Prestige Consumer Healthcare Inc. (PBH) Earnings

Management highlights

### Overall Business Performance - Q1 2027 results exceeded sales and earnings expectations, driven by broad-based portfolio strength. Record adjusted quarterly free cash flow of $83.7 million was achieved, supporting disciplined capital allocation. - Adjusted diluted EPS increased 3% year-over-year to $0.98, partially offset by higher interest expense from acquisition financing. Adjusted gross margin was 55%, flat sequentially but down 120 basis points year-over-year due to higher transportation costs and product mix. ### Recent Acquisitions - Two acquisitions were completed after the last earnings call: the Breathe Right portfolio (closed June 12, 2026) and Lacorium Health (closed July 1, 2026). - Breathe Right: Expected to generate ~$200 million in annual revenue, with accretive EBITDA margins and tax benefits that improve free cash flow. All major integration milestones are complete as of the call, with the business fully integrated into Prestige's operations, systems, and warehouse network. Long-term growth drivers include social media marketing to boost penetration, new product innovation (Breathe Right Menthol, new Breathe Right Sport), and international expansion leveraging Prestige's existing global footprint. - Lacorium Health: Expected to add ~$40 million in annualized revenue, with its leading Dermal Therapy brand strengthening the skincare category and supporting international organic growth objectives. Integration will proceed methodically through the rest of fiscal 2027, with long-term synergies expected from distributor optimization, sales integration, and operating efficiency improvements. - Combined, the two acquisitions add over 20% to Prestige's annualized revenue base, improving portfolio diversification across categories. On a pro forma basis, the new wellness, sleep, and other category (led by Breathe Right) represents ~low teens percentage of total pro forma revenue. ### Clear Eyes & Pillar 5 Manufacturing Strategy - Clear Eyes revenue remained constrained in Q1 due to ongoing output variability at the newly acquired Pillar 5 sterile ophthalmic manufacturing facility, which is expected to continue through Q2. Greater output stability is targeted for the second half of fiscal 2027, driving sequential shipment improvements. - The multi-year plan to return Clear Eyes to its market leading position has four core phases: 1) stabilize and expand in-house manufacturing capacity at Pillar 5; 2) rebuild safety stock for the company and retailers to avoid future supply disruptions; 3) restore the full SKU product offering; 4) resume marketing investment to reconnect with consumers. Management has made infrastructure investments, equipment upgrades, and leadership changes at Pillar 5 to support this plan. ### Capital Allocation - Strong cash flow generation has supported the two acquisitions, which were funded via a new seven-year term loan and $400 million in new unsecured notes maturing in 2031 that replaced maturing existing debt. The earliest debt maturity is now 2031, and management intends to begin paying down prepayable debt over the remainder of fiscal 2027 to strengthen the balance sheet.

Guidance

- **Full Fiscal 2027**: Reported revenue guidance is updated to $1.29 billion to $1.315 billion, with the entire increase driven by the two acquisitions, which are expected to contribute ~$190 million in revenue this year. Organic revenue growth guidance is maintained at 1% to 3%, unchanged from prior outlook. - Adjusted diluted EPS guidance is updated to $4.55 to $4.65, with the entire increase attributable to the acquisitions' attractive profit profiles. Adjusted gross margin is expected to be just over 57% for the full year, advertising and marketing spend is expected to be ~14.5% of sales, and adjusted G&A is expected to be ~10% of sales (down from prior guidance due to added scale from acquisitions). - Adjusted free cash flow guidance is increased to at least $270 million, with a projected year-end leverage ratio of just below 4x. Management plans to remain disciplined in debt reduction throughout fiscal 2027. - **Q2 2027**: Revenue is expected to be $328 million to $331 million (including both acquisitions), with a modest organic revenue decline due to order timing shifts that benefited Q1. Adjusted diluted EPS is expected to be $1.06 to $1.08. Organic growth is still expected for the first half of fiscal 2027 overall. - The International segment is still expected to return to its long-term organic growth target of 5% or more for the full fiscal year.

Segment performance

Consolidated Q1 2027 revenue was $265.7 million, a 6.5% increase year-over-year, with 3.2% organic growth excluding currency and acquisition impacts. The Breathe Right portfolio acquisition contributed $5.9 million of Q1 revenue. - **North America Segment**: Organic revenue (excluding FX and Breathe Right acquisition) increased 4.2% year-over-year. Growth was led by the GI category (Dramamine, Fleet) and dermatological/skin care (Compound W, Farateers, Dibrox), which more than offset the decline in Clear Eyes revenue from ongoing supply constraints. E-commerce saw double-digit consumption growth in the segment. - **International Segment**: Organic revenue decreased 2.1% year-over-year, impacted by distributor order timing, though positive consumption trends were observed. The Lacorium Health acquisition, which closed after quarter end, is expected to add ~$40 million in annualized revenue primarily from the Australian market.

Risks & headwinds

- Ongoing heightened business environment uncertainty remains due to supply chain constraints, high inflation, and geopolitical events, which could lead to actual results differing from current forecasts. - Clear Eyes supply output variability is expected to continue through the first half of fiscal 2027, limiting near-term revenue performance for the brand until Pillar 5 manufacturing stabilizes. Returning Clear Eyes to its prior peak market position is a multi-year process with execution risk. - Integration of two large acquisitions within a short timeframe carries some near-term execution risk, though management has staged integration timelines to mitigate internal resource competition. - Near-term sales volatility from shifting retailer order timing creates quarter-over-quarter variability that may not reflect underlying consumption trends. - Higher interest expense from acquisition financing partially offsets earnings growth from acquired revenue in the near term.

Analyst Q&A

• Q: What is the long-term growth outlook for the two new acquisitions, how much do they add to 2027 EPS, and how did the women's health segment perform in Q1? /

  A: Management remains optimistic about the long-term growth opportunity for both acquisitions, consistent with the 10% total long-term growth outlook provided in May. The acquisitions add approximately 3 percentage points of 2027 EPS growth, with near-term timing noise from the stub acquisition period, pre-close seller advertising commitments, and debt paydown timing that is temporary. Women's health performed steadily: Monistat maintains steady or growing share in a slowly declining category, while Summer's Eve's Ultimate Odor Protection franchise is performing well, with new product launches planned over the next few years.

• Q: Is Breathe Right still expected to deliver the same level of EPS accretion as initially projected, and what cost pressures and long-term gross margin improvements are expected from the acquisitions? /

  A: Breathe Right is still expected to hit the annualized 25 cent per share accretion projection initially outlined, with only a couple pennies of near-term downside from stub period timing that will resolve over time. The full-year 57% gross margin guidance increase is entirely driven by the acquisitions' higher margin profiles, with no change to the legacy business gross margin outlook. Over time, cost savings from acquisitions will be reinvested into higher advertising and marketing spend, consistent with Prestige's target of low to mid-30s EBITDA margins.

• Q: How large was the Q1 order timing benefit that will reverse in Q2, and what is the current status and multi-year recovery timeline for Clear Eyes? /

  A: The order timing benefit added approximately 2 percentage points of Q1 organic growth, but the first half of the year is still expected to deliver overall organic growth. Clear Eyes currently represents less than 3% of total company sales (including acquisition revenue), down significantly from prior peak levels due to supply constraints. Management expects stable output improvements in the second half of 2027, with a full multi-year recovery to peak levels that includes rebuilding inventory, restoring full SKUs, and resuming marketing, which will play out over the next couple years.

• Q: What is the current state of consumer demand, and have you seen any recent changes amid broader consumer uncertainty? /

  A: Prestige's over-the-counter health categories continue to see fairly stable overall consumption. The most notable ongoing trend is a consumer shift toward value-focused shopping channels, with continued strong growth in e-commerce and mass retail channels this quarter, consistent with prior trends.