Good afternoon, everyone. Thank you for joining us at Oppenheimer's 24th Annual Consumer Growth and E-commerce Conference. My name is Rupesh Parikh. I'm Senior Food, Grocery, and Consumer Products Analyst here at Oppenheimer. I'm happy to introduce our next presenting company, Prestige Consumer Healthcare. Joining us today are CEO Ron Lombardi, CFO Christine Sacco, and VP IR and Treasury Phil Terpolilli. So Prestige sells and distributes over-the-counter healthcare products to retail outlets in the U.S., Canada, and certain international markets. Some of the more well-known brands include Dramamine, Clear Eyes, DenTek, Luden's, etc. So PBH remains a top pick for us, and we would take advantage of the recent pullback related to what, in our view, is transitory supply chain pressures. So the format for today's session will be fireside chat, and then we'll move to audience Q&A. If you have a question, please enter them in the question panel below the video. Let's get started. Ron, your team has always talked about the benefits of a balanced business model as you think about your brands and categories, your distribution, etc. To kick it off, why don't I turn it over to you for a brief introduction of PBH, its strategy, and if anything else you'd like to highlight before I get into my questions. Sure. Thanks, Rupesh. Good afternoon to everybody, and thanks for joining us. So yeah, let me start with a brief overview of the strategy that we've been executing against for a long time that we believe has driven the success that we've realized. So simple to describe, three-part strategy, right? It starts with investing in the business that we have, investing in the portfolio of leading brands, and taking advantage of the unique position that they have in these niche categories. So when you have a brand that defines a category, has a 50% or 60% share, you get to step back and think about being a steward of the category and doing things to grow the category, bringing in new users, lapsed users, or people who don't treat as frequently as they should. That really plays out over time. I'm sure we'll get to some questions around brand performance and some of the other aspects of it. Starting with that portfolio of leading brands really positions us to be successful over the long term. The second part of the strategy is to take our industry-leading financial profile and free cash flow and use it to give us capital allocation optionality in addition to having the resources to invest in the business that we have for the long term. As I just said, that third part of our strategy is to take advantage of our capital allocation optionality to amplify the value creation that comes from growing the business that we have. Over time, we've been active in M&A. We've been active in buying back our shares. The board just recently approved a $300 million stock buyback program. Then in addition to that, pay down debt, reduce our leverage. At the quarter ended March, we were at the lowest level of leverage in the company's history. So really well positioned to take the billion dollars in free cash flow that we anticipate generating over the next four years and using it as a big value enhancer and creator for our shareholders. In summary, Rupesh, that's the best way to describe the strategy that we've been executing against. Great. That's a helpful overview. So now switching to a few topics post your earnings report a few weeks ago. So the first off, your FY 2025 is expected to be impacted by supply chain challenges in the eye care category. So I have a few questions here. First, can you update us on the latest here, and what is your confidence in being able to move past these headwinds as we move into the second half of FY 2025? Sure. Let me let Chris take this topic for you, Rupesh. Sure. So yeah, so we talked about really no update from what we said on our earnings call, right? What's reflected in our guide, if you're not familiar, right? We have two separate dual-sourced providers for our Clear Eyes brand. One is in South Africa. They've been providers for us for over 20 years. They're a pharma company, high quality. Went down for an upgrade to actually increase capacity, right? Clear Eyes has been performing really well over the last several years. Came back up, went down in December for that upgrade, came back up, is just operating at much lower levels of output than we had anticipated, actually lower than pre the upgrade. So they are producing, they are shipping product, and just not at the output levels that we'd like to see. The other providers up in Canada went down for another upgrade, a quality upgrade, actually. Anticipated being down for a little over a week, was down for more like five weeks. So they are up producing at risk. So it's just going to take some time. In sterile eye care, we have to test the sterility of the air. But I think you said it well. We look at it as transitory, right? We'll get through it. These are high-quality providers that we've been working with for a number of years. It's just how quickly we can ramp the output will be the question. Okay, great. And then what are measures being taken to help mitigate the risk of this recurring in the future? Sure. So we do a number of things that we've been doing for quite some time. Folks sometimes ask us, so there's no supply chain issues. And we just went through the most disrupted supply chain incidences in history with COVID. And so things come up, things happen all the time, right? We have over 100 CMOs. If you look at our 10-K, the 80/20 rule, right? Where about 20 of them are material to us. We work very closely with them. Clear Eyes is a perfect example where we're dual-sourced and facilities don't usually go down at the same time. This was just quite an anomaly. I think Ron says in his 14 years here, this has never happened before. So generally speaking, right, we're looking at safety stock levels. We're carrying the right amounts of inventory. We're auditing our suppliers. We're working on KPIs and normal regular updates, everything that you would think that folks would be doing to maintain the relationship. And then during this period, do you expect any share losses or empty shelves as a result of these pressures? Yeah, sure. So over the long term, no, right? We are producing product is arriving, right? In contrast this to a recall where there's no product on shelf for a prolonged period of time. So we think folks, there'll be a lot of transition, right? If you go to the shelf and you can't find your 1 oz Redness Relief, perhaps you'll pick up the 0.5 oz. So a little bit of spotty for a few periods here, but again, supply is coming in. Eye care in particular has the most amount of brand loyalty in terms of category, right? There's a high barrier of trust of putting a drop in your eye every day. One of the reasons that private label penetration is so low in this category. And for all those reasons, that's why we think the consumer will come back to their trusted brand. Okay, great. And then switching to another area, I tend to always have a lot of questions for your team, Women's Health. So it's been an area of your portfolio that's been challenged in recent quarters, due in large part to category challenges. So can you share with us how your team is thinking about the Women's Health category this year? Sure, Rupesh. So let me start with the two brands in Women's Health, right? A year ago, we were talking about Monistat and Summer's Eve kind of going through different processes to get stabilized and repositioned for growth. And a year ago, we said, hey, we thought the runway to getting Monistat fixed, if I use that term, and positioned for growth was shorter, right? There was less issues there that we were dealing with. And as we got into the latter part of fiscal 2024, we felt good about that brand's performance. And I think we actually did see some growth in Monistat. So as we head into 2025, that should be in line with historical levels of performance and growth. The bigger challenge for us in the more complicated recovery is Summer's Eve. We've talked about kind of two categories of issues there. The first is we continue to see the disruption that COVID had on the out-of-home, called on-the-go use, so the sprays and the wipes. The category was reduced meaningfully during COVID, and it hasn't really come back to where it was pre-COVID during that time. The Summer's Eve brand actually had much bigger shares than the average share of Summer's Eve in those two spaces. So we had a bigger hit in those categories where we had very outsized shares. And then the other side of it really was, I guess I'll describe it self-inflicted, where a number of years ago, the marketing team, based on insight that they were getting from consumers, looked to reposition Summer's Eve away from talking about odor and hygiene and moving towards kind of more of a beauty element. We introduced products like Spa, right, which couldn't be any more 180 degrees away from talking about hygiene and odor and fragrance. What we saw when we rolled out the new marketing campaigns and the new products, like Active as another example, right, away from the odor heritage, is that in fact, the consumers are looking for the trusted products to help them with their hygiene and odor control, odor elimination over time. We've started down the road to reposition the brand back to where it was. We launched some new products, Ultimate Odor Protection and Wash, Sprays, and Wipes. They launched in the last couple of months, and they're doing fantastic at retail. That's just one element of helping to get the brand back in a good position. We've started to update some of our digital media, and then we'll have some new updated campaigns on TV later in the year. So no one thing is going to suddenly turn Summer's Eve around, but we've got a number of elements here planned to help reposition the brand back to its heritage and its connection with consumers. In any sense, in terms of at least Summer's Eve, when you expect to be, I don't know, flat or even return to growth, do you expect that sometime this year or into next year? Yeah, what we've talked about is that we're looking to see the brand stabilized in the second half of the year and positioned for growth going forward. A lot of road to get behind us between now and then, but we feel good about the positioning of the brand here for long-term success. Great. As we think about your portfolio, what do you see as potentially the faster growing parts in the coming years? What do you see as the biggest areas of opportunity within your portfolio? Yeah. So one of the benefits of having a broad and diverse portfolio is that over time, you're going to find opportunities to have brands perform above long-term expectations. And if you look over the last few years, Hydralyte, Dramamine, Nix, and Compound W have been in that space, right? Really strong performance based on lots of different things, successful marketing campaigns, great new products, consumers continuing to use the product more often. In the case of Hydralyte, we're seeing users adopt it for more frequent use. And again, we've got 18 brands that make up about 80%, 85% of our sales. And those are the brands over time that you'll see potentially grow over their long-term expectations as we have successful marketing campaigns or new products or maybe expand into adjacencies like Dramamine, where it expanded from motion sickness into nausea and quickly became number one there. So over time, as new products or other campaigns get launched, we'll see some come into this higher growth bucket and then go back into their longer-term rates over time. So really nothing specific to call out over time here, but you'll just see that play out over the long term from these 18 brands. Okay, great. And then as we think about innovation, can you just remind us how you feel about your innovation pipeline this year and the coming years? And are there any examples you'd like to highlight of recent successes on the innovation front? Yeah. So one of the tenets of our brand building playbook here is that new products and innovation, where we're getting these ideas from consumers, is an important part of growing the brand, improving the product proposition, and growing the category ultimately. So NPD and innovation is an important element of it. We look to have a solid, well-defined three-year NPD pipeline for all of our major brands and then selected loyalty brands where we're looking to launch products for small brands like Stye. We launched eye drops or a drop version for Stye treatment. You've probably never heard us talk about Stye on any of these calls, but so it's really important. For this year, I just called out the Summer's Eve Ultimate Odor Protection as a great example. We've had some Monistat boric acid washes last year, and I think we've got a newer size launching this year as well that has done well out of the block. Nothing specific, no one SKU launch is going to move our needle. We step back and say, hey, it's going to be lots of singles and doubles, and it's all around just continuing to underpin long-term brand growth and health. Okay, great. And then just on competition, has anything notable changed on the competitive front lately, whether for private label or other branded players? It really hasn't. And it's a function of two things. The first is by strategy, we've picked niche categories to focus on where we believe the threat from competition, no matter who it is, private label and other branded player, can be managed against over time so that we can be successful. And then the more important part of it is it's our job to come to work every day and improve the product offering that we have so that there's more than just price. There's more than just the brand legacy differentiating us so that when the consumer goes out to do some research on Amazon or Google about offerings and at the shelf versus the competitive offering. And I'll go back to Compound W as a great example, we launched NitroFreeze, right? It's the coldest, most efficacious treatment you can get outside of going to a doctor's office. So that's how you win against competition over the long term is have better product. Great. Then international has been an area of strength in recent years at PBH. Longer term, you've indicated top-line growth expectations in the mid-single digit for your international segment. Can you talk about some of the drivers behind that growth expectation, including bigger growth opportunities that you see remaining for the Hydralyte brand? Yeah. Chris, do you want to talk about this? Sure. Yeah, Rupesh, we have seen a tremendous growth from the international segment over the last few years and really driven by all of the brands. They're executing on a similar playbook or the same playbook that we're doing here in North America. But really, behind the brand Hydralyte is our big brand in our international segment, right? It has about a 90% share of the oral rehydration market in Australia. It's been expanding geographically. Still room to go there. It's going to be kind of a steady climb as opposed to a cliff change. But really, household penetration for the brand. I think when we bought it, it was closer to mid-single digits. Now it's at about 10%. So that's what gives us the confidence that there's still runway to go here. They've expanded into different formats. This year, they have some pretty significant increases in some of their advertising initiatives that they're doing. So we talk about international growth at about 5%+. And that's a number we feel pretty comfortable. It's got a long runway ahead. Outside of Hydralyte, are there any other opportunities on the international front that you might want to highlight for us? It's really, as I said before, executing on the same playbook that we're doing here, right? We have brands with leading positions that we're looking to grow categories. They continue to innovate. They're using consumer insights to drive the innovation. So I don't want to say more of the same, but many, many of those brands have been growing for the international segment. It's not just Hydralyte. Okay. That's helpful. And then since we always get a lot of questions, just from a consumer channel perspective, are you seeing any notable shifts in consumer behavior or consumption by channel lately? Yeah. Rupesh, over the last year, we got a lot of questions on, oh, is inflation starting to change what consumers buy in response to the higher prices that they're seeing out in the marketplace? And we've said no, but what we have seen is consumers seem to be changing where they shop. So as they consider price value proposition. So in the past, they may have been willing to pay a higher price for a more convenient location. And today, they're switching back to a different channel because they're driving by it on the way home, and they're making an extra stop. And this is kind of a new habit. We saw this back in 2017, 2018, 2019 before COVID, right? We saw consumers begin to get very thoughtful about where they bought their product to get the best value. We always talk about our gross margins being consistent across channels. We're agnostic in terms of where the consumer buys their product. Our product's widely available. If they choose to move to a different channel or a dot-com versus where they had been buying it, it really doesn't matter for us. Okay. That's a great segue to the next area I want to cover, just e-commerce. So as we think about e-commerce, what are your key priorities here? And then are there any key efforts we should be thinking about? Phil, do you want to talk about e-commerce? Sure. So one of the things that we always talk about from a 30,000-foot view is back in fiscal 2017, so six, seven years ago, we made the strategic decision to invest early in the e-commerce channel, the time it was 1% of sales. And what we said is we wanted to have a few things: invest in content and be available when consumers, if and when they show up to buy the products; have it be profit-neutral to other channels. By strategy, that's the case across our channels and retail partners. So wherever the consumer shows up to buy a product, we want it to be margin-neutral to our business. And then lastly, to invest in overall brand building, just like we do with all our brands in the channel specifically. So we took those actions. We took those efforts, and it was gradually moving higher, 1%-5% of sales. COVID hit. It went from 5%-10% of sales overnight. And then it's continued to creep higher. So in the fiscal year we just finished, e-commerce represented about 15% of sales and continues to grow even off of those strong comps. About 2/3 of that is Amazon, which is wavering around that 10% customer threshold. And that playbook I described that we put in place back in fiscal 2017 is really more of the same. When we look across our brands, we tend to have a market share equal to or higher than what we do in offline. And we're investing in a lot of different ways: the availability I mentioned, but also in content. It's not just content so that when the consumer shows up and buys the product online, that they're going to see those content features, media, et cetera. But it's also if they're even researching products and then they're going to buy it in a store. So they might be on their mobile phone trying to understand what type of yeast infection treatment is right for them. So all of our brand teams, we think about things from the bottoms up, have their content strategies around brand building. And we think that's been an effective playbook over time. So the next question we always get is, where could it go? We don't have a crystal ball. It could be 15%, 20%, 25%, but it goes back to where we're ready and able if the consumer shows up in greater numbers to purchase more online. Great. That's helpful, caller. Now, shifting to a couple of financial questions. So what gives your team confidence in your longer-term 2%-3% organic sales growth target and being able to deliver 6%-8% EPS growth? Yeah, certainly from a top-line perspective, it starts with we always break it down as follows. We say the categories that we're in are going to grow probably in line with population growth, right? 0.5 point-1 point. And then we're going to enhance the growth with exactly the comments we've been making about brand growth, right? Innovation, using consumer insights to understand why people are in our categories, right? We're the category leader. Or how do we heavy up a lighter user to more heavier use in the category? We do that through the insights team, and then it leads to innovation and marketing plans. So the diversity of the portfolio is probably the number one thing that gives me confidence in the top line of the portfolio. And you saw it over the most disrupted period in history. From a bottom-line perspective, right, we often talk EBITDA is likely to follow top line. Where we get our enhancement for the bottom-line EPS growth is through our cash flow. Our cash flow has been stable. It's been consistent. We're calling for $240 million or more of free cash flow again this year. And so our ability to do that either through delevering or buying back stock has been a playbook we're very familiar with and feel comfortable executing. Then another area we always get a lot of questions is just on the gross margin line. How should we think about the recovering gross margins back up to that 58% level? And then what are the key efforts to get there? Yeah, sure. Certainly we're focused on our gross margin like every other company. We have line of sight to several-year programs in terms of cost-saving efforts. We've taken price over the years to offset inflation and been able to do that dollar for dollar. The margin back when you have a 58% gross margin is a little bit longer than maybe if we had a 20% gross margin. Saving efforts are there. We have line of sight to them. We're executing on them. That said, we often or always look to maintain our EBITDA margin, right? Call it about 34%. So to the extent that just as we protected that EBITDA margin in difficult times of COVID, as we look to increase our gross margin, we would look to invest in higher levels of advertising and marketing. And so the way to think about Prestige, I think, is on an EBITDA margin basis. And then as you look at the current backdrop out there on the cost side, transportation, sourcing costs, et cetera, is there a need to take further pricing at this juncture? So maybe just overall thoughts on what you're seeing on the cost side and the need to take pricing? Yeah. At this point, I think it's a more stable environment, right? If there's a need to take pricing, it will be more surgical. It'll be isolated potentially to a particular brand. But no, for us, inflation really came in the form of wage inflation, which is broad-based. The logistics piece of it has come down a bit. But you think about we're largely sourced from North America. So just as we didn't get hit on the way up from a transportation perspective as largely as some other companies did, we wouldn't expect the recovery on the way down as well. Okay. And just switching to capital allocation, so PBH has made significant progress in recent years in reducing leverage from over four times to under three times. And now you're forecasting $1 billion of free cash flow over the next four years. How are you thinking about the increased optionality with this $1 billion in expected free cash flow? And then can you just remind us of your capital allocation priorities from here? Sure. And so, yeah, the company had leverage just below six times, I think three times in its history. So with leverage at 2.8 times, the lowest in our history. We're very proud of that. So as a result of that reduced leverage, we now, to your point, Rupesh, have increased optionality in our minds, right? So of course, we're always number one priority is going to be to invest in the brands that we have. The number two use of cash now is anticipated to be M&A. And that's really a direct result of the reduced leverage. The third would be share repurchases, right? Each year, you can probably expect us to try to offset dilution as we've been doing consistently for a number of years now. And then Ron at the start of the call mentioned the larger share buyback program that the board recently authorized. So you'll see us kind of maneuvering between those as opportunities in the M&A space present themselves. And the last would be deleveraging, right? We still have about $135 million of prepayable debt on our balance sheet that I would anticipate we'll probably work through this year. And then potential to build cash on the balance sheet. So we'll kind of be working those levers as the environment and situations change. Okay. I want to dive deeper into some of the comments there. Just on share buybacks, how does your team approach share buybacks now that you can both offset dilution and actually drive meaningful accretion? Is it at this point more of an opportunistic repurchase strategy after you offset your dilution? Yeah, that's exactly right. That's exactly how we're looking at it, right? I wouldn't anticipate we're going to be sporadic, right? I think research shows that longer-term programs over time tend to perform better. And so that's the way we're thinking about it as well. Okay. Great. And then just on M&A, if you could share the latest you're seeing on the M&A front in terms of opportunities and valuations, and also remind us of the typical M&A criteria that you look at? Sure. So valuations, when we say more of the same, we said that a few years ago when everyone was hung up in some very high multiples that were being announced. And we said not for the kinds of things that we look at. And we announced there, it appears at about 10 times. So multiples have been pretty consistent in the spaces that we're looking at. Remember, we want leading brands in niche markets. The criteria for us is the same. It starts with the brand, as I just mentioned, the long-term brand building opportunity that's presented, right? Can we innovate? Are there large players in the space, right? Can we grow the category? Can we go into adjacent categories? Can we do it ourselves, or should we bring a new brand? And so all of those things factor into our assessment. Once we get comfortable with the brand opportunity, we get into the financials and the operating model, right? Generally speaking, we like asset-light models. But when there's a competitive advantage, like there was when we bought the Fleet brand and the facility, we're comfortable operating it. So channels from a retail perspective, does it fit the operating model? The last piece of it is really looking at the ROIC and the financial measures. We always say if you get the first two right, the third will fall out. But we're generally looking to have a return in excess of our WACC. And we've stayed disciplined to that criteria since I've been here, since Ron's been here. I think the other important comment on this is just because we have more M&A capacity going forward doesn't mean that we're going to change the criteria or all of a sudden start to decide we want to do one because we haven't done one for a period of time. I think no deal is still better than a bad deal. And we have to remind ourselves of that going forward. So nothing has changed. Okay. So you're happy to sit on cash if it comes down to it, then it sounds like. Absolutely. Okay. Great. Well, thanks, Ron, Chris, and Phil for joining us today. Great. Thank you. Thank you. Thank you, [audio distortion].