Prestige Consumer Healthcare Inc. Reports Second Quarter Fiscal 2024 Results


  • Revenue of $286.3 Million in Q2, Ahead of Outlook
  • Diluted EPS of $1.07 in Q2, Up Over 5% Versus Prior Year
  • Reduced Leverage Ratio to 3.0x at Quarter End
  • Reaffirming Full-Year Fiscal 2024 Revenue, Earnings, and Cash Flow Outlook

TARRYTOWN, N.Y., Nov. 02, 2023 (GLOBE NEWSWIRE) -- Prestige Consumer Healthcare Inc. (NYSE:PBH) today reported financial results for its second quarter and first six months ended September 30, 2023.

“Our second quarter results build on a strong first quarter performance thanks to our diverse and leading portfolio of brands and broad distribution. This stable top-line performance was amplified by our strong financial model and resulted in second quarter mid-single-digit earnings growth versus prior year. The earnings growth translated into robust free cash flow that we used for debt reduction and resulting leverage which will enable further disciplined capital deployment,” said Ron Lombardi, Chief Executive Officer of Prestige Consumer Healthcare.

Second Fiscal Quarter Ended September 30, 2023

Reported revenues in the second quarter of fiscal 2024 of $286.3 million compared to a record $289.3 million in the second quarter of fiscal 2023. Revenues decreased 0.7% versus the prior year second quarter excluding the impact of foreign currency. The revenue performance for the quarter was led by Cough & Cold and Ear & Eye Care category performances in North America and strong International OTC segment growth versus the prior year comparable period, offset by declines in certain other categories and the planned strategic exit of private label revenues.

Reported net income for the second quarter of fiscal 2024 totaled $53.6 million, compared to the prior year second quarter’s net income of $51.0 million. Diluted earnings per share of $1.07 for the second quarter of fiscal 2024 increased 5.4% versus $1.02 in the prior year comparable period.

Six Months Ended September 30, 2023

Reported revenues for the first six months of fiscal 2024 totaled $565.6 million and compared to revenues of $566.3 million for the first six months of fiscal 2023. Revenues increased 0.5% versus the prior year six-month period, excluding the impact of foreign currency. The revenue growth for the first six months was driven by International OTC segment performance and strong Dermatological category sales in North America, offset by lower Women’s Health category sales and the strategic exit of private label revenues.

Reported net income for the first six months of fiscal 2024 totaled $106.8 million versus the prior year comparable period net income of $106.3 million. Diluted earnings per share were $2.13 for the first six months of fiscal 2024 increased compared to diluted earnings per share of $2.11 in the prior year comparable period.

Free Cash Flow and Balance Sheet

The Company's net cash provided by operating activities for the second quarter fiscal 2024 was $62.5 million, compared to $57.5 million during the prior year comparable period. Non-GAAP free cash flow in the second quarter of fiscal 2024 was $59.5 million compared to $55.2 million in the prior year second quarter. The Company's net cash provided by operating activities for the first six months of fiscal 2024 was $110.5 million, compared to $115.8 million during the prior year comparable period. Non-GAAP free cash flow in the first six months of fiscal 2024 was $106.1 million compared to $112.4 million in the prior year comparable period, with the change attributable to the timing of working capital.

In the first quarter fiscal 2024, the Company repurchased approximately 0.4 million shares at a total investment of $25.0 million, completing its previously authorized share repurchase program.

The Company's net debt position as of September 30, 2023 was approximately $1.2 billion, resulting in a covenant-defined leverage ratio of 3.0x.

Segment Review

North American OTC Healthcare: Segment revenues of $244.4 million for the second quarter fiscal 2024 decreased 3.0% compared to the prior year comparable quarter's record segment revenues of $252.1 million. The revenue performance for the quarter was driven by lower sales in Women’s Health and certain other categories as well as the strategic exit of private label, partially offset by strong performance in the Cough & Cold and Ear & Eye Care categories.

For the first six months of the current fiscal year, reported revenues for the North American OTC segment were $490.6 million, which compared to $494.6 million in the prior year comparable period. The change was attributable to lower sales in the Women’s Health category, partially offset by higher sales in other categories including Dermatologicals, Ear & Eye Care, and Gastrointestinal.

International OTC Healthcare: Fiscal second quarter 2024 segment revenues were $41.9 million compared to $37.2 million reported in the prior year comparable period. The increase in revenue versus the prior year second quarter was driven by strong Eye & Ear Care and Women’s Health sales, partially offset by a $0.7 million currency headwind.

For the first six months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $75.1 million, an increase of approximately 5% over the prior year comparable period’s revenues of $71.8 million or an increase of 8.5% after excluding the impact a $2.6M foreign currency headwind. The strong sales growth exceeded the Company’s long-term growth expectation for the segment.

Commentary Reaffirming Outlook for Fiscal 2024

Ron Lombardi, Chief Executive Officer, stated, “We were pleased with our top-line performance against a record result in Q2 of the prior year. This was driven by our continued brand-building efforts and growth in multiple categories including Cough & Cold and Ear & Eye Care as well as our International segment. The resulting strong profitability and free cash flow enabled our continued disciplined capital deployment, which reduced debt by $55 million in the quarter and improved our leverage to 3.0x and the end of September.”

“Looking ahead, we are reaffirming our fiscal 2024 outlook that includes solid sales and earnings growth expectations. While we anticipate a continued dynamic macro environment, our diverse portfolio of brands in a resilient needs-based section of the store leave us well positioned to continue to create long-term shareholder value,” Mr. Lombardi concluded.

 Reaffirmed Fiscal 2024 Outlook 
Revenue$1,135 to $1,140 million 
Organic Revenue Growth1% to 2% 
Diluted E.P.S.$4.27 to $4.32 
Free Cash Flow$240 million or more 
   

Fiscal Second Quarter 2024 Conference Call, Accompanying Slide Presentation and Replay

The Company will host a conference call to review its second quarter fiscal 2024 results today, November 2, 2023 at 8:30 a.m. ET. The Company provides a live Internet webcast, a slide presentation to accompany the call, as well as an archived replay, all of which can be accessed from the Investor Relations page of the Company's website at www.prestigeconsumerhealthcare.com. To participate in the conference call via phone, participants may register for the call here to receive dial-in details and a unique pin. While not required, it is recommended to join 10 minutes prior to the event start. The slide presentation can be accessed from the Investor Relations page of the website by clicking on Webcasts and Presentations.

A conference call replay will be available for approximately one week following completion of the live call and can be accessed on the Company’s Investor Relations page.

Non-GAAP and Other Financial Information
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section at the end of this earnings release.

Note Regarding Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "outlook," "projected," "may," "will," "would," "expect," "anticipate," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology. The "forward-looking statements" include, without limitation, statements regarding the Company's future operating results including revenues, organic growth, diluted earnings per share, and free cash flow, the Company’s disciplined capital deployment, the Company’s brand-building efforts, the impact of the macro environment, and the Company’s ability to create shareholder value. These statements are based on management’s estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors, including the impact of business and economic conditions, including as a result of labor shortages, inflation and geopolitical instability, consumer trends, the impact of the Company’s advertising and marketing and new product development initiatives, customer inventory management initiatives, fluctuating foreign exchange rates, competitive pressures, and the ability of the Company’s manufacturing operations and third party manufacturers and logistics providers and suppliers to meet demand for its products and to avoid inflationary cost increases and disruption as a result of labor shortages. A discussion of other factors that could cause results to vary is included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023 and other periodic reports filed with the Securities and Exchange Commission.

About Prestige Consumer Healthcare Inc.
Prestige Consumer Healthcare is a leading consumer healthcare products company with sales throughout the U.S. and Canada, Australia, and in certain other international markets. The Company’s diverse portfolio of brands include Monistat® and Summer’s Eve® women’s health products, BC® and Goody's® pain relievers, Clear Eyes® and TheraTears® eye care products, DenTek® specialty oral care products, Dramamine® motion sickness treatments, Fleet® enemas and glycerin suppositories, Chloraseptic® and Luden’s® sore throat treatments and drops, Compound W® wart treatments, Little Remedies® pediatric over-the-counter products, Boudreaux’s Butt Paste® diaper rash ointments, Nix® lice treatment, Debrox® earwax remover, Gaviscon® antacid in Canada, and Hydralyte® rehydration products and the Fess® line of nasal and sinus care products in Australia. Visit the Company’s website at www.prestigeconsumerhealthcare.com.

Investor Relations Contact
Phil Terpolilli, CFA, 914-524-6819
irinquiries@prestigebrands.com

Prestige Consumer Healthcare Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
 
 Three Months Ended September 30,  Six Months Ended September 30,
(In thousands, except per share data) 2023   2022   2023   2022 
Total Revenues$286,316  $289,273  $565,625  $566,332 
        
Cost of Sales       
Cost of sales excluding depreciation 124,324   126,384   246,978   241,380 
Cost of sales depreciation 1,972   1,880   3,954   3,824 
Cost of sales 126,296   128,264   250,932   245,204 
Gross profit 160,020   161,009   314,693   321,128 
        
Operating Expenses       
Advertising and marketing 40,102   43,819   76,333   83,770 
General and administrative 25,997   26,438   53,684   53,152 
Depreciation and amortization 5,671   6,368   11,232   12,808 
Total operating expenses 71,770   76,625   141,249   149,730 
Operating income 88,250   84,384   173,444   171,398 
        
Other expense       
Interest expense, net 17,606   16,979   35,325   32,271 
Other (income) expense, net 229   812   (1,009)  1,637 
Total other expense, net 17,835   17,791   34,316   33,908 
Income before income taxes 70,415   66,593   139,128   137,490 
Provision for income taxes 16,856   15,570   32,293   31,195 
Net income$53,559  $51,023  $106,835  $106,295 
        
Earnings per share:       
Basic$1.08  $1.02  $2.15  $2.12 
Diluted$1.07  $1.02  $2.13  $2.11 
        
Weighted average shares outstanding:       
Basic 49,687   49,804   49,727   50,033 
Diluted 50,081   50,265   50,138   50,496 
        
Comprehensive income, net of tax:       
Currency translation adjustments (3,784)  (7,118)  (4,430)  (16,637)
Net loss on termination of pension plan          (790)
Total other comprehensive loss (3,784)  (7,118)  (4,430)  (17,427)
Comprehensive income$49,775  $43,905  $102,405  $88,868 


Prestige Consumer Healthcare Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
(In thousands)September 30, 2023 March 31, 2023
    
Assets   
Current assets   
Cash and cash equivalents$60,067 $58,489
Accounts receivable, net of allowance of $21,994 and $20,205, respectively 158,456  167,016
Inventories 161,283  162,121
Prepaid expenses and other current assets 8,392  4,117
Total current assets 388,198  391,743
    
Property, plant and equipment, net 70,700  70,412
Operating lease right-of-use assets 12,134  14,923
Finance lease right-of-use assets, net 2,870  4,200
Goodwill 526,860  527,553
Intangible assets, net 2,328,250  2,341,893
Other long-term assets 3,862  3,005
Total Assets$3,332,874 $3,353,729
    
Liabilities and Stockholders' Equity   
Current liabilities   
Accounts payable 44,381  62,743
Accrued interest payable 15,635  15,688
Operating lease liabilities, current portion 6,732  6,926
Finance lease liabilities, current portion 2,876  2,834
Other accrued liabilities 60,080  72,524
Total current liabilities 129,704  160,715
    
Long-term debt, net 1,262,972  1,345,788
Deferred income tax liabilities 388,481  380,434
Long-term operating lease liabilities, net of current portion 6,644  9,876
Long-term finance lease liabilities, net of current portion 218  1,667
Other long-term liabilities 8,896  8,165
Total Liabilities 1,796,915  1,906,645
    
Total Stockholders' Equity 1,535,959  1,447,084
Total Liabilities and Stockholders' Equity$3,332,874 $3,353,729


Prestige Consumer Healthcare Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 Six Months Ended September 30,
(In thousands) 2023   2022 
Operating Activities   
Net income$106,835  $106,295 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization 15,186   16,632 
Loss on disposal of property and equipment 191   94 
Deferred income taxes 9,721   4,211 
Amortization of debt origination costs 2,302   1,798 
Stock-based compensation costs 7,834   7,323 
Non-cash operating lease cost 2,816   2,984 
Other    447 
Changes in operating assets and liabilities:   
Accounts receivable 4,415   (8,276)
Inventories 223   (21,810)
Prepaid expenses and other current assets (3,814)  (1,501)
Accounts payable (18,820)  1,016 
Accrued liabilities (11,764)  9,788 
Operating lease liabilities (3,493)  (3,201)
Other (1,085)  (13)
Net cash provided by operating activities 110,547   115,787 
    
Investing Activities   
Purchases of property, plant and equipment (4,411)  (3,423)
Other 3,800    
Net cash provided by (used in) investing activities (611)  (3,423)
    
Financing Activities   
Term loan repayments (85,000)  (40,000)
Borrowings under revolving credit agreement    20,000 
Repayments under revolving credit agreement    (20,000)
Payments of finance leases (1,403)  (1,369)
Proceeds from exercise of stock options 9,183   1,489 
Fair value of shares surrendered as payment of tax withholding (5,508)  (5,450)
Repurchase of common stock (25,000)  (50,000)
Net cash used in financing activities (107,728)  (95,330)
    
Effects of exchange rate changes on cash and cash equivalents (630)  (1,777)
Increase (decrease) in cash and cash equivalents 1,578   15,257 
Cash and cash equivalents - beginning of period 58,489   27,185 
Cash and cash equivalents - end of period$60,067  $42,442 
Interest paid$33,706  $19,016 
Income taxes paid$25,118  $15,689 


Prestige Consumer Healthcare Inc.
Condensed Consolidated Statements of Income
Business Segments
(Unaudited)
 
 Three Months Ended September 30, 2023
(In thousands)North American OTC
Healthcare
 International OTC
Healthcare
 Consolidated
Total segment revenues*$244,423 $41,893 $286,316
Cost of sales 107,466  18,830  126,296
Gross profit 136,957  23,063  160,020
Advertising and marketing 35,389  4,713  40,102
Contribution margin$101,568 $18,350 $119,918
Other operating expenses     31,668
Operating income    $88,250
      
*Intersegment revenues of $0.6 million were eliminated from the North American OTC Healthcare segment.


 Six Months Ended September 30, 2023
(In thousands)North American OTC Healthcare International OTC Healthcare Consolidated
Total segment revenues*$490,566 $75,059 $565,625
Cost of sales 217,542  33,390  250,932
Gross profit 273,024  41,669  314,693
Advertising and marketing 66,790  9,543  76,333
Contribution margin$206,234 $32,126 $238,360
Other operating expenses     64,916
Operating income    $173,444
 
*Intersegment revenues of $2.0 million were eliminated from the North American OTC Healthcare segment.


 Three Months Ended September 30, 2022
(In thousands)North American OTC Healthcare International OTC Healthcare Consolidated
Total segment revenues*$252,054 $37,219 $289,273
Cost of sales 113,533  14,731  128,264
Gross profit 138,521  22,488  161,009
Advertising and marketing 39,316  4,503  43,819
Contribution margin$99,205 $17,985 $117,190
Other operating expenses     32,806
Operating income    $84,384
 
* Intersegment revenues of $1.1 million were eliminated from the North American OTC Healthcare segment.


 Six Months Ended September 30, 2022
(In thousands)North American OTC Healthcare International OTC Healthcare Consolidated
Total segment revenues*$494,572 $71,760 $566,332
Cost of sales 216,454  28,750  245,204
Gross profit 278,118  43,010  321,128
Advertising and marketing 74,728  9,042  83,770
Contribution margin$203,390 $33,968 $237,358
Other operating expenses     65,960
Operating income    $171,398
 
* Intersegment revenues of $1.7 million were eliminated from the North American OTC Healthcare segment.
 

About Non-GAAP Financial Measures

In addition to financial results reported in accordance with GAAP, we disclose certain Non-GAAP financial measures ("NGFMs"), including, but not limited to, Non-GAAP Organic Revenues, Non-GAAP Organic Revenue Change Percentage, Non-GAAP EBITDA, Non-GAAP EBITDA Margin, Non-GAAP Free Cash Flow, and Net Debt.

We use these NGFMs internally, along with GAAP information, in evaluating our operating performance and in making financial and operational decisions. We believe that the presentation of these NGFMs provides investors with greater transparency, and provides a more complete understanding of our business than could be obtained absent these disclosures, because the supplemental data relating to our financial condition and results of operations provides additional ways to view our operation when considered with both our GAAP results and the reconciliations below. In addition, we believe that the presentation of each of these NGFMs is useful to investors for period-to-period comparisons of results in assessing shareholder value, and we use these NGFMs internally to evaluate the performance of our personnel and also to evaluate our operating performance and compare our performance to that of our competitors.

These NGFMs are not in accordance with GAAP, should not be considered as a measure of profitability or liquidity, and may not be directly comparable to similarly titled NGFMs reported by other companies. These NGFMs have limitations and they should not be considered in isolation from or as an alternative to their most closely related GAAP measures reconciled below. Investors should not rely on any single financial measure when evaluating our business. We recommend investors review the GAAP financial measures included in this earnings release. When viewed in conjunction with our GAAP results and the reconciliations below, we believe these NGFMs provide greater transparency and a more complete understanding of factors affecting our business than GAAP measures alone.

NGFMs Defined

We define our NGFMs presented herein as follows:

  • Non-GAAP Organic Revenues: GAAP Total Revenues excluding the impact of foreign currency exchange rates in the periods presented.
  • Non-GAAP Organic Revenue Change Percentage: Calculated as the change in Non-GAAP Organic Revenues from prior year divided by prior year Non-GAAP Organic Revenues.
  • Non-GAAP EBITDA: GAAP Net Income before interest expense, net, provision for income taxes, and depreciation and amortization.
  • Non-GAAP EBITDA Margin: Calculated as Non-GAAP EBITDA divided by GAAP Total Revenues.
  • Non-GAAP Free Cash Flow: Calculated as GAAP Net cash provided by operating activities less cash paid for capital expenditures.
  • Net Debt: Calculated as total principal amount of debt outstanding ($1,275,000 at September 30, 2023) less cash and cash equivalents ($60,067 at September 30, 2023). Amounts in thousands.

The following tables set forth the reconciliations of each of our NGFMs (other than Net Debt, which is reconciled above) to their most directly comparable financial measures presented in accordance with GAAP.

Reconciliation of GAAP Total Revenues to Non-GAAP Organic Revenues and related Non-GAAP Organic Revenue Change percentage:

 Three Months Ended
September 30,
 Six Months Ended
September 30,
  2023   2022   2023   2022 
(In thousands)       
GAAP Total Revenues$286,316  $289,273  $565,625  $566,332 
Revenue Change (1.0)%    (0.1)%  
Adjustments:       
Impact of foreign currency exchange rates    (1,035)     (3,759)
Total adjustments    (1,035)     (3,759)
Non-GAAP Organic Revenues$286,316  $288,238  $565,625  $562,573 
Non-GAAP Organic Revenue Change (0.7)%    0.5%  
            

Reconciliation of GAAP Net Income to Non-GAAP EBITDA and related Non-GAAP EBITDA Margin:

 Three Months Ended
September 30,
 Six Months Ended
September 30,
  2023   2022   2023   2022 
(In thousands)       
GAAP Net Income$53,559  $51,023  $106,835  $106,295 
Interest expense, net 17,606   16,979   35,325   32,271 
Provision for income taxes 16,856   15,570   32,293   31,195 
Depreciation and amortization 7,643   8,248   15,186   16,632 
Non-GAAP EBITDA$95,664  $91,820  $189,639  $186,393 
Non-GAAP EBITDA Margin 33.4%  31.7%  33.5%  32.9%
                

Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow:

 Three Months Ended
September 30,
 Six Months Ended
September 30,
  2023   2022   2023   2022 
(In thousands)       
GAAP Net Income$53,559  $51,023  $106,835  $106,295 
Adjustments:       
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows 19,862   17,255   38,050   33,489 
Changes in operating assets and liabilities as shown in the Statement of Cash Flows (10,961)  (10,738)  (34,338)  (23,997)
Total adjustments 8,901   6,517   3,712   9,492 
GAAP Net cash provided by operating activities 62,460   57,540   110,547   115,787 
Purchases of property and equipment (2,934)  (2,376)  (4,411)  (3,423)
Non-GAAP Free Cash Flow$59,526  $55,164  $106,136  $112,364 
                

Outlook for Fiscal Year 2024:

Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Free Cash Flow:

(In millions) 
Projected FY'24 GAAP Net cash provided by operating activities$250 
Additions to property and equipment for cash (10)
Projected FY'24 Non-GAAP Free Cash Flow$240