• Revenue: $283.8 million, a decline of 90 basis points from the prior year.
• EPS: $1.09, up slightly from the prior year.
• Free Cash Flow: $68 million in Q2, up double digits versus the prior year.
• Debt Reduction: Reduced by $40 million, leverage declined to 2.7x.
• Gross Margin: Approximately stable to the prior year, with a full-year expectation of 56%.
• EBITDA Margin: Consistent in the low-30s, slightly down due to marketing spend timing.
• Adjusted EPS for First Half: $1.98, compared to $2.13 in the prior year.
• Tax Rate: Q2 tax rate of 24.1%, with a first half rate of 23.6%.
• Net Debt: Approximately $1 billion as of September 30.
• Share Repurchases: 566,000 shares for approximately $38 million in the first six months.
• Full Year Revenue Guidance: $1.125 billion to $1.140 billion.
• Full Year Adjusted EPS Guidance: $4.40 to $4.46, anticipating the higher end of the range.
• Full Year Free Cash Flow Guidance: $240 million or more.

• Warning! GuruFocus has detected 6 Warning Signs with SUP.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Prestige Consumer Healthcare Inc (NYSE:PBH) exceeded expectations for Q2 fiscal 2025, with stable earnings and cash flow.
• The company reported strong free cash flow of $68 million, growing double digits compared to the prior year.
• Debt reduction efforts resulted in a $40 million decrease in debt, lowering the leverage ratio to 2.7x.
• The Canadian portfolio showed strong growth, with a sales CAGR of approximately 4% since fiscal 2020.
• The International segment, particularly the Hydralyte brand, demonstrated strong growth, contributing positively to overall performance.

Negative Points

• Sales declined slightly to $284 million compared to the prior year, primarily due to supply chain limitations affecting the Clear Eyes brand.
• The eye and ear care category experienced declines, impacted by Clear Eyes supply constraints and timing of cough and cold ordering patterns.
• Gross margin for the first six months was slightly down at 55.1% due to expedited freight costs for Clear Eyes.
• Adjusted EPS decreased to $1.98 from $2.13 in the prior year, affected by lower Q1 revenues and increased air freight costs.
• The company faces ongoing supply chain challenges, particularly with the Clear Eyes brand, impacting inventory levels and sales.

Q & A Highlights

Q: Can you provide an update on the Clear Eyes supply chain issues and the outlook for Summer's Eve in the back half of the year? A: Ron Lombardi, CEO: For Clear Eyes, we are seeing sequential improvement and expect sales to improve in Q3. We are implementing strategic improvements and expanding capacity to strengthen the supply chain. For Summer's Eve, we are seeing positive momentum with new products and digital messaging, leading to share gains for the first time in three years.

Q: How do you view the impact of drugstore closures on your business? A: Ron Lombardi, CEO: The expected store closures are consistent with past trends and are already factored into our base business. Our products are broadly available, and we focus on winning with consumers wherever they choose to shop.

Q: What is driving the strong performance of the international business, particularly Hydralyte? A: Christine Sacco, CFO: Hydralyte continues to grow with double-digit consumption increases, despite new entrants in the category. It holds a strong market position in Australia. Additionally, other international markets like Latin America are also performing well.

Q: How are you approaching capital allocation between share repurchases and M&A? A: Christine Sacco, CFO: We are balancing share repurchases with M&A opportunities. We have repurchased $38 million in shares year-to-date and plan further buybacks. We are also evaluating M&A opportunities, especially with potential spinouts from larger players.

Q: Are you seeing increased competition or promotional activity in the US market? A: Ron Lombardi, CEO: Our categories are less impacted by promotional activities seen in personal care. Our products are incident-based, and we did not experience significant inflationary pressures, so we are not seeing increased competition in terms of pricing.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.