Prestige Consumer Healthcare Q3 2025 Earnings Call Transcript

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February 6, 2025
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Operator

Thank you for standing by and welcome to Prestige Consumer Healthcare's Third Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. I would now like to hand the call over to Phil Terpoli, Vice President, Investor Relations and Treasury. Please go ahead.

Phil Terpolilli
Phil Terpolilli
Vice President of Investor Relations & Treasurer at Prestige Consumer Healthcare

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 Christine Sacco, our CFO and COO. On today's call, we'll review our third quarter fiscal twenty twenty five 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. Remember, some of the information contained in the presentation today includes non GAAP financial measures.

Phil Terpolilli
Phil Terpolilli
Vice President of Investor Relations & Treasurer at Prestige Consumer Healthcare

Reconciliations to the nearest GAAP financial measures are included in our earnings release and slide presentation. 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 two 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, evolving U. S.

Phil Terpolilli
Phil Terpolilli
Vice President of Investor Relations & Treasurer at Prestige Consumer Healthcare

And international tariffs and inflation, which have numerous potential impacts. This means results could change at any time and the forecasted impact of risk considerations is a 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 most recent company 10 K. I'll now hand it over to our CEO, Ron Lombardi. Ron?

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Thanks, Phil. Let's begin on Slide five. Our solid third quarter results exceeded the expectations we communicated back in November and resulted in both record quarterly sales and EPS. Net sales of $290,000,000 increased nearly 3% versus the prior year and was above our forecast. We experienced continued strong international growth, including for the Hydralite brand, coupled with broad based growth across nearly all of our North American categories.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

This included year over year growth in the Summer's Eve brand within the women's health category, as well as sequential sales improvement for Clear Eyes. Earnings increased sharply in Q3 by 15% to a record quarterly EPS of $1.22 reflecting our strong sales growth, a stable gross margin and disciplined capital deployment that's led to both lower interest expense and share count. Lastly, our strong free cash flow continues to enable capital deployment options that we use to enhance shareholder value. In Q3, we reduced our variable term loan debt balance to zero and continued to opportunistically repurchase shares, while improving our leverage ratio to 2.5 times. Chris will discuss our financial profile and go forward capital priorities in greater detail later on.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Now let's turn to Page six for a review of our GI category. Our fast growing GI business represents nearly one fifth of North American sales. The category features wide ranging GI solutions that are shown on the left of the page. The portfolio is headlined by three iconic GI brands, Dramamine, Fleet and Gaviscon. Each solves for unique consumer needs and leverages our wide assortment of brand building capabilities to drive long term growth.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Dramamine is synonymous with motion sickness and nausea categories. It recently celebrated its seventy fifth anniversary and continues to remain the clear market defining brand. Our sales continue to grow nicely through a combination of engaging marketing featuring our drama llama that encourages consumers to ditch the drama as well as consistent innovation. Our most recent innovation includes Dramamine Advanced Herbals, which features ingredients specifically designed to help consumers deal with nausea and stress. Next, the Fleet brand is a clear market leader with a one hundred plus year history since its creation by Charlie Brown Fleet.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Today, it stands with over a 50% share of the rectal laxative category. The brand's core assortment of enemas and suppositories provide rapid constipation relief for consumers when they need it most. We're also successfully leveraging the brand's deep consumer trust to expand into adjacent categories such as oral laxatives, where consumers know and trust the Fleet brand for laxative relief in other forms. This expansion builds naturally on the brand's longstanding heritage. Lastly, our GAVISCON brand in Canada continues to grow nicely with targeted marketing and consistent innovation that we discussed in detail last quarter.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

So in summary, our wide ranging portfolio of leading GI brands have time tested brand building that is used to drive long term growth in their own unique ways. The formula continues to work, driving solid mid single digit growth over the last three years in total and has set us up well for future success. With that, I'll turn it over to Chris to discuss the financials.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

Thanks, Ron. Let's turn to Slide eight and review our third quarter fiscal twenty twenty five 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. Q3 revenue of $290,300,000 increased 2.7% or 2.3% excluding FX versus the prior year. In the North American segment, we experienced broad based growth, which included nice growth in GI category brands that Ron highlighted earlier, partially offset by lower cough and cold sales, which we expected.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

International segment sales grew approximately 8% excluding FX, headlined by Hydrilyte. EBITDA margin was consistent in the low 30s and up 5% versus the prior year. Diluted EPS of $1.22 was a quarterly record and increased 15% versus prior year, thanks to the benefits of our capital allocation strategy and reductions in interest expense and share count. Let's turn to Slide nine for detail around consolidated results for the first nine months. For the first nine months of fiscal twenty twenty five, revenues decreased 90 basis points organically versus the prior year.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

By segment excluding FX, North American segment revenues decreased 2.1% and International segment revenues increased 6.2% versus the prior year. The first nine months sales declines were due to anticipated impacts of the ClearEye supply chain constraints previously discussed, the planned impact of retailer ordering in the cough and cold category and women's health declines largely in the first quarter. We are pleased to report that we are experiencing our second quarter of sequential improvements in Summer's Eve with third quarter sales increasing slightly versus the prior year and ClearEye sales growing sequentially as well. E commerce was also a highlight continuing its trend of double digit year over year channel growth and the long term trend of higher online purchasing of our brands. As expected, total company gross margin of 55.2% in the first nine months was down slightly versus the prior year owing to the expense associated with expedited freight of Clear Eyes.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

For Q4, we anticipate a gross margin of approximately 57% with the increase largely attributable to the timing of certain cost saving efforts. Looking ahead in terms of tariffs, our unique business attributes leave us well positioned to manage further changes in inflation, which include tariffs. We continue to plan and manage our actions to respond quickly to any future changes in tariffs and other related inflation. Our needs based consumer health care brands and their leading market share leave us well positioned to execute further pricing and cost saving efforts as necessary to offset the impact of future inflation. Advertising and marketing was 14.1% as a percentage of sales for the first nine months.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

For fiscal twenty twenty five, we still anticipate A and M up in dollars versus the prior year. G and A expenses were 9.6% of sales in the first nine months and we still anticipate full year G and A of approximately 9.5% as a percent of sales. Finally, adjusted EPS of $3.2 compared to $3.19 in the prior year with slightly lower revenues and the timing of A and M and G and A spends offset by more favorable interest expense. Our Q3 tax rate was 23.9% resulting in a first nine months normalized tax rate of 23.7% and we anticipate a stable tax rate in Q4. Now let's turn to Slide 10 and discuss cash flows.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

For the first nine months, we generated $184,900,000 in free cash flow, up 5% versus the prior year. We continue to maintain industry leading free cash flow and are maintaining our outlook for the full year of $240,000,000 or more. We reduced our variable term loan debt balance to zero in the quarter, leaving just two fixed cost attractively priced notes with maturities in 2028 and 02/1931. We continue to repurchase shares opportunistically and for the first nine months we've repurchased approximately 600,000 shares for $40,000,000 We achieved a covenant defined leverage ratio of 2.5 times in Q3. This improved ratio, robust free cash flow and consistent business performance gives us strategic flexibility with our capital deployment moving forward.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

We will continue to evaluate further opportunistic repurchases as well as M and A as part of a disciplined capital deployment strategy and expect to build some cash on the balance sheet to support these efforts given the attractive rates of our remaining fixed debt. With that, I'll turn it back to Ron.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Thanks, Chris. Let's turn to Slide 12 to wrap up. Our business remains healthy and we are on pace to exceed the earnings outlook we gave at the start of the year. Our accelerating business momentum is a testament to our proven business strategy and diversified portfolio. For fiscal twenty twenty five, we now anticipate revenues of $1,128,000,000 to $1,132,000,000 with an FX headwind expected in Q4.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Our organic revenue growth forecast of approximately 1% versus fiscal twenty twenty four remains unchanged. We're forecasting Q4 revenue of approximately $290,000,000 We now anticipate adjusted EPS of approximately $4.5 for the full year, thanks to our debt reduction efforts and the lower interest costs. This implies fourth quarter EPS of $1.3 Lastly, we continue to anticipate free cash flow of $240,000,000 or more, thanks to our improved leverage ratio and the strong financial profile. The result is ample capital deployment optionality moving forward that allows us to drive upside and maximize shareholder value. With that, I'll open it up for questions.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Operator?

Operator

Our first question comes from the line of Rupesh Parikh of Oppenheimer and Company. Your question please, Rupesh.

Rupesh Parikh
Senior Equity Research Analyst at Oppenheimer & Co. Inc.

Good morning. Thanks for taking my question. So maybe just going back to Clear Eyes, if you could just remind us how you think about the recovery going forward, what you're seeing from an in stock perspective at retail and then just when you think we'll get back to normalized levels within the channel? Thank you.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Good morning, Rupesh. So for ClearRise, for the third quarter, production levels were pretty much in line with what we had expected for the quarter. Sales were a little bit ahead as some the timing of some quarter end shipments enabled us to get it in and out of the warehouse at the end of the quarter. So that was just timing differences between Q3 and Q4. For Q4, we anticipate a level of sales to be similar to Q3, again because of that timing.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

But we anticipate a continued slight increase in production levels going forward. So looking ahead, it continues to kind of be a balancing act between short and long term objectives as we look to continue to support service levels and in stock levels the best we can while allowing the suppliers to continue to make investments and improvements to support longer term capacity increases. So as we look forward, we expect our sales to the retailers to continue to ramp up slowly going forward each quarter with a likely increase in the second half of twenty twenty six as we see increases in supply from the current suppliers and the addition of a couple of additional suppliers into the network. So this is going to continue to improve slowly and incrementally each quarter going forward, Rupesh.

Rupesh Parikh
Senior Equity Research Analyst at Oppenheimer & Co. Inc.

Okay, great. And then maybe just going back to your expectations for Q4, I think before the expectation was for gross margins to increase in Q4. So just more clarity on the puts and takes as you look at the balance of the year on on the gross margin line?

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

Yes. Hi, good morning, Rupesh. So, gross margin step up in Q4 is really driven by the timing of cost saving initiatives. We're not counting on any one thing. There's a number of projects that have been in the works now for a couple of years and they'll start running through the P and L in the fourth quarter.

Rupesh Parikh
Senior Equity Research Analyst at Oppenheimer & Co. Inc.

Great. And then maybe just one final question. I know you're not ready to give guidance for the upcoming fiscal year, but is there any initial puts and takes as you look forward towards the next fiscal year?

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

Yes. So obviously, we feel good about the business, right? We just reported record sales and EPS. We think we have solid momentum as we finish up this year and head into fiscal twenty twenty six. We'll have more to share in May, but that's how we're feeling about the business overall.

Rupesh Parikh
Senior Equity Research Analyst at Oppenheimer & Co. Inc.

Okay, great. Thank you. I'll pass along.

Operator

Thank you. Our next question comes from the line of Susan Anderson of Canaccord Genuity. Your line is open, Susan.

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

Hi, good morning. Nice job on the quarter. I was wondering maybe if you could talk a little bit about the cold cough season. Obviously, it was weak. It does seem like it's picked up lately.

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

I guess, is this going to help fourth quarter or is it really just about clearing inventory out there? And then also, do you feel like the inventory is a little bit high at retail right now across the category? And can we I guess end the season clean? Thanks.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Good morning, Susan. I'd also like to start talking about coughcold, reminding everybody that it isn't a significant element of our portfolio. It's seven ish percent to sales. So whether it's a good, bad or in different coughcold season, it really doesn't move our needle. And the third quarter is a great example of not only that, but the benefits of the diverse portfolio.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

So coughcold was sales for us were down quite a bit in the third quarter. For the whole year, we anticipated it to be flat to down slightly. At the beginning of the year, it looks like it's going to be down a bit more than that at this point. So despite the fact that I think as we finished up December and got into January, incident levels have ticked up. I'm not sure that's going to result in retailer reorders at this point.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

As a matter of fact, through the third quarter, we've seen takeaway at the shelf be above shipments in. So retailers, at least for our categories and our products, seem to be working down the inventory that they built with their pre season buy. So at this point, I'm not sure I would anticipate any increase in reorder rates for our products.

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

Okay, great. That's helpful. And then maybe if you could just talk a little bit more about just your exposure to tariffs now that it's potentially moved to also Canada, Mexico, Europe and then also China as well. Maybe if you

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

could talk about do you

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

have any exposure there? I know most of the manufacturing is in The U. S, but if you could just kind of give us some more color there. Thanks.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

Good morning, Susan. So on tariffs, just like everyone, we're watching carefully for implications, not just for finished goods, but other derivative elements and we'll understand that better as the landscape becomes clearer. A tariff is the cost just like any other cost that we would address. While we do source some of our products from the countries expected to be impacted, in aggregate, the business is well diversified and that includes our supply base. As a reminder, the vast majority of our manufacturing is in The U.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

S. With the small remaining manufacturing fairly diversified across other countries and continents. And we think this is a strategic advantage versus others as things unfold. So I think given the fluidity of the situation, it wouldn't be prudent for us to speculate at this time. There's still a lot of unknowns out there and we need to understand the different variables.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

But we're running scenarios and we will be agile in our responsive actions as we were through the pandemic period.

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

Okay, great. Thanks so much. Good luck to the rest

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

of the year.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Thanks, Susan.

Operator

Thank you. Our next question comes from the line of Keith Davis of Jefferies. Your question please, Keith.

Keith Devas
Keith Devas
Analyst at Jefferies Financial Group

Hey, thank you. Good morning, guys. Maybe just doubling back quickly to the eye drop recovery, we can see some competitors have obviously benefited while you guys have been off the shelf. So as you think about the full stages of the recovery, are you expecting anything from a promotional anything to change from a promotional intensity standpoint and how you kind of expect consumption to evolve as you get back on the shelf?

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Yes. Clear Eyes is by far the leading eye care brand in units at retail. So we've got a long heritage in connection with consumers. We're seeing transferability amongst SKUs for ClearEyes. So if one SKU happens to be out at a retail location, we are seeing our consumers reach for a different ClearEye.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

So we don't need to have a different approach around promotional activity or spending to continue to connect with the consumers. They are going to go look for that Clear Eyes product. It's important to them. So service levels aren't exactly and in stock levels aren't where we want them to be. As I had mentioned earlier, we are focused on that balance between making sure we are doing the right things to support long term demand with our supply network and getting as much product into the retailer shelves as soon as possible.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

So we expect that we'll be able to regain and retain our historic levels of share over time.

Keith Devas
Keith Devas
Analyst at Jefferies Financial Group

Got it. That's helpful. And maybe just switching to Hydralite, the brand has obviously been very successful. You guys required the remaining rights in other markets. And so maybe just adding some context on how you kind of expect the brand to evolve, what plans or reinvestment you plan to put behind it now that you have the rights in some other countries and maybe just expected contribution that you can see from the brand and the momentum continuing?

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Yes. So for starters, right, the Hydrilyte brand in its core market of Australia continues to be the classic example of how we think about long term brand building, starting in Hydrilyte's case with growing the category and getting consumers to think about hydration as an important element of taking care of their health. So we think we got a long runway there. It was about six years ago, we bought the first tranche of international regions for Southeast Asia except for China. And then more recently, we bought the rest of the world's rights with the exception of The U.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

S. And in most of those territories, Hydrilyte didn't have any presence. So it's going to be a slow build, right, as we build out a distribution network, work with retailers to understand the offerings and then work to connect with consumers so that they understand that there's a product with these benefits out there and available for them. So it will be a slow build over time, but a product proposition in a way to connect with consumers that we think will grow nicely over the long term.

Keith Devas
Keith Devas
Analyst at Jefferies Financial Group

Got it. Thank you. I'll pass it on.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Great. Thanks, Steve.

Operator

Thank you. Our next question comes from the line of David Schaknow of William Blair. Please go ahead, David.

David Shakno
Analyst at William Blair & Company, L.L.C

Hey, good morning. I just had a question on international. I think it was a bit higher than many of us expected. And you mentioned in the press release that it came from broad based growth in addition to Hydralight. Can you expand on some of that growth outside of Hydralight and where that occurred?

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Yes. So maybe I'll start with Darren and I'll let Chris. I think if you look across the brand portfolio for the care business, I think almost all of the biggest brands there, so FES, Mirene, Zatadine, for example, actually had strong growth. So this isn't the first time that we've seen this and I've commented in the past that care is hitting on a lot of cylinders not just Hydralyte or our international business. I think we also had nice business excuse me, nice growth in our small European business and through our distributor network in South America as well.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

So not just Hydrolyte, it's really the broader portfolio.

David Shakno
Analyst at William Blair & Company, L.L.C

Great. I'll pass it on.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Thanks David. Thank you.

Operator

Our next question comes from the line of Linda Bolton Weiser of D. A. Davidson. Your question please Linda.

Linda Bolton Weiser
Managing Director at D.A. Davidson

Yes. Hello. Thank you. Congratulations on a good quarter. So I was curious about when you talked about the brands, Fleet and Dramamine, I was wondering on Fleet, I think you talked about an expansion into oral laxatives.

Linda Bolton Weiser
Managing Director at D.A. Davidson

I'm just wondering, is it in my understanding that that's like competing with like the big guys like a Metamucil? And if so, can you explain kind of why that makes sense? And then on Dramamine, I heard you mentioned anxiety. Is that a new expansion of the brand into that category? And again, what gives the brand the right to kind of compete in that category?

Linda Bolton Weiser
Managing Director at D.A. Davidson

Thanks.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Yes. So Lynn, let me start with the Dramamine first. So we launched a product that is for nausea and stress. So when we go out and talk to consumers, one of the things they tell us is that stress is often attributed to a cause of being nauseated. So that's the new product that's there and it's done very well at retail for us.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

We launched that I think last the end of last fiscal year or so. So for fleet, we've launched constipation related products, not fiber. So we are inching into the category that other big players have brands into, but we are connecting in a way that's more grounded in fleets position of serious constipation. So we have got a number of products including stool softeners out there that we've actually launched again towards the end of last fiscal year. We're growing distribution slowly and connecting with consumers online, digital and growing the distribution.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

So again, these products will be positioned in line with the fleet's heritage of strong, fast and efficacious constipation relief.

Linda Bolton Weiser
Managing Director at D.A. Davidson

Okay. That makes sense. I was also wondering, in looking at the Nielsen data and I know it does not tell the whole story, but nevertheless, it does seem like the prior year comparisons on POS growth do get a little bit harder in the coming weeks, like in the 4% to 10% growth range, which is pretty high. Can you remind us what that was all about a year ago? And then how do you feel about kind of comping up against that on a POS level?

Linda Bolton Weiser
Managing Director at D.A. Davidson

Thanks.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Yes. We see variability week to week in POS stuff whether there is a change in holidays or weather or other factors. The Super Bowl is a

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

week later this year, right?

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

So people are heading into the stores a week later to get their chips, dips and GI stuff, I guess. But anyway, so we look at that to step back for a minute, we already commented on the fact that we feel really good about the momentum in our business. If you go look at North America, for instance, in the third quarter, I think we were up year over year in just about every category, I think with the exception of one. So we saw broad based strong performance across the portfolio and we feel good about those trends as we head into the fourth quarter, both from a consumption standpoint and the ability to hit our outlook for sales and EPS for the fourth quarter.

Linda Bolton Weiser
Managing Director at D.A. Davidson

Okay. And then my last question is just on free cash flow. I'm just curious with the increase in earnings guidance, why wasn't there a little bump up in the free cash flow guidance?

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

Yes, Linda, hi, it's Chris. So the original guide was $240,000,000 or more. I guess that the recent uptick would be the or more part. So we're holding to that, but certainly feeling good about the cash flow at this point.

Linda Bolton Weiser
Managing Director at D.A. Davidson

Okay. Sounds good. Thanks a lot.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Thank you, Linda.

Operator

Thank you. Our next question comes from the line of Anthony Levodzinski of Sidoti and Company. Please go ahead, Anthony.

Anthony Lebiedzinski
Senior Equity Research Analyst at Sidoti & Company, LLC

Good morning, everyone, and thank you for taking the questions. So as far as the gross margin, so I know you're expecting a increase sequentially in the fourth quarter of fifty seven percent. Looking back prior to COVID, I guess you guys were close to fifty eight percent. As we look out into the future here, do you think there's an opportunity to get back to those historical gross margins or if not, how should we think about that?

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

Yes. Hi, Anthony. So longer term, obviously, we'll continue the path of continued cost saving measures. We'll launch margin accretive new products. And so we would anticipate fully creeping that margin up over time.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

Just a reminder, we're trying to manage to a low to mid-30s EBITDA margin. So to the extent our gross margin is moving, you're likely to see a change in our A and M or G and A spend, which would hold operating income margins pretty flat. So that's our expectation for the future, but nothing structural that's happening in gross margin that we don't think we can recover over time.

Anthony Lebiedzinski
Senior Equity Research Analyst at Sidoti & Company, LLC

That's great to hear. And then with the free cash flows of the business and now you paying off the debt, the variable debt that is, what's your appetite for acquisitions and what's the pipeline looking like these days?

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

Yes. So certainly after investing in our brands, M and A is our second focus for free cash flow, followed by opportunistic repurchases and then debt reduction, which will come in the form of cash build for now. Our appetite for M and A is healthy as ever. I mean, we are looking at a lot of things. We always say we haven't been out of the market.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

We've just remained disciplined. And when we find something that meets our very well defined specific criteria, we'll move forward with it. But for now, as we sit here today, the pipeline there's a lot out there. We're looking at all of it. It's kind of the same as it's been for a number of years now.

Christine Sacco
Christine Sacco
CFO at Prestige Consumer Healthcare

So just given the nature of the fragmented space, we think there'll be a lot of opportunities going forward. We'll continue to remain disciplined and we'll look at a lot.

Anthony Lebiedzinski
Senior Equity Research Analyst at Sidoti & Company, LLC

All right. Well, thank you very much and best of luck.

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Thanks, Anthony.

Operator

Thank you. I would now like to turn the conference back to Ron Lombardi for closing remarks. Sir?

Ron Lombardi
Ron Lombardi
Chairman, President & CEO at Prestige Consumer Healthcare

Thank you, operator, and thanks to everyone for joining us today, and we look forward to providing an update in May. Thank you, and have a great day.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Executives
    • Phil Terpolilli
      Phil Terpolilli
      Vice President of Investor Relations & Treasurer
    • Ron Lombardi
      Ron Lombardi
      Chairman, President & CEO
    • Christine Sacco
      Christine Sacco
      CFO
Analysts
    • Rupesh Parikh
      Senior Equity Research Analyst at Oppenheimer & Co. Inc.
    • Susan Anderson
      Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets
    • Keith Devas
      Analyst at Jefferies Financial Group
    • David Shakno
      Analyst at William Blair & Company, L.L.C
    • Linda Bolton Weiser
      Managing Director at D.A. Davidson
    • Anthony Lebiedzinski
      Senior Equity Research Analyst at Sidoti & Company, LLC
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Key Takeaways

  • Record Q3 Results: Net sales of $290.3 million (up 2.7% YoY) and EPS of $1.22 (up 15%) were both quarterly records, driven by strong international performance and broad-based North American brand growth.
  • Robust Free Cash Flow & Capital Deployment: Generated $184.9 million in free cash flow YTD (up 5%), reduced variable term loan debt to zero, improved leverage to 2.5×, and repurchased $40 million of shares, supporting opportunistic M&A and shareholder returns.
  • GI Portfolio Momentum: The GI category (nearly 20% of North American sales) delivered mid-single-digit growth over three years, led by flagship brands Dramamine (new Herbals SKU), Fleet (entering oral laxatives), and Gaviscon in Canada.
  • Clear Eyes Recovery Plan: Continued supply constraints are easing with production and sales aligning; management expects gradual inventory replenishment through FY 26 as additional suppliers boost capacity.
  • Fiscal Q4 & FY 25 Outlook: Full-year revenue guidance raised to $1.128–$1.132 billion (organic growth ~1%) with adjusted EPS of ~$4.50, Q4 EPS of ~$1.30, gross margin expected to rise to ~57%, and free cash flow of $240 million or more.
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Earnings Conference Call
Prestige Consumer Healthcare Q3 2025
00:00 / 00:00

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