Q1 2021 Prestige Consumer Healthcare Inc Earnings Call
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I'd now like to Hana conference over to your Speaker today Mr., Phil Terpolilli director of Investor Relations. Thank you. Please go ahead Sir.
Thanks, operator, thank you everyone who's joining today on the call with me around them Bharti, our chairman President and CEO, Chris Sacco our CFO.
On today's call will begin with some topical remarks, given the current pandemic review. The result, the first quarter fiscal 21 provide an outlook update and then take questions from analysts.
We had a slide presentation, which accompanies today's call. It can be accessed by designing for speech consumer health care Dot com clicking on the investors link and then on today's webcast presentation.
Please remember somebody information contained in the presentation sacred non-GAAP financial measures.
Reconciliations to the nearest GAAP financial measures are included in todays earnings release and slide presentation.
During today's call management will make forward looking statements around risks and uncertainties, which are detailed in a complete safe harbor disclosure on page two of the slide presentation accompanying the call.
These are important to review in contemplate it's everyone on the on the call today is well aware business environment uncertainty remains heightened do the duration impact of cold in 19.
These impacts include an uncertain shutdown timeframe for many areas of our economy ongoing changes to consumer purchasing habits, the potential for a disrupted supply chain heightened unemployment and many other economic factors.
This means that results could change it anytime in the forecasted impacted risks consideration the best estimate based on the information available as of today's date.
Additional information concerning risk factors cautionary statements are available in our most recent actually you filings and the most recent company 10-K.
I'll now hand, it over to our CEO Ron Lombardi Ron.
Thanks, Phil let's start on slide five.
Last quarter, we were in experiencing the very early innings of the cold at 19 pandemic at the time, we outlined several factors our organization began focusing on and real time to adapt to the changing environment.
As a result of these actions I'm pleased to report solid Q1 earnings result, and better than expected revenues.
This is a testament to our preparedness and the strategy that we outlined.
For starters, a long term strategy continues to work our mission to provide consumers brands. They know and trust is unwavering.
Even with the challenging environment being experienced due to covert 19 as consumers continue to turn to our leading brands to meet their health care needs.
Second our robust continuity plans continue to have us well position to service our retail partners our investments in selecting the right manufacturing partners and maintaining ample inventory inventory has paid off in the tight supply environment.
Third.
Embracing our company cultural the leadership Trust change in execution has paid off in a big way.
It's allowed us to be agile marketers pivoting quickly to efforts that optimize our brands in this very unique environment.
The end result is that we are winning in growing channels like E Commerce, and our portfolio continues to be well positioned for the long term.
And finally, our strong operating model and disciplined capital strategy continue to reward stakeholders are strong Q1 free cash flow and industry, leading financial profile enable further debt reduction in the quarter.
In summary, we're not sitting still we are learning from what is happening and adjusting our go forward strategy in real time.
You're doing this through the guide of our proven three pillar strategy, which remains intact.
It drives our long term success in Q1 was yet another example of it.
I'll now hand, it over to Chris to review Q1 financial results.
Thanks, Ron Good morning, everyone, let's turn to slide seven and review our high level first quarter financial result.
Q1 revenue of $229.4 million declined 60 basis points on an organic basis versus the prior year, which excludes the effects of foreign currency.
By segment in North America revenues were essentially flat positively impacted by the women's health oral care and skin category, but offset by lower cough and cold I, an ear care and G.I. shipments as categories. We participate in face declines in incidence levels and usage rates related to covert 19.
Our international business declined in the high single digits after excluding foreign currency.
This decline was attributable to both a difficult comparison in the prior year for a number of products as well at significantly lower sales of Hydralyte and Australia as a result of cobot, 19th impact lowering both general consumer illness and activities such as athletics.
EBITDA and EPS for the first quarter grew 12, and 32% respectively versus the prior year.
Solid EPS growth was attributable to positive contributions across our operating expense line as well as lower interest expense and share count from our strong free cash flow and strategic capital allocation.
Let's turn to slide eight for more detail around consolidated results.
As I mentioned on the prior slide first quarter fiscal 21 revenue decreased 60 basis points versus the prior year, excluding the effects of foreign currency.
Consumption decline just over 4%.
This was better than we had anticipated back in early may driven by strong ecommerce growth as consumers continue to shift to online purchasing.
That said, we continue to experience consumption declines in certain categories. As a result of coven 19.
As expected these consumption declines were partially offset by inventory replenishment efforts as retailers, we filled their supply following strong March consumer demand.
Total company gross margin of 58.4% increased 70 basis points versus prior years first quarter.
We experienced early benefits from the transition to our new third party logistics provider that was completed at the end of fiscal 20, which offset negative product mix.
For Q2, we anticipated gross margin of approximately 58%.
Advertising and marketing came in at 12.1% of revenue down in dollar versus the prior year as expected as we eliminated ineffective spending during the unique pandemic environment.
For the second quarter, we anticipate a more normalized rate of an m. spend of approximately 15%.
Down from the prior year, Oh into disciplined cost management and lower costs, resulting from the current environment.
For Q2, we anticipate G&A expense of approximately $21 million.
Last as stated on the prior page EPS grew approximately 32% versus the prior year.
Lower operating costs lower interest expense and lower share count, we're all factors to growth.
For Q too, we expect interest expense to approximate $21 million and our corporate tax rate of around 25%.
Now, let's turn to slide nine.
And the first quarter, we generated 72 6 million and free cash flow, which represents over 40% growth versus the prior year driven in part by the timing associated with strong retailer Reorders placed in April following the March consumption Spike.
For Q too, we would anticipate free cash flow below the prior year as we invest in capex of approximately $10 million <unk>.
Despite this total free cash flow for the first half fiscal 21 is expected to exceed that of the prior year.
And the first quarter, we continue to focus on debt reduction and paid down $111 million in that.
At June quarter, and we had approximately one 6 billion and net debt, which equated to leverage ratio of four four times.
We expect to continue to prioritize that pay down as our primary use a free cash flow.
Lastly, we'd like to remind investors of our continued focused on liquidity and the current environment.
We ended the quarter with over $50 million in cash on hand, with ample access to a revolving credit line of well over $100 million.
With that I'll turn it back to run.
Thanks, Chris.
Let's turn to slide 11 to recap what we've seen so far this year.
Although touched on earlier, despite the uncertainty Causeway Cove with 19, we're pleased with the plan, we implemented and Ah Revolting Q1 performance to date.
For a number of important factors shown here each of which underpin the financial results, Chris just touched on.
We continued to prioritize putting our employees safety first through various proactive measures.
We have numerous manufacturing partners, which are all operating in a similar capacity.
All of these employees all the enabler to our success. We are proud of how our team members have adapted well to the small alone environment and thank them for their continued commitment.
In the middle of the slide as our supply chain. We've continued to work with our third party partners closely on continuity of supply although dynamic we continued to avoid any material all the stock positions at retail.
The results of this is continued and reliable inventory supply and engaged workforce and committed partners, enabling us to maintain superior service levels with a retail partners in doing so we have set ourselves up for both short and long term success.
Now, let's turn to slide 12 for an update around our brand building efforts.
Investing in our leading portfolio of brands remains the number one principal and our three pillar strategy.
Many brands have heritage and connections with with consumers.
They are also diversified which positions as well to navigate the impact of Covid 19, as we realized and Q1.
We continually invest in our key brands over the long term through a wide ranging brand building toolkit critically it features various efforts, which differentiate from other brands and private label.
This playbook has not changed what has changed as outlined last quarter is where consumers are shopping as well as which categories. They are using the frequency. This is truly a unique attributed the covid 19 pandemic versus prior recessions.
This impacts all of our brands and unique ways just over one quarter into this new landscape, we are learning and adapting to the changes it brings for each of our brands in real time.
Where we have experienced the largest opportunities at the right end of the spectrum is from channels shifting into E commerce.
Early investments in this channel had us well positioned to capture growth is consumers transition to digital shopping during the pandemic.
A second opportunity our portfolio is experiencing is consumer focus on self-care at home.
Examples here include avoiding a doctor's visit and increasing focus on everyday hygiene and wellness.
Each of these factors are benefiting many of our brand shown towards the right of the slide will discuss a few of these in greater detail later on.
Towards the left we highlight some challenges we are navigating due to cope with 19.
Many activities remain it suppressed levels, including time spent outdoor travel and sports activities. Furthermore, less time spent with people means less overall illness, which is impacting certain brands such as Hydrolyte during Australia winter season.
<unk> also seem reduced convenience channel Catholic temporal early impact incrementals to bow purchases like chlorides pocket Pal and powdered analgesics.
[noise] spite these category challenges are brands maintain leading positions and many had actually expanded sure and the impact of categories.
An example here of Nick's as the headlights category currently declining due to children not in school or attending summer camps are brand has expanded sure through our ongoing brand building efforts.
With a wide range of impacts it remains critical that we continually adapt to the changing conditions.
We are doing just that by allocating investments to the opportunities we have identified here.
Let's turn to slide 13th to discuss some examples.
I've seen on the previous slide a diverse portfolio positions us to do well even in this challenging environment.
Our marketing efforts have moved rapidly to target the shifting needs of consumers and how best to connect with them in a pandemic world. The page here shows just a few of them many new initiatives that kicked off recently.
On the left of the slightest compound W. We're focused on expanding are leading position with compound W. By using marketing that reminds consumers of the ability to treat wards rapidly at home.
We believe this message in our brands efficacy is resonating with consumers further expanding our number one market position.
In the middle of the pages clear I've, we've had several new messages from the brand since the pandemic began most recently.
We are activating digital efforts focused on at home usage in the field could benefit of having clearer eyes for video calls.
Ultra positive.
Seeing higher than average click through rates on Google and our brand remains as resilient as ever.
The last example, we have here is D C and Goodies These brand which are concentrated in the southeast historically focused marketing efforts and sponsorship activities like Southern League baseball and NASCAR.
With these events, abbreviated or temporarily suspended we reallocated are spending into various digital opportunities.
Two examples shown here are a refresh of our web pages and marketing of new products like the recently launched Goodies hangover.
In summary, where quickly identifying opportunities like the ones discussed here through consumer insights from there are nimble marketing strategy looks to address the shifting consumer habits.
It's all part of our brand building playbook that is built for long term success.
Now, let's turn to slide 14 for an update on R E Commerce business.
Investments and E commerce have meaningfully paid off as we were able to successfully engage in transact with consumers as they are spending patterns shifted online.
These investments began several years ago as we invested in digital content and bringing external resources in house.
E Commerce traffic continues to increase and as a result of these actions. We believe our market shares are actually above average brick and mortar sure and many categories.
Are established business as a leader and E Commerce consumer health care and poised to continue benefiting from the growing interest and the channel.
And Q1 consumers increased online purchasing with the goal for many to minimize person to person contact during the pandemic.
E Commerce grew triple digits, and now accounts for over 10% of our total retail sales with no signs of swelling.
This growth is broad range of across many major retail partners, but also does not include Omnichannel solutions like clicked and collect which have also seen impressive growth.
But we aren't sitting still we continue to reallocate investments into this opportunity or three largest brands and the E. Commerce channel are shown on the right side of the slide each of the brands Summers Eve Monistat and <unk> have unique strategy that continued to build successful momentum for each and two one.
For some is eve consumers are at home more than ever they are exercising at home as well.
Therefore, refocused marketing efforts around homework outs and highlight recently launched some aviv active products.
For Den Tech, we recently launched a beyond brushing campaign that reminds consumers the benefits of abroad oral health care routine.
Beyond brushing reminds consumers the benefits of flossing dental guards and other medical devices for software, it's early but the campaign his resignation with consumers as a shop online and elsewhere.
Left for Monistat, where reminding home shopping consumers about quick and easy shipping to the home.
<unk> advertising has successfully reminded consumers of modest that's largely superior proposition to an in person doctor's visit.
As a result.
Seeing a doubling of visits to our Monistat Dot Com website is consumers research. The category. These digital investments deepened the incidents association with Monistat consistent with a long term strategy.
In summary by being early and actively investing in the E Commerce channel or brands are winning.
The pandemic shifts consumer preferences. This provides a great positioning for a brands to benefit.
Now, let's turn to slide 16 to discuss our outlook.
One quarter into fiscal 21, we're off to a solid start for the year, thanks to our business strategy and execution.
By continuing to execute are proven strategy and focusing on our leading brands.
Well positioned to continue to whether the storm.
So the second quarter.
Dissipate revenue of $225 million or more.
Within this outlook, we expect consumption declined low to mid single digits due to a certain categories that are being affected by Pope at 19.
Despite this challenge are brands continue.
To hold leading positions and many has expanded share in these declining category cases.
Most importantly, our investments continued to position these brands for the long term growth and categories returned to more normalised levels.
Our assumption also includes a modest inventory reduction expectation at retail.
Over the last month heightened week to week consumption variability has declined as a result, we believe certain channels and retail partners may begin to adjust their inventory levels to reflect this more stable performance.
We also anticipate EPS of 70 cents or more in Q too.
Our focus on cost management efforts, along with the benefit of our capital allocation strategy in debt reduction is expected to more than offset the anticipated Q2 revenue decline compared to the prior year.
Laughed are strong and stable free cash flow remains accompany strength free cash flow is expected to increase for the first half versus prior year and as always.
Intend to executed disciplined capital allocation strategy with a near term focus on debt reduction to drive shareholder value.
With that all open it up for questions operator.
Okay.
<unk> ask a question you'll need to press star one on your telephone.
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Please standby, while we can put all the Q&A roster.
Our first question comes from stuff wishing well it's Jeffries. Your line is now open.
Thanks, Good morning, everyone. Thanks for all the detail running Chris very helpful. I wanted to just Unpacks three areas at Christopher first one is for you is I mean, a N M advertising and marketing. Thank you mentioned cute too at 15%, but it did look like eubanks, a little bit of value in Q1, I shouldn't be be thinking about how.
Do you plan to use that value or do you think it would just dropped that through to the bottom line and that's not benefit for the year.
Yeah stuff I think the way, we think about A&P, obviously can be embarrassed acted by timing and this cove it environment very fluid and when I think about A&P, you'll recall in Q for our gross margin came in higher than anticipated and as we always say looking to maintain EBIT margins in the mid thirties, we invested that.
Gross margin back into A&P in Q4, so as I look too.
Step up for cute too, obviously and A&P from Q1 to more normalised levels were about 15% you're right year over year down slightly but when I think about Ah Q4, and Q1 Q2 combined more in line with our normalized right around 14% to 16%. So it can fluctuate right now we're anticipating at about 15% for.
Quarter, and I think we feel good about that number for Q too.
Okay, and then run a question for you you mentioned a benefit of inventory replenishment in the quarter, but also your comments at the end of your prepared remarks talked about potential destocking again.
Where are we along that continuum of normalizing to consumption do it anticipate we're going to continue to see it I had been from Destocking over the next several quarters or are we nearing that point of Recalibration.
Yeah, So first of all stuff.
Retailer inventory Destocking is driven by.
Each retailers individual performance and their objectives goal so.
It's tough for us to answer that for them, but what we did call out in our second quarter outlook is that we're seeing signs of retailers beginning to make adjustments already. So for example in July we've received orders from retailer's that have extended delivery dates as they begin to.
Just their inventory levels on hand will still trying to protect in stock levels. So it's something that we think is going to continue for for awhile.
The second quarter as each retailer begins to take stock of their performance and objectives in response to those.
Okay, and then last one for US, it's just something allowance for doubtful account it was.
Almost two acts as a percentage of receivable and in the corner versus the prior year look up a bit from cute. Once I'm. Just curious if you can talk a little bit about the quality of your receivables.
Some of the new channels that you were disturbing and distributing into a bit higher risk how should be think about reading that relative to the receivables balance. Thank you yeah stuff.
No change in the quality of our receivables.
A balance sheet account, so it's really impacted by timing there's been no change to the P&L impact of any of the items that would relate to an allowance has been consistent in terms of terms with customers and whatnot. So the timing of when we clear those impacts that number and that's the only variability for this period of over others.
Okay. Thank you very much.
Thank you. Our next question customer refresh party with Oppenheimer. Your line is now.
Good morning, Thanks for taking my question I'm, sorry, I guess I wanted to start with a question just just on emanated just given some of the change in consumer behavior.
See him out there related to cover it do you see any new opportunities on the M&A front and then just curious what you're sitting out there right now.
Yeah.
So first of all are.
The place we always start in terms of evaluating M&A opportunity Latasha is Ah brands position in the landscape that they compete in.
Number one brands.
That can be successful over the long term have <unk>.
Innovation in new product opportunities so.
The cold at 19 environment really hasn't changed the screening.
We don't think has changed the positioning of of categories long term.
But we would be interested in.
Okay, Okay great.
And then from consumption perspective, so great that would that was helpful to call or just in terms of what you guys are expecting but you too but if this is the right level of behavior receipt I don't know for a few more orders is about how you guys are thinking about maybe the consumption declines on it you could see in the current environment.
Yeah.
It's still too early to tell what's gonna happen in the.
Impacted categories.
R Q3, Q for at this point, which is why we're only giving an outlook for Q too alright things are still changing quicken quickly and fairly dynamically.
So it's two two soon to tell.
Okay, Great and maybe just one last question just just on Destocking in terms of where you guys. Thank you can see the pressure going forward is there any different than what you seem to pass or is it really the same channels that have been.
Struggling that you would expect a cubic.
Continued inventory adjustments.
We would expect it to be fairly consistent with what we realized over the last year year and a half real passion.
Okay, great. Thank you.
Thank you.
Thank you. Our next question comes from Linda Bolton Wiser with da Davidson. Your line is now.
Yes, hi.
I was wondering if you could talk about just margin impacts of your more rapid E Commerce Grove.
Does that actually increase your gross margin, but add to SG&A. So can you just give them a little taller on that and then what are your top one or two biggest brands in terms of dotcom E commerce sales on their own brand website.
Okay. So Chris do you want to touch on the gross margin and I'll I'll talk about the branch.
Sure.
So Ah our margins across channel channel agnostic from a margin perspective, so as you can see actually in our results margins pretty consistent despite our online sales being over 10% of our sales per quarter. So.
We manage the channel that way manage our product offering that way and so.
No significant deviation and margins across various channels.
[noise] So Linda I think your question was was around one of our three.
Biggest brands that are selling on online.
And because.
I'm sorry go ahead.
Well no I was just curious in general how much dotcom your own brand website E. Commerce activity. There is <unk> are you doing any or is it just mostly through the Amazon of the world.
It's all through.
Our our customers so it's through Amazon and the dotcom arms of our traditional brick and mortar retail partners. We don't have any direct to consumer business.
Okay, great. Thanks for that and then uhm.
I was curious about and mine is that.
I I know you made some comments about your categorized but.
Sometimes monistat demand is dampened when there's less antibiotic use.
And I would think with the pandemic and with social distancing that there's less just underlying.
You know conditions, requiring antibiotics are you seeing that in terms of affecting the amount of staff demands.
So for the quarter ended June we actually saw the total number of incidences down.
We measure that by looking at how many.
Prescriptions.
Were written during that same time period, so incident levels in totality were down.
But the actual percentage of people using OTC treatments was flat to slightly up so in total we actually grew sure for the total Bachelor yeast infection incident treatment.
Again, as we called out in the prepared remarks today. We also saw a significant growth and our online business, where we've got a meaningfully bigger sure online and we do even with our leading position and brick and mortar.
So it's again, a great example, where are longterm investments and connecting with with consumers and making investments to help educate them <unk>.
The incident is continued to pay off for us.
Thank you and then finally can I just ask you about.
Your balance thing of your a capital allocation and how are you thinking about share repurchase versus debt repayment at this point.
Sure Chris do you want to take that.
Sure so limit obviously in this environment continue focus on liquidity, but.
That pay download continue to be our primary use of cash for now, but as always will remain flexible as conditions weren't and.
If an opportunity arises as we've done in the past will certainly take advantage of it.
Okay, great. Thank you for taking my question.
Thanks, Thanks Linda.
Thank you. Our next question comes from Joe Altobelli with Raymond James Your line is no open.
Good morning, guys. This is actually Adam on for Joe Hope, you're all staying safe.
I appreciate all the colors you guys gave on <unk> in terms of breaking down that organic number.
But how much consumption look more so in July I know you gave your expectations for low to mid consumption to the quarter.
But maybe kind of more of a breakdown of what you're seeing so far.
And then maybe an outlook of when you can returned it out rough 2% level.
Although maybe some low visibility there.
Sure so.
Beginning very late May in into June.
Began to see consumption levels stabilize and that continued through July so the outlook of 225 million or more of revenue for the quarter ended September.
As soon as that will continue to be.
That level of consumption. So if you compare the 225 to last year were down about 13 million. So two thirds too roughly three quarters of the decline year over year is due to that.
Lower level of consumption largely driven by the categories. We talked about earlier today motion sickness life. For example, the convenience channel and then the balance of the last one third to one quarter decline year over here, it's from an anticipated.
Retailer inventory reduction.
Gotcha, that's very helpful and you guys are obviously executing quite solidly.
Maybe and perhaps a tough question, but why do you think maybe your products aren't saying the same consumption left as we've been seeing perhaps from some other H P C companies.
Yeah.
Again, our products are largely incident based so if you don't have the illness that you're not sick.
Generally going to go out and.
By our products, we didn't see the same kind of pantry loading that many other categories like tablet, it analgesics or cold and flu.
Category saw late in the quarter ended March and then the impact of it into the quarter ended June and then.
Few their future.
Anticipated impact so.
Starts with that so we didn't really see any pantry loading or.
Delay in future purchases as a result of that.
Great. Thanks ride and if I could just piggyback one last question here I I know you guys a touchdown capital allocation pretty thoroughly throughout the call us I don't want to belabor the point.
But I was kind of thinking more about obviously you guys mentioned.
Did your thoughts on prioritizing debt reduction.
But but have you seen anything any M&A environment. That's interesting have you noticed that may be salaries are more or less likely to sell in this environment. Even if it's not priority I assume you guys had been keeping an eye on the on the market.
Yeah. The lemonade pipeline has been fairly active over the last year and surprisingly it didn't really hasn't slowed down all that much over the last three or three or four months alright, each seller has their own motivation.
And we continue to see.
A lot of activity out there and again for us and we've been saying this for a long time, if the right opportunity comes along it's personalized dropped to figure out how to get it done if we think it's meaningful for.
In terms of value creation for our shareholders. So that'll hold true going forward, if something compelling shows up.
Figure out how to get it done.
Great. Thanks, a ton and wish you guys. The best of luck for the rest of the year.
Thank you.
Our next question comes from Mitch Panero with certain minute and your line is now.
Yeah, Hey, good morning.
[noise].
A couple other than questions here first.
<unk>.
Why is it that you were market share is higher N E Commerce, then and brick and mortar.
Is that private label.
Is that the the primary factor.
The.
The competitive landscape online can be different and some categories versus brick and mortar.
But we don't generally see a difference in a private label offerings in store versus online Mitch.
Really what I'll say is it's a testament to the heritage and the connection and the trust that's important.
And these categories is that when consumers go online.
It's even easier for them if you will to find the trusted brand that they're they're looking for.
Out there.
R continued brand building and connections with consumers play it plays out online and R. Q1 results are a testament to that.
Has there is speaking of private label has been any change.
And any private label sure in any any of your category.
It's not worthy.
No it's interesting that the trends at the last three or four months is <unk>.
Started to understand what this Kobe 19 impact means.
Really are the same as we've seen over the long term, which is R brands tend to outgrow the categories. We compete in and we <unk>, we have a history of outgrowing private label and it goes back to the fact that we're a marketing and brand building company and everyday our employees come to work folks.
On providing differentiated products to any and all competitors, whether it's another branded competitor there happens to be in the category or private label. So that when the consumer shows up at the shelf, there's a whole lot more different between our products and any other offering beyond just plain price. So that's all.
We think about it over the long term is to continue to provide differentiated products.
And strong heritage connection and trust with consumers.
We don't think that will change going forward either.
Okay.
What what is the breakdown of your A&M spending in terms of channel is it.
Is it consistent with your sort of your sales, but channel or is it.
Waited more heavily.
Two one area.
It does shift a bit over time based on opportunities or initiatives, we've got going on.
But clearly we invested of higher levels.
In the past couple of quarter supporting the E commerce side of things as consumers began 221 to that to that market.
But over over time, we're gonna have a multi pronged approach to managing our brand building and marketing whether it's traditional T V targeted T V digital <unk>.
Investments to support online purchases, whether that search and other similar similar investment opportunities.
I don't I don't watch a lot of T V, but I have happened to see a couple of.
Yes, your ads your den Tech cats.
I guess, it's a recent you read you mentioned.
Recent campaign.
Any comments regarding that campaign.
Any any near term or recent.
[noise] measures of effectiveness HM.
Sure first of all what you're seeing is targeted T V. So the den tech beyond brushing campaign that started.
During the quarter ended June.
Using that as a way to identifying connect with with those targeted consumers.
And if you'd take a look our den tech business was up over over <unk> excuse me over 10% during the quarter and we think.
Portland driver of that performance.
The beyond brushing marketing campaign, as well as our broad distribution and availability online.
That's another Great example, where.
Consumers are looking for those trusted differentiated products online and that was helping driving solid growth for dentex during the quarter.
Okay, just one last question.
Just sort of bigger picture and I know, we're still early in this cove it.
Environment.
[noise], but has.
As you look at your business relative to this new environment.
And any observations any anything you know.
See opportunity somewhere yeah, yeah.
Anything change in the way you're managing your business can you talk a little bit about that you know bigger picture.
Sure.
We've talked about the benefits of our diverse.
Business model.
A long time in it paid out again during the quarter ended June we talked about the diversity of our business, it's really on lots of different fronts.
Starts with a diverse portfolio of brands compete in many different categories, but more importantly.
The leader and many different sub categories, whether it's summers Eve Monistat clear is B C and good he's like the list goes on and on.
So.
If you take a look at our results for the first quarter, even though we had some challenges related to categories that had been impacted by covid like motion sickness and life.
To go products like clear ice pocket Pal.
City of our portfolio allowed us to yeah, mostly offset those challenges because of the solid and strong growth online with someone Z Monistat Pentech and other brands and then secondly, and I just mentioned with a solid E commerce, our products are broadly available across.
Most channels, whether it's convenience drug grocery.
Nah, that's dollar and now E commerce, so that no matter, where the consumer decides that they want to purchase the health care needs are products are available and we manage the offering in such a way that we don't have any any difference in our gross margin.
Just on where the consumer chooses to buy those products. So.
We talked during the prepared remarks today, a number of times around how solid our performance was in the benefits in the attributes of our strategy and our business model and.
Quarter ended June June results or just a great example of how well we're positioned.
To do well in this challenging environment.
Okay. Thanks for the time I appreciate it.
Thank you much.
Thank you.
As a reminder, ladies and gentleman that Star then want to ask a question.
Our next question comes from Carla Casella with J P. Morgan Carolinas now open.
Hi, Good morning, Chris Enron. Thanks for taking your question. This is Sarah Clark on for a car let cooked I'll just two quick one for you in terms.
<unk>.
For transportation and products are you seeing any changes burweed heard from.
Consumer product company is that they're seeing an increased due to a shit towards airfreight to ship products are you seeing any changes there on your end.
Hi, Sarah.
Yep, Thanks credit card.
So we have seen modest benefits from from benefits actually from diesel and frame, but no for our business just as we said when when freight cosmair rising in that environment airfreight to your point.
We've always talked about afraid of percent of our sales really not being a large component. We always said, we're not we're not shipping dog food as an example, so.
We haven't seen anything material from the transportation line other than some savings that we've got.
And the rates from our new warehouse location, but from an airport airfreight perspective, nothing meaningful from our point of view on margin.
[noise] structure it yeah and in addition to that I think Chris called out earlier today that we began to see some benefits from our move to our new three P. L partner that finished up at the end of March and what are probably <unk>, our our soul shipping.
Location for the U S during the quarter.
Got it that's super hardcore. Thank you and then apologies to go back to this but capital allocation. Thanks for your transparency odd prioritizing that pay down and what you've been thing N. D. M. N E Bay, we were wondering where you would feel comfortable.
Taking leverage at two four and that and now opportunity on the lemonade side and also how you feel about your current personally L are there any potential I bet that was in the future or do you like all of the brands you have now thanks.
So why don't I start with the.
Question of our portfolio on interest you can talk about leverage so.
We don't see ourselves actively managing the portfolio. We sold the household business I guess it was almost two years ago. Now are you in a half ago something like that.
And that was the last nature major change that we've seen in the portfolio. So we feel good about the business. We have in the opportunities that is going to provide us.
Yes, Sarah than on the on the leverage front, just talked about ending the quarter at four four times, we continue to target of leverage ratio of three and a half to five times.
That said given arc consistent financial models are consistent strung free cash flow for the right opportunity would we step just above five times.
It depends on the opportunity right, obviously qualitative factors come in as well, but with the ability to quickly delever and get back into our range.
I think it all depends on the opportunity, but are targeted range remains at three and a half to five time.
Great. Thanks for all the color that's all for me stay well.
Thank you Sarah.
Thank you I I'm not showing any further questions at this time I would now I'd like to turn the call back over CEO, Ron Lombardi for any closing remarks.
Thank you operator.
The first quarter results in our outlook are a great reminder of the resilience of our three pillar strategy. He continued to invest in are leaning brands, we're generating impressive cash flow and have a have a proven ability for effective capital allocation that will continue to create value moving forward.
We look forward to updating you on a on the success of our business again in a few months.
Have a great day and thanks for joining us.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may know disconnect.
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