HELE - NASDAQ

Thank you, operator. Good morning, everyone. Welcome to the Helen of Troy Fourth Quarter Fiscal 2024 Earnings Conference Call. The agenda for the call this morning is as follows. I'll begin with a brief discussion of forward-looking statements. Ms. Noel Geoffroy, the company's CEO will comment on business performance and key accomplishments and then provide some perspective as we begin the new fiscal year. Then, Mr. Brian Grass, the company's CFO, will review the financials in more detail and comment about current trends and expectations for the upcoming fiscal year. Following this, we will take questions you have for us today. This conference call may contain certain forward-looking statements that are based on management's current expectations with respect to future events or financial performance. Generally, the words anticipates, believes, expects, and other words similar are words identifying forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from the actual results. This conference call may also include information that may be considered non-GAAP financial information. These non-GAAP measures are not an alternative to GAAP financial information and may be calculated differently than the non-GAAP financial information disclosed by other parties. The company cautions listeners not to place undue reliance on forward-looking statements or non-GAAP information. Before I turn the call over to Ms. Geoffroy, I would like to inform all interested parties that a copy of today's earnings release has been posted to the Investor Relations section of the company's website at www.helenoftroy.com. The earnings release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP-based measures. The release can be obtained by selecting the Investor Relations tab on the company's home page and then the Press Releases tab. I will now turn the call over to Ms. Geoffroy.

Thank you, Jack. Hello, everyone, and thank you for joining us today. Today marks my first public remarks as Helen of Troy's CEO. I'm honored to lead this great organization with an inspiring purpose of elevating lives in moments that matter everywhere, every day, and I'm optimistic and energized by what lies ahead for the company. Today, we reported fourth quarter results that came in ahead of our expectations. We exceeded the full year fiscal '24 consolidated net sales and adjusted EPS outlook we provided in January. During this fiscal year, we expanded gross profit margin by 390 basis points and increased adjusted operating margin by 50 basis points, even as we used fuel generated by Project Pegasus to make incremental strategic investments in our business. We generated $269 million in free cash flow and strengthened our durable balance sheets by reducing our total debt by $269 million to $665.7 million. I am pleased with the continued execution and consistency of our results, particularly in light of an ongoing difficult macroeconomic environment and the changes that our organization is navigating. Today's results reflect the strength of our brand portfolio, the progress of our strategic initiatives, and the talent and dedication of our associates, all of which provides us with a strong platform to build upon in fiscal '25 and beyond. During the past fiscal year, we made significant progress on the goals we set for ourselves. I am pleased with the passion and engagement of the entire Helen of Troy team as we continue to embrace our new structure as a true global operating company. This structure includes next-level centralization of shared services to leverage our functional expertise, our first ever centralized marketing center of excellence to bring new capability and scale, business units that are even more focused on brand building and consumer centric innovation, and our newly formed North American Regional Market Organization, or NARMO, which mirrors our International RMO to drive excellence in market execution. Despite fiscal '24 being one of the tougher macroeconomic years for discretionary consumer goods, we found a way to deliver our plan while navigating a number of challenges, including inflationary pressures coupled with continued predictions of recession, lengthy COVID hangover effects impacting some of our categories, shopping patterns between brick-and-mortar and online, changes in the retailer landscape as they adjusted to consumer spending and shopping dynamics, and the effects of geopolitical events. We braced for the impacts of these challenges and responded by lowering inventories, reducing costs, leveraging our scale to find new growth opportunities, and keeping a laser focus on ROI with the investment fuel generated by Project Pegasus. Last October, we unveiled Elevate for Growth, our exciting six-year strategic plan that represents an important pivot for the company. The plan emphasizes increased growth investment and a new portfolio management approach with defined criteria to make sharper resource allocation choices based on growth potential and return on investment. We also doubled down on delighting consumers with next-level brand-building and innovation. We are striving for consumer obsession in all that we do. We committed to upgrading our data insight and analytic capabilities to solve business issues better and faster to enhance our productivity. Our new state-of-the-art distribution center in Galloway, Tennessee that opened in fiscal '24 is a great example of that. We did all this while still preserving the company's strong foundation, balance sheet, and long-term investments that we believe will deliver a bright future for all Helen of Troy stakeholders. Before turning to our fourth quarter results, I want to highlight four foundational elements of Elevate for Growth that I spoke about during October's Investor Day. These four elements excite me and give me confidence that we will emerge in a stronger position, even as we navigate an environment where we expect consumers will continue to face tough choices when it comes to discretionary spending. First, we have a diversified and well-recognized family of trusted brands with an enviable reputation as a leader across multiple categories and geographies. Our brands continue to be highly rated by consumers and receive awards and recognition from prestigious periodicals and industry organizations, such as consumer reports, Wired, Red Dot, Good Housekeeping, Beauty Publications, Food Network, and Forbes. We believe our strong brands have many opportunities to stretch into attractive adjacent spaces to further excite existing consumers and attract new ones. We identified new opportunities to expand distribution of our brands into incremental channels and customers, and those efforts paid off in fiscal '24 as we surpass the internal goals we set for ourselves. For example, at one of our key mass customers, we secured higher than expected incremental distribution of our OXO outdoor grilling line and key Revlon hair appliances. We expect to further benefit from a full fiscal year of this new distribution in addition to even more opportunities in fiscal '25. Second, we are generating fuel from Project Pegasus to incrementally invest in growth opportunities and capabilities. This will enable us to strategically invest in our brands with precision marketing and further product and commercial innovation. Third, we are advantageously positioned to fully leverage our operational and organizational scale and assets. I am delighted that our team is embracing our new global operating model to enable greater focus and centralized expertise. I am also excited to fully leverage our new state-of-the-art Tennessee distribution center to bring significant new scale and service capabilities that will set us up for years to come. Finally, and most importantly, I'm energized as I continue partnering with our talented and exceptional associates to further build on our strong culture. I am proud of our ability to attract, develop and retain a diverse team. I believe our culture is a competitive advantage that delivers benefits to all our stakeholders by bringing new perspectives, experiences and expertise resulting in great brands that elevate consumers lives with thoughtful and effective solutions. Turning now to fourth quarter business results. Consolidated net sales increased 1% as we benefited from growth in online, international, club channel sales and Home & Outdoor and prestige hair care. These factors were partially offset by declines in air purifiers, fans and heaters driven by our SKU rationalization efforts and softer consumer demand and a decline in humidification reflecting cough/cold/flu illness below the prior year and pre-COVID historical averages. Adjusted diluted EPS was $2.45 or a 21.9% increase over the same period last year and also slightly ahead of our expectations. Overall macro trends in the quarter reflected a consumer who remained cautious with their money and increasingly prioritized their discretionary spending on travel and other entertainment experiences over tangible goods. As we move into fiscal '25 we are seeing these trends intensify. Turning now to our segments. Home & Outdoor net sales increased 5.4% over the prior year period due to growth in the home category, insulated beverage ware, packs and travel and international. OXO remains the number one branded line in the kitchen utensils and canister food storage categories and gain share in kitchen utensils over the last 12 month period. The brand achieved strong results driven by distribution gains in the mass channel, the timing of club promotional programs as well as strength and new distribution in grocery. International was also a highlight in the quarter. Seeing win we're the shopper shop is one of our elevate for growth strategic choices. I'm pleased to share that our NARMO and Home & Outdoor teams have collaborated to secure exciting OXO distribution wins. At Walmart our OXO soft work kitchen gadgets have expanded. We added our grilling line and we are pleased to gain additional placement for OXO in other key categories later in fiscal '25. This is notable as 90% of the U.S. population lives within 10 miles of a Walmart store. Hydro Flask performed well online driven by continued positive reception to our new travel tumbler, seasonal colors and promotion as well as post-holiday replenishment. We are excited about where we are heading on this key brand. Being consumer obsessed with Hydro Flask means launching on trend color, design, style, customization and personalization options. In addition, we need to offer different container and cap configurations to meet the needs of various consumer use occasions, whether in the car, at the gym, in the park, around the house or at school. We are also evolving our marketing content and targeting with support of our new marketing center of excellence, allowing us to better connect with our Hydro Flask consumer with the right message in the right place at the right time. You'll see us expand on these concepts with new product offerings such as the new sugar crush limited edition available in bottles and travel tumblers featuring a beautiful waterfall of pastel colors and the new insulated shaker bottle designed with an internal whisk ball perfect for mixing a smoothie or protein shake. You will also see us further expand distribution of Hydro Flask in fiscal '25. Osprey sales should strengthen internationally with growth in EMEA and APAC on strong demand for travel pack. In North America, we made further inroads in key sporting goods retailers. For fiscal '24, overall U.S. brand share strengthened for luggage and we extended our number one position in technical pack. 2024 marks Osprey's 50 year anniversary and we were honored to be recognized in outside magazine. Osprey's focus remains on making the world's best past suited for a wide range of activities featuring our unique and superior design craftsmanship and commitment to sustainability all backed by our almighty guarantee. Our new collection continues to build on the brand's strengths and heritage including new designs for different occasions like biking, day packs and inclusive sizes so everyone can experience the outdoors with the very best gear. Perfect examples are three new additions to Osprey's extended fit line of packs which became available this spring and are already garnering positive consumer response on social media. Osprey's Farpoint 55 travel pack has also been a hit achieving 4.6 stars in Amazon out of over 1300 reviews. We believe Osprey has a bright future ahead building on its strengths continuing to extend into new adjacencies and leveraging the Helen of Troy operational and organizational scale. Switching gears now to our Beauty & Wellness segment, net sales declined 2.5% primarily driven by air purifiers fans and heaters reflecting softer consumer demand and our SKU rationalization efforts. We also saw a decline in humidification reflecting a cumulative cough/cold/flu season illness instance below the prior year and pre-COVID historical averages. These factors were partially offset by growth in hair appliances and thermometry which helped drive overall international sales and growth and prestige hair care. We also benefited from an incremental seven weeks of Curlsmith sales compared to the prior period as we acquired Curlsmith in April 2022. In Beauty, online sales for our volumizers strengthened in the quarter and we also benefited from incremental doors and distribution in the mass channel across our hair tool portfolio. Drybar and Curlsmith Prestige continued their momentum driven by their innovation pipeline and marketing support. As one example, Drybar hot roller club rollers arrived at our key retailers in early February and quickly became a consumer sought after innovation making it our best selling tool in those retailers within weeks. In Wellness, cough/cold/flu season was below the prior year and pre-COVID historical average for both our quarter and the fiscal year. This impacted sales of our products designed to help relieve cough/cold and congestion symptoms such as humidifiers, inhalants and related consumables. As mentioned during our January call, we saw a softer start to the season. As the quarter progressed influenza like illnesses increased some and retailers were able to meet this consumer demand with their existing inventory. Therefore we have not seen incremental replenishment orders so far in Q1 of fiscal '25. International was a stand-up in the quarter posting double digit growth as we benefited from more focused strategic choices on must win brands and markets, strengthen distribution and distributor partnerships and implemented a more integrated organizational structure of our EMEA team. Growth was driven by performance in EMEA with strong demand for both Braun and Revlon. Hydro Flask benefited from our new strategic outdoor sports lifestyle and travel initiatives in Europe while leveraging Osprey's European distribution footprint to accelerate growth. We will continue to prioritize international growth leveraging the must win brand and market choices selected and elevate for growth. Looking ahead, as we face what we believe will be a tough environment of increasingly soft consumer discretionary spending I'm confident that our strategic plan and efforts position us to achieve our fiscal '25 objectives which Brian will take you through shortly. In the current business environment we believe it is imperative that we remain agile, invest incrementally to further strengthen our brand, leverage our organizational structure and scale and control our controllables. Elevate for Growth and Project Pegasus are about leveraging our organization to unleash its full potential and ensuring that the framework and our associates are fully equipped to keep up with the pace of change. Just last month I was delighted to attend our new unified NARMO annual sales meeting. The enthusiasm and power of this event was inspiring. You could feel the optimism, teamwork, and focus towards elevating our brands to deliver our growth goals. Globally we have an outstanding worldwide organization that is motivated by our purpose and values and excited for our future. Our purpose and values set a high bar and this will remain the most important element of Helen of Troy. Elevating lives and moments that matter everywhere, every day is something that matters to all our stakeholders and importantly can stand the test of time. I am excited and feel incredibly fortunate to have an exceptional team of determined associates whose dedication and passion will help further elevate our company in this next era. I am confident that the best is yet to come. Before turning the call over to Brian, I would also like to let the investment community know that at the end of May, Jack Jancin, Senior Vice President of Corporate Business Development, will be retiring after 40-years in the consumer products industry, 20 of them at Helen of Troy. Many of you know Jack from the various events and meetings over the past 10-years. He has been instrumental to increasing Helen of Troy's visibility within the financial community and leading our M&A activities. We are so grateful for his many years of service and contributions and would like to extend our warmest congratulations and best wishes for his future endeavors. I would also like to welcome [indiscernible], our new Senior Vice President, Business Development and Investor Relations who joined us on April 1. She brings a wealth of experience and fresh perspective to our team. Many of you also know Anne Rakunas, our Director of External Communications and Investor Relations who will remain the main point of contact for all investor inquiries. Now I will pass the call over to Brian.

Thank you, Noel. I'm pleased to report fourth quarter results that again exceeded our expectations. We delivered net sales and adjusted EPS ahead of our outlook. We expanded gross profit and adjusted EBITDA margins. And our business continued to generate strong pre-cash flow. As Noel mentioned, fourth quarter consolidated net sales increased 1% despite unfavorable impacts from SKU rationalization and the bankruptcy of Bed, Bath and Beyond. Driven by growth from OXO, Hydro Flask, Osprey, Drybar, Braun, Revlon and Curlsmith. Growth was partially offset by declines in Honeywell, Vicks, PUR and Hot Tools. Growth profit margin improved 570 basis points to 49% compared to 43.3% in the same period last year, just slightly above our expectations for the quarter. Year-over-year improvement was due to lower inbound freight and commodity costs, a decrease in inventory reserve expense, lower trade discount promotional program expense, and a more favorable product mix within Beauty & Wellness, including the benefits of SKU rationalization. These factors were partially offset by a less favorable customer and product mix within Home & Outdoor. GAAP operating margin for the quarter was 13.5% compared to 11.1% in the same period last year. On an adjusted basis, operating margin increased 320 basis points to 17%. The increase was driven by the gross profit improvement I just referred to, partially offset by increased marketing investment, higher annual incentive compensation expense, and higher expense associated with the ramp up of our Tennessee distribution facility. On a segment basis, Home & Outdoor adjusted operating margin increased 160 basis points to 18.7%, driven by lower commodity and inbound freight costs, lower trade discount promotional program expense, and a decrease in inventory reserve expense. These factors were partially offset by higher expense associated with the ramp up of our Tennessee distribution facility, an increase in annual incentive compensation expense, and a less favorable customer and product mix. Adjusted operating margin for Beauty & Wellness increased 440 basis points to 15.6%, driven by lower inbound freight, a decrease in inventory reserve expense, lower trade discount promotional program expense, decreased distribution expense, and a more favorable product mix, including the benefits of SKU rationalization. These factors were partially offset by an increase in marketing investment, and a higher annual incentive compensation expense. Net income was $42.7 million or $1.79 per diluted share. Non-GAAP adjusted diluted EPS grew 21.9% to $2.45 per share, primarily due to higher adjusted operating income in both segments, lower interest expense, higher interest income, and lower shares outstanding, partially offset by an increase in the adjusted effective tax rate. We continued to generate strong cash flow with cash from operations of $73.6 million in the fourth quarter, in line with our expectations. We ended the quarter with total debt of $666 million, a decrease of $269 million compared to fiscal '23. Our net leverage ratio was 2 times compared to 2.8 times at the same time last year. Stepping back to look at the full fiscal year, I'm pleased with the consistency of our financial performance and our ability to meet or exceed our full year outlook commitments, including net sales, adjusted EBITDA margins, interest expense, adjusted EPS, free cash flow, and ending net leverage ratio. I'm also pleased with the improved performance in year-over-year sales and other key measures throughout the course of the year. While full year consolidated sales declined 3.3%, this included the year-over-year declines from SKU rationalization and the Bed, Bath & Beyond bankruptcy of approximately 3.4% combined and the slightly ahead of our full year outlook. We improved gross margin by 390 basis points driven by lower inbound freight, SKU rationalization, lower inventory reserve expense, and the favorable comparative impact of EPA compliance costs incurred in the prior year. We improved adjusted EBITDA margin by 100 basis points despite structural headwinds and lower operating leverage, even as we increased our marketing investment $10 million beyond our original target. We generated free cash flow of $269.4 million reaching the high end of our outlook which helped us beat our original interest expense expectations, make $50 million a share repurchase not included in our original outlook, and still end the year with leverage in line with expectations. Finally, we made progress in our effort to optimize our brand portfolio through a potential divestiture and are actively engaged in a process that we hoped to complete in the second quarter of fiscal '25. The likelihood, timing, and potential impact of the divestiture cannot be reasonably estimated at this time and therefore is not included in our outlook. We will make an announcement when we have more to share and if the divestiture does occur, we will update our outlook at that time. Fiscal '25 begins our elevate for growth era which provides our strategic roadmap through fiscal '30. We intend to further leverage our operational scale and assets, including our state-of-the-art Tennessee distribution center, improve the go-to-market structure with the North America RMO and our expanded shared service capabilities to grow organic sales, further expand margins, and deploy capital through strategic acquisitions, share repurchases, and capital structure management. Turning to our full year outlook for fiscal '25, we have factored in a number of variables, including our view of lingering inflation, interest rates that are higher for longer, lower growth expectations from certain retailers, a softer consumer that is further prioritizing their more limited discretionary spend on experiences and services, and a cough/cold/flu season in line with pre-COVID historical averages. In terms of retail inventory, while we see pockets of higher leaks on hand in some of our categories, we believe retail inventory is healthy overall and we generally expect sell-in to closely match sell-through. With the fuel from Pegasus, the operational improvements we've made and our elevate for growth strategies, we believe we are well positioned to navigate what we expect will be a softer consumer spending environment. We expect net sales between $1.965 billion and $2.025 billion in fiscal '25, which implies a decline of 2% to growth of 1%. In terms of our net sales outlook by segment, we expect Home & Outdoor growth of 1% to 4% and the Beauty & Wellness decline of 4.5% to 1.5% which includes a year-over-year headwind of approximately 1% related to the expiration of an out-licensed relationship of one of our wellness brands. We expect GAAP diluted EPS of $6.68 to $7.45 for the full year and non-GAAP adjusted diluted EPS in the range of $8.70 to $9.20 which implies an adjusted diluted EPS decline of 2.4% to growth of 3.3%. We expect adjusted EBITDA margins to decline roughly 40 basis points as benefits from Pegasus and other gross profit improvements are reinvested for growth. We see the current softness in the environment as an opportunity to further invest in the health of our brands and grow our market share. As such, our outlook reflects a year-over-year increase in growth investment spending of roughly 100 basis points on top of an increase of 100 basis points in fiscal '24. Our adjusted EBITDA outlook also includes a year-over-year headwind of approximately 50 basis points from the exploration of the out-licensed relationship I referred to earlier and some expected margin compression from enterprise technology initiatives included in the Elevate for Growth Strategic Plan that are beginning in fiscal '25. In terms of Project Pegasus, we have updated our expectations to reflect the choices we are making to maximize the benefits of these initiatives while minimizing the transitional risk. We are maintaining the total estimated savings of $75 million to $85 million over the duration of the plan but have revised the cadence of estimated savings recognition now extending into fiscal '27. After achieving our fiscal '24 Pegasus targets, we now expect the savings in fiscal '25 to be approximately 35% of the total and the balance of savings to fall across fiscal '26 and '27. We are also lowering the total estimated restructuring charges by $10 million. We now expect one-time pre-tax restructuring charges for approximately $50 million to $55 million over the duration of the plan compared to our previous estimate of $60 million to $65 million. We continue to expect restructuring charges to be completed during fiscal '25. We expect a GAAP effective tax rate range of 19% to 21% for the full fiscal year and a non-GAAP adjusted tax rate range of 17.2% to 18.3%. We expect capital and tangible asset expenditures of between $30 million and $35 million for fiscal '25, which includes remaining equipment technology of approximately $8 million associated with our New Tennessee distribution facility and initial capital expenditures related to the first phase of Enterprise Technology initiatives I referred to earlier. We expect free cash flow in a range of $255 million to $275 million and adjusted EBITDA of $324 million to $331 million. Net leverage ratio as defined in our credit agreement is expected to be between 1.25 times and 1 times by the end of fiscal '25. In terms of quarterly cadence of sales, we expect a decline of approximately 7% to 5% in the first quarter of fiscal '25 in a range of flat to 3% growth for each of the remaining quarters. We expect a slight decline in adjusted EPS for the first half of fiscal '25 with a decline of approximately 15% to 20% in the first quarter and nearly offsetting growth in the second quarter. We expect adjusted EPS in the range of flat to 5% growth in the second half of fiscal '25. In summary, we're pleased to provide an outlook with both net sales and adjusted EPS growth at the high end of our range, further implied growth margin expansion, a significant increase in growth investment, strong free cash flow, further balance sheet productivity and capital deployment optionality. Our free cash flow outlook at the high end of the range implies a forward free cash flow yield of 11.6% using Monday's market capitalization. Our adjusted EBITDA outlook at the high end of the range implies an EV to forward EBITDA multiple of 9.1 times using Monday's market capitalization and our outstanding debt at the end of fiscal '24. We believe these are compelling metrics with strong underlying business fundamentals that compare favorably with our peer set and the market overall. And finally, I want to close by recognizing and congratulating Jack Jancin on his retirement after a distinguished career. I've been fortunate to work with Jack for almost 20-years now and have long admired his wisdom, leadership, charm and sense of humor. His contributions to Helen of Troy are immeasurable and he will be missed. But I'm happy for him and all the boards he will soon meet. Jack, I can only hope that you're better at retirement than I was. And with that, I'll turn it back to the operator for questions.

Thank you. [Operator Instructions] Thank you. Our first question comes from line of Peter Grom with UBS. Please proceed with your questions.

Thanks operator. Good morning everyone. Maybe just to start, Jack, thank you so much for all the help over the years. We wish you nothing, but the best of luck moving forward. Maybe just turning to the questions here. And I guess I have a couple of questions about the 25 outlaws just in the context of what was outlined at the Investor Day. And I totally understand that this is never supposed to be, or never considered to be guidance. But just going back to that slide that shows the tailwinds, or the buildings lost or growth. There was a lot of those really expected to break your way this year. So can you maybe just help us understand what's really changed versus October? And then just maybe a follow-up to that. Just kind of we'd love some perspective on the degree of comfort you have at the guidance at this point, right. It's not lost on many of those listening that, oftentimes with the management transition sometimes the outlook can embed a bit more flexibility. So just in the context of the phasing that seems to imply an improvement following a challenging 1Q. Can you maybe just discuss your comfort, or visibility that's outlook is achievable just to kind of give you the operating backdrop? Thanks.

Okay. Peter, it's Brian and I'm going to start and Noel can build. I'd say look, let's take this in sequence and start with Q1. And then we could talk about the whole year and the factors that are there the whole year. And then I'll go into what gives us confidence that we can hit that outlook. With respect to Q1, we're now, we now know how the cough, cold and flu season played out. We did not know that when we had Investor Day in October. And based on the way it's played out, we are expecting reduced replenishment orders in Q1. And that's what we've seen so far, versus the same period last year, when there was a stronger season and it drove solid replenishment in Q1 of last year. We've also seen pockets of higher inventory in the outdoor channel both domestically and internationally. And so, it will take a period of time to work through that inventory. And then we have seen some speed bumps and shipments, during Q1 resulting from the system integration of Curlsmith and a certain other DTC platform enhancements. But we believe we're largely past those speed bumps now. And then some additional factors that impact, the full year again a lot of these we were not aware of in October. We've shared another manufacturers, and retailers have also cited an increasingly soft consumer environment. That was really a bit of a change, versus what we saw in October. And hopefully, you've also seen lower growth expectations from certain retailers like ULTA, Amazon, Target, which have all come out with recent reports. We also had an exploration of an out license relationship on one of our brands that, we licensed the trademark to, in exchange for royalty income. And that has a meaningful impact on revenue and earnings. It effectively dropped straight to the bottom line with respect to earnings. And again that is not something we had complete visibility on when we gave Investor Day long-term guidance. I'm glad you pointed out it was long-term and not fiscal '25 long-term guidance in October. And then lastly, what gives us confidence in improvement in kind of the last three quarters of the year. We know we have incremental distribution that will layer in throughout the year, and will actually build. So it's a building - kind of building layers of distribution throughout the year. You know in terms of absolute marketing spend Q1, is our lowest level of spend. And so, we anticipate the benefit of that incremental investment, will accelerate over the course of the year. So, there will be more spend over the course of the year, which will drive we believe more volume. We're doing repositioning on key brands like Hydro Flask and Drybar, but that is still early on, and it will take time to build momentum behind those efforts. And then, we have new product innovation and refreshes weighted two quarters two through four. So those are layer in later in the quarter. And then again we saw speed bumps and shipments in Q1, as result of system work that we were doing that we don't expect in the later quarters. So that's kind of the high level summary of our entire fiscal '25 outlook with a little bit of comparison to, you know what we saw in October versus what we're seeing now.

That's really awesome. I'll pass it on.

Oh sorry go ahead, Noel.

No, I was just going to say, I think Brian covered it well. I think you know I feel especially in the last few levers that Brian pointed out, on why better the rest of the year. I feel a good degree of confidence on the incremental distribution in particular. Those are areas where, you have ongoing customer retail or conversations. You look at their plan of grand timings et cetera. So you know things can change as the year goes along, but visibility to those things are solid in my view.

Great. Thank you so much. I'll pass it on.

Thank you.

Our next question comes from line of Rupesh Parikh with Oppenheimer. Please proceed with your question.

Good morning. Thanks for taking my question. And also Jack congrats and best wishes on retirement. So just starting out with the - I guess the competitive promotional backdrop. We just love to hear the ways you guys are seeing on the competitive promotional front, and then your expectations this year just on the promotional backdrop?

Yes, I could start again. I mean Q4, we actually had less promotional expense, but going into next year with the software consumer. Yes, I think it's reasonable to expect that you could have pressure - in terms of promotion, and how will the competitive dynamic play out. I mean, I think at this point in time, we feel comfortable with how we're positioned, and we've made some adjustments honestly to position ourselves well. And don't see a significant headwind, but again that's one where the consumer, or the customer competitive dynamics could change during the year, and we'll have to adjust. I don't know if you want to add.

Yes, I don't major shifts right now. We continue to swatch. We continue to pay attention to what's out there as Brian mentioned. We made a few select adjustments on some of our Hydro Flask items, as we looked across our assortment and some of the competitive assortment, and found a few places that we thought we could be a bit sharper. But I don't see major other changes and less dynamics, kind of evolve over the course of the year.

And then my - I guess my follow-up question, this year this past fiscal year very strong gross margin improvement. Is there any color, you can just share in terms of gross margin expectations, and the key puts into takes we should be thinking about the gross margin line?

Yes, I can give you some color where we're trying not to guide, to specific gross profit guidance for fiscal '25, but implied in our outlook is gross margin expansion. And you can you can understand the extent of it, if you consider that we you know - we have a drag of 100 basis points related to, we called out in the earnings release how we have the drag of 100 basis points on increased marketing investment, or growth investment. And then we have a 50 basis point compression coming from the loss of the out license relationship. And then overall our adjusted EBITDA margin, is contracting only 40 basis points. So you at least, we're having at least expansion of 110 basis points implied through those comments. We're - again we're not doing specifics with respect to gross margin, but hopefully you get some idea of the dimensionality of the gross margin expansion for fiscal '25.

Great, thank you. I'll pass it on.

Our next question comes from Robert Labick with CJS Securities. Please proceed with your question.

Hi, this is Justin on for Robert. So, going back to the Analyst Day one of the messages, or key messages in our view, was your ability to ratchet investment spending up and down, depending on the macro environment and other factors, to achieve a steady bottom line growth. So given the revenue outlook that you've laid out this morning, why do you think fiscal '25 is the right time to ramp up growth investment spending by 100 bps in addition to the incremental spend, included in your elevate for growth plans?

Yes, I think - as we looked at our brands and the need to be top of mind aware, you know build top of mind awareness, be available where our key shoppers are shopping. We needed to put some investment and now - in my view now is the time. And these kind of prop consumer environments. These are the moments when you need to really invest in the strength of your brand. And so, the 100 base point investment is - comes out of the fuel from Project Pegasus, and we will use the portfolio - the new portfolio strategy that we laid out. We'll lean into those brands and invest in the areas that, we think the ROI is very good. We'll adjust throughout the year, based on how the return on investment is playing out. How the responsiveness of the brands are playing out. But we believe, this is the right time to invest in the strength and the health of our brand.

Yes. The other thing I would add is, there are less Pegasus savings expected for fiscal '25 that factor into kind of the algorithm, and with less savings there is more compression. But I agree with Noel now is the right time to do it. So, we get a little leakage in terms of EPS, but again the right thing to do. And we have no concerns about our ability to ultimately achieve the Pegasus savings will just come a little bit later. And it's really tied to a piece of technology development that is taking a little bit longer, to get that developed and in place, but we're comfortable that we're going to get there.

I appreciate the additional color there. And then, one more follow-up your guidance calls for healthy cash flow generation and your target leverage of one and a quarter to one at the end of the year. I assume that's exclusive of any potential buybacks, and then you know along those lines could talk about your willingness to be opportunistic, and aggressive repurchasing shares you know particularly in light of this modest leverage and possible share price weakness this morning?

Yes, that's correct that our outlook does not include the impact of any share repurchase, but I would say our mindset is that we're open to buy with respect to capital deployment, which would include share repurchase. And we're looking at acquisitions as well. So, I think we are in a position balance sheet wise, where we're interested in deploying capital.

I appreciate you taking the questions. Thank you.

Our next question comes from line of Linda Bolton Weiser with D.A. Davidson. Please proceed with your question.

Yes, hi. So can you talk about just the beauty area, I think you said that Hot Tools was down in FY '24, and yet you had the consumable launch that would have helped that brand. So can you talk about that a little bit more, and is the consumable now ending the exclusivity at all top so will you be expanding it. And then I thought you said beauty was up in the fourth quarter, so kind of what were the roots of the beauty being up in the fourth quarter, if I caught that correctly? Thank you.

Hi Linda, it's Brian I want to start, because I want to clarify we called out Hot Tools being down in the quarter, but it was up for the full fiscal year. So, I just want to get that clear. Then, if you want.

Yes, and I think and driven by as you pointed out Linda the launch of the Liquids in addition to the tools drove Hot Tools up for the year. And you know I think as - in terms of that line it is, it does continue to be and also we did you know continue to work with them to expand some of the end tasks that are on the Hot Tools Liquids. And we are now looking to expand that further into other retail into other retail customers. In terms of broader hair tools, I think I maintain the consumer centric innovation across our portfolio brand. We have Revlon, Hot Tools, Drybar and now Curlsmith. So, we really hit that good Bed or Bath, which is a great position to be in. And in a world of kind of the current consumer environment. We can meet the full range of consumer needs Revlon offers consumers that great value. Our Revlon Volumizer still the number one hot air - styling tool in the market. It's a price point that's much more accessible, plus we have a whole range of other appliances that have done well for us in mass retailers in particular. And then on the higher end I mentioned in my remark, one of our newest innovations that drive our ROLLER CLUB the hot rollers, have done well for us. We just launched them in February, and it's already become our top selling tool, and some of the beauty retailers. So it's a good example of how you know when you meet the range of needs, with the range of brands that you have, you can you can cover the market and start to get the right momentum going.

Thanks. And then, in terms of you referred to some speed bumps that affected shipping in the fiscal first quarter. It sounds like they were very specific things, is there any way to quantify the speed bump impact on revenue in the first quarter of '25 and then is any of that revenue just delayed revenue, or is it completely lost, due to the speed bumps that you had in shipments in the first quarter?

Yes. Linda I mean we still work through system things. I don't think it would make a lot of sense, to try and be so precise in terms of quantification. But yes, we were specific and it was isolated to you know two or three areas where. In Curlsmith, we are integrating that business into our ERP system, and are effectively done with that integration. We're working out the kinks right now. But as we went through that, we did get some speed bumps in terms of shipments. And I would say, at this point in time our view is that we're probably won't recapture those shipments. So, I would say they retailers will buyback what they need, but - they're not going to over buy and kind of recoup what - we weren't able to ship in the first quarter. And then in the DTC, you probably are aware of the brands where we have the highest DTC presence. We upgraded the platform in one of our businesses and again working through things there and likely won't recoup lost volume there. And then, the other business was really just instituting changes and enhancements, it wasn't really a platform upgrade, but as we continue and evolve and put new features in - constant maintenance and attention is required and we saw some declines there. So hopefully that gives you what you need it's combination of probably, it goes across three different brands and - not something that we expect to recoup, but we expect you know we expect robust volume from our DTC platforms going forward that's why we do the enhancements. And so, maybe there's a little bit of lift later, because we have those in place now, but not a recruitment of the shipments we lost specifically in the first quarter.

Thanks. And then finally, in terms of the - you seem very excited about the distribution expansions that you are getting in FY '25. Can you quantify how much of the revenue growth you're guiding to, is pipeline fill. And then, how do you comp that in FY '26 I know this is looking at a long time, but if the pipeline fill is a significant contributor do you expect to get more shelf space days going out, and do you have visibility on that? Thanks.

Yes, I would say going after as you probably remember from the industry going after white space distribution opportunities, has been a key priority as we form the North American RMO. We were pleased with some progress that we made in '24. We kind of set an internal goal for ourselves, as this was a new organization and exceeded that, some of that was some of the comments that I made in the remarks around OXO software gadgets and OXO grilling and Walmart are two nice examples there. So, we got some in '24. We've got a positive outlook for some additional opportunities in fiscal '25. And I think it'll be an ongoing area that we continue to go after year in and year out that's part of the beauty of the North American RMO where that becomes their focus. If it's not getting a whole new brand into distribution, sometimes it's just getting the right assortment in there you're looking at a skews, b skews. And really making sure, you've got your highest velocity high turning skews in the best retailers at the best time. So, I don't think it, we get it and then it all goes away I think in my experience that's an ongoing activity that the North American RMO will be going after year in and year out.

And I agree with everything Noel said, but I think it does when it does, layer in the first time like in the second third and fourth quarters, will cause some lumpiness, compared to the first quarter, which is part of the reason why we have the cadence that we do with respect to sales and fiscal '25. But what we've seen with our new distribution that we have in fiscal '24, is strong replenishment strong results. So, we don't see it as a kind of you fill it in, and then don't get the repeat business we've been able to - in some cases expand the business where we've added these layers of distribution. So, we think it's a good sustainable long-term growth strategy. We plan to continue to use, and then just on your last point - I think it'd be premature to talk about the visibility and the drivers of this in fiscal year '26. We're really not to the point, where we do that now obviously if we get the sell through. We get the benefits of everything we do in fiscal '25, but I think it's premature to talk about '26.

Okay. And then, my final question is on M&A you're talking about looking at a potential acquisition, it just seems like with Curlsmith integration issues, and all the moving parts going on. And other integration, or other execution issues. It just seems not wise to me, to be adding more on to the plate with another acquisition. And I think before you had said you might actually do an acquisition before the divestiture, is that still the case. Is it and are you seeing the M&A valuation so attractive that that's what's making you - seem like very agreeable to doing another deal? Thanks.

Yes. The first let me say M&A processes evolve. And so, you can have a point of view at one period of time that, completely changes the next period of time. And we're not going to lock ourselves into an acquisition that doesn't make sense, just because we talked about being in the market for acquisitions. So yes, we did talk about one before, things change and we have to adjust. Yes, I think valuations are at a good point. We see this as an opportunity, to buy attractive assets of reasonable valuations. And so, we think it makes sense. And then with respect to Curlsmith we called it out, because it had an impact on shipments. But - I think you have to have the perspective of when people do systems integrations there can often be very big problems these were not very big problems. Just these were minor hiccups in the ability to ship, and it's you know very complicated integrations that have to occur. This I actually would view as a success, it has a slight impact on Q1, but our integration of Curlsmith was largely successful. And so, I would not see it as a reason, to not do further acquisition.

Okay. Thank you very much. I appreciate it.

Our next question comes from a line of Olivia Tong with Raymond James. Please proceed with your questions.

Great, thank you. And congrats Jack on your retirement best of luck with everything, and great working with you.

Thank you.

I want to focus my questions more on the - your Q2 to Q4 expectations. I'm hoping you can provide additional color on the building blocks, to drive the improvement in revenue, because we have to take you all the debate around consumer slowdown. And seeing increasing signs of that. So what is - right what would be driving retailers, to increase your distribution of the macros, are not in favor. And let me leave it there, and then I'll ask the next question?

Yes, I think the drivers that we see the first and you just touched on Olivia, is the further incremental distribution later in the year. And I think in the case of some of the opportunities we have. We have some really strong brands with strong consumer appeal that aren't in - some retailers. And they're excited and anxious to get our brands on their shelves and in distribution. And so, we feel good about it. I think that the one that we shared is OXO Soft Works at Walmart. I mean that's one where Walmart's really pleased to have I think the brand on the shelf it's a leading brand. And one that their shoppers were looking for. So I feel confident and very good about those opportunities. The other one, we talked about, is the incremental marketing investment. We talked about bringing - building kind of the first ever marketing center of excellence within Helen of Troy that team is now partnering with our business unit brand teams, to upgrade our creative upgrade our full funnel experience plans and investing incrementally behind it. So that we can drive even more interest awareness, desire for our brand. And then I think the repositioning on a few of the key brands is also important to point out. If you look at Hydro Flask, and I talked quite a bit about that in in a prepared remark, some of the new items like the show crush that just came out getting a lot of positive traction for new innovation like that that's very appealing and investing behind that, so that we get the word out of some of these new items that that are very desirable. The Drybar hot rollers is another example of that. So when you put those innovations out you've got to spend the marketing behind them to drive that awareness, the desire that the purchase of those items. So those are - the areas that were we're excited about in the back half. They are a little bit more quarter two through for weighted than quarter one - as Brian and I shared. And those are the things that give me strong confidence for us in that year to go.

Kind of thanks. Maybe I can ask a little bit about any divergence you're seeing between more between performing the more premium end of your portfolio versus the mid-price specifically more around beauty appliances obviously we've heard some commentary out of out of the key retailer are you seeing similar - a similar divergence in terms of performance, or is your outlook more reflective of what they're saying and expectations that that's going to happen even if you haven't seen it so far?

Yes, what I'm saying hair tools is again, what I really like about our portfolio, is that we cover the range. We have that Good/Better/Best Revlon, Hot Tools, Drybar encroachment at the high end. So wherever the consumer is we have an opportunity to be there with the right kind of assortment price point retailer channel et cetera to meet those needs. So I would say we had good performance at sort of the Revlon entry point and with some new broaden distribution in math kind of those opening price point hairdryers, straighteners. There's a perfect match essential hairdryer for example at more of a $25 price point that's doing well the Dry Max hairdryer at a below $40 price point. Those sorts of tools that that are resonating well when the consumers pinched. But by the thing to again as I mentioned, we're also seeing at the high end really strong uptake on the Drybar hot rollers that are a higher price point. So there's pockets of the market doing well, if the innovation is appealing and the innovation draws them to it. I would say prestige liquids continues to grow. We continue to see that as a strong category as we've heard with some of the retailers it's flowing. A little bit versus where it was the most recent two months, but that's an area that we continue to feel strongly about it's an area that we continue to launch, new innovation whether it's on Curlsmith with a new volume line, new items and Drybar et cetera. So I think the key here to sum it up is really, to have strong innovation across all of the different price points, and all of the different channels to meet the various consumers where they are that's going to be key in this in this environment.

Understood. Thanks so much.

Our next question comes from line of Susan Anderson with Canaccord Genuity. Please proceed with your question.

Hi, good morning. And thanks for taking my question. And honest in my congrats to Jack as well and your retirement you're definitely be missed, it was great working with you while you're at Helen of Troy. I guess maybe just to start out on just the outdoor category, I think you mentioned some pockets of higher retail inventory there are you seeing that also in some other categories And then in outdoor as just curious is the weakness, just across the packs are you seeing weakness and maybe higher inventory in other areas as well.

Thanks Susan. Yes, I would say retailer inventory is always a function of what what's happening from a consumer standpoint. So you can see different adjustments that they make based on how the consumers purchasing, but the one we called out was an outdoor. And as we looked across both domestically and internationally, we saw a little bit more elevated inventory not necessarily in our areas per se. But kind of across their entire store inventory which then reduces their open to buy and in our areas and in other areas that they're kind of managing their total inventory levels tech path for us is on Osprey. Obviously kind of the core of the business, we have a very strong number one position. We extended that number one position over the last year, but the category has slowed versus where it was. We do see growth in some of the other adjacent categories that Osprey has gone into. So some of the areas like duffels and travel packs and lifestyle packs et cetera show a little bit more growth. But we called out kind of the pocket of inventory in outdoor, because we were seeing it both domestically and internationally.

Got it. Okay. Great thanks. And then, I guess maybe just talk about OXO a little bit it's obviously done very well with a lot of new innovation. I'm curious to hear about what you have coming out this year. And then also just the timeline of the Walmart rollout in stores like how should we expect that to flow throughout the year?

Yes OXO remains number one in kitchen utensils, canister food storage, some really nice adjacent categories like in coffee kind of our baby and toddler feeding area. Lots of new products constantly coming out on OXO it's one of the hallmarks of the brand. In terms of Walmart in particular, the kitchen utensil set has already happened that's, already in market. So you can you can see that as this growing it kind of the expansion happened right towards the end of our fiscal '24. So that's out in stores now and as I mentioned in my remarks there's some other OXO categories that we anticipate expanding over the course of '25.

Okay. Great. And then just one last question so on Hydro Flask so it sounds like obviously tumblers continue to do well I'm curious just if you see any other I guess bottle formats coming out for fiscal '25, or if you expect kind of the tumblers to be the hot format and I guess maybe more of the newness coming from color ways, or types of accessories to go with those?

Yes, I would say on Hydro Flask, tumblers do continue to be where a lot of the growth and where a lot of the energy is we think about kind of a Gen

Great, that's exciting. Thanks so much, great good luck the rest of the year.

All right, thanks so much everyone. We thank you for your interest and support and we really look forward to speaking with many of you, over the coming days and weeks. Thanks for joining us.