Release Date: May 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Prestige Consumer Healthcare Inc reported strong consumption growth for the year, exceeding the long-term target of 2% to 3%.
- The company generated approximately $240 million in free cash flow as anticipated, enabling significant deleveraging to a leverage ratio of 2.8 times, the lowest in the company's history.
- Prestige Consumer Healthcare Inc maintained a diverse supply chain with over 100 third-party suppliers, which has historically provided flexibility and resilience.
- The company's portfolio remains resilient and well-positioned, benefiting from a broad range of leading brands across many categories.
- Prestige Consumer Healthcare Inc continues to invest in efficient marketing and innovation, driving long-term growth for its leading brands.
Negative Points
- Fourth quarter performance did not meet growth objectives, with revenue and adjusted EPS approximately flat compared to the prior year.
- Supply chain pressures late in the fourth quarter prevented the company from fulfilling retailer orders, impacting both gross margin and EBITDA.
- Significant disruptions in supply from Clear Eyes suppliers due to maintenance and quality improvements led to production limits expected to continue into the first half of the upcoming fiscal year.
- The women's health products categories faced challenges, particularly with the Summer's Eve on-the-go offerings, although improving trends are beginning.
- The company anticipates revenue and EPS outlook for the full year to be below long-term expectations due to ongoing supply chain headwinds.
Q & A Highlights
Q: What's the confidence in resolving some of the supply chain challenges by the second half?
A: Ronald Lombardi, CEO, expressed confidence in the recovery plan for the Clear Eyes suppliers, expecting stabilization and recovery in the second half of the fiscal year.
Q: Can you quantify the percentage point headwind to your top-line growth due to supply chain disruptions?
A: Christine Sacco, CFO, mentioned that supply chain disruptions represent about a one-point headwind to the year's revenue, with a greater impact expected in the first half.
Q: Are competitors facing similar supply chain issues in eye care, or is it just your brands?
A: Ronald Lombardi clarified that their suppliers for Clear Eyes are primarily exclusive to their brands, so competitors would be subject to different factors.
Q: What was the impact of supply chain issues on Q4 sales, and how did it compare to issues in the women's health categories?
A: Christine Sacco explained that the majority of the Q4 sales miss was related to eye care supply chain issues, significantly impacting revenue.
Q: How are you managing the gross margin impact from supply chain disruptions?
A: Christine Sacco noted that the gross margin impact was minimal in Q4, with fixed costs like warehousing slightly affecting margins due to reduced sales volume.
Q: What are your capital allocation priorities, especially regarding M&A and share repurchases?
A: Ronald Lombardi discussed maintaining flexibility in capital deployment, emphasizing investing in strategic brands and disciplined M&A, while Christine Sacco highlighted a $300 million multi-year share repurchase program, prioritizing offsetting share dilution and considering further buybacks as opportunistic.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
