Church & Dwight Co. Inc (CHD) — Q4 2025 Earnings Call Transcript

Good morning, everybody. Thanks for coming today. This is the 2025 Analyst Day for Church & Dwight. We have a big crowd with us today, including the entire management team. We've got a couple of casualties due to the flu that's going around. So let's begin with the safe harbor statement. I encourage everybody to read that after class. Here's a list of the people who are going to be here today, our presenters: Shitij Chabba from SPD, Mike Read from International, Surabhi Pokhriyal our Chief Digital Officer, Stacey Ramstedt who is our CMO, and Carlos Linares who leads R&D and Innovation for the company. Alright, we have a long agenda here, but I won't read it to you; let's jump right in. I want to start by noting that 2025 marks the 35th anniversary of Church & Dwight being listed on the New York Stock Exchange. If you adjust for stock splits, the stock price has grown from just a dollar a share back in 1990 to well over a hundred dollars today. So here's a fun fact: if you invested $1,000 in Church & Dwight back in 1990 when it was first listed, it'd be worth $114,000 today. This illustrates the consistency of our company. The fellow on the lower left is Dwight Minton, who became CEO in 1969. He is a descendant of Austin Church, the founder of Church & Dwight. He's the last family member of the company to serve as CEO, having succeeded his father. I am the third non-family member to take on the CEO role, and Rick will be the fourth. Now, looking back at 2024, as you may know if you're following our story, we've experienced organic sales growth, beating our algorithm across all three businesses: U.S., International, and SPD. We have seven power brands that represent 70% of our revenue and profits, and we saw an increase in market share for 507. Our algorithm for marketing spend has been about 11% annually, and we've spent over 11% in 2024. Innovation has been a big focus for us this past year; 4% organic growth came from new product launches, which is incremental growth year-over-year. Online sales have become a standout for us compared to other CPG companies; our online sales are over 21%, translating to approximately $1.3 billion of our $6 billion in sales being ordered online. We bought HERO a couple of years ago and have expanded it, launching it in 40 countries. Our job now is to grow that brand in those markets, including in Japan where we acquired a great distributor that propelled OXICLEAN to the number one pre-wash additive in powder form in the country. You're going to hear from Shitij Chabba today about SPD, which is now a perennial grower for us. We generate a lot of cash as a company, nearly a billion dollars for 2024, and we have a lot of cash on our balance sheet, all dressed up to buy some businesses going forward. You can see from the charts I'm showing you, this gives you an idea of the consistency of our company over many years, which is really credited to the culture and management team at Church & Dwight. Many of you here are long-term holders, and I'm going to run through some familiar points. We are split about 77% domestic and 18% international. We are starting to grow the international segment faster, showing over time growth from 17% to 18%. Our seven power brands still account for 70% of our revenues and profits, and we maintain an evergreen model to drive long-term total shareholder returns (TSR). We're targeting 4% organic sales growth, with a gross margin increase of 25 to 50 basis points, and we strive to ensure our operating margins grow by 50 basis points annually, translating to 8% EPS growth.

Thank you, Matt. So, this is probably one of the last times I’m going to go through detailed financials with you. Okay, Q4 2024, we ended the year with momentum. We had 3.5% reported sales growth, which was better than our outlook of 1.5% to 2.5%. For the year, the share gains for our brands were 5.07%. This was a strong indicator of the important brands driving our company. Our organic growth came in at 4.2%, which exceeded our expectations of 2% to 3%. Our gross margin came in as we expected at 110 basis points for the full year. Our EPS was up almost 19%, demonstrating a strong finish to not only the year but also to the quarter. Our full-year stats reveal 4% net sales growth, 4.5% organic growth, 3.5% for domestic, 9% for international, and 7% for SPD. This is indeed broad-based growth across the company and divisions, and with 110 basis points of gross margin, we have returned to pre-COVID levels. Marketing spending turned out to be significant as well, with an incrementally higher spend of 11.4% as we aimed to capture this momentum into 2025. We generated $1.16 billion in cash this year and expect similar figures as we move into 2025. Free cash flow conversion is around 115%, which affords us a lot of options moving forward. Looking ahead, we are confident in our future, and I'll touch more on our strategy and how household penetration presents a huge opportunity for us in the U.S. You will hear more about THERABREATH and HERO as they add exciting prospects to our growth narrative. Similarly, we have high aspirations for the international business, which has shown an impressive growth rate. Innovation initiatives, as you will hear more about from Carlos and Stacey, are pivotal. We aim to capitalize on the e-commerce growth we have seen, which is a significant advantage.

I am so excited to be here and talk about our new products. Let’s have some fun! First, let’s review what just happened in 2024. As Matt mentioned, new products drove 50% of our incremental growth for the company. Starting with Deep Clean, when dirt and stink run deep, we want you to clean deeper, and our consumers absolutely did that in 2024. Deep Clean not only established a best year category but also drove incremental growth for the brand. Next, we have ARM & HAMMER Power Sheets, which marries ARM & HAMMER Clean with convenience and introduces a mess-free format that taps into the fastest-growing segment in laundry. Finally, I’m excited to talk about ARM & HAMMER Hardball, our technologically advanced lightweight litter, making cleaning a breeze. I love this story because there is tremendous runway with these items, so we’re definitely going to invest in growing awareness and trial to drive incremental growth in 2025. Let's look at the free and clear segment within the laundry category, which represents a huge $1.3 billion opportunity and is skyrocketing. We already have some products in this space, but we’ve identified a potential of capturing an additional $20 million in incremental opportunity. Our first new product for 2025 is ARM & HAMMER Deep Clean, targeting consumers with sensitive skin and is free from typical irritants. Next, we have ARM & HAMMER Power Sheets in a fragrance-free format, boasting 50% more cleaning than the leading value brand. Lastly, we’re introducing ARM & HAMMER Plant Power, our clumping litter that utilizes hardball technology to tackle odor control without additives, potentially driving over $30 million in revenue. We’re also going all in on VITAFUSION with new initiatives, including a new improved formula, and we're expanding our sugar-free offerings to meet the growing consumer demand. As we transition there, I’m introducing HERO’s new Mighty Patch Body patch designed for body acne, addressing a significant pain point for consumers. Lastly, BATISTE Light dry shampoo offers a lighter formula with no white residue for a pleasant experience. I’m thrilled about these launches in the first half of the year and look forward to sharing more later!

Okay. Thanks, Stacey. Yes, following that performance is a tough act! So, I'm here to discuss how we think about innovation and the transformation we've undergone at Church & Dwight. I’ve spent close to 40 years in R&D innovation, working with large companies and mid-sized businesses focusing on beauty and home products. My journey with Church & Dwight started roughly seven and a half years ago, motivated by the brands, the culture, and an invitation to innovate in a distinctly different way. We have completely transformed the innovation paradigm here, utilizing five innovation sources that work cohesively instead of in silos. One example is BATISTE Sweat Activated. Identifying common consumer needs like odor control across our brands allowed us to create integrated R&D solutions that enhance effectiveness. Our strategy successfully reduces cannibalization by tailoring innovations to expand our overall portfolio, and now over 50% of our pipeline originates from these new sources. I’m excited to highlight that our innovation portfolio is now more balanced, with a strong emphasis on transformational innovations, and the metrics of incremental net sales showcase our progress over the years. We've seen considerable growth from 1% previously to now positioning ourselves for future success.

Good afternoon! My name is Michael Read, and I lead our consumer international division and specialty products group. Let’s discuss the international growth story. Our evergreen model targets 8% organic growth per year, and we operate just under $1 billion. Our international markets makeup approximately 18% of our business, and we aim to grow that significantly as we capitalize on the left over $400 billion market potential in the CPG sector. 2024 was a stellar year with our sub-markets witnessing nearly 5% growth, while our GMG business grew an astounding 19%. We've been successful due to better service levels, consistent growth across our markets, and strong portfolio management. We've invested heavily in our acquisitions, particularly with THERABREATH acting as key drivers of growth. Moreover, we’ve rolled out HERO to over 40 countries, showcasing our ability to effectively expand our global footprint rapidly. Our robust brand portfolio allows us to travel well into these new markets; our U.S. stronghold brands have shown promising growth and acceptance in new territories, and we approach each market diligently by ensuring we have a solid understanding and strategy tailored specifically for that region. The next few years present immense opportunities as our brands continue to gain prominence across various geographies.

Hello everyone. I lead all things digital, e-commerce, media, and optimization for Church & Dwight. I’m excited to talk about our digital growth! As mentioned earlier, e-commerce constitutes 21% of our business, way ahead of many competitors in our category. We're present wherever our consumers are, especially post-COVID, e-commerce has become a significant driver in ensuring convenience for shopping. In 2024, our seven power brands achieved tremendous success online, especially ARM & HAMMER Laundry which has driven a lot of our growth. We are strategically blending content and commerce, intending to ensure our products are seamlessly available to consumers through optimized marketing channels. Utilizing AI has also become part of our strategy, ensuring our creative approaches are as effective across various platforms. We have seen incredible traction with new product launches and are carefully calibrating our strategies to ensure market effectiveness and sustained profitability as we expand our online presence.

Good afternoon, everyone. I'm Shitij, and it’s an honor to share with you the B2B arm of the company, Specialty Products Division. Our 5% evergreen growth target is certainly ambitious, but attainable. Last year, we delivered over $300 million in revenue — 60% from our animal nutrition business and 40% from specialty chemicals. SPD has three core business pillars — animal nutrition, performance products, and B2B services enhancing our growth potential significantly. Strategic decisions made over the past year, like divesting non-core assets, have positioned us towards portfolio optimization and refocused efforts on higher profitability channels. Additionally, we are expanding internationally, gaining traction in key markets across Eurasia and Latin America. We’ve launched innovative products such as CERTILLUS, a custom probiotic solution, contributing to our remarkable turnaround from negative sales growth in 2023 to positive growth in 2024 and beyond promising sustainable growth.

Thank you all. Many of you know I’ve been with the company for 18 years, and what’s remarkable about Church & Dwight is our consistency in execution. Our commitment to do what we say we’re going to do sets us apart from others. As I prepare to step away from the company in April, I can confidently say that the leadership team you see here today embodies the culture of Church & Dwight. We are moving into a phase where our competence in capital allocation becomes critical. We’re in an excellent position with a healthy balance of cash available for M&A, innovation, and ongoing brand development. This is a strong moment for Church & Dwight, and we’re grateful for the support you provide us as we progress toward future growth and success. Thank you all, and I look forward to possibly seeing many of you at CAGNY!