Helen of Troy Limited (HELE) Earnings Call Transcript & Summary

Good morning, everyone, and thank you all for joining us today either in person or virtually. I'm Anne Rakunas. I'm Director of External Communications. Before we get started, I have a couple of housekeeping items that I'd like to go over. First, if you kindly just turn off your phones and computers, put them on silent if you haven't already. And then I'd also like to remind everyone that today's presentation is being recorded. The slides can be found on our investor presentation website on the Events and Presentations page. For those listening on the webcast, you'll be able to follow along with the slides and use the chat feature at any point during the presentation to insert a question, and then we will take that during the Q&A session. Please be advised that we may make forward-looking statements during our presentation within the meaning of Federal Securities laws. These include expectations and assumptions of the company's future operations and financial performance. Forward-looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from our expectations. Please refer to our SEC filings that can be found on our investor website. And now it's my great pleasure to Noel Geoffroy, our Chief Operating Officer. As previously announced, Noel has been appointed as the company's new CEO effective March 1, 2024, upon the retirement of Julien Mininberg, our current CEO. Noel's career spans over 25 years in the consumer industry across diverse categories and companies with a proven track record and passion for strong operational leadership, consumer-centric brand building and marketing and strong people, culture, and development. And now I'd like to hand it over to Noel.

Thanks, Anne, and good morning, everyone. I'm so glad to have you all here. I've met a lot of you, but for those of you I haven't yet had the opportunity to meet, I joined Helen of Troy in May of 2022 as the Chief Operating Officer, overseeing the company's global business operations, architecting, and leading Project Pegasus and leading the development of the Elevate for Growth strategic plan that you'll see here today. Prior to Helen of Troy, I worked across a range of consumer companies, including Procter & Gamble, Kellogg, Heinz, and Sanofi Consumer Healthcare, leading complex end-to-end businesses and multifunctional global organizations. During that time, I was privileged to steward several consumer-loved brands, brands like Downy, Bounty, Heinz Ketchup, Frosted Flakes, Eggo, Icy Hot and Allegra, just to name a few. So I'm passionate about growing great brands alongside high-performing teams. On the personal side, I've been married for 30 years. I'm a proud mom of 2 terrific young men. I'm an ardent supporter of my Alma Mater Clemson and I serve on the Clemson University Foundation Board, and I'm always cheering for the Tigers and sports, that love might have inspired some of the color choices that you're going to see here today. I'm honored to be the next CEO of Helen of Troy with an amazing portfolio of loved brands, great capabilities and talented people, and I'm delighted to be here with you today, along with our global leadership team and many of our associates to share our thinking on Helen of Troy's bright future ahead. We have a robust agenda centered around our next strategic plan called Elevate for Growth. Julien will get things started sharing some history and some context. I will come back to share our strategic plan with the assistance of a few global leadership team members. And then Brian Grass, our CFO, will share a deeper dive into the financials. Following Brian's presentation, we'll take a break for an innovation showcase in the room adjacent and that will allow you to visit with some of our global leadership team members and other associates to learn more about our brands and our products. We will then come back for a Q&A session with the global leadership team. So with that, I will turn it over to Julien, our CEO.

Great. Well, thank you, Noel, and hi, everybody. We're thrilled to have you here today. This is the third time only that we've ever done an Investor and Analyst Day for Helen of Troy, and hopefully, we've earned a reputation that we would not call you together if we didn't have something to say. And today, we have a lot to say, and I hope that it will be interesting for you. As Noel mentioned, I'm here to provide relevant history on a go-forward basis, so this is not a review of the past, this is a perspective on the past in order to be able to help lay the groundwork as we move forward, which is the purpose of our meeting today. I think many of you know Helen of Troy deeply, some of you, in fact, were in the room when we did our first ever Analyst Day about 10 years ago, and there's many that have become shareholders or followed us in between during that time. So I thought it would be relevant to just show our journey. This is a 55-year-old company. These are the sales from its founding in 1968, all the way up to where we are today. And you'll see a couple of different eras here. The legacy or beauty-only eras when Helen of Troy was a start-up, got itself to about $400 million of sales over the first 35 years or so of history, focusing on brands you'll recognize, brands like Vidal Sassoon, Revlon, both under license and brands we ourselves started like Hot Tools, all in the hair and hair appliance space. We then started under our founder of diversification era, and that diversification era had some very interesting changes. We got into liquids for the first time with mass market personal care liquids, such as Brut, PUR Plus, Sure, brands you also know, and we've since divested and entered into the prestige liquid space, but further diversified into new adjacent categories like housewares. And housewares was a big change for Helen of Troy, far from the beauty world and yet still in a house hold space in another part of the home. The Kaz acquisition, which came during 2010, brought the company over $1 billion for the first time, and you can see that in the orange bar there at $1 billion, adding PUR on top of that. I came to the company at that time. I was the CEO of Kaz and then since became the CEO of Helen of Troy and started much as Noel is doing today, a whole another era. And that era was the transformation era. Blue just for coding is the Phase I of it and green is the Phase II. And that was enough to double the size of the company in just that 10-year period. And despite the law of large numbers, it's hard to double numbers that are getting bigger. That's exactly what we did. But we sat in a room just like this 10 years ago, some of you might be wondering, is it worth going to Analyst and Investor Days. And my humble answer is, yes, at least for us. And the reason I say it is not to be rude about at least for us, but to simply say that we had the question at that time the aspiration, mostly internal, could we add 50% to the sales of Helen of Troy and could we find a way to double its profits through a new strategy? And I'm here to say that 10 years later, we didn't add 50% to the sales of the company. We doubled them during that period of time. And we didn't just double the free cash flow of the company. In fact, it's 2.3x where it was when we started that era. And it means that strategy matters, leadership matters. We have just the right next leader in Noel and our leadership team and the strategy that's being introduced today is a winning one. In terms of strategy, I think as a quick reminder, the transformation era had 2 phases. Phase I and Phase II. You can see them here on the slide. I won't take you through them all because we're forward-looking today, but big choices were made. On the left, investing in our core, not managing the company for cash flow the same way, becoming consumer-centric, majorly upgrading our organization focusing a little bit on culture at that time and in establishing a shared service base in the company versus a highly vulcanized organization. This was transformational. I assure you it was hard to do in a balkanized company. In Phase II, we liked it so much. We brought forward a number of those big ideas, but we added new ones, doubling down on shared services, doubling down on international and then adding a whole new level of culture unification and inclusion on the people side that has been transformational for us in Phase II. In fact, it creates a journey, and this is a point of perspective, please look across the whole period of change at Helen of Troy. You'll see on the left the idea of a fully autonomous set of business units that were highly vulcanized. I was running one of them. I was running Kaz at that time. And the business units didn't have much to do with the corporation, except at the consolidation level because there was no shared service base to collaborate with. And the culture, if I can say so at that time, it was undeveloped, and I'm being generous there. And in the case of where we were, we added the shared services, we overhauled the organizations and then brought our culture to the next level. We did it again in Phase II and started centralizing more now using those shared services, doubling down on that collaboration, eliminating all of the silos within the business units and then unifying our associates under a common culture and bringing the whole organization forward. You can see its blank on the right and the reason is because the whole next year is designed to continue this to a whole next level. it's coming very quickly. And the reason is not just because of the strategy we're rolling out today, but also because of Pegasus. Noel, as you mentioned, he did a wonderful job leading this and seeing the opportunity to go much further and much faster and it laid the foundation that's now being built on in what we're announcing today for the next level of this journey. If you look at our brands, I think most of you know them, and these are names that are familiar in most households, in fact, in many parts of the world, and they're also market leaders in many countries around the world, too. And these brands, we're very proud of. We steward them carefully, whether we own them or license them, and we have acquired more to make our family bigger and bigger. As we go forward, I would say that the foundation of this house is critical. If you look at those 4 stepping stones, those big ideas for those of you who may not be able to see down at the bottom of the screen, it talks about differentiated market leaders with an emphasis on the words, differentiated and market leader. That's why they're there because it matters. It's one thing to be a market leader. It's another thing to be differentiated to the point that you keep your leadership. In terms of higher margin, the ability to grow and the ability to be asset efficient, this is where our resources have been focused. So as we work our portfolio, we'll talk what we do with it next and keep our foundation of principles. In terms of how we execute the strategy in the company, we run a flywheel. And this flywheel was created to drive us forward as a company, and we basically invested in those brands and much more than we did before, in fact, more than twice as much. We brought organic revenue growth, margin expansion and then use those shared services to pull cost after cost and get better and better. In fact, my favorite thing, better and cheaper, who would want anything less than better and cheaper, anything more than better and cheaper. Run it through an efficient debt structure and a unique tax structure given our setup, which creates further efficiency always working on our working capital. And importantly, we're low CapEx as a company. We do not own our factories. That's an important strategic choice and allows us to deploy our capital into acquisitions, deploy our capital into accretion and add critical mass to the same flywheel and run it at a higher level of momentum. In terms of our people, there's a secret to Helen of Troy. I've told it many times, so it's not much of a secret, which is we are powered by exceptional people, their level of passion, engagement, quest for winning and devotion to driving this company ahead is unmatched. It's unmatched in the company, and I'll show you a little bit more about how it's also unmatched in our industry. And it is the secret sauce that makes all of this work. That culture that I mentioned, I won't read all of this to you. I'll simply say there's a basic set of values. We call it I RISE because of the acronym that's across in the next line and then exactly stating precisely what we mean by that. And anyone can practice these behaviors. I'm here to tell you that when you do and when a chorus of about 2,000 people also do, you get power and you get unity and you get energy and we call that the Power of One. In fact, if you take a look externally at Glassdoor, a common measure of, I wouldn't necessarily say culture, but where people go when they have something to say about a company, they rate them on a star basis, 1,2,3,4,5, and Helen of Troy was mediocre just below 3 stars, not even in the middle of the pack. And you can see there was a radical change. That change brought us above 4 stars and we've sustained in the 4-star-plus club. That's rare air, by the way, in Glassdoor, to be in that club and to keep it, especially through the ups and downs of things like COVID and remote work and even a Pegasus, where we frankly did some downsizing in our organization, and here we are maintaining this. If you take a look at I RISE and Power of One, that's the jump. It made a big difference. Power of One is that unity that I was talking about. And if you look at Glassdoor compared to Helen of Troy, Helen of Troy in that 4 star and up club, and my favorite measure there is recommend to a friend. It's sort of like a net promoters type of score. And our net promoter type of score on Glassdoor recommend to a friend is between 77% and 93% in all of those 4 star-plus years. And the Glassdoor average is at least 10 points below that and 25 points below our high, and that makes us an employer of choice, and people want to be here. They want to stay here, and this is what they talk about when they're on Glassdoor. Changing gears, you entrust us to deploy capital. We're grateful for that trust, and we take it very seriously. During the transformation era, we've put about $3 billion just under to work in the transformation Phase I, just a little over $0.25 billion -- sorry, $1.25 billion, and during Phase II, just over [ $1.5 billion ]. You say, "Well, where did you put it?" So we broke it here into the 3 basic elements. Acquisition, which is the middle bar. We did a fair amount of it in Phase I, more of it in Phase II. And then in Phase I, we also bought back a significant amount of the company's stock because stock was very undervalued, and we believe very strongly in what we're rolling out 10 years ago when we were in a room just like this. We've done some more of it in Phase II as well. And on CapEx, I mentioned we are CapEx light. So unless we're doing something huge, like building a big distribution center, that would prevent us from spending a disproportionate amount of money on capital. That distribution center will be discussed later in the meeting. So I won't say more here, but I can simply say game changer. In the case of results, I think they speak for themselves. This is Phase I in blue in the first 3 years of Phase II, we've hit an important speed bump in the last 2 years, and I'll speak directly to that on the next slide. But I want to demonstrate here that the CAGR, the growth rates for the company, pretty much no matter where you look, whether you look at revenue in the upper left, adjusted operating income or in the bars, our margin on the right, the free cash flow of the company with that big asterisk for the distribution center. That's what that green box is, and our adjusted earnings per share. The CAGR has accelerated from our baseline, and we're very upstanding in Phase I, and then we accelerated them again in the first 3 years of Phase II. That said, we did hit a speed bump, and you can see that our revenues have declined in fiscal '23. And now in fiscal '24, they're projected to decline to the numbers that you see here on the left in the last 2 bars, and our earnings have fallen off considerably. It is probably worth noting that the CAGR of all of Phase II on the left is nonetheless faster than the CAGR of all the Phase I on the left. So that's revenues and that's including the COVID-up and also the post-COVID down and all the external startups. On the right, it's not the case. On the right, we have had a significant decline. Pegasus is an important intervention in that area, and it lays the groundwork for the next era going forward. In terms of what those challenges were that caused that decline, I would say it was a combination of internal and external. I think most of you are aware of all of these at the headline level. I won't go through them in much detail, whether it was supply disruptions where possession was sort of nine-tenths of the law at the peak of COVID, cost inflation has touched all shores, weakening consumer demand, especially in durable products. And we've been in a bit of a rolling recession in some of our categories because of that. The retailers, of course, rebalancing accordingly. Capital deployment, we deployed the capital that you saw in the slide before. I'm very pleased that we made the Osprey acquisition, the Curlsmith acquisition, the buyout of our Revlon license amended now to 100 years. And further the building of that warehouse. And yet interest rates rose significantly, and you saw that our interest expense like a lot of other variable floating rate companies spiked up. And with the EPA, there was a concern about our packaging in a couple of categories. So what about the actions? Rather than walk you through all of them, I would simply say in typical Helen of Troy fashion, we jumped on them hard. So whether just pick one, the supply chain disruptions, secured the supply despite the shortages and built our own inventory because possession was nine-tenths of a law in those years. But then as the retailers adjusted lower left, we rapidly adjusted our supply base majorly upgraded our supply and demand planning capability under our Chief Officer, Jay Caron, and later Noel brought even new tools to this and then significantly lowered our own inventory. And you've seen several hundred million dollars come out of our own inventory since then. And when it goes through all of them, and I guess my message is this is a company that manages in dynamism, it manages through adversity, and it finds weight. Pegasus is very important here. You see a dead center. Project Pegasus restructuring plan, and it will be an important driver to our future. So as I wrap up, I want to say that I walk off of this stage and ultimately into retirement, as Anne mentioned at the beginning, with tremendous confidence in the team and the plan going forward. And these are the reasons. First of all, the plan, the company itself has proven. You've seen the numbers, and it's been a long time of managing through a lot of change. This company has the ability to not only change but to power through change and come out stronger for it. That track record is meaningful. The targets that you'll see today are ambitious. They're stretching. And yet you heard what happened in the prior Analyst Day. So 10 years later, what will you see or in the number of years that Noel and Brian will talk about, what will you see? We believe. We don't just believe, we believe it will create significant value for you, and we further believe it won't just be for our shareholders but for all the stakeholders that Helen of Troy serves. In terms of the strategic plan, it has just the right combination of continuity and newness. And in each of the areas of continuity, there's also just the right upgrades to each area to bring them to the next level in that same next dynamism. So I love that balance, and it's just right in the company. The senior team, Noel, did an absolutely terrific job of leading the development of the new strategic plan, the workshopping, the inclusion of the right people and getting this to the plan that you'll see today was extremely well done, as was the Pegasus work. And as a result, the senior team, which is here today is not only highly engaged, but now fully committed to cascading it throughout the whole organization and being ready to hit the ground running on March 1st, as she becomes the CEO and as the organization makes year 1 of the new plan happen. And that culture, I've already spoken to it, so I won't say more, but secret sauce makes a big difference. Before I turn the quicker back over to Noel, I do want to say a little bit about her because she's far too shy to say for herself, but there's some important information here. It was an easy decision to choose Noel as our Chief Operating Officer. She was just the right one, and we didn't just choose the idea of a Chief Operating Officer. We had the idea of CEO succession in mind for multiple years as any good company would do. And we further had the idea that we want to hire a person who could grow into that. What we did not know is that we would run into those 2 years of decline, and that was sort of an elephant in the room. In fact, it's just what we called it. And Noel sprung into action, whether it was the envisioning creation and now execution of Pegasus and its multiple work streams, getting her arms around the operations of the company as any good COO would do and then doing the strategic planning work, she has kept forward on all of these with excellent aplomb and with a lot of scale and now brought the organization with her, and we're ready to talk about it going forward. It was an easy decision for the Board. I remember raising my hand to nominate to the Board, Noel is our next CEO. The decision was instant and unanimous and we are ready to go forward with that choice. So Noel, I know that's hard to hear all that good stuff, but it's all very well deserved, and I hand the mic back to you.

Thank you, Julien. I really appreciate the foundation that you have built with the team and that we can continue to build upon, as you said, you've lead Helen of Troy to deliver strong results during your distinguished 10 years as CEO, and you leave a strong legacy on Helen of Troy's business, organization and culture. So we're now entering a new era designed to create significant value that builds on the foundation established during the transformation era and also leverages new ideas and capabilities. These strategies are designed to help focus more on the most attractive opportunities, take our brand building and our retailer partnerships to the next level and fully leverage the scale and capability of an empowered but leveraged operating company. Today, we will walk you through the objectives, long-term targets and strategic choices in that plan. Before I do that, I want to call out 4 elements that are foundational ingredients to the plan that excite me about our future potential. First, we have a diversified and well-recognized family of trusted brands with leadership positions across multiple categories and geographies. Importantly, our brands have opportunities to stretch into attractive spaces where we have the right to win. Our mission is to unlock their full potential. Our strong portfolio brands was one of the things that most attracted me to join Helen of Troy. My household relies on Hydro Flask and PUR for hydration needs. My kitchen drawers and cabinets are full of OXO classics like the salad spinner and angled measuring cups, and I love all things Curlsmith for my curly hair. Second, we have generated new fuel from Project Pegasus to invest in growth opportunities and capabilities. This will enable us to invest so we can grow the business, particularly our brands with precision marketing and further product innovation. This is crucial because I believe we're under-investing today. Third, we are positioned to fully leverage our operational and organizational scale and assets. Two areas I'm particularly excited about include: fully embracing our new operating model that unlocks more focus and more centralized expertise than where Helen of Troy was during the Phase II of the transformation. I'm also excited about the leveraging of our new state-of-the-art Tennessee distribution center that is now operational and brings tremendous new scale and capability that will set us up for years to come. You will hear and see more about that today. And finally and most importantly, I'm excited to continue partnering with our talented and passionate people and building on the strong culture that Julien talked about. We have an outstanding worldwide organization who are passionate about our purpose our brands and our values and, of course, passionate about winning. Before I introduce the strategic plan, I want to share the foundation that we're building on. Our purpose, vision and values are timeless and represent the essence of Helen of Troy. Our purpose fuels everything we do. Our brands elevate lives in moments that matter everywhere, every day. Whether it's the parent of a sick child seeking an accurate temperature read with a Braun Ear Thermometer or providing comfort with a Vicks Humidifiers, or a mom or a dad seeking convenience and excellence when preparing a meal for the family with OXO tools, or outdoor enthusiasts confident to hit the trail with all the right comfort and tools with Osprey, Hydro Flask. And finally, women preparing to look and feel their best every day with our Revlon, Hot Tools, Drybar and Curlsmith products. We are driven each and every day to steward Helen of Troy's exceptional portfolio of brands to elevate lives and those moments that matter. Our vision for the future is to continue curating and building on our family of highly trusted brands that delight consumers in their everyday lives. And finally, our values explain what we believe and how we operate. Our Helen of Troy associates worldwide operate with a core set of 5 values that we call I RISE, in touch, mutual respect, ingenuity, shared success and exceptional people. One area that stood out to me since joining Helen of Troy is how motivated our associates are by our purpose, vision and values. It's really more than just the words on the page. Let me share a quick video that illustrates what it's all about. [Presentation]

It's powerful. I hope you enjoyed the short clip that really helps bring our purpose to life. Related to our purpose, vision and values is our commitment to the environment and society. It's part of the very fabric of the company. We recently published our third annual ESG report. A big thank you goes to Janice Lau, our Global Vice President of ESG, who is here today and will be available during the innovation showcase for those who wish to learn more. I'll walk through the key pillars of our ESG commitment. Our ESG strategy focuses on 3 areas. First, embed ESG into our business. A few examples include Hydro Flask: Parks for All, Osprey's Factory Code of Conduct and OXO's participation in 1% for the Planet. Let's play a short video so you can learn more about these programs. [Presentation]

As you saw, these 3 programs exemplify how ESG is embedded in our business. Our second strategy is engaging our people and our people and our communities. Across our company, we have associate community volunteer days to encourage our associates to engage with the communities where they work, live and source. In addition, we proudly offer each associate 2 paid chartable leave days annually. As part of this program, we empower our associates to choose the charitable organization that they feel strongly about supporting. Here, just a few pictures of the invaluable work our associates do through this program. Finally, our third strategy is to enhance our products and brands. For example, our OXO Outdoor Campgrounds French Press features a craft made from 50% certified recycled content. And Osprey holds the prestigious Blue-Sign approved status for the main body fabric on 95% of our fall '23 season portfolio. This means that we meet strict ecological and toxicological requirements. Now let me transition to talking about our new strategic plan. We call it Elevate for Growth. We thought about this plan as a 6-year time horizon, taking us out to fiscal '30. The plan is ambitious, yet long term in nature. We have achievable objectives, long-term targets and a compelling and clear set of where to play and how to win strategic choices that will guide us. Here's the leadership team who will be stewarding the company into the Elevate for Growth era. This group came together as an integrated and aligned team to build this strategy. We are all hands on deck and energized for a great future. Please indulge me for a few minutes to brag on this team. We have a hugely talented group of leaders with a great balance of experience, continuity at Helen of Troy, some fresh perspective and diverse skills and styles. To illustrate that balance, you'll see an orange circle around the team members who are new to the company or to the global leadership team in the last 2 years. I'm very proud to lead this terrific team working collaboratively to bring out the best in each one of us. We are energized to elevate Helen of Troy to the next level of performance together with our global associates. Our plan has the following targets, 3% to 4% average annual net sales growth, 30 to 40 basis points of average annual adjusted EBITDA margin expansion, 10% or greater average annual adjusted EPS growth. And I think you won't be upset to hear that we're shooting for more internally. We are asking ourselves the question, what will it take to get to $3 billion in net sales? 300 basis points in adjusted operating margin growth? And $20 of adjusted EPS, all by fiscal '30? Brian will share more details on the financials and our planned algorithm later in the presentation. As part of our strategic plan, we set out to deliver for all of our stakeholders, we defined an objective for all 5 of them as follows: The Consumer, earn the consumers vote. We want to be we want to be there for her as their first choice and their repeat choice. Associates, we want to be an employer of choice, one that our employees are proud to work for and would recommend to others. For our Customers, we want to be a partner of choice for our retail customers. We want to create win-wins together. Communities, be a respected supporter and member of our communities, and this is defined as where we live, work, and source. And finally, our Shareholders, deliver exceptional shareholder returns. It's the natural outcome of meeting the other 4 objectives. These objectives become our north stars by delivering on our ambitions and goals, we believe we will create strong value for all 5 of the stakeholders. So I'll now transition to the strategic choices that underlie this plan. We have worked collaboratively as a team to develop a clear and compelling strategy comprised of where to play and how to win choices, and we will walk through each now. We'll start with our 4, where to play choices. First off is shape and invest in a growth portfolio. Now I won't go through the slide in depth. But I do want to call out that we are very fortunate to have fantastic brands with strong leadership positions across many geographies and many segments. Brands that have delivered very strong growth for us. So we have assessed our portfolio using timeless criteria. This allows us to identify the brands that are most financially attractive and have the greatest growth potential. This assessment will enable us to focus and prioritize how we allocate our resources. Our approach is to disproportionately fund those opportunities that we think are most attractive, leveraging the following 4 criteria for each brand. Are they a differentiated marketing leader? Is there growth potential in core and in adjacent categories? Do they have higher margins than the fleet average and are they asset efficient? This is foundational. Julien talked about these as the foundation of the pillar. So doing so produces our new brand portfolio classification. It's comprised of 3 categories. The first is Invest to Grow, our fastest-growing financially attractive brands. We expect to resource these brands so that they can grow faster than the category. Our second is Stronghold, our next tier of stable and growing brands. We expect to resource these brands so that they perform at least in line with the category. And third, Optimize our Tiered Brands, where we're assessing future action. These brands may be a good source of cash if we can sustain our position with minimal resources or we may be able to improve the financials through design-to-value initiatives or margin-accretive innovation. But there's also another path. We may, as we've done in the past, consider assets for divestiture, the 2021 Personal Care divestiture is a key example of making a choice just like that. Zooming out, this portfolio prioritization is particularly critical right now as we look to reinvest back in the business. We're leveraging the incremental fuel generated by Project Pegasus with a brand portfolio classification to enable us to focus our investment on the most attractive opportunities. This allows that incremental funding to have a double benefit, more funding, but also more focused on the best opportunity and even further enabled with new ROI analytic capabilities that I'll touch on later. This is a big moment for our brands, especially our Invest-to-Grow brands. We are looking to supercharge organic revenue growth in a way we haven't been able to before, leveraging the fuel from Project Pegasus. We will refresh the classification regularly as we make resource allocation decisions, taking into account the landscape, our market position and any other changes that might impact brand's margins or potential. Importantly, we want to remain agile as needed. This classification and the incremental funding are an important difference in Elevate for Growth that we believe will enable more and accelerated growth. Our second where-to-play choice is, win with winning customers. Creating the North America regional market organization or the North American RMO was one of the biggest choices in the organizational work stream of Project Pegasus. We did this to build new and scaled sales capability like joint business planning and to identify opportunities for new growth via distribution in existing and new customers. North America sales teams now see across the full company portfolio versus only a portion. This means they can identify opportunities to leverage our scale and elevate our partnership with key customers. Ronnie Anderskow, our President of the North America RMO, has worked to prioritize the opportunities and retailers so that we disproportionately resource and prioritize the biggest and most attractive opportunities. Let me invite Ron to join me to share an example of what he and his team are achieving.

Thanks, Noel. Good morning. My name is Ron Anderskow, and I lead the Helen of Troy North American regional marketing organization. Prior to this role, I was the President of our Global Beauty business for the previous 5 years at Helen of Troy. Before joining Helen of Troy, I held various leadership positions at Procter & Gamble and OPI products for over 30 years. This is a brand-new organization, started up in January 2023 to leverage the scale of our dynamic brand portfolio across all North American customers with a dedicated focus on our top customers. This reapplies the proven concept we've been using internationally. I'm excited to share with you today an example of how my team is bringing to life our strategic choice to win with winning customers. Our framework to win with winning customers centers around customer joint business planning. This is a holistic business planning approach that focuses on aligning our strategies with our customer strategies. This partnership and alignment is proven to deliver superior business results for both parties. While the concept is universal, and we love all of our customers, we focus on implementing this approach with our very largest winning customers to ensure that we are capturing the largest growth potential. Now let me share with you 4 examples of how this comes to life in the marketplace with one of our very largest retailers, Walmart. Our first example illustrates how we partnered with Walmart to deliver the right value to their key shopper. To start, we leveraged our Shopper Insight expertise to understand who their prime prospect was and how we could deliver on their value needs. We then aligned our top brands and the segments within those brands to Walmart's key prime prospect. In this example, using Revlon smooth stay hair appliances. We partnered with Walmart to drive the right distribution and the right shelf placement to reach that key value shopper. This brand's attractive price point and high-quality performance meets this need extremely well. The result has been positive growth in the marketplace. The second example illustrates how we're partnering with Walmart to bring the right assortment of our winning brands to their shopper. The pandemic changed the way that the consumer shops. There's been a surge in the consumer preference for trusted brands and consumers are shifting to stores closer to home for one-stop shopping. Based on these shopper needs; we believe that OXO would be a natural fit for Walmart as a very meaningful shopper destination. Earlier this year, we initiated an in-store test of our OXO soft work line with them in store. I'm very happy to report that Walmart and the OXO brand are very pleased with the initial results of this test. The third example that I'd like to share focuses on co-creating customer-specific innovation for our brands. In this example, we partnered with Walmart to expand one of their exclusive partnerships, Beautiful by Drew Barrymore to a new category within their store. Specifically, we created a Beautiful by PUR Collection, which combines PUR's strong brand equity and performance heritage with Beautiful by Drew Barrymore. Multiple SKUs and in-store displays were created to drive brand awareness and help bring in more shoppers into the Walmart stores and also into the PUR brand. Finally, this fourth example of customer joint business planning with Walmart involved aligning and optimizing key Vicks seasonal products and inventory levels. In the seasonal cough and cold category, it's critical to ensure that their shoppers can always find the right Vicks product when the illness hits. This is a challenging balance between having enough inventory to meet the shoppers need without running out of stock, yet also helping Walmart avoid having excess product. Our team has strategically aligned with them to create customized displays targeted to specific stores to maximize in-stock availability of Vicks for their shopper. This joint business planning approach drives the top line revenue for Walmart while the customization and the targeting minimizes both out of stock or excess stock situations. Again, this ultimately means win-win more profits for both sides. I hope that you can see how the North American regional marketing organization is bringing to life our choice to win with winning customers.

Thank you, Ron and to the North American RMO team who is energized and excited to be a driver of growth. Now on to our third where-to-play choice, strategically grow international. In the first half of fiscal '24, about 22.5% of our total company revenue is from outside North America. That is up from just over 20% for the same period a year ago. While we have seen growth in our international sales, we see this as an opportunity to accelerate the growth. Like we have done with our brand portfolio, we have prioritized brand market combinations where we see high market attractiveness, using criteria like size, growth potential, profitability and ease of doing business. We've also looked at a strong ability for us to win using criteria like current market position, competitive intensity, strong internal or distributor relationships. This enables our international RMO team to focus on the most attractive opportunities first. We will disproportionately resource these highest potential and most financially attractive brand and market combinations to build our scale and momentum. We have also identified the next tier of attractive market and brand opportunities. In those cases, we are evaluating our go-to-market partnerships to identify scaled partners so that we are set up for success to unlock these additional opportunities. Like the brand classifications, we will refresh the assessment regularly to identify which new opportunities we are ready to pursue and then allocate our resources accordingly. It's important to note, we will also continue to look to grow our international presence through acquisition. Osprey is a great example of this, with 50% of sales outside of the U.S. It offered great additional scale in many markets and is opening up opportunities for us for Hydro Flask. Osprey performance internationally continues to be strong. This is a great segue into our fourth wear-to-play choice, continue better together M&A. Helen of Troy has a strong track record of cultivating and acquiring attractive assets. We built our outdoor vector with Hydro Flask and Osprey, and broadened into prestige beauty, including high-margin and growing liquids with Drybar and Curlsmith. These are now some of our most known and highest growth potential brands in our portfolio. We will continue this winning M&A approach and Elevate for Growth. Specifically, we will continue to string of pearls strategy, looking for brands that complement our portfolio. We will also continue to look for opportunities that are better together. What does this mean? It means better for both Helen of Troy and better for the acquired brand. Better for Helen of Troy means that the asset is accretive to our fleet average, has growth potential and complements our portfolio and capabilities. Better for the acquired brand means Helen of Troy can bring value and scale to enable more or faster growth and efficiency. This concludes our play choices. Now we'll move to how-to-win. We've identified 7 how-to-win choices as part of Elevate for Growth. I will walk through each of them now. Our first how-to-win choice is, be consumer obsessed. As a consumer products company, this is likely expected but our intention is to elevate our consumer centricity, taking it to the next level to a true consumer obsession. As a reminder, another important choice we made in the organizational work stream of Project Pegasus is that we focused our business units on delighting consumers through developing strong brands and activating with brilliant innovation and marketing. This focus is an important enabler of being consumer obsessed. So now let's dig further into consumer obsession. I'll start with what consumer obsessed means for our people. I just talked about the BU teams focusing on consumers and brands, but this choice extends this consumer obsession to traditionally non consumer-facing functions as well. We will do this by bringing the consumer into our company meetings, expecting everyone to do regular store visits, among other activities so that they're closer to our consumer on a day-to-day basis. In other words, delighting our consumer is everyone's job. Importantly, I've also added a new member to the global leadership team, Chris Osner-Hackett. He joined us about a month ago as our Global Chief Marketing Officer. He has over 25 years in the industry, building capability and driving outstanding results. His remit is to build excellence and standardization in our approach to brand building, including championing deep consumer understanding, stewarding our Helen of Troy brand-building framework and improving our marketing activation excellence and measurement, all of this to build even stronger brands to delight consumers. Now moving on to tools. We are in the process of sharpening our brand equities to ensure they're clear, distinctive and inspiring. From this, we can develop end-to-end consumer journeys so that we can identify when and where our core growth consumers are most receptive to our brands. We will also embrace marketing mix modeling and real-time performance data so that we can better optimize our spend across the portfolio and across tactics in a more agile manner. Finally, we'll deploy new tools for social listening, and mining ratings and reviews to unlock consumer insights. As a result of this, we believe we can build stronger brands through brand advocacy, market share gains and improved return on investment on our commercial spend. When you get all this right, you develop brands and products that create passionate brand advocates. I would like to play a Montage video to share some authentic examples direct from our consumers on social media. [Presentation]

Makes me smile every time. There is nothing better than hearing directly from your consumers, especially when they love your products. Our second how-to-win choice is focused on strategically extending our brands to drive growth. Many of Helen of Troy brands have this kind of stretched potential. The key to successful brand extension is identifying attractive adjacencies with strong growth potential where our brand has a strong right to win. Let's define right to win. We see right to win as ensuring that at least one of our brands points of difference, both matters to the consumer and meet the consumer need in that new adjacency. This means that we have a transferable point of difference that we believe will drive sustainable growth. To enable success, it is also important to assess the category dynamics to identify what capabilities and investment it will take to be successful. Let me share a few quick examples where we believe we have done this well. I'll start with Braun. Internationally, we have extended Braun from thermometers into other at-home diagnostics like Pulse Oximeters and blood pressure monitors. These adjacencies leverage Braun's point of difference in precision into an attractive adjacent category, giving us a strong right-to-win. We also have the capabilities needed to win. In fact, the additional range helped us build strong brand blocks and scale in European pharmacies. Osprey's extension into travel is another great example. We're pushing deeper into the adjacent and attractive travel category, leveraging Osprey's technical prowess in carry, fit, durability and use of sustainable materials all points of difference that resonate with travel consumers. In doing so, we believe we can continue to drive strong incremental growth. Finally, in our beauty portfolio, we recently extended the Hot Tools brand into liquids. The extension leverages the powerful consumer insight around the love-hate relationship women have with heat. Women know that heat helps to style their hair via the tools, but they also fear that the heat causes damage to their hair. Hot Tools, an expert in heated styling addresses this insight with the line of liquids designed to protect the hair from heat. We're seeing this product line perform well at Ulta. Now let me invite Larry Witt, our Home and Outdoor President, to share one of our strongest examples with OXO. Larry has been a leader of this brand for several years and has been personally involved in many of these successful exemptions. Larry?

Thank you, Noel. Good afternoon, almost good afternoon. I think we're still good morning, 7 minutes to go. I have been part of Helen of Troy since 2004, with OXO -- I'm sorry, with -- Helen of Troy since 2004. With OXO since 1994, and I will celebrate my 30th year with OXO and my 20th year with Helen of Troy next year. And by the way, I've been leading the Home and Outdoor division now since 2017. Time flies. So when we think about strategically extending our brands across our portfolio, we look towards OXO as our North Star. OXO has been successfully extending into new categories for decades. If you don't know the history of OXO, it all started with a carrot peeler, the simple little thing. The founder, Sam Farber, set out to create kitchen tools that we'd be more comfortable for users like his wife Betsy, who had arthritis. Over the past few decades, OXO was extended beyond just kitchen tools and gadgets, which has fueled the growth of the brand. We extended into multiple new categories such as food storage, Tot, kitchen and bathroom organization. cleaning and most recently outdoors. Today, OXO has over 1,200 unique products across 20 different categories. Let's talk about our newest entry, Outdoor. Like all our extensions, this one also started with numerous consumer insights. The lines between inside and outside the home have been blurring for decades. The addition of outdoor kitchens remains a growing trend, while car camping, glamping, RV and van-life further extend the concept of Home. Our team of marketers, engineers and industrial designers work collaboratively to uncover meaningful, unmet consumer needs and then set out to design and engineer rugged high-performance solutions. We launched a line in partnership with REI in the summer of 2021 and in just the last 2 years, we designed over 40 unique tools. OXO moving in cleaning and bath was fueled by learnings in kitchen sink-ware and kitchen organization. When we looked at the needs of consumers outside of the kitchen, we saw a similar need for thoughtfully designed products in other rooms of the home. We studied how people clean their showers, their floors and yes, even their toilets. We observed how they organize their cleaning closets as well as their undersink cabinets. We even gained insight to the difficulty of installing shower caddies leading to design solutions extending the brand into new rooms in the home and new aisles in the store. One last example I will touch on is OXO Tot. This line focuses on toddlers. We recognize that most infant and toddler products created at of levels of stress and frustration for new parents. We set out to solve these pain points across a wide range of products related to bath time, feeding, meal prep and cleanup as well as on the go through thoughtfully designed products that are highly functional, safe for both parents and children alike. These are just a few examples to illustrate our way of working at OXO, and the same approach to consumer-obsessed innovation is practice across all of Home and Outdoor segment as well as Beauty and Wellness. We are always looking for new places to play, where unmet consumer needs, provide the opportunity for us to design and engineer solutions with winning points of difference. And doing so allows to strategically expand our brands to deliver against our business, customer and consumer objectives. To close, I'll share a brief video that captures this as well as OXO's history of innovation and award-winning product design. [Presentation]

I am going to hand it back to Noel. Thank you.

Thank you, Larry. And I want to take this opportunity to congratulate Larry and the team for the numerous awards OXO has received extending into new categories. What a remarkable brand. The third how-to-win choice has 2 components: Be-and-win where the shopper shops. Let me break this down. Be where the shopper shops is all about distribution. It may sound obvious, but we have to be on shelf, whether physical or virtual where our shopper is shopping. Win where the shopper shops means that once we're there, we must execute brilliantly to earn the purchase. Be where the shopper shops is all about distribution, whether on the physical or virtual shelf, this is a key objective for the North America RMO. That growth can come in 2 different ways. We can expand distribution across more of our portfolio in existing customers or expand distribution in new customers where the category may be developed, but our Helen of Troy brands aren't currently playing. We've gone through a rigorous process to understand the opportunity across channels, customers and our portfolio of brands, as you can see here. Our categories are down the left side and the channels across the top. This enables us to identify the white space and then mobilize a plan to get after it. We have already seen some success stories, including PUR in the value channel and OXO and Masson Club. We also expect further wins in the coming months in channels like hardware and department stores across several of our brands. Once we are in distribution, we have to execute with excellence. This is the win where the shopper shops. Winning execution means great shelf presence, strong merchandising and display, great in-store education to drive interest and trial. Here are a few examples. You see great displays with our colorways on Hydro Flask, strong shelf presence on Osprey with a variety of packs for all shapes, sizes and needs. Drybar and Curlsmith displays, including in-store trainers who help educate retailer personnel so that they can recommend the right products and answer shopper questions. And finally, OXO displays in a prominent U.K. department store that show the array of options to help shoppers relish in the joy of cooking. When it comes to e-commerce, our ambition is to go from good to great. The key ingredients are A+ content scores across the portfolio, the right assortment, optimize search and media across platforms, and finally, strong participation in the big events, for example, Prime Day. Our fourth how-to-win choice is fully leveraged operational scale and assets. This pertains to both our assets like our Tennessee distribution center but also in how we work. As Julien mentioned in his remarks through the organizational work stream of Project Pegasus, we embraced the next level of centralization in fiscal '24. We want to fully embrace and leverage our new operating model that enables our business units to 100% focus on delighting consumers with our brands and innovation. Our regional market organizations to focus on unlocking new and bigger opportunities in our markets and with our retail partners. And finally, our centralized global shared services to bring scaled excellence to enable success in all that we do. This enables us to be an empowered but leveraged operating company. We expect to see continued benefits from our new organizational structure. In addition to this, we want to leverage our assets fully. As a prime example, we invested in a new state-of-the-art distribution center in Tennessee as many of you know. To share more about this incredible facility, I'd like to invite Jay Caron, our Global Chief of Operations, to tell you more.

Thanks, Noel. It's great to be here with you today. I've been with the company for 7 years now and have over 30 years of transformational leadership experience in consumer goods, operations and supply chain. I've been fortunate to have work for names like Sony, Newell, Duracell, Gillette, Dorel Industries and most recently with the Thule Group out of Sweden. In my career, I've had direct leadership roles with every facet of operations and supply chain and have led multiple strategic sourcing efforts, acquisition integrations, ERP implementations around the globe. Today, I'm excited to share insights on how we will fully leverage our operational scale and assets. As Noel mentioned, we opened our new state-of-the-art Tennessee distribution center in March of this year. We're on track to scale all automation solutions by the end of FY '24. We affectionately call it the Iron Giant and I want to give you a quick look at the build process. [Presentation]

We're very proud of the Iron Giant for several reasons. We have already enabled consolidation of 5 distribution locations in the network and the 2 million square foot facility is sized to meet our ambitious growth plans. The Gartner leading technologies are built for plug-and-play acquisition integration allowing us to quickly and easily leverage our scale to improve acquisition margins. The automation solutions deployed are agile, allowing us to quickly flex to beat spike demands across all of our distribution channels, without a heavy reliance upon labor. From cyber bundy direct-to-consumer spikes to Prime Day business-to-business builds, our solutions are designed to respond with automation, not temp labor. The cutting-edge automation is modular and scalable, providing future-proof expansion capabilities, allowing us to tailor fit the operation around our growth. Finally, the project has been awarded LEED Silver certification by the U.S. Green Building Council, the most widely used green building rating system in the world and an international symbol of sustainability excellence. We don't have time today to show you each of the supported distribution channels, but we do have a video that shows our direct-to-consumer capabilities by taking you through the consumer journey from the product order to order delivery. As with everything that we do, our work starts and ends with the consumer. [Presentation]

Thank you, Jay. The capability and scale of Iron Giant is truly cutting edge. It's a real low. Our fifth, how-to-win choice focuses on embracing next level data and analytics to enable enhanced productivity and visibility across the enterprise. This strategy stretches across all corners of Helen of Troy, enabling some of the earlier choices we spoke about, including bringing data to power business and financial forecasting and analysis, tools to gather and synthesize consumer insights, and analysis to drive marketing spend optimization. As a few examples, we're investing in enhanced marketing mix modeling capabilities to optimize the ROI of our marketing investment across the portfolio and within each brand's strategic choices. We're developing dashboards across sales and operations to put data at our associates' fingertips. This will enable faster decision-making. We will also further leverage the first-party data we have from our opting consumers to ensure we are leveraging it for rich insights and look-alike targeting within our digital activation. I'll double-click now on a marketing activation example from Curlsmith, our most recent acquisition to show how our data-driven approach to audience targeting helps us reach the most qualified audiences throughout their journey. Let's start with awareness. We size the growth audience on Curlsmith and then seek them at scale by leveraging not only our first-party data, but also seeking to scale them, leveraging second and third-party data. Now on to consideration. As consumers interact with any of our ads, we can begin to capture interest and where they are in their journey. So we serve the right content for the moment and fit for the platform that they are in. Then on to conversion, as they get closer to purchase in their journey, we ensure we reach them with shoppable ad units so that they can buy now. And finally, retention. We leverage first-party data to retain them as brand advocates with new product offers, subscribe and save and repurchase reminders. Ultimately, this leads to greater brand advocacy, which results in higher conversion, greater retention and increased repurchase rates. Curlsmith is delivering significant point-of-sale growth and is a strong example in our portfolio of the success we can realize with a data-driven approach to marketing. As part of our next level brand building work and embracing next level data and analytics, we will scale this approach more broadly across the portfolio. Our 6 how-to-win choices is focusing on strengthening our end-to-end M&A capabilities. As outlined in our where-to-play choice, we will continue with our M&A string of pearls strategy. This choice is all about strengthening our end-to-end capabilities. So we continuously learn to become best-in-class acquirers and integrators. While each process is unique, there are certain steps and certain capabilities that stretch across them. We believe we have an opportunity to continuously improve across the process. For example, in the strategy phase, we plan to conduct data-driven analysis to scan and prioritize potential new attractive categories that meet our Better-Together criteria. In doing so, we'll continue to take a proactive approach to target identification, cultivating relationships with businesses we feel could be a good fit. This will help increase the likelihood that we're the buyer of choice. In the dealmaking and integration phases, we'll work to build more institutional knowledge and capability through M&A playbooks and all of these things to drive continuous improvement. Our seventh and final how-to-win strategies perhaps are most important. We need highly engaged people to be successful, so it's critical that we foster a winning culture. We have a great foundation to build on with our I RISE values that I spoke to earlier and other foundational Helen of Troy culture initiatives. As part of Elevate for Growth, we want to take those tools to the next level. To do so, we identified new leadership behaviors needed to succeed in the Elevate for Growth era. First, be accountable. We want all associates to be outcome-focused fully owning their delivery on the expectations that are set. Second, embrace agility. We want all associates to be curious nimble and able to adapt to a rapidly changing marketplace dynamics. Third, accelerate growth. The Elevate for Growth plan is all about growth. So we want our team to stretch and take calculated risk to deliver against our ambitious targets. And finally, take action. We want our associates to be empowered to move forward and drive outcomes. To further enable these behaviors, we'll build additional training programs and invest in coaching resources to drive the change. And the GLT will lead by example from the top, living the I RISE values in these 4 As. As each and every day. Now to wrap up our strategic choices, I'll close with what Elevate means for some of our associates. [Presentation]

Couldn't have said it better myself. So this concludes the 4 win-to-play and 7 how-to-win strategies. We believe they represent continuity with some foundational strategies that have been successful for Helen of Troy in the past, but also importantly, bring some new ideas that will be critical to our success in the next era. Furthermore, we believe the choices are mutually reinforcing in a way that will help us deliver on our ambition. We also believe that the strategy has the right elements that will start the flywheel turning again. I touched on many of them, including our approach to drive growth for our portfolio strategy and incremental investment and the advantages of our new structure and capabilities. Brian will elaborate further on the other accelerators for our next level flywheel. Speaking of Brian, before he gets started, let me take a moment to again welcome him back to Helen of Troy. We shared in our second quarter earnings that the company and Brian have reached an agreement for him to stay on as our CFO. Many of you know Brian from his 15-year career at Helen of Troy, 7 of those as CFO. After retiring from the company in 2021 he come back as our CFO on an interim basis last April. I'm delighted Brian will remain on a more permanent basis department with me now and when I assume the CEO position next fiscal year. He's a terrific partner to me in the GLT. He brings strategic thinking, public company CFO experience and deep company background and continuity. Brian, the floor is yours. He is coming from the other side. That's not the way we practiced. Keeping me on my toes already.

Good afternoon, everyone, and thank you, Noel, for the kind introduction. Good to see some familiar faces. I got to tell you, I didn't see this coming. When I came back in the interim role about 7 months ago, the leadership team was already planning for this Investor Day. And I thought, I'll be back in retirement by the time that occurs. So one less thing for me to worry about. I guess I was wrong about that, but I'm excited to be back with a clear opportunity to create significant shareholder value. With that, let's turn to the agenda for my remarks. I want to give you some perspective on fiscal '24 year-to-date performance and outlook. Next, I'll take a step back and review highlights of Phase II of the transformation. Then I'll lay out our vision for what we think is possible in Elevate for Growth. And finally, I hope to illustrate why Helen of Troy is poised to create next level of shareholder value. Let me start with a recap of the second quarter of fiscal '24. I'm never satisfied with the year-over-year decline but I believe Q2 revenue performance is a step in the right direction as we navigate post-COVID normalization and the pressured consumer environment. Just a reminder that the fiscal '24 year-over-year comparison includes a full year drag of approximately 3.4% from the bankruptcy of Bed Bath & Beyond and our SKU rationalization efforts. If you were to make an adjustment for those onetime items, 2-year growth would be closer to 7% or 8%. We think this is a good start as we look to resume year-over-year growth. Moving to cash generation. We are pleased with our free cash flow improvement ahead of revenue and earnings growth. Significant inventory and other working capital improvements have us back on track. Further inventory upside and a return to normalized CapEx spending provide opportunity for continued improvement in fiscal '25 and beyond. We see signs of stabilization and underlying strength in our business. Starting on the left, we have begun to reestablish a track record of top and bottom line performance in line with expectations, not easy in this environment. Looking at the right-hand side, we are also improving underlying fundamentals with significant gross margin expansion and free cash flow growth. Now looking at our recent performance on a trailing 12-month basis, we believe key metrics show improving fundamentals in signal and inflection point. Gross margin improvement has been strong with further expansion expected in fiscal '25 and '26. We've been able to maintain adjusted EBITDA margin despite lower leverage and a year-over-year incentive comp increase of over 80 basis points, as we reinstate expense at target levels. We expect to expand EBITDA margin in the second half of fiscal '24 and as we realize the benefits of lower costs and our revenue trajectory improves. Free cash flow is back on track, and we expect fiscal '24 to be a platform for continued improvement. And finally, we believe our double-digit free cash flow yield compares favorably to our peer set. Just wanted to take a moment to fully frame up recent changes from our restructuring plan and our asset optimization initiatives. There's a lot here, but I'll just talk through the highlights. Let's start with restructuring on the left. We've lowered our total estimated restructuring charges by $25 million to $30 million while including the geographic consolidation of the U.S. Beauty business in the plan. Taking a step back to look at Project Pegasus as a whole, its breadth and significance is substantial. We think it will be a game changer in terms of fueling investment and accelerating growth. On the asset optimization side, to the right, we sold our El Paso, Texas office and distribution facility for $51 million after the end of the second quarter, and we expect to recognize a gain of $34 million in the third quarter. As a result of these 2 actions, we've significantly narrowed the delta between GAAP and non-GAAP EPS to less than $2. As we discussed during Q2 earnings, we honed our outlook for the second half of fiscal '24. We maintained our full year outlook, which shifted revenue and earnings from Q3 to Q4. This reflects greater visibility on the puts and takes under our control, which include distribution gains layering in more fully in Q4 and an isolated supply pinch expected to hurt Q3, but should benefit Q4. It also factors in the visibility from certain key retailer expectations, which includes cautious ordering patterns in the short term as certain retailers factor in student debt loan impact and manage their year-end inventory levels. Because retail inventory is generally at low levels, we expect Q4 ordering patterns more in line with the first half of the fiscal year. We also called out the drivers of our expected second half performance. Club channel phasing, better supply in key products with high demand, distribution gains set for the second half in the full weight of new product launches during fiscal '24. We expect the most adjusted EPS improvement in Q3, which lines up well with the ease of the prior year comparison. We expect the most net sales improvement in Q4, which also aligns with the prior year comparison. Taking a step back, we thought it would be helpful to review some highlights from the past 5 years and leave you with some takeaways as to why we think we're set for success going forward. We are not satisfied with our recent year-over-year performance. We are pleased with our overall Phase II results. Core business revenue is expected to end Phase II with a 6.6% CAGR through a combination of organic and acquisition growth. As a reminder, our core business measures remove the impact of divested business from all relevant periods. Significant gross margin expansion in Phase II with the bulk of it coming from recent improvements, and we expect continued expansion going forward. We expect EBITDA margin expansion of 100 basis points despite significant recent macro headwinds. And finally, we expect the core business adjusted EPS CAGR of 4.4% through a period of extraordinary disruption. This is not how we originally wanted to end Phase II but this represents solid performance considering the environment. Our adjusted profit measures are back on track with high conversion ratios to cash and when you line up our cash conversion with key valuation metrics compared to our peer set, you see that we trade at a discount to the peer median, yet we have much higher cash conversion ratios. We believe the strategic investments we've made over the last several years provide a platform for success going forward. First, we've been successful at acquiring high-growth, high-margin insurgent brands at attractive multiples. I'll do a deeper dive on this in a few slides. Second, Project Pegasus greatly improves our operating efficiency. It provides fuel for growth. Third, Iron Giant establishes next level distribution capability and operating leverage for years to come. Impressive that a project at this size and scale was on budget and largely on time in a period of such significant disruption. These are just a few of the things I'm most excited about as we entered the Elevate for Growth era. And with that, let's talk more about our vision for Elevate for Growth. We estimate strong financial outcomes over the course of the plan, built the bottoms up organic revenue by brand, acquisition and divestiture inputs and required investment inputs. We consider multiple scenarios before selecting the one we believe is most representative of our potential outcome. We modeled reasonable acquisition impacts for illustrative purposes and are presenting with and without. We included Pegasus savings in line with our disclosures and assumed $100 million of share repurchase annually as a baseline. Finally, we assume commodity and freight costs to remain largely at current levels, slight moderation of interest rates beginning in fiscal '25, more normalized inflationary impacts beyond fiscal '25. And here's how these assumptions translate to average annual organic growth rates. Net sales growth of 3% to 4%, which excludes acquisitions, divestitures, and material foreign currency fluctuations. Adjusted EBITDA margin expansion of 30 to 40 basis points per year. Adjusted EPS growth of 10% or greater each year, which excludes acquisitions, divestitures and material foreign currency fluctuations and include share repurchases. Achievement of 18% return on invested capital by the end of fiscal year '30. Reinvestment to earnings growth ratio of 2/3 to 1/3 compared to what we used in the past, which was 50/50, which we expect to result in annual growth investment of [ 9% ] of net sales annually. A key choice in Elevate for Growth will be to focus our investment and efforts on our Invest to Grow brands, while also maintaining sufficient investment to hold our position on stronghold brands. Our vision is to drive a 6% CAGR with the Invest to Grow portfolio, which has a current gross profit margin of 58%. We believe we can achieve a solid 3% growth rate with the stronghold brands that have a current gross profit margin just to click down from invest-to-grow. We think we've done a good job building the invest-to-grow portfolio with recent acquisitions, which helps drive our vision for a 6% CAGR. We've added value along the way by acquiring high-growth assets attractive multiples and overperforming against valuation economics. In each case, we've been able to acquire the assets and competitive processes at or below our trading multiple at the time of acquisition. We've also realized results at or above the metrics implied in the assets valuation. In my experience, it's very difficult to win assets of this quality in a competitive process at a discounted multiple and then exceed valuation economics. Do it for successive acquisitions in a row, I would argue is rare. But we're not just relying on recent acquisitions to fuel growth. We want to improve the core and add more. We intend to improve the core organically while continuing to shape the portfolio. As an example, our model assumes a luster divestiture at the beginning of fiscal year '25. Excluding the divested revenue from fiscal '24, results in a base business in this CAGR of 4.5% over the course of the plan. And then finally, we think we can continue to add more of the same type of assets we've acquired in the past to drive high growth CAGRs over the next 6 years. How will we drive our core growth, this is an illustration of how we think it will evolve over the duration of the plan. Short-term growth will rely more on leveraging the distribution white space opportunity Noel shared, while we amplify our growth investment in brand building and product development. In the longer term, new product introductions and brand building will drive the vast majority of the growth with distribution being much more supplemental in nature. Turning to performance improvement drivers below the sales line. We believe Pegasus will create many advantages that we will use for years to come. Here's a reminder of what Pegasus consists of in the results we expect to achieve. $75 million to $85 million of savings over a 3-year period that we intend to use to amplify our growth investment with the bulk of savings expected in fiscal '25. We intend to develop on-going productivity initiatives that will supplement Pegasus savings in fiscal '26 and later years. As part of our investment in Iron Giant, we've been busy assessing the optimal distribution network going forward. Our fiscal '23 network is a combination of owned and leased facilities quickly built up due to strong demand before and during COVID. Our vision is that the future network will consist of 2 core distribution locations at a significantly lower cost. We expect to scale and leverage this network for years to come with expected distribution expense as a percentage of sales coming down from 5.3% to well below 4%, which we think is best-in-class. We like what we've been able to achieve through capital deployment. The concentration of actions in fiscal '22 and '23, along with rising interest rates set us back at the end of Phase II. But we are quickly returning to a steady state of capital deployment. Our model assumes share repurchases of $100 million per year over the life of the plan as a baseline. We've also assumed two $300 million acquisitions and a return to more normalized levels of capital expenditures. And here's what that looks like in terms of accretion. We expect to drive significant accretion while also delevering the balance sheet. As an example, we believe we could drive accretion of over $0.80 in fiscal '25 just from share repurchase and debt pay down alone. Even with more extensive capital deployment, our model implies leverage at or below target range by the end of fiscal '25. Any deployment above what has been assumed in our model should result in upside. We believe we have significant earnings growth drivers that can fuel next level growth investment and EPS accretion. Let's walk through them. We expect Pegasus and ongoing productivity initiatives to be a significant driver. Next, we are expecting a margin benefit from a higher mix of invest to grow revenue. Portfolio and SKU optimization will continue to lift profitability in fiscal '25. Next is the favorable impact from Iron Giant, the DC network consolidation I just discussed. And finally, we have capital deployment accretion and tax structure leverage, which gains efficiency with growth. So absent any reinvestment, we believe we could drive 26% earnings growth in fiscal '25, but that's not the plan. We expect to invest roughly 2/3 of that profit improvement back into brand building, new product development to feed the flywheel, which leaves roughly 10% for annual adjusted EPS growth. And we think we can rinse and repeat each year during Elevate for Growth, adding in operating leverage as yet another driver beginning in fiscal '26. We believe that rents and repeat cycle will provide significant fuel to reaccelerate the flywheel but also allow us to jump from roughly 6% of net sales to roughly 9% of net sales in terms of growth investment Because of the fuel from Pegasus, we plan the majority of that jump to occur in fiscal '25 and '26 but maintained higher levels thereafter. Our ongoing reinvestment to earnings growth ratio would go from roughly 50-50 to 2/3 to 1/3. We think that level of investment will drive strong results in the Elevate for Growth era. Just to get you grounded in the slide, all presented metrics include the assumption of a divestiture in the first quarter of fiscal '25. Prior period as reported results were not adjusted in this presentation as we don't have certainty that the divestiture will occur. We also assume 2 acquisitions over the course of the plan, which are illustrated with the lighter color orange at the top of the bars. The illustration provides our vision for organic and inorganic CAGRs over the course of the plan. We believe we can achieve 3% to 4% organic revenue growth over the course of the plan with growth of 6.3% including acquisition. We think we can grow adjusted EBITDA at 5.5% organic CAGR with over 8% with acquisition. Using all the earnings growth levers we have, we think we can drive 10% organic adjusted EPS growth while making the increased investment I just discussed. And with acquisition, we think we can drive EPS growth of 12.4%. Finally, we think we can achieve an organic return on invested capital of 18% by the end of our plan or 16% with acquisition. Here's how our Elevate for Growth targets line up against the targets in Phase I and Phase II of the transformation. You can see that we are taking our targets to the next level. We're targeting net sales growth of 3% to 4%, not including acquisition or divestiture. We're setting an adjusted EBITDA margin expansion target of 30 to 40 basis points going forward as opposed to an operating margin target of 20 to 30 basis points used in the past. As mentioned, we are targeting 10% adjusted EPS growth, not including acquisition or divestiture. Our adjusted EPS target does include the assumption of share repurchases because it's an alternative to debt paydown. As discussed, we are setting a growth investment target of 9% of net sales annually. Our return on invested capital target is slightly lower than our Phase II target, which largely reflects a higher base of invested capital over the [ arc of ] time, but still reflects what we view as best-in-class. Finally, we expect to return to more normalized capital expenditures. With that, let's turn to our vision for next-level value creation. We have a next-level strategy, and we've upgraded to a next-level flywheel. Here's the next level of flywheel, we believe, will drive the next virtuous cycle for Helen of Troy. We believe we've upgraded each element to fly faster and create more value. We've refocused our growth strategy and amplified our investment. We've upgraded our go-to-market structure with the creation of the North America RMO and added centralized marketing leadership to leverage best practices. We believe we've achieved best-in-class margins that we intend to leverage and expand further. We will also leverage our further operating integration, which includes the North America RMO, consolidation of Beauty & Wellness, further centralization of supply chain and finance and centralized marketing and business insights leadership. We're very excited by our state-of-the-art distribution network and the leverage and opportunities it provides. We have sustainable financial advantages, including a tax advantage that becomes more efficient as pretax income grows. And we made a lot of progress with respect to balance sheet productivity but have opportunity to further improve in this next era. And finally, we think we can drive even more value from capital deployment than we have in the past. So why invest in Helen of Troy? The reasons on the left, we think, are foundational. The reasons on the right reflect recent strategic and operational improvements that signal we are at -- we are poised to create significant shareholder value in our next era. I won't touch on each of these points now, but I'll cover many of them in a few slides. So those are some of the qualitative reasons. Here are the quantitative ones. We think we can use the combination of operating profit growth, tax efficiency, further working capital improvement and significant debt reduction to drive best-in-class return on invested capital. The plan is laser-focused on improving our fundamentals and results to drive value creation, both in terms of EPS growth and multiple expansion. This is an illustration of the value creation possible with the accelerated sales and EPS growth in our plan, along with margins, cash flow and return on invested capital we believe is best-in-class and worthy of a multiple expansion over time. And I'll close with what I think are the key investment highlights for you to consider. Trailing 12-month trends and fiscal '24 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 Helen of Troy is undervalued relative to peers. Recent strategic investments and initiatives provide a strong platform for growth. Rapidly improving balance sheet provides capital deployment optionality that can drive significant accretion. Multiple earnings growth drivers fuel the next level investment and double-digit adjusted EPS accretion. Opportunity to establish an even better M&A platform with better capabilities. And finally, the Elevate for Growth plan has potential to produce strong financial results with upside from additional capital deployment. We expect 6% revenue CAGR with acquisition, 4% organic; 12% adjusted EPS CAGR with acquisition, 10% organic; 8% adjusted EBITDA CAGR with acquisition, 6% organic; 16% ROIC by fiscal '30 with acquisition, 18% organic; and finally, a fiscal '30 implied share price of $300 with modest multiple improvement or $400 share price at our fiscal '21/'22 trading multiple. Now you can see some of the reasons why I'm so excited to be back at Helen of Troy. This concludes my review of the financials. And with that, I welcome you to join us at the innovation showcase in the next room. [Break]

Rupesh Parikh, Oppenheimer. So I guess just one clarification question. So I know this year your EPS guidance was $8.50 to $9. And then you talked about an average growth of 10% in EPS over, I think, the entire time frame of your targets. So just to confirm, the 10% we saw for FY '25 does not imply 10% growth off of this year's numbers.

It is not our guidance for fiscal '25. I mean you may say, well, you implicitly guided by saying you have 10% average annual growth rates over the course of the plan. Yes, that's correct. That's what we want to give the market in terms of what's possible. I think we want the flexibility to shape the year and determine what priorities we have, what we want to invest in and how flexible we want to be with respect to investment or earnings growth. Hopefully, you saw from the slide, because it's kind of supposed to be the takeaway, we have the drivers, which means we have the flexibility. So we can toggle and pick and choose what we want to do and still get to the 10%; or maybe 1 year, it's going to be 11%; maybe 1 year, it's going to be 9%, I don't know. But yes, we are not guiding specifically to fiscal '25 at this point.

Okay. Great. And then my real question -- my follow-up question is you have the different buckets: invest to grow, stronghold, optimize. Can you give some color in terms of the brands that go into each bucket or even at a high level, maybe the brands that you think can be more impactful in the coming years?

Yes. So we're deliberately not sharing specifically which brands fall into which bucket, and we're doing that for a couple of reasons. The first is competitive reasons. I don't necessarily want to telegraph exactly where we're spending and how much and which brands, et cetera. The second, as I mentioned in my remarks, we're going to continually refresh it. So as part of -- this will become kind of part of our annual planning process where we take a good hard look at each of the brands against the criteria that I had on the chart and look at them, right? Because in a given year, you could have a great design-to-value initiative that really dramatically improves the margins of a certain brand, that could go from an optimize to a stronghold or a stronghold to an invest to grow. You could also have a really margin-accretive innovation that meets the consumer insight need that we lean into. So it will ebb and flow with each year, and we'll allocate the resources accordingly. So I think it's safe to say that the smallest bucket is optimize, and then the majority of the brands are kind of falling across stronghold and invest to grow.

Peter Grom, UBS. So maybe, Brian, one question for you just on the gross margin opportunity. I think the slide moved a little fast, so I apologize if I missed it. But I think you kind of touched on invest to grow is like a 58% gross margin and stronghold is more like a 50% gross margin. Can you maybe -- sitting here at kind of this, call it, mid- to high 40% gross margin, like how should we think about the long-term gross margin opportunity just given those 2 numbers, which are both currently pretty nicely ahead of your trailing 12-month...

Right. There is a third, optimize, bucket, which is not where we'd want it to be in a perfect world. But we're also trying to improve that gross profit margin, and we're also looking at optimizing that portfolio to see if all the brands and businesses that are currently in there hit our profile. So we'll work gross profit margin that way. But I hope it came across that Project Pegasus, the scale of what we've already kind of teed up for fiscal '25 and '26, which is largely gross profit-based is significant to drive much more incremental than what we've done through fiscal '24. So because of that, we think it's sustainable. We think it will only expand. The only caveat I'd put on that is commodity and freight rates are at a level now that, I would call, may be beneficial to long term of freight and commodity rates. Now if they were to swing in a different direction, that would be a headwind. But with the extent of savings we have teed up, I think we could expand margin even through a cycle like that. So it would depend on how much and timing and how it layered in with some of our cost savings. And then the last point I'll make is we're going to continue to do this kind of SKU rationalization work that we did maybe more extensively this last year. We'll do it going forward less extensively, hopefully don't have a revenue impact to call out. We just have profit improvement to gain. We'll continue to do that, and we think we can drive profit from that. And then just new products in the invest to grow brands themselves will -- that mix will also [ list ] gross profit. So I feel very comfortable with our ability to keep expanding.

No, that's really helpful. I guess I was just -- following up on that is just on -- it seems like you have a clear line of sight into the cost component here, right, in terms of Pegasus savings and whatnot. How would you characterize your line of sight in terms of getting to that 3% to 4% top line growth? And I guess -- I know you kind of outlined that one slide that kind of -- I know it's not '25 guidance, but it showed kind of 10% earnings growth per year. Is there any sort of weighting we should be thinking about in terms of the next 6 years in terms of that 3% to 4% growth? Is it going to be more back-end loaded just given the environment we're in?

No. The only thing I would say is part of the line of sight to it is the Pegasus reinvestment that we have. If we -- we need that fuel to really reinvest back in the business and drive the growth, and we feel very good about the progress and where we are on track to pull that fuel out to reinvest back into the business. '25 and '26 are kind of some of those key reinvestment periods. So I think that's key.

I agree with all of that. How I feel about the 3% to 4%, I mean, the way I look at it is it's only slightly above where we were growing before. We're amping up our investment in brand building, in new product development and all those things significantly. So I actually got the question, "Well, why isn't your growth rate higher going forward if you're making all that investment?" Let's see what happens at this point. This is what we're comfortable with in terms of a target, but we're not going to stop at 3% to 4%.

If we can get it.

Yes. As I said, we're looking at how do we get even -- how do we grow even faster.

And just, Julien, your earlier remarks, it's worth coming to. It's fantastic. Very nice day. Great job by everybody. I'm Bob Labick with CJS Securities, and thanks for having me here. Part of the theme is reinvest in growth and taking it from a 6% investment into the brands up to 9% over -- I guess, starting now and going forward. As a generalist, I don't know exactly how to think about that. Can you help us understand, does this mean more advertising and promotion? Like does this mean more R&D for new product development? Or how do you think about where the incremental investments are going and what you hope to achieve from them?

Yes. It's a great question, Bob. I would say it's both and. It's both incremental marketing investment as well as investment in new product development. And one of the things that we want to do is, in my view, as we look across our very diverse portfolio, it's not a one-size-fits-all. Not every brand needs exactly the same amount of spend, which is part of the classification I talked about, and they don't all need exactly the same time spend, right? Some categories and brands need more marketing and maybe a little bit less product innovation. Others might need the opposite. So the work to be done as we cascade the strategy is for each of our brands and our categories to really look in a landscape sort of way and say, okay, what's it going to take? If I'm an invest to grow brand and I want to grow above the category average, what does it take from an innovation standpoint? What does it take from a marketing [ dependence ] standpoint? And then bring that proposal into the resource allocation process that we do as a collective leadership team to really decide where do we place those bets and so on and so forth. And I don't think they'll all look the same because each category and each brand we participate in is very different. Some are very competitive. Landscapes and others, may be a little bit less so. And so that's the magic of being that granular and how we classify the brands and then really looking deeply at each category and each brand that we play in.

Olivia Tong with Raymond James. I wanted to first ask if you could break down that 3% to 4% target on top line a little bit between the Home & Outdoor and Beauty & Wellness businesses, thinking about the innovation opportunity in both and also thinking about the last couple of years and obviously, replacement cycle and things like that. So that's my first question. Then I had a follow-up.

Yes. Sure. I mean we're not at a stage where we're breaking that out. We would obviously break it out when we give fiscal year '25 guidance. I think as you would expect, you could assume a higher growth rate from Home & Outdoor than Beauty & Wellness. That's just kind of based on historical, and it's a safe assumption for you to make if you wanted to make that. Going anywhere past that, I don't want to do that because we haven't really framed that up yet. We do this process, which is long term, and then we do a robust budgeting process. It's very specific to a year and the opportunities in front of us, the marketing plan that we just discussed, the new products that are rolling out, distribution gains, all that sort of stuff. So if I gave you a rate right now, I don't want to do that. And even if I did, I'd probably be wrong because things are going to change as we shape up next year.

Yes. On the breakout between the categories, it's certainly right that we're not at the stage of that level of guidance, but important to understand the secular categories themselves. When we bought into outdoor, we did it because it's a secular trend with a higher long-term growth rate, and I would make the same comment about prestige beauty. So it's naturally true that those categories are growing faster than the others. Then there's the efforts in the innovation and the spending that was just discussed and the consumer-obsessed innovation to earn as much market share as possible so you get a turbocharge effect. Those effects would be relevant in the Beauty & Wellness categories, too, but not with the same secular growth rate.