PBH - Earnings call transcript Q1 2020 | Prestige Consumer Healthcare Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Prestige Consumer Healthcare Q1 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, today's conference call is being recorded.

I'd now like to turn the conference over to Phil Terpolilli, Director of Investor Relations. ahead. go Please

Phil Terpolilli

and operator, to joining everyone Thank good today. us you, morning

Ron with Sacco, Chairman, call the Lombardi, our me Christine On and are our CEO; President CFO. and

results the today's our review outlook, questions and On will take XXXX fiscal cover then analysts. we review first call, fiscal the from of and quarter, our XXXX highlights

presentation. We have by accompanies then prestigeconsumerhealthcare.com, on clicking which today's visiting link on that and call a today's slide webcast and the presentation accessed can Investors' be

in the financial Please today of in remember information contained between presentation. reported some financial non-GAAP and today's slide Reconciliations measures presentation measures. and the includes included earnings adjusted release are

During today's slide the call. a statements in complete risks call, Safe Harbor presentation and accompanying Page forward-looking the around uncertainties, disclosure which of detail will management we on make X

risk statements company recent on information are and SEC factors XX-K. recent Additional cautionary available filings and most our most concerning

it hand of now to highlights Ron CEO, the I'll through quarter to walk over Ron? first Lombardi our our performance.

Ron Lombardi

good everyone. and Thanks, Phil, morning,

on slide Let's X. begin

We quarter, start achieve are to the on our on basis revenue our highlights flat fiscal QX was million pleased offered to approximately May. of the of an are and include in which year guidance. with in to pace over the slightly $XXX year year ahead prior our just expectations organic solid back

anticipated fully consumption Household as we have Importantly, X% was which the for growth of lapped. Cleaning our continue portfolio leading in segment trends year. QX to the full divestiture for July consumption expect the remain positive approximately now of last $X.XX we EPS given and the

opportunistically allowed quarter cash free reduce flow debt. us million the we Finally, $XX as generated to shares repurchase well approximately which as of in

cash enabled strategy and continues strong to capital generation. our profile by allocation Our be financial consistent

have to further QX X, Slide we details results. Turning around

million, versus adjusting Australia XX% with strong distributor our positively The Sales and the for I've topline flat performance just of was prior sales of by trends an on countries. other both over basis. after driven in impacted growth timing our in in International essentially the segment were year organic by were $XXX.X strong orders mentioned, net As results FX. consumption

of inventory in positively Domestic and retailer changes by sales including at reductions by ear/eye a strength oral cough/cold and but care, categories care category. offset shelf were in the impacted number

Women's consumption also Health experience performance in to orders compared the but to affected positive the sales timing continues by declined trends, as year. prior QX of

spending from margin, margin million was gross in XX.X% capital $XX our this XX.X% flow gross company slightly sequentially opportunistically cash and margin. in Total strategy low improved in QX $XX.X rate. came tax buying versus EBITDA fourth QX reducing our million. and Free and industry-leading to allocation benefit approximately debt used QX by at continues quarter's cash stock minimal million needs, We cash disciplined $XX towards back of in flow capital

details for Now, turn some to let's X business. Canadian on our Slide

number similar In The have made about growing important comprised and categories. brands U.S. is portfolio of addition of in portfolio sales. to annual Canadian leading the represents in fast-growing International our up which one of an our business, X% brands is we many and Canada to also niche

shown few right of examples in these slide. have a We the of the upper

our has we back which Gaviscon since acquired addition is In the XXXX. steadily anchored portfolio grown in Canadian brand by

and brand-building in We playbook wide-ranging In many leveraging a to by execute ways, playbook iconic our Canada brands. similar the positions U.S. successfully is leading

communicated message with our Gaviscon to of by against treat an both around the communications consumers. blue-man to campaign with to are sharing one This consumers having is Gaviscon and heartburn. expand that iconic our continued As memorable we example protect benefits product

U.S. Sleep-eze new to Strength opportunities. past Liquid This business in we and as from led has in to also are like addition products Canada. the launched year insights our look Extra Consumer focus Minis innovation to an Gaviscon important bringing for innovation

driven shown set the Canadian which business. hand brand-building and of excess performance the for continued experienced sales X% is in slide, the we've our stage in success. The of in positioning, growth our has each side As by left of healthy strategy portfolio

to from with being brands makes of comes for our which The An company's five turn a of X. brand-building half key one is objective this to brands slide principal that positioning our let's sales. our long-term core of up Now example success organization is our our growth. of a core DenTek,

XXXX, changes we in for has consumers and retailer brand-building opportunities XXXX brand the year long-term feel retailers. brand DenTek about DenTek many Fiscal execute Acquired to to challenging was but the good due strategic a strategy. a for our at with and positioning the certain shelf, to ability win

best a is guards, the aisle. store. the section them organize floss of care picks, of and across store, We section with the the care dental in around pain the oral brushes, of DenTek relief competing hard-to-shop how leader retail oral and interdental to subsections fragmented partners care oral a accessories educating category peg health by collaborate growing

We develop category work then an household the driving initiatives the penetration. goal mix well merchandising of end across partners products incremental our help optimal with of sales peg-section with as increased to as and

our oral is Guard. One add a Guard, and mix, brand dollar enables margin a growing Dental aisle. this DenTek product which care DenTek's to represents is a their differentiated example in of highly quarter category high retailers category Dental about of a item where to

the time-tested space, that by this lightweight our market nighttime through a this can efforts and differentiated Guard are grinding. caused by effort brand We help damage supported household drive increase and executing teeth our we for including that TV Ultimate efforts DenTek gains launching brand-building various brand-building In DenTek. be campaigns to share emphasize penetration memorable

time. dental over growth these feel position the number four year-to-date our overall DenTek factor space. we The the to and to continue working. By expand outperformed category of our the and We've positioning this for guard types the about by ability across strategy in portfolio, efforts good is one we strategic of brand a executing drive

over release. the press today's mentioned I'd on around call turn I comment logistics to upcoming to in like transition Chris, Before our

of nationwide center distribution performed divestiture business, Cleaning we to optimal our partner to best analysis our service determine party the most Household the third an extensive retail for partners. location and Following our

of The was to Indianapolis year. the near third review an next warehouse a logistics completion new spring transition with and of provider this in a to expected decision result party

additional We during and information progress as as aspects additional will the details financial of the year Chris provide provide updates transition. well. will we the this change make on on

detail. Chris over I'll that, to QX in to With financials greater it through walk turn

Christine Sacco

our you, by Thank detail and line item. Good walk fiscal for results first our context financial I'll greater through everyone. some updated quarter morning, Ron. expectations XXXX around in offer

that results release. earnings prior presentation in year today's our for As the are a reconciled reminder, the adjusted information in includes

On prior EPS Cleaning included which slide organic share million level revenue of include can that of first prior a slight see XX, the high versus you year $XXX the of per by $X.XX was and decline our impacted Household in year. $X.XX quarter share approximately results, per flat

Adjusted to EBITDA year prior also declined the versus Household. of divestiture due

Household in As Ron noted earlier, we impacts will Cleaning fully comparison beginning lap QX. of the

XX, turn discuss consolidated where let's to I'll Now results. quarter first slide

quarter the Household effects XXXX, to For of net flat $XXX.X excluding FX. fiscal and were first our the million, after revenues divestiture X.X% but the decreased

also assumed in Our impacted as by full reductions inventory outlook. year our top retailer was line

the for XX.X% margin XX points Gross quarter, first basis sequentially. was up

margin XXXX full year still fiscal XX.X%. ahead, we expect approximately of gross Looking

we A&P, at of in revenue XX% terms In came QX. of in

half year to XX.X% higher with second first A&P spend of a full As for in the we approximate sales the A&P spend half. versus expect reminder,

spending the versus G&A down first about revenues divestiture result was dollars deleveraging total Household. Our X% was the quarter, year, reflecting of slightly in of modest of but in a prior as

divestiture the items. $X.XX, certain representing of QX in was anticipated share to rate due per discussed tax a as year higher of also prior the a by Household earnings Cleaning reported discrete the impacted due We slightly decline EPS versus impact previously. slight than to

expect tax XX.X% full year. rate to a continue effective We the for

Now let's XX slide turn our cash to discuss first to quarter flow.

just prior we down QX, free we million $XX Household. focus due the generated the fiscal completed flow, and of quarter, share sale versus authorized in program our In reduction million balance For shares. we the the July, additional $XX.X expect debt for year to million of under cash In May, repurchasing repurchasing the year. utilized authorized on million of $XX approximately to remaining one buyback, therefore, slightly in

the Given sequentially debt approximately the to quarter was unchanged at a at of XX June share effectively and our leverage flow, segment equating cash billion repurchase efforts net $X.X in loss Household times. ratio the five of

repurchase now leverage Given we by the anticipate share our end. program, approximately X.X times of our use complete of fiscal year

to over the new regarding to in third-party the of the we logistics Last, fiscal incur costs earlier, one-time transition $XX XXXX. Ron approximately expect balance discussed million provider

now I'll outlook and XXXX discussion a closing to for Ron surrounding our back some fiscal remarks. turn it

Ron Lombardi

Thanks, Chris.

up on wrap slide XX. Let's

success to a year, fiscal driven We to our are off of start strategy. by the continued solid

$XXX the million. XXXX fiscal expect to approximately continue we sales, $XXX to to range in of net million be For

QX We revenues year-over-year. be the year continue prior revenues to modestly anticipate flat organic approximately down to versus with

We timing XXXX. we spend, of now the expect at half recent outlook heavily although first second EPS in adjusted the A&P G&A to range anticipate EPS $X.XX our our fiscal be $X.XX, repurchase. the of is end being opportunistic continue still given the of to XXXX share to expected half weighted higher compared more in fiscal to of and due the to

adjusted Regarding full the for expect still more of cash year we million year. free or cash flow flow, $XXX

in about year, feel prospects. So, growth summary, good into and the guidance our quarter one we

and strong consumption share results top-line wins solid our First, experienced trends, market international growth.

with QX strong cash profile financial and was our consistent Second, flows margins. in and stable

both capital allocate debt strategy. repurchasing These the our recent reducing underpinned our three-pillared proven stock effectively quarter. by long-term to and continued we are developments success Finally, in and

providing and efforts heritage, these The of and company has a strong and record development brand drive similar channel the growth product fiscal continue XXXX through results long-term we will in beyond. to for innovation balance of

to I'd the over for that, operator questions. like to With turn it

Operator

James. Thank our Joe from question you. Altobello Raymond comes from Instructions] first [Operator And

Your line is now open.

Unidentified Analyst

appreciate fiscal more trends This in a I X% to good X% rest down bit just on destocking color and this then little more perhaps of guys, inventories wanted reconciling [ph] the Joe. the with Hey on we'd headwind for morning. a ask the and just the year. up is for sales Adam clarity

Ron Lombardi

take question, Chris? Chris on the I'll let destocking. and inventory then the comment me let So

Christine Sacco

Yeah. Hey, Adam.

prepare warehouse we're the the we So, really starting two on impacting that call the for today. move inventory; factors mentioned one to

So at quarter. facility then of bit we to will transition. of we'll come inventory little go-live also it a ahead start the as through and the during ramp built And SAP up that see Lynchburg our an down we work back

year come rest the that back of So during well. will as the

Ron Lombardi

So during quarter. destocking the Continues what with as full in in we of year the to be the in we well. only not first expected, continued but for line largely what concentrated we to drug in expect terms destocking Adam, the channel quarter,

Unidentified Analyst

I OTC declining having margin the more again for I I three looking was Ron gross Thanks, now, then if the in And could here. appreciate quarter. and years follow-up ask down one Chris. that. June at

that there being was be color If more at down International significantly. helpful. rather And looking would gross I you provide margin guys could a little also

So could, but I know on tough going quarter-to-quarter that and just lapping what curious -- that volatile was from wanted comp you was obviously. just there? a are be

Christine Sacco

Yeah Adam.

So And with the our margins business. Household remember I over in about with stranded time, that BC the which impacted remained costs have if now also Goody's certain have start packaging if you're American has & America, looking North we the from business. we've talked transition, North

International you back QX time really than this front, On an year over was the of if more quarter. a the look anomaly bit prior

As can distribution so impact really and the mix you it lumpy and business product bit given of channel a that mentioned it. can be nature

quarter say the So current was of indicative I more the gross International would margins.

Unidentified Analyst

get back I’ll Thanks the in Great. guys, queue. Thanks, Chris.

Ron Lombardi

Sure.

Operator

next our from from Blair. question Thank And Jon you. comes William Andersen

line Your now is open.

Jon Andersen

everybody. morning, Good

Ron Lombardi

Good Jon. morning,

Jon Andersen

a Going the the drug still just back more destocking that retail I fiscal are really of being you minute, destocking the it there for inventory you're isolated channel, channels? is Ron here year, or done quarter seeing, kind to in to the is broadly a across to guess work is

kind kind -- visibility you inventory is a amount hold-your-breath-every-quarter visibility a in this and what situation with to respect given channel where of a with there inventory really based then levels Is And given with kind have? are of of certain a do destocking? on retailer? just your Or conversations of a of assessment

Ron Lombardi

retailers in is the in channel, concentrated meaningfully we question close destocking impact it's that back. expected or of largely seeing where see we of are as as as as anticipated part scale expected. there is terms But first the regional So the some that's some although, drug

really year with thought again, the it And in what in with would So retailers us going terms what don't expect. be we of line plans continues point. of into point they at this see we at share this insight, the to advance

in it So, it kind the about of out our a really a where bit And quarter. hold nowhere is quarter. breath of comes little given we've of this years, each past over talked

So, it. we of lot don't get insight a into

Jon Andersen

label? your core label about talk comment aggregate private quite has then private you I vary say performance on, Can bit trended bit but a brand it Okay. a brand, and your price may could if changes. across pricing and by in know portfolio? across in How portfolio aggregate you little versus pricing any your

Ron Lombardi

Sure.

based portfolio started over the being quarters. us in a couple in managing actually know really increases the our price last to over leading on terms really You price some of brands strategically time. good of we've long-term. And is managed take over But it position puts

In label, and we grow categories our our private market to terms share partners. with of positioning versus the take retailer continue

trend the over that continues So long-term. as it has

Jon Andersen

the think up, a prepared business, consumption comment sales down was to made were timing. you that I And during but Okay. Health remarks Women's the due

and Eve. that for brands how and brands both those maybe terms their you those big two how from Could you those growth a about Monistat Summer's just issue, bit are how little with are brands performing there consumption forward? potential you and think in in timing about moving standpoint think I a talk platform of

Ron Lombardi

Summer's year. had continue feel to to trends solid ability Both Monistat and grow good and the we Sure. about for during quarter the full their Eve consumption

it quarter, timing really was versus last year. activity the During

new So issue. a for had product so year, during comp Summer's than more Eve, this quarter was it the last really year we launches

some then result this timing we the it And excuse year offering orders. that in a made this was change was SKU year me, -- Monistat impact of that the for retailer really

of it just really trends solid orders the quarter. with consumption both the versus year prior cadence was the realizing cases both in during So

Jon Andersen

on on the seems rationale It logistics, some just provider logistics a big And more the Okay. some rationale changes. like deal.

hoping decade same out provider I facility. the of think really achieve move? for or now Can to what with a you're you. about you've been Louis, talk through this working you St. Louis a more St. Thank

Ron Lombardi

Sure.

of by of really crushed outbound and meaningful a was location you're Span of the shipping legacy to Louis And bottles part Comet. St. location water is Spic Household the local cans the business. of both St. So freight supplier that so was driven business. for and the and rock Louis of very inbound truckloads and

us evaluate business, gave the the divestiture and with the So of location to Household the was healthcare the business. for consumer it opportunity where step best back

service -- our where's the was the retailers. to driver; where was that best So, location primary for all around be for

A&P that cost consistent that, we'll modest In into higher we initiatives other addition growth some to will strategy. and get time, reinvest back savings would over over of levels time which be with our

Jon Andersen

Great. Thanks luck. much. Good so

Operator

Wissink you. comes Thank Steph Jefferies. question And our from next from

line Your now is open.

Steph Wissink

of everyone. Chris you is asked morning Good on Thanks. maybe questions have guidance. Most been for our think I this already, the but

on One of the this underlying of inclusion logistics of guidance the the morning points is just the confusion change. versus

the cash that Just is want back for adjustment EPS to now. in clear absolutely the adding guidance logistics the make numbers full is either underlying changing, for this not correct or the that year You're for change just flow?

Christine Sacco

correct. That's

Steph Wissink

Okay.

know seeing with just destocking? relief sort that's be you would question of amount any to back respect are the in Or pretty the follow-up pressure? across thinning we or the cycle this broadly coming the seeing theme. out destocking it the of of regarding to throughout then degree But, consistent has keep been happening So of destocking. space any I

Ron Lombardi

consumption overall where I drug first was consistent drip would slow trends. were it fairly in been channel that order kind quarter the of during the in say, the Steph it's patterns below

which matter trends of a saw a us. As good of actually trends drug consumption for reverse the a in in we fact, was bit channel

realizing as relieve eight that some over overall we've six channel. hoping that that the channel. to an consumption from that we're But the no what in quarters in pressure we trends been change in see help really last increase of So will

Steph Wissink

phase marketplace close supply a think of is the final at they're average getting towards weeks weekly And level the of How as try your of we Okay. and trends and that and consumption with to end relative in weeks just or should you're to supply one the about the average is of about starting think sales? getting we're their to any supply talking this end? buyers what of to looking sense channel appropriate of destocking in that weeks

Ron Lombardi

managed buyers first most the Yeah. the I is cases. of for are at generally outside – guess the comment in inventory retailers levels

the So part. that's first

the retailers slowly that, is of terms second in on journey The reducing long I inventory big are think over time. a their

it once we go base So really a we of year year to change won't normalizes gets the in from as our and business forward. see

Steph Wissink

Thanks the helpful. all for detail. very That's Okay.

Operator

question next from Linda Bolton Weiser Davidson. our from And you. Thank D. comes A.

Your line is now open,

Linda Bolton Weiser

Hi. is secondly, also mean looking same it other OTC think affected other the Church on carrying what another what are that. destocking items? just higher-velocity focus a or the extent the or space? who to just are on niche you mostly you're or experiencing than why question any And they're you day don't overly more done carry bigger you in competitors? a products space but then by day, I at same some the And and you is benchmarking maybe Have Again, Dwight? whereas maybe and that versus guys like can the experiencing in the you if destocking those see competitors a because comment Or of on to Perrigo thing compete so to & competitors

Ron Lombardi

the Yes. drug We're based extent. channel a business a competitors, balanced is have that publicly In things feeling of side the on competitive other are the the set is general, may most the the that international available we than same concentrated who lesser especially on larger for to it although the that more more largely information, seems in example. competitors, headwinds of

has it business because on much us. a as it about talk them it does hear smaller than necessarily don't their you impact So

all we're same all from boat and the categories the information with environment. their or categories, have partners retail our their same in effective declining large in we're and is being inventory the they that treated what that sales are the the back trying be niche in So hearing to and a in retailers front-of-store warehouses more where we're that getting stores are

Linda Bolton Weiser

does consumption you and data? loss about data negative looks but data – products. carry the the opportunity. of of that. you Thank looks just and I DenTek the you some last Guard seemed could be completely look many And year? some the why highlighted poor idea then then, the there just Okay. other versus also fine. saying some it's DenTek you. Is the you products since that – Can Dental of more distribution be It other IRI today you But of so mentioned comparison doors And actually stuff space – talk know your some Or not can of the than give Guard? that the how that Dental picks carry us might representative

Ron Lombardi

Yeah.

So a in questions number of there.

could First on on today to update of you we bring ongoing an long-term trajectory. of growth to get continuing we so up all, focus gave back a DenTek that speed DenTek our on

still were sales acquisition. business at Our outlook what trailing of time the are the the for for this above sales year the

been since on to able continue grow acquired we've have modestly, the business a to get trajectory. we've back it So plans it. growth to And and invest we

of that today's the was So intent update.

basis. and the retailers offering of distribution, so of major ACV guards all got it's DenTek terms of out on dental in high we've In a both national there levels the rest for the

quarter totality growth that, term get in final no And again brand So the looking did during over the the a and to to first for focused we comment that on long trajectory. we're it brand. back there's declining realize the there is sales and difference

Linda Bolton Weiser

much. very Thanks Okay.

Ron Lombardi

Linda. you, Thank

Operator

Sidoti. the Camma from Thank from question Frank you. And next comes

open. Your line is now

Frank Camma

Hey, for good morning, Thanks the questions. guys. taking

has fast asked thing. the whatever was three, I'm stock to And going My ago, back to ago, ask pulled with times your other I it not That's nobody's forward felt promise rates thing leverage. reason than is biggest a interest months about four I six question an it first surprised coming destocking. months the big destocking, and First, my is seven was. world end up

go going it's down to to we two times. think three Now,

since should of stock. we you your guidance far a I that's but which not about how about its should and was leverage other maybe how the view can way therefore because it your that? little on think hit reflected the bit, So, Because in talk it so stock benefit would affected has think

Ron Lombardi

terms couple in I to add of end may be Even on looks of let Okay. back rising it a like outlook. Chris though there me our some time comments at delay up I start think some though and going let at guess, with over I'll point. interest the go rates, they're in

our getting our level… strategy leverage So of

Frank Camma

hard so. It's from down zero, to go

Ron Lombardi

Yes. mean zero quite not I right? at it's yet Well

Frank Camma

Correct.

Ron Lombardi

X% X/X% so. and somewhere But from up It's it between zero. is

Frank Camma

Sure.

Ron Lombardi

from So flexibility let's do so leverage But not thing targeted sub-X X.X is to still five to think to long the opportunities to forget that. we our in X.X business. to the moving term down growth for rate still that or right provide

doesn't do the in change Chris, So, recent activity have you to… have us rethink Fed that focus.

Frank Camma

at year, but a rates there we saw way? different really so that Or But your you sort last do of didn't Because thought timing I'm in think that think you it change? the the sorry outlook maybe but did you of guess you when was year -- about that think you beginning make that I stock nominal would it for it did the given okay some buyback? was

Ron Lombardi

repurchase, we're didn't cash Frank. Remember, We way utilizing flow about for the really our it free that share only quarter think of a so…

Frank Camma

Okay.

spend, just QX on that is your why less than just A&P little question back is spend. always timing the seasonal of ago? if a why that go revenue? as way you slanted typically percent years more portfolio know been other is is sort of where me? is remind a but has or of So it Could now your you high the given I The quarter A&P second

Ron Lombardi

is the new to just timing launches marketplace. the the during really opportunities initiatives a any of than given spending product other A&P It of the really or year, of year. to function It support concentrate initiative best in our rather a time or at is decision on based Frank what's

Frank Camma

is seasonality was at. nothing getting to the I really the revenue do has it with of what But Okay.

Ron Lombardi

No it doesn't.

Frank Camma

Great. Thanks Okay. guys.

Ron Lombardi

you, Frank. Thank Okay.

Operator

question from next [Operator Instructions] our you. And Thank from Jon Andersen William is Blair.

now is line Your open.

Jon Andersen

follow-up. for to the guidance. come to quick wanted question back Thanks on just I an earlier

midpoint. think in expressed confidence has than extent one greater more end changed the range. about we're I just that last that pointed end's big confirm know there range And Is And the thoughts I say likely high the changed wanted that be any again opposed your anything confidence Thanks. but not here, EPS accurate? greater has as just earlier I that to lot end a high talking to gives would to terrific. to high the of you guidance the -- a You've number this you around what time time. that

Christine Sacco

this Jon, Hey is Chris.

yes, the are pointing driver And the to really that share is confirming end the high So this the range. of of that repurchase. time primary we

Jon Andersen

Thanks Okay. a lot.

Operator

session over our turn to closing like remarks. And Ron for concludes the today. you. that I'd conference Thank Lombardi back for to question-and-answer

Ron Lombardi

and our talking you, executing Thank QX results us Have and forward operator, join everyone everyone three-pillar QX. today. look by for quarters and encouraged to our in to We're great time disciplined with to thank a day. coming in you taking strategy again

Operator

program Ladies today's conclude This participating and have thank you may day. Everyone in does you a disconnect. gentlemen, conference. the great for all and

Prestige Consumer Healthcare (PBH) 3 Aug 192020 Q1 Earnings call transcript