Financial Data and Key Metrics Changes - Q2 revenue was $274.1 million, a decline of 3.4% from $283.8 million in the prior year, primarily due to lower eye and ear care category sales and cough and cold category sales [10][11] - Adjusted EPS was $1.07, slightly down from $1.09 in the prior year, but ahead of expectations due to sales performance [10][11] - Free cash flow for the first half was $134 million, up 10% year-over-year, with a full-year outlook of $245 million or more [5][15] Business Line Data and Key Metrics Changes - The North America segment saw a revenue decrease of 6.1%, while the international segment experienced a revenue increase of 2.7% [11][12] - E-commerce consumption growth remained strong, with double-digit year-over-year growth, driven by long-term investments [4][11] - The DenTek brand achieved over 50% market share in its category, with a focus on dental guards contributing significantly to revenue [6][8] Market Data and Key Metrics Changes - The overall market for eye care products has declined, impacting Clear Eyes' supply and market share [44] - International OTC segment business increased, supported by higher Hydralyte sales, despite Q2 being affected by distributor order timing [12][14] Company Strategy and Development Direction - The company is focused on diversifying its portfolio and channels to drive long-term growth, with a particular emphasis on e-commerce and brand building [4][6] - Plans to enhance shareholder value through share repurchases and potential M&A opportunities, including the acquisition of Pillar Five for approximately $100 million [16][18] - The company anticipates a revenue range of $1.1 billion to $1.115 billion for fiscal 2026, with organic growth expected to decline by approximately 1.5% to 3% [17] Management's Comments on Operating Environment and Future Outlook - Management noted heightened uncertainty in the business environment due to supply chain constraints, high inflation, and geopolitical events [3] - Confidence in the business strategy and diversified portfolio is strong, with expectations for improved supply of Clear Eyes in the second half of the year [17][34] - The company has not seen significant impacts from macroeconomic trends on its needs-based product categories [33][34] Other Important Information - Gross margin for the first half was 55.7%, up 60 basis points year-over-year, with expectations for a gross margin of approximately 56.5% for the full year [12][14] - Advertising and marketing expenses were down due to timing, expected to be 14% of sales for the full year, with Q3 anticipated to have the highest spend rate [13][14] Q&A Session Summary Question: Follow-up on Clear Eyes supply and shelf space - Management confirmed that supply chain improvements are expected to benefit Q3 and Q4, but acknowledged a reduction in market share due to supply constraints [21][23] Question: Cold and cough season expectations - Management indicated that the cold and flu category is not a significant revenue driver, and it is too early to predict performance for the upcoming season [25] Question: Retailer inventories health - Retail inventories have been steady, with no significant impacts from performance issues, aside from e-commerce order patterns [27] Question: Women's health performance - Women's health category experienced noise in order patterns, but overall performance remains positive over the trailing twelve months [29][46] Question: Macro environment impact - Management noted that while consumer trends are slowing, their needs-based products are somewhat insulated from broader economic pressures [33][34] Question: Capital allocation and M&A strategy - The company remains focused on M&A opportunities while also prioritizing share repurchases, with a disciplined approach to capital allocation [37][39] Question: Clear Eyes marketing investment post-supply improvement - Future marketing investments will be evaluated based on opportunities, with no immediate increase in overall A&M spending anticipated [65][67] Question: Private label competition - No significant changes in market share or impact from private label competition were reported [68]

Q2 FY26 Performance - Quarterly revenue reached $274.1 million, exceeding forecasts due to Clear Eyes supply timing and retail order timing[11] - Gross Margin was 55.3%, consistent with the prior year[11] - Adjusted Diluted EPS was $1.07, surpassing expectations[11] - Free Cash Flow year-to-date amounted to $134 million, a 10% increase compared to the previous year[11] Financial Results - Revenue decreased by 3.3% year-over-year, excluding foreign currency impacts[20] - EBITDA totaled $86.8 million, compared to $91.9 million in the prior year[20] - Adjusted Diluted EPS decreased by 1.8% year-over-year[20] FY26 Outlook - The company anticipates revenues between $1,100 million and $1,115 million[29] - Organic revenue is expected to decline by approximately 1.5% to 3.0%[29] - Adjusted Diluted EPS is projected to be between $4.54 and $4.58[29] - Free Cash Flow is expected to be $245 million or higher[29]

Core Insights - Prestige Consumer Healthcare (PBH) reported quarterly earnings of $1.07 per share, exceeding the Zacks Consensus Estimate of $0.97 per share, but down from $1.09 per share a year ago, indicating an earnings surprise of +10.31% [1] - The company generated revenues of $274.11 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 6.87%, although this is a decrease from $283.79 million in the same quarter last year [2] - Prestige Consumer Healthcare has underperformed the market, with shares down approximately 23.4% year-to-date compared to the S&P 500's gain of 15.6% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.23 on revenues of $294.9 million, and for the current fiscal year, it is $4.51 on revenues of $1.1 billion [7] - The estimate revisions trend for Prestige Consumer Healthcare was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Medical - Products industry, to which Prestige Consumer Healthcare belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, suggesting that stocks in the top 50% outperform those in the bottom 50% by more than 2 to 1 [8]

Revenue Performance - Total revenues for the three months ended September 30, 2025, were $274.1 million, a decrease of $9.7 million, or 3.4%, compared to the same period in 2024[86]. - Total revenues for the six months ended September 30, 2025 were $523.6 million, a decrease of $27.3 million, or 5.0%, compared to the same period in 2024[102]. - North American OTC Healthcare segment revenues decreased by $9.1 million, or 3.8%, primarily due to declines in Eye & Ear Care and Women's Health categories[87]. - North American OTC Healthcare segment revenues decreased by $28.8 million, or 6.1%, primarily due to a decline in sales in the Eye & Ear Care category[104]. - International OTC Healthcare segment revenues decreased by $0.6 million, or 1.4%, mainly attributed to a decrease in Eye & Ear Care sales[88]. - International OTC Healthcare segment revenues increased by $1.5 million, or 1.9%, mainly driven by sales growth in the Dermatologicals and Analgesics categories[105]. Profitability Metrics - Gross profit for the three months ended September 30, 2025, decreased by $5.8 million, or 3.7%, with gross profit as a percentage of total revenues decreasing to 55.3% from 55.5%[90]. - Gross profit for the six months ended September 30, 2025 decreased by $11.5 million, or 3.8%, while gross profit as a percentage of total revenues increased to 55.7% from 55.1%[107]. - Contribution margin for the North American OTC Healthcare segment decreased by $0.8 million, or 0.8%, while the percentage increased to 41.8% from 40.5%[95]. - Contribution margin for the North American OTC Healthcare segment decreased by $2.3 million, or 1.2%, but increased as a percentage of revenues to 42.4% from 40.3%[112]. - Contribution margin for the International OTC Healthcare segment decreased by $2.3 million, or 12.4%, with the percentage decreasing to 38.1% from 42.8%[96]. Expenses and Financial Position - General and administrative expenses increased by $1.9 million to $28.0 million for the three months ended September 30, 2025, primarily due to higher professional fees and acquisition costs[97]. - General and administrative expenses increased to $56.5 million for the six months ended September 30, 2025, up from $55.0 million in 2024[114]. - Net cash provided by operating activities was $136.5 million for the six months ended September 30, 2025, an increase of $11.9 million compared to the same period in 2024[120]. - Cash and cash equivalents as of September 30, 2025 were $119.1 million, an increase of $21.2 million from March 31, 2025[119]. - Interest expense, net decreased to $20.2 million for the six months ended September 30, 2025, down from $25.4 million in 2024, with average indebtedness decreasing to $1.0 billion[116]. - The provision for income taxes for the six months ended September 30, 2025 was $41.2 million, with an effective tax rate of 31.5%, up from 20.5% in 2024[117]. - Net cash used in financing activities decreased by $5.5 million to $111.2 million for the six months ended September 30, 2025, primarily due to a $75.0 million decrease in debt repayments[122]. - As of September 30, 2025, the company had an aggregate of $1.0 billion of outstanding indebtedness, with no balance on the asset-based revolving credit facility and a borrowing capacity of $190.0 million[123]. - The company must maintain a fixed charge ratio greater than 1.0 to 1.0, and it was in compliance with applicable financial and restrictive covenants as of September 30, 2025[125]. - The company anticipates remaining in compliance with financial and restrictive covenants during the next twelve months[125]. Economic and Market Conditions - The company continues to face economic uncertainty, including supply chain constraints and inflation, which may impact product demand and costs[80]. - The company expects ongoing volatility in economic conditions, which could further affect its operations and financial performance[81]. - The company is exposed to risks including disruptions in supply, price increases for raw materials, and competition in the industry[131]. Foreign Currency Exposure - Approximately 16.0% of gross revenues for the three months ended September 30, 2025, were denominated in currencies other than the U.S. Dollar, indicating exposure to foreign currency exchange rates[135]. - A hypothetical 10.0% adverse change in foreign currency exchange rates would have resulted in a pre-tax income impact of approximately $1.3 million for the three months ended September 30, 2025[136]. Debt and Financing - The company has $400.0 million of 5.125% 2019 senior unsecured notes maturing on January 15, 2028, and $600.0 million of 3.750% 2021 senior unsecured notes maturing on April 1, 2031[127]. - The company experienced a decrease in shares surrendered as payment of tax withholding by $1.6 million[122]. - There were no material changes to critical accounting policies during the six months ended September 30, 2025[126].

Financial Performance - Reported revenues for Q2 fiscal 2026 were $274.1 million, a decrease of 3.4% from $283.8 million in Q2 fiscal 2025[4] - Net income for Q2 fiscal 2026 totaled $42.2 million, down from $54.4 million in the prior year, with diluted EPS of $0.86 compared to $1.09 in Q2 fiscal 2025[5] - For the first six months of fiscal 2026, revenues were $523.6 million, a decrease of 5.0% from $550.9 million in the same period last year[7] - Non-GAAP adjusted net income for the first six months of fiscal 2026 was $99.9 million, slightly up from $99.4 million in the prior year[9] - North American OTC Healthcare segment revenues for Q2 fiscal 2026 were $230.8 million, down from $239.8 million in the prior year[13] - International OTC Healthcare segment revenues for Q2 fiscal 2026 were $43.4 million, slightly down from $44.0 million in the prior year[15] - Total segment revenues for North American OTC Healthcare were $443,334, while International OTC Healthcare revenues were $80,310, leading to consolidated revenues of $523,644[35] Cash Flow and Share Repurchase - The company repurchased approximately 1.1 million shares in Q2 for about $75.0 million, totaling approximately 1.6 million shares repurchased for $109.8 million in the first half[12] - The net cash provided by operating activities for the first six months of fiscal 2026 was $136.5 million, compared to $124.6 million in the prior year[11] - Cash and cash equivalents at the end of the period increased to $119,106 from $97,884, marking a rise of 21.2%[32] - Non-GAAP Free Cash Flow for Q3 2025 was $55,384,000, down from $67,773,000 in Q3 2024, a decline of 18.5%[44] - Projected FY'26 Non-GAAP Free Cash Flow is estimated at $245,000,000[45] Guidance and Outlook - The company reaffirmed its fiscal 2026 revenue outlook of $1,100 to $1,115 million, with adjusted diluted EPS guidance updated to $4.54 to $4.58[20] - The company expects to improve eye care supply in the second half of fiscal 2026 due to long-term capacity efforts and the closing of the Pillar5 transaction[18] - Projected FY'26 GAAP Diluted EPS is expected to be between $4.33 and $4.37[46] - Projected FY'26 Non-GAAP Adjusted Diluted EPS is anticipated to be between $4.54 and $4.58[46] Profitability Metrics - Gross profit for the six months ended September 30, 2025, was $291,910, down from $303,404 in the same period of 2024, reflecting a decrease of 3.8%[37] - Operating income for the six months ended September 30, 2025, was $151,426, compared to $156,385 for the same period in 2024, indicating a decline of 3.5%[37] - The company reported a contribution margin of $218,272 for the six months ended September 30, 2025, compared to $222,630 in the same period of 2024, a decrease of 2.0%[37] Balance Sheet Highlights - Total assets increased to $3,442,280, up from $3,402,218, representing a growth of 1.2%[30] - Total current liabilities increased to $134,604 from $106,623, reflecting a rise of 26.2%[30] - Long-term debt remained stable at $993,146, slightly up from $992,357, indicating a marginal increase of 0.1%[30] Other Financial Metrics - GAAP Net Income for Q3 2025 was $42,211,000, a decrease from $54,377,000 in Q3 2024, representing a decline of 22.5%[43] - Non-GAAP EBITDA for Q3 2025 was $86,832,000, compared to $91,873,000 in Q3 2024, reflecting a decrease of 5.4%[43] - Non-GAAP EBITDA Margin for Q3 2025 was 31.7%, slightly down from 32.4% in Q3 2024[43] - GAAP Net Cash Provided by Operating Activities for Q3 2025 was $57,486,000, compared to $69,800,000 in Q3 2024[44] - Interest expense for Q3 2025 was $10,036,000, down from $12,281,000 in Q3 2024, a decrease of 18.3%[43] - Total adjustments to reconcile GAAP Net Income to Non-GAAP Adjusted Net Income for Q3 2025 amounted to $10,261,000[43]

Core Insights - Prestige Consumer Healthcare Inc. reported second quarter revenues of $274.1 million, a decrease of 3.4% from $283.8 million in the same quarter last year, primarily due to lower sales in the Ear & Eye Care category, particularly for Clear Eyes® [3][12] - The company achieved a net income of $42.2 million for the second quarter, down from $54.4 million in the prior year, with diluted earnings per share of $0.86 compared to $1.09 in the previous year [4][10] - For the first six months of fiscal 2026, total revenues were $523.6 million, a decline of 5.0% from $550.9 million in the same period last year, again attributed to supply limitations for Clear Eyes [6][7] Financial Performance - The second quarter net income was reported at $42.2 million, with non-GAAP adjusted net income at $52.5 million, compared to $54.4 million in the prior year [4][10] - The first six months of fiscal 2026 saw net income of $89.7 million, down from $103.4 million in the same period last year, while non-GAAP adjusted net income increased slightly to $99.9 million from $99.4 million [7][8] - Free cash flow for the first six months was $133.6 million, an increase from $121.4 million in the prior year [9] Shareholder Value - The company repurchased approximately 1.1 million shares for about $75 million during the second quarter, totaling approximately 1.6 million shares repurchased for $109.8 million in the first six months [10][11] - The net debt position as of September 30, 2025, was approximately $0.9 billion, with a leverage ratio of 2.4x [11] Segment Performance - North American OTC Healthcare segment revenues for the second quarter were $230.8 million, down from $239.8 million in the prior year, primarily due to lower sales in the Eye & Ear Care category [12] - International OTC Healthcare segment revenues for the second quarter were $43.4 million, slightly down from $44.0 million in the previous year [14] - For the first six months, North American OTC revenues were $443.3 million, down from $472.1 million, while International OTC revenues increased to $80.3 million from $78.8 million [13][15] Outlook - The company reaffirmed its fiscal 2026 revenue outlook of $1,100 to $1,115 million, with expectations for eye care supply improvements in the second half of the year [16][18] - Adjusted diluted EPS outlook was updated to a range of $4.54 to $4.58, reflecting a slight increase from the previous range [10][18]

Group 1: Market Overview - U.S. equities experienced a rally in Q3 2025, driven by the Federal Reserve's first rate cut of the year, strong corporate earnings, and broadening market participation [1] - The enthusiasm for AI led to significant gains in the technology sector, while small-cap stocks outperformed as capital shifted into undervalued market segments [1] - Ariel Fund achieved a return of +12.39% in Q3 2025, outperforming the Russell 2500 Value Index (+8.17%) but lagging behind the Russell 2000 Value Index (+12.60%) [1] Group 2: Prestige Consumer Healthcare Inc. (NYSE:PBH) Performance - Prestige Consumer Healthcare Inc. reported a one-month return of -0.60% and a 52-week decline of 14.31%, with shares closing at $62.59 and a market capitalization of $3.08 billion on October 23, 2025 [2] - The company faced challenges due to mixed earnings results and a downward revision to full-year guidance, with sales impacted by limited inventory in the eye care segment [3] - Despite these challenges, the announced acquisition of Pillar5, a leading sterile ophthalmic manufacturer, is expected to strengthen supply over time [3] Group 3: Financial Insights and Hedge Fund Interest - In Q1 2026, Prestige Consumer Healthcare Inc. reported revenue of $249.5 million, down from $267.1 million in the prior year's quarter [4] - The company is not among the 30 most popular stocks among hedge funds, with 19 hedge fund portfolios holding its shares at the end of Q2 2025, down from 23 in the previous quarter [4] - While acknowledging the potential of Prestige Consumer Healthcare Inc. as an investment, the company believes certain AI stocks offer greater upside potential and less downside risk [4]

Market Overview - U.S. equities saw significant gains in Q3, driven by the Federal Reserve's first rate cut of the year, strong corporate earnings growth, and increased market participation [2] - Investor enthusiasm for artificial intelligence contributed to substantial gains in technology stocks, particularly among the "Magnificent Seven" [2] - Small-cap stocks outperformed as capital shifted into undervalued market segments, despite ongoing concerns about tariffs, inflation, and labor market softness [2] Company Highlights - Resideo Technologies, Inc. (REZI) was the top contributor in Q3, with organic revenue, EBITDA, and adjusted EPS exceeding expectations, and a positive outlook supported by demand for smart home solutions [3] - Barrick Mining Corporation (B) experienced a rise in shares due to strong financial results and rising gold prices, alongside a strategic divestiture of its Hemlo Gold Mine for $1.09 billion [4] - ZimVie, Inc. (ZIMV) advanced following an announcement of its acquisition by ARCHIMED, expected to close by year-end [5] - Mosaic Co. (MOS) was the biggest detractor from performance due to an earnings miss, with pressures from lower volumes and rising production costs, although phosphate markets are expected to remain tight through 2025 [6] - Prestige Consumer Healthcare Inc. (PBH) declined after mixed earnings results and a downward revision to guidance, but plans to strengthen supply through an acquisition of Pillar5 [7] - Schlumberger Limited (SLB) traded lower due to a challenging macroeconomic environment, with pressures from OPEC+ supply increases and geopolitical uncertainty impacting oil prices [8] New Positions and Exits - New positions included Arthur J. Gallagher & Co. (AJG), which faced pressure due to a delay in closing its $13.4 billion acquisition of AssuredPartners, but is expected to benefit from stronger synergies [10] - Fiserv, Inc. (FI) was also purchased, seen as a leading provider of payment processing and financial services technology, with a recent stock pullback providing an attractive entry point [11] - Exited positions included ZimVie, Inc., Core Laboratories, Inc. (CLB), and Bio-Rad Laboratories Inc. (BIO) to pursue more compelling opportunities [12] Economic Outlook - As Q4 approaches, U.S. markets are balancing elevated valuations against emerging macroeconomic headwinds, with the Federal Reserve's rate cut providing some support [13] - Investor sentiment remains positive, driven by AI momentum, although risks related to market concentration and policy uncertainty may lead to increased volatility [14] - There is a belief that small-cap equities may outperform large caps over the next two years, with small caps trading at historically attractive levels [14]

Core Insights - Heartland Advisors reported a strong performance for small-cap stocks in Q3 2025, with the Russell 2000® Index increasing by 12.39%, outperforming the S&P 500 Index's 8.12% rise [1] - The Heartland Value Plus Fund returned 8.51% in Q3 2025, lagging behind the Russell 2000® Value Index, which gained 12.60% [1] Company-Specific Insights - Prestige Consumer Healthcare Inc. (NYSE:PBH) was highlighted as a significant detractor in the Heartland Value Plus Fund's performance due to missed earnings forecasts and lowered EPS estimates related to supply chain issues in its eye care segment [3] - The stock of Prestige Consumer Healthcare Inc. experienced a one-month return of -3.13% and a 52-week decline of 12.96%, closing at $61.00 per share with a market capitalization of $3.002 billion on October 10, 2025 [2] - In Q1 2026, Prestige Consumer Healthcare Inc. reported revenue of $249.5 million, down from $267.1 million in the previous year, indicating potential challenges in maintaining revenue growth [4] Hedge Fund Interest - Prestige Consumer Healthcare Inc. was held by 19 hedge fund portfolios at the end of Q2 2025, a decrease from 23 in the previous quarter, suggesting a decline in interest among hedge funds [4]

Core Points - Prestige Consumer Healthcare Inc. will release its fiscal 2026 second quarter and first half earnings on November 6, 2025, before market opening [1] - A conference call to discuss the earnings results will take place on the same day at 8:30 a.m. ET [1] Company Overview - Prestige Consumer Healthcare Inc. markets, sells, manufactures, and distributes consumer healthcare products across the U.S., Canada, Australia, and other international markets [4] - The company's product portfolio includes brands such as Monistat®, Summer's Eve®, BC®, Goody's®, Clear Eyes®, TheraTears®, DenTek®, Dramamine®, Fleet®, Chloraseptic®, Luden's®, Compound W®, Little Remedies®, Boudreaux's Butt Paste®, Nix®, Debrox®, Gaviscon®, Hydralyte®, and Fess® [4]