Good morning, everyone, and thank you for joining us at Oppenheimer's 26th Annual Consumer Growth and E-Commerce Conference. My name is Rupesh Parikh. I'm the 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 and COO Chris Sacco, and VP, IR, and Treasury Phil Terpiloli. Prestige sells and distributes over-the-counter healthcare products to retail outlets in the U.S., Canada, and certain other international markets. Some of the more well-known brands include Dramamine, ClearEyes, Dentec, Ludens, et cetera. In addition, in recent months, PBH announced plans to acquire Breathe Right and other brands from Foundation Consumer Healthcare, as well as the acquisition of Licorium Health. The format of today's session will be a fireside chat with a number of questions I've prepared. So let's get started. So, Ron, as we normally do, I was hoping you could kick it off providing a quick intro to ProSiege and anything else you'd like to highlight with regards to the company's strategy.

Good morning, Rupesh, and good morning to everyone. Thank you for joining us today. I think maybe the best place to start, Rupesh, is talking about our strategy. You know, our strategy has been in place for a very long period of time, and it's been applied consistently. and what we executed against in fiscal 26 is a great example of how we think about creating value over the long term. But let me break our strategy up into three parts. The first is every day we come to work thinking about long-term brand building and looking for ways to connect with consumers as they think about taking care of their health. And being in that space really results in business attributes that has the business well positioned for the long term. The first is the categories tend to be very stable. And despite everything that happened in calendar 25 and into 26, including tariffs, more tariffs, inflation, government shutdowns, and more recently, conflicts and oil price inflation, right, our categories have been fairly steady. So no matter what's going on, it's hard to disrupt people thinking about taking care of themselves. So that's the first attribute of it. The second part of it is, you know, we're not involved in head-on competing with others in the space where you're fighting for share. We look to focus on categories where our brands define the space. Think of Dramamine, drink of Fleet, think of Fleet, think of Hydrolite outside of the U.S. Those brands define and drive the growth in the categories. And as a result of it, it helps deliver an outstanding financial profile and free cash flow. So stable business, great financial profile and cash flow that sets up the third part of it, which is all about disciplined capital allocation. So over the long term, we've looked for ways to invest capital to create the best return for our shareholders over the long term. And that's included managing our leverage down to low levels. In fiscal 26, we were at just about the all-time low level of leverage for the company. We bought back stock over a number of years, I think approaching $300 million worth of stock buyback over the last number of years. And then finally, acquisitions, right, which we've been very, very active in. 26 is a great example of it. And we had a couple of different kinds of acquisitions. At the end of December, we acquired a sterile eye care partner because we felt it was in the company's best interest to get direct control of ClearEye's supply chain to better position ourselves to manage the challenges that had been showing up under the previous owner's stewardship over the long term. Second is, we signed an agreement to acquire Breathe Right. As you mentioned in your opening remarks, largest acquisition in the company's history, just over a billion dollars. The profile of the company is sales approaching 200 million and EBITDA approaching 100 million dollars for that acquisition. And then in addition to that, we also signed an agreement to acquire Le Corium, which is an Australia based skin care business that fits great with our care pharma business. And both businesses are actually headquartered in the same office building outside of Sydney. So there are some great examples of how we look to take the capital and apply it consistently over time to position the company for long-term growth. And if you go back and look at our long-term growth over the last 15 to 20 years, our top line has grown close to 10%, and our bottom line has been in the mid-teens. So solid long-term growth, and that's how we think about the business going forward.

Thanks, Ron, for that overview. So to start, maybe we can kick it off with the consumer. So given the dynamic and evolving macro backdrop, can you provide some thoughts on the overall consumer landscape? Have there been any changes of note on the consumer front from your perspective? And then have you noticed any shifts in consumption by channel lately? Yeah.

So really, over the last year or two, the big consumer change that we've noticed is consumers are thinking about price value proposition. And in our space, they're not looking for different products. They're looking to where they might shop for the product and get a better price value proposition based on whatever it is they're looking for. A different balance between convenience and price, or all the way to just best price. So there's a continuum in terms of how consumers think about shopping, and they've been shifting. So if you look back over the last year, as we've now had two bouts of inflation show up in about 12 months, first tariff-related and now oil-related, consumers are shifting to where they might get a better price. So for us, that means we see mass and we see e-commerce doing very well in this environment. And other channels like drug are seeing a bit more of a headwind. Regional grocer I put into that category as well. And it's a little bit of unwinding of what happened during COVID, where shoppers were focused on where can I go shopping? Where can I feel good? Where I may get other services. And we saw channels really explode in growth versus where the historical trends were prior to 20. So we're starting to see the consumer go back to that price value orientation in this environment.

Great. That's a good segue into my next question. In recent quotas, retail order patterns have been volatile at times. Have you noticed any changes how retailers are managing inventories lately? And then how do you characterize the health of retailer inventories here in the U.S.?

Yeah, I'll take that repression. Morning, everybody. So we have not seen a lot of variability. When we think about consumption in our channels, it's been fairly consistent. We do hear some folks talk about, it seems like there could be a bubble in certain channels out there. You know, we review our largest customers' inventory levels, and they're pretty consistent over time. They're essentially following consumption. So nothing out of the ordinary for us.

You know, you may hear from other players, even in our space, that they're seeing a little volatility. And, you know, think about our category, right? Dramamine defines it. There isn't 10 brands, eight brands in the motion sickness category. So the retailers aren't necessarily looking to make changes in offerings or looking to cut back in what's at the shelf to be more efficient in our space, nor are we a big player in the flu and cold session where the retailers have to make a guess as to how hardy a season are we going to have. And then if it's a weak season, they've got to think about changing their order patterns during the seasonal allergy season or ahead of the next cough-cold season to get rid of what's going on. So you may hear others talk about it a little bit differently, but again, where we've chosen to focus has us a little bit outside of what's going on there.

Okay, great. And then shifting to the competitive backdrop, have you observed any notable changes in competitive landscape lately, whether from branded or private label players?

Yeah, really no change over the long-term trends, which is, you know, if you or someone in your family has a certain illness once a year or once every two or three years, like head lice, you know, we'd like your kids to get head lice more often than they are. But, you know, if they only get it once in their lifetime, it's not the time that you're going to be trying private label or reaching for something that doesn't come strongly recommended. So no changes for us over share or the competitive kind of landscape.

Next, I'd like to quickly touch on the current cost backdrop. So with elevated oil prices, can you remind us of your exposure here in terms of freight packaging, et cetera? And if rates stay elevated for a prolonged period of time, what are some of the levers you could pull to mitigate the impact?

Yeah, sure. So I guess the word I would use similar to when we were in the period of inflation with COVID is manageable for us. We talk about freight being in the low single digits as a percent of our sales, right? The majority of our COGS relates to labor in terms of conversion for product costs. That being said, so, you know, elevated levels obviously baked into our outlook for fiscal 27. And we have cost-saving plans in place to mitigate, you know, we'll take surgical pricing if necessary in certain categories that are affected. But, again, the majority of our product being produced in North America, I think our exposure is a little more insulated than some other folks out there.

Great. Now I'd like to switch gears to talk a little bit about your portfolio. So in March, you announced plans to acquire Breathe Right and other brands from Foundation Consumer Healthcare. So Breathe Right will become your largest brand at over $125 million in revenue. So to start, can you talk about what attracted you to the Breathe Right brand in particular? Yeah.

So really a couple of factors there. The first is, right, it fits how we think about participating in consumer health care, right? A brand that not only defines, but kind of invented the whole category a bunch of years ago, right? So when you think about better breathing, better breathing at night for a better night's sleep, it's easy to think about Breathe Right. So we like how it defines the category. The second is for the Breathe Right brand, there's a meaningful portion of international sales, highly concentrated in Europe. So that'll take what we've got going on in Europe right now and give us a big head start in building some critical mass over there. So that's kind of the sales side of it. The financial profile is very consistent with what we look for into the space, very strong gross margins, plenty of room for long-term advertising and marketing spend to invest behind the brand, new products and innovation. It fits our supply chain model. There's a short list of suppliers who will provide not only Breathe Right, but the other brands that are in the portfolio that we're acquiring. So it really checks all of the boxes when we step back to evaluate an M&A opportunity. Phil, anything else you'd like to add to Breathe Right?

Yeah, I think Ron hit the highlights. We're very excited about it. It's in many ways similar to how we think about many of the crown jewels of our portfolio, where they represent the category and have a lot of great growth opportunities. So we're excited for closing and growing the brand.

And as you think about the brand, Breathe Right, how do you guys think about the potential growth rates? And then from a competitive standpoint, just remind us of the competitive dynamics within the category as well.

Yeah, we would expect the BreatheRite growth rate to be above the company's long-term growth objective, so above 3%. It really defines the category. There's private label. There's some other branded players that come and go, whether it's direct-to-consumer or online. line, some of them that have a selling price of, you know, 10x that you might go and see if you go do a search for these kind of products, you might see these other products that are out there. And, you know, similar to what we see in our other categories is, you know, we don't look at it as a threat, but we look at it as another way to bring attention to the category. So you may be thinking about a way to help snoring at night or breathing better when you have a cold and you go out and do some looking at it. It might bring you some attention, bring you some information, but we still think you're going to reach for that trusted Breathe Right brand over time.

Switching gears, you recently announced the Midnight Plants Acquire Licorium Health leader in the Australian therapeutic skincare category. To start, can you talk a little bit about what attracted you to the brand?

Chris, do you want to take La Corium? We tell the story of our general managers leading our international efforts in Australia as having bought a lot of coffees for the founders of La Corium over time. And just a very well-known brand, again, that defines the category that they're in in Australia. majority of the sales about three quarters of the sales are in the uh australian new zealand so they know the brands very well they're actually like ron mentioned they're on they're in the same building on a different floor uh so we've been chasing this for a bit and i think you know rupesh you used the word therapeutic skincare you know don't don't think beauty here right this is right in our wheelhouse this is this is think eczema think cold sores um you know again consumer needs you know, scarcity in terms of, you know, how many times you're going to get one of these conditions in your lifetime. And Lucorium really, I think their advertising campaign recently is a campaign called It Works. Sounds really simple, but it really prides itself. These are brands that pride themselves in efficacy, and that's really critical. And we've got about two-thirds of their folks who are coming along from an innovation and marketing perspective, and that will be key as we move forward. So, again, as Ron mentioned, just kind of checks all of the boxes as we go down our M&A criteria.

And then as you look at this acquisition, what are some of the key strategic priorities for this brand? And then how do you think about intermediate-term top-line growth prospects?

Yeah. So, let me talk about integration in the areas that we're focused on. I'll let Chris talk about the last part of the question there. Certainly, it's keeping the new product development and innovation pipeline going. It's been an important driver of their long-term sales growth that has been in the mid-teens. And we'd expect the near-term sales growth for that brand to be above 10% from both new products, innovation, getting more critical mass. So we're going to look over time to get the benefit of combining the sales forces and taking the best of both approaches and being able to take advantage of that. And then Le Corium has a growing international export element. So much like Breathe Right, based in the U.S., has this nice business in Europe, Le Corium has a growing business in other areas in Southeast Asia, Asia Pacific, that we'll look to take advantage of. We've got a very strong distributor base in that region, So we'll look to take their products into our distributors, and then we'll look for opportunities for the care portfolio to go into their distributors as well. So it's the typical kind of execution and integration that we look for, which is where can we take advantage of distribution opportunities? New products and innovation is really important.

Think about long-term, and that's going to reap a lot of benefits. great and then from a synergy perspective are you expecting any meaningful synergies from this deal yeah not really a synergy play uh for for either of the deals right when i think about breathe right very small group of folks some of them are going to remain largely in the in the marketing front um you know they're in a little bit of different channels than we are and we'll look to take advantage of that where we can but uh it's really just kind of getting it into the machine consumer insights innovation you know how do we how do we grow the category right because we're not swapping share with the next player. And the same holds true, really, for Liquorium. Again, two-thirds of the folks really coming along. The synergy will be just kind of getting it into our network. And, you know, the international piece, especially, will be interesting. As Ron said, we're going to kind of take the best of both approaches.

Okay, great. Now, switching gears to your core business, to ClearRise. In Q4, you had some unexpected shutdowns in your Pillar 5 facility that weighed on the quarter. How is this facility now progressing versus expectations? Additionally, how are your other new suppliers ramping?

So let me start with a little bit about strategy, right? Again, you know, why did we do it? What are we thinking about? And I'll let Chris talk a little bit about the detailers, the details. You know, for a long time, we've been scouring the globe to expand our sterile eye care partners. And it's really a tough space, right? The capacity that is out there is often locked up for other forms, other sterile kinds of products. You combine that with ClearEye's peak volume in nearly 50 million bottles, there just aren't partners out there that are well-situated to take care of what's going on. So for the most part, the partners that we've used over time, we've invested with, we've had long-term arrangements and helped get them to the point of where they were. So we've been working with Pillar 5 since, I think, 2016 or so. We made a very small investment with them to add a new machine way back then. It took a few years to get up and running. And they had changes in ownership during that time. And as we observed what was going on, it was clear to us that the new owners that were coming in, one, they were new to sterile eye care and they were having a problem finding the right managers. And the second is they had different objectives for that facility that absolutely did not line up with what we were trying to get done with them. So it became important for us to get captured in-house sterile eye care capabilities so that over the long term, we can invest in it and first set it up to be able to manage the vast majority of our need. And then we'll have, you know, secondary or tertiary suppliers over time as a backup, but be able to take care of ClearEyes on our own, and then also have the footprint to be able to take care of TheraTears over time as the need may arise. And again, just writing the check starts the work. The check didn't fix all the problems that we stepped into on December 31st. Actually telling the sellers we were going to buy it from them actually kind of made things maybe worse because they stopped doing stuff between when we agreed on the acquisition and when we purchased. We've seen this no matter what we're buying. sellers don't invest in something that they're getting rid of. So we got into it, and although we didn't find any new surprises since we closed on it at the very end of December, but the issues that we've been expecting to deal with over time popped up late in the first quarter, and we're taking a very disciplined approach to make sure that as we do things, we think about the long-term solve. So in other words, don't fix something right now only to have it pop up again and again and again. You know, take the extra time to address it the right way. So with that, I'll let Chris maybe talk about some of the other suppliers and some of the other things that we've been addressing here. Yeah.

And I, you know, I think we mentioned on the call, as Ron said, you know, about 120 days in definitely solidifies our decision to acquire it. There's a number of things for the long term that we've already done, obviously, and are in the process of doing. Some of those will take time. It's the nature of sterile eye care. And so, you know, I think what we've done for our guide, it's why we talked about, you know, in our outlook, the majority of the improvement is expected in the back half of this year. We talked about, you know, our one to three percent top line guide for this year in a little wider than it's been historically, right? At the low end, we said we would expect clear eyes to be essentially flat to last year. And so that's probably the biggest variable in terms of the range of the outlook. For fiscal 27 right now, I would say our focus and expectation is that Pillar will provide the majority of our supply for the year. And as Ron mentioned, longer term, we would expect, you know, another supplier we're working with to provide some backup and some additional supply.

So it sounds like, you know, on the Q4 call, you guys indicated plans that you expect to grow clear eyes this year. Is it fair to say you're still confident in that planning assumption?

Yeah, that's the variability in the range of the guide, right? And so we wanted to give ourselves that flexibility. As Ron mentioned, right, we don't want to make short-term decisions at the expense of longer-term improvements. So we wanted to give ourselves that room. And again, it's some of the action plans that we're taking, adding additional staff, as an example, right? Those folks have to get in. They have to get trained. They actually need quite a few months of training before they can touch a bottle. So that kind of lends itself to our back half improvement.

And as you look longer term for the brand, can you just remind us of your ability to recover lost ClearEyes market share over time?

You know, in this space, you know, brand and brand positioning is really important. We've actually seen the redness category decline with the decline in availability of ClearEyes products. So it tells you something about the consumer connection with the brand. The brand is positioned as the opening price point for redness, itchy, dryness. And that's an important position not only to connect with consumers, but also for the retailer as well. So if you go out to retail and you look at the shelf, you're going to see clear-eyed spots out there that are being held. So the retailers are just waiting for us to get back there. So it'll start with that. we have product in the market. So it's not like we're completely absent. So we're still connecting and making lots of connections with the consumer. So it won't just happen. It won't fall in our laps. We're going to have to get out there and market and advertise and remind the consumer that we're back out there and available. And we expect, you know, over a period of time, we'll get back to that peak leading position for eye care period with that 50 million units being by far, you know, the vast leader in the number of units sold for a brand out there, no matter what category.

Okay, great. Thank you. Your team has always talked about the benefits of a balanced portfolio. As we think about this year, are there any areas of the portfolio where we might see stronger growth and others which could perhaps lag? And any dynamics within the portfolio that we should be thinking about this year?

Phil, you want to start it off?

Sure. So, as you pointed out, Rupesh, we have a very balanced portfolio and diversified portfolio that we think about as a strength. And when you look across those, I think, seven or eight categories in total, there's always going to be ebbs and flows. In a given year, a category might do a little bit worse, might do a little bit better, but in aggregate, the goal is that 2% to 3% long-term top-line organic growth that we talk about and still feel good about that algorithm is sort of North Star. In terms of individual categories for fiscal 27, one that we've talked about for a while now and had success in fiscal 26 is the GI or gastrointestinal category. So when you look across our major brands there, and we have four of them, Hydrolite, largely concentrated in Australia, but has some international presence, Gaviscon, which we own in Canada, and then Dramamine and Fleet in the U.S., all four of those brands have had a lot of long-term success And we'd expect that momentum to continue again in fiscal 27. One of the things that both Ron and Chris have talked about in the U.S. in particular for Fleet and Dramamine is the benefits to those two brands related to GLP-1. So when you think about the number one and number two side effects of usage in the GLP-1 category, it's constipation and it's nausea. So those brands sort of leveraging their proven heritage and connection with consumers into this sort of new need state, for lack of a better term, is an opportunity for us to kind of go after from a marketing perspective and a brand innovation perspective. So we certainly are eyeing that in fiscal 27 and beyond. And there's certain other categories that have opportunities, too, but that's one in particular that we've called out.

Okay, great. Now I want to switch to your international segment. So your financial algorithm calls for FY27 targets, international organic sales growth of approximately 5%. Can you talk about some of the key growth drivers here? And then how do Breathe Right and LaQuorum fit into your international strategy?

So the big drivers for the international growth are going to continue to be Hydrolyte based out of the Australia market. And again, it's growing nicely in additional international markets as well. But that business also is doing well in Europe and has had nice growth, not only based in the UK where our business is focused, but also as they export from the UK the brands that they have there to international markets in that part of the world. So it's really not just Hydrolite, but a number of brands and a number of regions that are driving that 5%. Now, you may look at our international growth rates over a long term and say, geez, you've declined all the way to 5%. But, you know, we've had years with fantastic growth that has been driven by, you know, step function gains in international distributor markets we've moved into. And, you know, quite frankly, the number has gotten bigger and bigger and bigger. You know, our Australasia business was $2 million a year when I started here a whole bunch of years ago. So it's the old law of large numbers there. And then the Breathe Right and Le Corian business, as we touched on earlier, we expect to have very solid growth as an element of those businesses' growth metrics that we just talked about earlier.

Great. And just going back to HydroLate, so we've seen really strong momentum in recent years there. As your team looks forward, what are some of the bigger growth opportunities for the brand in the intermediate term?

Yeah, it's really going to be continuing to evolve away from hydration from a need state to a general lifestyle, right? Being hydrated as part of your everyday routine. So packaging and flavors and the way we market and advertise and, quite frankly, distribute the product in Australia will be big drivers of that. The grocery channel in particular has not been a big channel for drugs in Australia because if you go back a whole bunch of years ago, they weren't allowed to sell drugs. You had to buy them for the local pharmacist. So that channel is evolving and growing rapidly. So, we would expect to look to that channel as a way to grow the whole category. So, again, it goes back to growing that category and participating in it.

And one final question on international. So, Q4, your top buying results were impacted by shipping disruptions in the Middle East. Can you update us on what you're seeing on this front?

Yeah, that was, you know, we don't think of that as something structural, right? It's really, it's not that product's not getting in. It's just some delay in our ability to schedule them in a timely fashion. So, you know, the way we kind of think about it is, you know, if Q4 slipped into Q1, Q1 slips into Q2. So right now what we're seeing is it's making it in. It's just taking more than three times as long to get in there, just as an indication.

Okay. Helpful cover there. Now I'd like to wrap up with a few financial questions. So your new median term algorithm calls for an annual CAGR, revenue CAGR of about 10%, an EPSK group of approximately 8% and a cumulative free cash flow approaching $900 million over the next three years. What gives your team confidence in delivering on these targets?

Yeah, so we wanted to step back in light of, you know, some recent quarterly volatility, right, and remind folks of our long-term algorithm, right? When we think about our top-line growth, let's take the 2% to 3% organic growth that we talked about, right? North America growing in that 1% to 2%. You take the 5% from our international business, and that's kind of the combo that gets you there. When you add the Trident, excuse me, the Breathe Right and Le Corium assets, as we mentioned, right, Breathe Right growing in excess of our long-term target. The rest of the portfolio kind of just firms up our 2% to 3%, and Le Corium growing at double digits, you know, approaching 10% top line, the power of, you know, our consistent margin structure. getting into 8% bottom line growth and the power of that free cash flow. It kind of, you know, reloading that prepayable debt for us has been a big growth driver over time because of the power and consistency of our cash flow. And with the, with the two assets we're acquiring now, we'll be reloading that, reloading that ability, if you will. Okay, great.

It's really a function of our long-term strategy, which is right. Invest for long-term brand building, you know, reap the benefits, enjoy the benefits of the financial profile and the stability of the categories, and then it's a big function of that capital allocation choices and decision. You know, I started today talking about if you look back over the last 15 to 20 years, our business has grown 10 plus percent top line and close to that on the bottom line. And that's, you know, we gave the three-year outlook to remind people, this is what you should be expecting as a return from the execution of our strategy.

And then switching gears to margin question, just on EBITDA margins, PBH's business has always been very healthy from an EBITDA margin perspective. With these two new acquisitions, how should we think about EBITDA margins going forward? Are there opportunities to drive further margin expansion from here?

Yeah, it's similar to the base business that we've always talked about, right? We have industry leading consistent EBITDA margins in the low 30s as a percent of sale. And so while we have continuous cost improvement opportunities and programs, three years and all that good stuff that folks talk about, we would look to reinvest gross margin savings into higher levels of A&M, right? I mean, we're a marketing company. And as Ron always says, we should always want to be spending more money to grow categories and grow our brands and innovate. So we'll be looking to maintain those EBITDA margins, which we've done even in periods of extreme volatility, if you go back over time. And we think our ability to continue that is uh positive great in the last minute just on capital allocation so given the recent two acquisitions can remind us how you're thinking about leverage going forward and what is your appetite for more m&a from here yeah i'll start with the appetite for more m&a so so right now you know we always start with can the organization is is the organization ready to absorb an acquisition we've got a number of questions about that we think we've uh got very different teams working on those the three acquisitions whether it's pillar five breathe right, Liquorium, and so we think we're in a good position there. From a capital allocation perspective, it's going to be deleveraging for the next, you know, call it 12 to 18 months. We're going to work our way back down to our long-term target of three times or less, you know, and when the organization has absorbed and integrated and are working the acquisitions, we'll start to, you know, kind of be open for business again, if you will, but cognizant of the leverage, you're likely not to see us buying back stock in the near term as we pay down some debt.

Okay, great. So, thank you, Ron, Chris, and Phil for joining us today.

Thank you.