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]

Prestige Consumer Healthcare Conference Summary Company Overview - Prestige Consumer Healthcare Inc. (NYSE: PBH) is a consumer healthcare company focused on over-the-counter medicines, helping consumers care for themselves daily [2][3] Key Business Segments - The company has a diversified portfolio of brands, including: - Monistat (50%+ market share in vaginal antifungal treatment) - Summer's Eve (40%+ market share in feminine hygiene) - Dramamine (60% market share in motion sickness) [4][5][10] Financial Performance - Over the last five years, total revenue grew by approximately 3.5%, with organic revenue growth in the range of 2% to 3% [9] - Adjusted earnings increased by about 9% annually, exceeding the long-term target of 6% to 8% [9] - The company maintains best-in-class EBITDA margins in the low 30s, contributing to strong free cash flow generation [7][22] Growth Strategy - The growth strategy is built on three pillars: 1. Investing in brand building to achieve 2% to 3% organic growth [6] 2. Maintaining a strong financial profile with an asset-light model and high free cash flow [7] 3. Reinvesting free cash flow into capital allocation for further growth and potential acquisitions [8][22] E-commerce Growth - E-commerce sales have increased from less than 1% to over 16% of total sales in the last five years, driven by investments in content and marketing [15][16] - The company aims to be channel-agnostic, ensuring products are available across various platforms [40] Innovation and Brand Building - The company introduces 3 to 5 new products annually, focusing on incremental innovations rather than large-scale launches [17] - Recent innovations include expanding the Dramamine brand to include non-drowsy options and nausea relief products [11][12] - The introduction of a maintain subline for Monistat allows for broader usage beyond acute treatment [19] International Expansion - The international segment accounts for about 16% of sales, with expected growth rates exceeding 5% [20] - Key brands include Hydralyte, a leading rehydration product in Australia, with plans for geographic expansion [20][21] Capital Allocation Strategy - The company prioritizes: 1. Investing in current brands for organic growth 2. M&A opportunities to consolidate consumer healthcare brands 3. Strategic share repurchases to offset dilution [23][24] - The company has a long-term leverage target of less than 3 times, currently at 2.4x [22] Challenges and Future Outlook - The Clear Eyes brand faced supply chain challenges, leading to a shortfall in revenue. The company is acquiring a critical supplier to enhance production capacity [26][32] - The long-term outlook remains positive, with expectations for continued free cash flow generation and strategic capital allocation to enhance shareholder value [26][27] Conclusion - Prestige Consumer Healthcare is well-positioned for sustainable growth through a diversified brand portfolio, strong financial management, and a focus on innovation and market expansion [27]

Core Insights - Prestige Consumer Healthcare Inc. is focusing on growth in its eye care business despite operational challenges in 2025 [1] - The acquisition of Pillar5 Pharma aims to resolve supply constraints and support long-term expansion in the eye care segment [2] - The company reported a 6.6% year-over-year revenue decline in Q1 2026 but showed momentum in other segments, including international OTC healthcare growth [3] Group 1: Company Strategy - Prestige Consumer Healthcare Inc. is taking strategic steps to secure growth in its eye care business amid operational challenges in 2025 [1] - The acquisition of Pillar5 Pharma is intended to address previous supply constraints and ensure reliable production for the Clear Eyes brand [2] Group 2: Financial Performance - The company experienced a 6.6% year-over-year revenue decline in Q1 2026 [3] - Despite the revenue decline, there was momentum in other business segments, including international OTC healthcare growth and improved gross margins [3] Group 3: Leadership Perspective - CEO Ron Lombardi emphasized that integrating Pillar5's capabilities strengthens the Clear Eyes franchise and enhances overall business resilience [3]

Company Overview - Prestige Consumer Healthcare focuses on niche categories where brands can compete successfully over the long term [2] - The company emphasizes the breadth and depth of its consumer connections through its product offerings [2] Product Impact - The company sells enough Clear Eyes and TheraTears to treat 12 billion irritated eye occasions annually [2] - It addresses 650 million sore and dry throat occasions each year [2] - The BC and Goody's powdered analgesic brands help treat approximately 17 million pain occasions weekly, including hangovers [2] - Monistat assists in treating about 8 million vaginal yeast infections annually [2]

Financial Data and Key Metrics Changes - The company reported a free cash flow of approximately $242 million for the previous year, with an outlook for this year exceeding $245 million [10][48] - The five-year compound annual growth rates (CAGRs) showed revenue growth of about 3.5%, organic growth of 2.5%, and earnings per share (EPS) growth of nearly 9% [12] Business Line Data and Key Metrics Changes - The largest category for the company is gastrointestinal (GI) health, followed by women's health, eye and ear care, skin care, and analgesics [4] - The company has a diverse portfolio that allows it to manage fluctuations in illness levels effectively, with brands performing variably based on market conditions [6][51] Market Data and Key Metrics Changes - The company's e-commerce sales have grown significantly, increasing from about 4% of total sales five years ago to approximately 16% at the end of the last fiscal year, with two-thirds of that coming from Amazon [25] - The international business, particularly in Australia, has been growing in the mid-teens on average over the last five years, exceeding long-term expectations [37] Company Strategy and Development Direction - The company focuses on niche categories where brands can compete successfully over the long term, emphasizing brand building and consumer insights [2][8] - The management plans to utilize free cash flow for mergers and acquisitions (M&A), share repurchases, and maintaining a strong balance sheet [41][42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged capacity constraints affecting the Clear Eyes brand but expressed confidence in addressing these issues with new suppliers coming online [47][48] - The company maintains its free cash flow outlook despite adjustments to top-line expectations, indicating resilience in its business model [48] Other Important Information - The company has a strong financial profile characterized by low capital expenditures and a variable cost model, which supports consistent free cash flow generation [40] - The management highlighted the importance of consumer insights in driving product innovation and brand growth [53] Q&A Session Summary Question: What are the kind of valuations the company is seeing? - The company has not observed a meaningful shift in valuations for the brands it targets, emphasizing its competitive advantages over private equity in terms of cost of capital and operational sophistication [59] Question: How does the company view the shift in retail channels? - Management noted that channel shifts are not new and emphasized the importance of adapting marketing strategies to support retail partners across various channels, including drugstores and e-commerce [61][62]

Financial Data and Key Metrics Changes - The company reported a free cash flow of approximately $242 million for the previous year, with an outlook of over $245 million for the current year, indicating a strong financial profile and consistent cash generation [9][48]. - The five-year compound annual growth rates (CAGRs) showed revenue growth of about 3.5%, organic growth of 2.5%, and earnings per share (EPS) growth of nearly 9% [11]. Business Line Data and Key Metrics Changes - The company operates in several categories, with gastrointestinal (GI) being the largest, followed by women's health, eye and ear care, skin care, and analgesics [4][5]. - The company has a diverse portfolio that allows it to manage fluctuations in illness levels effectively, with brands performing variably based on market conditions [6][10]. Market Data and Key Metrics Changes - The e-commerce segment has grown significantly, with online sales increasing from about 4% of total sales five years ago to approximately 16% by the end of the last fiscal year, with two-thirds of that attributed to Amazon [24][25]. - The international business, particularly in Australia, has been growing in the mid-teens, exceeding long-term expectations of mid to high single-digit growth [36]. Company Strategy and Development Direction - The company focuses on investing in niche categories where brands can compete effectively, emphasizing a brand-building playbook that includes understanding consumer insights and agile marketing strategies [2][12]. - The company aims to utilize its strong cash flow for mergers and acquisitions (M&A), share repurchases, and maintaining a low leverage ratio, with a preference for M&A as the primary use of cash [41][42]. Management's Comments on Operating Environment and Future Outlook - Management acknowledged capacity constraints affecting certain brands but expressed confidence in addressing these issues through new supplier agreements and operational adjustments [46][48]. - The company maintains its free cash flow outlook despite adjustments to top-line revenue expectations, indicating resilience in its financial performance [48]. Other Important Information - The company has a disciplined approach to M&A, focusing on acquiring brands with leading positions in niche categories, and has significant acquisition capacity without returning to previous high leverage levels [44][45]. - The company has successfully launched several new products, including Dramamine advanced herbals for kids and Summer's Eve whole body deodorant, which have performed well in their respective markets [31][33]. Q&A Session Summary Question: What are the kind of valuations the company is seeing in the market? - The company has not observed a meaningful shift in valuations for the types of brands it seeks, emphasizing its competitive advantages over private equity in terms of cost of capital and operational sophistication [58][59]. Question: How does the company view the shift in retail channels from traditional drugstores to clubs and retailers? - The company has adapted to channel shifts by developing unique programs for each retail partner and remains committed to supporting brands in the drug channel while also leveraging opportunities in e-commerce and other retail formats [60][62].