Helen Of Troy Limited · NASDAQ:HELE
Helen Of Troy — ICR Conference 2024
49 slides from Helen Of Troy's conference presentation, Jan 9, 2024
Slide 1: ICR Conference
ICR Conference January 9, 2024
Slide 2: Noel Geoffroy, Incoming CEO
Noel Geoffroy Chief Operating Officer Incoming CEO: Effective March 1, 2024
Slide 3: Forward-Looking Statements and Reconciliation of Non-GAAP Financial Measures
Forward-Looking Statements and Reconciliation of Non-GAAP Financial Measures Forward-Looking Statements: Certain written and oral statements made by the Company and subsidiaries of the Company may constitute “forward-looking changes to its business practices, penalties, increased cost of operations,
Slide 4: Brand portfolio
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Slide 5: Helen of Troy has Evolved into a $2+ Billion Consumer Products Company
Helen of Troy has Evolved into a $2+ Billion Consumer Products Company Helen of Troy Revenue Evolution ti o n ma Legacy ~$2.0B+ or Diversification s f n Transformation I Tra n $1.5B+ tio Transformation II ca Revenue $1.0B+ r s if i Div e t y O n ly $500M+ L eg ac y/Beau $100M+ 1968 1975 1980 1985 19
Slide 6: Embrace and Leverage Our New Operating Model
Embrace and Leverage Our New Operating Model Fully End-to-End, with Empowered, Autonomous Units Shared Services but Leveraged Description • Business Units (BU) operate with • BU’s collaborate with shared • BU’s laser focused on brands, full autonomy service experts: varying levels of consumers and i
Slide 7: Purpose, Vision and Values Are Foundation We Are Building On
Purpose, Vision and Values Are Foundation We Are Building On Elevating Lives, Soaring Together PURPOSE VISION VA L U E S Why we exist and how Who we want to be and What we believe at our we improve the world where we want to go core and how we operate Elevating lives To curate and build I In Touch i
Slide 8: Proprietary and Confidential
Proprietary and Confidential 8
Slide 9: We Have a Set of Clear and Compelling Strategic Choices
We Have a Set of Clear and Compelling Strategic Choices How to Win ► Foster a winning culture Where to Play ► Strengthen end-to-end M&A capabilities Shape and Invest in a Growth Portfolio ► Embrace next-level data and analytics Win with Winning Customers ► Fully leverage operational scale & assets ►
Slide 10: Shape and Invest in a Growth Portfolio; Be Consumer Obsessed
Shape and Invest in a Growth Portfolio; Be Consumer Obsessed Differentiated Growth Higher Margin Asset Efficient Market Leaders Potential z New Brand Portfolio Classifications Invest to Grow Stronghold Optimize 10
Slide 11: Win with Winning Customers via the North America RMO
Win with Winning Customers via the North America RMO North America Sales Helen of Troy North America RMO US/Canada Beauty Sales US/Canada Home & Outdoor z Sales US/Canada Health & Wellness Sales RMO: Regional Market Organization 11
Slide 12: Be and Win Where the Shopper Shops
Be and Win Where the Shopper Shops Leverage NA RMO to Strategically Expand Distribution How we assessed North America white space opportunities What we plan to do next Category Drug Food Club Dept Store Home Mass Speciality Value Wellness • Leverage our NA RMO to Thermometry Rx Humidification Humidi
Slide 13: Strategically Grow International
Strategically Grow International How we assessed brand-market combinations Next big opportunities to pursue High Market 1 Attractiveness • Disproportionately resource highest 1 Market Attractiveness potential and most financially ▪ Current Market Size Must Win attractive brand + market ▪ Expected Gr
Slide 14: Continue Better Together M&A
Continue Better Together M&A 2015 2016 2017 2020 2020 2021 2021 2022 Divest Divest Healthy Amended 100 Personal Directions Year License Care We expect to continue our String of Pearls strategy, looking for brands that complement our portfolio Better Together • Better for Helen of Troy: accretive to
Slide 15: Next-Level Flywheel Creates the Next Virtuous Cycle
Next-Level Flywheel Creates the Next Virtuous Cycle Accretive Capital Next-Level Growth Strategy Deployment and Investment Balance Sheet Improved Go-To-Market Productivity Structure Structural Financial Best in Class Advantages Gross Margin State-Of-The-Art Further Operating Distribution Network Co
Slide 16: Brian Grass, Chief Financial Officer
Brian Grass Chief Financial Officer
Slide 17: Q3 Fiscal 2024 Results
Q3 Fiscal 2024 Results Net Sales in Millions Adjusted Diluted EPS Key Third Quarter Takeaways -6.6% -1.6% vs.vs. Q1Q3 FY23 FY23 +1.5% vs. Q3 FY23 • We achieved better than expected net sales, further strengthened gross margin, grew adjusted EPS, and generated strong cash from operations that put us
Slide 18: Strong Phase II Performance Provides Healthy Base as We Enter Elevate for Growth
Strong Phase II Performance Despite Significant Macro Disruption Provides Healthy Base as We Enter Elevate for Growth Net Sales ($M) Gross Profit ($M) $927 $953 $899 $940 $2,099 $2,223 $2,073 $2,000 $734 $641 $1,564 $1,707 Gross Profit Margin 41.0% 43.0% 44.2% 42.9% 43.4% 47.0% FY19 FY20 FY21 FY22 F
Slide 19: Consistency of Performance with Margin Expansion and Free Cash Flow Growth
Consistency of Performance with Margin Expansion and Free Cash Flow Growth Consistency of Performance vs. Outlook Midpoint Year-Over-Year Improvement Net Sales ($M) Gross Margin Rate $550 48.0% $542 46.7% 46.8% 45.4% 45.9% $492 43.4% $485 $485 42.5% $475 41.6% $467 $449 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY
Slide 20: Adjusted Income and Adjusted EBITDA Cash Conversion Back on Track
Adjusted Income and Adjusted EBITDA Cash Conversion Back on Track Adjusted Income Conversion to Free Cash Flow 1.3x 1.1x 0.9x 0.8x 0.2x 0.1x FY19 FY20 FY21 FY22 FY23 FY24E Adjusted EBITDA Conversion to Cash Flow from Operations 0.9x 0.9x 0.9x 0.8x 0.6x 0.4x FY19 FY20 FY21 FY22 FY23 FY24E 20 Notes: 1
Slide 21: Introduction to Elevate for Growth
Introduction to Elevate for Growth Executive Summary Average Annual Organic Target Highlights • We estimate strong financial outcomes over the course of the plan, built by bottom-up organic revenue growth assumptions, acquisition and Net Sales Growth (1) 3.0 - 4.0% divestiture inputs, and required i
Slide 22: Elevate for Growth Targets; Another Step Up
Elevate for Growth Targets; Another Step Up Average Annual Organic Targets Phase I Phase II Elevate for Growth Net Sales Growth (1) 2.0% - 3.0% 2.5% - 3.5% 3.0% - 4.0% Operating Margin Expansion 30 - 40 bps 20 - 30 bps -- Adjusted EBITDA Margin Expansion -- -- 30 - 40 bps Adjusted EPS Growth (2) 7%
Slide 23: Launched Pegasus to Expand Margins, Create Efficiency and Fuel Growth
Launched Pegasus to Expand Margins, Create Efficiency and Fuel Growth • Objective: Project Pegasus Initiatives o Provide new efficiencies to amplify and accelerate growth o Invest more in growing market share and developing new products 1 Further optimize our brand portfolio o Expand our operating m
Slide 24: Illustration of Numerous Drivers that Can Fuel Revenue and EPS Growth
Illustration of Numerous Drivers that Can Fuel Revenue and EPS Growth 30% 29% 29% 28% 26% 26% Annual Adjusted EPS Growth Annual Growth Investment Operating Leverage Capital Deployment/Tax Iron Giant/DC Consolidation Portfolio/SKU Optimization 10% 10% 10% 10% 10% 10% (16%) (19%) (16%) (19%) (20%) Inv
Slide 25: Pegasus Fuels Step-Level Increase in Growth Investment
Pegasus Fuels Step-Level Increase in Growth Investment ≥ 9% of Net Sales ~6% of Net Sales Reinvestment / Earnings Growth Ratio 50% / 50% 67% / 33% FY24E Elevate for Growth Target Note: Growth investment as presented does not include trade advertising, promotions and other programs that are recorded
Slide 26: Summary of Elevate for Growth Model
Phase I Phase II Elevate for Growth Organic Elevate for Growth Inorganic Summary of Elevate for Growth Model Net Sales Revenue ($M) and YOY Growth Adjusted EBITDA and Margin Reflects Q1 Reflects Q1 divestiture divestiture $2,223 $2,099 $2,073 $2,000 Organic CAGR $378 Organic $1,707 $355 $335 $1,564
Slide 27: Next-Level Flywheel Creates the Next Virtuous Cycle
Next-Level Flywheel Creates the Next Virtuous Cycle Accretive Capital Deployment Next-Level Growth Strategy and Investment • Even more Better Together M&A • Greater focus on higher growth and higher margin brands • Amplify the Invest to Grow portfolio • Significantly more brand and product investmen
Slide 28: Capital Deployment Illustration - Significant Earnings Accretion
Capital Deployment Illustration - Significant Earnings Accretion with Remaining Dry Powder to Further Deploy Adjusted EPS Accretion from Capital Deployment Acquisitions Share Repurchase 0.55 1.09 Interest Expense 0.32 0.55 0.33 0.32 0.34 0.51 0.43 0.32 0.32 0.08 0.37 0.10 0.18 FY24E FY25E FY26E FY27
Slide 29: Operating Profit Growth, Tax Efficiency, Working Capital Improvement and Debt Reduction Drive ROIC
Operating Profit Growth, Tax Efficiency, Working Capital Improvement and Debt Reduction Combine to Drive Return on Invested Capital 2.8x 2.0x-1.85x 172 18%+ ROIC ~80 FY23 WACC 8.5% Cash Conversion Cycle 7.9% Net Debt/EDITDA FY23 FY24E FY25E FY26E FY27E FY28E FY29E FY30E ROIC Cash Conversion Cycle Ne
Slide 30: Key Investment Highlights
Key Investment Highlights • Trailing 12-month trends and FY24 outlook signal an inflection point in fundamentals and operating results • Pegasus provides next-level reinvestment fuel, operating efficiency and organizational capability • Key metrics and related cash conversion ratios indicate that He
Slide 31: Elevating Lives, Soaring Together
Elevating Lives, Soaring Together
Slide 32: Glossary of Terms
Glossary of Terms Acquisition-related Expenses – Expenses associated with the definitive agreement to Bed, Bath, & Beyond bankruptcy – Represents a charge for uncollectible receivables acquire Drybar Product LLC, Osprey and Curlsmith due to the bankruptcy of Bed, Bath & Beyond Adjusted Diluted Earni
Slide 33: Glossary of Terms
Glossary of Terms Gain from insurance recoveries – Gain from insurance recoveries on damaged inventory Peer, Peers or Peer Set - Includes Church & Dwight Co., Inc., The Clorox Company, resulting from a severe weather-related incident that impacted a third-party warehouse facility Coty Inc., Edgewell
Slide 34: Reconciliation of Non-GAAP Financial Measures - GAAP Operating Income to Adjusted Operating Income
Reconciliation of Non-GAAP Financial Measures - GAAP Operating Income and Operating Margin to Adjusted Operating Income and Adjusted Operating Margin (Non-GAAP) (Unaudited) (in thousands) Three Months Ended November 30, 2023 Home & Outdoor Beauty & Wellness Total Operating income, as reported (GAAP)
Slide 35: Reconciliation of Non-GAAP Financial Measures - Net Cash from Operations to Free Cash Flow
Reconciliation of Non-GAAP Financial Measures - GAAP Net Cash Provided by Operating Activities to Free Cash Flow (Non-GAAP) (Unaudited) (in thousands) Fiscal Years Ended Last Day of February, Outlook Fiscal 2024 2023 2022 2021 2020 2019 Net cash provided by operating activities (GAAP) $ 295,000 — $
Slide 36: Reconciliation of Non-GAAP Financial Measures - Net Cash from Operations to Free Cash Flow
Reconciliation of Non-GAAP Financial Measures - GAAP Net Cash Provided by Operating Activities to Free Cash Flow (Non-GAAP) (Unaudited) (in thousands) Nine Months Ended November 30, 2023 2022 Net cash provided by operating activities (GAAP) $ 232,459 $ 49,523 Less: Capital and intangible asset expen
Slide 37: Reconciliation of Non-GAAP Financial Measures - Net Cash from Operations to Free Cash Flow
Reconciliation of Non-GAAP Financial Measures - GAAP Net Cash Provided (Used) by Operating Activities to Free Cash Flow (Non-GAAP) (Unaudited) (in thousands) Three Months Ended November 30, 2023 2022 Net cash provided by operating activities (GAAP) $ 74,727 $ 124,975 Less: Capital and intangible ass
Slide 38: Reconciliation of Non-GAAP Financial Measures – GAAP Net Income to EBITDA
Reconciliation of Non-GAAP Financial Measures – GAAP Net Income to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), Adjusted EBITDA and Adjusted EBITDA Margin (Non-GAAP) (Unaudited) (in thousands) Fiscal Years Ended Last Day of February 2023 2022 2021 2020 2019 Net Income, as
Slide 39: Reconciliation of Non-GAAP Financial Measures – GAAP Net Income to EBITDA
Reconciliation of Non-GAAP Financial Measures – GAAP Net Income to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), Adjusted EBITDA and Adjusted EBITDA Margin (Non-GAAP) (Unaudited) (in thousands) Quarterly Period Ended Twelve Months Ended February May August November Novembe
Slide 40: Reconciliation of Non-GAAP Financial Measures - GAAP Diluted EPS to Adjusted Diluted EPS
Reconciliation of Non-GAAP Financial Measures - GAAP Diluted Earnings Per Share (“EPS”) to Adjusted Diluted EPS (Non-GAAP) (Unaudited) Quarterly Period Q3 FY24 Q2 FY24 Q1 FY24 Q4 FY23 Q3 FY23 Diluted EPS, as reported (GAAP) $ 3.19 $ 1.14 $ 0.94 $ 1.50 $ 2.15 Bed, Bath & Beyond bankruptcy, net of tax
Slide 41: Reconciliation of Non-GAAP Financial Measures - GAAP Diluted EPS to Adjusted Diluted EPS
Reconciliation of Non-GAAP Financial Measures - GAAP Diluted EPS to Adjusted Diluted EPS (Non-GAAP) (Unaudited) Fiscal Years Ended Last Day of February, 2023 2022 2021 2020 2019 Diluted EPS as reported (GAAP) $ 5.95 $ 9.17 $ 10.08 $ 6.02 $ 6.62 EPA compliance costs, net of tax 0.96 1.31 — — — Gain f
Slide 42: Reconciliation of Non-GAAP Financial Measures - GAAP Income and Diluted EPS to Adjusted
Reconciliation of Non-GAAP Financial Measures - GAAP Income and Diluted EPS to Adjusted Income and Adjusted Diluted EPS (Non-GAAP) (Unaudited) (in thousands, except per share data) Fiscal Year Ended February 28, 2023 Income Diluted EPS Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported
Slide 43: Reconciliation of Non-GAAP Financial Measures - GAAP Income and Diluted EPS to Adjusted
Reconciliation of Non-GAAP Financial Measures - GAAP Income and Diluted EPS to Adjusted Income and Adjusted Diluted EPS (Non-GAAP) (Unaudited) (in thousands, except per share data) Fiscal Year Ended February 28, 2021 Income Diluted EPS Before Tax Tax Net of Tax Before Tax Tax Net of Tax As reported
Slide 44: Reconciliation of Non-GAAP Financial Measures - Continuing Operations Income and Diluted EPS
Reconciliation of Non-GAAP Financial Measures - GAAP Income and Diluted EPS from Continuing Operations to Adjusted Income and Adjusted Diluted EPS from Continuing Operations (Non-GAAP) (Unaudited) (in thousands, except per share data) Fiscal Year Ended February 28, 2019 Income From Continuing Operat
Slide 45: Fiscal 2024 Outlook for Net Sales Revenue
Fiscal 2024 Outlook for Net Sales Revenue (Unaudited) (in thousands) Fiscal 2023 Outlook Fiscal 2024 Net sales revenue $ 2,072,667 $ 1,975,000 — $ 2,000,000 Net sales revenue decline (4.7)% — (3.5)% 45
Slide 46: Fiscal 2024 Outlook for GAAP Operating Income to EBITDA and Adjusted EBITDA
Reconciliation of Non-GAAP Financial Measures - Fiscal 2024 Outlook for GAAP Operating Income to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), Adjusted EBITDA and Adjusted EBITDA Margin (Non-GAAP) (Unaudited) (in thousands) Outlook for the Balance of the Nine Months Ended
Slide 47: Fiscal 2024 Outlook for GAAP Diluted EPS to Adjusted Diluted EPS
Reconciliation of Non-GAAP Financial Measures - Fiscal 2024 Outlook for GAAP Diluted EPS to Adjusted Diluted EPS (Non-GAAP) and GAAP Effective Tax Rate to Adjusted Effective Tax Rate (Non-GAAP) (Unaudited) Outlook for the Balance of the Nine Months Ended Fiscal Year November 30, 2023 (Three Months)
Slide 48: Reconciliation of Non-GAAP Financial Measures – Net Leverage Ratio
Reconciliation of Non-GAAP Financial Measures – Net Leverage Ratio (Non-GAAP) (Unaudited) (in thousands) Fiscal Year Ended February 28, 2023 Adjusted EBITDA (non-GAAP) $ 327,519 Plus: Pro forma effect of acquisitions 1,985 Adjusted EBITDA per the credit agreement $ 329,504 Total borrowings under the
Slide 49: Reconciliation of Non-GAAP Financial Measures – Net Leverage Ratio
Reconciliation of Non-GAAP Financial Measures – Net Leverage Ratio (Non-GAAP) (Unaudited) (in thousands) Quarterly Period Ended Twelve Months Ended February May August November November 30, 2023 Adjusted EBITDA (non-GAAP) $ 73,421 $ 72,358 $ 71,730 $ 97,817 $ 315,326 Bed, Bath & Beyond bankruptcy —