PBH - Earnings call transcript Q2 2019 | Prestige Consumer Healthcare Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Prestige Brands Holdings Second Quarter 2019 Earnings Conference call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Phil Terpolilli, Director of Investor Relations. Sir, you may begin.

Phil Terpolilli

good everyone and the operator, you, morning on to phone. Thank

call, call. are on There Sacco, presentation, our today’s review the the the fiscal second me analysts. and outlook fiscal Ron of our will accompanies our highlights which call On financial Christine Joining from quarter, CEO; and slide today Lombardi, then is XXXX questions cover a and Chairman, CFO. today’s our results we XXXX President take

clicking prestigebrands.com, remember on Investors can information release access reconciliations visiting You and financial webcast include Please by then between and presentation. contained today reported earnings today’s and The measures some the slide on financial presentation it link the measures. are presentation. non-GAAP adjusted today’s in included and the of in

management the make uncertainties, harbor disclosure around risks call, detail a the today’s of call. accompanying X statements will slide complete and in forward-looking presentation on safe we which During page

available factors XX-K. our Additional I’ll risk Healthcare through Ron? our information it and recent now Consumer our SEC CEO, in most hand concerning of to quarter over second and most Prestige the walk Lombardi, filings performance. to statements the recent Ron cautionary highlights are

Ron Lombardi

good and Phil, everyone. Thanks, morning,

a continuation performance begin on page the X. QX discussed solid first Let’s quarter back of was we August. in

top X% growth for consumption line for our year. continue to X% portfolio consumption organic performance Our trends we the and expect remain favorable, to and full

strong expectations resulting line prior of our the EPS in We by X% the Adjusted improvements and business. leverage and further driven continued Cleaning grew improved year, profile to gross experience the our Household with were capabilities. by divestiture margin financial versus

we in Household strong the generate with July from down quarter. debt million free We in Cleaning, $XXX X proceeds the combination during divestiture continued flow. our cash And of paid to

a business focuses and also remind day. changed on what to our important It’s our to Healthcare reflect we Prestige strategy evolution customers Lastly, to ourselves, name corporate investors Consumer company. our as an QX, during shift every

turn let’s to more Slide detail QX for on X our Now results.

the Our quarter, supported consumption the prior with net the household expectation year. quarter, after year by for adjusting X% was This sales the to the in X% versus X.X% aligned million which trends up were our for approximately for strong $XXX divestiture.

consumption in sales and the categories. ear North Our healthy remain led trends by with eye growth America, and GI care

EBITDA when additional second XX.X%, add at and QX. guidance. progress million our tax in capital have both. quarter rate. continues and and cash from the for benefit year cover up against We’ve change gross XXX made expenses. normalized recognition by was $XX.X cash detail the segment policies Our in timing new double-digit Australia top will timing the International timing in to of experienced Asia partially to shipment fiscal revenue by year Goody’s with second a growth the begin half our was the Pacific. half. the I of and led as well accounting in as line the from warehouse last free QX discussed low around gradually margins, launch will approached Total in higher and strong consumption freight QX, associated in related packaging strong needs QX, These and performance Adjusted Similar offset the points reverse the & industry-leading solid level headwinds first BC to business in half flow company came we margin spending costs sequentially basis we minimal in

the proceeds paid full of of expectation and ongoing Last, our year $XXX the remains July Household we with business. down net in debt from flow cash cash the Cleaning divestiture X the for unchanged. Our generation million QX

revenue fiscal growth good performance feel with first Slide So year-to-date highlights let’s about summarize on solid our expected. half We as X. our

warehousing are call private our our label remover winning of core acquisition with of costs category, performance in on example one continue we year the XX% over was X leading brands. criteria, core category the branded first focus our part brand X, to Freight a small with focuses and factors, half of with our another our to represents success momentum also be categories full acquisition base. with with a portfolio, category portfolio, up results which The financial from category, revenue On brands to brand-building let’s from Slide strong sales, to a and which growth. on able and over make representing growth earwax fit brand-building the our this these well such of driving pleased one acquired share number and representing leading earwax that Today, the long-term outperforming from long-term sales. development the strong but our have oftentimes profile Debrox of growth brand Debrox continuation as XX% it’s consumers. of with behind outgrowing XXXX both into improve, our advantaged in X of in portfolio, X/X we use are strategy. dozen leverage loyal Debrox. consumption EPS business being continued of a to represents product Based we excellent efforts and portfolio continue and we of what Our period. year. core trend and marketing the market and consumer comes being our performance about GSK the the category, The growth of long-term expect during success sales, brands It’s on review our removal leading our organization, of the our new brands, we

microfoam consumer drive on placement helps to new slide. educate of shown like the focused used Debrox to We’ve to that of on invested remind strategy, share we’ve investments. right the working. launched more work us Keyways product focus last, professionals marketing marketing our in action the ongoing consumers is brand invested that consumer brand. we’ve of know With allows And content also consumers our strong is are and development recently digital insight and distinct product the Debrox to long-term and heritage, formula clean to with advantages side ears. utilized we’ve the part of on leading it Debrox

As of Debrox XXXX, over earwax result our is in fiscal which of grown a removal efforts, well category. has X% the on since annually excess average team’s

an to let’s update our & BC X slide turn change. Now for on Goody’s packaging

and our As launch to fiscal transition packaging broad-based to packaging The successful we’ve BC discussed commitment since to launch on the May, brand-building and report an & new consumer continue a both the our feedback where I’m Goody’s efforts example objective XXXX we the easier-to-use pleased is the continually portfolio. to activity key in utilize of brands. we launch of ongoing is retail. And to improve new offerings that date insights continues plan, our and across product to for

headwinds major to are equity the now leveraging of see the perfect And awareness our Late of The new move ordering brand development. customers. channel anticipate initiatives gradually forward. of We enhance and we of in example areas results across conversion in BC of portfolio. all all each XXXX, margin nearly brand Goody’s and should nearly X, October and efforts success our revenue show marketing half impact of product. shipment as converted are in the transition October, around we fiscal abate of ongoing new began brand from the the behind And key of designed customers our from innovation and benefits. second these & its Debrox heritage, continues to both and our and As we packaging to activate the remaining

our for example e-commerce and to of whatever products. The is shop development. slide XX, let’s emerging example healthcare a channel a their timely Moving and adapt discuss ability research great serve customers around channel to they

business equal we or online believe to Our market better a grow to traditional maintain than rapidly, retail. continues and we share

opportunity than to a threat. result, a as long-term a As rather online continue we view

Our relatively strategy is simple.

the trusted First, in channel a be consumer shop goes for available to brand. when their

pattern, based of an our in to often to time still many and consumers up expect purchase needs gradually products show numbers over we shop Although online. increasing have are unpredictable

Our they it from presence the in physical to A the out left a like challenging they benefit the a with learning examples others side store, so product like on NasalCrom case be in for find about with online or portfolio a of different brands can seek may ways shown uncomfortable be Monistat. this the the few consumer of loyal in may brand slide. each

can are all These case to Finally, win time. all picks, predictable DenTek the of delivery. suited are unique us different but floss consumer with frequency buy examples, and a in very e-commerce is with over for for opportunities online well

channel availability. The in parallel second piece which is investments, runs with

understand and our have are websites on smarter made to content identify we online sure gives around is products make specifically the an is complement and critical the trusted investments brand quickly several sales, brick-and-mortar products our of the make pages structure ring, that online categories. content. our the third ability retail providing high and starting on our that and to we We other partners. more value profitability Over rate the low sure informative consumers And easily. versus last With years, point With our profitability. excellent similar

on core a to as ongoing This side attributable in in provides detail. be continued right it Chris the over financials and e-commerce greater through portfolio the success I’ll shown of Our versus our competition to growth turn can With and the brand performance both walk for strong sales QX sound strategy. slide. that, underpinning to

Christine Sacco

morning, Good Ron. Thanks, everyone.

around in like second and to As greater line results our some offer brief fiscal context I’d earlier, our expectations Ron for reviewed in walk by ‘XX item. through updated detail quarter

results, results increase in XX, and versus second see year. a quarter release. X.X% As today’s X% prior presentation reminder, an approximately includes of organic growth the which our to On of are revenue information our reconciled you $XXX.X EPS that include million can earnings the adjusted in slide high-level adjusted

As ‘XX the Goody’s the a revenue half recognition of organic accounting we expenses. a packaging BC & flat as new policies first well of revenue the around noted and to performance as anticipated in roughly due change launch of related in timing previously,

versus timing accounting the change, I would divestiture, changes the mentioned. the I referring this sales. to change due the Goody’s to relates you remind the launch just household and impacts year to are of declined Adjusted we timing policy of packaging deductions certain EBITDA against & gross prior BC Regarding

Now ‘XX let’s to consolidated XX, fiscal outlook turn and slide I’ll review results item. discuss by where

half, the approximately we for in BC were X.X% and changes. came by as the on up For XX.X% but progress by year-over-year. previously partially expected mentioned the the These freight decreased QX We to packaging were Adjusted QX and & $XXX policy revenues benefits make quarter up during recognition both first In the organic the X% accounting rollout sequentially an second ‘XX, of Goody’s timing. I impacted divestiture quarter, at gross revenue mentioned. and Cleaning to around were segment just quarter. million, against second fiscal net rollout basis margin and benefited packaging the policy changes offset and the from Household both continued and from initiatives impact warehousing lower-margin accounting our

Looking margin to ahead, we continue gross expect of approximately year ‘XX fiscal full XX%.

which of Regarding A&P, XX.X% brands. percent QX, we in as came behind invest sales revenue we healthcare our grew of a consumer as continued core at to for

sales first half For below fiscal approximately of second due ‘XX, initiatives. of to we expect slightly marketing XX.X% with still A&P timing half of the

look long-term top brand building Over as a the will we basis term, dollars seek grow continually we to A&P drive on growth. year-over-year for to actively line long absolute opportunities

adjusted Our second costs. total ‘XX, in timing-related the fiscal X% quarter revenues at just came spending of including G&A in certain under of

year prior operating single-digit impacts favorable than $X.XX, For the the & X.X% we of to following per the earnings of and earlier. income representing discussed offset growth Goody’s, reported a rate of accounting BC adjusted high the versus resulting continue the sales expect divestiture in timing Last, Household approximately from share Cleaning. G&A of QX shift both as full we year, more tax of

XX & build discuss inventory was flow. let’s packaging Now cash the slide our the to $XX.X BC adjusted by million cash we QX, which, to flow, impacted quarter new as support to In in rollout. turn ‘XX generated free second expected, Goody’s

million of in we ‘XX We from in free $XX divestiture. generation Cleaning down continue million debt or proceeds cash million following million Cleaning. adjusted Household from In divestiture flow $XXX the net anticipate $XXX cash and paid Household QX, with ongoing the more to of $XX fiscal of

our was for at some discussion closing and I’d a by September turn back anticipate of billion and XX year-end. outlook to leverage debt-to-EBITDA our fiscal now leverage surrounding fiscal broad still $X.X to it Our X.Xx Ron remarks. to ‘XX net of ratio X.Xx. a like net We debt equated approximately

Ron Lombardi

Chris. Thanks,

some Let’s with slide XX. remarks closing wrap-up on

unchanged. is on shown As for business our slide, the XXXX outlook

approximately For growth net sales, we still to million of anticipate with in be organic $XXX XXXX to between range to fiscal X.X%. $XXX million, X.X% revenue the

quarter prior holidays. the comparison For the most we QX, to of often lap please year-end hardest remember, is of predict given our year difficult timing will and dollar the

in on result, a QX with to organic As sales prior largely the we basis. an year line be expect

the $X.XX EPS to be XX% we plus still plus to $X.XX range in anticipate or For to profitability, year-over-year. XX% of

expect year outlook $XXX still by X portfolio for in, we flow, summary, achieve our free strategy. adjusted we cash full strong months feel more. or and to Regarding continue business the to our of cash In underpinned year, flow well million positioned

Our line and our grow of with continue year-to-date expectations we business of private top in performance brands to was label. category our line in the excess and

turn Our for value to business continued focus strong it enhancing and on to in rapid term. an With enabled to our months focus X-pillar cash long with the that grow simple continues shareholder I’d and and consistent for the actions business positions X on free operator has over that, first and from strategy are the by like our repurchase the our success. opportunistic questions. These these deleveraging effective enabled share for successes flow our

Operator

the Raymond Altobello first Our of question Instructions] [Operator comes James. line from Joe with

Your is line open

Joe Altobello

good guys, hey Thanks, morning.

I So gross to question, first want touch margin. on

the You from seems like was household the of the mentioned -- year-over-year because is business. of it divestiture And up that all sequentially. it then somewhat of nicely

down I You it North year-over-year. OTC down was was bps XXX guess, gross look at margin, America the XXX.

So if that be freight & much from accounting the much change? is still recognition How of may how launch? tease and much the out packaging you sort and how is form from warehousing revenue could BC Goody’s is of

Christine Sacco

Chris. is this Joe,

and against warehousing of both prepared levels Ron as during the have made freight costs, our progress remarks, So higher his normalized in which quarter. approached we solid mentioned

and question, impacted about BC by During Goody’s this gross rec our point. & to rev quarter, transition, your margin a

year our about we’re as XX%, And margin so well positioned to expect full to that. and we we look forward, continue achieve gross feeling

Joe Altobello

it accounting And on Okay. was like recognition from the sizable did at the secondly, in was looks you the of XXX, that a that top the mention adoption a drag quarter. revenue pretty That’s but helpful. ASC least change line, benefit of

So how square those just isn’t the X we that calculation? do and statements why straight

Christine Sacco

things X Yes, here. so Joe,

the related expenses a referring our certain timing sales that when to numbers in ‘XX used our year about the reminder, when the net accounting of sales runs, certain when requiring ran. recognized gross spend net is to are promotional As to it ships, that product change the timing now that the are of when we are be around program be last in we talk to policy within

our fiscal half for were impact this is company, forward pulling So into half. certain second spends that in ‘XX the of first year in the that recognized

people operate of the we not that’s revenue the thing your fiscal The we’ve comparisons. disclosure to as and So X in on ‘XX efficiently is the of doesn’t had if for under XX-Q I after It’s no is calculation recognition more footnote new team there’s orders into to I’d the customer to factors. of a It’s for quarter only. said, changed. policy more business purposes do accounting that the create disclosure a ended. adopting by delivery performed independent like that or our customer standard completely that’s requirements other Like accounting orders that impact way a year the full changed our fact changed calculation around policy. haven’t consideration in the didn’t point just accounting operate and timing it’s us. business terms for new hypothetical anything the It timing take certain to shipment remind

hypothetical calculation. it’s really So a just

Joe Altobello

the that’s first ASC And that you Okay. change revenue mentioned of XXX? independent accounting recognition

Christine Sacco

contained components is just of changes actually and different the other ASC policy results. and your just, one Both No. a XXX. It’s within the are impacts disclosure they’re

Operator

Jon question with Andersen line next of Blair. William Our the from is

Jon Andersen

impacted first follow-up rev year? then, rec much half How change the color you more the give And the first of BC around us in Goody’s the also growth that the impacted of the how is much Could you the year? any & half transition. in

Christine Sacco

Yes.

a that any So you it’s by Remember margin into of point. impacting of quarter, rev second John, yourself if that, so Goody’s is think was BC isolating most within to I around don’t our dollars back and a rec given as transition about the about & specific rev gross we’ve mentioned, thinking rec I other rec, kind that. rev in point, net. that by

Ron Lombardi

X.X, So organic timing, to excluding net QX the the Jon. points X.X growth the would gross have change been during about in

Jon Andersen

Goody’s that the in And QX? heavier than Okay. QX BC impact, was & in

Christine Sacco

Yes.

returns, heaviest QX QX, Goody’s like of slotting, things & BC things transitioning So of right? think within those impact in largest about in are the throughout customers costs, terms year to during gross net like to net. And gross we most our

transition through some that through this will way subside as the We little and we COGS then of that will within should ‘XX. second got as fiscal bit a year we’ve the continue of remainder transition into our costs see because half we remain to work

Ron Lombardi

we’ve to Jon, So last year. comparability and some got noise

to it’s good point business back continues always have trends. The to think to I consumption. consumption solid

For the end private as second basis we outlook high drag as quarter, XXX categories X%. by we continue as points categories points. compete much to at label, in X% as the almost as were to consumption by outgrow of trends the as our continues much to And of the basis XXX which well

given remainder about business So the outlook to realizing. business good feel is we the the for consumption at the trends continue the the that of year solid for

Jon Andersen

you’re of So closer consumption essentially in quarter? X% was to saying what is kind the

Ron Lombardi

Yes.

Jon Andersen

of helpful. relay be but on, think this I the of early of & BC for consumer of response at you kind now Goody’s And out you, or uptake into point? it too the just demand packaging kind the marketing Have is this early or kind phase. into generation insights and of to any initial execution moving Okay. Terrific. That’s you comment may too really the

Ron Lombardi

We yet. it It’s at really retail too have early, completely don’t Jon.

the design work X-year a sure number we like a it. at spot to feedback that this of have next the was to this. the or packaging significant start to on consumer product we make the as went changes a ensure very we right we’ll of project that get more intense But over involved through reminder, on quarter and insight that beginning very to evolution heavy conversion So with the and in were X,

to So lot use did But insight sure and get, we we’ll sure make right. home we a feedback. to keep of lot make get ground we our a tests work the of consumer to to good this got ear

accepted. be So that we it to well anticipate continue very will

Jon Andersen

Okay.

more growth of quarter operationally, the On bit this so real that What seems happens because bit business, in should rate it Is quarter. a less of little last the, volatility strong And going we should be you a International bit about if that it little it that business? X-step a talk Can expect volatile. smoother? why you distribution? just think if forward? kind Or

Ron Lombardi

patterns a nature beast business, of of for the markets, of given the flow. order of kind those A business Jon. in portion the distributors and It’s No. International through part from of that distributors and ebb kind is big the

go flexibility kind So that of will forward.

Jon Andersen

And America, and your was bit what’s driving within GI you brands most called more specifically that in little think called Okay. which, out ear Can seeing out, and eye about that you’re it benefit strength, a talk you you North care. in I that and the portfolio?

Ron Lombardi

Sure.

then is we Debrox in GI. the I a well And performance a GI, ago. out as by Dramamine, well received stabilized big called of of consumers. nausea for growing business driver the the growth. today, our has long eye for to be very, eye where relaunched run Recently, a has levels for year and Dramamine-N care from and we which there prepared high remarks drivers of For were one ear, very that continues had is That’s in the

Jon Andersen

here. terrific. else if Okay to see got anything Look I’ve

queue. good back it. quarter the think the for I’ll help. Congrats I that’s the in Thanks get and on

Christine Sacco

Thanks Jon.

Operator

you. Thank

question Our Jefferies. Steph next with from Wissink is

open. Your line is

Steph Wissink

the just Good on flu what’s of get cold going follow may also, Jon’s cough, in be kind as guys. the Thanks. want morning, then I period year. a thinking of season you’re up women’s and question business. that and into unpack we about And Thank to of how the you. on bit health

Ron Lombardi

Sure.

of women’s that’s business, rev where during rec hit bigger the a the occurred. portion for the So health actually quarter,

consumption we’re both growth So Summer’s and Eve Monistat. in to actually solid in continuing see

So It’s underlying quarter rev there. rec a actually had that we for there particularly was good consumption. just impact concentrated

of now X.X% of terms cold it these represents cough, sales season, less days. or our In

So shipments season. like it as how doesn’t the into quarter we needle we level in it September, our into see did, get made the but the cold incident cough, takeaway move the and drives the ended retailers we’ll

Steph Wissink

more just And one on follow-up Goody’s. & BC

we the and for as out merchandising So marketing. what in recommend What convenience monitor of lot trade, of placement, in and our that’s of are of eyes representation How strong looking we’re a specifically, the as should kind should that and keep out channel merchandising search efforts signals concentrated? track? your you we be effectiveness just would and marketing given for where we

Ron Lombardi

Sure.

the last So channel distribution packaging. changing over channel of the convenience the that new to part we’re the is actually

to in-store that’s product well, to when it when convenience getting part new So be makes distributor convenience can vehicle to as a see mid-Atlantic going NASCAR programs country. network around Steph. way merchandising way local just support stores, does displays the But it of make its the in southern it we bit its will and stores, especially the slow that move at at help a those you’ll makes the a local as as and point. of goes this programs to to retail And the it and use and the

Steph Wissink

-- of Okay. hold BC that staging for in And Goody’s? at also inventory inventory is inventory portion you on process think of if into versus What give should we about clarification on planned could cadence How Chris, kind quarter-end? those inventory, underlying for the then merchandising just a us brands? the & the

Christine Sacco

quarter. the $X we be million channel the That way the $X Goody’s in its as to work through and would to of million start inventory Yes. fourth ended I will third largely BC built. & September, the in of say enter probably quarter through

Operator

Thank you. with [Operator Frank Instructions] Our question next Sidoti. is Camma from

open. is line Your

Frank Camma

question My the is guys. morning good on Hey guidance.

got But A&P the implies if pretty of look guidance, mean, year. right the you for improvement your you high-end some pretty color a -- on and I the at gave the profit rest the gross nice in of nice margins. You G&A

you mean, the on conviction I still So half of things it’s your talked a think this on weighs about quarter, spread nice you the of year. even exactly second fairly talk drives that? that in what a can margin I that couple but the about and

Christine Sacco

is Frank, as holding with start are If the QX’s midpoint right, full for gross results. I at our we to essentially XX% out Chris. right, really the this Yes. with of year you’re pointing call and flat math, margins outlook the

As again, on I are mentioned don’t then on little the levels as costs. did normalized in call, we half. feel very on expect enter good the quarter. to head about they’ve the and impact a second freight recall, have the the approached of we we progress on repeat feel the as that & revenue we’ve in BC margin second into we half. warehousing lapping, if made favorable We Goody’s recognition But you the QX product, also in bit and mix We we

happen that. rev people reverse, like will So just on to that to Nothing we remind rec right? has

We’re on home second runs any not counting we enter the half. as

So little the about more bit it’s a it. good feel same, we so of

Frank Camma

Okay.

because Second revenue back the you the there about on growth was the -- impact flipping specific the that FX technically part, where Can was International just I talk quarter. the for just mean, quarter? in to

Christine Sacco

Yes.

not -- expecting our us it far. right in baked because out if into for it’s but material called haven’t we’re we for the it We’ll it’s out thus call now. So wasn’t the material, year outlook FX future

Operator

Blair. Andersen from a we And with follow-up William have Jon

open. Your line is

Jon Andersen

I just any what been baked really into or my back of follow-up. inventory about -- destocking. what’s in guidance? I to last about in hasn’t quarter the your discussion, further thinking taking are for how wanted for your guess, of you or X. ask you Thanks point and Has itself a It resolved kind expectations now -- that do half Thanks. the that

Ron Lombardi

Jon, headwinds has line driven between is retailers how largely inventory. to it reduce the impact, far, point impact the some -- full they of for so with seems retail thought expected point and we drug continue is year and and would as the consolidation been which be by in other as year-to-date, largely X.X what our to continued expectations destocking the at us, X proceeding So in channel, then we from

So the continues what be in for Jon. to year, with it we expected line

Operator

showing turn any for further now the Lombardi back to I’m I’ll so closing remarks. call And Ron not questions, over

Ron Lombardi

Thank Okay. Thank joining like you. and today, day. a us everybody you. for I’d good have to thank

Operator

and the this gentlemen, does program. Ladies conclude

Everyone, great now day. have a may You disconnect.

Prestige Consumer Healthcare (PBH) 3 Nov 182019 Q2 Earnings call transcript