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Prestige Consumer Healthcare Inc. Reports Results for First Quarter Fiscal 2023

·16 min read
Prestige Consumer Healthcare Inc.
Prestige Consumer Healthcare Inc.
  • Revenue of $277.1 Million in Q1 fiscal 2023 increased 2.9% versus Prior Year

  • Diluted EPS of $1.09 for Q1, ahead of expectations

  • Net Cash Provided by Operating Activities of $58.2 Million and Non-GAAP Free Cash Flow of $57.2 Million

  • Reaffirming Full-Year Fiscal 2023 Revenue and Earnings Outlooks

TARRYTOWN, N.Y., Aug. 04, 2022 (GLOBE NEWSWIRE) -- Prestige Consumer Healthcare Inc. (NYSE:PBH) today reported financial results for its first fiscal quarter ended June 30, 2022.

“We are pleased with our first quarter performance that delivered a solid start to the year, with financial metrics slightly ahead of our expectations. We continued to use our strong and consistent cash flow strategically to reduce debt, finishing Q1 at 3.8x leverage while enhancing shareholder value by executing a portion of our authorized share repurchase program. Our proven business strategy and the benefits of our leading portfolio of brands have enabled this success against the backdrop of a dynamic operating environment. Following this solid Q1 start, we are reaffirming our fiscal year outlook for revenue and earnings and believe we are well positioned for the remainder of the year,” said Ron Lombardi, Chief Executive Officer of Prestige Consumer Healthcare.

First Fiscal Quarter Ended June 30, 2022

Reported revenues in the first quarter of fiscal 2023 of $277.1 million increased 2.9% versus $269.2 million in the first quarter of fiscal 2022. Revenues decreased 1.2% excluding the impact of foreign currency and a $12.6 million contribution from the acquisition of Akorn. The revenue performance for the quarter was driven by continued strong performance across many of the Company’s key brands but offset, as anticipated, by comparing to the prior year Q1 which experienced significantly increased demand for certain brands, categories and channels that had previously been impacted by the COVID-19 virus.

Reported net income for the first quarter of fiscal 2023 totaled $55.3 million, compared to the prior year first quarter’s net income of $57.8 million. Diluted earnings per share of $1.09 for the first quarter of fiscal 2023 compared to $1.14 in the prior year comparable period.

Free Cash Flow and Balance Sheet

The Company's net cash provided by operating activities for first quarter fiscal 2023 was $58.2 million, compared to $69.3 million during the prior year comparable period. Non-GAAP free cash flow in the first quarter of fiscal 2023 was $57.2 million compared to $67.8 million in the prior year first quarter attributable to the timing of working capital.

In the first quarter fiscal 2023, the Company repurchased approximately 0.7 million shares at a total investment of $37.7 million.

The Company's net debt position as of June 30, 2022 was approximately $1.5 billion, resulting in a covenant-defined leverage ratio of 3.8x.

Segment Review

North American OTC Healthcare: Segment revenues of $242.5 million for the first quarter fiscal 2023 was approximately flat to the prior year comparable quarter's segment revenues of $242.4 million. The revenue performance for the quarter was driven by continued strong performance across many of the Company’s key brands but offset, as anticipated, by comparing to the prior year Q1 which experienced significantly increased demand for certain brands, categories and channels that had previously been impacted by the COVID-19 virus, most notably motion sickness. The first quarter fiscal 2023 revenue performance also included an approximate $12.4 million contribution from the acquisition of Akorn.

International OTC Healthcare: Record segment fiscal first quarter 2023 revenues of $34.5 million increased 28.9% from $26.8 million reported in the prior year comparable period. The revenue increase versus the prior year first quarter related primarily to an increase in consumer demand for Hydralyte, partially offset by an approximate $1 million currency headwind.

Commentary and Updated Outlook for Fiscal 2023

Ron Lombardi, Chief Executive Officer, stated, “Our start to fiscal 2023 exceeded our expectations. Our top line delivered revenue growth of approximately 3% compared to the prior year where we experienced a surge in demand from consumers returning to certain COVID-19 impacted categories like motion sickness. This resulted in strong cash flows that enabled us to continue investing in our brands, reduce debt, and repurchase shares during Q1.”

“Following these results, we are reaffirming our fiscal 2023 outlook for revenue and earnings growth. We continue to maintain this outlook in a dynamic supply chain and inflationary environment thanks to the makeup of our portfolio and our strong three-pillar business strategy of brand-building, maintaining a strong financial profile, and optimizing capital allocation efficiency,” Mr. Lombardi concluded.

 

Reaffirmed Fiscal 2023 Outlook

Revenue

$1,120 to 1,130 million

Organic Revenue Growth

2% to 3%

Diluted E.P.S.

$4.18 to $4.23

Free Cash Flow

$260 million or more

Fiscal First Quarter 2023 Conference Call, Accompanying Slide Presentation and Replay

The Company will host a conference call to review its first quarter results today, August 4, 2022 at 8:30 a.m. ET. The Company provides a live Internet webcast, a slide presentation to accompany the call, as well as an archived replay, all of which can be accessed from the Investor Relations page of the Company's website at www.prestigeconsumerhealthcare.com. The toll-free dial-in numbers are 833-634-2598 for the U.S. & Canada and 412-902-4108 internationally and callers can reference joining the Prestige Consumer Healthcare earnings call. The slide presentation can be accessed from the Investor Relations page of the website by clicking on Webcasts and Presentations.

A conference call replay will be available for approximately one week following completion of the live call and can be accessed on the Company’s Investor Relations page or at 877-344-7529 within the U.S., 855-669-9658 in Canada, and 412-317-0088 internationally using the conference ID is 9498360.

Non-GAAP and Other Financial Information
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section at the end of this earnings release.

Note Regarding Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "guidance," "strategy," "outlook," "projection," “plan,” "may," "will," "would," "expect," "anticipate," "believe”, "consistent," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology. The "forward-looking statements" include, without limitation, statements regarding the Company's future operating results including revenues, organic growth, diluted earnings per share, and free cash flow, the impact of supply chain issues and inflation on the Company’s performance, the Company’s ability to execute on its brand-building and capital allocation strategy, and the Company’s ability to enhance shareholder value. These statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors, including the impact of business and economic conditions, including as a result of COVID-19 and geopolitical instability, consumer trends, the impact of the Company’s advertising and marketing and new product development initiatives, customer inventory management initiatives, fluctuating foreign exchange rates, competitive pressures, and the ability of the Company’s manufacturing operations and third party manufacturers and logistics providers and suppliers to meet demand for its products and to avoid inflationary cost increases and disruption as a result of labor shortages. A discussion of other factors that could cause results to vary is included in the Company's Annual Report on Form 10-K for the year ended March 31, 2022 and other periodic reports filed with the Securities and Exchange Commission.

About Prestige Consumer Healthcare Inc.
Prestige Consumer Healthcare is a leading consumer healthcare products company with sales throughout the U.S. and Canada, Australia, and in certain other international markets. The Company’s diverse portfolio of brands include Monistat® and Summer’s Eve® women's health products, BC® and Goody's® pain relievers, Clear Eyes® and TheraTears® eye care products, DenTek® specialty oral care products, Dramamine® motion sickness treatments, Fleet® enemas and glycerin suppositories, Chloraseptic® and Luden's® sore throat treatments and drops, Compound W® wart treatments, Little Remedies® pediatric over-the-counter products, Boudreaux’s Butt Paste® diaper rash ointments, Nix® lice treatment, Debrox® earwax remover, Gaviscon® antacid in Canada, and Hydralyte® rehydration products and the Fess® line of nasal and sinus care products in Australia. Visit the Company's website at www.prestigeconsumerhealthcare.com.

Prestige Consumer Healthcare Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)

 

Three Months Ended June 30,

(In thousands, except per share data)

2022

 

2021

Total Revenues

$

277,059

 

 

$

269,181

 

 

 

 

 

Cost of Sales

 

 

 

Cost of sales excluding depreciation

 

114,996

 

 

 

108,335

 

Cost of sales depreciation

 

1,944

 

 

 

1,834

 

Cost of sales

 

116,940

 

 

 

110,169

 

Gross profit

 

160,119

 

 

 

159,012

 

 

 

 

 

Operating Expenses

 

 

 

Advertising and marketing

 

39,951

 

 

 

39,439

 

General and administrative

 

26,714

 

 

 

22,471

 

Depreciation and amortization

 

6,440

 

 

 

5,760

 

Total operating expenses

 

73,105

 

 

 

67,670

 

Operating income

 

87,014

 

 

 

91,342

 

 

 

 

 

Other expense (income)

 

 

 

Interest expense, net

 

15,292

 

 

 

15,077

 

Other expense (income), net

 

825

 

 

 

(105

)

Total other expense, net

 

16,117

 

 

 

14,972

 

Income before income taxes

 

70,897

 

 

 

76,370

 

Provision for income taxes

 

15,625

 

 

 

18,615

 

Net income

$

55,272

 

 

$

57,755

 

 

 

 

 

Earnings per share:

 

 

 

Basic

$

1.10

 

 

$

1.15

 

Diluted

$

1.09

 

 

$

1.14

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

Basic

 

50,264

 

 

 

50,139

 

Diluted

 

50,730

 

 

 

50,671

 

 

 

 

 

Comprehensive income, net of tax:

 

 

 

Currency translation adjustments

 

(9,519

)

 

 

(1,492

)

Unrecognized gain on interest rate swaps

 

 

 

 

520

 

Net loss on termination of pension plan

 

(790

)

 

 

 

Total other comprehensive loss

 

(10,309

)

 

 

(972

)

Comprehensive income

$

44,963

 

 

$

56,783

 

Prestige Consumer Healthcare Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

(In thousands)

June 30, 2022

 

March 31, 2022

 

 

 

 

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

35,869

 

$

27,185

Accounts receivable, net of allowance of $18,335 and $19,720, respectively

 

145,451

 

 

139,330

Inventories

 

133,768

 

 

120,342

Prepaid expenses and other current assets

 

9,527

 

 

6,410

Total current assets

 

324,615

 

 

293,267

 

 

 

 

Property, plant and equipment, net

 

70,393

 

 

71,300

Operating lease right-of-use assets

 

18,885

 

 

20,372

Finance lease right-of-use assets, net

 

6,193

 

 

6,858

Goodwill

 

576,794

 

 

578,976

Intangible assets, net

 

2,682,611

 

 

2,696,635

Other long-term assets

 

2,743

 

 

3,273

Total Assets

$

3,682,234

 

$

3,670,681

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

 

58,110

 

 

55,760

Accrued interest payable

 

15,182

 

 

4,437

Operating lease liabilities, current portion

 

6,548

 

 

6,360

Finance lease liabilities, current portion

 

2,772

 

 

2,752

Other accrued liabilities

 

72,737

 

 

74,113

Total current liabilities

 

155,349

 

 

143,422

 

 

 

 

Long-term debt, net

 

1,472,427

 

 

1,476,658

Deferred income tax liabilities

 

442,537

 

 

444,917

Long-term operating lease liabilities, net of current portion

 

14,460

 

 

16,088

Long-term finance lease liabilities, net of current portion

 

3,800

 

 

4,501

Other long-term liabilities

 

8,918

 

 

7,484

Total Liabilities

 

2,097,491

 

 

2,093,070

 

 

 

 

Total Stockholders' Equity

 

1,584,743

 

 

1,577,611

Total Liabilities and Stockholders' Equity

$

3,682,234

 

$

3,670,681

Prestige Consumer Healthcare Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 

Three Months Ended June 30,

(In thousands)

2022

 

2021

Operating Activities

 

 

 

 

 

 

 

Net income

$

55,272

 

 

$

57,755

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

8,384

 

 

 

7,594

 

Loss on disposal of property and equipment

 

13

 

 

 

26

 

Deferred income taxes

 

1,213

 

 

 

5,876

 

Amortization of debt origination costs

 

828

 

 

 

759

 

Stock-based compensation costs

 

3,857

 

 

 

1,878

 

Non-cash operating lease cost

 

1,493

 

 

 

1,691

 

Other

 

446

 

 

 

 

Changes in operating assets and liabilities, net of effects from acquisition:

 

 

 

Accounts receivable

 

(7,079

)

 

 

(15,879

)

Inventories

 

(14,415

)

 

 

9,384

 

Prepaid expenses and other current assets

 

(3,227

)

 

 

(1,049

)

Accounts payable

 

2,542

 

 

 

(15,551

)

Accrued liabilities

 

10,524

 

 

 

18,439

 

Operating lease liabilities

 

(1,602

)

 

 

(1,578

)

Other

 

(2

)

 

 

(40

)

Net cash provided by operating activities

 

58,247

 

 

 

69,305

 

 

 

 

 

Investing Activities

 

 

 

Purchases of property, plant and equipment

 

(1,047

)

 

 

(1,500

)

Other

 

 

 

 

177

 

Net cash used in investing activities

 

(1,047

)

 

 

(1,323

)

 

 

 

 

Financing Activities

 

 

 

Term loan repayments

 

(15,000

)

 

 

(20,000

)

Borrowings under revolving credit agreement

 

20,000

 

 

 

85,000

 

Repayments under revolving credit agreement

 

(10,000

)

 

 

 

Payments of finance leases

 

(686

)

 

 

(638

)

Proceeds from exercise of stock options

 

1,489

 

 

 

2,204

 

Fair value of shares surrendered as payment of tax withholding

 

(5,450

)

 

 

(2,916

)

Repurchase of common stock

 

(37,727

)

 

 

 

Net cash (used in) provided by financing activities

 

(47,374

)

 

 

63,650

 

 

 

 

 

Effects of exchange rate changes on cash and cash equivalents

 

(1,142

)

 

 

(310

)

Increase in cash and cash equivalents

 

8,684

 

 

 

131,322

 

Cash and cash equivalents - beginning of period

 

27,185

 

 

 

32,302

 

Cash and cash equivalents - end of period

$

35,869

 

 

$

163,624

 

 

 

 

 

Interest paid

$

3,562

 

 

$

3,389

 

Income taxes paid

$

1,799

 

 

$

2,388

 

Prestige Consumer Healthcare Inc.
Condensed Consolidated Statements of Income
Business Segments
(Unaudited)

 

Three Months Ended June 30, 2022

(In thousands)

North American
OTC Healthcare

 

International
OTC Healthcare

 

Consolidated

Total segment revenues*

$

242,518

 

$

34,541

 

$

277,059

Cost of sales

 

102,921

 

 

14,019

 

 

116,940

Gross profit

 

139,597

 

 

20,522

 

 

160,119

Advertising and marketing

 

35,412

 

 

4,539

 

 

39,951

Contribution margin

$

104,185

 

$

15,983

 

$

120,168

Other operating expenses

 

 

 

 

 

33,154

Operating income

 

 

 

 

$

87,014

*Intersegment revenues of $0.5 million were eliminated from the North American OTC Healthcare segment.

 

Three Months Ended June 30, 2021

(In thousands)

North American
OTC Healthcare

 

International
OTC Healthcare

 

Consolidated

Total segment revenues*

$

242,393

 

$

26,788

 

$

269,181

Cost of sales

 

99,404

 

 

10,765

 

 

110,169

Gross profit

 

142,989

 

 

16,023

 

 

159,012

Advertising and marketing

 

35,230

 

 

4,209

 

 

39,439

Contribution margin

$

107,759

 

$

11,814

 

$

119,573

Other operating expenses

 

 

 

 

 

28,231

Operating income

 

 

 

 

$

91,342

* Intersegment revenues of $1.0 million were eliminated from the North American OTC Healthcare segment.

About Non-GAAP Financial Measures

In addition to financial results reported in accordance with GAAP, we disclose certain Non-GAAP financial measures ("NGFMs"), including, but not limited to, Non-GAAP Organic Revenues, Non-GAAP Organic Revenue Change Percentage, Non-GAAP EBITDA, Non-GAAP EBITDA Margin, Non-GAAP Free Cash Flow, and Net Debt.

We use these NGFMs internally, along with GAAP information, in evaluating our operating performance and in making financial and operational decisions. We believe that the presentation of these NGFMs provides investors with greater transparency, and provides a more complete understanding of our business than could be obtained absent these disclosures, because the supplemental data relating to our financial condition and results of operations provides additional ways to view our operation when considered with both our GAAP results and the reconciliations below. In addition, we believe that the presentation of each of these NGFMs is useful to investors for period-to-period comparisons of results in assessing shareholder value, and we use these NGFMs internally to evaluate the performance of our personnel and also to evaluate our operating performance and compare our performance to that of our competitors.

These NGFMs are not in accordance with GAAP, should not be considered as a measure of profitability or liquidity, and may not be directly comparable to similarly titled NGFMs reported by other companies. These NGFMs have limitations and they should not be considered in isolation from or as an alternative to their most closely related GAAP measures reconciled below. Investors should not rely on any single financial measure when evaluating our business. We recommend investors review the GAAP financial measures included in this earnings release. When viewed in conjunction with our GAAP results and the reconciliations below, we believe these NGFMs provide greater transparency and a more complete understanding of factors affecting our business than GAAP measures alone.

NGFMs Defined

We define our NGFMs presented herein as follows:

  • Non-GAAP Organic Revenues: GAAP Total Revenues excluding revenues associated with products acquired in the current period and the impact of foreign currency exchange rates in the periods presented.

  • Non-GAAP Organic Revenue Change Percentage: Calculated as the change in Non-GAAP Organic Revenues from prior year divided by prior year Non-GAAP Organic Revenues.

  • Non-GAAP EBITDA: GAAP Net Income before interest expense, net, provision for income taxes, and depreciation and amortization.

  • Non-GAAP EBITDA Margin: Calculated as Non-GAAP EBITDA divided by GAAP Total Revenues.

  • Non-GAAP Free Cash Flow: Calculated as GAAP Net cash provided by operating activities less cash paid for capital expenditures.

  • Net Debt: Calculated as total principal amount of debt outstanding ($1,490,000 at June 30, 2022) less cash and cash equivalents ($35,869 at June 30, 2022). Amounts in thousands.

The following tables set forth the reconciliations of each of our NGFMs (other than Net Debt, which is reconciled above) to their most directly comparable financial measures presented in accordance with GAAP.

Reconciliation of GAAP Total Revenues to Non-GAAP Organic Revenues and related Non-GAAP Organic Revenue Change percentage:

 

Three Months Ended June 30,

 

2022

 

2021

(In thousands)

 

 

 

GAAP Total Revenues

$

277,059

 

 

$

269,181

 

Revenue Change

 

2.9

%

 

 

Adjustments:

 

 

 

Revenues associated with acquisition (1)

 

(12,624

)

 

 

 

Impact of foreign currency exchange rates

 

 

 

 

(1,563

)

Total adjustments

 

(12,624

)

 

 

(1,563

)

Non-GAAP Organic Revenues

$

264,435

 

 

$

267,618

 

Non-GAAP Organic Revenue Change

(1.2

)%

 

 

(1) Revenues of our Akorn acquisition are excluded for purposes of calculating Non-GAAP organic revenues.

Reconciliation of GAAP Net Income to Non-GAAP EBITDA and related Non-GAAP EBITDA Margin:

 

Three Months Ended June 30,

 

2022

 

2021

(In thousands)

 

 

 

GAAP Net Income

$

55,272

 

 

$

57,755

 

Interest expense, net

 

15,292

 

 

 

15,077

 

Provision for income taxes

 

15,625

 

 

 

18,615

 

Depreciation and amortization

 

8,384

 

 

 

7,594

 

Non-GAAP EBITDA

$

94,573

 

 

$

99,041

 

Non-GAAP EBITDA Margin

 

34.1

%

 

 

36.8

%

Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow:

 

Three Months Ended June 30,

 

2022

 

2021

(In thousands)

 

 

 

GAAP Net Income

$

55,272

 

 

$

57,755

 

Adjustments:

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows

 

16,234

 

 

 

17,824

 

Changes in operating assets and liabilities as shown in the Statement of Cash Flows

 

(13,259

)

 

 

(6,274

)

Total adjustments

 

2,975

 

 

 

11,550

 

GAAP Net cash provided by operating activities

 

58,247

 

 

 

69,305

 

Purchases of property and equipment

 

(1,047

)

 

 

(1,500

)

Non-GAAP Free Cash Flow

$

57,200

 

 

$

67,805

 

Outlook for Fiscal Year 2023:

Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Free Cash Flow:

(In millions)

 

Projected FY'23 GAAP Net cash provided by operating activities

$

270

 

Additions to property and equipment for cash

 

(10

)

Projected FY’23 Non-GAAP Free Cash Flow

$

260

 

Investor Relations Contact
Phil Terpolilli, CFA, 914-524-6819
irinquiries@prestigebrands.com