EX-99.1 CHARTER 2 amjq4earningsslides.htm AMJ Q4 FY23 EARNINGS SLIDES

The Procter & Gamble Company Regulation G Reconciliation of Non-GAAP Measures
The following provides definitions of the non-GAAP measures used in Procter & Gamble's July 28, 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 3

2. | Core EPS and currency-neutral Core EPS — page 4

3. | Core gross margin and currency-neutral Core gross margin — page 6

4. | Core operating margin and currency-neutral Core operating margin — page 6

5. | Adjusted free cash flow and adjusted free cash flow productivity — page 7

Organic sales growth: Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of the July 1, 2018, adoption of the new accounting standard for “Revenue from Contracts with Customers,” acquisitions and divestitures and foreign exchange from year-over-year comparisons. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. This measure is used in assessing the achievement of management goals for 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 common share from continuing operations excluding items that are not judged by management to be part of the Company’s sustainable results or trends. Management views this non-GAAP measure as a useful supplemental measure of Company performance over time. This measure is also used in assessing the achievement of management goals for at-risk compensation. Currency-neutral Core EPS is a measure of the Company's Core EPS excluding the incremental current year impact of foreign exchange.
The Core earnings measures included in the following reconciliation tables refer to the equivalent GAAP measures adjusted as applicable for the following:

• | Charges for early debt extinguishment: During fiscals 2021, 2018 and 2017, the Company recorded after-tax charges due to the early extinguishment of certain long-term debt. These charges represent the difference between the reacquisition price and the par value of the debt extinguished.

• | Incremental Restructuring: The Company has historically had an ongoing restructuring program with annual spending in the range of $250 to $500 million before tax. Starting in 2012 through fiscal 2020, the Company had a strategic productivity and cost savings initiative that resulted in incremental restructuring charges. The adjustment to Core earnings includes only the restructuring costs above the normal recurring level of restructuring costs.

• | Gain on Dissolution of the PGT Healthcare Partnership: The Company dissolved our PGT Healthcare partnership, a venture between the Company and Teva Pharmaceuticals Industries, Ltd (Teva) in the OTC consumer healthcare business, during fiscal 2019. The transaction was accounted for as a sale of the Teva portion of the PGT business; the Company recognized an after-tax gain on the dissolution.

• | Shave Care Impairment: In fiscal 2019, the Company recognized a one-time, non-cash, after-tax charge of $8.0 billion to adjust the carrying value of the Shave Care reporting unit. This was comprised of a before- and after-tax impairment charge of $6.8 billion related to goodwill and an after-tax impairment charge of $1.2 billion to reduce the carrying value of the Gillette indefinite-lived intangible asset.

• | Anti-Dilutive Impacts: The Shave Care impairment charges caused certain equity instruments that are normally dilutive (and hence normally assumed converted or exercised for the purposes of determining diluted net earnings per common share) to be anti-dilutive. Accordingly for U.S. GAAP diluted net earnings per common share, the instruments were not assumed to be converted or exercised. Specifically, in fiscal 2019, certain of our outstanding preferred shares and share-based equity awards were not included in the diluted weighted average common shares outstanding. As a result of the non-GAAP Shave Care impairment adjustment, these instruments were dilutive for non-GAAP earnings per share.

• | Transitional Impacts of the U.S. Tax Act: The U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Act”) in December 2017. This resulted in a net charge for the fiscal year 2018. The adjustment to core earnings includes only this transitional impact. It does not include the ongoing impacts of the lower U.S. statutory rate on pre-tax earnings.

• | Venezuela B/S remeasurement & devaluation impacts: Venezuela is a highly inflationary economy under U.S. GAAP. Prior to deconsolidation, the government enacted episodic changes to currency exchange mechanisms and rates, which resulted in currency remeasurement charges for non-dollar denominated monetary assets and liabilities held by our Venezuelan subsidiaries in fiscal 2015.

• | Charges for Certain European legal matters: Several countries in Europe issued separate complaints alleging that the Company, along with several other companies, engaged in violations of competition laws in prior periods. In fiscal 2015, the Company incurred after-tax charges of $11 million to adjust legal reserves related to these matters.

• | Venezuela deconsolidation charges: For accounting purposes, evolving conditions resulted in a lack of control over our Venezuelan subsidiaries. Therefore, in accordance with the applicable accounting standards for consolidation, effective June 30, 2015, we deconsolidated our Venezuelan subsidiaries and began accounting for our investment in those subsidiaries using the cost method of accounting. The charge was incurred to write off our net assets related to Venezuela.

We do not view the above items to be part of our sustainable results, and their exclusion from core earnings measures provides a more comparable measure of year-on-year results. These items are also excluded when evaluating senior management in determining their at-risk compensation.
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 and adjusted for certain other items as indicated. 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 adjusted as indicated. Management views adjusted free cash flow productivity as a useful measure to help investors understand P&G’s ability to generate cash. This measure is used by management in making operating decisions, allocating financial resources and for budget planning purposes.
1. Organic sales growth:

Three Months Ended June 30, 2023 | Net Sales Growth |  | Foreign Exchange Impact |  | Acquisition & Divestiture Impact/Other* |  | Organic Sales Growth
Beauty | 8% |  | 4% |  | (1)% |  | 11%
Grooming | 3% |  | 5% |  | —% |  | 8%
Health Care | 3% |  | 2% |  | —% |  | 5%
Fabric Care & Home Care | 5% |  | 2% |  | 1% |  | 8%
Baby, Feminine & Family Care | 7% |  | 3% |  | (1)% |  | 9%
Total Company | 5% |  | 3% |  | —% |  | 8%

* 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.

Fiscal Year Ended June 30, 2023 | Net Sales Growth |  | Foreign Exchange Impact |  | Acquisition & Divestiture Impact/Other* |  | Organic Sales Growth
Total Company | 2% |  | 5% |  | —% |  | 7%

* 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
Q3 FY 2023 | 4% |  | 4% |  | (1)% |  | 7%
Q2 FY 2023 | (1)% |  | 6% |  | —% |  | 5%
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
Prior Fiscal Years

Total Company | Net Sales Growth |  | Foreign Exchange Impact |  | Acquisition/ Divestiture Impact/Other* |  | Organic Sales Growth
FY 2022 | 5% |  | 2% |  | —% |  | 7%
FY 2021 | 7% |  | (1)% |  | —% |  | 6%
FY 2020 | 5% |  | 2% |  | (1)% |  | 6%
FY 2019 | 1% |  | 4% |  | —% |  | 5%
FY 2018 | 3% |  | (2)% |  | —% |  | 1%
FY 2017 | —% |  | 2% |  | —% |  | 2%
FY 2016 | (8)% |  | 6% |  | 3% |  | 1%

* Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures for all periods, the impact from the July 1, 2018, adoption of the new accounting standard for “Revenue from Contracts with Customers,” the impact of India Goods and Services Tax implementation in FY 2018, the impact of Venezuela deconsolidation in 2016 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 2024 (Estimate) |  | +3% to +4% |  | +1% |  | +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 June 30
| 2023 | 2022
Diluted Net EPS | $1.37 | $1.21
Adjustments* | — | —
Core EPS | $1.37 | $1.21
Percentage change vs. prior period Core EPS | 13% |
Currency Impact to Earnings | 0.11 |
Currency-Neutral Core EPS | $1.48 |
Percentage change vs. prior period Core EPS | 22% |

* For the three months ended June 30, 2023, compared with the three months ended June 30, 2022, there were no adjustments to or reconciling items for diluted EPS.

| Fiscal Year Ended June 30
| 2023 | 2022
Diluted Net EPS | $5.90 | $5.81
Adjustments* | — | —
Core EPS | $5.90 | $5.81
Percentage change vs. prior period Core EPS | 2% |
Currency Impact to Earnings | 0.55 |
Currency-Neutral Core EPS | $6.45 |
Percentage change vs. prior period Core EPS | 11% |

* For the fiscal year ended June 30, 2023, compared with the fiscal year ended June 30, 2022, there were no adjustments to or reconciling items for diluted EPS.
Core EPS and Currency-Neutral Core EPS
Current and Prior Fiscal Years

| 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015
Diluted Net Earnings Per Common Share from Continuing Operations, attributable to P&G | $5.90 | $5.81 | $5.50 | $4.96 | $1.43 | $3.67 | $3.69 | $3.49 | $2.84
Early Debt Extinguishment Charges |  |  | 0.16 |  |  | 0.09 | 0.13 |  |
Incremental Restructuring |  |  |  | 0.16 | 0.13 | 0.23 | 0.10 | 0.18 | 0.17
Gain on PGT Dissolution |  |  |  |  | (0.13) |  |  |  |
Shave Care Impairment |  |  |  |  | 3.03 |  |  |  |
Anti-dilutive Impacts |  |  |  |  | 0.06 |  |  |  |
Transitional Impact of U.S. Tax Act |  |  |  |  |  | 0.23 |  |  |
Venezuela B/S Remeasurement and Devaluation Impacts |  |  |  |  |  |  |  |  | 0.04
Charges for Pending European Legal Matters |  |  |  |  |  |  |  |  | 0.01
Venezuela Deconsolidation Charges |  |  |  |  |  |  |  |  | 0.71
Rounding |  |  |  |  |  |  |  |  | (0.01)
Core EPS | $5.90 | $5.81 | $5.66 | $5.12 | $4.52 | $4.22 | $3.92 | $3.67 | $3.76
Core EPS growth vs prior year | 2% | 3% | 11% | 13% | 7% | 8% | 7% | (2)% |
Currency Impact to Earnings | 0.55 | 0.11 | 0.04 | 0.15 | 0.35 | (0.05) | 0.15 | 0.35 |
Currency-Neutral Core EPS | $6.45 | $5.92 | $5.70 | $5.27 | $4.87 | $4.17 | $4.07 | $4.02 |
Percentage change vs. prior period Core EPS | 11% | 5% | 11% | 17% | 15% | 6% | 11% | 7% |
2018 – 2023 Core EPS growth | 40% |  |  |  |  |  |  |  |

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

| Q1 FY22 | Q1 FY21 | Q2 FY22 | Q2 FY21 | Q3 FY22 | Q3 FY21 | Q4 FY22 | Q4 FY21 | Q1 FY23 | Q1 FY22 | Q2 FY23 | Q2 FY22 | Q3 FY23 | Q3 FY22
Diluted Net EPS | $1.61 | $1.63 | $1.66 | $1.47 | $1.33 | $1.26 | $1.21 | $1.13 | $1.57 | $1.61 | $1.59 | $1.66 | $1.37 | $1.33
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 | $1.59 | $1.66 | $1.37 | $1.33
Percentage change vs. prior period Diluted Net EPS | (1)% |  | 1% |  | 6% |  | 7% |  | (2)% |  | (4)% |  | 3% |
Currency Impact to Earnings | (0.03) |  | 0.02 |  | 0.05 |  | 0.08 |  | 0.16 |  | 0.16 |  | 0.13 |
Currency-Neutral Core EPS | $1.58 |  | $1.68 |  | $1.38 |  | $1.29 |  | $1.73 |  | $1.75 |  | $1.50 |
Percentage change vs. prior period Core EPS | (3)% |  | 2% |  | 10% |  | 14% |  | 7% |  | 5% |  | 13% |

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

Total Company | Diluted EPS Growth | Impact of FX | Currency-neutral EPS Growth
FY 2024 (Estimate) | +6% to +9% | 3% | +9% to +12%

3. Core gross margin and currency-neutral Core gross margin:

| Three Months Ended June 30
| 2023 | 2022
Gross Margin | 48.4% | 44.6%
Adjustments* | — | —
Core Gross Margin | 48.4% | 44.6%
Basis point change vs. prior year Core gross margin | 380 |
Currency Impact to Margin | 0.7% |
Currency-Neutral Core Gross Margin | 49.1% |
Basis point change vs prior year Core gross margin | 450 |

* For the three months ended June 30, 2023, compared with the three months ended June 30, 2022, there were no adjustments to or reconciling items for gross margin.

| Fiscal Year Ended June 30
| 2023 | 2022
Gross Margin | 47.9% | 47.4%
Adjustments* | — | —
Core Gross Margin | 47.9% | 47.4%
Basis point change vs. prior year Core gross margin | 50 |
Currency Impact to Margin | 0.5% |
Currency-Neutral Core Gross Margin | 48.4% |
Basis point change vs prior year Core gross margin | 100 |

* For the fiscal year ended June 30, 2023, compared with the fiscal year ended June 30, 2022, there were no adjustments to or reconciling items for gross margin.
4. Core operating margin and currency-neutral Core operating margin:

| Three Months Ended June 30
| 2023 | 2022
Operating Margin | 20.3% | 18.4%
Adjustments* | — |
Core Operating Margin | 20.3% | 18.4%
Basis point change vs. prior year Core operating margin | 190 |
Currency Impact Margin | 1.2% |
Currency-Neutral Core Operating Margin | 21.5% |
Basis point change vs. prior year Core operating margin | 310 |

* For the three months ended June 30, 2023, compared with the three months ended June 30, 2022, there were no adjustments to or reconciling items for operating margin.

| Fiscal Year Ended June 30
| 2023 | 2022
Operating Margin | 22.1% | 22.2%
Adjustments* | — |
Core Operating Margin | 22.1% | 22.2%
Basis point change vs. prior year Core operating margin | (10) |
Currency Impact Margin | 1.1% |
Currency-Neutral Core Operating Margin | 23.2% |
Basis point change vs. prior year Core operating margin | 100 |

* For the fiscal year ended June 30, 2023, compared with the fiscal year ended June 30, 2022, there were no adjustments to or reconciling items for operating margin.
5. Adjusted free cash flow and adjusted free cash flow productivity (dollar amounts in millions):

Three Months Ended June 30, 2023 |
Operating Cash Flow | Capital Spending | Adjusted Free Cash Flow | Net Earnings | Adjusted Free Cash Flow Productivity
$5,341 | $(734) | $4,607 | $3,392 | 136%

Fiscal Year Ended June 30, 2023 |
Operating Cash Flow | Capital Spending | U.S. Tax Act Payments | Adjusted Free Cash Flow | Net Earnings | Adjusted Free Cash Flow Productivity
$16,848 | $(3,062) | $225 | $14,011 | $14,738 | 95%

Adjusted Free Cash Flow and Adjusted Free Cash Flow Productivity
Current and Prior Fiscal Years

Fiscal Year | Operating Cash Flow | Capital Spending | Adjustments to Operating Cash Flow* | Adjusted Free Cash Flow | Net Earnings | Adjustments to Net Earnings** | Net Earnings as Adjusted | Adjusted Free Cash Flow Productivity
2023 | $16,848 | $(3,062) | $225 | $14,011 | $14,738 | — | $14,738 | 95%
2022 | $16,723 | $(3,156) | $225 | $13,792 | $14,793 | — | $14,793 | 93%
2021 | $18,371 | $(2,787) | $225 | $15,809 | $14,352 | $427 | $14,779 | 107%
2020 | $17,403 | $(3,073) | $543 | $14,873 | $13,103 | — | $13,103 | 114%
2019 | $15,242 | $(3,347) | $235 | $12,130 | $3,966 | $7,625 | $11,591 | 105%
2018 | $14,867 | $(3,717) | — | $11,150 | $9,861 | $845 | $10,706 | 104%
2017 | $12,753 | $(3,384) | $418 | $9,787 | $15,411 | $(4,990) | $10,421 | 94%
2016 | $15,435 | $(3,314) | — | $12,121 | $10,604 | $(72) | $10,532 | 115%
2015 | $14,608 | $(3,736) | $729 | $11,601 | $7,144 | $4,187 | $11,331 | 102%
2014 | $13,958 | $(3,848) | — | $10,110 | $11,785 | — | $11,785 | 86%
10-Year Average |  |  |  | $12,538 |  |  | $12,378 | 101%

* Adjustments to Operating Cash Flow include transitional tax payments resulting from the U.S. Tax Act in fiscals 2023, 2022, 2021, 2020 and 2019; tax payments related to the Merck OTC Consumer Healthcare acquisition in fiscal 2020; tax payments related to the Beauty Brands divestiture in fiscal 2017; and tax payments related to the Pet Care divestiture in fiscal 2015.
** Adjustments to Net Earnings include early debt extinguishment charges in fiscal 2021; Shave Care impairment charges and the gain on the dissolution of the PGT Healthcare partnership in fiscal 2019; transitional impact of the U.S. Tax Act in fiscal 2018; losses on early debt extinguishment in fiscals 2018 and 2017; the gain on the sale of the Beauty Brands business in 2017; the gain on the sale of the Batteries business in fiscal 2016; the Batteries business impairment charges in fiscals 2016 and 2015; and the Venezuelan deconsolidation charge in fiscal 2015.