Q1 2022 Prestige Consumer Healthcare Inc Earnings Call
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Today's conference is scheduled to begin shortly please continue the standby and thank you for your patience.
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The patient which of companies today's call can be accessed by visiting prestige consumer health care Dot com clicking on the investors link and not on today's webcast and presentation.
Please remember some of the information contained in the presentation today includes non-GAAP financial measures right.
[noise] Conciliations to the nearest GAAP financial measures are included in today's earnings release and slide presentation.
During today's call management awake forward looking statements around risks and uncertainties, which are detailed on a complete safe harbor disclosure on page 2 of the slide presentation accompanying the call.
These are important to review and contemplate as everyone on the call today is well aware business environment uncertainty remains heightened due to COVID-19 and continues to have numerous potential impacts the.
This means the results could change at any time in the forecast the impact of risk considerations of the best estimate based on the information available as of today's date.
Additional information concerning risk factors and cautionary statements are available on our most recent SEC filings and most recent company 10-K.
I will now hand, it over to our CEO around the body from.
Thanks, So let's begin on slide 5.
We are very pleased with our records start to the year of proof of the business strategy emphasizing brand building payoff meaningfully in Q1 and the strong results will discuss in detail are key factor, enabling us to raise us just full of year guidance.
The fast start to our fiscal 22 was driven by 2 primary factors.
First and most importantly are based business continues to perform well with strong 5% growth across the base portfolio.
This result was driven by solid consumption and share gains across the portfolio a continuation of of the trends we have seen for a while now.
Second we experienced a dramatic increase the sales for brands benefiting from travel related activity as consumers shifted habits with increased vaccination rates.
The estimate this accounted for approximately 25 million of the queue on sales increase over the prior year.
Of discuss the change in consumer habits in greater detail on the next slide.
Ah Time-tested brand building strategy and the Reacceleration of certain categories and channels resulted in our highest level of sales ever on excluding our divested household cleaning business.
Meanwhile of financial profile has remained solid throughout the change in consumer purchasing patterns and we generated record EPS of of dollars 14, and free cash flow of approximately $68 million in Q1.
Are stable and strong cash flow profile continues to enable of disciplined the capital allocation strategy.
Throughout the fiscal 21, this meant focusing on debt reduction combined with share repurchases.
In Q1, we announced the acquisition of Acorn consumer health and it's fair of Tears brand, which closed on July 1st.
We believe this acquisition is of great strategic use of capital, which will share more detail on shortly.
So in summary, we delivered excellent Q1 results underpinned by our long term strategy and further fueled by a rebound in certain COVID-19 impacted categories and channels.
Let's turn to page 6 and review some of the changing consumer habits, resulting from the pandemic.
Throughout all of fiscal 21, we noted dramatic ways in which consumer habits changed as a result of the cold of COVID-19, pandemic and the resulting effects on our portfolio.
We observed the less consumer travel and more focused on hygiene is consumer stayed home and warmack.
This meant of significant headwind for many of our brands, including Dramamine and motion sickness.
Chloraseptic in Lootens, and cough, cold Hydrolyte, and rehydration and Nixon headlights combined these brands represent about 20% of our revenues.
Back in May when we provided fiscal twenty-two guidance. We anticipated. This portion of our portfolio will be largely flat as we expected consumers would take time to move away from the habits form over the previous year.
While this is still the case of certain categories. This assumption proved conservative and others.
To start we saw dramatic rebound and travel related activity. This drove of meaningful recovery and dramamine along with the recovery in our in our Australian hydrolase business.
The recovery and travel activity also drove increases in convenience store consumption and the distributor inventory and this channel to support the increase takeaway itself.
This benefited brands like Dramamine as well as clear is whether it's packet Perl on the go offering.
In addition, drug retailer traffic also increased owing to vaccination visits leave.
Leading to a strong consumption trends driven by our broad distribution and market share in this channel.
As these changes to consumer habits continued to evolve our playbook remains the same and are nimble business strategy is of strength.
We will invest opportunistically across our portfolio to drive long term brand building.
This strategy paid off again in Q1 on the right you see dramamine with Q1 sales compared to prior years as consumer travel habits began to accelerate we've leaned into our leading market position in marketing playbook.
The reactivated time-tested marketing strategies for the brand, resulting in both market share wins and the resumption of sales growth of consumers returned to the to the category.
While the timing of of full Covid recovery remains difficult to predict our focus on investing behind our brands leaves us well positioned for future variability and the eventual return to more normalized trends.
Now, let's turn to slide 7 to discuss the <unk> acquisition in further detail.
As highlighted earlier, we closed on the announced the Acorn consumer health acquisition on July 1st.
As you can see on the left side of the page the portfolios revenues are concentrated in the fair of tears brands.
Thera tears created in the nineties as of proven history, and the ITER category and will further enhance our efforts in this space. The addition will be complementary to our existing eyecare present by expanding into the growing dry eyes segment of ICANN.
Third of tears, as well positioned with the mild and episodic dry consumer or the long track record of steady market share gains and revenue growth above the category.
The portfolio complement the prestige is operating model nicely with outsourced manufacturing and is widely distributed across retail channels in the U S similar to our existing business.
Lastly, the Acorn portfolio has a solid financial profile of sales growth and margins consistent with prestige as long term targets.
So in summary, these attributes are of great match against our well defined M&A criteria that evaluates brand opportunity the businesses fit with the prestige of operating model and the financial returns that a line with hurdle rates that we measure against.
Now, let's turn to slide 8.
Strategically thera tears fits with our disciplined MNI M&A criteria of nicely.
But Furthermore, as shown on the slide it is of great fit alongside of clear eyes brands.
The transaction enhances our market leading scale on Ikea when combined with our existing eyecare business. We now have 100 million dollar plus franchise that addresses the range of consumer ailments across the $1 billion category.
Clear eyes is time tested and proven at the leader in reference relief and has the long heritage with consumers for of consumer It stands for redness solutions clear eyes remains the leader in the category with long term sales growth and as a brand that remains as relevant as ever to consumers seeking redness of.
Relief.
Third of tears share similar attributes, but it's focused on a different consumer symptom.
It is established with consumers as a leader in dry ice solutions, particularly for those episodic users and dry eye relief.
For a consumer it stands for tears and soothing I release.
As shown on the right to 2 brands in totality represent a wide spectrum of consumer solutions and eyecare.
This brought offering will continue to be supported by our brand building strategy and with this comprehensive solution and I care, we are well positioned for continued success.
Let's turn to slide 9 to review clear eyes as of proven example of this opportunity.
Clear eyes is a great brands success story, and 1 that gives us an advantage to start as experts in the eyecare category of <unk>.
Rand we've owned since of IPO over 15 years ago clear eyes. As an example of how we think about long term brand building it's.
Its success has incorporated a number of marketing factors overtime.
First is innovation when we went public clear eyes had about 3 <unk> with a very narrow focus.
Today, we have over a level of different solutions for consumers solving Iraq Miss the most recent example shown here is clear eyes sensitive, which is specifically format formulated for sensitive eyes.
Second as investments these.
These are constantly evolving and most importantly, we emphasize the bottom of approach to enable effective tactic at a given point in time for example, Ram messaging evolved during the pandemic to emphasize the concept of at home usage and use time tested digital tactics, which helped growth share in the ear.
Sure.
Third marketing campaigns, we know from consumer insights that consumers respond to celebrity an influencer marketing and I care as a result, we've had many long term successful initiatives from spokespersons like Bernstein, and Vanessa Williams to more recent social VB.
Influences.
The result of these efforts as we have broad distribution across retail channel with partners, who recognize the value of of clear eyes brands and the investment efforts, we just discussed.
We continue to work with all of our retail partners to optimize their eyecare of assortment and drive long term category of growth.
The result of clear our playbook continues to work and we continue to win share to date in fiscal 2002.
We look forward to applying this prove of knowledge base to the third of tears brands and drive continued long term success across our eyecare franchise.
With that I'll turn it to Chris who will walk through Q on financials.
Thing from you and good morning, everyone, Let's turn to slide 11, and review our first quarter of fiscal 22 financial results.
As a reminder of the information in today's presentation includes certain non-GAAP information that is reconciled to the the closest GAAP measure and our earnings release.
Q1 revenue of $269.2 million increased 17, 23% and $15, 6% on on organic basis versus the prior year. The latter excluding the effect of foreign currency.
As a reminder, Q1 faced the unique comparison in the year prior where we experienced the lower sales as consumers depleted items previously purchased in March 2020, as a result of COVID-19.
By segment North America revenues were up about 15%.
Nearly all product categories grew with the largest increases in Gi and iron ear care.
As Ron discussed earlier, a return towards more Normalised travel trends helped drive of significant lifts for certain brands versus a year ago, namely Dramamine and Gi and clear eyes on iron ear care.
International OTC increased approximately 30% in Q1 after excluding the effects of foreign currency.
The increase was attributable to of more favourable comparison in the prior year as well as an overall uptake of Hydrolyte sales for more normalised consumer trends around an illness and activities in Australia.
EBITDA increased in Q1, approximately 13%, while EBIT margin remained consistent with our long term expectations in the mid thirties.
Diluted EPS for the quarter with the record $1.14 per share up over 30% versus the prior year driven by both of the higher sales discussed and lower interest expense.
Let's turn to slide 12 for more detail around consolidated results.
Q1 fiscal twenty-two revenues increased 17% versus the prior year.
Are strong and diverse portfolio experienced approximately 5% baseline growth driven by the favorable year ago comparison, and our long term brand building efforts.
In addition, we experienced a sharp rebound in certain COVID-19 impact of categories, adding an estimated $25 million to our queue on revenue performance.
Of this we believe roughly half of this relates to the timing.
While the other half resulted from increased consumption in the current quarter.
We also continue to experience year over year double digit consumption growth and the E. Commerce channel further building off the sharply higher online purchasing shifts of the prior year.
Total company gross margin of 59.1% in the first quarter increased 70 basis points versus last year's gross margin of 58.4%.
The strength was driven by higher than expected sales performance as well as product mix.
We continued to anticipate of gross margin of about 58% for fiscal 2002.
Advertising and marketing came in at 14.7% for the first fiscal quarter.
Following the abnormally low rate of spending Q1 of last year due to COVID-19 shelter in place restrictions A&M returned to normalize levels of spend of approximately 14% to 16%.
For fiscal 22, we still anticipate an approximate 15% A&M rate as a percentage of sales and for Q2, we anticipate A&M of closer to 14%.
G&A expenses were just over 8% of sales in Q1.
For the full year physical twenty-two we still anticipate G&A expenses to approximate just over 9% of sales.
G&A dollars are likely to be the highest for the year and Q2, owing to the timing of certain expenses.
Lastly record diluted EPS of of $1.14 grew 30 to 5 per cent over the prior year.
Higher sales and lower interest expense drove this growth.
Looking forward, we know anticipate interest for the full year to approximate $63 million, reflecting the recent financing completed in conjunction with the <unk> acquisition now.
Now, let's turn to slide 13.
In Q1, we generated $67.8 million in free cash flow down versus the prior year due entirely to the timing of working capital.
We continue to maintain industry, leading free cash flow and are raising our outlook for the year.
A tune 30th our net debt was approximately $1.4 billion inclusive of of the cash. We built ahead of the anticipated acquisition closing on July 1st.
Following the acquisition of Acorn, our net debt at July 1st was approximately 1.6 billion.
The acquisition was funded from cash on hand, or ABL revolver, and our term loan, which we simultaneously amended and now matures in calendar 2028.
Our covenant define leverage ratio with 4.3 times at the closing of the transaction and we anticipate leverage of approximately 4 times by year end fiscal 22.
With that I'll turn it back to Ron.
Thanks, Chris, Let's turn to slide 15 to wrap up and discuss the increased outlook for fiscal 2002.
Over the last year, we've faced an unprecedented and dynamic environment. The many positive attributes of our business and our execution leave us well positioned moving forward. This is evidenced by our strong Q1 results were are long term brand building efforts paid off in a big way.
For the full year of fiscal 2002, we know anticipate revenues of of $1 billion 45, or more which includes an organic revenue growth expectation of about 6% and the revenue from the acquisition of the Acorn consumer health.
For the second quarter, we anticipate revenues of 260 million or more.
This revenue outlook assumes a few key factors 1 of the travel impacted portion of our business will continue at the recovered levels for the remainder of the year.
<unk>, we still anticipate flat sales to prior year, and the cough and cold and headlights areas of our business and.
And 3 the acquisition of the Acorn portfolio discussed today should contribute approximately $40 million to the fiscal year net sales.
We anticipate adjusted EPS of $3.90 or more for fiscal 2002 for Q2, adjusted EPS is expected to be 95.
Or more.
These attributes translate into strong free cash flow as well, where we anticipate adjusted free cash flow of $245 million or more for the year.
With that I'll open it up for questions operator.
As a reminder to ask the question you will need the cash star 1 on your telephone to withdraw your question cash the talent teach please stand by while we compiled the Q&A roster.
Our first question comes from the Pash Perry of Oppenheimer. Please proceed.
Good morning, Thanks for taking my question on and congrats on a really nice quarter.
So I guess I wanted to start our first just with your guidance on just commentary on on really the travel of portion of that you guys look looking for us So clearly the the delta balance out there.
As you look at on on a recent weeks, which of you guys seen any changes in the channel just given the delta vary in terms of the demand and then and also on Australia, just curious of given the some of the resources lockdowns areas of your starting to see.
And the impact on on the travel portion of your portfolio.
Good morning, with cash yet so far we haven't seen any any change in the trends that were helping to drive the Q1 results that we saw.
This point the other.
Of the thing I think it's important to point out on you.
You consider our new updated outlook is that the base business continues to do very well and we've incorporated some of that strong performance in the updated outlook as well.
We're really in what's going to be I think of 3 year.
Period of really tough to understand comps right last year, we had the COVID-19 disruption right in the created low watermarks from any companies. This year I think we're going to see very lumpy and oddly paced recovery in certain categories like we realized in Q1, and then next year.
We're going to be comping against those oddly recovered period so.
Think we're entering a period of that's going to be tough to understand but I think the important thing for.
Outlook in our businesses that are based business continues to do very well with strong growth in consumption games of cross the portfolio not just of recovery and some of the COVID-19 disrupted categories.
Okay, Great and then I guess, just going back to your base business I mean, very strong growth during the quarter and I know you guys of talked a lot in recent quarters or even the or just about the brand building efforts on and the execution in that area.
Just any more anti in terms of what you think contributed to a strong performance of the based on the portfolio and then drudge retail ditzy benefits relate to the boxing. So just curious how you guys think about the sustainability of of the momentum within the the drug channel.
Yeah. So let me address the the drug channel or really sales by channel, but last year, we saw incredible growth in R. E Commerce business as consumers changed where they bought the product. They went online and this year we're seeing.
Gains in the drug channel.
Our strategy is be available wherever consumers choose to buy the product and that net approach was really paid off for us last year of again this year.
No matter, where the consumer shows up so.
Who who knows.
How consumer shopping.
Patterns will will will change over time for us it really doesn't matter will be available wherever they go.
I think the first part of your question is the ongoing.
Strength the cost of the portfolio on what the outlook is.
Long term brand building investments launching new products, bringing innovation is of playbook, we're going to continue to executed as we think of our growing categories.
It's going to drive long term growth. So we continue to feel good about our long term outlook.
Okay, Great and then maybe I'll start off of the.
The antics reflected in our increased outlook for the year.
Okay, Great and then maybe just 1 final question maybe for Chris just on Terra tears.
Can you comment on seasonality of that business or just the margin dynamics of characters.
Yeah. So the 30th business through past, we've talked about from a financial profile perspective really being in line with our company.
From a margin per gross margin perspective as well so.
Similar to the to our business in terms of the profile.
Seasonality.
Nothing of kind of seasonality and the business, so kind of similar to clear eyes as opposed to say an allergy brand.
For for Eyedrop so.
It's limited.
Okay, great. Thank you.
Thank you.
Thank you. Our next question comes from John Anderson of William Blair <unk>.
Good morning, everybody.
Morning on.
Congratulations on a.
A quarter.
I think the contribution that you've quantified.
From the recovery in some of the travel.
The latest.
I am in the quarter.
You look to the balance of the year in on the guidance that you've provided.
Are you assuming kind of of similar contribution.
In dollar terms.
From those Covid impacted category How're, you kind of of assessing the.
Or is there some kind of diminishing.
As you go forward and the contribution but.
Yes, John Hi, It's cross so.
Our full year outlook is expecting continued rebound in the travel related categories to prepandemic levels still a highly volatile environment, but that's the assumption going in this.
This is most impactful to the summer travel season.
And Q2.
We've talked about the the base business being strong and Q2 similar to Q1 right with the strong consumer activity, we've seen bit easier comps and then normalizing trends in the back half versus the first half so think of the base business returning to kind of that low single digit growth in the second half as we exited unusual period with.
With the remainder of of the Covid impact the categories not really expecting any change to the original guide which was flat the prior year, that's cough cold and headlights, primarily so you kind of have to break COVID-19 into travel related of non travel related but in terms of that travel related bump. We got we are expecting the normalized recovery to continue throughout the year.
Okay.
And then.
Well.
Should we expect some.
Benefit from.
Let's say on a brand like be some goodies, which has a strong from the seat store channel, which should also benefit I would think from kind of of a return to work returned of travel.
Scenario.
And maybe even some of.
The Mike mix with.
More schools opening person in the fall or were you thinking about those categories and breakers channels categories on Brown yeah.
So when we when we talk about.
The recovery.
Travel on on the go like I had in my comments today and includes a pickup from D. C Goodies amcor eyes in.
In particular, the pocket Pal products that sold through C store, so that was a component of the 25 million.
And the increase in the full on your outlook, John because to your point, we absolutely see of pick up and.
And that channel on photos brands.
In terms of headlights again, we've been monitoring of closely we're in the middle of summer camp season, and we still haven't seen any uptick.
Headlights outbreaks and we've got Ah ha.
Headlights trough of our out online if you want to take a look for yourself as well.
We haven't seen we'll see what happens when we get back into the school season, whether kids back in the classroom.
Triggers that and we've got the unknown around cough cold is the weather will have an increase in cough cold incident levels, such that it will trigger retailers to rebuy light on both of those categories retailers still have the.
Decent levels of inventory and keep an eye on it or the top 5 plus customers.
So not only about an increase in internet levels, it's about and.
Of an increase on nostril cause retailers to to reorder at some point.
So a little bit more complicated than.
It may sound from the circles.
Understood.
And then.
Could you may have talked about this in your prepared remarks, I'm, sorry, I joined a bit late.
The gross margin improvement that you saw year over year can you talk a little bit about the.
The factors that growth that and then the follow on to that or are you planning any pricing to address any inflation that you're experiencing in the in the business.
Sure Hey, John maybe I'll take the gross margin Ron can take the price in question gross margin was primarily mix. This quarter. You know you think about a brand like Dramamine is the higher than average gross margin international sales with Hydrolyte, particularly in particular with.
The.
Strong performance this period drove the mix.
For the quarter and then also just the higher we get some leverage from higher sales as we saw back in queue for of fiscal 2000, when the when sales elevated and we and we got some leverage there.
In terms of inflation John.
Face inflationary pressures every year.
We're seeing many of the same inflationary pressures that you hear others talk about although till the lesser degree of given are hiring and low weight profile of of our product. So.
It's something that we are used to dealing with every year.
We've got tactical price increases plan.
For the year of along with the cost savings programs.
To help offset bells going forward, so really nothing new.
4 of us in terms of dealing with inflationary pressures.
Okay and the last 1 for me on.
Acorn.
Obviously the.
The the vast majority of the businesses is that there appears brands, but they're a handful of smaller brands there.
Where where the both get classified to those the of classified as.
Non core are they.
What what are your plans for the I guess, the smaller brands on that part of the portfolio.
Sure. So the those tailed brands with that have strong loyal following followings role will be to generate earnings and cash flow that we invest in the.
Behind the rest of the business just like the rest of of our non core and tail brands. So it's really more of the same which is we acquired.
A very nice leading brand that we think has wonderful opportunities to grow of long term and it came along with the small tail that.
We will manage for for cash over time.
Okay. Thank you very much.
Thank you John.
Thank you. Our next question comes from Stash, which day.
Of <unk>. Please proceed.
Hi, Good morning, everyone, Chris I think I should probably of question best for you I just wanted to follow up on your comments on advertising and marketing plans sounds like maybe this is a reflection of brands mentioned of variability, but it sounds like you are of maintaining a degree of discretion and how you are allocating and just talk a little bit more about how.
On said, you're an implant is and I think you mentioned Q2, it's going to be around 14 per cent, but how should we think about just as the basic framework of cadence for the year.
Yeah, that's the A&M really rolls up from our brands individually and we always say the number of fall, where we run our programs and so.
I am expecting A&M as.
For the first half to be about equal to the second half in terms of in terms of dollars. So I think if you do the math from Q1 night, we guided closer to 14% per Q2 Q.
Q3 is usually higher for us in queue for keyboard is usually our lowest quarter in terms of seasonality of A&M spend in particular.
So that's how they will probably flow for the rest of this year.
Okay. That's really helpful. And then of follow up to replace his earlier question on.
On any changes in weekly cadence I'm, just curious of shocked you're hearing from your retailers how are they planning into inventory is it are we.
Wait and see approach are they willing to take some inventory to have some back stock and safety stock.
Are you are noticing about order of patterns and how does that frame. How do you think about kind of the back half of the year opportunity and whether a level of conservativism, our connection and your guidance.
Yeah, So I think.
For starters staff is that.
In general, there's a little bit of of worry around supply chain out there in retail later on.
Broad brush here.
So the I think that's the first part so I think retailers are looking to play it more safe and not looking to to reduce the inventory or or keep things.
Sure, so but per our categories it seems to be fairly stable.
At this point, so we're not anticipating any meaningful swings in retailer inventories during the during this period.
Okay and last 1 from me and Ron. This is for you. It's just on the Destocking effect, we've been seeing in the drug cannot seems like drug may be is picking up a little bit of traffic again with the vaccination cycle.
True the bulk of what you expect to be that Destocking headwind and now add new base line to grow from.
Yeah and again the Destocking.
That we saw on the drug channel.
Couple of for a couple of years was driven by of their focus to improve the performance of their business.
And as their businesses have stabilized.
We think that initiative is behind them in behind Us at this point.
Thank you very much you're very helpful.
Thank you Sir.
Thank you. Our next question comes from Linda Liza of D. A Davidson. Please proceed.
Hi, how are you I was just hi, a couple of.
Of the companies that we fall I'll have reported kind of of channel chefs as brick and mortar retailers have reopened can you remind the remind us what percentage of e-commerce represented for you in FY 21, and then did you see any shifting kind of away from the Congress the brick and mortar in the fiscal first quarter.
Yeah. So so last year R e-commerce business growth to just over 10% or so of of our of our total business.
And for the first quarter, we continued to see strong double digit come.
Consumption growth and E Commerce, and again that includes not only Amazon, but the dot com arms of our brick and mortar partners target Dot com, Walmart dot com and others. So.
For us it continues to be a channel of continued growth.
Okay.
And then just a couple of questions on the spur of tears. So you kind of have the.
Oh, well I guess, you could call it synergy with clear eyes.
Is that expected to result in any actual cost synergy. So in other words is there any overlap on.
Outskirts of pliers, where you can consolidate or anything of that nature of that would result in maybe some special synergies that you wouldn't normally get.
In your acquisition.
Yes, I think over the long term it will present cost savings.
For us, but any change in the supply chain, especially on sterile eyecare takes a very very long period of time.
The seller, we entered in towards a long term supply of agreement with the seller of the brands with Acorn, which we're delighted to have so we'll see where it goes over the long term for.
For cost savings opportunities, but it really all starts with having a great partner, which which we got as part of this transaction.
Okay, and then finally on free cash flow.
You know it seemed like you were kind of thought that that $200 million level for a couple of years, but you've really taken of bump up in terms of your annual free cash flow.
How sustainable is that level I mean of that the accretion from the deal that's adding to let so that's sustainable of or do you feel like this is on on abnormally high level that you're seeing an app line 20 tail that may come down a little bit in the future.
So I guess for starters, we saw a string of continued cash flow of growth for for a long period of time now we've had a dramatic increases are EBITDA and EPS has grown and in particular are cash interest has dropped from the $100 million a year for this year's outlook in the mid sixties.
Has been a big driver of it so as we look forward. We would continue to expect ongoing cash flow of growth as are powerful cash flow of allows us to delever and reduce our cash flow of our cash interest as well of continuing EBITDA growth. So we think Linda will continue to some of those growth on our cash flow.
Okay, great. Thank you very much thank.
Thank you Linda.
Thank you. Our next question comes from niche Tinyurl of Stupidity and please proceed.
Good morning.
Most of my questions of milk.
Yes, but I do have.
A couple of on the other ones here.
The $25 million you call out of the Q1 sales increase.
Mentioned like half the time it.
What do you mean by that.
Yeah, He mentioned, Chris so for.
For timing, we're talking about things that Ron was discussing such as the store opening back up right. We saw.
Recovery and the C store of stocking back up if you will there were also certain programs Prime day comes to mind that most folks know about that shifted from later in the year to our fiscal Q1. So that's what we meant by about half of that appropriate $5 million being timing.
Got it and then and when it comes the consumption.
So you feel I guess, we feel pretty good about.
Inventory.
In the channel.
But when I'm trying to understand is.
So e-commerce is still growing strong.
The C store is growing strong.
Drug stores there.
You know.
Is there.
Is it really just the.
Pent up demand, but the thing that you're a need space you know occasion, I I'm, just having trouble understanding.
You know where all the consumption is coming from.
Is it just merely comparative the last years.
The stripped his environment or.
You know how you parse out.
The various elements of of sort of consumption.
Yeah.
The first of all as I started with we're past this morning, I talked about really the odd.
<unk> and comps that we're seeing right, we're comparing against the low watermarks last year right. This unprecedented disruption. So we start by looking at our business.
With long term trends. So we're back looking at our fiscal plenty of physical 19 periods and comparing our market share on our consumption levels against the on Undistracted period of time. So if you go and you look at the share the consumption level for our brands compared to the fiscal 90.
And of 20.
We're seeing long term consistent gains in growth over that period of time. So you can go back and look at our biggest brands clear writing some rosy monistat, even the number of our core brands things like the Bronx, Gaviscon up and.
In Canada compound W of been killing a number of years now we have just had steady consistent growth across our portfolio year in and year out even last year at our business was down 2% last year on total if you pull out the 20% of the sales that was impacted by Covid are based on.
Business grew 5% last year, which is above our long term outlook and expectation. So our business has been killing it really for a long period of time and it's 1 of the messages were trying to make sure that you folks.
Get today, which is continued solid performance of across from.
Of portfolio.
Driven by our long term brand building approach.
Okay and then.
Yeah.
As it comes to.
The.
The Chris you mentioned the on the eighth of them spending if I heard that right was 14th.
10% of sales for the year, whereas the 14 per cent for the queue too.
It is that we're both of them percent per Q2 and about 15% for the year.
15% sorry of yesterday.
Okay.
That's all I have.
Thank you.
And as a reminder to ask the question you will need to crash Star line on your telephone.
Draw your question cash the pound key 1 moment for our next question.
And our next question comes from Anthony left the hidden ski of Sidoti and company. Please proceed.
Good morning of thank you for taking the questions. So.
Of course the growth.
I know you guys talked about the are benefiting in the quarter from a favorable mix shift your guiding too of slightly lower gross margin of for the full year.
Again is that just simply because of the you expect the mixture of the change are you seeing any other cost pressures already on this quarter or of how should we think about the cadence of gross margins for the rest of the year.
Anthony Chris.
Continues to be a lot of uncertainty about the COVID-19 will impact every the.
Consumer and that's the supplier environment, where 1 quarter in the physical 22, and while we did benefit from some favorable mix during the quarter at this point, we think holding our initial guide for the year is prudent.
Got it okay and.
And then.
In terms of of acquisitions going forward obviously.
You guys just closed on the 30th the acquisition of but just wanted to get a sense of so what's your appetite is for additional acquisitions of it seems like by the end of the year you'll be.
Closer to the lower end of your target leverage ratio of 4 times. So I just wanted to get a sense from Ya are you guys thinking about the growing the business potentially of food.
Shall M&A activity.
Yeah. So let me answer this I guess in the context of our.
Capital allocation strategy, which remains unchanged witches.
Continuing to look to Delever of lower R. Dot net overtime and then we will.
Addressed M&A opportunistically of things come up the first order of business is to integrate fair of tears right, where 35 days post closed so we're busy getting that integrated into the business and once that's behind us will be ready to think about future opportunities. So.
Historically, I think we've been disciplined and our approach to M&A and focused on things that make long term strength.
Surround brand building opportunities and growth and that'll be the way we continue to think about things.
Got it alright. Thank you the best of luck.
Thank you Anthony.
Thank you I would now like to turn it back to 1.9 thirtyish or closing remarks.
Okay. Thank you operator, and thanks to everyone for joining us today, and we will talk next quarter have a great day.
Just conclude today's conference call. Thank you for participating and you may now disconnect.
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