Prestige Consumer Healthcare Inc. Q3 FY2026 earnings call

• Delivered solid Q3 results with sales of $283 million, slightly better than forecast, benefiting from diverse business model and broad distribution. - ClearEye supply showed sequential improvement for the second quarter in a row, with actions taken to further improve supply, including acquiring Pillar Five and adding new third-party suppliers. - Gross margin of 55.5% and adjusted EPS of $1.14 were in line with expectations. Free cash flow was $209 million year to date, up 13% versus prior year, allowing share repurchases and the Pillar Five acquisition while maintaining leverage in the mid-2s. - Christine discussed financials, noting Q3 revenue decline due to eye and ear care sales constraints, adjusted EBITDA margin in the low thirties, adjusted diluted EPS down slightly, and a $10 million write-off of a supplier loan. For the first nine months, revenues decreased 3.9% organically, with channel diversity helping offset negative trends, and international OTC business impacted by distributor order timing and limited eye care production.

For the third quarter, sales were $283 million. By segment, excluding FX, North America segment revenues decreased 4.4% and international segment revenues decreased 90 basis points. Q3 revenue of $283.4 million declined 2.4% from the prior year, or 2.2% excluding FX, mainly due to lower eye and ear care category sales from Clear Eye supply constraints. Total company gross margin in the first nine months was 55.7%, up 50 basis points versus the prior year, and they anticipate a 57% adjusted gross margin in Q4. The North America segment saw a 4.4% revenue decrease excluding FX, while international segment revenue decreased 90 basis points. Revenue contribution from different segments was affected by factors like Clear Eye supply issues and channel diversity.

• Fiscal 2026 revenue outlook is approximately $1.1 billion. - Adjusted diluted EPS is anticipated to be approximately $4.54 for the year. - Full-year free cash flow is expected to be $245 million or more. - Q4 free cash flow is expected to be lower year-over-year due to timing and investments in working capital. - Anticipates a 57% adjusted gross margin in Q4. - Expect interest expense of approximately $11 million in Q4, a normalized tax rate of 24%, and a share count of just under 48 million.

• Business environment uncertainty remains heightened due to supply chain constraints, high inflation, and geopolitical events, which can have numerous potential impacts on results. - Management makes forward-looking statements around risk and uncertainties, with details on a complete safe harbor on page two of the slide presentation. - Additional information concerning risk factors and cautionary statements are available in the most recent SEC filings and the most recent company 10-K.

Q: Rupesh Parikh asked about shopper headwinds in weaker distribution, consumption shift, when headwinds may go away, and initial thoughts on next fiscal year.

A: Ron Lombardi responded that it's a channel shift, hard to predict when headwinds go away, and they feel good about organic business performance with continued increases in Clear Eye supply expected to be detailed in May call.

Q: Susan Anderson asked about eye care business restocking timeline, impact on margins, e-commerce penetration, and women's health.

A: Christine Sacco said Clear Eye supply restocking will take time, margins relatively stable with no material impact from eye care supply; Ron Lombardi mentioned e-commerce consumption grew over 10% in Q3, and women's health brands like Monistat and Summer's Eve have varying trends but continue to do well.

Q: Keith Devas asked about capital allocation, buybacks vs reinvesting.

A: Christine Sacco stated investing in brands is priority one, evaluating M&A as secondary, disciplined with capital returns, and math shows good return for shareholders with repurchases at current levels.

Q: Jon Andersen asked about sales outlook, 2027 expectations.

A: Ron Lombardi said they feel good about the broad portfolio and Clear Eyes supply improving for 2027, with more detail to come in May call.

Q: Mitchell Pinheiro asked about advertising/marketing changes with e-commerce, private label, and 2027 focus.

A: Ron Lombardi said marketing evolves with consumer behavior, private label share not expected to change, and Compound W's SkinTag product is an example of brand extension; more focus on brand building in 2027.

Q: Carla Casella asked about the supplier loan charge and future M&A.

A: Christine Sacco explained the supplier loan situation and successful product transfer, Ron Lombardi noted future M&A will focus on brands and long-term brand building value