buckets? And I was wondering if you're stepping up your savings efforts this year, because of the weaker external environment. Thanks.

Yeah. So, we have several buckets. We have ZBS that we've talked about, where we're on track for $25 million to $30 million. We also target COGS on a continuous improvement basis and we target about 4% gross with offsets because of the commodities and all that, but gross continuous improvement savings about – by 4%, which adds up to about $40 million. And then we had an additional $15 million in the productivity savings for the year and that's how the big buckets line up. And again, we're planning to execute that plan. We're on track. And then, we're actively looking to fill the funnel for 2019 and beyond, and we're broadening the cost buckets to total company-wide organization and operating model.

Thank you, Kate. Operator, next question, please.

Our next question comes from Jonathan Feeney of Consumer Edge. Please go ahead.

Hi. How you are doing? This is Armani Khoddami on for Jon today. I was hoping you could give some more color on the international outlook. A little bit surprising to see organic declines in both Wet Shave and Sun and Skin Care. Seems like there was price pressure in Asia, but I guess it was our expectation, there was price increases recently in Japan and you're launching on Tmall, so it seems like that should have been a big benefit. And then just on Skin Care, internationally, distribution gains seem to have been a big driver. Is there anything we should have in mind as an update from just Sun and Skin Care internationally may be slowing down broadly going forward? Thank you.

Well, maybe the second question first. No, we think Sun and Skin internationally, I think, we're lined up to grow that double digit for the year, fueled not only by new markets and new doors, but also velocity per door where we're growing well internationally. On the price mix that you mentioned from Asia, we think that that's a little bit of a timing through the trade and promotional actions taken before our innovation is launched. So, that's the background to the price mix for Asia.

Okay.

Thanks, and then...

Thank you. Go ahead, Armani.

Sorry, do you have another question?

Yeah. Absolutely. Just on the club channel. So, you guys lost the promotional event, but later on the call you talked about this kind of being a continuing headwind for a couple of quarters. So, is this also sort of like some distribution that's also going to be coming out of non-measured channels in the U.S. going forward or is it just sort of one-time promo? Thank you.

Well, it's in and out. It's waves of in and out promotions, and the largest one, last year this quarter, we didn't anniversary. There's some other smaller waves that we did last year that we won't anniversary either and we're working with the customer to revise category plans going forward.

Okay. Thanks, Armani. Operator, next question, please.

Thank you very much.

This concludes our question-and-answer session. I would like to turn the conference back over to David Hatfield for any closing remarks.

Thank you all for your interest in Edgewell. Thank you for your time and have a great day. Thank you all.