Helen of Troy Limited Reports Fourth Quarter Fiscal 2022 Results

Consolidated Net Sales Growth of 14.3%; Core Net Sales Growth of 17.2%

GAAP Diluted EPS of $1.64; Core Adjusted Diluted EPS Growth of 76.8%

Full Year Core Net Sales Growth and Adjusted Diluted EPS Growth Above Phase II Long-Term Targets On Top of Fiscal 2021 Elevated Base

Initiates Fiscal 2023 Outlook:

Consolidated Net Sales Growth of 6.8%-8.8%; Core Net Sales Growth of 8.5%-10.5%

Consolidated Diluted EPS of $9.92-$10.38

Core Adjusted Diluted EPS of $12.73-$13.03; Growth of 4.5%-7.0%

EL PASO, Texas–(BUSINESS WIRE)–Helen of Troy Limited (NASDAQ: HELE), designer, developer and worldwide marketer of consumer brand-name home, outdoor, health, wellness, and beauty products, today reported results for the three-month period ended February 28, 2022.

In the fourth quarter of fiscal 2022, the Company changed the names of two of its segments to align with the growth in certain product offerings and brands. The previously named “Housewares” segment was changed to “Home & Outdoor,” and the previously named “Health & Home” segment was changed to “Health & Wellness.” There were no changes to the products or brands included within the segments as part of these name changes.

Executive Summary – Fourth Quarter of Fiscal 2022 Compared to Fiscal 2021 and Fiscal 2020

• Consolidated net sales revenue of $582.0 million, an increase of 14.3% from fiscal 2021 and an increase of 31.6% from fiscal 2020
• Core net sales increase of 17.2% from fiscal 2021 and an increase of 37.1% from fiscal 2020
• GAAP diluted EPS of $1.64, compared to $0.90 for the same period last year and $(0.13) in fiscal 2020
• Non-GAAP Core adjusted diluted EPS of $2.51, an increase of 76.8% from fiscal 2021 and an increase of 45.1% from fiscal 2020
• Non-GAAP adjusted diluted EPS of $2.51, an increase of 59.9% from fiscal 2021 and an increase of 33.5% from fiscal 2020
• Net cash provided by operating activities of $145.9 million

Executive Summary – Fiscal 2022 Compared to Fiscal 2021 and Fiscal 2020

• Consolidated net sales revenue of $2.22 billion, an increase of 5.9% from fiscal 2021 and an increase of 30.2% from fiscal 2020
• Core business net sales growth of 8.4% from fiscal 2021 and an increase of 35.5% from fiscal 2020
• GAAP diluted EPS of $9.17, compared to $10.08 for the same period last year and $6.02 in fiscal 2020
• Non-GAAP Core adjusted diluted EPS of $12.18, an increase of 10.4% from fiscal 2021 and an increase of 39.7% from fiscal 2020
• Non-GAAP adjusted diluted EPS of $12.36, an increase of 6.1% from fiscal 2021 and an increase of 32.9% from fiscal 2020
• Net cash provided by operating activities of $140.8 million, compared to $314.1 million for the same period last year, primarily due to cash used for inventory purchases

Julien R. Mininberg, Chief Executive Officer, stated: “Our fourth quarter results significantly outperformed our expectations in each business segment, delivering an exceptionally strong finish to our fiscal year. We are very proud that fiscal 2022 marks another year of top and bottom line growth well ahead of our Phase II targets, despite the global pandemic, supply chain disruption, inflation, the EPA matter, and the elevated base.”

Mr. Mininberg continued: “Looking back over the first three years of Phase II, core net sales and core adjusted diluted EPS increased by 50% and 68%, respectively. We believe our performance so far in Phase II illustrates the strength of our strategic choices, the power of our diversified portfolio, the return on investments in our Leadership Brands and shared services, and the winning culture and organization we have built. We are proud that our results contributed to total shareholder returns significantly ahead of our proxy peer group since the start of Phase II, and all through Phase I.”

Mr. Mininberg concluded: “As we now begin the fourth year of Phase II, we are pleased to be able to provide our outlook for continued top and bottom-line growth in fiscal 2023. We expect our recent acquisitions of Osprey and Curlsmith will drive revenue and adjusted EPS growth and further expand margins. Our outlook includes our current assessment of the impact from continued widespread inflation on input costs and consumer buying power, further supply chain disruption, and expected rising interest rates. Our outlook also reflects the work we have done with our supply chain partners, cost mitigation measures, pre-negotiated sea freight contracts, and price increases. We will continue to make thoughtful spending choices that support the most important opportunities for our brands, cost efficiency projects, new capabilities, and further scalability for our shared services. We believe this approach will help us continue creating incremental value for shareholders in the remaining two years of Phase II and beyond.”

	Three Months Ended Last Day of February,
(in thousands)	Home & Outdoor				Health & Wellness				Beauty				Total
Fiscal 2021 sales revenue, net	$	162,463			$	228,623			$	118,289			$	509,375
Organic business (1)		24,683				(388	)			25,910				50,205
Impact of foreign currency		(672	)			(630	)			(631	)			(1,933	)
Acquisition (2)		24,373				—				—				24,373
Change in sales revenue, net		48,384				(1,018	)			25,279				72,645
Fiscal 2022 sales revenue, net	$	210,847			$	227,605			$	143,568			$	582,020
Total net sales revenue growth (decline)		29.8	%			(0.4	)%			21.4	%			14.3	%
Organic business		15.2	%			(0.2	)%			21.9	%			9.9	%
Impact of foreign currency		(0.4	)%			(0.3	)%			(0.5	)%			(0.4	)%
Acquisition		15.0	%			—	%			—	%			4.8	%
Operating margin (GAAP)
Fiscal 2022		10.7	%			4.2	%			12.6	%			8.7	%
Fiscal 2021		10.0	%			(0.7	)%			8.5	%			4.8	%
Adjusted operating margin (non-GAAP)
Fiscal 2022		13.1	%			10.2	%			15.2	%			12.5	%
Fiscal 2021		11.7	%			0.7	%			18.9	%			8.4	%

		Three Months Ended Last Day of February,												% Change
(in thousands, except per share data) (unaudited)		2022				2021				2020				FY22/FY21			FY22/FY20
Consolidated net sales revenue		$	582,020			$	509,375			$	442,365			14.3	%		31.6	%
Core business net sales revenue (3)			578,141				493,458				421,640			17.2	%		37.1	%
Leadership Brand net sales revenue (4)			480,391				417,931				347,713			14.9	%		38.2	%
Online channel net sales revenue (5)			162,107				140,016				107,329			15.8	%		51.0	%
Consolidated Diluted EPS		$	1.64			$	0.90			($	0.13	)		82.2	%		*
Consolidated Adjusted Diluted EPS (non-GAAP) (6)			2.51				1.57				1.88			59.9	%		33.5	%
Core Adjusted Diluted EPS (non-GAAP) (3) (6)			2.51				1.42				1.73			76.8	%		45.1	%
* Calculation is not meaningful.
		Year Ended Last Day of February,												% Change
(in thousands, except per share data) (unaudited)		2022				2021				2020				FY22/FY21			FY22/FY20
Consolidated net sales revenue		$	2,223,355			$	2,098,799			$	1,707,432			5.9	%		30.2	%
Core business net sales revenue (3)			2,189,239				2,020,453				1,615,094			8.4	%		35.5	%
Leadership Brand net sales revenue (4)			1,810,249				1,706,545				1,360,059			6.1	%		33.1	%
Online channel net sales revenue (5)			531,114				538,191				407,230			(1.3	)%		30.4	%
Consolidated Diluted EPS		$	9.17			$	10.08			$	6.02			(9.0	)%		52.3	%
Consolidated Adjusted Diluted EPS (non-GAAP) (6)			12.36				11.65				9.30			6.1	%		32.9	%
Core Adjusted Diluted EPS (non-GAAP) (3) (6)			12.18				11.03				8.72			10.4	%		39.7	%

Consistent with its strategy of focusing resources on its Leadership Brands, during the fourth quarter of fiscal 2020, the Company committed to a plan to divest certain assets within its Beauty segment’s mass channel personal care business (“Personal Care”). On June 7, 2021, the Company completed the sale of its Personal Care business, not including the Latin America and Caribbean regions, to HRB Brands LLC, for $44.7 million in cash. Accordingly, the Company continued to classify the identified net assets of the Latin America and Caribbean Personal Care businesses as held for sale in its fiscal 2022 financial statements. Subsequent to its fiscal 2022 year end, on March 25, 2022, the Company completed the sale of the Latin America and Caribbean Personal Care businesses to HRB Brands LLC, for $1.8 million in cash.

The Company defines Core business as strategic business that it expects to be an ongoing part of its operations, and Non-Core business as business or net assets (including net assets held for sale) that it expects to divest within a year of its designation as Non-Core. Sales from the Latin America and Caribbean Personal Care businesses are included in Non-Core business for all periods presented and sales from the North America Personal Care business are included in Non-Core business for all periods presented through June 7, 2021.

	Three Months Ended Last Day of February,
(in thousands)	Home & Outdoor				Health & Wellness				Beauty				Total
Fiscal 2021 sales revenue, net	$	162,463			$	228,623			$	118,289			$	509,375
Core business (3)		48,384				(1,018	)			37,317				84,683
Non-Core business (Personal Care) (3)		—				—				(12,038	)			(12,038	)
Change in sales revenue, net		48,384				(1,018	)			25,279				72,645
Fiscal 2022 sales revenue, net	$	210,847			$	227,605			$	143,568			$	582,020
Total net sales revenue growth (decline)		29.8	%			(0.4	)%			21.4	%			14.3	%
Core business		29.8	%			(0.4	)%			31.5	%			16.6	%
Non-Core business (Personal Care)		—	%			—	%			(10.2	)%			(2.4	)%

Consolidated Results – Fourth Quarter Fiscal 2022 Compared to Fourth Quarter Fiscal 2021

• Consolidated net sales revenue increased $72.6 million, or 14.3% to $582.0 million compared to $509.4 million. The growth was driven by an increase from Organic business of $50.2 million, or 9.9%, and from the acquisition of Osprey Packs, Inc. (“Osprey”) of $24.4 million, or 4.8%. The Organic business increase primarily reflects higher brick and mortar and online channel sales in the Home & Outdoor and Beauty segments due primarily to strong consumer demand, approximately $20 million of accelerated retailer orders to improve inventory levels and in anticipation of price increases, higher sales in the club and closeout channels, the impact of customer price increases related to rising freight and product costs, growth in consolidated international sales, and the favorable comparative impact of orders that were not able to be shipped at the end of the fourth quarter of fiscal 2021 due to Winter Storm Uri. These factors were partially offset by a decrease in sales in the Health & Wellness segment as a result of stronger COVID-19 driven demand for healthcare and healthy living products, primarily in thermometry and air filtration, in the comparative prior year period, and a net sales revenue decline in Non-Core business primarily due to the sale of the North America Personal Care business during the second quarter of fiscal 2022.
• Consolidated gross profit margin decreased 2.6 percentage points to 42.6%, compared to 45.2%. The decrease was primarily due to the net dilutive impact of inflationary costs and related customer price increases, EPA compliance costs of $4.0 million, higher inventory obsolescence expense, and a less favorable channel mix within the Beauty segment. These factors were partially offset by a more favorable brand mix within the Home & Outdoor segment and a favorable mix of more Home & Outdoor and Beauty segment sales within consolidated net sales revenue.
• Consolidated selling, general and administrative expense (“SG&A”) ratio decreased 4.7 percentage points to 34.0%, compared to 38.7%. The decrease was primarily due to a decrease in marketing expense and the favorable leverage impact of net sales growth. These factors were partially offset by EPA compliance costs of $7.4 million in the Health & Wellness segment, an increase in annual incentive compensation expense, and higher outbound freight costs.
• Consolidated operating income was $50.4 million, or 8.7% of net sales revenue, compared to $24.5 million, or 4.8% of net sales revenue. The increase in consolidated operating margin was primarily due to a decrease in marketing expense in the Health & Wellness segment, the favorable comparative impact of asset impairment charges recorded in the prior year period and lower marketing expense in the Beauty segment, lower distribution expense and a more favorable brand mix in the Home & Outdoor segment, favorable consolidated operating leverage, and a favorable mix of more Home & Outdoor and Beauty segment sales within consolidated net sales revenue. These factors were partially offset by EPA compliance costs of $11.4 million, the net dilutive impact of inflationary costs and related customer price increases, increased inventory obsolescence expense, an increase in annual incentive compensation expense, higher outbound freight costs, and a less favorable channel mix within the Beauty segment.
• Income tax expense as a percentage of income before tax was 15.6%, compared to income tax benefit as a percentage of income before tax of 2.7%. The year-over-year change was primarily due to shifts in the mix of taxable income in the Company’s various tax jurisdictions, higher taxes associated with the Company’s Macao subsidiary, the comparative impact of tax benefits recognized on impairment charges in the prior year period, and differences in the Company’s fiscal 2021 actual year-to-date results as compared to estimates used to calculate the estimated annual effective tax rate for the Company’s fiscal 2021 third quarter results.
• Net Income was $39.8 million, compared to $22.2 million. Diluted EPS was $1.64 compared to $0.90. The increase in diluted EPS was primarily due to higher operating income in all segments and lower weighted average diluted shares outstanding. These factors were partially offset by an increase in the effective income tax rate and higher interest expense.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 61.9% to $78.7 million compared to $48.6 million.

On an adjusted basis for the fourth quarters of fiscal 2022 and 2021, excluding acquisition-related expenses, asset impairment charges, EPA compliance costs, restructuring charges, amortization of intangible assets, and non-cash share-based compensation, as applicable:

• Adjusted operating income increased $29.8 million, or 69.5%, to $72.6 million, or 12.5% of net sales revenue, compared to $42.9 million, or 8.4% of net sales revenue. The 4.1 percentage point increase in adjusted operating margin was primarily driven by a decrease in marketing expense in the Health & Wellness and Beauty segments, lower distribution expenses and a favorable brand mix in the Home & Outdoor segment, favorable consolidated operating leverage, and a favorable mix of more Home & Outdoor and Beauty segment sales within consolidated net sales revenue. These factors were partially offset by the net dilutive impact of inflationary costs and related customer price increases, higher inventory obsolescence expense, an increase in annual incentive compensation expense, higher outbound freight costs, and a less favorable channel mix within the Beauty segment.
• Adjusted income increased $22.1 million, or 56.9%, to $60.8 million, compared to $38.8 million. Adjusted diluted EPS increased 59.9% to $2.51, compared to $1.57. The increase in adjusted diluted EPS was primarily due to higher adjusted operating income in the Home & Outdoor and Health & Wellness segments and lower weighted average diluted shares outstanding. These factors were partially offset by lower adjusted operating income in the Beauty segment, an increase in the effective income tax rate and higher interest expense.

Segment Results – Fourth Quarter Fiscal 2022 Compared to Fourth Quarter Fiscal 2021

Home & Outdoor net sales revenue increased $48.4 million, or 29.8%, to $210.8 million, compared to $162.5 million. The growth was driven by an increase from Organic business of $24.7 million, or 15.2%, and growth from the acquisition of Osprey of $24.4 million, or 15.0%. The Organic business increase was primarily due to higher brick and mortar and online channel sales driven by strong consumer demand, accelerated retailer orders to improve inventory levels and in anticipation of price increases, higher sales in the club and closeout channels, the impact of customer price increases related to rising freight and product costs, growth in international sales, and the favorable comparative impact of COVID-19 reduced store traffic and orders that were not able to be shipped at the end of the fourth quarter of fiscal 2021 due to Winter Storm Uri. Operating income increased 39.7% to $22.6 million, or 10.7% of segment net sales revenue, compared to $16.2 million, or 10.0% of segment net sales revenue. The 0.7 percentage point increase was primarily due to favorable operating leverage, a more favorable brand mix and a decrease in distribution expense. These factors were partially offset by the net dilutive impact of inflationary costs and related customer price increases, higher inventory obsolescence expense, increased personnel expense, higher acquisition-related expenses, and higher amortization expense. Adjusted operating income increased 45.2% to $27.5 million, or 13.1% of segment net sales revenue, compared to $19.0 million, or 11.7% of segment net sales revenue.

Health & Wellness net sales revenue decreased $1.0 million, or 0.4%, to $227.6 million, compared to $228.6 million. The decline was driven by a decrease from Organic business of $0.4 million, or 0.2%, primarily due to a decrease in sales of thermometers and air filtration products due to stronger COVID-19 driven demand for healthcare and healthy living products in the comparative prior year period. These factors were partially offset by an increase in sales of fans, higher humidification product sales due to the COVID-19 Omicron variant surge, and the impact of customer price increases related to rising freight and product costs. Operating income was $9.6 million, or 4.2% of segment net sales revenue, compared to operating loss of $1.7 million, or 0.7% of segment net sales revenue. The 4.9 percentage point increase in segment operating margin was primarily due to a decrease in marketing expense, lower new product development expense, lower royalty expense, and a decrease in amortization expense. These factors were partially offset by EPA compliance costs of $11.4 million, an increase in outbound freight costs, increased inventory obsolescence expense, higher distribution expense, a less favorable product mix, and the net dilutive impact of inflationary costs and related customer price increases. Adjusted operating income increased to $23.3 million, or 10.2% of segment net sales revenue, compared to $1.5 million, or 0.7% of segment net sales revenue.

Net sales revenue from Beauty Core business increased $37.3 million, or 31.5%, primarily reflecting higher brick and mortar and online channel sales driven by strong consumer demand and accelerated retailer orders to improve inventory levels and in anticipation of price increases, an increase in closeout channel sales, new product introductions, higher international sales. Total Beauty segment net sales revenue increased $25.3 million, or 21.4%, to $143.6 million, compared to $118.3 million primarily due to Core business growth partially offset by the sale of the Non-Core North America Personal Care business during the second quarter of fiscal 2022. Operating income was $18.2 million, or 12.6% of segment net sales revenue, compared to $10.0 million, or 8.5% of segment net sales revenue. The 4.1 percentage point increase in segment operating margin reflects favorable operating leverage, the favorable comparative impact of asset impairment charges recorded in the prior year period, a decrease in marketing expense, and lower amortization expense. These factors were partially offset by a less favorable channel mix, the net dilutive impact of inflationary costs and related customer price increases, higher royalty expense, and an increase in annual incentive compensation expense. Adjusted operating income decreased 2.5% to $21.8 million, or 15.2% of segment net sales revenue, compared to $22.4 million, or 18.9% of segment net sales revenue.

Balance Sheet and Cash Flow Highlights – Fiscal 2022 Compared to Fiscal 2021

• Cash and cash equivalents totaled $33.4 million, compared to $45.1 million.
• Accounts receivable turnover for fiscal 2022 was 72.6 days, compared to 68.6 days for the same period last year.
• Inventory was $558.0 million, compared to $481.6 million. Inventory turnover for fiscal 2022 was 2.3 times, compared to 3.2 times for the same period last year.
• Total short- and long-term debt was $813.2 million, compared to $343.6 million.
• Net cash provided by operating activities for fiscal 2022 was $140.8 million, compared to $314.1 million.
• Net cash used by investing activities of $438.9 million included investments to acquire Osprey for $410.9 million and capital and intangible asset expenditures of $78.0 million, of which $55.8 million was for land and initial construction expenditures related to a new 2 million square foot distribution center. This was partially offset by proceeds from the sale of the Company’s North America Personal Care business of $44.7 million.
• Net cash provided by financing activities included share repurchases of common stock in the open market during the fiscal year for $170.7 million.

Subsequent Events

On March 30, 2022, a third-party facility that the Company utilizes for inventory storage incurred severe damage from a weather-related incident. The Company’s inventory stored at this facility primarily relates to the Health & Wellness and Beauty segments. While the inventory is insured, some seasonal inventory and inventory designated for specific customer promotions is currently not accessible, and as a result, may unfavorably impact the Company’s net sales revenue in the first half of fiscal 2023. The Company is working with local officials and its insurance provider to understand the extent of the damage, however the building must be assessed and made to be structurally sound before the Company will have access to the inventory and be able to fully assess damages.

On April 22, 2022, the Company completed the acquisition of Recipe Products Ltd., a producer of innovative prestige hair care products for all types of curly and wavy hair under the Curlsmith brand (“Curlsmith”). The total purchase consideration, net of cash acquired, was $150.0 million in cash, subject to certain customary closing adjustments. The acquisition was funded with cash on hand and borrowings under the Company’s existing revolving credit facility.

EPA Update

As previously disclosed, during fiscal 2022, the Company was in discussions with the U.S. Environmental Protection Agency (the “EPA”) regarding the compliance of packaging claims on certain of its products in the air and water filtration categories and a limited subset of humidifier products within the Health & Wellness segment that are sold in the United States. The EPA approved modest changes to labeling claims on packaging of the air and water filtration impacted products, which the Company implemented, and subsequently resumed shipping during fiscal 2022. While the Company resumed normalized levels of shipping of the affected inventory by the end of the third fiscal quarter, the Company is still in process of repackaging the existing inventory of impacted products. Additionally, as a result of continuing dialogue with the EPA, the Company is executing further repackaging and relabeling plans on certain additional humidifier products and certain additional air filtration products.

Executive Leadership Update

To accommodate the significant growth during its Transformation, the Company previously announced that it would be creating a Chief Operating Officer role.

Contacts

Investor Contact:
Helen of Troy Limited

Anne Rakunas, Director, External Communications

(915) 225-4841

ICR, Inc.

Allison Malkin, Partner

(203) 682-8200

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