Q4 2025 Prestige Consumer Healthcare Inc Earnings Call

Speaker Change: Good day and thank you for standing by. Welcome to the Prestige Consumer Healthcare's fourth quarter 2025's earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message asizing your hand as raised. To withdraw your question, please press star 11 again.

Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Phil Terpolilli, Vice President, Investor Relations and Treasury, please go ahead.

Speaker Change: Thanks, operator, and thank you to everyone who has joined today. On the call with me, Mr. Ronald Lombardi, our chairman, president, and CEO , and Christine Sacco, our CFO and COO.

Speaker Change: On today's call, review our full year fiscal 2025 results. Discuss our full year outlook and then take questions from analysts.

Speaker Change: A slide presentation of companies today's call, you can be accessed by visiting PrestigeConsumerEalthcare.com, clicking on the Investors link and that on today's webcast and presentation.

Speaker Change: Remember, some of the information contained in the presentation today includes non-GAAP financial measures. Reconciliation to the nearest GAAP financial measures are included in our earnings release and slide presentation.

Speaker Change: On today's call, Magellan will make forward-looking statements around risks and uncertainties, their detailed and complete safe harbor disclosure on page two of the slide presentation, which the company is to call.

Speaker Change: These are important to review and contemplate. Business environment on certainty remains heightened due to evolving US and international tariffs, supply chain constraints, and inflation which have numerous potential impacts.

Speaker Change: This means results could change at any time and the forecasted impact of risk considerations is the best estimate based on the information available as of today's date.

Speaker Change: Additional information concerning risk factors and cautionary statements are available in our most recent NACC filings and our most recent company, TenK.

I'm now handed over to our CEO , Ronald Lombardi, Ron [inaudible]

Ron Lombardi: Thanks so, let's begin on slide 5. We are very pleased with our record fiscal 25 results, which delivered a year of solid revenue and earnings growth thanks to our diversified portfolio of brands and proven business attributes.

Ron Lombardi: Net revenue of over $1.1 billion increased just over 1% versus the prior year, consistent with our forecast.

Ron Lombardi: Our international segment growth continues to deliver growth in excess of 5 percent, while in North America, many of our GI brands, such as Dramamine and Fleet, continue to experience superior results.

Ron Lombardi: We've also continued to see stabilization for the summer's eve brand within the Women's Health category, which was a key priority we discussed at the start of the year.

Ron Lombardi: For profitability, we expanded Gross Margin slightly, anticipate further expansion in fiscal

Ron Lombardi: This helped generate solid adjusted EPS of $4.52 up approximately 7% consistent to our long-term growth objectives.

Ron Lombardi: We continue to execute a steady and disciplined capital allocation strategy using our strong fiscal 25 free cash flow, which was in excess of $240 million.

Ron Lombardi: to finish the year at 2.4 times leverage while still executing value-enhancing capital deployment. Chris will review at Go Forward Capital Allocation Priorities later.

Ron Lombardi: Now with that, let's turn to the next section for a reminder of a few of the ways our unique business strategy looks to generate consistent long-term performance.

Ron Lombardi: To begin, slide seven is a reminder of our marketing agility.

Ron Lombardi: One of the benefits of having a wide-ranging portfolio of brands is the ability to adjust our brand-building strategy and allocations in real time, focusing investments around the best near-term opportunities wherever they arise.

Ron Lombardi: In fiscal 25, we faced supply challenges for clear eyes, which we discussed last May. We worked quickly to refocus marketing efforts around the rest of our eye and ear care portfolio

Ron Lombardi: Each of which had unique opportunities available to invest behind. For Thereteers, we leveraged its well-recognized heritage of the dry-eye solution in multiple ways to generate solid growth of approximately 10%.

Ron Lombardi: for Stion D. Brox, two brands synonymous with their categories, a combination of innovation and accelerated marketing investments, helped add incremental growth.

Ron Lombardi: The result was clear. As shown on the left of the slide, these three brands outperformed their combined category growth by over three percentage points and are well positioned for continued growth.

Ron Lombardi: This agility and investments is the unique strength of our business, and we will continuously look to pivot into the best marketing opportunities that drive superior revenue growth.

Ron Lombardi: Now, let's turn to Slide 8 to discuss the e-commerce channel.

Ron Lombardi: Beyond executing successful marketing, we are focused on aligning our investments into channels that are important to consumers. We continue to see consumers shift channels most prominently toward e-commerce, where our long-term investments have enabled continued success.

Ron Lombardi: Even with robust growth over the last five years, we continue to maintain a consistent, double-digit, sales growth profile.

Ron Lombardi: For Fiscal 25, we've experienced solid consumption growth with strong performance across our key partners thanks to multiple tactics and solid retail partnerships

Ron Lombardi: Each of our individual brands develops and maintains its own e-commerce strategy, including continuous improvements to the user experience to help retain loyal consumers.

Ron Lombardi: For example, a recent refresh of the STI website helps consumers educate themselves around STI Symptoms and Relief Options.

Ron Lombardi: Equally important is engaging content that can help thrive traffic and conversion of new users. We've had wide-raging success across our portfolio with some examples shown on the right side of the page.

Ron Lombardi: So we reviewed both marketing and channel opportunities. Now let's turn to slide 9 to discuss innovation.

Ron Lombardi: Innovation continues to be a key part of Prestige Brand Building Toolkit. We operate with a multi-year pipeline of new product development concepts to ensure we generate new skews that match the needs of consumers.

Ron Lombardi: As shown on the page, the tactical elements are successful for the various products launched in fiscal 26

Ron Lombardi: are wide-ranging. Most importantly, all of our innovations seek to provide better consumer experiences, each designed to satisfy key consumer interests like launching a new flavor, adding of an efficacious ingredient or a new plane.

Ron Lombardi: Some of the latest product highlights these attributes include the recent launch of watermelon and pineapple flavors for hydrolyte, as well as the Modestat Maintain Kit, which contains boric acid in two formats in an all-in-one older solution.

designed for peace balance while addressing odor and discharge.

Ron Lombardi: Incrementally, some innovations often seek to build on improving consumer experience through new technologies or form factors.

Ron Lombardi: An example of this we've discussed in the past was the launch of COMPONW Nitro Freeze, a work treatment solution with extreme freezing technology, not available and others OTC treatments.

Ron Lombardi: For fiscal 26, we have numerous new form patches across multiple products, including the launch of Summers Eve Whole-Body Deodorant and the recent launch of Fleet's Oral Stool Soffner.

Ron Lombardi: Lastly, many of our product launches help expand our brands into adjacent categories, leveraging their history of efficacy and strong brand heritage with consumers.

Ron Lombardi: One recent example is goodies plus headache pain and mental alertness, which takes goodies proven history of fast pain release combined with added caffeine to help consumers get back to the things they enjoy faster.

Ron Lombardi: So in summary, we have a long history of innovation, another great year planned for 26 and a continuous new product pipeline that should help provide consistent organic sales growth over time.

Ron Lombardi: With that, I'll turn it to Chris to discuss the financials.

Chris: Thanks, Ron. Good morning, everyone. Let's turn to slide 11 and review our fourth quarter and full year fiscal 25 results. As a reminder, the information in today's presentation includes certain non-GAAP information that is reconciled to the closest gap measure in our earnings release.

Ron Lombardi: Please note, I'll also be discussing our initial fiscal 2026 outlook in greater detail by line item. This is also available in summary form in the appendix of today's slide presentation.

Ron Lombardi: As well as a favorable prior year comparison of supply chain challenges adjusted diluted EPS of one dollar and 32 cents was a quarterly record up sharply versus one dollar and two cents in the prior year. Thanks to a combination of factors including T.

Ron Lombardi: Gross margin expansion and lower interest expense, let's turn to slide 12 for detail around consolidated results.

Ron Lombardi: Segment experienced solid growth in excess of 5% thanks to strong performance, including the Hydrolyte brand, which continues to grow household penetration and overall usage in North America. We were pleased with continued strong broad based growth in the.

Ron Lombardi: Which helped offset declines from challenged cough and cold sales and the anticipated gradual supply recovery for clear eyes, which we anticipate will continue in fiscal 26 for some reason we experienced the second quarter in a row of year over year sales growth in Q4. Thanks.

Ron Lombardi: Marketing and innovation strategies E Commerce remains a highlight and our fastest growing channel of double digits. Once again in fiscal 25, and now representing high teens as a percentage of sales E Commerce channel shipment growth accelerated in Q4.

Ron Lombardi: Consumption, which we believe was an anticipation of certain tariff actions. Our outlook assumes this order timing resulted in an approximate 7 million dollar benefit to Q4, which will come out of Q1.

Ron Lombardi: Total company gross margin of 55.8% for fiscal 25 was up 30 basis points versus the prior year, including material improvement in Q4 to approximately 57%.

Ron Lombardi: For both fiscal 26 and for Q1, we anticipate gross margin of approximately 56.5% driven primarily by cost saving measures. Please note. This gross margin forecast includes approximately $15 million in estimated tariff costs.

Ron Lombardi: Which is about $20 million on an annualized basis, Ron will discuss the tariff and macro backdrop in more detail later, but we have confidence that our needs based consumer healthcare brands and their leading market shares leave us well positioned.

Ron Lombardi: Advertising and marketing was 13.7% as a percentage of sales for fiscal 25 up in dollars for fiscal 26, we expect a and M of approximately 14% of sales both for fiscal 26 and Q1. This higher percentage is an.

Ron Lombardi: GA expenses were 9.5% of sales in fiscal 25 as anticipated we'd anticipate a slight increase in GA on a percentage basis in fiscal 26 for Q1, GA and dollars should be consistent with the prior year.

Ron Lombardi: Our full year normalized tax rate of 23.7% was consistent with our long term expectations and we anticipate a similar tax rate of approximately 24% again in fiscal 26, finally I'd like to point out. These results are adjusted.

Ron Lombardi: As shown on the left side of the slide. This performance is another example of our steady long term free cash flow generation. Thanks to our unique business attributes, which continue to enable further net leverage reduction while still leaving capital available for other.

Ron Lombardi: In the fiscal year, we reduced our variable term loan debt balance to zero repurchased over $50 million and shares and build some cash on the balance sheet in advance of future M a opportunities.

Ron Lombardi: This balance approach, we achieved a covenant defined leverage ratio of 2.4 times at the end of March looking ahead, we'd anticipate a continuation of our disciplined but flexible capital allocation strategy, Let's review those priorities on slide 14.

Ron Lombardi: Our improved leverage ratio robust free cash flow and consistent business performance gives us strategic flexibility with our capital deployment moving forward, we still anticipate approximately $1 billion of free cash flow over the next four years, which is after.

Ron Lombardi: Long term marketing investments, we continue to make in our strategic brands, we remain committed to our waterfall of priorities shown on the page that add value for our shareholders first we'll continue to evaluate MA as part of a disciplined capital deployment strategy. We continue.

Ron Lombardi: Fragmentation as an opportunity to acquire future brands and portfolios next we anticipate additional share repurchases under our multiyear share repurchase authorization to offset dilution and return capital to shareholders last we anticipate.

Ron Lombardi: Yes. So in summary, we have both a healthy leverage position and steady free cash flow profile, which is highly beneficial to enabling disciplined value added capital allocation with that I'll turn it back to Ron Thanks, Chris Let's turn to slide 16.

Ron Lombardi: As we begin fiscal 26 market conditions remain fast changing and hard to predict to start as everyone as well aware terrafolatility and uncertainty continues to be complex for businesses to navigate the potential impact.

Ron Lombardi: Including both the direct costs of a finished good being tariffed as well as the wider inflationary impact. These risks are reducing consumer optimism broadly where consumers are actively reviewing their spending decisions. Fortunately, we believe our unique business model leaves used.

Ron Lombardi: Challenging environment. Many of these attributes were proven to be beneficial during COVID-19.

Ron Lombardi: We have a wide ranging portfolio of needs based products, we have approximately 20 strategic brands across seven distinct product categories. Each of which is broadly distributed this allows us to be available with a product that is important to maintaining our.

Ron Lombardi: To high tariff countries. We also have many products produced elsewhere in North America that are currently exempt from tariffs under U S. MCA.

Ron Lombardi: Third we are moving with urgency to identify cost savings levers across our supply chain to help mitigate any near term tariff impacts and resulting long term inflation lastly, with a portfolio of leading brands, we are well positioned.

Ron Lombardi: Pricing as necessary. So in summary, our broad portfolio of neat space brands, Diversed, and mostly domestic supply base and a focus around cost savings leaves us well positioned to navigate the current environment with that let's turn.

Ron Lombardi: 19 for our initial outlook that reflects this backdrop.

Ron Lombardi: Even with the fluid macro environment, thanks to our proven business strategy, we achieved a consistent revenue performance in fiscal 25 and believe we are on track to do so again in fiscal 26 for fiscal 26, we anticipate.

Ron Lombardi: 2 billion 140 to 1 billion 155, with an FX headwind expected of about a point. This includes an organic revenue growth forecast of approximately 1% to 2% versus the prior year for Q1.

Ron Lombardi: One and Q2, we anticipate diluted E. P. S of approximately $4.70 to $4.82 for the full year or about 4% to 7% E. P. S growth. This is thanks to higher expected.

Ron Lombardi: Gross margin expansion and lower interest, we expect first quarter E. P. S. Between 98 cents and one dollar. These profitability assumptions include what we know about the tariff environment as of today, we currently.

Ron Lombardi: Impacts of approximately 15 million for fiscal 26, even with these projected impacts we are still forecasting gross margin expansion to about 56.5%. Thanks to our strategic cost savings efforts and account.

Ron Lombardi: Been executing for some time.

Ron Lombardi: Lastly, we anticipate free cash flow of 245 million or more thanks to our strong financial profile. The stable free cash flow will continue to enable multiple capital deployment priorities that will drive upside and maximize.

Ron Lombardi: That I'll open it up for questions. Operator. Thank you as a reminder to ask a question. Please press star one one and your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again please stand by.

Ron Lombardi: And our first question comes from Rupesh Parik of Oppenheimer. Your line is open good morning, and thanks for taking my question. So I just want to go back to organic sales growth guide of one 1% to 2%. So it sounds like you know, maybe there's a half point or so headwind just really to that shift in.

Ron Lombardi: Sorry pull forward to to Q4 versus Q1, but just anything else you know that drives it below your 2% to 3% larger term algorithm.

Ron Lombardi: To your point, we did talk about in the prepared remarks, the timing of certain E. Commerce orders, we highlighted those at about $7 million, which we believe was pulled forward and FX remains difficult to predict we saw some highly unusual swings and two of our.

Ron Lombardi: Australian dollar and the Canadian dollar. So overall, we think we're being prudent in our guide given the current environment. Okay. So it sounds like just more I'm consumption, just more conservatism versus any weakening you're seeing in your business I guess quarter a day is that.

Ron Lombardi: Not the way to think about that that's a fair way to think about it yes, okay. Okay, great and then second on clear eyes, just a latest in terms of how you think about the recovery for clear eyes. You know do you guys expect to get back to you know maybe normal this year from I guess, insox retailers, and just where you'd like to be with the business.

Speaker Change: Yeah. Good morning, Pash, so for starters, there's really no change in.

Speaker Change: The clear eye supply chain plan that we began to talk about about a year ago, where we're looking to expand capacity at the existing suppliers and bring on two new suppliers in fiscal 26 like we saw in fiscal 25 the.

Speaker Change: Shipment results can be lumpy, we anticipate them being a bit lumpy as the current suppliers take production down to do upgrades and expand capacity and we work with them to manage that so that we have the best managed timing from.

Speaker Change: In addition to that we would expect that the second half of the year will begin to see the bigger recovery year over year, and just an absolute dollars versus the first half as that added capacity in the new suppliers come online.

Speaker Change: Okay, great. Thank you I'll pass it along.

Speaker Change: Thank you.

Speaker Change: And our next question comes from Susan Anderson of Canaccord. Your line is open.

Susan Anderson: Hi, good morning, Thanks for taking my questions nice job on the quarter and ending the year I guess, maybe just to follow up on the woman's health category definitely help you nice growth in fourth quarter I guess, how are you feeling about both brands some of the even monostat heading into this year and then.

Ron Lombardi: Yeah. Good morning, Susan So women's health and Summer's Eve in particular, we're we feel really good about the progress that the brand made during fiscal 25, each quarter the brand improved quarter to quarter, and we actually were able to.

Ron Lombardi: Redoing, our marketing messaging and our marketing communication tools, the new products that we launched in fiscal 25, the ultimate order protection in both wash spray and wipes forms has been the best for.

Ron Lombardi: All in all we we expect that our women's health franchises will get back to a position of being able to grow over the long term.

Ron Lombardi: Inventory management Whatsapp in the shelf in the bathrooms of our consumers at home. So we're starting off with that that forecast as we head into 26.

Ron Lombardi: Good morning, Susan it's Chris So to your point at a 2.4 times leverage we feel well positioned to demonstrate multiple uses of our capital just as we did in fiscal 25, right. We did about $50 million in repurchases. This year, we paid off our term loan which was 100.

Ron Lombardi: I think you'll see a balanced approach in us doing some share repurchases, but also building some cash on the balance sheet, because we want to be well positioned when something that that fits our criteria is actionable.

Speaker Change: Thanks, So much good luck the rest of the year.

Speaker Change: Thank you.

Speaker Change: [noise]. Our next question comes from Keith Davis of Jefferies. Your line is open.

Keith Davis: Hey, good morning. Thanks for the question I wanted to just drill down a little bit on the consumer uncertainty it doesn't sound like it's impacting your business that kind of makes sense given your portfolio, but I'm curious how you might look to evolve your innovation or.

Keith Davis: Just through the year. Thank you.

Keith Davis: So what we've seen in the in the past during challenging economic times or fluid fluid times is that needs based category tend to be the last place that consumers look to make a change they stick with their trusted brands worked for them.

Keith Davis: What we have seen though over time is that where consumers choose to purchase the product will evolve and we've started to see that in fiscal 25. So they may look for the best value proposition, whether it's price or a different price point offering.

Keith Davis: Broad distribution and our very product offerings within our brand well suited to meet whatever the consumer might be looking for so we'll look to see where the consumers of evolving to and we'll realign our investments to better support.

Keith Davis: Products and that proposition that best fits their needed at that moment. So I think I commented on this today in the prepared remarks, one of the things that we do well here is pivot quickly and change to me a.

Keith Davis: Environment, we saw that in 25, when we pivoted and made changes to Iker investment as we dealt with clear eyed supply and took advantage of therapiers.

Keith Davis: Dbrocks and sky opportunities, So we'll continue to be fluid and.

Keith Davis: Thank you.

Speaker Change: And our next question comes from Glen West of William Blair. Your line is open hi, everyone. This is Glen West Stepman for John Anderson, I was hoping to ask about the hot topic of term.

Speaker Change: I assume that's kind of taking into account that the current tariff environment stays as it is for the four year, obviously, and then you talk about being able to offset it with cost savings lovers. I was wondering if you guys could give us a little color.

Speaker Change: Hey, good morning, Glenn This is Chris So you're correct in your assumption we are assuming in our guide that all tariffs that are in place or scheduled to be in place as of today. We around mentioned in the prepared remarks, the U S. MCA exemptions the elevated Chinese tariff rate global basis Fo.

Speaker Change: Tariffs aren't very meaningful to us and and have been factored in our guide, but just given our limited exposure to that you know and we're working closely with all of our suppliers to identify and close exposures that can result in savings for fiscal 26 and beyond you know you asked about.

Speaker Change: Dual sourcing or alternative sourcing even for Apis for some of our our co Packers everything's on the table and we're looking and working closely with our external partners to mitigate the costs and that will obviously be our where we go first but to your point we do.

Speaker Change: Taking some surgical pricing if need be but our efforts are gonna start with cost savings. Okay. That's helpful. And then if I could sneak in one more just on the E Commerce channel up to you know a high percentage.

Speaker Change: I T of sales at this point is that still like really mainly North America or how is the rollout kind of going internationally. It's e-commerce picking up internationally at all sort of.

Speaker Change: Yeah. So Glen this is Ron the E Commerce is still largely U S centric, we don't see.

Speaker Change: The growth in online purchases in the other countries, where we are doing business. So in the U K and Australia and even in Canada E. Commerce, just hasn't grown to the extent that it has in the U S doesn't mean that we're not looking for.

Speaker Change: Our retail partners in those regions to help them invest and grow those those channels, but for now it's very much U S centric.

Speaker Change: Okay. Thank you guys very much for the time I'll hop back in the queue. Thanks. Thank you and as a reminder, if you have a question. Please press star one one and our next question comes from Anthony Lebasni of.

Speaker Change: Your line is open.

Anthony Lebasni: Good morning, everyone and thank you for taking the questions and certainly nice results for four Q.

Anthony Lebasni: Just wondering so obviously as you pointed out the vast majority of your products are sourced in the U S or North America. Just wondering if there are any opportunity that you think that for those that are sourced outside of the U S are there any domestic suppliers that are out there.

Anthony Lebasni: You think you're you're kind of tapped out with that yeah. We're certainly looking where where we can you know I would say obviously, the most meaningful impact about half of our tariffs is relating to China limited exposure, but just given the magnitude of the of the rate.

Anthony Lebasni: If there are other countries even outside of the U S. Obviously that don't have the same impact as as the impact China is having but again for us I think it's a little bit similar to COVID-19, where tariffs for us at about $15 million. This year. We feel is manageable will look to offset it with a lot of savings.

Anthony Lebasni: Given the brand positioning surgical pricing if necessary.

Anthony Lebasni: Okay, and then you've talked about the innovation of you know it's not the first time, but I'm. Just just look just wondering as you look towards this year.

Anthony Lebasni: Are you as far as like the the number of products that you're looking to launch is that comparable to past years or you know or do you guys target a specific percentage of sales that you want to come from new products, just just wondering how.

Anthony Lebasni: What's the margin profile for the new products that you're looking to roll out.

Anthony Lebasni: Yes, so good morning, Anthony So the first part of it is we tend to see see us a fairly steady impact from new products. Each year, we don't target a certain percentage of sales to come out of new products in a.

Anthony Lebasni: We just look to have great ideas that our teams work on on over a long period of time. It can take two or three years to launch new products or bring new innovation to the OTC market. So it's something that has to be a focus over the long.

Anthony Lebasni: Over time, Yeah. Nancy this is Chris just to piggyback on run from a margin perspective, you know we haven't edict that all of our innovation needs to be margin accretive to the brand right. When when we don't have we don't take price if we don't have associated costs impacts.

Speaker Change: Got it alright, well, thank you very much and best of luck. Thanks.

Anthony Lebasni: Thank you.

Anthony Lebasni: [noise] and our next question comes from Doug Lane of Watertowel Research. Your line is open yeah, hi, Thanks, and good morning, everybody just one thing I I noticed that the Opella deal closed this week and that's a big transaction an.

Speaker Change: That impacts you either competitively or perhaps it could it be an M. A catalyst for you.

Speaker Change: Good morning, Doug So I guess Apella is the next in line of the spin outs of the big pharma. So we've been through this a little bit before it really doesn't do anything to change the competitive landscape of where were focused or the competitors in those space and over time, we've seen.

Speaker Change: The fig pharmacy outs potentially be opportunities for brands that may come to market. So it's more of the same with the latest spinout for us.

Speaker Change: Okay. Thank you that's helpful.

Speaker Change: [noise]. Thank you I show no further questions at this time I'd like to turn it back to Ron Lombardi for closing remarks.

Ron Lombardi: Thanks, operator, and again, thanks to everyone for taking the time to join US today as we've discussed throughout this call. The current environment is fluid, but we believe our unique business attributes and strategy has us well positioned to navigate the upcoming year successfully thanks again for.

Speaker Change: Have a great day.

Speaker Change: This concludes today's conference call. Thank you for participating in you may now disconnect.