Edgewell Personal Care Company (EPC) Earnings Call Transcript & Summary

All right. Welcome back, and good afternoon, everyone. My name is Christopher Barnes, and I'm Deutsche Bank's U.S. consumer packaged goods team. It's my pleasure to welcome Edgewell Personal Care to the stage. And with from the company, we have Rod Little, President and CEO; and Dan Sullivan, Chief Financial Officer, and they're going to lead us in a quick presentation, after which we'll dive into Q&A. From there, Brad, take it away, or Dan, take it away.

Good afternoon. Thank you for taking the time to hear or revisit our story. My name is Dan Sullivan. I'm the CFO for Edgewell, I'm joined on stage by Rod Little, our President and CEO. We have three chapters to the story that we're going to talk to you about today before the Q&A. The first one is a reminder of the transformation that began about 4 years ago. and some of the core elements of our strategy. I'll talk to you about that. I'll also talk to you about the proof points we've seen in the business in the year since that give us clear indications. The strategy is working, and then Rod will talk to you about where we go from here. And what does the path and the runway look like for Edgewell going forward. So three elements to the story. That's us. Safe harbor, I'll skip through, and I'll get to the transformation. Our strategy which was about 6 months in the making internal work that we did. If it could be captured in a page, it would look like the page on the screen. Not surprising, 4 or 5 underlying elements to the strategy. You see those in the middle of the page. I think the most important point or the highlight that I would call out is the way that we thought about the portfolio and how -- at the underlying level of this strategy is the desire and the movement into higher growth categories. That is what underpins the strategy. You see it in the way that we talk about our strategy. We have a nomenclature we use internally built to win, built to play. All of these brands and all of these segments are important they just play different roles for us, and we invest in them differently, we resource them differently. On the built to win side of the equation, these are categories that are higher growth in nature, structurally healthier. We have leading share positions in these categories. We have outpaced the category, and therefore, gain share, and we expect to continue to do that, and you see the segments that make that up. Equally important, though, on the right side of the page, things that we call right to play, which have a tremendously important role in cash flow profile and profit profile. Category is less healthy. Over time, there's a bit of choppiness in these categories. Our share position, though solid, not leading in these categories, and our ambition here is to continue to grow at category levels. So the portfolio diversification, the single biggest element of the strategy that we launched as I said 4 years ago. Now before I go on with the strategy, let me take a sidestep here and talk a bit about Shave. It is a sizable piece of the business. It's important, particularly in the U.S. We get asked about it disproportionately to other ends of our business. I think this slide is really helpful to highlight a couple of points. First of all, looking at the profile of Shave, we play across all relevant subsegments within shave. In fact, we are the only manufacturer that plays as a branded business that plays in disposables and in private label. So as the consumer shifts as sentiment shifts, as perhaps price value becomes important, we are obviously well positioned given this breath of the business. I think the second thing I would highlight here is the importance of our Private Brands group or custom brands, as you see there, sizable business, very interesting economics, I would say, at par on a contribution margin level with the branded side of the house gives us interesting opportunities at retail with key retailers also gives us interesting access to early-stage digitally native brands. That's how we got Billie, and I'll talk about that in a minute. The other thing I would point out about Shave that I think is noteworthy is that we have a bigger Shave portfolio outside of the U.S. than inside of the U.S. And why that's important is because of the growth algorithm that we've seen internationally. And the numbers there speak to the success that we've seen in our international business, which is largely a Shave portfolio. There's a bit of Sun, but it's largely a shave business. 6% growth going back a couple of years, 6% growth is our best expectation for the fiscal year that we're in. And as Rod will talk to you later, we think that is a really reasonable proxy for how we think about this business going forward. We've made some leadership changes. We've brought in new talent. We've replatformed the management teams. We've gotten much more local in how we think about attacking the market. Capabilities are better, local interest is better, innovation profile is better results starting to bear out. Now back to the strategy. One of our key focus points dating back a few years now is focusing on core capabilities. And here you see three that are top of mind for us, one of which is well demonstrated and has been in our business model for years now, and that is our focus and our effectiveness of productivity and taking cost out. If you know us, you would know that well. It's something we've done pre-COVID and obviously something we've done during COVID. I'll talk a bit more about the details there in a minute. Where we have focused more of our time are on the other two areas of capability growing largely through acquisition and new talent, we have become a different commercial organization, how we talk to consumer, how we platform and architect the portfolio, how we execute digitally. These are muscles that we didn't have coming out of our spin with Energizer, and these are now core to how we run the business, both in the U.S. and internationally. Rod will give you an example of that relevant to the European market in a bit. I think where we're now focused is on innovation and getting away from a tech-driven innovation platform, getting much more consumer-centric, getting much more local in how we think about game-changing innovation, and again, Rod will speak to that. So these capabilities now some well-grown and matured, some new to Edgewell underpin our strategy. Equally, we have what we think is a pretty compelling business model. Healthy gross margins that are now pivoting. We think we've met an inflection point and started to turn, you would have seen that last quarter with meaningful year-over-year margin accretion. But in its nature, we compete in categories with very healthy margins. We are relentless on cost. I'll show you the math in a minute, and I think importantly and perhaps the most interesting part of our economic model, we throw off a ton of cash that gives us very, very interesting options. So building on that point, from a capital allocation standpoint, that cash is put to use in a pretty impactful way and in a very disciplined and in many ways, balanced approach. We are in year 3 of a share buyback program, 3-year, $300 million program. We launched a dividend a little over 2 years ago that we think is relevant and interesting in terms of yield and payout ratio. And of course, we put that cash to use. Most recently and most importantly, to delever. We ended last year at about 3.5x levered. This year, we aim to be at or below 3x, taking half a turn of debt off, and that is still and will remain our priority in this high rate environment. But again, that cash generation opportunity, $170 million, $180 million of free cash flow put to good use in a very balanced and disciplined way in terms of capital allocation. So for our strategy then, we also put an algorithm out, and I'll show you how those results look for 2024. But the principles here are pretty simple. Sustainable, durable growth at the top in the range of 2% to 3%. And then profit and EPS growth coming in at a much higher rate, obviously, getting the benefit of leverage and good capital allocation, and you see the compelling cash flow profile. So that's our strategy. I just put 6 months of work and 4 years of execution into a few slides. Let me talk now before I hand to Rob about what proof points do we see that the strategy is working. And I think I would highlight a few. The first, of course, is sustainable growth. This was the ambition behind the strategy. This was the reason to move into more compelling growth categories to strengthen our portfolio and I think the results speak for themselves. There has been a very healthy mix of volume and price growth. There's been a very healthy mix of geographic segment growth. And not surprisingly, we have seen our right to win categories or segments growing at a disproportionate rate and now almost 1/3 of our business sitting in those segments. So we've demonstrated that we can consistently grow the top line, as you see 3 years running and an outlook for this year. A key reason for that is the second proof point, which is we simply have better brands, a stronger portfolio that we are activating in a much better way on shelf. I won't go through all of the details of the portfolio. I'll highlight a couple of brands just to give examples. The Billie brand, which if you're from the U.S., you would know quite well. We were the supplier for this brand at its birth. We have a relationship with the founders. That then brought us into an opportunity to acquire the brand. We then took the brand to retail in the U.S., where it is over a 10 share. It's about an 18, 19 a share in women's shave at Walmart. So Edgewell historically been disrupted on shelf became the disruptor. And now we are taking this brand out of shave and moving it into some really interesting women's grooming categories, deodorant, lotion, wash, et cetera. Second brand, I would highlight more close to home is Bulldog, a brand we acquired years back that we have grown 1.5x from its acquisition now a solid #2 in the grooming space in the U.K. and a brand that is making its way also out of its heritage into, in this example, premium skin space through its new advanced line. So a lot of great things happening in the portfolio, showing up better on shelf, executing. That's proof point #2. Proof point #3 goes back to one of our core strengths at the start of when we launched the strategy, which is our ability to structurally take cost out of this business. We were doing this long before COVID and inflation having on everyone, that's the left side of the page. And over that time period, highlighted $400 million in gross cost takeout. Equally then moving to this year, where we've got another program in place delivering north of 200 basis points of further cost reduction. It is structural, it is programmatic. It is capabilities that we've developed in the organization, ranging from automation, to network optimization to global procurement to just a mindset to be intolerant to waste. How that has benefited us over time has been significant in the world that we all have dealt with, with inflationary pressures with FX headwinds, which we have certainly not been immune to, we have developed meaningful cost offsets to that. You're starting to see the benefit of the fruit of our labor though, this year, whereas inflation eases and as FX is more moderate, we are seeing now the inflection point. And you saw that in our last quarter where we delivered over 300 basis points of year-over-year margin accretion and now have an outlook for the year that will be north of 100 basis points, about 120 basis points of margin accretion. Good cost productivity, demonstrated muscle capability, combined now with good revenue management, good SKU productivity, understanding promotional intensity and price pack architecture and all of the things that go into good unit economics. Those two forces coming together, and you see that on the slide, 370 basis points of tailwinds from the cost and revenue side of the operations. Coming back on the cash flow piece. I think this slide sort of speaks for itself. It's interesting for a manufacturing operation, we are not meaningfully capital intensive. And so we have a terrific operating cash flow and free cash flow profile, and I talked earlier already about how we put that to use in a disciplined way in terms of capital allocation. So last slide for me before I hand over to Rod is to just put our algorithm, which I showed you earlier into a bit of context. We presented here with the algorithm itself and the right side of the page, and then we show you 2024, both in reported and in constant currency. And I would draw your eyes to the middle of the page, where you see the meaningful profit over delivery constant currency versus a solid what we expect will be 2% organic growth for the year. So hopefully, that's helpful to understand how we've gotten to this point, the underlying elements of the strategy and the proof points we've seen over the last 3 to 4 years since we launched. With that, I'll turn it over to Rod to talk to you about what comes next.

Thank you, Dan, and good afternoon, everyone. It's good to be here for those that own us, in the room, thank you. Always good to be with our stakeholders and for those considering us. We think it's a good time to jump into the stock. This transformation that Dan referenced really started around the pandemic. But we have background, if you go back and put a time line together, we had a deal put together to acquire the Harry's business in the United States, global acquisition as we were going to go forward. We got blocked by the FTC on that acquisition after working with them for about 7, 8 months in February of 2020. The pandemic then hit in March of '20. And so at that moment, we were blocked on what was going to be one path of our strategy. We put the strategy in place that Dan showed you, and very quickly got after transforming our business and creating something that we think is durable and can create a lot of value and it has every right to be successful in the market. If you go back to the five pillars of the strategy that Dan showed earlier in the presentation, the far right pillar on that page was the words that are on this page, build a company people love to work for. We have done that. Over the last 5 years, if you go back to that pre-pandemic period, our positivity scores and the annual organization engagement survey are up over 20 points to approximately 80% positive and favorable in the company. That's a dramatic move forward. Point two, we take our role to be a sustainable company across all elements of people, planet and product, and making us better across all those elements very seriously. We are now ranked and up to #19 in America's most responsible companies. That's 19 out of the whole universe, and at the very top of consumer products in terms of the landscape. And the final piece in the award I'm most proud of is we are now ranked the second best company to work for in America in the midsize category. So companies between 1,000 and 5,000 employees, in the United States, we're ranked 2 in the inaugural entry on that list for us out of 400 that we're ranked. So I think we've made a lot of progress in being a place people love to work. With that, the engagement, you get the very best of everyone, and you can do things like we have on the page here around really attacking the fundamentals. We're much better on innovation. We still have some work to do on our innovation capabilities. We have better return from our investments. We've been able, in some cases, to reduce spend in some areas but yet still get a better return, and you saw the growth rates, Dan put up as well. The final piece of this that we've been on a journey to do is to really modernize our brand building so that when we connect and communicate with consumers, we're hitting them at a point in time where they're open to hear our message and the message we give them resonates, and ultimately drives through to brand purchase. And I think just the imagery we have up here on the screen looks quite different than what we would have had up here 4 or 5 years ago. So we're making a lot of progress there. Dan mentioned international, and showed you that consistent 6% mid-single digits growth rate. I think we're very bullish that we can continue that growth rate in the mid-single digits as we look forward over the next couple of years. There's a couple of things underpinning that. I'll start at the bottom of this page, and that is we have a better set of leaders running our markets. So if you look at Japan, China, or ahead of Europe, over the last 18 to 24 months, we've recruited new people in who are very talented, very skilled leaders, and at a different level than what we had before internationally. I was part of the personal recruitment, so as Dan, of bringing those people in, partly because we also removed a layer between us and the market. So it was an international management layer that was in between us. We now have basically a global leadership to local country model set up in place, which makes us very fast as we work with the markets to win in our key categories. The other thing that we have done internationally as Dan touched on it, is we've taken our innovation model and gone away from a global approach and gone to a much more locally tailored approach. So really working with local consumers to win locally and put things in front of them that they'll resonate to directly that have been built and designed for a Japanese consumer, a Mexican consumer, as opposed to trying to navigate this global average that, frankly, I think we all realize does not exist. And so I think this is an area back versus 2019, 2020, where we were declining, losing market share. This is now a steady pillar of growth for us. And I think as you think about the future, something we feel very confident can continue. We are also investing more in our brands internationally. What you see on the slide here, and I'll show you a clip in a minute is our latest campaign on Wilkinson Sword right here in Europe. First launched in the U.K. The imagery you see here is from the U.K. we're relaunching the Wilkinson Sword brand. Going back to the roots and heritage of the brand, which is over 250 years of blade making. So we're leaning in to this concept of blade masters and the fact that we have great technology, we have great shave performance, and we want people to know that. But to do it in a way that is catchy, memorable and playing a little bit on humor as we do it. And the circle you see there is a very different way for us to have activated the brand in this case versus what we've historically done, and it's looking across all 360-degree of the touch points, whether you're in the tube or walking down the street, you're online e-commerce, you're in the store, you're looking at a brand page, it all looks the same and it all serves up ultimately to drive purchase. And so I'll just show you a quick example of the ads you can kind of get a feel for how the campaign shows up to consumers. [Presentation]

All right. So kind of a needle spot. We're serving it up digitally primarily in different vignettes from 5, 10 second clips all the way to 30-second clips. And we're spending behind this. You'll see this roll out across the balance of Europe over the next couple of weeks. And then Dan talked about the brand portfolio and how we have really built out effectively acquired a grooming business that did not exist starting with Bulldog, Jack Black, and then the Cremo acquisition. Cremo was done in the first year of the pandemic in the fall of '20, followed by Billie in the fall of '21. This has taken our high-growth parts of the business from about 20% of the portfolio 4 years ago to write out 1/3 of the portfolio now in fast-growing territory. And the thing that's kind of cool about this is we've got geographic expansion opportunity behind all four of these acquisitions. But additionally, we have category adjacency expansion as well. We just launched the Billie body that Dan mentioned, APDO, body wash and moisturizers exclusively at Walmart. This year, having lots of success with that and would expect that to go national just like we had the blade and razor launch within Billie as well. So lots of opportunity to expand. Dan referenced the margin pivot that we've made, we are committed and have a high level of confidence that we can get this business back to pre-COVID margin levels of 45-plus percent. The productivity muscles are well developed in the company, on average, about 200 basis points a year we have generated, we think we can continue to do that. Price revenue management will give us another 50 to 100 in any given year. So there's somewhere between 250 to 300 basis points in our model every year to improve margin spend back, drive profitability or really lean into investment opportunities where we have them. All that's underpinned by enhanced capabilities across the board. And we're now in what we think is a very moderated inflationary environment. The quarter just finished, we had 60 basis points of headwinds on inflation as opposed to 600 basis points a year prior. So we also think we're heading into a better period there. So what to expect from us going forward? We think our business model is much stronger, more predictable, more reliable, more consistent delivery of growth. We now have margin in flexing positive, which gives us flexibility to invest. We're committed to debt reduction and getting after leverage and getting that at or below 3x leverage. We're committed to returning capital via share repurchase. We're just finishing off a $250 million repurchase program. We had shares outstanding close to 55 million. A couple of years ago, we're now at 49 and some change. And so we've taken real share count down. And the bar is very high for M&A, despite us being a good acquirer and having people viewing us as a good destination to land and sell into. The bar is high. Because we think the leverage reduction is important in this moment, and we do believe we're undervalued. And so we want to stay focused on share repurchase. And then as M&A presents itself, we'll get after that as well. So overall, I think more optionality, more strength in the model, and we're encouraged about the future. Christopher?

Great. Well, thank you both for that presentation. I guess, Rod, just sticking with you for a second. Look, in the past 4 years, you guys have made remarkable progress on the transformation. Organic growth delivery has consistently exceeded 4%. You're unlocking substantial gross cost savings, reinvesting back into the core and brand support. And you've also acquired assets like Cremo and Billie and returning cash to shareholders, reducing leverage over that time. So I guess, where are we in the transformation journey today? What inning would you say we're in today?

I'll use a football reference given where we sit. We're into the second half of the match. The bulk of the transformation from a transformation terms is largely behind us. We've got a great leadership team in place. We've got increasing depth in leadership around quality and just numbers of people who are really good at what they do. We've got a very clear strategy laid out. The strategy is working, and we've addressed the capital structure of the company. We think we're on very solid footing. We're also more consistent with results delivery. So I think all of that suggests we've been successful. The one thing that we're really focused on, though, for the future that is kind of the rest of the match here is around innovation and brand resonance with consumers. We historically have been too technology and product focused and not enough consumer focused. And so we are really leaning into a consumer-centric approach to what we do, and then building our innovation locally to win locally and then looking at where there's potential to take that global as opposed to starting global product it takes time to make that pivot. So innovation and consumer centricity is the final piece here. And if we hit on that, you could argue our growth algorithm is conservative if we can do that.

Got it. That's helpful. And then maybe, Dan, if we could just pick up on gross margin. you guys spent quite a bit of time on that you're expecting 120 basis points of favorability this year. Could you just remind us what are the drivers of that expansion? And how do -- like we've been hearing from other companies just emerging pockets of reinflation, consumer pressure? Like how does that affect your outlook for the year?

Yes. Good question. Look, we're very confident in the outlook because we are seeing those elements which we control, those skill sets, which we have, cost side of the house, revenue side of the house are delivering, right? And I think we've got a history on the cost side of 200-plus basis points a year in cost takeout this year, we've profiled 240 basis points. On the revenue side of the house, I think these are newer skills and capabilities for us. Certain markets are a little bit ahead of others. But here, you think about return on promotion, good pack price architecture, good mix management, downsizing in size of product, all of the good hygiene that you would expect to see a company like ours have. It's a newer developed skill. But the two of those together, which this year will deliver over 300 basis points. To Rod's point, I think in a normalized world, 250 to 300 is the right algorithm for us. Inflation is going to be there. You're always going to be faced with some pocket of labor and/or commodity basket. Now up to 600 basis points we've been dealing with, 60 to 100 is more common. And so I think the structural elements we control, good line of sight, a high degree of confidence. The numbers we put out that underpin our outlook, we have really good confidence in.

Got it. And then just as it relates to consumer weakness, like we've heard a lot about the lower and even middle income consumers facing more pressure, trading down. Like is that -- and then also just stepped up competitive pressure. Like have you seen any -- like what you're seeing in market in category like affect your prospects for delivering further upside to gross margin from like revenue management activities and pricing.

I'll take it from the margin side, Rod, you can take if from the consumer side. Short answer is no. I think we have modeled in a second half of the year that will be more promotionally intensive than the first half. We are seeing others in the space, namely market leader, increase both the breadth and depth of their promotions, and particularly in Shave and Fem Care we will be right there in the second half of the year doing the same. We would be delivering even greater margin accretion, if not some of these choices we made. So the short answer to that, Chris, is no. We've modeled in what we think is state of the consumer state of competition and likely a more promotional environment.

And I think there's two elements to it. If you look internationally outside the domestic U.S. market, we're seeing recent past 13 weeks, past 26-week trends be very consistent growth wise with past 52 weeks from the last time we marked it last quarter. So there's real stable trends internationally, and that's Europe, Latin America, Asia, as we look at those markets. So no meaningful change, no meaningful trade down to private label. We see it pretty steady. In the U.S., we have seen the consumer come under pressure. And we have seen the aggregate of our category. So if you take Shave, Grooming, Sun and Skin and Fem Care as an aggregate where we compete, those categories are growing roughly 5% on a past 52-week basis in the quarter just finished, it was a little better than flat. So it's not declining, but we've seen a slowdown. Some of that seasonality around Sun and Care, but some of it is the consumer coming under pressure with everything in the basket being more expensive, even if it's not in our categories, it's more expensive. People are still prioritizing travel and leisure travel is good for us with Sun Care, but it does put pressure then on the spin basket of everyday consumables and people looking just to get value there. So again, not trade down domestically in the U.S. either but people are looking to maximize value, whether it be price pack count, using product a little longer, a cartridge for another shave or two before they change it out. We're starting to see some of that behavior.

Got it. And like for parts of your portfolio like the Custom Brands Group, like have you seen an acceleration in demand for that.

Yes. So custom brands for us is it's our terminology for running private label. So it's opening price point like equate at Walmart or the TESCO Local brand, right, whatever they're running as their private label opening price point business. It's that. And then it's also manufacturing for people like Billie and selling our blade technology into some of those faster-growing nascent start-ups that are typically D2C to start. It's both of those. We are not seeing a material trade down in market share pickup in the custom brands opening price point piece of business, but yet it is very solid and on track with plan everywhere. So there's no weakness there. but there's also not a trade down. What we are seeing, which is kind of interesting, and this is where Billie brand is benefiting on the women's side, it's at a value price point value offerings not private label are doing very well in this environment as well branded value.

Got it. And let me just come back to the gross margin. I think you both spend a good deal of time about the goal to return to 45% plus. Do you have a time line associated with when you get from current margin to 45% plus? And then just thinking longer term, if you go before 2019, while you guys had margins in the high 40s. Is there anything structural like your portfolio today, the operating environment that prevents you from getting back to that level sometime in the future?

Yes, I'll take them in reverse order. When you think about a business that has 200 basis points of capability to take cost out, 50 to 100 basis points of a capability to drive revenue gains at the unit level, 45% is not the end of the story. Now there's a lot of other factors that go in around inflation and competition in all of those things. I'm not going to predict or put a time line on it. What we have said is getting back to pre-COVID levels is the first step for us. We got down around 41% in the margin profile. This year, we profiled to be about 43. So one could argue we're halfway home. But again, just do the math around this capability that we have as inflation continues to moderate and most of the FX headwinds are baked in that path to getting back to 45%, while I would not put a time line on it, is much more nearer term than it is 3, 4, 5 years out, and that's our commitment.

Got you. And maybe we could just dive into a little bit of the segment business. I hate to be just like everyone else and asked about Wet Shave, but it seems like recent trends have been quite bifurcated between the U.S. and international, like even normalizing for some of product launch and pipeline timing. Could you just explain like why you're seeing such different trends domestically versus overseas?

Yes. I think Dan showed the slide, 52% of our business in Shave comes from outside the United States. And so we have a very diversified portfolio, not only by segment but also geographically. When you get outside the United States, the category is generally less competitive. I talked about the consumer kind of being steady and stable and being there. But it's typically less competitive. A lot of the disruption we've seen in Shave has happened primarily in the U.S. It's gone to the U.K., a little bit in Canada. Beyond there, though others have tried to expand into other markets they've not been successful. And so I think internationally, consumers healthy category a little less competitive, and within that, with the technology we have, the scale, the local knowledge, the example of the Wilkinson Sword campaign and Heritage, we just have a lot to work with to be successful. In the United States, it's a more competitive category. There's just more brands at shelf. Women's right now, we're part of the disruption launching Billie, but we've got Intuition, Hydro Silk, there's Venus from P&G. They've also got Joy, there's Flamingo from Harry's, and there's a new brand called Athena Club that's out there that's entered into Target. So it's a very -- still a very competitive environment. Although what I'll tell you is as we look forward in the shave category, we're actually pretty optimistic about the category in the United States, seeing the worst, if you will, of the competitive intensity as the number of brands is kind of reverting back down to those that have technology, performance capability know-how and just good innovation. The business is coming back to that as a fundamental core operating principles. So while it's tough in the moment in the U.S. on Shave, we don't expect that to always be the case. But we're definitely winning disproportionately in international on Shave at the moment.

Got it. And then maybe just quickly on Billie. Performance has been remarkable. You've gained a ton of share both nationally and then even more so within Walmart. Like how should we think about near-term opportunities for that brand, especially considering the increased competitive activity in the back half?

Yes. I think there's still opportunity to grow that market share position more towards the Walmart 17%, 18% share versus the 10 national. We're gaining share in every single weekly share report on Billie. And so I think we think on shave that can continue. We're not in club. For example, there's still some distribution to be had in specialty and some of the regional grocery. There's some international opportunity out there beyond the United States that we're looking at as growth vectors. But really, the bigger opportunity in this brand is to build out the adjacencies to be a lifestyle brand for females across many personal care lines. And the first adjacency we're going after is body as we talked about and showed some examples of we're having success. We're on track. In fact, we're ahead of expectations in our launch year here. So we expect that to be something that can go national as well. And then we've got many other vertical adjacencies that we can move to with at least two other big categories we've got lined up that we would take the brand again. So we agree with you. And everyone tells us it's the #1 brand in Shave right now in terms of engagement with consumers. The consumers it goes after are young, have money, have upward mobility, and are hungry to do more with the brand as they engage. So it just sets up very nicely for us to broaden out the portfolio.

Perfect. And we are rapidly running out of time. So I'll pass it back to you. What are the key parting messages you want investors to leap here with.

I'd just go back to, to kind of where I ended the presentation. We've done a lot of work on the transformation. Our energy is focused more on the future 1, 2, 3, 4, 5 years out, not worrying about fixing today, today works really well. And with the margin inflection happening in our brand strength being better across the board. That just gives us optionality that we didn't have. Frankly, even at this point last year, as we sat and talk, we still had gross margin declining. And so as we've done the flip, it's not trust us, it will happen, story. It's happening. And so now as stewards of your investment, it's how do we continue to fund money to drive growth while also bringing the profitability long in terms of doing that all together. And we think it's a both end story, not just one or the other. So again, we think we're undervalued -- the market will tell us whether we're a true or not a year from now, but we're very convinced that's the case. And we appreciate the opportunity to tell the story. Thank you.

Great. It was great to have you. Thank you so much.