Prestige sumer Healthcare (PBH) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record revenues of $276 million for Q2 2022, an increase of 16% compared to the prior year, driven by strong consumer behaviors and brand building efforts [5][19] - Adjusted EPS for the quarter was $1.02, up over 31% year-over-year, primarily due to higher sales and lower interest expenses [6][21] - Adjusted free cash flow reached $62 million, also reflecting a double-digit increase from the previous year [6][21] - For the first half of fiscal 2022, revenues increased by 17%, with organic growth of 13% after excluding the acquisition impact [23] Business Line Data and Key Metrics Changes - North America revenues increased approximately 16%, with significant organic growth in GI, cough and cold, and dermatological categories [19] - The acquisition of Akorn's Consumer Brands contributed $12.4 million in revenue during the quarter [6][19] - E-commerce sales continued to grow double digits, now accounting for over 10% of total sales, driven by investments in online content and digital advertising [14][16] Market Data and Key Metrics Changes - International OTC revenues increased approximately 15% in Q2, benefiting from a favorable comparison to the prior year and increased sales of Hydralyte in Australia [20] - The company experienced a rebound in travel trends, positively impacting brands like Dramamine and Clear Eyes [9][20] Company Strategy and Development Direction - The company is focused on a disciplined capital allocation strategy, emphasizing debt reduction and maintaining a strong financial profile [27][28] - The management expressed confidence in navigating the dynamic market environment and raised the full-year revenue outlook to $1.05 billion to $1.06 billion [29][30] - The company plans to continue executing cost-saving measures and pricing actions to mitigate inflationary pressures [24][46] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing uncertainty in the business environment due to COVID-19 but highlighted the company's strong portfolio and brand positioning [4][29] - The company anticipates continued consumer demand trends and a modest recovery in cough/cold and head lice categories [30] - Management expects adjusted EPS for fiscal 2022 to be in the range of $3.93 to $3.98, reflecting strong cash generation and financial leverage [31] Other Important Information - The company maintained a gross margin of 58.4% for the first half of fiscal 2022, with expectations of approximately 57% for the full year due to rising supply chain costs [24][46] - The company generated $129.7 million in free cash flow for the first half, up about 12% year-over-year [27] Q&A Session Summary Question: Guidance on organic growth in the second half - Management explained that the organic growth in the first half was strong, but the second half may see a deceleration due to seasonality and tough comparisons from the previous year [34][36] Question: Comparison of shipments and consumption - Management indicated that consumption and organic sales trends were aligned, both around 10% [38] Question: Retail inventory levels - Management noted that retail inventory levels are generally in good shape, despite some supply chain stresses [40][41] Question: E-commerce performance - Management confirmed that e-commerce continues to grow and remains a strong channel for the company [43] Question: Gross margin pressures - Management acknowledged expected pressures on gross margins but expressed confidence in recovering to historic levels over time [45][46] Question: Consumer stock-up trends - Management estimated that about half of the sales increase in the quarter was due to timing related to consumer stock-up behavior [48] Question: TheraTears integration - Management reported no surprises in the integration of TheraTears, maintaining optimism about its long-term growth potential [49] Question: Drug channel performance - Management observed increased foot traffic in the drug channel, positively impacting sales [51] Question: Advertising and marketing spend - Management anticipated some inflation in advertising and marketing costs but planned to focus on effective investment areas [60]