Church & Dwight Company, Inc. · NYSE:CHD
Church & Dwight — Investor Day (January 2021)
145 slides from Church & Dwight's investor day presentation, Jan 29, 2021
Slide 1: Church & Dwight's Analyst Day 2021
CHURCH & DWIGHT’S ANALYST DAY 2021
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT This presentation contains forward-looking statements, including, among others, statements relating to net sales and earnings growth; gross margin changes; trade and marketing spending; marketing expense as a percentage of net sales; sufficiency of cash flows from operations; e
Slide 3: Who From Management Is With Us Today?
WHO FROM MANAGEMENT IS WITH US TODAY? Matt Farrell Chairman and Chief Executive Officer Britta Bomhard Executive Vice President & Chief Marketing Officer Barry Bruno Executive Vice President of International Steve Cugine Executive Vice President of GNPI Patrick de Maynadier Executive Vice President
Slide 4: 2020 was another solid year. We have confidence in our future.
2020 was another solid year. We have confidence in our future. Evergreen Digitally Consistent model is savvy innovation healthy Steady US Sustainable High Strong 2021 growth ahead International Growth Rate Outlook 4
Slide 5: Agenda
01 Who We Are 02 U.S. Consumer Business Agenda 03 Consistent Innovation 04 International Story 05 Animal Productivity Story 06 How We Run the Company 07 Strong M&A Platform 08 Financials 5
Slide 6: Who We Are
01 Who We Are Matt Farrell, Chairman and 6 Chief Executive Officer
Slide 7: Deliver Outstanding Returns to Our Shareholders
DELIVER OUTSTANDING RETURNS TO OUR SHAREHOLDERS 15 YEAR: 10 YEAR: 5 YEAR: 3 YEAR: 2020: 24.2% 19.5% 17.2% 21.9% 25.5% 7
Slide 8: We Have an Evergreen Business Model
WE HAVE AN EVERGREEN BUSINESS MODEL 3% Organic Sales Growth 8% EPS Growth 8
Slide 9: Over Ten Years of Solid Organic Sales Growth
OVER TEN YEARS OF SOLID ORGANIC SALES GROWTH 4.1% organic sales average 10.0% 9.6% 9.0% 8.0% 7.0% 6.0% Evergreen 5.0% Model: 4.0% 3.0% 3.0% 2.0% 1.0% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 9
Slide 10: Consistent Strong Adjusted EPS Growth
CONSISTENT STRONG ADJUSTED EPS GROWTH 11.4% adjusted EPS growth average 18.0% 16.0% 14.6% 14.0% Evergreen 12.0% Model: 10.0% 8.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 10
Slide 11: Organic Sales – Sources
ORGANIC SALES – SOURCES 2% United States 3% 6% International 5% Specialty Products 11
Slide 12: Power Brands
LE fi hd Orajel ae eto waterpik: FINISHING TOUCH* FLAWLESS® ZICAM. = 13 POWER BRANDS
Slide 13: These Brands Drive Our Results
THESE 13 BRANDS DRIVE OUR RESULTS more than 80% of sales & profits are represented by these 13 POWER BRANDS 13
Slide 14: Our Portfolio Is Balanced & Diversified
OUR PORTFOLIO IS BALANCED & DIVERSIFIED A well-balanced portfolio of household and personal care products. Household: 46% Specialty Products: Personal Care: 48% 6% 14
Slide 15: Diversified Product Portfolio
DIVERSIFIED PRODUCT PORTFOLIO Our Unique Product Portfolio Has Both Value and Premium Products Premium: 58% Value: 42% 15
Slide 16: Long International Runway
LONG INTERNATIONAL RUNWAY U.S. Consumer International Consumer 77% 17% Specialty Products 6%
Slide 17: Our Advantage: Nimble Organizational Structure
OUR ADVANTAGE: NIMBLE ORGANIZATIONAL STRUCTURE quick decision easy ability to adapt making communication 17
Slide 18: Long History of Growth Through Acquisitions
LONG HISTORY OF GROWTH THROUGH ACQUISITIONS Net Sales (Billions) $4.9 $1.5 2004 2005 2006 2008 2010 2011 2012 2014 2015 2016 2017 2018 2019 2020 Note: Trojan, Nair and First Response acquired in two parts – 2001 and 2004. 18
Slide 19: Acquired 12 of Our 13 Power Brands Since 2001
ACQUIRED 12 OF OUR 13 POWER BRANDS SINCE 2001 Acquired 2001 Acquired 2001 Acquired 2001 Acquired 2001 Acquired 2005 Acquired 2006 #1 EXTREME VALUE #2 BATTERY LAUNDRY POWERED #1 LAUNDRY #1 CONDOM DETERGENT #1 PREGNANCY KIT #1 DEPILATORY TOOTHBRUSH ADDITIVE Acquired 2008 Acquired 2011 Acquired 2012 Ac
Slide 20: We Are Growing Online
WE ARE GROWING ONLINE PERCENTAGE OF NET SALES 13% 8% 7% 5% 2% 1% 2015 2016 2017 2018 2019 2020 20
Slide 21: Low Exposure to Private Label
LOW EXPOSURE TO PRIVATE LABEL Weighted Average Private Label Share of our Categories 20% Private Label Consistently ~12% 10% 0% 2016 2017 2018 2019 2020 Source: Nielsen Total U.S. AOC 21
Slide 22: Private Label Shares
PRIVATE LABEL SHARES Only 5 of our 17 categories have private label exposure PREGNANCY TEST KITS BAKING SODA GUMMY VITAMINS 50% 30% 20% 40% 25% 15% 20% 30% 15% 10% 20% 10% 10% 5% 5% 0% 0% 0% ORAJEL EQUIVALENT CLUMPING CAT LITTER 30% 20% 15% 20% 10% 10% 5% 0% 0% Source: Nielsen Total U.S. AOC / 2012
Slide 23: U.S. Consumer Business
02 U.S. Consumer Business Britta Bomhard, EVP and Chief Marketing Officer
Slide 24: US Organic Sales Evergreen Target: +2%
US ORGANIC SALES EVERGREEN TARGET: +2% 2% United States 3% 6% International 5% Specialty Products 24
Slide 25: 2021 Key US Growth Drivers
2021 KEY US GROWTH DRIVERS Vitamin growth continues as gummy conversion accelerates As dental offices get back to normal, Waterpik growth continues Flawless growth from new products, influencers and better store foot traffic Core brands level out from Covid extremes Brand equity strength and media e
Slide 26: We Are in the Right Categories (Nielsen)
WE ARE IN THE RIGHT CATEGORIES (NIELSEN) 2016 2017 2018 2019 2020 Clumping Litter Power Flossing Dry Shampoo Toothache Gummy VMS Toothpaste Baking Soda Battery Toothbrush Laundry Hair Growth Pregnancy Test Kits Stain Fighters Condoms Depilatories Carpet Deodorizers Women’s Electric Grooming Adult Co
Slide 27: 2020 Category Growth Rates
2020 CATEGORY GROWTH RATES Gummy Vitamins 58.1% Baking Soda 18.4% Carpet Deodorizers 12.2% Adult Cold Shortening 12.0% Toothache 11.4% Pregnancy Test Kits 9.4% Laundry 5.5% Toothpaste 3.3% Depilatories 2.4% Battery Toothbrush 2.4% Clumping Litter 2.2% Stain Fighters 2.1% Women's Electric Grooming -0
Slide 28: 2021 Category Expectations
2021 CATEGORY EXPECTATIONS MAINTAIN DECLINE FROM RECOVER FROM STEADY ELEVATED LEVELS COVID HIGHS COVID LOWS STATE Gummy Vitamins Pregnancy Test Kits Condoms Battery Toothbrush Laundry Additives Baking Soda Dry Shampoo Toothpaste Cat litter Toothache Hair Growth Laundry Depilatories Carpet Deodorizer
Slide 29: 2020 % Change in Household Penetration
2020 % CHANGE IN HOUSEHOLD PENETRATION Baking Soda Hair Growth Depilatories Stain Fighters Gummy VMS Clumping Litter Battery Toothbrush Toothache Carpet Deodorizers Laundry Toothpaste Power Flossing 11 out of 17 Women’s Electric Grooming Pregnancy Test Kits Dry Shampoo categories have higher Adult C
Slide 30: We Are Growing Households for Our Brands
WE ARE GROWING HOUSEHOLDS FOR OUR BRANDS ARM & HAMMER 8.6 million more households were buying in 2020 OxiClean: 2.4 million more household were buying in 2020 Vitafusion: 3 million more households were buying only in 2nd half of 2020 with repeated trips Source: Nielsen and Company data 30
Slide 31: Gummy Vitamins
GUMMY VITAMINS CATEGORY 2020 dollar change YOY category 120% consumption: 100% 80% +58% 60% 40% 20% 0% • immunity Mar Apr May Aug Jan Feb Sep Oct Nov Dec Jun Jul • stress Source: Nielsen Total U.S. AOC 31
Slide 32: Consumer Vitamin Habit Statistics
“The average time it takes a person to create a new habit is 66 days” “20% of consumers have started taking vitamins or supplements“ “57% of consumers now take vitamins daily” “33% of consumers plan to purchase more immune support supplements.” Source: Covid Behavior Study, Dec 2020
Slide 33: Adult Conversion to Gummies Has Accelerated
ADULT CONVERSION TO GUMMIES HAS ACCELERATED 2019 2020 82% 18% 77% 23% All Other Gummy All Other Gummy Source: Nielsen Total U.S. AOC 33
Slide 34: Power Flosser
POWER FLOSSER CATEGORY 2020 units by month category 120% 100% consumption: 80% 60% 40% • 1H down 20% 20% • 2H improving 0% Mar Apr May Aug Jan Feb Sep Oct Nov Dec Jun Jul -20% -40% -60% Source: Nielsen Total U.S. AOC 34
Slide 35: Dental Flossers Remained Stable in 2020
“Despite dental office closures, number of dental flossers sold in 2020 remained stable." "99% of dental offices are back open but 60% of dental offices have reduced traffic.” “Consumer confidence in dental practices will return.” Source: ADA Dec 2020, Covid Behavior Study, Dec 2020
Slide 36: Women's Electric Grooming
WOMEN’S ELECTRIC GROOMING CATEGORY 2020 dollar change YOY category 60% 50% consumption: 40% 30% 20% -0.4% 10% 0% -10% • beauty retailer closure -20% -30% • reduced foot traffic Mar Apr May Aug Jan Feb Sep Oct Nov Dec Jun Jul Source: Nielsen Total U.S. AOC 36
Slide 37: Flawless Growth Drivers in 2021
FLAWLESS GROWTH DRIVERS IN 2021 ASHLEY GRAHAM AMELIA HAMLIN DOVE CAMERON HALLE BERRY
Slide 38: Laundry
LAUNDRY CATEGORY “Increase in number of loads due to desire to remove Covid related germs.” dollar change YOY 2020 category 40% consumption: 10% 8% +5.5% 6% 4% 2% 0% -2% • Covid concerns -4% -6% • more time to do -8% -10% laundry Mar Apr May Aug Jan Feb Sep Oct Nov Dec Jun Jul Source: Nielsen Total
Slide 39: Clumping Litter
CLUMPING LITTER CATEGORY “New cat ownership has climbed steadily with cat litter household penetration up 6% versus pre-Covid time period.” dollar change YOY 2020 category 25% consumption: 20% 15% +2.2% 10% 5% 0% • huge ecommerce -5% growth not reflected -10% (underrepresented in Nielsen -15% Mar Ap
Slide 40: Dry Shampoo
DRY SHAMPOO CATEGORY “As consumer mobility returns, dry shampoo usage will increase.” dollar change YOY 2020 category 20% consumption: 15% 10% -4.0% 5% 0% -5% -10% -15% • beauty retail store -20% closures -25% -30% -35% • decreased usage Mar Apr May Aug Jan Feb Sep Oct Nov Dec Jun Jul occasions Sour
Slide 41: Condom
CONDOM CATEGORY “As consumer mobility returns, condom usage will increase.” dollar change YOY 2020 category 15% consumption: 10% 5% -6.0% 0% -5% -10% • fewer ‘hookups’ -15% -20% • 40% drop in singles -25% going out on dates Mar Apr May Aug Jan Feb Nov Dec Jun Jul Sep Oct Source: Nielsen Total U.S. A
Slide 42: Some Covid Behaviors Won't Change
SOME COVID BEHAVIORS WON’T CHANGE self care cat washing wellness: at home ownership & cleaning supplements & gum health 42
Slide 43: We Know How to Grow Share
WE KNOW HOW TO GROW SHARE 2016 2017 2018 2019 2020 7 out of 13 power brands maintained or grew share in 2020 Source: Nielsen Total U.S. AOC 43
Slide 44: Partnered with 500 Influencers
We partnered with 500 influencers across our portfolio driving engagement and building brand love with more than 200 million consumers!
Slide 45: Consistent Innovation
03 Consistent Innovation Steve Cugine, EVP of GNPI
Slide 46: Consumer Insight: Germs in Laundry
CONSUMER INSIGHT: 79% of consumers want germs removed from their laundry. N=1003 Survey Completed May 2019
Slide 47: Kills 99.9% of Bacteria and Viruses
• Kills 99.9% of bacteria and viruses • Removes germs, odors & stains
Slide 48: Consumer Insight: Cleaning Household Surfaces
CONSUMER INSIGHT: Consumers have been hyper-focused on cleaning household surfaces.
Slide 49: Multi-Purpose Disinfectant Sprays
Multi-Purpose Disinfectant Sprays Kills COVID. Powerful cleaning and disinfecting without chlorine bleach Note: claims pending
Slide 50: Consumer Insight: Flossing Is Difficult
CONSUMER INSIGHT: 2/3 of consumers find flossing difficult and only 16% floss daily. Source: Lynx AAU, 2019; Ipsos survey, 2017
Slide 51: Most Successful Power Flosser Launch Just Got Better
The most successful new product launch in power flosser history, just got even better… • 2x bristle speed • greater flossing power • 2 brush head sizes • 2 brush speeds 51
Slide 52: Consumer Insight: Small Bathrooms
CONSUMER INSIGHT: Consumers with smaller bathrooms struggle with counter space and outlets.
Slide 53: The Same Amazing Clean, Unplugged
The same amazing clean, unplugged! • 30% smaller than traditional plug-in models. • 90 seconds of water capacity • lithium-ion battery that lasts up to 4 weeks with a single charge
Slide 54: Consumer Insight: Condom Fit and Feel
CONSUMER INSIGHT: Men seek condoms that fit and feel the best.
Slide 55: A Selection of Our Best Condoms
A selection of our best condoms • personalized fit and feel • better feel = more usage
Slide 56: Consumer Insight: At-Home Beauty
CONSUMER INSIGHT: Consumers are becoming more confident in doing beauty routines at home and are aware of the cost savings.
Slide 57: For Your At Home Solutions
CLEANSE For your “at home” solutions. SALON NAILS
Slide 58: Consumer Insight: Immune Support Supplements
CONSUMER INSIGHT: 33% of consumers plan to purchase more immune support supplements. Source: Covid Behavior Study, Dec 2020
Slide 59: Super Immune Support
Super Immune Support • Only gummy to deliver over 100% Daily Value of the top 3 immune ingredients: vitamin C, zinc and elderberry • Includes hot new ingredient: manuka honey • First vitafusion item in the cough and cold aisle!
Slide 60: History of Launching New VMS Items
HISTORY OF LAUNCHING NEW VMS ITEMS 5 new items 22 new items 12 new items 60
Slide 61: International Story
04 International Story Barry Bruno, EVP of International
Slide 62: International Organic Sales Evergreen Target: +6%
INTERNATIONAL ORGANIC SALES EVERGREEN TARGET: +6% 2% United States 3% 6% International 5% Specialty Products 62
Slide 63: Historical Organic Performance vs. Evergreen Target
HISTORICAL ORGANIC PERFORMANCE VS. EVERGREEN TARGET Q4 organic sales: 14.9% 10.0% 9.2% 8.6% Evergreen 8.1% 7.8% 7.8% growth target 6.0% 2015 2016 2017 2018 2019 2020 Note: Organic sales growth is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most directly comparable GAAP meas
Slide 64: International Net Sales: The Cugine Effect
INTERNATIONAL NET SALES: THE “CUGINE EFFECT” ~$828 MM 81% ~$535 MM United States 2014 2020 64
Slide 65: International Composition: Subsidiaries + GMG
INTERNATIONAL COMPOSITION: SUBSIDIARIES + GMG 2020 INTERNATIONAL Global Markets Group Canada 29% NET SALES: 34% $828 million Mexico Europe 6% 23% Australia 8% 65
Slide 66: 2020 Sources of International Organic Growth
2020 SOURCES OF INTERNATIONAL ORGANIC GROWTH Subsidiary Markets: +4.8% Global Markets Group: +19.0% 66
Slide 67: 2021 Key Growth Drivers
2021 KEY GROWTH DRIVERS Subsidiary Markets: • Delivering outsized growth, more than double CPG competitor average growth, Approaching Scale Global Markets Group: • Emerging Markets serve as future growth driver Acquisitions: • Waterpik & Flawless still under-represented in International markets vs.
Slide 68: Fuel for Growth: Subsidiary Markets
FUEL FOR GROWTH: SUBSIDIARY MARKETS 1. Power Brand Expansion: Arm & Hammer, OxiClean, Trojan 2. Acquisition Acceleration: Waterpik & Flawless 3. Pricing 68
Slide 69: Fuel for Growth: Global Markets Group
FUEL FOR GROWTH: GLOBAL MARKETS GROUP 1. Emerging Markets: China + SE Asia + Middle East + Latin America 2. Acquisition Expansion: Waterpik + Flawless + Batiste + VMS 3. Local Manufacturing: Shift from “export” approach to localized 69
Slide 70: GMG Emerging Markets Focus: Asia First
GMG EMERGING MARKETS FOCUS: ASIA FIRST GDP. World Development Indicators. World Bank. Retrieved 22 Nov. 2020, The World in 2050: PWC, The Future of Asia: McKinsey & Company 70
Slide 71: Fuel for Growth: Recent Brand Acquisitions
FUEL FOR GROWTH: RECENT BRAND ACQUISITIONS Waterpik + Flawless: 1. Leveraging Subsidiaries: Eliminating Distributors and Going Direct 2. Global Markets Group Footprint: Expansion into New Markets 3. New Competencies: Marketing, eCommerce & Pricing Expertise 71
Slide 72: Waterpik International: 2X Growth with More Room to Run
WATERPIK INTERNATIONAL: 2X GROWTH WITH MORE ROOM TO RUN Waterpik International Net Sales 3 YEAR: 2016 2020 $50M 2x 18.0% $100M Driving Building Expanding Professional Endorsement Consumer Awareness Retail Distribution 72
Slide 73: Flawless International: Global Celebrity Ambassador Launch
FLAWLESS INTERNATIONAL: GLOBAL CELEBRITY AMBASSADOR LAUNCH ASHLEY GRAHAM global launch AMELIA HAMLIN in 10 key markets. DOVE CAMERON HALLE BERRY 73
Slide 74: Batiste International: Room to Run
BATISTE INTERNATIONAL: ROOM TO RUN Household Penetration 9% UK < 2% Rest of World $100M+ +20% 5YR CAGR Batiste HHP UK, Nielsen Homescan 10/31/20 74
Slide 75: Vitamins International: Another Growth Driver
VITAMINS INTERNATIONAL: ANOTHER GROWTH DRIVER 2019 2020 +29% VMS growth is fueled by China up +38% 75
Slide 76: Investment in Resources & Capabilities
INVESTMENT IN RESOURCES & CAPABILITIES Added eCommerce Opened New Added International Expertise in China Office in Mumbai, India Pricing Expertise Ramped Up Local Launched First Global Manufacturing in Asia Marketing Campaign 76
Slide 77: Improving Adjusted Operating Margin (+50 bps Per Year)
WHILE IMPROVING ADJUSTED OPERATING MARGIN (+50 BPS PER YEAR) +120 bps +50 bps +50 bps 12.0% 12.5% 13.0% 10.8% 2019 2020 2021E 2022E *2019 includes the impact of Brazil shutdown **2020 includes the impact of Flawless Earnout Adjustment 77
Slide 78: Committed to International Organic Growth
COMMITTED TO INTERNATIONAL ORGANIC GROWTH • Long int’l runway for existing U.S. power brands • Leverage newly acquired brands • Global Markets Group fueled by Emerging Markets • Strategic investments in Resources & Capabilities 78
Slide 79: Animal Productivity Story
05 Animal Productivity Story
Slide 80: SPD Organic Sales Evergreen Target: 5%
SPD ORGANIC SALES EVERGREEN TARGET: 5% 2% United States 3% 6% International 5% Specialty Products 80
Slide 81: Specialty Products Division
SPECIALTY PRODUCTS DIVISION Animal Non-Dairy 2020 SPD 18% NET SALES: Animal Dairy $300 million 49% Specialty Chemical 33% 81
Slide 82: Farm-to-Fork Solutions to Improve Productivity
FARM-TO-FORK SOLUTIONS TO HELP IMPROVE PRODUCTIVITY NUTRITIONAL SUPPLEMENTS 82
Slide 83: The Cyclical Dairy Industry Drives SPD Organic Revenue
THE CYCLICAL DAIRY INDUSTRY DRIVES SPD ORGANIC REVENUE Organic Sales 30% 22.6% 20% 11.5% 10% 6.0% 0.4% 0% -10% 2011 2014 2017 2020 83
Slide 84: Acquisitions Created a More Balanced Business
ACQUISITIONS CREATED A MORE BALANCED BUSINESS Non-dairy sales expected to grow approximately 10% in 2021. % OF NON-DAIRY SALES 30% <1.0% 2015 2021 84
Slide 85: Positioned for Organic Growth
POSITIONED FOR ORGANIC GROWTH • Trusted brand • Aligned with consumers’ trend • Multiple species • Global growth 85
Slide 86: How We Run the Company
06 How We Run the Company
Slide 87: We Have Five Operating Principles
WE HAVE FIVE OPERATING PRINCIPLES Brands Consumers Love 1 Leverage Brands 2 Friend of the Environment 3 Leverage People Highly productive people in a place where people matter 4 Leverage Assets Asset Light 5 Leverage Acquisitions GOOD shareholder returns become GREAT shareholder returns 87
Slide 88: Brands Consumers Love
BRANDS CONSUMERS LOVE Brands Consumers Love 88
Slide 89: Friend of the Environment
FRIEND OF THE ENVIRONMENT Company institutes the use of recycled paperboard to package household products. Company introduces Sole sponsor of first pro-environmental Earth Day. wall charts & trading cards as product Launches first non- promotion. polluting, phosphate- free laundry detergent. 89
Slide 90: Friend of the Environment
FRIEND OF THE ENVIRONMENT Partnering with the Arbor Day Foundation to plant millions of trees in the Mississippi River Valley. 50% of global 100% of global electricity demand electricity demand supplied by offset by green renewable energy energy. sources. 90
Slide 91: Environmental Goals
ENVIRONMENTAL GOALS Water: to reduce water and/or wastewater by 25% by 2022* Solid waste: to increase solid waste recycling rate to 75% by the end of 2021. Air: to achieve 100% carbon neutral status for all global operations by end of 2025. * using 2016 as a baseline. 91
Slide 92: ESG Recognition
ESG RECOGNITION 2020 NATIONAL TOP 100 92
Slide 93: Highly Productive People in a Place Where People Matter
HIGHLY PRODUCTIVE PEOPLE IN A PLACE WHERE PEOPLE MATTER Revenue per Employee $958 (in ‘000s) $761 $717 $465 $461 $458 $402 $336 $324 CHD CLOROX PG ENERGIZER KIMBERLY COLGATE RECKITT EDGEWELL NEWELL Source: Most recent 10K filings 93
Slide 94: Simple Compensation Structure
SIMPLE COMPENSATION STRUCTURE 1. Bonuses are tied 100% to Gross business results. Net Revenue Margin Expansion 2. Equity compensation is 100% stock options. 3. Management is required to be heavily invested in Cash From EPS company stock. Operations 94
Slide 95: All Employees Focus on Gross Margin
ALL CHURCH & DWIGHT EMPLOYEES FOCUS ON GROSS MARGIN Gross margin is 25% of all employees’ a n n u a l b o n u s . 95
Slide 96: Asset Light
ASSET LIGHT 2.5% Capital Expenditures as a % of Sales 2.0% 2.1% 2.0% 1.8% 1.5% 1.7% 1.5% 1.4% 1.0% 1.2% 0.5% 0.0% 2014 2015 2016 2017 2018 2019 2020 Outlook as of July 31, 2020 96
Slide 97: Strong M&A Platform
07 Strong M&A Platform
Slide 98: We Have Five Operating Principles
WE HAVE FIVE OPERATING PRINCIPLES Brands Consumers Love 1 Leverage Brands 2 Friend of the Environment 3 Leverage People Highly productive people in a place where people matter 4 Leverage Assets Asset Light 5 Leverage Acquisitions GOOD shareholder returns become GREAT shareholder returns 98
Slide 99: Long History of Growth Through Acquisitions
LONG HISTORY OF GROWTH THROUGH ACQUISITIONS Net Sales (Billions) $4.9 $1.5 2004 2005 2006 2008 2010 2011 2012 2014 2015 2016 2017 2018 2019 2020 Note: Trojan, Nair and First Response acquired in two parts – 2001 and 2004. 99
Slide 100: We Have Clear Acquisition Criteria
WE HAVE CLEAR ACQUISITION CRITERIA Primarily #1 Higher growth, Asset Light Leverage CHD Deliver or #2 share higher margin manufacturing, sustainable brands brands logistics and competitive purchasing advantage 100
Slide 101: #1 Zinc Supplement in the United States
#1 zinc supplement in the United States in the Adult cold shortening category. 101
Slide 102: 13 Power Brands Today, 20 Tomorrow
13 POWER BRANDS TODAY, 20 TOMORROW Net Sales (Billions) $5.0 13 $4.5 12 $4.0 11 $3.5 $3.0 10 9 $2.5 8 $2.0 7 6 $1.5 $1.0 5 $0.5 1 $0.0 1846 2001 2005 2006 2008 2011 2012 2017 2019 2020… Note: Trojan, Nair and First Response acquired in two parts – 2001 and 2004. 102
Slide 103: Financials
08 Financials Rick Dierker EVP and Chief Financial Officer
Slide 104: We Have an Evergreen Business Model
WE HAVE AN EVERGREEN BUSINESS MODEL 3% Organic Sales Growth 8% EPS Growth 104
Slide 105: Evergreen Model
EVERGREEN MODEL TSR Model Organic Net Sales Growth +3.0% Gross Margin +25 bps Marketing FLAT SG&A -25 bps Operating Margin ∆ +50 bps EPS Growth 8%
Slide 106: Q4 2020 Highlights – Strong Finish
Q4 2020 HIGHLIGHTS – STRONG FINISH Domestic 11.0% Organic sales growth +10.8% International 14.9% SPD (1.2%) Gross margin -280 bps Includes (40) bps impact from Supply Chain Employee Recognition Marketing change +140 bps 15.6% of sales is the highest spend rate of 2020 SG&A -70 bps Acquisition impac
Slide 107: Full Year 2020 Highlights
FULL YEAR 2020 HIGHLIGHTS Domestic 10.7% International 8.6% Organic Sales Growth +9.6% SPD 0.4% Gross Margin 45.2%, -30 bps Marketing % 12.1%, +30 bps Adjusted SG&A 14.1%, -10 bps Adjusted EPS +14.6% to $2.83 Cash from Operations $990MM FCF Conversion 125% Organic sales, adjusted SG&A and adjusted E
Slide 108: Gross Margin Expansion in 2020
GROSS MARGIN EXPANSION IN 2020 Q4 2020 Price/Volume/Mix +130 bps +150 bps Inflation (commodities, distribution, labor, investments) (310) bps (140) bps Covid Costs (40 bps due to supply chain EE bonus) (150) bps (100) bps Incremental Tariffs (90) bps (50) bps Productivity Programs +160 bps +140 bps
Slide 109: Key Gross Margin Growth Drivers
KEY GROSS MARGIN GROWTH DRIVERS Good to Supply Great Cost Chain Optimization Optimization Acquisition New Synergies Products 109
Slide 110: 2021 Outlook
2021 Outlook
Slide 111: Outlook for 2021
OUTLOOK FOR 2021 REPORTED ORGANIC OPERATING ADJUSTED SALES SALES PROFIT EPS GROWTH GROWTH MARGIN GROWTH ~4.5% ~3.0% +100 bps +6-8% Outlook as of December 31, 2020. Organic sales and adjusted EPS are non-GAAP measures. 111
Slide 112: 2021: +6-8% EPS Growth
2021: +6-8% EPS Growth 2021 Outlook Reported Sales Growth ~4.5% Domestic +2% Organic Sales Growth ~3.0% International +6% SPD +5% Gross Margin +50 bps Marketing -30 bps Adjusted SG&A -20 bps Adjusted Operating Profit Margin +100 bps Effective Tax Rate ~21-22% Adjusted EPS Growth +6-8% Cash From Oper
Slide 113: Organic Sales – 10 Year Trend
ORGANIC SALES – 10 YEAR TREND 10.0% 9.0% 8.0% 7.0% 10-year 6.0% average: 5.0% 4.1% 4.0% 3.0% 2.0% 1.0% 0.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 113
Slide 114: Focus on Adjusted Gross Margin
FOCUS ON ADJUSTED GROSS MARGIN +50 bps 45.8% 45.5% ~45.7% 45.2% 44.4% 2017 2018 2019 2020 2021E Note: Percentages are adjusted gross margin, a non-GAAP measure. See appendix for adjustments to gross margin presented in accordance with GAAP. Normalized gross margin and excludes prior year Flawless 11
Slide 115: Gross Margin Expansion in 2021
GROSS MARGIN EXPANSION IN 2021 2020 2021 Price/Volume/Mix +150 bps +80 bps Inflation, Covid (240) bps (130) bps Productivity Programs +140 bps +100 bps Tariffs (50) bps (40) bps Acquisition +10 bps +40 bps Flawless Accounting (40) bps - Gross Margin Change (30) bps +50 bps 115
Slide 116: Gross Margin 2021
GROSS MARGIN 2021 First Half Gross Margin Impacted By: +150 bps • More normal promotional activity • Higher Waterpik tariffs • Covid costs +50 bps • Higher commodity costs Second Half Gross Margin Impacted By: • Lower Covid costs -50 bps • Tariff remediation 1H 2H FY21E • Improved promotional effici
Slide 117: Marketing Spend Target: ~11% - ~12%
MARKETING SPEND TARGET: ~11% - ~12% 5-year average: 12.0% 12.1% 11.7% 11.8% ~11.8% ~11.8% 2017 2018 2019 2020 2021E 117
Slide 118: SG&A Leverage
“SG&A” LEVERAGE -20 bps 13.6% 14.2% 14.1% ~13.9% 13.3% 2017 2018 2019 2020 2021E Note: Adjusted SG&A is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. 118
Slide 119: SG&A Leverage Ex Acquisition Amortization
“SG&A” LEVERAGE EX ACQUISITION AMORTIZATION “FLATTISH” 11.6% 11.8% 11.6% 11.6% ~11.0% 2017 2018 2019 2020 2021E Note: Adjusted SG&A is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. 119
Slide 120: Consistent Strong Adjusted EPS Growth
CONSISTENT STRONG ADJUSTED EPS GROWTH ~$3.00 - ~$3.06 $2.83 $2.47 +6-8% $2.27 14.6% $1.94 8.8% 17.0% 9.6% 2017 2018 2019 2020 2021E Note: Adjusted EPS growth is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measures. Excludes Waterpik. 120
Slide 121: EPS 2021
EPS 2021 First Half EPS Impacted By: ~20% • More normal promotional activity • Higher Waterpik tariffs • Covid costs • Higher Commodity Costs +6-8% Second Half EPS Impacted By: • Return to historical marketing levels • Improved promotional efficiency ~(5%) • Lower Covid costs 1H 2H FY21E • Tariff re
Slide 122: Best in Class FCF Conversion
“BEST IN CLASS” FCF CONVERSION 10-Year Average: 122% 129% 131% 128% 126% 126% 125% 123% 116% 112% 108% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Sources: Nasdaq Actual and Consensus 122
Slide 123: Cash Conversion Cycle
CASH CONVERSION CYCLE TIGHT CONTROL OF WORKING CAPITAL DRIVES CCC IMPROVEMENT 52 40 32 34 36 32 27 21 18 22 21 18 16 days 16 13 days excluding 8 7 5 Waterpik & Flawless 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E Outlook as of December 31, 2020 123
Slide 124: Strong Balance Sheet
STRONG BALANCE SHEET TOTAL DEBT/BANK EBITDA 2.6x 2.2x 1.6x 1.5x 1.7x 1.4x 1.9x 1.2x 1.4x 1.4x 1.3x CREDIT RATING 0.6x A3/BBB+ 0.5x 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E Note: Total debt/EBITA is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most co
Slide 125: Significant Financial Capacity $4.2B
SIGNIFICANT FINANCIAL CAPACITY as of December 31, 2020 (in $millions) Cash & Cash $185 Equivalents on Hand Acquisition Power: Leverage Capacity $4,000 $4.2B • 2020 TTM Bank EBITDA = $1,295M Current $2,165 • Leverage capacity to 3.75x EBITDA Outstanding Debt • Example: Acquisition EBITDA multiple of
Slide 126: Prioritized Uses of Free Cash Flow
PRIORITIZED USES OF FREE CASH FLOW 1 TSR-Accretive M&A 2 Capex For Organic Growth & G2G 3 New Product Development 4 Debt Reduction 5 Return Of Cash To Shareholders 126
Slide 127: Minimal Capital Investment
MINIMAL CAPITAL INVESTMENT Capital Expenditures as a % of Sales 5.4% Evergreen 3.5% Model: 2.5% 2.8% 2.5% 2.0% 2.1% 2.1% 2.0% 1.8% 1.7% 1.4% 1.5% 1.2% $135 $64 $77 $75 $67 $71 $62 $50 $45 $60 $74 $99 $180 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E Outlook as of December 31, 20
Slide 128: Ensuring a Steady Supply for Our Categories
ENSURING A STEADY SUPPLY FOR OUR CATEGORIES 2020 LLD Unit Dose Baking Soda Cleaners VMS 2021- 2022 LLD Litter Baking Soda VMS Technology Capacity 128
Slide 129: 5.2% Dividend Increase in 2021
5.2% DIVIDEND INCREASE IN 2021 $1.01 $0.96 $0.91 120 $0.87 +5.2% +5.5% $0.76 +14.5% +4.6% +7.0% consecutive years of dividends +119% +35% 2017 2018 2019 2020 2021 129
Slide 130: Slide 130
Slide 131: Reconciliations
Reconciliations www.churchdwight.com 131
Slide 132: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES Church & Dwight Co., Inc.’s Reconciliation of Non-GAAP Measures: The following pages provide definitions of the non-GAAP measures used in this presentation and reconciliations of these non- GAAP measures to the most directly comparable GAAP measures. These non-GAA
Slide 133: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES Organic Sales Growth: The presentation provides information regarding organic sales growth, namely net sales growth excluding the effect of acquisitions, divestitures and foreign exchange rate changes, from year-over-year comparisons. Management believes that the
Slide 134: Total Company Organic Sales Reconciliation
TOTAL COMPANY ORGANIC SALES RECONCILIATION Acquisitions & Discontinued System Calendar Shipping Year Reported FX Divestitures Operations Upgrade / Other Terms Organic 2020 12.3% 0.1% -2.8% 0.0% 0.0% 0.0% 0.0% 9.6% 2019 5.1% 0.5% -1.2% 0.0% 0.0% 0.0% 0.0% 4.4% 2018 9.8% 0.0% -5.5% 0.0% 0.0% 0.0% 0.0%
Slide 135: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES Adjusted Gross Profit Margin This presentation discloses the Company’s Gross Profit Margin. Adjusted Gross Profit Margin , as used in this presentation, excludes significant one-time items that are not indicative of the Company’s period-to-period performance. We b
Slide 136: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES Adjusted SG&A: This presentation discloses the Company’s SG&A expenses as a percent of net sales. Adjusted SG&A, as used in this presentation, is defined as selling, general and administrative expenses excluding significant one-time items that are not indicative o
Slide 137: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES Adjusted Operating Profit Margin: The presentation discloses Operating Profit margin (a GAAP measure) and Adjusted Operating Profit Margin (a non-GAAP measure) which excludes significant one-time items that are not indicative of the Company's period-to-period perf
Slide 138: Reported & Adjusted Non-GAAP Reconciliations
REPORTED & ADJUSTED NON-GAAP RECONCILIATIONS For the year ending December 31, 2020 2019 2018 2017 Adjusted Gross Margin Reconciliation Gross margin Reported 45.2% 45.5% 44.4% 45.8% Brazil Charge 0.0% 0.0% 0.0% 0.0% Gross Margin - Adjusted (non-gaap) 45.2% 45.5% 44.4% 45.8% Adjusted SG&A Reconciliati
Slide 139: SG&A less Amortization Expense Reconciliation
Church & Dwight Co., Inc. and Subsidiaries SG&A less Amortization Expense Reconciliation 2020 2019 2018 2017 SG&A as % of Net Sales - Reported 12.1% 14.4% 13.6% 14.4% Pension Settlement Charge - - - -1.0% Brazil Charge - -0.2% - -0.1% Passport Earn-out Reversal - 0.2% Flawless Earn-out Adjustment 1.
Slide 140: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES Adjusted EPS: This presentation discloses reported EPS excluding the following, namely, earnings per share calculated in accordance with GAAP adjusted to exclude significant one-time items that are not indicative of the Company’s period-to-period performance. We b
Slide 141: Reported & Adjusted Non-GAAP Reconciliations
REPORTED & ADJUSTED NON-GAAP RECONCILIATIONS For the year ending December 31, 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Adjusted EPS Reconciliation EPS - Reported $ 3.12 $ 2.44 $ 2.27 $ 2.90 $ 1.75 $ 1.54 $ 1.51 $ 1.40 $ 1.23 $ 1.06 $ 0.94 $ 0.85 Restructuring Charges $ - $ - $ - $
Slide 142: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES Free Cash Flow: Free cash flow (a non-GAAP measure) is defined as cash from operating activities (a GAAP measure) less capital expenditures (a GAAP measure). Management views free cash flow as an important measure because it is one factor in determining the amount
Slide 143: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES Total Debt to Bank EBITDA: Total Debt to Bank EBITDA is a ratio used in our debt agreements. Bank EBITDA (a non-GAAP measure) is a form of adjusted EBITDA, and represents earnings from Income (a GAAP measure), excluding interest income, interest expense, and befor
Slide 144: Debt to Bank EBITDA Reconciliation
DEBT TO BANK EBITDA RECONCILIATION Church & Dwight Co., Inc ($ in millions) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total Debt as Presented (1) $ 2,163.9 $ 2,063.1 $ 2,107.1 $ 2,374.3 $ 1,120.1 $ 1,050.0 $ 1,086.6 $ 797.3 $ 895.6 $ 246.7 $ 333.3 Other Debt per Cov enant (2) 1.5 15.9 5
Slide 145: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES Non-GAAP Reconciliations for Fourth Quarter of Fiscal Year 2020 145