Transcript: Prestige Consumer Q1 2027 Earnings Conference Call

Prestige Consumer (NYSE: PBH ) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

The full earnings call is available at Summary Prestige Consumer Healthcare Inc. 5% increase in sales to $266 million for Q1 2027, driven by strength in GI and skincare segments. The company completed two strategic acquisitions: Breathe Right and Locorium Health, expected to contribute significantly to revenue growth and portfolio diversification. 315 billion, attributing growth to acquisitions, while maintaining an organic growth expectation of 1-3%.

7 million, enabling further capital allocation for strategic investments. The integration of Breathe Right is nearly complete, and Locorium's integration is progressing, with both expected to enhance long-term growth and value creation. Management highlighted ongoing supply chain improvements for Clear Eyes, aiming for stability and growth in the second half of the fiscal year. The acquisitions are anticipated to add over 20% to Prestige's annualized revenue base, with synergies expected over the next one to two years.

Full Transcript OPERATOR Good day and thank you for standing by. Welcome to the first quarter 2027 Prestige Consumer earnings conference call. At this time all participants are in a listen-only mode. 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. To withdraw your question, please press star 11 again. Please be advised that today's conference call is being recorded.

I would now like to hand the conference call over to your first speaker today, Phil Terpolilli, Vice President, Investor Relations, Treasury, & Business Development. Please go ahead. Phil Terpolilli, Vice President, Investor Relations, Treasury, & Business Development Thanks, operator, and thank you to everyone who has joined today on the call. With me are Ron Lombardi, our Chairman, President and CEO, and Chris Sacco, our CFO and COO.

On today's call we'll review our first quarter fiscal 2027 results, discuss our increased full-year outlook, and then take questions from analysts. A slide presentation accompanies today's call. com, clicking on the Investors link and then on today's webcast and presentation. 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. In 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. 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.

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. Further information concerning risk factors and cautionary statements are available in our most recent SEC filings and our most recent company 10-Q that was released this morning. I'll now hand it over to our CEO, Ron Lombardi. Ron Lombardi, Chairman, President & CEO Thanks, Phil, and thanks to everyone for joining us on a busy earnings day.

While we are just at the start of our fiscal year, we have a lot to discuss today. Since our call in May, we've completed two acquisitions that are now positioned for long-term success, and we'll walk through both of them shortly. Our business exceeded sales and earning expectations in the first quarter, a testament to our long-term brand-building strategy and the strength of our diversified portfolio. We also delivered record adjusted free cash flow, providing additional flexibility for disciplined capital allocation.

Moving forward with that, let's begin with our first quarter highlights on Slide 4. 5%, reflecting broad-based strength across the portfolio. Growth was led by GI, where Dramamine and Fleet continued to deliver long-term consumption gains, as well as strong performance in skin care led by Compound W. Ferroteers and Debrox also posted solid growth, helping offset Clear Eyes sales that were below our expectations.

Results also benefited from retailer order timing, which Chris will discuss in more detail. The quarter also included approximately $6 million of revenue from the Breathe Right portfolio acquisition. Our strong top-line performance translated into solid earnings and free cash flow. 98.

7 million, further supporting our ability to deploy capital in ways that enhance shareholder value. One of these deployment priorities is M&A, and since our May call we completed two acquisitions. The Breathe Right portfolio closed on June 12th, and the acquisition of Locorium Health in Australia closed on July 1st. I'll discuss our integration progress and the strategic value each brings to Prestige.

Our strong cash flow generation is also enabling us to invest in Pillar 5, our sterile ophthalmic manufacturing facility, which will help support additional long-term eye care capacity. Now let's turn to Slide 5 and review the key principles supporting our expected long-term recovery of Clear Eyes at a high level. We remain focused on the actions we believe will best support Clear Eyes and return the brand to its leadership position within the eye care category. There are three key elements to this strategy.

First, we continue to invest in our recently acquired Pillar 5 facility. These investments are designed to strengthen long-term supply capabilities while maintaining the high quality standards we expect across our portfolio. Second, a key objective for the facility is to support demand while improving supply consistency versus current levels. As we discussed in May, achieving that objective requires actions during fiscal '27 that will continue to create some output variability in the first half of the year, as we experienced in Q1 and expect again in Q2.

Looking ahead, we believe the facility is positioned for greater stability in the second half, supporting sequential improvements in eye care shipments. Third, as the historical unit share leader in eye care, Clear Eyes has unique volume requirements where we believe in-house manufacturing provides an important strategic advantage. As a result, we expect to further expand capacity at Pillar 5 to fully support these long-term demand requirements and return Clear Eyes to its leading market position. Now let's turn to Slide 7 and review our recent acquisitions.

We are pleased to have closed both the Breathe Right portfolio and Locorium Health acquisitions. Each transaction brings distinct strengths that we believe will enhance our business over the long term. Starting with Breathe Right, the portfolio is expected to generate approximately $200 million in annual revenue. The majority comes from the flagship Breathe Right brand, where we see multiple opportunities for long-term growth that I'll discuss in a moment.

The business also brings a strong financial profile with gross and EBITDA margins that are accretive to Prestige. In addition, it supports our long-term sales and earnings growth algorithm while generating tax benefits that enhance future free cash flow. Less than 60 days after closing, we have successfully completed all major integration milestones. As of this week, the business is largely integrated into our operations, running through our systems and our warehouse network with retailers ordering Breathe Right along with our existing brands.

Turning to Locorium Health, the business is expected to contribute approximately $40 million in annualized revenue, with the majority generated in Australia. Its Dermal Therapy brand holds a leading position in therapeutic skin care categories, including eczema and cold sore treatments. We believe the brand is well positioned for continued growth and will support the organic growth objectives of our international segment. In July, we welcomed Locorium's employees into our Care Pharma office, making for a seamless transition given they were already located in the same building outside Sydney, Australia.

The broader integration effort will proceed methodically over the balance of the year. Over time, we also expect to realize additional synergies through distributor optimization, sales integration, and other operating efficiencies that should further enhance profitability. In summary, we've added two highly strategic businesses to our portfolio. The Breathe Right integration is largely complete, while Locorium will continue to be integrated over the coming quarters.

In both cases, our focus is on establishing a strong foundation for long-term growth and value creation. Now let's turn to Slide 8 and discuss how these acquisitions further strengthen our portfolio. One of Prestige's core strengths is the diversity of our portfolio. The diversity helps reduce reliance on any single brand or category while allowing us to allocate resources towards the most attractive growth opportunities and to consistently execute against our long-term growth algorithm.

As shown on the right side of the slide, these acquisitions further enhance that diversification. On a pro forma basis, our portfolio is now even more balanced across eight categories. With the addition of Breathe Right, we've created a new Wellness, Sleep and Other category, which is primarily comprised of Breathe Right and represents a low-teens percentage of pro forma revenue. Locorium's Dermal Therapy brand further strengthens our skin care category, and we've also updated several category names to better reflect the consumer need states they address.

Now let's turn to Slide 9 and discuss the growth opportunities we see for Breathe Right. With roots dating back to the 1990s, Breathe Right is an iconic, category-defining brand with consumer awareness exceeding 90%. Given that strong foundation, we see several drivers of long-term growth. First, the brand has meaningful opportunities to further leverage its heritage and consumer recognition.

As shown on the left side of the slide, Breathe Right has successfully done this through campaigns such as Strip On. Looking ahead, we believe social media marketing initiatives can further strengthen brand engagement and drive household penetration. Second is innovation, shown in the center of the slide. At Prestige, we rely on consumer insights to identify opportunities that can meet evolving consumer needs while expanding categories; we expect Breathe Right to be no exception.

Recent launches demonstrate this potential. Breathe Right Menthol, introduced in 2025, combines improved breathing with the added benefit of an aromatic scent. Breathe Right Sport, which is launching now, expands the brand into the sports category with a sweat-resistant strip designed to help improve airflow during exercise. Finally, international expansion remains an attractive opportunity.

Breathe Right is sold in more than 20 countries, with a strong presence in Western Europe and Japan. We see opportunities to drive growth through the same marketing and innovation initiatives I just described, while also benefiting from geographic expansion and long-term synergies across our global portfolio. In summary, Breathe Right is a category leader with an iconic brand, a strong foundation, and multiple avenues for sustained long-term growth. We look forward to updating you on our progress in the quarters ahead.

With that, I'll turn the call over to Chris to review our financials. Christine Sacco, Chief Financial Officer Thanks, Ron. Good morning, everyone. Let's turn to Slide 11 and review our first quarter fiscal 27 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. 2% excluding the effects of foreign currency and the acquisition of the Breathe Right portfolio. 5% versus the prior year, mostly tracking the sales growth. Adjusted diluted EPS increased approximately 3% versus the prior year, as the revenue increase was partially offset by higher interest expense from the acquisition.

Let's turn to Slide 12 for details around these consolidated results. 2% organically versus the prior year. 2% excluding FX and the Breathe Right portfolio acquisition. As Ron highlighted, the biggest category increases were in GI, highlighted by continued strength in Fleet and Dramamine, and Dermatologicals thanks to strong growth in Compound W; in ear and eye care.

As we anticipated, Clear Eyes supply continued to be volatile and was constrained in Q1, leading to a decline in brand revenue, but this was more than offset by strength in the TheraTears and Debrox brands, which highlights the benefits of our portfolio diversity even within individual product categories. We also continue to experience strong double-digit consumption growth in e-commerce. Q1 benefited from some continued order volatility in e-commerce at the expense of Q2. This is reflected in the Q2 sales outlook Ron will discuss later.

1% versus the prior year on an organic basis, as we expected in our outlook. We continue to see positive consumption trends, but sales were affected by the timing of distributor orders. For the full year, we still expect a return to the segment organic revenue long-term growth target of 5% or more. 9 million.

Total company adjusted gross margin of approximately 55% in the first quarter was largely as anticipated, flat sequentially but down 120 basis points versus the prior year, primarily due to higher transportation costs and mix. Following the inclusion of acquisitions, we now anticipate adjusted gross margin of just over 57% for both Q2 and the full year. 7 million, or 13% of sales, in Q1, down versus the prior year. 5% of sales.

5% of sales in Q1. For the full year, we now anticipate adjusted G&A of approximately 10% as a percent of sales, thanks to the scale associated with additional acquisition revenue. 95. Ron will discuss our earnings outlook shortly, and we detail the assumed components and other line items at the end of the slide presentation.

These include higher interest and amortization expenses in the balance of the year of approximately $100 million and $33 million, respectively, as well as a similar tax rate and share count to prior assumptions. Now let's turn to Slide 13 and discuss cash flow and capital allocation. 7 million in adjusted free cash flow, largely driven by the timing of working capital. We continue to maintain industry-leading free cash flow and now expect to generate at least $270 million of adjusted free cash flow in fiscal 27 due to the inclusion of the new acquisitions.

At June 30th our net debt was approximately $2 billion. We purchased the Breathe Right portfolio on June 12th, funded with a new seven-year Term Loan B. When combined with cash on hand, the new term loan also funded the Liquorium transaction which closed on July 1st after quarter end. While executing these market actions, we also took the opportunity to price $400 million of new unsecured notes, replacing existing notes that were coming due.

This funded on July 15th. Following these actions, our earliest debt maturity is now 2031, and we have re-established prepayable debt which we intend to begin paying down over the balance of the fiscal year. With that, I'll turn it back to Ron. Ron Lombardi, Chairman, President & CEO Let's turn to Slide 14 and wrap things up.

We are encouraged by our first quarter results and remain confident in the outlook we previously provided for our legacy business. The updated guidance shown on this page reflects the addition of the Breathe Right portfolio and Licorium acquisitions, along with the related financing impacts Chris just discussed. For fiscal 27, we now expect revenues of 1,290 to 1,315 while maintaining our expectation for organic revenue growth of 1% to 3%, unchanged from our prior outlook.

The increase in reported revenue versus our previous guidance is entirely driven by the Breathe Right and Liquorium acquisitions, which we expect will contribute approximately $190 million of revenue this year. For the second quarter, we expect revenue of $328 million to $331 million, including the contribution from both acquisitions. Given retailer order timing that benefited the first quarter, we would expect a modest organic revenue decline in the second quarter.