Prestige Consumer Healthcare Inc. Q4 FY2025 earnings call

Ron Lombardi mentioned the company is pleased with record fiscal 2025 results with net revenue over $1.1 billion, a rise of just over 1% compared to the previous year. The International segment has growth exceeding 5%, and North America's GI brands perform strongly. Regarding marketing agility: the company adjusted its brand-building strategy during the Clear Eyes supply challenges, with TheraTears achieving a solid growth of approximately 10%, and Stye and Debrox seeing incremental growth. On the e-commerce channel: consumers are shifting towards e-commerce, and the company's long-term investments have enabled continued success, with each brand having its own e-commerce strategy. In terms of innovation: the company operates with a multi-year pipeline of new product development concepts, with examples like the launch of watermelon and pineapple flavors for Hydralyte and the Monistat maintain kit. For fiscal 2025, the total company gross margin was 55.8%, up 30 basis points from the prior year, with Q4 at approximately 57%. Adjusted diluted EPS was $4.52, up approximately 7%, and free cash flow was over $240 million, resulting in a leverage of 2.4 times.

Net revenue of over $1.1 billion increased just over 1% versus the prior year. The International segment growth continues to exceed 5%, while in North America, GI brands such as Dramamine and Fleet show superior results. For fiscal 2025, revenues increased by 120 basis points organically compared to the prior year. Excluding foreign exchange (FX), North America and International segment revenues increased by 30 basis points and 6.4% respectively. Q4 revenue was $296.5 million, up 7% or 7.9% excluding FX. The International segment sales grew by 7.1% excluding FX, driven by the Hydralyte brand. E-commerce remains a highlight, growing double digits in fiscal 2025 and now accounting for a high teens percentage of sales.

For fiscal 2026, the company anticipates revenues of $1.140 billion to $1.155 billion with an organic revenue growth forecast of approximately 1% to 2% versus the prior year. Q1 revenues are anticipated to be $258 million to $260 million. The company anticipates diluted EPS of approximately $4.70 to $4.82 for the full year, representing about 4% to 7% EPS growth. It anticipates gross margin of approximately 56.5%, with tariff impacts of approximately $15 million for fiscal 2026, and free cash flow of $245 million or more.

Business environment uncertainty remains elevated due to evolving U.S. and international tariffs, supply chain constraints, and inflation. Tariff volatility and uncertainty pose challenges, reducing consumer optimism and affecting spending decisions. The company needs to navigate these challenges with its wide portfolio of needs-based products, diverse and mostly domestic supply base, focus on cost savings levers, and the ability to take surgical pricing if necessary.

Q: Good morning, and thanks for taking the question. So I just want to go back to your organic sales growth guide of 1% to 2%. So it sounds like maybe there’s a 0.5 point or so headwind just really to that shift in timing of – or I guess, the pull forward to Q4 versus Q1. But just anything else that drives it below your 2% to 3% longer-term algorithm?

A: Hey, good morning. Rupesh, this is Chris. So a couple of things to contemplate in our initial guide, which is a bit wider than it had been in prior year, right? First, given the macro environment that Ron touched on a little earlier, just as you’re hearing from just about every company in every industry, there’s heightened volatility and uncertainty today. To your point, we did talk about in the prepared remarks, the timing of certain e-commerce orders. We highlighted those as about $7 million, which we believe was pulled forward. And FX remains difficult to predict. We saw some highly unusual swings in two of our major exposures, primarily the Australian dollar and the Canadian dollar. So overall, we think we’re being prudent in our guide given the current environment.

Q: Okay. So it sounds like just more consumption, just more conservatism versus any weakening you’re seeing in your business, I guess, quarter-to-date. Is that the right way to think about that?

A: That’s a fair way to think about it, yes.

Q: Okay. Okay. Great. And then second on Clear Eyes, just the latest in terms of how you think about the recovery for Clear Eyes. Do you guys expect to get back to maybe normal this year from, I guess, in-stocks at retailers and just where you’d like to be with the business?

A: Good morning, Rupesh. So for starters, there’s really no change in the Clear Eyes supply chain plan that we began to talk about, about a year ago, where we’re looking to expand capacity at the existing suppliers and bring on two new suppliers in fiscal 2026. Like we saw in fiscal 2025, the quarterly shipment results can be lumpy. We anticipate them being a bit lumpy as the current suppliers take production down to do upgrades and expand capacity. And we work with them to manage that so that we have the best managed timing from quarter-to-quarter. In addition to that, we would expect that the second half of the year we will begin to see the bigger recovery year-over-year and just in absolute dollars versus the first half as that added capacity and the new suppliers come online.

Q: Hi, good morning. Thanks for taking my questions. Nice job on the quarter and ending the year. I guess, maybe just a follow-up on the women’s health category. Definitely saw some nice growth in the fourth quarter. I guess, how are you feeling about both brands, Summer’s Eve and Monistat heading into this year? And then do you feel like the brands are in a good position to grow? And do you plan any new innovation as well for this year?

A: Good morning, Susan. So women’s health and Summer’s Eve in particular, we feel really good about the progress that the brand made during fiscal 2025. Each quarter, the brand improved quarter-to-quarter, and we actually were able to grow enough in the second half of fiscal 2025 to get Summer’s Eve to a full year level of growth year-over-year, even with starting off with a pretty big decline in the first quarter. So we feel really good about the results of our efforts focused on redoing our marketing messaging and our marketing communication tools. The new products that we launched in fiscal 2025, the ultimate odor protection in both wash spray and wipes forms has been the best launch for Summer’s Eve in a really long time. And then we’ve got a number of other products that I touched upon in our comments today, including whole body deodorant, amongst others that we feel really good about as we head into 2026. So all in all, we expect that our women’s health franchises will get back to a position of being able to grow over the long-term.

Q: Hey, good morning. Thanks for the question. I wanted to just drill down a little bit on the consumer uncertainty. It doesn’t sound like it’s impacting your business that kind of makes sense given your portfolio. But I’m curious how you might look to evolve your innovation or marketing plans as the year progresses just as some of this consumer uncertainty persists. It could also be a time where the consumer is a little less receptive to marketing or innovation as well. Curious how you guys might look to adapt or evolve even if it’s prioritizing different channels if the uncertainty persists through the year?

A: Good morning, Keith. So what we’ve seen in the past during challenging economic times or fluid times is that needs-based categories tend to be the last place that consumers look to make a change. They stick with their trusted brands that’s worked for them. So what we have seen though over time is that where consumers choose to purchase the product will evolve, and we’ve started to see that in fiscal 2025. So they may look for the best value proposition. Whether it’s price or a different price point offering. And with our broad distribution and our varied product offerings within our brand, we’re well suited to meet whatever the consumer might be looking for. So we’ll look to see where the consumer is evolving to, and we’ll realign our investments to better support or best support where the consumer is looking for the products and that proposition that best fits their need at that moment. So I think I commented on this today in the prepared remarks. I think one of the things that we do well here is pivot quickly and change to meet a dynamic evolving environment. We saw that in 2025 when we pivoted and made changes to eye care investment as we dealt with Clear Eyes supply and took advantage of TheraTears, Debrox and Stye opportunities. So we’ll continue to be fluid and work best to meet where the consumer ends up this year.

Q: Hi, everyone. This is Glenn West stepping in for Jon Andersen. I was hoping to ask about the hot topic of tariffs. You guys obviously called out the $15 million headwind. I assume that’s kind of taking into account that the current tariff environment stays as it is for the full year, obviously. And then you talked about being able to offset it with cost savings levers. I was wondering if you guys could give us a little more color what levers you have there? And then you also mentioned maybe the ability to take surgical pricing. I’m wondering if that’s kind of just, hey, if there’s anything left over that we can’t mitigate with our levers, we’ll obviously offset dollar for dollar with extra pricing. So maybe just overall color on your plans there.

A: Hey, good morning, Glenn. This is Chris. So you’re correct in your assumption. We are assuming in our guide that all tariffs that are in place or scheduled to be in place as of today. Ron mentioned in the prepared remarks, the USMCA exemptions, the elevated Chinese tariff rate, global baseline and reciprocal. I would just point out that reciprocal tariffs aren’t very meaningful to us and have been factored in our guide, but just given our limited exposure to that. And we’re working closely with all of our suppliers to identify and close exposures that can result in savings for fiscal 2026 and beyond. You asked about levers. When we have dual sourcing or alternative sourcing even for APIs for some of our co-packers, everything is on the table, we’re looking and working closely with our external partners to mitigate the cost, and that will obviously be our – where we go first. But to your point, we do anticipate taking some surgical pricing if need be, but our efforts are going to start with cost savings.

Q: Hey, good morning, everyone, and thank you for taking the questions, and certainly nice results for 4Q. Just wondering, so obviously, as you pointed out, the vast majority of your products are sourced in the U.S. or North America. Just wondering if there are any opportunities that you think that for those that are sourced outside of the U.S., are there any domestic suppliers that are out there? Or do you think you’re kind of tapped out with that?

A: Yes. We’re certainly looking where we can. I would say, obviously, the most meaningful impact, about half of our tariffs is relating to China, limited exposure, but just given the magnitude of the rate, and we’ll look to see if there are other countries even outside of the U.S., obviously, that don’t have the same impact as the impact China is having. But again, for us, I think it’s a little bit similar to COVID, where for tariffs for us at about $15 million this year, we feel is manageable. We’ll look to offset it with a lot of levers of cost savings and given the brand’s positioning, surgical pricing if necessary.

Q: Yes. Hi, thanks, and good morning, everybody. Just one thing. I noticed that the Opella deal closed this week, and that’s a big transaction. And I just wondered if that impacts you either competitively or perhaps it could it be an M&A catalyst for you?

A: Yes. Good morning, Doug. So I guess Opella is the next in line of the spinouts of the big pharma. So we’ve been through this a little bit before. It really doesn’t do anything to change the competitive landscape of where we’re focused or the competitors in those space. And over time, we’ve seen the big pharma spinouts potentially be opportunities for brands that may come to market. So it’s more of the same with the latest spinout for us.