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Published: 2023-01-19 11:21:54 ET
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EX-99.1 CHARTER 2 ondq2earningsslides.htm OND Q2 FY23 EARNINGS SLIDES




























































The Procter & Gamble Company Regulation G Reconciliation of Non-GAAP Measures


In accordance with the SEC's Regulation G, the following provides definitions of non-GAAP measures used in Procter & Gamble's January 19, 2023, earnings call, associated slides, and other materials and the reconciliation to the most closely related GAAP measure. We believe that these measures provide useful perspective on underlying business trends (i.e., trends excluding non-recurring or unusual items) and results and provide a supplemental measure of year-on-year results.

The non-GAAP measures described below are used by Management in making operating decisions, allocating financial resources and for business strategy purposes. These measures may be useful to investors as they provide supplemental information about business performance and provide investors a view of our business results through the eyes of Management. Certain of these measures are also used to evaluate senior management and are a factor in determining their at-risk compensation.

These non-GAAP measures are not intended to be considered by the user in place of the related GAAP measure, but rather as supplemental information to our business results. These non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the items or events being adjusted.

The Company is not able to reconcile its forward-looking non-GAAP cash flow and effective tax rate measures because the Company cannot predict the timing and amounts of discrete items such as acquisition and divestitures, which could significantly impact GAAP results.

The following measures are provided:
1.
Organic sales growth — page 2
2.
Core EPS and currency-neutral Core EPS — page 3
3.
Core gross margin and currency-neutral Core gross margin — page 3
4.
Core operating margin and currency-neutral Core operating margin — page 4
5.
Adjusted free cash flow — page 4
6.
Adjusted free cash flow productivity — page 4

Organic sales growth: Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of acquisitions and divestitures and foreign exchange from year-over-year comparisons. Management believes this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis.

The Core earnings measures included in the following reconciliation tables refer to the equivalent GAAP measures adjusted as applicable for the following:
•
Early debt extinguishment charge:  In the three months ended December 31, 2020, the company recorded after tax charges of $427 million ($512 million before tax), due to early extinguishment of certain long-term debt.  These charges represent the difference between the reacquisition price and the par value of the debt extinguished.
We do not view the above item to be part of our sustainable results, and its exclusion from core earnings measures provides a more comparable measure of year-on-year results. This item is also excluded when evaluating senior management in determining their at-risk compensation.

Core EPS and currency-neutral Core EPS: Core earnings per share, or Core EPS, is a measure of the Company's diluted net earnings per share from continuing operations adjusted as indicated. Currency-neutral Core EPS is a measure of the Company's Core EPS excluding the incremental current year impact of foreign exchange.

Core gross margin and currency-neutral Core gross margin: Core gross margin is a measure of the Company's gross margin adjusted for items as indicated. Currency-neutral Core gross margin is a measure of the Company's Core gross margin excluding the incremental current year impact of foreign exchange.

Core operating margin and currency-neutral Core operating margin: Core operating margin is a measure of the Company's operating margin adjusted for items as indicated. Currency-neutral Core operating margin is a measure of the Company’s Core operating margin excluding the incremental current year impact of foreign exchange.

Adjusted free cash flow: Adjusted free cash flow is defined as operating cash flow less capital spending. Adjusted free cash flow represents the cash that the Company is able to generate after taking into account planned maintenance and asset expansion. Management views adjusted free cash flow as an important measure because it is one factor used in determining the amount of cash available for dividends, share repurchases, acquisitions and other discretionary investment.

Adjusted free cash flow productivity: Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings. Management views adjusted free cash flow productivity as useful measures to help investors understand P&G’s ability to generate cash. These measures are used by management in making operating decisions, allocating financial resources and for budget planning purposes.


1. Organic sales growth:
Three Months Ended
December 31, 2022
Net Sales Growth
  
Foreign Exchange Impact
  
Acquisition &
Divestiture Impact/Other*
  
Organic Sales Growth
Beauty
(3)%
  
8%
  
(2)%
  
3%
Grooming
(9)%
  
9%
  
—%
  
—%
Health Care
2%
  
6%
  
—%
  
8%
Fabric Care & Home Care
1%
  
7%
  
—%
  
8%
Baby, Feminine & Family Care
(1)%
  
5%
  
—%
  
4%
Total P&G
(1)%
  
6%
  
—%
  
5%

* Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.


Organic Sales
Prior Quarters
 
Total Company
Net Sales Growth
  
Foreign Exchange Impact
  
Acquisition/ Divestiture Impact/Other*
  
Organic Sales Growth
Q1 FY 2023
1%
  
6%
  
—%
  
7%
Q4 FY 2022
3%
  
4%
  
—%
  
7%
Q3 FY 2022
7%
  
3%
  
—%
  
10%
Q2 FY 2022
6%
  
—%
  
—%
  
6%
Q1 FY 2022
5%
  
(1)%
  
—%
  
4%

* Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.


Organic Sales
Guidance
Total Company
  
Net Sales Growth
  
Combined Foreign Exchange &
Acquisition/Divestiture Impact/Other*
  
Organic Sales Growth
FY 2023 (Estimate)
  
(1)% to 0%
  
5%
  
4% to 5%

* Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.


2. Core EPS and currency-neutral Core EPS: 
 
Three Months Ended
December 31
  
 
2022
  
2021
Diluted Net Earnings Per Share
$1.59
  
$1.66
Percentage change vs. prior period
(4)%
    
Adjustments*
—
  
—
Core EPS
$1.59
  
$1.66
Percentage change vs. prior period Core EPS
(4)%
    
Currency Impact to Earnings
0.16
    
Currency-Neutral Core EPS
$1.75
    
Percentage change vs. prior period Core EPS
5%
    

* For the three months ended December 31, 2022, compared with the three months ended December 31, 2021, there are no adjustments to or reconciling items for diluted net earnings per share.


Core EPS and Currency-Neutral Core EPS
Prior Quarters
 
Q1
FY 2022
Q1
FY 2021
Q2
FY 2022
Q2
FY 2021
Q3
FY 2022
Q3
FY 2021
Q4
FY 2022
Q4
FY 2021
Q1
FY 2023
Q1
FY 2022
Diluted Net Earnings Per Share
$1.61
$1.63
$1.66
$1.47
$1.33
$1.26
$1.21
$1.13
$1.57
$1.61
Early Debt Extinguishment
      
0.16
            
Rounding
      
0.01
            
Core EPS
$1.61
$1.63
$1.66
$1.64
$1.33
$1.26
$1.21
$1.13
$1.57
$1.61
Percentage change vs. prior period
(1)%
  
1%
  
6%
  
7%
  
(2)%
  
Currency Impact to Earnings
(0.03)
  
0.02
  
0.05
  
0.08
  
0.16
  
Currency-Neutral Core EPS
$1.58
  
$1.68
  
$1.38
  
$1.29
  
$1.73
  
Percentage change vs. prior period Core EPS
(3)%
  
2%
  
10%
  
14%
  
7%
  

Note – All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction


3. Core gross margin and currency-neutral Core gross margin:
 
Three Months Ended
December 31
 
2022
2021
Gross Margin
47.5%
49.1%
Basis point change vs. prior year gross margin
(160)
  
Adjustments*
—
—
Core Gross Margin
47.5%
49.1%
Basis point change vs. prior year Core gross margin
(160)
  
Currency Impact to Margin
0.6%
  
Currency-Neutral Core Gross Margin
48.1%
  
Basis point change vs prior year Core gross margin
(100)
  

* For the three months ended December 31, 2022, compared with the three months ended December 31, 2021, there were no adjustments to or reconciling items for gross margin.



4. Core operating margin and currency-neutral Core operating margin: 
 
Three Months Ended
December 31
 
2022
2021
Operating Margin
23.0%
24.7%
Basis point change vs. prior year operating margin
(170)
  
Adjustments*
—
  
Core Operating Margin
23.0%
24.7%
Basis point change vs. prior year Core operating margin
(170)
  
Currency Impact Margin
1.0%
  
Currency-Neutral Core Operating Margin
24.0%
  
Basis point change vs. prior year Core operating margin
(70)
  

* For the three months ended December 31, 2022, compared with the three months ended December 31, 2021, there were no adjustments to or reconciling items for operating margin.


5. Adjusted free cash flow (dollar amounts in millions):

Three Months Ended December 31, 2022
Operating Cash Flow
Capital Spending
Adjusted Free Cash Flow
$3,574
$(708)
$2,866


6. Adjusted free cash flow productivity (dollar amounts in millions):

Three Months Ended December 31, 2022
Adjusted Free Cash Flow
Net Earnings
Adjusted Free Cash Flow
$2,866
$3,959
72%