Q1 2026 Prestige Consumer Healthcare Inc Earnings Call

Speaker #1: 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 advising your hand is raised.

Speaker #1: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Phil Terpolilli, Vice President, Investor Relations, and Treasury.

Speaker #1: Please go head.

Speaker #2: Thanks, operator, and thank ou to everyone who's joined today. On the call with me are Ron Lombardi, our Chairman, President, and CEO. And Christine Sacco, our CFO and COO.

Speaker #2: On today's call, we'll review our first quarter fiscal 2026 results, discuss our full-year outlook, and then take questions from analysts. A slide presentation accompanies today's call can be accessed by visiting prestigeconsumerhealthcare.com, clicking on the Investors link, and then on today's webcast and presentation.

Speaker #2: Remember, some of the information contained in the presentation today includes non-GAAP financial measures. Reconciliations to the nearest GAAP financial measures are included in our earnings release and slide presentation.

Speaker #2: On today's call, management will make forward-looking statements around risks and uncertainties, which are detailed in a complete safe harbor disclosure on page 2 of the slide presentation that accompanies the call.

Speaker #2: These are important to review and contemplate. Business environment uncertainty remains heightened due to supply chain constraints, high inflation, and geopolitical events, which have numerous potential impacts.

Speaker #2: This means results could change at any time, and the forecasted impact of risks is a best estimate based on the information available as of today's date.

Speaker #2: Additional information concerning risk factors and cautionary statements is available in our most recent SEC filings and most recent company 10-Q that was released this morning.

Speaker #2: I'll now hand it over to our CEO, Ron Lombardi. Ron?

Speaker #3: Thanks, Phil. Let's begin on slide 5. Q1 sales were approximately $250 million. We were disappointed by the start to the year which did not meet the $258 to $260 million revenue forecast, we communicated back in May.

Speaker #3: At the time, we had forecasted a year-over-year decline in Q1 largely based on the timing of sales orders between Q4 last year and Q1 this year, as well as modestly lower sales in eye care.

Speaker #3: Unfortunately, a planned production shutdown in eye care scheduled for early May stretched longer than anticipated, resulting in a significant shortfall for ClearEyes in Q1.

Speaker #3: We'll discuss the action steps we are taking to address this including the announcement to acquire Pillar 5, on the next page. Elsewhere, our business performed largely in line with our expectations including strong international segment growth and healthy long-term consumption trends for many of our key US brands such as Dramamine and Fleet, as well as the continued recovery of Summer's Eve.

Speaker #3: In addition to this, we experienced gross margin expansion 150 basis points to 56.2% thanks to ongoing cost savings efforts resulting in a gross margin similar to our forecast.

Speaker #3: For EPS, we delivered $0.95 which was below our expectations due to the sales miss but still up approximately 6% versus the adjusted prior year thanks to the gross margin expansion, marketing expense timing, and lower interest expense.

Speaker #3: Pre-cash flow of $78 million was a quarterly record and continues to enable capital deployment used to enhance shareholder value. In Q1, we repurchased over $400,000 shares and maintained our leverage ratio of approximately 2.4 times.

Speaker #3: Now, 's turn to page 6 to discuss our eye care supply. Given the challenges faced in our eye care supply over the past year, we wanted to give a detailed update on our actions to address the issue.

Speaker #3: Over the past year, we began accelerating our long-term efforts focused on how to best position our supply chain to support ClearEyes sales growth. The first phase of this was to ing on two new suppliers to supplement our long-term supply requirements and better align to our business phase has made significant progress with the first of these suppliers providing product deliveries in late Q1.

Speaker #3: The second supplier is on track to begin supply in early Q3. The second phase was to further invest in our North American-based partner to expand their capacity.

Speaker #3: Over the past year, we have made progress with them but at the same time have been significantly impacted by shortfalls in production. As we evaluated our options to address this, we decided the best course for us was direct ownership of the facility to help secure and expand long-term supply.

Speaker #3: Resulting in today's announcement of the agreement to acquire Pillar 5. This direct ownership will allow us to accelerate the expansion of capacity, including the startup of a new high-speed line that we expect production from in Q3, as well as future capacity additions to fully support our expected growth in eye care demand.

Speaker #3: As a result of these actions, we believe we will see some improvements in supply late in Q2 but a more meaningful recovery in the second half of fiscal 26 and into fiscal 27.

Speaker #3: With that, I'll pass it to Chris to walk through the financials.

Speaker #4: Thanks, Ron. Good morning, everyone. Let's turn to slide 8 and review our first quarter fiscal 26 financial results. As a reminder, the information in today's presentation includes certain non-GAAP information that is reconciled to the closest GAAP measure in our earnings release.

Speaker #4: Q1 revenue of $249.5 million declined to $6.6% from $267.1 million in the prior year and $6.4% excluding the effects of foreign currency. EBITDA was approximately flat in Q1 and diluted EPS increased approximately 6% versus the prior year, as the revenue decline was offset primarily by improved gross margin, the timing of marketing spend, and lower interest expense versus the prior year.

Speaker #4: Let's turn to slide 9 for detail around these consolidated results. As I just highlighted, our Q1 fiscal 26 revenues decreased 6.4% organically versus the prior year.

Speaker #4: By segment, excluding FX, North America segment revenues decreased 8.4%, and international segment revenues increased 7.1% versus the prior year. As Ron noted earlier, our Q1 sales declined due to our inability to move supply-constrained eye care product to customers to meet demand, as well as the expected order timing of a certain e-commerce customer that benefited Q4 of the prior year.

Speaker #4: Excluding these factors, we experienced organic growth. Positively, our international segment experienced organic sales growth of 7% thanks to broad-based sales growth. We also experienced impressive double-digit year-over-year consumption growth in the e-commerce channel continuing the long-term trend of higher online purchasing.

Speaker #4: Total company gross margin of 56.2% in the first quarter was largely as anticipated and up 150 basis points versus the prior year. Looking forward, we still expect a 56 and a half percent gross margin for the year, with a Q2 gross margin of 55 and a half percent.

Speaker #4: For tariffs, we now anticipate a full-year potential cost of approximately $5 million, as of today. This is the estimated cost prior to any strategic actions which we expect can fully offset the current tariff outlook.

Speaker #4: As a reminder, we have a predominantly domestic supplier base, and have a diverse and only modest exposure to high tariff countries, as well as certain products that are currently exempt from tariffs under USMCA.

Speaker #4: Advertising and marketing came in at approximately $35 million, or 14% of sales in Q1, down versus prior year due to the timing of marketing programs.

Speaker #4: For fiscal 26, we now anticipate an A&M rate of just over 14% of sales, and up in dollars versus prior year. G&A expenses were $11.4% of sales in Q1 due to the timing of certain expenses.

Speaker #4: For the full year, we now anticipate G&A of approximately 10% as a percent sales. Diluted EPS of $0.95 increased versus an adjusted diluted EPS of $0.90 in the prior year, as lower revenue was offset by improved gross margin, the timing of A&M, and lower interest expense.

Speaker #4: For full-year fiscal 26, we now expect adjusted EPS of approximately flat to 1% growth due to the latest revenue forecast. We still expect EBITDA margin in the low to mid-30s, consistent with long-term trends.

Speaker #4: Finally, looking below the line, interest expense of approximately $10 million benefited from the effects of our continued debt reduction efforts. Our Q1 tax rate was approximately 23.2%, and we anticipate a normalized tax rate of approximately 24% for the remaining quarters of fiscal 26.

Speaker #4: Now, let's turn to slide 10 and discuss cash flow and capital allocation. In Q1, we generated $78 million in free cash flow, driven largely by the timing of working capital along with disciplined debt reduction efforts.

Speaker #4: We continue to maintain industry-leading free cash flow and are maintaining our outlook for the full year of $245 million or more. At June 30th, our net debt was approximately $900 million, consisting of attractive rate-fixed debt, and we maintained our covenant-defined leverage ratio of 2.4 times.

Speaker #4: In the quarter, we repurchased approximately $400,000 shares for $35 million, and we'll continue to evaluate further repurchase opportunities in the remainder of fiscal 26.

Speaker #4: Now, let's discuss some details around the announced acquisition of our primary ClearEyes supplier, Pillar 5 Pharma, that Ron mentioned earlier. Based in Ontario, Canada, Pillar 5 is a well-established pharma manufacturing site who we have partnered with since 2016.

Speaker #4: With over 200 employees, the site's core capability is multi-dose sterile OTC ophthalmic products. In s of financial impact, we anticipate the estimated purchase price of approximately $100 million, to be funded from cash on hand.

Speaker #4: We expect the transaction to have a minimal impact to our P&L and to be approximately neutral to EPS on a normalized basis. As a reminder, this would exclude any one-time costs associated with the acquisition.

Speaker #4: Given the size, we'd also anticipate the acquisition to be leverage neutral. In terms of CapEx, we anticipate modest ongoing CapEx requirements bringing our total company CapEx outlook to $1 to 3% of sales annually versus $1 to 2% previously.

Speaker #4: We would expect to close in fiscal Q3 based on fulfillment of certain closing conditions. With that, I'll turn it back to Ron.

Speaker #3: Thanks, Chris. Let's turn to slide 12 to wrap up. We continue have confidence in ur diverse and leading consumer healthcare portfolio, and its long-term growth opportunities.

Speaker #3: Although the strong fundamentals of our remain unchanged, we are disappointed in our start to the year. But the actions we've outlined today give us confidence for an improvement in ClearEyes supply.

Speaker #3: For fiscal 26, we now anticipate revenues of $1 billion, 100 million, to $1 billion, 100, 115 million, with organic revenue down approximately 1.5% to 3% versus last year, with this change in revenue outlook largely in the first half of fiscal 26.

Speaker #3: This update to guidance is primarily driven by the anticipated eye care first-half supply constraints with an additional headwind related to the current retail environment.

Speaker #3: For Q2, we're ecting revenues of approximately $256 to $259 million, down year-over-year largely to ClearEyes supply chain timing as well as lower retail order patterns experienced in July that are not consistent to our stable consumption rates outside of eye care.

Speaker #3: Beginning in the second half, as discussed earlier, we anticipate significant improvement of ClearEyes shipments into retailers to support in-stock levels. For diluted EPS, we now anticipate adjusted EPS of $4.50 to $4.58 for the full year, and for Q2, we'd anticipate EPS of approximately $0.97.

Speaker #3: Lastly, we continue to anticipate free cash flow of $245 million or more, and we have ample capital deployment optionality that has a history of maximizing value for our shareholders.

Speaker #3: With that, I'll open it up for questions. Operator?

Speaker #1: Thank you. At this time, we will conduct the estion and answer session. As a reminder, to ask a question, you will need press star 11 on your telephone and wait for your name to be announced.

Speaker #1: So withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Rupesh Parikh, who is Oppenheimer and Company.

Speaker #1: Yolanda is now open.

Speaker #5: Good morning, and thanks for taking my question. So I ess just on the, I ess the change in retail order patterns, the inventory de-stocking, just curious if that's broad-based across retailers and then how to think about the magnitude of that impact for Q2, whether you expect that to continue for beyond Q2.

Speaker #4: Yeah, good morning, Rupesh. It's Chris. So you know we talked the impacts to the full-year outlook the first, of course, being our expectations around eye care supply.

Speaker #4: The second aspect that we talked about relates to the current retail environment. You know we're hearing what ou're hearing from other CPG companies concerning the environment, and we have seen increased order volatility from retailers in July.

Speaker #4: One in particular where we've en big swings week-to-week in orders that are disconnected from consistent consumption levels. So there's a degree expectation that what we've seen thus far will significantly impact Q2.

Speaker #4: But we are expecting to return to more normalized retail order trends in the second half.

Speaker #5: Okay. And no specifics on the impact of that headwind for Q2?

Speaker #4: If think about the call down for the year, we talked about the majority being eye care. Think of it as a 60/40 split, really.

Speaker #4: 60 being eye care.

Speaker #5: Okay. That's helpful. And then just going to the ClearEyes, you know just would love to hear our confidence in being able to supply sorry, confidence in supply normalizing in the back half of the year, and then would you expect to recover some of these lost sales in FY 27 and beyond?

Speaker #4: Sure.

Speaker #3: Hey, good morning, Rupesh. So let me start maybe by stepping back a little bit on our decision and announcement on Pillar 5. And touch on some of the topics we've talked about in the past, right?

Speaker #3: So the sterile eye care sourcing strategy that we've been talking about and announced the Pillar 5 acquisition on today really has been in the development for a long time.

Speaker #3: You know we've been scouring the globe for years to understand sterile eye care capacity and the options available to us. And that led to what we started to describe about a year ago, actually over a year ago, where we talked adding new suppliers and focusing on investing in our current suppliers to expand their capacity.

Speaker #3: So we started to see the beginnings of deliveries from one of those new suppliers at the very end of June. We anticipate the second will come on early in our third quarter.

Speaker #3: And then as we evaluated the two long-term suppliers that we've been working with, over the years, it became obvious to us that Pillar 5 was meaningfully ahead of the other supplier in terms of being able to expand their capacity.

Speaker #3: And we've talked about the expectation that a new high-speed line will come online later in Q3. So with those three elements, right, the two new suppliers, working with direct oversight on Pillar 5, once we close in the addition of this high-speed line, is going to provide a significant level of stability in sterile eye care that we that we've forecasted will add meaningfully to the to the sales level in the second half of the year.

Speaker #3: So, a bit more detail than maybe you asked in your question, but I just thought it'd be good to step back and pull all the pieces together, Rupesh.

Speaker #5: Okay. So you feel good about getting back to normalized supply at this point for the back half of the year?

Speaker #3: We do, right? So, and again, that was our expectation that we talked about back in May. We thought it would be slower in the first half, not to this extent.

Speaker #3: But expected that the new suppliers and the additional high-speed line at Pillar would be in place for the second half.

Speaker #5: Okay. And then my final question, just on ClearEyes as well, just from a market share out-of-stock perspective, what's appening from that perspective?

Speaker #3: Yeah. You know over the past year, up through May, we had fairly steady supply concentrated around our biggest SKUs. So despite the fact that we saw volatility in shipments into retail, we still had decent supply and availability at shelf.

Speaker #3: You know that all changed in late May as a result of the disruption at Pillar 5. And we saw a significant decrease in late May and June and into July in our share.

Speaker #3: And we expect to see that recover as shipments get back in. You know as a reminder, ClearEyes was by far the number one volume leader in redness relief.

Speaker #3: You know talking about it, you know nearly 50 million units a year sold at retail. And that's a big a big presence. So we would anticipate that we'd be able to begin to recover that share over time.

Speaker #3: You know we have seen some loss distribution for the SKUs that were around the big movers. So like cooling comfort and complete care and some of the other SKUs that we have.

Speaker #3: So that'll take a bit more time. But we would expect to see the recovery over time of our leading position in redness.

Speaker #5: Great. Thank you for all the color if possible, on.

Speaker #3: Thank you, Rupesh.

Speaker #1: Thank you. Our next question comes from the line of Susan Anderson with Canaccord Genuity. Your line is now open.

Speaker #6: Hi. Good morning. Thanks for taking my questions. Quick question on the eye care manufacturing. I guess bringing that in the house, does that change the margins at all for the segment?

Speaker #6: That segment of the business? And then also, did you say what percent now of your eye care business will be internally manufactured?

Speaker #4: Morris, is that Chris? So we're not expecting any meaningful movement in our gross margin or actually any of our financial metrics as a result.

Speaker #4: We talked about expecting it to be largely neutral to the P&L. So no on that. We didn't disclose the percent. Obviously, the benefit of having more than one, more than two suppliers at this point allows us the flexibility to flex back and forth.

Speaker #4: that'll be determined over time. But we'll evolve it as we go.

Speaker #6: Okay. Great. And then I ess just looking at the model, maybe if you could talk about the puts and takes of gross margin. For the year, you're it looks like you're going to still maintain the gross margin guide despite the pressure from the eye care business.

Speaker #6: So I guess you know what do you expect to be driving that performance the rest of the year? Thanks.

Speaker #4: Yeah. So from a gross margin perspective, it's kind of the same, you know steady as she goes, right? Largely a variable cost model. Most of our channels and our brands have a similar margin.

Speaker #4: So not a lot outliers there. may see some shift in mix, and that's the that's the movement you'll see, I think, as we go through the quarters.

Speaker #4: But nothing meaningful there. know we talked today, we updated the tariff number. It used to be 15 million. We we we brought it down to about 5.

Speaker #4: And again, we would expect pricing and cost-saving actions to to mitigate that, but that could have some impact on the mix. Excuse me, on the margin.

Speaker #4: But all in all, when you it together, it's really you know no change as a result of eye care. We are expecting to recoup a significant portion of the sales in the back half.

Speaker #6: Okay. Great. And then I guess just looking out to the back half now and the CAF cold season, I guess what are you ecting out of the season this year?

Speaker #6: I assume you're planning it to be normal, which I assume would be up over last year. Was kind a weaker season?

Speaker #4: Yeah. So no change to the initial guide on CAF cold. We were forecasting a modest decline in the category a little bit too early to tell at this point.

Speaker #4: So we're taining that at this point.

Speaker #6: Okay. Great. And then one more, I guess just if you could k about just how you feel about the inventory within your segments in the channels.

Speaker #6: Do you feel like there's any areas that are still over-inventoried, which you would expect some de-stocking going forward? Or do you feel that within your categories, you know the inventories are pretty clean?

Speaker #4: Yeah. So we do review our largest customers. And we do not see any meaningful ramp-up of inventory. You know as we as we talk about our the current retail environment and this kind of big swings that we're seeing in order patterns, it's really disconnected from consumption, and it's not starting from a place of inflated inventory.

Speaker #4: So no, we are not seeing any meaningful opportunities for folks to take significant amounts of inventory out at this point.

Speaker #6: Yeah. That's interesting. I guess one last one, just on the women's health business. You talked about Summer's Eve continuing to recover. I guess are you expecting that business to be positive the rest of the year?

Speaker #3: Good morning, Susan. It's Ron here. Yeah. So we continue to feel feel good about the Summer's Eve momentum and trends. You know if you take a look at performance for the different categories during the quarter, it's tough to get a handle on them because of that shift between the fourth quarter and the first quarter.

Speaker #3: But even with that shift, our 's health category had growth in the quarter-ended June. So it gives you little insight into the to the strong trends there versus where we were a year ago when we hit we hit bottom for the Summer's Eve brand.

Speaker #3: So yeah, we continue to feel good about it for the remainder of the year.

Speaker #6: Okay. Great. Thanks so much for all the details. Good luck the rest of year.

Speaker #3: Thank ou.

Speaker #1: Thank you so much. Our next question comes from the line of Glen West with the William Blair. Your line is now open.

Speaker #7: Hi, guys. Glen West on for John Anderson. Some of what I wanted to hit was kind of ask, but maybe piggybacking back on the onto the ClearEyes situation, can you elaborate kind of on the cadence of that improvement in the second half?

Speaker #7: I know there's a new supplier coming on during Q3. And then the new high-speed line will be coming on in Q3 as well. Does that mean you know full supply recovery isn't really going to until Q4?

Speaker #7: Or maybe just a little more color on on that back half recovery?

Speaker #4: Yeah. Hi, Glen. So yes, we are anticipating the third quarter and the fourth quarter to significantly step up from the from the first half.

Speaker #4: So it's not all fourth quarter loaded. It is also an increase in the third quarter.

Speaker #3: And Glen, it's Ron here. And again, in terms of recovery, it's going to take more than a couple of quarters of improved output at our suppliers to catch up.

Speaker #3: We've been shipping in well behind potential demand for the brand for for a good year now. So we would expect that full recovery to continue into '27.

Speaker #7: Okay. Thank you. And then on capital allocation, you guys said the deal would be paid for entirely in cash. I think you said 100 million.

Speaker #7: But still said you'll look to opportunistically maybe repurchase shares. Looking forward, I guess, how are ou thinking about the capital allocation since you ow you're using a large chunk of cash here?

Speaker #7: Is there maybe opportunity to pursue purchasing more suppliers in the future? Or what are ou guys thinking there?

Speaker #3: Yeah, Glen, it's Phil. So the waterfall of our capital allocation priorities really hasn't changed. You know with the leverage ratio we've achieved over the last few years as we've paid down debt, and the approximate $1 billion in free cash flow we'd expect over the next four years, we think we have a lot of firepower to create value in multiple buckets.

Speaker #3: So we're continuing to pursue M&A and staying disciplined around that, looking for opportunities. From there, the second pillar is repurchases. You saw the $400,000 shares in Q1 to offset dilution.

Speaker #3: Beyond that, look for incremental opportunistic repurchases over time and then still thinking about debt uction and cash build as sort of the fourth element to enable those other pillars.

Speaker #3: So no change to that waterfall that we've id out in the past. And the acquisition of Pillar 5 is one many of those deployment priorities.

Speaker #7: Appreciate the color. Thank you, guys.

Speaker #1: Thank you so much. Our next question comes from the line of Anthony Liebenzinski with Sidotti. Your line is now open.

Speaker #8: Good morning, and thank you for taking the question. So first, the one here is on Pillar 5. So, now you said it's going to be earnings neutral to EPS this year.

Speaker #8: Now, how should we think fiscal '27 as you have a full-year impact of that? If you could just give us some maybe directional guidance on that, 'd be at.

Speaker #4: Yeah, Anthony. Hi, Chris. So again, we're king about expecting us to be largely neutral to the P&L. And I think I mentioned you ow we're thinking tens of basis points, not hundreds here.

Speaker #4: You know given the the investment that the Pillar 5 made in the facility and maybe the different objectives of financial sponsor might have in running a facility, like this, there's also an element of cost avoidance here.

Speaker #4: As we would expect, Pillar 5, as well as other options we explored to be looking for significant capital investments from us as well as significant price increases in the years to come.

Speaker #4: So obviously, that doesn't affect my current gross margin or my margin structure. But again, just a reminder, think about this acquisition differently than a brand acquisition, right?

Speaker #4: You know we did this transaction to better secure supply for one of our largest brands. As well as to ensure the ability to increase capacity in a space that we believe will provide nice growth as we move forward.

Speaker #4: So that's how we're inking about it at this point.

Speaker #3: Yeah, a couple of other comments on it. Anthony, you know to put it in perspective, right, ClearEyes is a high single-digit of our sales.

Speaker #3: So that in and of itself you ow isn't going to have a major impact on the total company's financial profile. You know, you put the high margins in there and you end up with you know a small relative level of purchase costs.

Speaker #3: And the P&L, the second is, right, our sole focus as we sit here today is about recovering supply. And this being at this point.

Speaker #3: So it doesn't mean that we won't have a sharp pencil and a focus on making this as a creative as possible and finding ways for that facility to be more effective from a cost standpoint going forward.

Speaker #3: But for now, it's all about stability of supply, going forward, and then we'll get an eye on the ability to be more cost-effective over time.

Speaker #8: Got it. Okay. Thanks a ot. That definitely helps. Now, and just thinking of ClearEyes, so we've had a few quarters of supply chain issues for ClearEyes.

Speaker #8: Just wondering, you know what steps are you taking to ensure that the brand remains in the strong position and top-of-mind for consumers as you know some you ow because of you know not having adequate supply at retail, you ow maybe some consumers have shifted to other brands.

Speaker #8: So how are you guys inking about you know just the ability to maintain your strong position for ClearEyes?

Speaker #3: Yeah. So first, as I think I commented earlier, our focus has been trying to maximize availability of our top SKUs. So our base redness and our max redness.

Speaker #3: Have been primary focus for what we produce is the first thing. And then the second part of it is to maintain the right level of connections with consumers for the brand in the last thing we want to do is drive them to the shelf with an expectation that the product is available in the channel that they're happening to looking to buy at it and be disappointed.

Speaker #3: When they get to the shelf. So that's the first part of it. The second part of it is you know so where are we seeing the shift in our share go to?

Speaker #3: The first is you know the entire redness category from a unit standpoint is down. So you know we're number one by far from a unit basis, and we're impacting the entire category.

Speaker #3: So we're seeing the category decline. And then second, where we do see a shift in share, it's kind of spread across a broad number of players who are in that redness category.

Speaker #3: So there isn't any one big winner here. It's ind of spread out and you know as I just mentioned, we're seeing the category shrink.

Speaker #8: Got it. Okay. And then my last question here. So as far as the international segment, so obviously nice performance there. How do you guys think about your ability and confidence to be able to sustain that growth internationally?

Speaker #4: Yeah, Anthony. Hi, Chris. So you know the quarter, we had solid international consumption. Just ahead of our long-term forecast, it was pretty broad-based growth by brand and by geography.

Speaker #4: So for the full year, you ow we're expecting a little bit of a softer trend versus the 7% you saw in the first quarter.

Speaker #4: Some of which is timing, but still in line with our longer-term algorithm of 5 plus percent for the segment. And I think the you know we've talked in the past about opportunities as we expanded our hydrolyte rights, as we looked to expand other brands geographically, and then just executing the same kind of brand-building playbook in the other regions that we have done here in North America.

Speaker #4: So we feel pretty confident in our ability keep that long-term algorithm going for the years to come.

Speaker #8: Got it. Well, thank you very much and best of luck.

Speaker #3: Thanks, Anthony.

Speaker #1: Thank ou so much. And as a reminder, everyone, to ask a estion, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker #1: To withdraw your question, please press star 11 again. One on the far next question, please. Our next question comes from the line of Doug Lane with Watertower Research.

Speaker #1: Your line is now open.

Speaker #9: Thanks, operator. Hi, good morning, everybody. You know I'm relatively new to Prestige Brands, but I have followed OTC pharmaceutical companies in the past. And I don't remember talking about supply constraints in this category.

Speaker #9: So what is it about eye care that has caused so much consternation as far as supply is concerned?

Speaker #3: Good. Hey, good ning. Doug, good to speak with you. So I think I touched on this a little bit earlier. You know we've been evaluating sterile eye care supply options for over a decade.

Speaker #3: As we looked for the ability to support ClearEyes growth over the long term. And what you find is generally the bigger players have their own in-house manufacturing.

Speaker #3: And as a result of that, there isn't a lot of available high-volume sterile eye care capacity that's out there. Because the brands that are out there generally don't have that $50 million unit annual volume requirements that ClearEyes has.

Speaker #3: So it isn't out there to tap into. So you know when we look to add to to our supply base, it begins with having to make meaningful investments in suppliers to get them to acquire and install high-capacity unique fillers that match our unique ClearEyes bottle, right?

Speaker #3: So we're not in a Boston round. We've got that great iconic flattish-style bottle out there. So you ow the simple answer is there isn't the kind of capacity out there available that wouldn't require years - three, four, five - from start to finish and meaningful investments.

Speaker #3: So you know as we've gotten to the inflection point of setting ourselves up for long-term success here, it became obvious that we needed to bring this in-house.

Speaker #3: To be in the best position long-term.

Speaker #9: Is this going to require an accelerated capital spending for maybe next year, if not this year, to get that capacity and be comfortable to have what you need for the xt several years?

Speaker #9: You know.

Speaker #3: As I said earlier, it's you know we thought Pillar 5 had a significant head start to our other options. So they've got HVAC infrastructure ready to go.

Speaker #3: They've got this new high-speed line that we should be seeing production set up for. So they're far ahead of the other options that we had.

Speaker #3: Including the amount of capital. So I think in Chris's prepared remarks today, she gave an update that we would be ecting our capital to move from 1 to 2 percent of revenues to 1 to 3 percent.

Speaker #3: Over the long term. So that's another $10 million on a billion one. So the short answer is we're not expecting any meaningful step up either in the short term or the longer term for capital, even with the ownership.

Speaker #3: You know, and I'll compare it to our Lynchburg facility. Which will be, you know, which will be producing 2X the sales value of output versus Pillar 5.

Speaker #3: You know, still only requires single-digit sub-millions of capital spending each year to support that level.

Speaker #8: Okay. That's helpful. And just, you said in your, on your slides, your double-digit consumption growth in e-commerce, which is, you know, continues be strong.

Speaker #8: But that doesn't sound like it was shipments from you guys. Is that where some inventories were worked off in the quarter?

Speaker #4: Yeah, Doug. This is Chris. So yes, that is an area where we saw a meaningful disconnect from consumption levels, which have been very consistent over time.

Speaker #3: And some of that was expected. When we gave our outlook the quarter end of June, we had called the seven or eight million dollar shift from the fourth quarter into the first quarter.

Speaker #3: So we anticipated that for the first quarter.

Speaker #8: Yes, I remember that. And so that inventory build, if you will, that you called out last quarter has been pretty much worked off at this point?

Speaker #3: Right.

Speaker #4: It has. The guidance that we're calling for the adjustment is largely in Q2. That for what we've experienced in July. And as I mentioned, in the Q&A session, inventory levels were not at inflated levels.

Speaker #4: So meaningful disconnect there so far.

Speaker #8: Got it. Got it. That's helpful. Okay. Thank ou.

Speaker #3: Thank you, Doug.

Speaker #1: Thank you so much. This does conclude our, well, I'm I'm sorry. This does conclude our question and answer session. I would now like to turn it back to Ron Lombardi, CEO, for closing remarks.

Speaker #3: Thank you, operator. And I want to thank everybody for joining us today. And we look forward to providing an update for Q2. Have a great day.