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Prestige Consumer Healthcare Inc (PBH) (Q4 2024) Earnings Call Transcript Highlights: ...

GuruFocus Research
·4-min read

  • Revenue: Fiscal '24 revenue approximately flat year-over-year; Q4 revenue $277 million, down 2.9% organically.

  • Net Income: Adjusted diluted EPS for fiscal '24 was $4.21, flat compared to the previous year.

  • Free Cash Flow: Generated approximately $240 million in fiscal '24, consistent with expectations.

  • Gross Margin: Total company gross margin for fiscal '24 was 55.5%, slightly up from the previous year.

  • EBITDA: Lower than expected in Q4 due to reduced sales from supply chain issues.

  • Debt Leverage: Reduced to 2.8 times, the lowest year-end leverage ratio in company history.

  • International Revenue Growth: International segment grew by 11% excluding FX impacts.

  • E-commerce Growth: E-commerce sales grew by approximately 8% in fiscal '24, representing about 15% of total sales.

  • Outlook for Fiscal '25: Revenue projected between $1.25 billion to $1.40 billion; EPS expected to be $4.40 to $4.46.

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.

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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.

This article first appeared on GuruFocus.