Prestige Brands Holdings, Inc. Stock

Well, good afternoon, everyone. I think we can start. So I'm Victor from the Consumer Staples team here at Barclays. Thanks a lot for attending this session. So I'm really pleased to have with us today Prestige Consumer Health, which is one of the few listed consumer health -- pure-play consumer health companies in the space.

So I am joined today by Ron Lombardi, which is the CEO of the company. We also have Christine Sacco, which is the CFO and COO; and Phil, which is also joining, doing Investor Relations.

So thanks a lot for being with us today. So right, I think we can start. We have a pretty packed agenda, so I'll jump straight into the questions.

And maybe to start, Ron, would you -- could you please give you an overview of, I guess, Prestige Consumer Health today? What are your sales, your margins? Maybe if you could outline a few key brands, the key geographies, just to orientate everyone.

Sure. Thanks, and thanks to everyone for joining us this afternoon. So Prestige Consumer Healthcare is a consumer health care-focused company. We have about 80% of our revenues coming from North America and the balance outside. And maybe it's best just to step back for a second and talk about calendar '27 -- excuse me, calendar '26 and fiscal '27 for a second.

We've had a number of big changes in the company although it's really more of the same for us, even though we've had a number of meaningful transactions in the last 9 months. We started the calendar year off by acquiring a key sterile eye care supplier, Pillar5, up in Canada to better position us for long-term support of our key Clear Eyes and TheraTears brands. We followed that up in June by closing on the company's largest acquisition in our history with a $1 billion acquisition of Breathe Right and a number of other brands from a PE seller and then followed that up with a June 1 closing of a business based out of Australia that is added to our Care Pharma business in Australia.

So lots of change in the last 9 months. And as I think back, boy, it's been a quick 9 months. But -- so lots of change, but I said earlier, it's more of the same, right? Prestige has been focused on building out a portfolio that we believe positions us for long-term growth and meaningful cash flow generation to create value. And we saw that with these transactions I just described.

So on a pro forma basis, taking account for the recent acquisitions, sales are now approaching $1.4 billion. We would expect top line sales growth of about 10% over the next 3 years as we integrate those acquisitions, get them going and recover our Clear Eyes business. EPS growth would be pretty close to that.

And then I think just as importantly, if not more importantly, we would expect to generate around $900 million of free cash flow over the next 3 years as well to help deleverage and pay off the debt that we put in place to do the acquisitions.

So more of the same. We've continued to add and build out the portfolio. We continue to expand outside of North America. The Breathe Right business came with a nice business in Europe. It's very additive to what we've got going on. And the LaCorium acquisition in Australia is certainly additive to what we've got going on there.

Great. Thanks a lot for that. There is a lot in there that we'll unpick a little bit later as well. But as a follow-up, I also wanted to ask about -- you described yourself about a company of brand builders. It seems like you have a business model that is slightly different from the other consumer health companies on the market.

So can you tell us what does that mean in practice? And what distinguishes, I suppose, your business model from those other companies?

Yes. In a lot of ways, we're doing many of the same things that the big spun out consumer health care companies are doing, where we're looking to grow our brands in categories, like looking to grow the categories as well. The difference is, is we focused on niche categories where our brands can define the space and take on the responsibility of growing the category.

I always like to use Dramamine as the best example of that. We bought it from a big pharma company back in January of 2011. And in the last 16, 15 years, we've been able to grow it by 5 or 6x because we focused on it, right? We talked to the consumer to learn that they were looking to treat motion sickness and nausea in a way that wouldn't make them drowsy.

There wasn't a child or a children's SKU out there. So we launched a chewable one. So we got feedback from consumers about what they were looking for, why they didn't treat, why they mistreated and look to bring propositions to help them take care of their health.

Great. I would like to take a step back for a minute and just look at the consumer health market as a whole. So the companies playing on that market, it seems like they all have a very different definition of actually what is consumer health. So I was wondering what is Prestige's definition of the market? How do you address it? What are the different categories that you are playing in? If you could give us a little bit of color on that?

And then as a follow-up, what would you say is your biggest competitive advantage? And conversely, what are the areas where you think you can improve as a consumer health company going forward?

Sure. So we start by thinking about defining the space the way consumers think about it, right, which is how do they think about taking care of themselves. On one end of the spectrum, folks may think about eating right, exercising, getting good sleep to promote wellness. In the middle, it may be OTC type products. Over the counter, you're taking care of your own health.

And on the far right would be medical intervention, whether it's prescription drugs that come from a doctor, GLP-1s is a great example of that, all the way up to surgeries to address medical situations. We see ourselves in the middle in that kind of OTC space. Now we've got a number of products in our product offering that aren't OTC, but consumers think about them as OTC medicines or treating a disease state.

So we want to line up with how consumers are thinking about taking care of themselves and offering efficacious product that works to address what they're looking to deal with.

I think the second part of your question is how might we do it differently, how might we be -- have a competitive advantage. And it goes back to, and I mentioned this a couple of times already, thinking about the consumer, getting consumer insight. And we do it brand by brand. So we don't think about women's health and get insights around women's health.

We get insights around Monistat and how women are thinking about taking care of vaginal yeast infections. Summer's Eve is a hygiene-oriented product. So we talk to women to get insight on that. Same thing with GI, right? We'll get consumer insight on motion sickness and nausea for Dramamine, and then we'll get specific information around Fleet for constipation.

So our focus is trying to grow the categories and brands brand by brand rather than thinking about competing in large categories. So I think that's both the advantage and the difference in how we approach growing the brands that we have versus the big players.

This is very insightful. I guess on the market here, there is one specificity about consumer health is that it remains very fragmented at market if you compare it to the broader staples. So why is that? And in your view, is the market -- do you expect the market to consolidate further going forward?

Yes. Let me let Phil start with this.

So you're exactly right, Victor. We see the same thing you do, which is on a global basis, consumer health care is quite fragmented when you look at it in comparison to other sections of the grocery store and the pharmacy. And what you ask, why is that?

Well, when consumers think about taking care of their health, those brands are very individual to the ailments they might be treating. So we often use skin care as an example. If I have a wart that I'm looking to treat, that's far different than if I'm treating eczema or any number of other skin ailments.

On top of that, there were pharmaceutical companies, families, et cetera, that owned these brands historically over the last, in many cases, 50, 100 years potentially. And gradually over time, that consolidation has begun. So we see future opportunities for that to, like, further consolidate and for us to play a part of that. The most recent acquisitions that Ron just highlighted earlier, Breathe Right here in the U.S. and LaCorium in Australia are just the latest examples of that.

Yes, exactly. So you mentioned those 2 acquisitions, and I think because we are talking about the consolidation, the market and M&A, this is a good moment to deep dive maybe into that.

So Breathe Right, you mentioned it earlier, biggest acquisition in the company's history. You closed it in June. Can you talk us through just the rationale of this company? What are your expectations for this business going forward?

Chris, you want to take it?

So we've come to this conference a number of years in the last few years, we get a lot of questions around M&A. We're an acquisitive company. And why are you out of the market? And we would say, we're not out of the market. We just stayed very disciplined. And hopefully, as I take you through the rationale for Breathe Right, you'll understand why.

We remain very disciplined to our criteria, right? We're #1, we're looking for brands that have long-term growth potential. So we start with that, right? Breathe Right has a nice heritage in connection with consumers. It has a 90% brand awareness and only a 3% household penetration. So we see a lot of opportunity there. We look for brands that have -- we have the ability to innovate, as Ron mentioned, to use consumer insights to bring new users into the category, grow the category as a market leader, holding that type of position.

Breathe Right checks all of those boxes. We then move on to, kind of, operationally. Does it fit within our -- do we have similar distribution models? Do we have similar consumers? Usually looking for something that's asset-light, although we won't shy away from something with a facility if we have a competitive advantage to doing so.

Breathe Right checks those boxes. We, kind of, joke with folks we're not kidding that their distribution center was across the street from ours. Similar customers, there's a few nuances, but generally speaking, it fit the operational piece.

And then third, we go to the financials. Breathe Right has a financial profile that actually was accretive to Prestige's, which is industry-leading to begin with, with gross margins over 70%, able to support higher levels of advertising and marketing and actually pulled the company's EBITDA margin up. So it checked all of the boxes that we were looking for.

We use it similarly to Dramamine. I mean it's a category-defining brand, right? I just said 90% brand awareness, right? It's synonymous with the brand. The opportunity, if you take the brand back several years, and it's been through a few owners started with snoring. It was a snoring brand, right? And over the years and what we intend to keep going and just, kind of, got going recently, we're going from an incident-based, like, snoring to a wellness -- overall wellness brand, right, Breathe Right, better breathing.

We all came out of COVID and the data tells you that we're all stressed and people aren't sleeping and such. And so the concept behind Breathe Right is it will get you a better night sleep.

So overall, you wake up in the morning and you feel refreshed. And so there's a number of things in the pipeline for innovation. That's also in our M&A criteria. Can we innovate to continue to be the brand leader, to continue to differentiate ourselves from private label and other branded players out there.

We recently launched Breathe Right Sport. And it's a different technology slightly, but it's been tested against extreme sweat, for example, to stay intact. And so for all those attributes, we think we have the potential to grow it pretty nicely. Breathe Right has been growing above our company's 2% to 3% organic revenue target.

Came with a couple of tail brands. We don't see that as a negative because we know how to run those. We run them. They're OTC brands. They have strong margins, and we don't need to invest behind them. So they throw off a lot of cash. And so when you put those together, it really just reinforces the higher end of our 2% to 3% outlook range for our revenue growth organically. And for all those reasons, we feel really good about the transaction.

There's also another brand that you acquired very recently. You talked about it a little bit earlier. So I would also like to deep dive on this. This is LaCorium. So this one is smaller, but this is also growing very, very fast.

So it's an Australian brand, I think. It's in therapeutic skin care. Can you talk us through a little bit about your long-term growth ambition for that brand? And also, I guess, how do you see your ability to roll these brands in other regions where it has been mainly concentrated in Australia in the past?

Yes. So LaCorium, again, based out of Sydney, Australia, actually located in the same office building that our Care Pharma is. And Care Pharma was -- is on the third floor and LaCorium was up on the sixth floor, and the folks have moved down to the third floor, and we've turned the sixth floor into a conference center with meeting rooms and whatnot. So great fit with our business in a lot of ways and very consistent with the M&A criteria that Chris just laid out. We've actually had this business on our radar screen for a long time.

Our Care Pharma general manager has drank probably 10 gallons of coffee with the owner and founder of that company over the years trying to convince them to engage in discussions for us, and that time finally happened this past year. But strong brands, their position is efficacious skin care.

We met with somebody today who told us they ordered some during COVID because they weren't able to get out and see a doctor or something. And her comment was, boy, it worked really well, which is the tagline for the brand. It works. So that's, kind of the positioning. We believe that it's got a great runway to continue to grow at high levels. Because it's really just getting going.

So not only is there room in Australia to launch continued new products and to expand into adjacent skin care products, but also to step into the distribution that the Care Pharma business has in the region. We have a very nice distributor-based network through Asia Pacific. And we believe there's an opportunity to take those brands and work with the existing Care Pharma distributors in those countries to grow.

So it's going to be the same, kind of, playbook where we look to invest in new products, innovation, marketing to grow the categories that they define.

Okay. Well, those 2 acquisitions sound very promising and exciting. So we'll be looking forward to the progress. Turning over to you maybe, Christine, for the next question. And I would like to pivot a little bit more to your core business now that we've been talking about acquisitions.

So I guess your long-term growth algo is 2% to 3% organic growth, but you've been tracking in the past period a little bit below that. And that has been due mainly to Clear Eyes, which is a brand playing in eye care that has been quite struggling lately. So brand has significantly reduced in size. You've been facing supply disruptions. So I guess the question is, can the rest of the portfolio sustainably deliver towards the 2% to 3% range? Or are you actually expecting a recovery in eye care to meet that target?

Yes. So certainly, when we talk about the Clear Eyes franchise, it's undergone a lot of challenges. It's been the biggest challenge to our organic growth, right? It is now 3% of sales, historically had been high single digits as a percent of sales. As we -- and I'm sure we'll get into a few more questions around that.

But as we look to our long-term growth algorithm, the rest of the portfolio is performing well. We feel good about our ability to deliver that. And I think Clear Eyes recovery over the next few years likely puts us towards the higher end of that range. But yes, we believe the other brands performing according to the playbook that Ron mentioned can get us within that range of that 2% to 3%.

And can you tell us about what is the road map? What is the plan to recover then your eye care category in Clear Eyes? I think you mentioned also another acquisition earlier, Pillar5. So can you talk about what's the road map? What is the time line where you expect actually this brand to be back on track and to its leadership position?

And I suppose a follow-up on that because you've been off the shelf for a while because of all those disruptions, is there actually a risk that the market share that you lost might be a little bit more sustainable? Or do you think you'll be able to recover that?

Sure. So hopefully, I'll hit on all of those points. So if we just step back, the sterile eye care industry globally, industry-wide has gone through increased inspections, increased activity from not just the FDA, but regulatory agencies around the world. The reason on the May earnings call, we mentioned that at this point, at that point, every single one of our sterile eye care facilities, whether it's Pillar5 that we now own or our third-party CMOs had been inspected by at least one regulatory authority.

So there's been a lot of increased activity for a number of reasons around those facilities. Those inspections have resulted in things between industry-wide recalls and observations to specific facilities. And those observations have required sometimes more downtime for folks to address them, sometimes not as much. It varies pretty widely.

What has happened for us is we've been talking for years and been looking for years really because for third-party sterile eye care capacity. It's limited worldwide. And Clear Eyes demands almost 10x, sometimes 5x, sometimes 10x what in terms of units that are required to sustain the brand, having this leading position in units for a long time.

And as we scoured the globe looking for a provider and in connection with then this increased activity around regulatory, we realized that Pillar5 -- acquiring Pillar5, who was a third-party provider to us in Canada was our fastest path to improvement and long-term continuity of quality supply.

And so in December of last year, we acquired Pillar5 up in Canada. And I think since we've owned it, we've been reassured that we think we made the right decision in acquiring it and taking ownership of a sterile eye care facility, not just for our near-term continuity plans, but for our long-term capacity plans to bring further capacity into that facility.

And so we talked -- most recent update was on our August call, where we said we've -- to date now, we've owned it almost 9 months, right? We've made investments in equipment. We've made investments in infrastructure. And what we didn't want to speak to previously that we did on the call is we've changed out a lot of the leadership positions.

The previous owner, for their own reasons, of course, made shorter-term decisions that we will look to make different decisions on. There were a number of third-party consultants that they had hired that were in pretty top positions there. We have now brought in sterile eye care experts into the facility that I think will make a meaningful impact.

And under previous ownership, right, PE firm owned them and had different priorities. And now we have one priority, and it's to manufacture Clear Eyes. And so we feel good about the path that we're on. We talk about expecting increased supply in the back half of our fiscal '27. Our fiscal year ends on March 31. And it's going to take some time. But over time, we do think we can improve capacity, increase capacity and improve continuity of supply at that facility.

So maybe I'll take the brand recovery part, right, Chris just, kind of, covered how do we feel about Pillar5's progress. But in terms of brand recovery, right, we see the first step being getting better inventory levels of Max Red and Base Red, the 2 top SKUs in place. And then we would look to expand the product offering to include the other SKUs that we've had historically and then work with the retailers to make sure we've got full distribution and then ultimately get back to a place where we can market and advertise the brand.

The Clear Eyes brand really has a unique position as the defining OPP in sterile eye care over the counter. If you go out to the shelf, you see that eye care products start at about $5 can go up to as high as $25 to $30 a bottle and Clear Eyes was the beginning of that price offering at retail. So it's important to the category. It's what consumers are looking for to treat red, itchy and dry eyes.

Okay. It does sound like you have a lot on your plate for the year to come. So obviously, you have the 2 integration of the acquisitions that we talked earlier LaCorium, Breathe Right, then you have also this recovery around Clear Eyes that you are working on. How do you feel about that? How are you getting organized as a management team to, I guess, tackle all these different goals and milestones that you need to reach for this year?

Yes. So we started with in December, acquiring Pillar5, right? So the leadership team, obviously, at Pillar is only focused on what they need to be doing in the facility. Our operational team in New York, really just the Head of Operations focuses on that. And then the executive team is obviously focused on it.

When we acquired Breathe Right, we separated it into 85% of Breathe Right sales in North America versus international. They function very differently. We were aware of that through our diligence. On our August earnings call, we announced the big chunk, the 85% had been fully integrated. That's the hard work. That's getting them in our SAP system.

And as of, I want to say, August 4, it might be August 3, we flipped the switch. All the product is in our warehouse. It's coming in one order and through SAP. It's on [ RPO ] we're collecting the cash. It's fully integrated. The international piece, about 15% of the business, we knew it was going to take a little bit more time just because it's different than ours. And quite frankly, we want to choose the best model.

So we structured a transition service agreement that extended for a longer period of time for that international business, and we're in that stage now, and it's going according to plan. Then LaCorium came along. And as Ron said, a lot of coffee had been drunk between the 2 leaders of the groups.

And so you can't always plan when something comes, but we just said we'll derisk it by structuring it differently. That's the Australia team who's integrating that, limited impact to the U.S. team. And we also gave them a very long transition service agreement to account for that.

23 of, I think, 33 people from LaCorium came with the transition. That also helps. And so we really structured these in a way we were aware that there was a bunch to take on. We always start, by the way, any acquisition discussion when people say, when are you going to do the next transaction? And we say, we always start with is the organization ready to take on a transaction.

And so we structured this in a way, certainly, we had conversations with ourselves and our Board and folks around, okay, how can we structure this to derisk it. And having gotten through that big chunk of the largest acquisition, Breathe Right, being fully integrated for the majority of the business, I think we're on the right track.

Okay. Maybe one question for you, Ron. I would like to switch gear to international expansion, which is also a very important topic for you. So I think international represents about 16% of your revenue as of today. So you have plans to expand that to about 20% on the medium term.

So how do you plan to approach international expansion in terms of strategy? Are you planning to acquire local brands just like you did in the U.S., basically applying the playbook that you have in the U.S. to other geographies?

And how confident are you that this playbook will actually work in some other countries? Maybe if you have a few examples of brands that you acquired that work very well and maybe some others that didn't work as well and the learnings from that?

Sure. One of the things that our company does well is we don't apply a master approach to every situation and every business opportunity. We step back and evaluate the right way to move forward and take advantage of opportunities. And that's true for how we think about managing growth opportunities internationally.

So each market and each brand opportunity is going to be a bit different. So in Europe, with the addition of these Breathe Right distributors in about a dozen different countries, we're going to manage that differently, right? And the approach is going to be how do we make sure we have the right distributor partner and make sure that they execute the marketing programs and the retail programs to maximize the opportunities for Breathe Right in those markets.

And then secondarily, once that's on its way, is there opportunities to bring other brands into those markets in Europe. And then same thing for Australia and Asia Pacific. So we'll look to see where we can take the LaCorium brands into the distributor network that we have for the Care Pharma brands, Hydralyte in particular, to take advantage of a good distributor partnership, somebody that executes marketing plans well in a given market to look to grow and then build off of it from there.

So that's where we are today. In terms of examples of acquiring brands and taking them a step forward, we acquired the brand Zaditen in Australia from a big pharma company and have had nice success growing that eye care brand. It's an allergy eye care brand that was additive to our Murine eye care business in Australia. So again, consumer insight, we look to invest further in marketing and advertising. So each opportunity is going to have nuances to it, and we're going to approach it each one of those opportunities uniquely.

Okay. Great. And now going back to your core business. So I think you are playing now in 8 categories, and there are a few that stand out to me. Maybe can we talk a little bit about gastrointestinal. So this is a category that has been very successful for you over the past 5 years, I think 5 consecutive years of growth.

So you talked a little bit about some brands that are successful for you, Fleet, for instance, Hydralyte, Dramamine as well. So how much of that growth has actually come from category growth versus you gaining market shares against your competitors?

And I suppose as a follow-up, are you happy with your portfolio currently? Or do you think you will require another leg of growth to continue growing gastrointestinal going forward?

Yes. So although we categorize sales by these segments, we don't think about them that way. So we don't think about GI per se and having a strategy around GI. We think about the brands. And there's one common thread amongst the 4 brands you just mentioned. So Dramamine, Fleet, Hydralyte and Gaviscon up in Canada is they're #1 brands in their niche categories, and they define the space.

And although we have grown share in those cases, we've really grown the categories. And as a result of that, been able to grow our shares as we've brought in new users into the category. I talked about Dramamine earlier is the best example we have. It's grown by 5x as we moved it from 4 SKUs and very much motion sickness oriented to nausea over time. Fleet enemas and suppositories, again, we've taken the opportunity of GLP-1 side effects. The #2 side effect is constipation to do clinical studies to be able to communicate with sufferers of constipation from GLP-1 use about how fleet can be helpful to them. So each one of those GI brands has its own version of how we're thinking about growing the category and growing the brand over time.

Another one I would like to focus on is women's health. So you have a few brands there. You have Monistat that you talked about also earlier and Summer's Eve. It does feel like those 2 brands actually have a different trajectory.

So when it comes to Monistat, you're gaining share in a category that is mostly declining, whereas Summer's Eve is improving. So can you talk a little bit about the strategy for those 2 brands? How can you accelerate growth in women's health? What is the outlook and your ambitions for those 2 brands and this category in general?

Yes. So again, our goal for both of those brands is to continue to find ways to grow the categories that they compete in. They're both category-defining brands. They both have significant shares. Monistat is over 50% and Summer's Eve is clearly the #1 share in the hygiene category.

So each of them will have different playbooks. So Monistat defines vaginal yeast infection treatment over the counter. There's only so many of those incidences each year. So for us to be able to grow outside of whatever, kind of, natural growth rate there is in infections is to move into adjacencies.

So care, right, prevention. A couple of years ago, we launched a wash under the Monistat care line, and it has quickly grown to be a very meaningful SKU for us in the offering and connects very well with what women are looking for as part of prevention and care either before, during or after a vaginal yeast infection. So that's Monistat.

For Summer's Eve, we acquired the brand back in 2017. We did a lot of consumer insight work. And what women told us was is that they'd like to think about Summer's Eve differently, destigmatize it, move it away from just odor. And we went down the path to launch a number of new products and changed our marketing campaign around daily usage.

And what we learned was you always have to think through the feedback you get through consumers was that they really think about Summer's Eve around odor and odor prevention and odor treatment. So we've moved back to the long-term positioning of the brand and have it well positioned to get back to a growth trajectory and continue to be the leader of the space.

I think we have time for one last question. So maybe to conclude and summarize, if you were sitting there 5 years from now, looking back, what would you -- what would success look like for Prestige Consumer Health? I suppose what are the milestones that you would like to have achieved over the past 5 years? Yes, I suppose what does success look like on a 5-year time for.

Yes. So our strategy of creating value for shareholders is pretty simple, right? Lever #1 is continue to focus on growing the brands that we have. The second is to continue to deliver industry-leading cash flow over the next 5 years. We'll use that to meaningfully delever and create capital allocation optionality.

If you look back over the last 5 years, we've had significant share repurchases. We've done meaningful acquisitions and continue to position our brands for long-term growth. So as we sit here today and I look back at the progress our business has made over the last 5 years, we feel good about what we've done. And 5 years from now, I think it would look a lot like the same things that we've executed over the last 5 years.

Okay. Great. Well, I think we can finish it there. Thanks a lot, Ron. Thanks a lot, Christine. Thanks a lot, Phil. And yes, thanks a lot for attending the session, everyone.

Good day, and thank you for standing by. Welcome to the Quarter 1 2027 Prestige Consumer Healthcare, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded.

I would now like to hand the conference call over to your first speaker today, Phil Terpolilli, Vice President, Investor Relations and Treasury Business Development. Please go ahead.

Thanks, operator, and thank you to everyone who's joined today. On the call with me are Ron Lombardi, our Chairman, President and CEO; and Chris Sacco, our CFO and COO. On today's call, we'll review our first quarter fiscal 2027 results, discuss our increased full year outlook and then take questions from analysts. A slide presentation accompanies today's call. It can be accessed by visiting prestigeconsumerhealthcare.com, clicking on the Investors link and then on today's webcast and presentation.

Remember, some of the information contained in the presentation today includes non-GAAP financial measures. Reconciliations to the nearest GAAP financial measures are included in our earnings release and slide presentation.

In today's call, management will make forward-looking statements around risks and uncertainties, which are detailed in a complete safe harbor disclosure on Page 2 of the slide presentation that accompanies the call. These are important to review and contemplate. Business environment uncertainty remains heightened due to supply chain constraints, high inflation and geopolitical events, which have numerous potential impacts. This means results could change at any time, and the forecasted impact of risk considerations is the best estimate based on the information available as of today's date. Further information concerning risk factors and cautionary statements are available in our most recent SEC filings and our most recent company 10-Q that was released this morning.

I'll now hand it over to our CEO, Ron Lombardi. Ron?

Thanks, Phil, and thanks to everyone for joining us on a busy earnings day. While we are just at the start of our fiscal year, we have a lot to discuss today. Since our call in May, we've completed 2 acquisitions that are now positioned for long-term success, and we'll walk through both of them shortly.

Our business exceeded sales and earnings expectations in the first quarter, a testament to our long-term brand building strategy and the strength of our diversified portfolio. We also delivered record adjusted free cash flow, providing additional flexibility for disciplined capital allocation moving forward.

With that, let's begin with our first quarter highlights on Slide 4. Sales of approximately $266 million increased 6.5%, reflecting broad-based strength across the portfolio. Growth was led by GI, where Dramamine and Fleet continued to deliver long-term consumption gains as well as strong performance in skin care led by Compound W. TheraTears and Debrox also posted solid growth, helping offset Clear Eyes sales that were below our expectations. Results also benefited from retailer order timing, which Chris will discuss in more detail.

The quarter also included approximately $6 million of revenue from the Breathe Right portfolio acquisition. Our strong top line performance translated into solid earnings and free cash flow. Gross margin was largely in line with expectations and adjusted EPS increased to $0.98. Adjusted free cash flow reached a quarterly record of $83.7 million, further supporting our ability to deploy capital in ways that enhance shareholder value. One of these deployment priorities is M&A. And since our May call, we've completed 2 acquisitions. The Breathe Right portfolio closed on June 12 and the acquisition of LaCorium in Australia closed on July 1. I'll discuss our integration progress and the strategic value each brings to Prestige.

Our strong cash flow generation is also enabling us to invest in Pillar5, our sterile ophthalmic manufacturing facility, which will help support additional long-term eye care capacity.

Now let's turn to Slide 5 and review the key principles supporting our expected long-term recovery of Clear Eyes. At a high level, we remain focused on the actions we believe will best support Clear Eyes and return the brand to its leadership position within the eye care category. There are 3 key elements to this strategy. First, we continue to invest in our recently acquired Pillar5 facility. These investments are designed to strengthen long-term supply capabilities while maintaining the high-quality standards we expect across our portfolio. Second, a key objective for the facility is to support demand while improving supply consistency versus current levels. As we discussed in May, achieving that objective requires actions during fiscal '27 that will continue to create some output variability in the first half of the year as we experienced in Q1 and expect again in Q2. Looking ahead, we believe the facility is positioned for greater stability in the second half, supporting sequential improvements in eye care shipments. Third, as the historical unit share leader in eye care, Clear Eyes has unique volume requirements where we believe in-house manufacturing provides an important strategic advantage. As a result, we expect to further expand capacity at Pillar5 to fully support these long-term demand requirements and return Clear Eyes to its leading market position.

Now let's turn to Slide 7 and review our recent acquisitions. We are pleased to have closed both the Breathe Right portfolio and LaCorium Health acquisitions. Each transaction brings distinct strength that we believe will enhance our business over the long term. Starting with Breathe Right, the portfolio is expected to generate approximately $200 million in annual revenue. The majority comes from the flagship Breathe Right brand, where we see multiple opportunities for long-term growth that I'll discuss in a moment. The business also brings a strong financial profile with growth and EBITDA margins that are accretive to Prestige. In addition, it supports our long-term sales and earnings growth algorithm while generating tax benefits that enhance future free cash flow.

Less than 60 days after closing, we have successfully completed all major integration milestones. As of this week, the business is largely integrated into our operations, running through our systems and our warehouse network with retailers ordering Breathe Right along with our existing brands.

Turning to LaCorium Health. The business is expected to contribute approximately $40 million in annualized revenue with the majority generated in Australia. Its dermal therapy brand holds a leading position in therapeutic skin care categories, including eczema and cold soar treatments. We believe the brand is well positioned for continued growth and will support the organic growth objectives of our International segment. In July, we welcomed LaCorium's employees into our Care Pharma office, making for a seamless transition given they were already located in the same building outside Sydney, Australia. The broader integration effort will proceed methodically over the balance of the year. Over time, we also expect to realize additional synergies through distributor optimization, sales integration and other operating efficiencies that should further enhance profitability.

In summary, we've added 2 highly strategic businesses to our portfolio. The Breathe Right integration is largely complete, while LaCorium will continue to be integrated over the coming quarters. In both cases, our focus is on establishing a strong foundation for long-term growth and value creation.

Now let's turn to Slide 8 and discuss how these acquisitions further strengthen our portfolio. One of Prestige's core strengths is the diversity of our portfolio. The diversity helps reduce reliance on any single brand or category while allowing us to allocate resources towards the most attractive growth opportunities and to consistently execute against our long-term growth algorithm. As shown on the right side of the slide, these acquisitions further enhance that diversification. On a pro forma basis, our portfolio is now even more balanced across 8 categories.

With the addition of Breathe Right, we've created a new wellness, sleep and other category, which is primarily comprised of Breathe Right and represents a low teens percentage of pro forma revenue. LaCorium's dermal Therapy brand further strengthens our skin care category, and we've also updated several category names to better reflect the consumer need states they address.

Now let's turn to Slide 9 and discuss the growth opportunities we see for Breathe Right. With roots dating back to the 1990s, Breathe Right is an iconic category-defining brand with consumer awareness exceeding 90%. Given that strong foundation, we see several drivers of long-term growth. First, the brand has meaningful opportunities to further leverage its heritage and consumer recognition. As shown on the left side of the slide, Breathe Right has successfully done this through campaigns such as Strip On. Looking ahead, we believe social media marketing initiatives can further strengthen brand engagement and drive household penetration.

Second is innovation, shown in the center of the slide. At Prestige, we rely on consumer insights to identify opportunities that can meet evolving consumer needs while expanding categories. We expect Breathe Right to be no exception. Recent launches demonstrate this potential. Breathe Right Menthol introduced in 2025 combines improved breathing with the added benefit of an aromatic scent. Breathe Right Sport, which is launching now, expands the brand into the sports category with a sweat-resistant strip designed to help improve airflow during exercise.

Finally, international expansion remains an attractive opportunity. Breathe Right is sold in more than 20 countries with a strong presence in Western Europe, Australia and Japan. We see opportunities to drive growth through the same marketing and innovation initiatives I just described, while also benefiting from geographic expansion and long-term synergies across our global portfolio.

In summary, Breathe Right is a category leader with an iconic brand, a strong foundation and multiple avenues for sustained long-term growth. We look forward to updating you on our progress in the quarters ahead.

With that, I'll turn the call over to Chris to review our financials.

Thanks, Ron. Good morning, everyone. Let's turn to Slide 11 and review our first quarter fiscal '27 financial results. As a reminder, the information in today's presentation includes certain non-GAAP information that is reconciled to the closest GAAP measure in our earnings release.

Q1 revenue of $265.7 million grew 6.5% from $249.5 million in the prior year and 3.2% excluding the effects of foreign currency and the acquisition of the Breathe Right portfolio. Adjusted EBITDA grew 5.5% versus the prior year, mostly tracking the sales growth. Adjusted diluted EPS increased approximately 3% versus the prior year as the revenue increase was partially offset by higher interest expense from the acquisition.

Let's turn to Slide 12 for details around these consolidated results. As I just highlighted, our Q1 fiscal '27 revenues increased 3.2% organically versus the prior year. By segment, North America segment revenues increased 4.2%, excluding FX and the Breathe Right acquisition. As Ron highlighted, the biggest category increases were in GI, highlighted by continued strength in fleet and Dramamine and dermatologicals, thanks to strong growth in Compound W. In Ear and Eye Care, as we anticipated, Clear Eyes supply continued to be volatile and was constrained in Q1, leading to a decline in brand revenue. But this was more than offset by strength in the TheraTears and Debrox brands, which highlights the benefits of our portfolio diversity even within individual product categories.

We also continue to experience strong double-digit consumption growth in e-commerce. Q1 benefited from some continued order volatility in e-commerce at the expense of Q2, and this is reflected in the Q2 sales outlook Ron will discuss later. International segment revenues decreased 2.1% versus the prior year on an organic basis. As we expected in our outlook, we continue to see positive consumption trends, but sales were affected by the timing of distributor orders. For the full year, we still expect a return to the segment organic revenue long-term growth target of 5% or more. Revenues from the Breathe Right portfolio acquisition totaled $5.9 million.

Total company adjusted gross margin of approximately 55% in the first quarter was largely as anticipated, flat sequentially, but down 120 basis points versus the prior year, primarily due to higher transportation costs and mix. Following the inclusion of acquisitions, we now anticipate adjusted gross margin of just over 57% for both Q2 and the full year. Advertising and marketing came in at $34.7 million or 13% of sales in Q1, down versus the prior year due to the timing of marketing programs. For fiscal '27 as well as Q2, we now anticipate an A&M rate of approximately 14.5% of sales.

Adjusted G&A expenses were 11.5% of sales in Q1. For the full year, we now anticipate adjusted G&A of approximately 10% as a percent of sales, thanks to the scale associated with additional acquisition revenue. Adjusted diluted EPS of $0.98 increased versus last year's diluted EPS of $0.95. Ron will discuss our earnings outlook shortly, and we've detailed the assumed components in other line items at the end of the slide presentation. These include higher interest and amortization expenses in the balance of the year of approximately $100 million and $33 million, respectively, as well as a similar tax rate and share count to prior assumptions.

Let's turn to Slide 13 and discuss cash flow and capital allocation. In Q1, we generated $83.7 million in adjusted free cash flow, largely driven by the timing of working capital. We continue to maintain industry-leading free cash flow and now expect to generate at least $270 million of adjusted free cash flow in fiscal '27 due to the inclusion of the new acquisitions. At June 30, our net debt was approximately $2 billion. We purchased the Breathe Right portfolio on June 12, funded with a new 7-year Term Loan B. When combined with cash on hand, the new term loan also funded the LaCorium Health transaction, which closed on July 1 after quarter end.

While executing these market actions, we also took the opportunity to price $400 million of new unsecured notes, replacing existing notes that were coming due. This funded on July 15. Following these actions, our earliest debt maturity is now 2031, and we have reestablished prepayable debt, which we intend to begin paying down over the balance of the fiscal year.

With that, I'll turn it back to Ron.

Thanks, Chris. Let's turn to Slide 14 and wrap things up. We are encouraged by our first quarter results and remain confident in the outlook we previously provided for our legacy business. The updated guidance shown on this page reflects the addition of the Breathe Right portfolio and LaCorium acquisitions, along with the related financing impacts Chris just discussed.

For fiscal '27, we now expect revenues of $1.29 billion to $1.315 billion, while maintaining our expectation for organic revenue growth of 1% to 3%, unchanged from our prior outlook. The increase in reported revenue versus our previous guidance is entirely driven by the Breathe Right and LaCorium acquisitions, which we expect will contribute approximately $190 million of revenue this year.

For the second quarter, we expect revenue of $328 million to $331 million, including the contribution from both acquisitions. Given retailer order timing that benefited the first quarter, we would expect a modest organic revenue decline in the second quarter. However, we continue to expect organic revenue growth for the first half of the fiscal year. For adjusted diluted EPS, we now anticipate $4.55 to $4.65 for the full year. The increase versus our prior outlook is entirely attributable to the acquisitions, which bring attractive financial profiles, including strong gross margins and lower G&A as a percentage of sales. For our second quarter, we expect adjusted diluted EPS of approximately $1.06 to $1.08. Lastly, we expect adjusted free cash flow of $270 million or more and a year-end leverage ratio of just below 4x.

We will remain disciplined in reducing debt throughout fiscal '27, which will further strengthen our balance sheet and provide additional flexibility for future capital deployment opportunities that can maximize shareholder value.

So in summary, we're off to a solid start to the year. We delivered strong first quarter results, remain confident in the outlook for our legacy business and are excited about the opportunities ahead with Breathe Right and LaCorium. Together, these acquisitions are expected to add more than 20% to our annualized revenue base while providing additional scale, diversification and long-term value creation opportunities for Prestige.

With that, I'll open it up for questions. Operator?

[Operator Instructions] Our first question comes from Susan Anderson with Canaccord Genuity.

Nice job on the quarter. I guess maybe just if you could just give us an update on the long-term growth of the 2 acquisitions. Are you still expecting 10% total growth with contribution, obviously, from those 2 over the next several years? And then also, I don't think I saw it, how much are the 2 acquisitions adding to earnings also for the year with the updated outlook?

Susan, Ron here. So let me start with the long-term outlook for the 2 acquisitions. So we're about 60 days or so, just under for the Breathe Right portfolio and 30 days or so for LaCorium. And so far, we continue to be very optimistic about the opportunity for the brands and the businesses. As we get into them, we continue to see all the opportunities that we believe were there during the diligence and continue to point you to the outlook that we gave back in May for the long-term outlook for the business. So we're in early days here, but to continue to feel really good about the opportunities. Chris will talk about...

Yes, Susan, it's Chris. So the acquisitions, obviously, higher sales growth projected for the year. It's about 3 points of EPS growth. The range that we provided on the sales line is in line, combined with the stub period in Q1 with what we'd expect and the long-term numbers that Ron just shared. EPS is a bit of timing. It's the timing of the stub period, right, some committed A&M from the sellers prior to our ownership, the impact of the debt paydown in the future, right, and how that will compound over time and then just the timing of sales in the near term. So a little bit of near-term noise. It's temporary, but we still feel good as we did when we made these acquisitions that will drive sales and profitability for each of the brands as we reduce debt. And so as Ron says, you put that together, you get back to the long-term algo we presented back in May for the 3-year CAGR.

Okay. Great. And then maybe if you could -- I don't know if I heard you mention the Women's Health business. Just curious how that performed in the quarter with Monistat and Summer's Eve. And then are you expecting any new launches there for the rest of the year?

So our Women's Health care businesses continue to make progress. Monistat continues to be fairly steady, continues to have steady or growing share. As we talked about on past calls, the category there has seen some decline over the last few years. For Summer's Eve, we continue to look at long-term new product opportunities and launches. The ultimate odor protection franchise continues to do really well, and we'll have additional products launched over the next couple of years as well.

Our next question comes from Rupesh Parikh with Oppenheimer Company.

So just going back to the acquisitions, just from an accretion perspective, I know obviously, timing may be slightly different. But as you look at the acquisitions, like is the accretion still in the same ballpark of what you guys thought before for Breathe Right? And I think LaCorium, there was not much assumed initially.

That's right, Rupesh. You're correct on the Corium. For Breathe Right, we talked about an annualized rate of about $0.25 of accretion, right? And in a normal environment, I would say we absolutely still support that. You'll be a couple of pennies as you look at the stub period below that. But again, we expect some variability during the first couple of quarters. Haven't really done an acquisition where we didn't see some initial volatility, particularly as we undo some things maybe the sellers had put in place before the closing process. I mentioned sales timing, and I mentioned A&M a bit ago and then just the timing of how quickly we'll pay down debt, which we'll be prioritizing this year.

Okay. Great. And then on the gross margin outlook, so 57% obviously very strong. I think there's benefits from the M&A as well. Just curious, in the environment right now, what type of cost pressures are you guys seeing in the business? And then with these acquisitions, like do you expect an improvement in gross margins as we go into next year? Just overall thinking of longer-term opportunities on the margin front with the new M&A.

Yes. So Rupesh, on the gross margin revised guide up, it's entirely based on the acquisitions. We're holding our base guide for gross margin. It's been in line with our expectations, primarily -- the increase is primarily year-over-year related to diesel, and we factored that in. So no change to the base. Over time, we, of course, always look to increase our gross margin. But remember, it will be no different for the acquisitions that we're managing to a low to mid-30s EBITDA margin. So to the extent we get cost saving, we have cost-saving programs in place, we'll look to put that back into the business and higher levels of A&M over time.

Great. And maybe one last question for Ron. Commentary was positive just on consumption during the quarter. Consumer environment is still uncertain. So have you guys seen any changes out there? Just curious just overall, what you're seeing in the consumer environment, Ron.

Yes. So in our categories, we continue to see fairly stable consumption. As I mentioned in the prepared remarks, we continue to see strong growth in the GI brands, Dramamine and Fleet. Skin, we're doing well in. And again, as we've talked about for about a year now, the big thing we're seeing is that consumers are looking for value and it's impacting where they shop. So we continue to see channel shifts. We had another particularly strong growth in dot-com in mass again this quarter. So we continue to see strong growth in those value channels or where price shopping is easy.

Our next question comes from Jon Anderson with William Blair.

Could you quantify the order timing benefit in the first quarter, and I guess that will reverse out in the second quarter?

Yes, Jon, it was just about 2 points of growth for the quarter. And again, that's why we're trying to focus folks back to the first half where we still expect organic growth in total.

So first half underlying growth kind of on plan. It's just a bit of a shift from quarter-to-quarter.

That's correct.

Okay. Great. And then could you give us a little bit more of an update on, I guess, Clear Eyes and maybe where it sits today relative to its kind of prior peak run rate and how kind of some of the operational initiatives of Pillar5 are progressing? And what kind of ramp to kind of think about there as you think about getting Clear Eyes back to its leadership position over the next, I don't know, a couple of years?

Yes. So let me start there, Jon. So I mean, clearly, the Clear Eyes franchise is down significantly from its peak levels a few years ago, right, again, driven by product availability. We're 2 quarters in, right? At the end of June, we had owned Pillar5 for just 2 quarters. And we've got a multifaceted program in place to stabilize the facility and better position it for long-term product availability to support the brand. We've made a number of changes over the last 6 months starting with investment to better position the infrastructure, some investment in the equipment. We've also made significant changes in the management and leadership change in the team there. And clearly, that's something we're not going to talk about ahead of time.

So last quarter, we weren't going to talk about management team changes publicly ahead of getting them in place. But we've transitioned out a significant amount of consultants that the previous owners had in place. We've made changes in management and recently appointed a new General Manager for the facility who's a long-term employee that we feel really good about. So it's not just one thing. It's a whole bunch of initiatives that we continue to get behind us. And I think as we said today, we expect to see improving levels of output for the second half of the year. as we continue to focus on getting the initiatives behind us.

And Jon, it's Phil. I think you asked about kind of where Clear Eyes sits today versus the high watermark. As we talked about last quarter, because of the supply challenges we've seen, it represents less than 3% of sales today. But certainly, we expect to improve that based on the demand that we know is out there and the production changes that Ron is talking about. So a lot of runway ahead, and we think it's an opportunity.

And that 3% is with the acquisition revenue?

Yes.

Okay. Do you have anything on kind of as you rebuild capacity or improve output, there are other steps, obviously, that probably need to be taken to get back to that leadership position, working with retailers, reestablishing shelf space, activating the consumer again. In your experience, how long does that aspect of this tend to take?

So we've talked about it being multiyear Jon, and that plan really is unchanged. There's kind of 4 pieces to it. First is to develop consistent and high-quality supply. The second would be to start to rebuild safety stocks for ourselves and at retailers so that as we have variability in the future from supply, we won't see a hiccup in sales or out of stock. Third would be to get back to our full SKU offering. Right now, if you get out to the shelf, you'll see that we focused on Base Red and Max Red. And then fourth would be to get back to investing in marketing and advertising campaigns to get back to connect the brand with consumers who have been out there looking for it. So a number of steps that we'll be thoughtful about executing over the next couple of years.

Great. Just one more, if I could. You've done 2 kind of acquisitions here in close proximity. Are you confident that you can kind of integrate both of these and kind of hit the ground running? I just sometimes think about integration risk, the bandwidth of the team to kind of manage and brand build and kind of go after some of the opportunities around both at the same time.

Yes. As we said in the prepared remarks today, the Breathe Right portfolio, that business is essentially integrated into Prestige. So just this Monday, we flipped the switch and the whole business is in our system. So purchase orders to the supply base to receiving product to orders from our customers and making shipments to the retailers is happening, right? The marketing folks that we took on from the seller are here with our marketing team. We've got salespeople that we've taken on that are out in the field working with the customer. So Breathe Right is integrated, and we're into continuing to focus on growth plans. for that business.

For LaCorium, we've made sure we've given ourselves enough of a runway so that we're not competing for resources internally as we were dealing with a bigger Breathe Right. So we've got a bit of a longer runway that will work on the integration of that business over the rest of the fiscal year. But again, we've emphasized this a number of times. We have the huge advantage of LaCorium being in the same office building that care is, literally just a couple of floors up and those people have moved down to the care floor. So the organization is integrated, and we're making progress on that. So this is something that Prestige actually does very well. And our integration planning begins during diligence. So it's not just what are you getting, but how are you going to integrate it so you hit the ground running to use your words. So Breathe Right is in a great place, and we're continuing to move forward on Lord.

[Operator Instructions] Our next question comes from second, Keith Devas with Jefferies.

Maybe just going back higher level to the retailer inventories. I'm curious where you guys think there are now. We've heard from some peers that there's been some volatility or choppiness in the quarter, but maybe higher level also just how you're thinking about adjusting your operations and spend to account for this ongoing volatility or choppiness.

Yes. So in terms of retailer inventory levels for our categories, we haven't seen kind of the builds and the destock that you're hearing others talk about in other categories. So that hasn't been the driver in some of the order pattern volatility that we've seen. We talked a little bit about it in Q4, and we talked about it in Q1. That just seems to be planning and resource driven by really one main customer. But again, we're able to deal with whatever the flow is and the peaks and valleys of that. But consumption is good. Inventory levels are stable, and we're just managing around the timing impact of that from quarter-to-quarter.

Okay. Great. And then I think you commented one of the acquisitions is pretty much integrated and another will soon be. But you also mentioned some synergies that are coming down the road. Maybe if you could just give us some context on what those synergies are, where they're coming from, how we should think about them? And maybe it's a longer-term question, but just kind of how you see that materializing over time.

Yes. It's more of a year to 2 runway for the synergies that we've talked about associated with LaCorium. There's opportunities and benefits to synergize the sales forces between the 2 organizations. We think we can adopt some resources from both of the businesses to be in a better place. We think there'll be some marketing opportunities for some synergies that will give us some pools to reinvest and then the supply chain as well. So no one big area like we've seen in other acquisitions that we've primarily done in the U.S. where we essentially just bolt on a brand into our existing infrastructure. This one is nuanced with a number of different areas that we'll get at over the next year or 2. First order of business is to get it integrated into our systems and processes.

Our next call comes from Anthony Lebiedzinski with Sidoti.

Nice start to the fiscal year. Just wondering if there was any notable pricing benefit in the quarter. And given the pressures as it relates to higher diesel costs and other costs, are you looking to perhaps raise prices? How should we think about those things?

Anthony, it's Chris. So minimal price in the quarter. But as we look to our fiscal '27 outlook, I would say about 1/4 of the growth is projected to be price. Inflationary pressures, including diesel.

Okay. Okay. And then as it relates to Breathe Right, you talked about focusing longer term on brand building. From my understanding, that brand does more advertising marketing compared to the core business. So are you looking to spend even more than that? Or like when you talk about brand building, can you give us some examples as to what you think you'll be doing here going forward after you get past the near-term programs that already are in place?

Yes. So for the Breathe Right business, it's got higher gross margins and higher A&M and slightly higher contribution margin or EBITDA margins in our base business. So plenty of room for advertising and marketing spend. The brand has been on a path to move and expand from kind of illness occasions, think of congestions and cold and allergies to that better breathing, better sleep, better wellness positioning. So the spending and the programs have kind of been in the base business. So we wouldn't anticipate a need to increase the spending levels from historic levels, Anthony.

I am showing no further questions at this time. I would now like to turn the call back over to Ron Lombardi for closing remarks. Please go ahead, Ron.

Thank you, operator, and thanks, everyone, for joining us today and your continued interest in Prestige. We are pleased with our strong start to fiscal '27 and remain focused on executing our strategy, integrating our recent acquisitions and creating long-term value for our shareholders. We appreciate your time today and look forward to updating you next quarter. Have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect the call.

Good day, and thank you for standing by. Welcome to Prestige Consumer Healthcare, Inc. Fourth Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to Phil Terpolilli, Vice President of Investor Relations, Treasury and Business Development. Please go ahead.

Thanks, operator, and thank you to everyone who has joined today. On the call with me are Ron Lombardi, our Chairman, President and CEO; and Christine Sacco, our CFO and COO. On today's call, we're going to review our fiscal 2026 results, discuss our fiscal 2027 and longer-term outlook and then take questions from analysts. The slide presentation accompanies today's call. It can be accessed by visiting prestigeconsumerhealthcare.com, clicking on the Investors link and then on today's webcast and presentation.

Remember, some of the information contained in the presentation today includes non-GAAP financial measures. Reconciliations to the nearest GAAP financial measures are included in our earnings release and slide presentation.

On today's call, management will make forward-looking statements around risks and uncertainties, which we detail in a complete safe harbor disclosure on Page 2 of the slide presentation, which accompanies the call. These are important to review and contemplate. Business environment uncertainty remains heightened due to supply chain constraints, high inflation and geopolitical events, which have numerous potential impacts. This means results could change at any time, and the forecasted impact of risk considerations is the best estimate based on the information available as of today's date. Further information concerning risk factors and cautionary statements are available in our most recent SEC filings and the most recent company 10-K.

Now I'll hand it over to our CEO, Ron Lombardi. Ron?

Thanks, Phil. Let's begin on Slide 5. We experienced a challenging fourth quarter that fell short of expectations, resulting in full year revenue declining approximately 4%. A difficult consumer environment persisted into Q4 and was further impacted by global conflict. While these dynamics led to certain shipment disruptions late in the quarter, we expect to return to organic growth in fiscal '27, and are well positioned to manage ongoing macro pressures, including inflation, as we have successfully done in the past.

In eye care, we continue to experience near-term volatility driven by our deliberate focus on high-quality production. In Q4, Clear Eyes sales were below expectations due to delayed shipments and production shutdowns ahead of line updates. We are actively implementing initiatives to improve production volume and supply consistency, which we believe are essential to supporting our long-term demand outlook.

Many aspects of our diverse portfolio of leading brands continue to perform well despite the environment. For example, our GI franchises of Dramamine, Fleet and Hydralyte had solid success with all brands growing in fiscal '26.

For our women's health category, Summer's Eve had a year of stabilization and continues to be positioned for growth, while Monistat held share in VAF despite the category declining significantly over the past 3 years.

Moving down the P&L. Adjusted gross margin was in line with the prior year, while adjusted EPS of $4.38 was down versus the prior year, largely tracking the sales change. Free cash flow was approximately $246 million for fiscal '26, up slightly versus the prior year and in line with the outlook we gave at the beginning of the year. This durable and resilient free cash flow profile allowed us to repurchase shares in fiscal '26, acquire our manufacturer Pillar5, to enhance our long-term eye care output capabilities and build cash in advance of the pending Breathe Right and LaCorium acquisitions. As we'll touch on later, this disciplined capital allocation strategy continues to enhance shareholder value and positions us for a robust multiyear outlook.

Let's turn to Page 6 and review our strategy and our tactics that have delivered value over a longer horizon. Despite the challenging fiscal '26, our business model's 3-pillar strategy has a history of delivering value. First, we use our proven marketing strategy to leverage our leading portfolio of brands. Using consumer insights, we drive effective marketing, channel development and innovation that underpin our success.

Second, the business model we operate leverages our leading financial profile to enable robust free cash flow. And third, the model uses the first 2 points to enable strategic capital allocation optionality that further amplify shareholder returns. Our ability to use cash flows efficiently through disciplined capital deployment creates incremental value. This includes M&A like the Breathe Right and LaCorium Health transactions.

Executing these pillars has created value over the last 5 years with a compounded annual growth rate of about 3% for revenues and free cash flow and adjusted EPS of approximately 6%. These results include the volatile fiscal '26 just discussed.

Now let's turn to Slide 7 for a detailed update on Clear Eyes and our eye care supply chain. In fiscal '26, we executed actions that supported our long-term strategic objective of best positioning our supply chain to support our eye care franchises long-term sales growth. This included the acquisition of Pillar5 in December, which gave us the opportunity to take direct control over this important element of our supply chain. Just over a quarter in, we've made meaningful progress to the benefits of having a dedicated aseptic eye care facility. For example, Pillar5 recently began producing product on a new high-speed line, which we have plans for further volume output from during fiscal '27.

Importantly, production is supported by our rigorous focus on coupon or quality product on time that underpins our operating model. To that point, nearly all of our eye care supply chain has had recent regulatory visits, which helps reinforce this approach. For fiscal '27, we expect Clear Eyes to grow in the year as we continue to ramp production. This includes a meaningful increase in production, but entirely in the back half of the year. So in summary, our leading eye care brands are positioned for long-term growth in the attractive and growing eye care market. The investments we are making behind capabilities in eye care is a long-term, multiyear process, but puts us on a path to returning to a historic sales level over the next few years, and we expect that growth to begin in fiscal '27.

So with that, let's turn to the next section and review a few key areas of how we drive base growth in more detail. As we've discussed in the past, our proven brand-building playbook starts with consumer insights. We seek ways to solve unique consumer needs and leverage our wide-ranging brand-building capabilities to drive long-term growth. Three of the major ways this manifests itself are: first, using marketing to establish consumer connection; second, launching relevant innovation that solves unmet consumer needs and being widely distributed and available where consumers are shopping. Example of this is our GI franchise, where we've continued to experience long-term success in our Fleet and Dramamine brands.

As shown on the left side of the page, we leverage wide-ranging tactics to expand our category reach and relevance. We continue to lead in the motion sickness category with engaging motion sickness content like our iconic Ditch the Drama campaign and various travel sweepstakes. We've continued to accelerate our penetration into the nausea category, entering pediatric nausea last year and adding new form factors to help consumers solve their nausea needs on the go. And we further broadened our relevance by using digital tactics and health care practitioner outreach to remind GLP-1 users, the benefits of Fleet and Dramamine and treating side effects.

These tactics continue to prove out in the numbers. In Fleet shown on the right side of the page, we are driving category growth and have expanded our 50-plus percent market share. This is due to proven marketing tactics as well as innovation like the recent launch of Fleet Mini Enema.

Let's turn to Slide 10 to discuss this innovation and others in more details. Beyond executing successful marketing, innovation continues to be a key part of Prestige's brand building tool kit. We operate with a multiyear pipeline of new product development concepts to ensure we generate new SKUs that match the needs of consumers. The Fleet Mini Enema is just one of the examples of product launches this year matching consumer needs. With this easy-to-use size and travel-friendly design, the product offers fast-acting constipation relief for both new and existing laxative users.

Another innovation introduced in fiscal '26 is Compound W skin tag remover. Leveraging its leadership in wart relief, Compound W is utilizing its Nitrofreeze technology to also solve for skin tags and adjacent niche category to warts. Other product launches like new forms of Dramamine, mental alertness for Goody's and great new flavors for Hydralyte are further example of our consistent pipeline. We are excited for additional new product launches in fiscal '27, and we'll update everyone as the year progresses.

Now let's turn to Slide 11 and discuss e-commerce. Alongside effective marketing and innovation, we are prioritizing investment in consumer-relevant channels. As channel shifts remain, our e-commerce business continues to deliver strong growth, reflecting the impact of our long-term investments. In fiscal '26, we continue to experience double-digit consumption growth and our e-commerce penetration for the company has reached approximately 18%.

Looking ahead, consumers are not only shifting across channels, but also their behaviors, driven by AI, social media and other emerging influences. In response, we remain focused on continually refining our content to stay aligned with these trends. By enhancing seasonal relevance, updating brand pages and emphasizing key terms tied to new innovations, we believe we have the capabilities in place to sustain our success across our e-commerce partners.

With that, I'll turn it over to Chris to review the financials.

Thanks, Ron. Good morning, everyone. Let's turn to Slide 13 and review fourth quarter and fiscal '26 financial results in more detail. A quick reminder, information we're about to review contains non-GAAP information that is reconciled to the closest GAAP measure in our earnings release.

Q4 revenue of $281.6 million declined 5% from $296.5 million in the prior year or 6.4% excluding FX. The revenue decline was attributable to lower eye and ear care category sales owing largely to Clear Eyes supply constraints and a portion of International segment sales affected by Middle East shipping disruptions. As a reminder, in Q4, we also lapped an approximate $7 million benefit from the timing of certain e-commerce orders in the prior year. Mimicking sales, both adjusted EBITDA and adjusted EPS declined high single digits as certain cost savings and below-the-line items were more than offset by lower sales and gross margin. Last, please note, Q4 includes certain adjustments to reported results. These relate primarily to Pillar5 and the expected normalized cost structure following operational efficiency improvements as we continue to improve Pillar5 manufacturing volumes.

Now let's turn to Slide 14 for a discussion around detailed consolidated results for the fiscal year. For fiscal '26, revenues decreased 4.5% organically versus the prior year. North America segment revenues decreased 4.9%, excluding FX. Sales declines were largely due to constrained eye care supply we've discussed, which more than offset strength in the oral care and GI categories. International OTC sales decreased 2.8% versus the prior year, excluding FX. Segment sales declined due to limited eye care supply and disruption in the timing of shipments to distributors due to the Middle East conflict. We expect improved shipment trends and a return to an approximate 5% annual segment organic revenue growth in fiscal '27.

Total company adjusted gross margin of 55.6% for the year was approximately flat to 55.8% in the prior year. Looking forward, we expect adjusted gross margin in Q1 approximately flat sequentially versus Q4 and for the full year to approximate that of fiscal '26. Embedded in this assumption are incremental diesel costs stemming from the conflict in the Middle East. As a reminder, we have a history of taking actions across our portfolio to offset the dollar amount of inflationary headwinds. Advertising and marketing came in at 13.7% of sales for fiscal '26, flat to prior year. For fiscal '27, we anticipate both Q1 and full year A&M at over 13% of sales.

Adjusted G&A expenses were up versus prior year, primarily due to the timing of certain expenses and an increase in bad debt allowance in Q3 for one specific customer. For fiscal '27, we'd expect Q1 G&A of about $30 million and full year G&A of 10.5% as a percent of sales, with the increase primarily attributable to the inclusion of Pillar5 and normalized incentive compensation versus the prior year.

Finally, adjusted diluted EPS of $4.38 compared to $4.52 in the prior year, as the lower sales more than offset other favorable line items like lower share count, interest expense, A&M and other income.

Now let's turn to Slide 15 and discuss cash flow. For fiscal '26, we generated $246.4 million in free cash flow, up 1.3% versus the prior year. At March 31, our net debt was approximately $900 million, and we had a covenant-defined leverage ratio of 2.6x. Our strong financial position continues to be underpinned by multiple attributes. Our business model, where the majority of revenue remains externally manufactured, results in low capital expenditures of 1% to 3% of sales annually even with the recent inclusion of Pillar5. For example, we are expecting approximately $25 million in CapEx for fiscal '27.

Our products have strong margins, thanks to the characteristics of the categories we participate in, their importance to consumers' health and the regulated nature of OTC that creates high barriers to competitive entry. We have meaningful tax benefits from past acquisitions that result in a cash tax rate in the high teens. And we remain focused on profitability with continuous cost-saving efforts helping us maintain a strong low 30s EBITDA margin profile.

The result of this model is clear. We generate best-in-class sustainable free cash flow, and our free cash flow conversion remains strong. This enables efficient capital allocation. In fiscal '26, this included over $150 million in share repurchases and a $110 million investment in long-term eye care manufacturing capabilities. Looking ahead, we expect adjusted free cash flow growth in fiscal '27.

Now let's turn to Slide 16 to review the priorities for capital allocation and use of this cash. Thanks to our strong financial profile, optimal capital deployment is a valuable driver in enhancing long-term shareholder value. Including the estimated benefit of pending acquisitions, we now anticipate that cumulative cash flow over the next 3 years approaches $900 million. This level of impressive cash generation enables significant capital deployment and allows us to further enhance shareholder value.

To start, the #1 priority continues to remain investing in our strategic brands to ensure long-term success. From there, we expect to execute disciplined debt reduction in the near term, rapidly working to deleverage back towards 3x following the closure of the acquisition of Breathe Right and LaCorium, which we intend to fund with new prepayable term loan debt. As we begin to deleverage and demonstrate continued strong free cash flow growth, we would likely consider a return to future share repurchases in the out years where we currently have over $90 million of existing authorization remaining. Last, of course, as we rebuild leverage capacity, we will continue to monitor for future M&A opportunities in consumer health care.

With that, I'll turn it back to Ron to discuss our broader outlook.

Thanks, Chris. Let's turn to Slide 18. Before discussing fiscal '27, I want to review the business attributes that leave us confident in our business outlook and have us well positioned for future growth. Our brands are trusted and diverse, which helps limit the impact from individual category slowdown. This diversity stretches beyond just brands, but is a diversity of channels, geographies and suppliers, each of which benefits our business in periods of uncertainty and volatility.

The majority of our brands also lead their categories with the #1 market share and are often synonymous with their categories, such as in the case of BC and Goody's, Monistat, Dramamine and many more. This enables us to leverage our proven brand-building strategy, opportunistically growing categories and as a byproduct, our brands. Our superior financial profile has generated consistent and increasing cash flows over the long term. And finally, the model continues to be scalable, which allows us to reinforce organic growth with future potential M&A like the pending acquisitions of Breathe Right and LaCorium.

In summary, we have the right resources to continue our disciplined capital deployment playbook, while reinforcing investments in our existing business. We continue to have confidence that our business model and strong financial profile have set us up for long-term success.

Now let's turn to the following pages and review our initial fiscal '27 outlook. For fiscal '27, we are forecasting revenues of $1.1 billion to approximately $1.12 billion with organic growth of approximately 1% to 3% for the year. This is driven by solid consumption growth across our diverse portfolio of brands even against a continued volatile consumer and economic backdrop.

As discussed earlier, we also expect improvement in eye care shipment trends, thanks to improving volume from production in the back half of the year. For profitability, we expect adjusted EPS of $4.42 to $4.51. This follows sales growth as we expect gross margin to remain relatively consistent with fiscal '26 and higher G&A costs in dollars from the addition of Pillar5 and normalized incentive comp versus the prior year.

Our forecast assumes continued oil-related inflation, and we believe this will be offset by cost reduction activities and tactical pricing as necessary. This is similar to prior inflationary periods and thanks to the benefits of having a diverse and leading brand portfolio. For Q1, we expect revenue to be approximately $250 million or about in line with prior year and adjusted EPS of $0.87, largely due to the timing of eye care supply.

Lastly, we anticipate free cash flow of $250 million or more in fiscal '27. The strong free cash flow will allow us to accelerate debt reduction following the acquisitions of Breathe Right and LaCorium Health, which are expected to close in June and the second quarter, respectively.

Please note that the guidance I've just discussed does not yet include either of these acquisitions. We expect to update these outlooks on our first quarter call in August. We're excited about both opportunities for many reasons, the highlights of which are on Page 20.

First, let's discuss Breathe Right. As we discussed in detail back in March, we are acquiring a portfolio of brands from Foundation Consumer Healthcare headlined by Breathe Right. It's a category-defining brand within the attractive, better breathing space. We expect Breathe Right to generate over $125 million in revenue and believe it is set up for long-term success by growing its category and expanding its international presence over time. The business operates with a strong financial profile that is accretive to Prestige's growth and EBITDA margins. It also reinforces our long-term financial algorithm for organic sales and earnings and brings annual future tax savings that will benefit free cash flow.

Now moving to LaCorium Health, which we announced last night. Australian-owned and headquartered in the same office building as our Care Pharma team, LaCorium generates over $40 million in sales and is headlined by the dermal therapy brand which will become our second largest brand in Australia behind Hydralyte. The business has been founder-led with a focused mission to treat therapeutic skin care ailments like eczema, cold sores and more. LaCorium's marketing messages like the It Works campaign, the unique efficacy-driven innovation and geographic expansion have each helped the business grow double digits annually for a decade. We anticipate another solid year of sales growth, thanks to this proven model and connection around efficacy with consumers.

Under Prestige, we intend to carry on this heritage while continuing to find opportunities for international expansion. We believe the portfolio can continue its rapid sales growth and be accretive to an international OTC business.

In terms of profitability, we intend to leverage our distribution network to drive revenue and cost synergies and would expect EBITDA of approximately $12 million once the business is fully integrated. So in summary, each of these acquisitions offers unique opportunities for us to further enhance and strengthen our portfolio of leading consumer health care brands.

Now let's turn to Slide 21 and wrap up. Looking out at the next 3 years, we see several catalysts that we expect to strengthen our business profile and returns meaningfully. Let's begin with revenue. As the 2 acquisitions I just discussed closed, we believe they will provide accretive organic revenue growth in future years. Additionally, they also provide scale and accelerate our fast-growing international footprint, which we believe will approach 20% over the next few years.

In addition to this, we see eye care sales improving as we grow long-term capacity. Although the timing of this is fluid, we see significant opportunity off the current low base. And we also see a stable outlook for our diverse needs-based portfolio of brands. Collectively, these drivers position us to deliver a sales CAGR approaching 10% through fiscal '29, while creating a clear path towards sustained organic growth at the high end or above our 2% to 3% long-term range.

Next is profitability. Thanks to our disciplined financial management, we believe we are well positioned to continue to maintain low to mid-30s EBITDA margins. We would then anticipate a magnifying effect on EPS from using cash to pay down prepayable debt. These factors give us confidence in an approximate 8% or more CAGR between now and fiscal '29.

Last, let's touch on free cash flow. We have a proven sustainable model that Chris outlined earlier, generating strong and durable cash flows. By reducing leverage, it both unlocks future capital deployment opportunities and reduces cash interest expense. Cash flow is expected to continue to be enhanced by cash tax savings, which will have further benefits from the Breathe Right transaction. In aggregate, we believe there is a clear path to delivering free cash flow that could approach $900 million over the next 3 years, enabling debt reduction and further enhancing shareholder value.

In summary, we remain confident in our strategy and our ability to execute against it. Our business attributes and leading brands support our formula for organic growth, leading free cash flow generation and a proven capital deployment strategy. We have an opportunity in eye care that can drive future upside, and the pending acquisition should further enhance our formula, helping to drive superior returns in coming periods.

With that, I'll open it up for questions. Operator?

[Operator Instructions] And our first question comes from the line of Susan Anderson of Canaccord Genuity.

Congrats on another acquisition. I guess maybe just to drill down a little bit more on LaCorium's brands in Australia and the U.S. Maybe if you could talk about just the landscape there and also in the U.S. and kind of who the competitors are? And then also, you talked about leveraging your distribution network and other operating expertise for revenue and cost synergies. Maybe if you could expand on that and talk about where you see the most opportunity to expand geographically and then also maybe potential category expansion, and then also where you see the efficiencies in the business?

Susan, so LaCorium, right, we're excited to announce it. We've actually had this business on our radar screen for a very long period of time. It's actually in the same office building that our Care Pharma is outside of Sydney. So we're very familiar with what's going on there as we've kept an eye on it over time. So first of all, the brand is primarily anchored around Australia and New Zealand. It has a very small footprint in the U.S. and Canada. It's just getting going. So concentration of the business is in Australia.

It has a broad offering of products to treat a variety of different skin care needs. So the competitive landscape is fairly broad, whether it's therapeutic skin like skin -- excuse me, eczema on the skin or cold sores or other skin ailments. So there isn't any one key competitor that would be there or it would focus on. Growth opportunities exist around further expansion to other skin care conditions as well as international distribution expansion starting first in the Australasia region, much like we're doing with Hydralyte. So we would look to piggyback off of the distributor relationships that we have in that region.

And then in terms of integrating into our business, we would look first to integrate into our sales force and take advantage of the sales folks that we have out calling on pharmacy and doctors and other caregivers. And then we'll look to integrate into our backroom organization as well to look for cost synergies there.

Okay. Great. That's really helpful. And then maybe also if you could just give a little bit more color on the eye care business and the time line that you guys see the recovery and a return to growth. And also, I think you mentioned there was like a shutdown or something ahead of shipments that also impacted things. Maybe is that fixed now? I guess, should we expect things to go smoothly going forward? And when do you think the new plants will be fully up and running?

Yes. So there's a lot in that question. So let me start, Susan, and I'll talk a little bit about the supply background, and then I'll let Chris talk a bit about our outlook, and maybe a bit about the impact we saw in Q4. So for starters, and we included some of this in the prepared remarks today is we were trying to talk about quality, right? We've received a number of questions following additional eye care headlines that have happened over the last quarter or so. So we thought it would be helpful to provide some context around the quality environment of eye care and why we prioritize quality first and foremost.

So at the end of March, we were into Pillar5, just about 90 days, right? We closed at the end of December. And we were motivated to acquire Pillar5 because we didn't have the confidence in the previous owner's ability to run the facility and manage the quality environment the way we felt that it needed to be. So as we got into this 90 days, we continue to believe it was absolutely the right thing to do. But as we saw last year, there's kinds of variability and unexpected shutdowns in the manufacturing base, right, in the eye care suppliers. And we saw that in the fourth quarter, really in 2 ways.

The first is there was a production that we were expecting to get released by the end of the quarter for shipments that didn't happen. So that got released after the end of the fourth quarter, and that was a big element of the miss in the fourth quarter. The second part of it was the facility was shut down to do some upgrades and the shutdown ended up being quite a bit longer than was originally anticipated. So that impacted the fourth quarter a bit, but it's going to have a bigger impact on the first quarter. So as we gave our outlook for the first quarter, we reflected that expected impact on supply.

And then for the whole year, outlook, we've tried to give ourselves enough runway in the first half to get these things behind us and get back to a more predictable, meaningfully increased level of output versus what we realized in fiscal '26. So let me ask Chris to add a little bit about the outlook.

Yes. Yes. Just to expand a little. I mean we've taken actions in just these 90 days, Ron referred to, to improve output. We've hired additional staff. We're increasing preventative maintenance practices, a whole bunch of things to help make gradual improvements in the long-term output. But in the near term, these efforts can impact shipments, right? So we'll have some likely period-to-period volatility. We're expecting Q1 eye care to be relatively flat to Q1 of the prior year.

We're feeling that a bit more just also because we have a lack of safety stock that normally would cover for this, right? So we'll manage through it. It's difficult to predict. But as we look to the '27 guide, we provided a broader range outlook than we have the last few years, due largely to eye care supply volatility and the consumer challenging backdrop we mentioned in the prepared remarks. So the 1% to 3% range reflects this potential lumpiness we've seen. Again, we're halfway through Q1, in terms of our Q1 assumption that's built into the guide. As we make modifications to processes, we install long-term capacity and things that we've discussed in the back -- in the past. And so the bottom end of the range that we've provided assumes no improvement from fiscal '26 for eye care. And then the mid and high obviously assumes that the back half, we will have increased production with efforts mainly focused around Pillar5.

So we think our outlook with the majority of the improvement in the back half gives us room for these initiatives for improvement.

Good luck with the acquisitions in the rest of the year.

Our next question comes from the line of Jon Andersen from William Blair.

I wanted to just ask on the quarter itself, if you could kind of put a little more detail around the $12 million sales shortfall relative to your guidance. How much of that was related to the Clear Eyes supply issue? How much is related to -- I think you called out Middle East shipping disruptions. And on the Middle East shipping disruptions, just to follow up on the prior question. What's your level of conviction that, that's in the rearview mirror now and that won't be an issue affecting international sales going forward?

Jon, it's Chris. So about 2/3 of the miss of the shortfall was related to eye care and about 1/3 related to the disruptions in the Middle East. Right now, we're seeing lead times increase to scheduled transportation into our distributors in the Middle East. Difficult to predict. Obviously, when orders will catch up to the natural state of our demand right now. But these increased lead times are included in our outlook. We are expecting continued pressure for international in our first quarter, and that's really related to eye care supply and the timing we just discussed is really weighted towards the back half as an organization. But if you think about -- if you take eye care out of fiscal '26 for our international business and you take consideration for the Middle East disruption, we're pretty close to our long-term algo.

And as we go into fiscal '27 for the year, again, Q1 is probably going to be a bit similar to Q4 because of eye care timing, but we would expect the full year to get back to our long-term algorithm on international of about 5% growth.

Okay. And when you talked about for '27, kind of a little bit about the cost environment and energy prices are up, and obviously, that affects different parts of your business in different ways. What are you assuming on a full year basis? Are you assuming any improvement in costs? Or are you kind of assuming the status quo? And then how confident are you in your ability to use price in this, as you've called it, a very dynamic consumer environment, use price as one of the levers to help offset that?

Jon, so our outlook for inflation related to the environment right now assumes that there is continued oil-related inflation at current levels. In terms of our confidence, just like past periods of significant inflation, including COVID, right, we believe our leading positions with our brands will enable us to execute surgical pricing is necessary, but we'll start with cost reduction activities as we always do, and plans are in place. The teams are working through that as we speak.

Okay. One more, if I can squeeze it in. Just I think when you announced the Breathe Right acquisition, you talked about 20 -- EPS accretion of about $0.25 in the first year. Am I remembering that right? Is that the right way to think about it? I know you're not giving formal guidance until it closes, but $0.25. And then how -- is LaCorium accretive to EPS right out of the gate as well? And kind of how long will it take you to get to that full synergized EBITDA run rate of $12 million?

Sure. Jon, it's Phil. So you're exactly right. Back in March, we talked about Breathe Right being approximately $0.25 accretive to EBIT -- EPS, excuse me, on an annualized basis. So the time line that Ron called out earlier, expecting Breathe Right to close sometime in the June time frame would take a few periods of that into the full year. That is not incorporated in our guidance that we gave today. We'll incorporate that in the future once it closes. And certainly still finalizing things like amortization, cost of borrowing, et cetera, that can impact that, but that's our estimate as of now.

And then on LaCorium, obviously, a smaller transaction, and we talked through the details of that earlier. We'd expect it to be approximately neutral to EPS to maybe slightly positive, but we'll update everyone once that transaction closes.

Okay. Maybe can I squeeze one more in? I'll try one more. I guess, I don't know, I kind of feel like the last time we talked or heard from you around the Clear Eyes supply that things seem to be progressing according to plan. And now it kind of feels like you've taken a step back there. And I'm really -- I know you've talked about some longer downtime ahead of some maintenance that was being done, I guess, in the Pillar5 facility. But when did this happen?

And what -- can you give us a little bit more detail around this time, you think you've kind of handicapped it or put the right programs in place to make sure that production levels and shipment levels are coming back by the second half of the fiscal year? And really, does this kind of push you out another year in terms of getting more shelf space when the retailers are resetting the shelves because I think they only do that once a year. So have you kind of missed the window for '26 on that -- '27 on that part of the recovery?

Yes. So I guess to add a little more color, Jon. So we learned about this disruption or it happened late in the fourth quarter. And as we've seen in the past, right, of dealing with the previous owners and management at Pillar5 is what would start out as an expected 1-week shutdown to do something, turned into 2 weeks, would turn into 3, which would turn into 4 as things either got more complex or the work got expanded, right?

The previous owners or in this case, we decided to expand the scope of work that was being addressed to get benefits in the future, right, to help prevent these kind of things from going on. So again, 90 days in, we continue to believe we've made the right strategic investment here to get control of the strategic supply of sterile eye care. And again, our outlook for '27 as we're 90 days smarter on the ownership and what it's going to take to get this stabilized, we believe, gives us the right runway to get this kind of thing behind us and get to a more predictable environment.

[Operator Instructions] Our next question comes from the line of Keith Devas of Jefferies.

You had some comments on what's happening in the eye drop industry, specifically in the U.S., and we've seen the recall headlines with some competitors. I was just hoping you can talk through how you're thinking about that as an opportunity. Maybe it's a little early given you have supply ramping with Pillar5, but just maybe what you're hearing from your customers on the retail front and how you're thinking about the recall and the absence of some competitors as an opportunity long term?

Keith, clearly, there's an opportunity for our leading Clear Eyes brand to take share and to grow above where it was historically once we get our supply chain caught up to the opportunity and the potential here. If you go out and you talk to the retailers, given the recalls that they're seeing for private label and the out-of-stocks that you're seeing broadly across the shelf is they're beginning to understand the importance of partnering with trusted suppliers and brands over time.

We've talked about the importance of quality in the space a couple of times already this morning, and I think it's worth repeating. We have a very high level of focus on quality to the extent that for all of our Clear Eyes suppliers, we review and release the product here in our quality group. We don't rely on the third-party suppliers or even Pillar5 when it was a third-party supplier to review and release product on their own. We've always felt that it was an important area for us to keep close control of.

And in the recent environment where there was recalls of private label product, that's an example where if you're not actively involved, you can't be up to speed on what's going on. So again, go back to the beginning of your question, we think that this is a solid opportunity for Clear Eyes and TheraTears, quite frankly, over time.

Great. Maybe just as a follow-up, I think you mentioned some consumer pressures in the fourth quarter. Maybe just high level, I think there's a lot of macro volatility, but just thoughts on what's driving that overall, I believe, consumption across a lot of consumer health categories in the U.S. at least, has been a little bit softer for longer than expected. So just thoughts on what's driving that? And then, I guess, in your guidance for organic growth, just expectations for recovery or more so status quo from what we're seeing in the fourth quarter and today?

Yes. So let me start by talking about the consumer environment. And then again, I'll let Chris add some comments around the outlook for next year, right? Fiscal '26 had a whole lot of factors going on that in a lot of ways, I feel very good that we successfully navigated them in '26, right? We started our fiscal '26 off with tariffs, right? And lots of volatilities about when tariffs were going to happen and at what level and what level of disruption and that kind of thing. And then it moved on to government shutdowns, disruptions into government payments as well as escalating inflation and interest rate volatility during the year and then over our last quarter ended March, conflict in the Middle East and concerns around where that will go and the impact on oil prices. So there's been a lot going on.

And even with all that going on, we continue to see that our categories are the last place that consumers look to make a change in what they buy, right? Sticking with the trusted health care brand and products that worked in the past is something that's very consistent in consumers for a long time. So we start with that benefit, and it really underpins how we're thinking about fiscal '27, right? The importance of continuing to reinforce that, continue to have a steady pipeline of new products that brings benefits to the user out there. So lots going on, but again, we believe that we start in a good place given what's going on.

Yes, Keith, just to piggyback on that, obviously, difficult to predict, but our outlook assumes kind of status quo on the consumer to current conditions. But again, we extended our range to be prudent around both eye care and consumer sentiment at this point.

Our next question comes from the line of Rupesh Parikh of Oppenheimer & Co.

So I guess maybe I just want to start at a high-level question. So you have the 2 M&A transactions that you need to execute on. Clear Eyes, that's been challenging in recent years. It sounds like this year, you expect to make progress. So what's your -- just your overall confidence in being able to execute all these different priorities this year and going forward?

Yes. Rupesh, so whenever we evaluate M&A opportunities, the first question we always ask ourselves is, can we successfully manage the opportunity, the acquisition? And that was true with Pillar5. We stood back and said, can we manage the complexity of the sterile eye care facility? And given the expertise we have in-house and the ability to tap into outside experts, we felt very good about being able to manage that. .

And as the Breathe Right opportunity came up, right, largest acquisition in the company's history, we started with that question, okay? We got Clear Eyes going on. Are the people involved with that also going to be involved with the Breathe Right portfolio. Do we have enough bandwidth? And the similarities of that business model with ours, one, makes it an easier -- I hate to use the word easy, but an easier transition into our business.

We know the space sold through the same channels, gives us a nice growth opportunity international. So we felt good about the ability to execute this. As I mentioned earlier, we've been keeping an eye on LaCorium and actively engaging with the owner for over 5 years, where I think the owner and seller was avoiding our General Manager in the elevator because he liked to ask them when he was going to be ready to sell the business. But we started with that question, is there overlap between the integration resources for Breathe Right and LaCorium Health? Can we get it done? And we did a deep dive on it.

And essentially, there's not a lot of overlap in the Breathe Right business model in Australia. So very limited resources there will be working on both of them. So we feel very good about our ability to execute all of these things that need to go on in fiscal '27. Writing the Pillar5 and the sterile eye care supply chain, closing and integrating Breathe Right. We feel really good about that business opportunity and then closing and integrating the LaCorium business in Australia. So again, it's been the key area of focus as we thought about these things.

Great. And then a follow-up question just on guidance. So for this fiscal year, how are you thinking about sell-in versus sell-out? And then within your longer-term targets for FY '27, FY '29, just anything you can say at this point, phasing of EPS growth and just the magnitude of the Clear Eyes recovery opportunity that you see during that period?

Rupesh, it's Chris. So sell-in and sell-out, we're expecting to be normalized, right? We don't have any reason to believe there will be a large anomaly at any particular customer or channel at this point. And I believe your second question was centered around Clear Eyes and the assumptions that we have in the guide. So for the out...

Yes. So -- yes. So FY '27, F '29, just your longer-term targets, like anything you say about the phasing of the EPS growth and just what that recovery opportunity is in Clear Eyes?

Sure. We are not assuming by the end of fiscal '29, we are fully recovered. We're essentially planning our shipments and sales in line with our increased demand -- or excuse me, our increased production and capacity, which will meaningfully increase over the period, but not at the historical levels to get all the way back.

And our next question comes from the line of Anthony Lebiedzinski of Sidoti.

So just in terms of the 4Q reported numbers and your organic sales outlook, can you speak to pricing versus unit volumes? How should we think about those?

Yes, Anthony, it's Chris. So limited pricing in Q4, probably consistent with historical levels and anticipated for fiscal '27, we're thinking volume is going to drive about 2/3 of our growth and price 1/3.

And then just in terms of the different channels of distribution. So it sounds like the e-commerce channel is showing the most sales growth. Are there any other sales channels that you're seeing growth? And then conversely, where are you seeing the most pressure points in terms of your sales channels of distribution?

Yes. Anthony. So channel shifting by the consumer continues, right? This has been some long-term trends here for us. As we talked about in the prepared remarks, the dot-com, the e-commerce business continues to grow very nicely for us, not only at the big player there, but at the dot-com arms of our brick-and-mortar partners as well. It's a focused initiative and investment area for us. It's not just happening to us. It's a managed investment and focused area that we feel will continue to grow well above the company's average here.

Mass continues to do well, the big player there as well and the channels with headwinds are consistent in the fourth quarter and in all of calendar '26, and we would expect them to continue heading into '27.

And our next question comes from the line of Mitchell Pinheiro of Sturdivant & Co. As we are not getting response, I'll move to the next question. And our next question comes from the line of Doug Lane of Water Tower Research.

Just looking at Slide 21, talking about your longer-term outlook. The 10% revenue growth, I think if I understood you right, is probably low to mid-single digits organic and then mid- to high single digits from acquisitions. Is that about right?

That's about right. That's organic growth in line with our long-term outlook of 2% to 3% and then the acquisitions.

I think you actually said at the higher end, did you give a little bit more optimistic outlook during this period? Or is it right at the 2% to 3%?

Yes. Doug, Ron here. So right, first thing we got to do is get these acquisitions closed. We feel really good about them. But in both cases, we've talked about their growth potentials being above their comparable pieces of our business. So we think Breathe Right in North America can grow ahead of our organic North American business. And the international piece can be above what we have for the international piece. And then same thing for LaCorium.

For LaCorium, we think it can grow and expect it to grow well above the international long-term organic outlook of 5%. So the whole intent of getting that comment in there as we put these pieces together, get our eye care recovery going over the next few years that the organic piece of it could clearly push us above the 3% for periods, going forward.

So first thing is to get these things closed and get them behind us. But one of the important messages today that we wanted to get across and why we put this medium-term outlook out there is we don't want to get things lost into the fiscal '26 challenges that we had, right?

Lots of things to unpack in fiscal '26. We started the year with a headwind from order timings. That went into the fourth quarter of '25 as a result of tariffs. And then we've had the big impact on Clear Eyes this year as well as other factors going on that I mentioned earlier around all of the macro disruptions. So it was important for us to make sure we emphasize how well the business is positioned and the benefit that these major acquisitions are going to have on our business going forward. And again, we did not want that to get missed in today's discussions.

No, that's very helpful, and I get that. So I guess my follow-up question is, if the acquisitions are accretive, then why would you expect an EPS CAGR to be below the sales CAGR over this period?

Yes, Doug, what we factored into the long-term numbers is really the new term loan debt that we're anticipating as well as the repricing of our 2028 notes. So it's really the impact of interest on the model. All other factors would be similar to -- and consistent with what you'd expect from our long-term algorithm.

So operationally, you think margins will basically hold, maybe expand a little bit? I mean, how should we look at that?

That's exactly right, Doug.

Thank you. We have now come to the end of the question-and-answer session. Thank you all very much for your questions. I'll now turn the conference back to Ron Lombardi for closing comments.

Thank you, operator, and thanks for all the great questions this morning, and we look forward to providing an update in August. Have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

Good day, and thank you for standing by. Welcome to the Prestige Consumer Healthcare Acquisition of Breathe Right Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Phil Terpolilli. Please go ahead.

Thanks, operator, and thank you to everyone who has joined today. On the call with me are Ron Lombardi, our Chairman, President and CEO; and Christine Sacco, our CFO and COO. We're excited to announce the acquisition of a portfolio of brands headlined by Breathe Right this morning. It's an opportunity that fits squarely into our strategic M&A criteria. Ron will review the strategic rationale. Chris will review the financial impact, and then we'll open up the call for some Q&A.

A slide presentation accompanies today's call can be accessed by visiting prestigeconsumerhealthcare.com, clicking on the Investors link and then on today's webcast and presentation. On today's call, management will make forward-looking statements around risks and uncertainties. They are detailed in a complete safe harbor disclosure on Page 2 of the slide presentation that accompanies the call. Additional information concerning risk factors and cautionary statements are available in our most recent SEC filings and our most recent company 10-Q and 10-K.

I'll now hand it over to our CEO, Ron Lombardi. Ron?

Thanks, Phil, and good morning, everyone. As detailed in our press release, we have entered into a definitive agreement to acquire a portfolio of brands from Foundation Consumer Healthcare. This acquisition represents a compelling strategic opportunity that aligns squarely with our disciplined M&A framework and fits well with our long-term growth objectives.

First, the portfolio is headlined by Breathe Right, which defines its category within the attractive better breathing space. It is a scale brand with over $125 million in revenue that we believe is set up for long-term success by growing its category and further expanding its international presence over time. Second, the business is well aligned with ours. It uses outsourced manufacturing and has largely overlapping customers, which will allow us to focus on driving sales growth from day 1. Finally, the business operates with a strong financial profile that is accretive to Prestige, and we anticipate strong returns on invested capital early on. This profile will also support our proven history of rapid deleveraging.

Chris will discuss the transaction details later, but let's first review the portfolio beginning on Slide 7. Approximately 2/3 of revenues are generated from Breathe Right, a brand synonymous with better breathing. As the market leader, we see a clear path for long-term growth, and I'll outline the brand's proposition on the next couple of pages. The second largest brand in the portfolio at about 10% of sales is Dimetapp. With a 50-plus year heritage with consumers, it is a trusted children's cold relief brand in a category we are very familiar with.

The third is Anbesol, an oral pain relief brand that also has long-standing heritage with consumers. The remainder of the portfolio contains a number of well-established brands. Similar to our loyalty portfolio, we'll manage the brands over time to generate cash flow and earnings that can be used to reinvest in our strategic brand portfolio.

Finally, in totality, the portfolio is also highly attractive financially. It generated approximately $200 million in annual revenue last year, which translates into strong profitability, including an estimated gross margin of approximately 70% and EBITDA margins above our company average. In addition, the business operates with a low CapEx model, so we anticipate strong free cash flow conversion similar to our own business.

Now let's turn to Slide 8 to discuss Breathe Right. With heritage dating to the 1990s, Breathe Right is an iconic category-defining brand with strong consumer awareness. It has a broad assortment of strip offerings shown on the left side of the page. These are each designed to help consumers breathe better, both throughout the day and at night. With highly efficacious strips that immediately increase nasal airflow by up to 30%, consumers today use the product for a wide range of reasons, including improving sleep quality, snoring, athletic performance, allergies, congestions and more. It's a drug-free product that doesn't cause side effects and the brand also receives wonderful consumer reviews due to its superior user experience.

So in summary, the consumer proposition is clear. It works, it's cost-effective solution to improving nasal airflow, and it solves a range of needs. Our objective with the brand will be to lean into these attributes and continue to increase household penetration, which stands at approximately 3% today.

Let's turn to Slide 9 to review the brand's reach. As mentioned earlier, the brand is a market leader with 60% market share and over 90% aided awareness. Consumers in the U.S. know and trust the Breathe Right brand. Additionally, the brand is sold internationally, mainly concentrated in Europe, where we will more than double our presence. It also has a nice presence in Australia that will fit well with our current Care Pharma business. We see an opportunity to drive strong growth for the brand consistent with our long-term international segment expectations of 5% growth or more. The brand will be our largest at over $125 million in revenue with attractive profitability. We'd expect the brand to grow ahead of our company's long-term 2% to 3% outlook by utilizing our proven brand-building playbook. The brand has grown steadily in the last couple of years, driven by the proposition I outlined on the prior page.

Now let me turn it over to Chris to review the financial details of the transaction.

Thanks, Ron. Let me first walk everyone through the highlights. We're acquiring a portfolio of brands headlined by Breathe Right. The purchase price is $1.045 billion or $900 million net of anticipated tax benefits. Trailing 12-month EBITDA through December 31, 2025, was estimated to be approximately $95 million, which equates to a purchase price of approximately 9.5x EBITDA net of tax benefit. We'd expect the business to be immediately accretive to the company's margin profile, EPS and free cash flow.

Ron discussed much of the strategic rationale, but to reiterate, we are pleased to add an attractive and growing market-leading brand to our portfolio. It also provides long-term international sales opportunities, aligned with our business model and reinforces our long-term financial algorithm for sales and earnings. For financing, we're expecting to finance the transaction primarily with the new term loan facility with an emphasis on deleveraging post close that I'll discuss in detail shortly. Last, we expect the acquisition to close during our fiscal Q2 ended September.

Let's turn to Slide 12. Shown on the page is some additional detail regarding financial impacts. First, the transaction will add nearly 20% to our revenue base and add Breathe Right to our stable of scaled strategic brands. We'd anticipate the aggregate portfolio growing approximately 2% to 3%, consistent with our own organic growth outlook with the Breathe Right franchise growing at a faster rate. It's a highly profitable portfolio, leading to a company EBITDA margin approaching 35% on a pro forma basis. For EPS, we'd estimate approximately $0.25 of EPS accretion on an annual basis, reflecting the impact of incremental interest and estimated intangible amortization.

Now let's turn to Slide 13. We anticipate funding the transaction with a combination of cash on hand and a new term loan facility. On a pro forma basis, we anticipate bank-defined net leverage of approximately 4x at closing. We believe this is an effective use of our balance sheet that generates strong returns for shareholders. As we've done in the past, such as in fiscal '22 following the acquisition of TheraTears, we intend to use the company's strong and consistent free cash flow to return to our long-term leverage target of less than 3x in fiscal '28.

Now let's turn to Slide 15, and Ron will review our company strategy.

Thanks, Chris. Shown on this slide is a reminder that we have a proven value creation strategy. Utilizing these 3 pillars resulted in a resilient business model that continues to deliver value over the long term by, first, using our brand-building tactics to grow our sales in the long term; second, to maintain and leverage our superior financial profile to enable robust free cash flow; and finally, deploying this capital optimally to further amplify shareholder returns. The result of this execution is clear in our financial performance with 5-year compound growth rates for organic revenue and adjusted EPS largely aligned to our long-term targets of 2% to 3% sales growth and 6% to 8% EPS growth, respectively.

Now let's turn to Slide 16. We believe this growth profile can be supplemented over time by incremental M&A that can both expand our portfolio as well as offer incremental business capabilities. This page highlights the many successful transactions that have done just that. Whether it's acquiring Care Pharmaceuticals, which added geographic capabilities for us in Australia or the acquisition of C.B. Fleet, which enabled us to acquire 2 leading brands alongside strategic manufacturing capabilities, we will continue to seek out future M&A in the fragmented consumer health space. Today's announced acquisition of Breathe Right is the latest example.

Now let's turn to Slide 17 and wrap up. So to recap, we have a diversified portfolio of leading consumer health care brands, strong financial profile and an advantaged position to continue scaling strategically. We will execute disciplined strategic M&A over time, and today's announcement is just the latest example in driving long-term value creation.

Now let's open it up for questions. Operator?

[Operator Instructions] And our first question will come from the line of Rupesh Parikh of Oppenheimer.

Congrats on the acquisition. Just a couple of questions for me. So first, on the synergy front, just curious your thinking on potential cost synergies and revenue synergies down the road.

Rupesh, so from a synergy, not really a synergy play. They're very limited in this transaction. This model was run pretty lean by a PE firm, largely outsourced. That being said, again, not a synergy play, but already immediately accretive to our gross margin and our EBITDA margin. So that was the play here for top line opportunity for long-term growth of the Breathe Right brand.

And then just, I guess, just diving deeper into some of the sales opportunities. Just curious how you guys feel about opportunities on the distribution front domestically and internationally? And then just from an innovation perspective, just overall, how is the pipeline?

Yes, up. So let me start by talking about our expectations for total growth for the portfolio that we're acquiring. So over time, we expect it to grow in line with the company's average, following really the model that we have for the existing business, which is in the U.S., we would expect Breathe Right to grow above the company average. Internationally, we would expect Breathe Right to grow at 5% or more, again, similar to what we've been experiencing with our international business. And then we would manage the investment in their heritage and tail brands that we would expect them to decline, their role being to generate earnings and cash flow that we'd invest behind the big brands. So you put all that together, we'd expect it to reinforce total company organic growth of 2% to 3%.

Great. And then maybe my final question. Just from a channel mix perspective, is there anything to highlight there? Like is it pretty consistent with PBH's business today? Or is there more exposure to pharmacy? I'm just curious just from a channel mix perspective.

Yes, it's fairly consistent in the U.S. with one exception. They have a bigger presence in Costco than our business does. And this is the kind of product that consumers might look for in the club channel where they're looking to buy bigger quantity because the product is used routinely. There's many heavy users in the Breathe Right franchise that use it on a fairly frequent basis. So if you go to the club, you look they have 144 account size to support that. So that's probably the only other difference.

And then internationally, as we said in today's prepared remarks, there's a nice business that's going to be added to what we've got going on in Europe, and it's going to more than double our scale in Europe and give us the opportunity to continue to grow nicely in that region.

And our next question will be coming from the line of Susan Anderson of Canaccord Genuity.

I guess maybe just looking at the EBITDA margin for the portfolio, how are you thinking about that over the long term? Should we think about it as kind of maintaining that EBITDA margin? Or is there opportunity to improve it after integrating it into your own portfolio? Or should we expect kind of more increased investment maybe for it to come down a little bit?

Susan, it's Chris. So as we mentioned on the call and in the presentation, you see they have over 45% EBITDA margins. We always concentrate on that gross margin being able to support the right level of A&M on the -- for the brand and the category they compete in. Obviously, for a brand like Breathe Right, their A&M spend is at a higher percent of sales than ours and their gross margin obviously can warrant that. And so for now, we're going to look to maintain that and continue to invest behind the brand and are expecting the entire company margin to increase to that about 35% as a result of the acquisition. So we think it's well positioned. It's spending at the right levels. And for now, we'll look to maintain that.

Okay. Great. And then I guess for the Breathe Right brand, how should we think about the brand's competition across, I guess, both branded and private label? I guess, for that brand and then maybe the other brands in the portfolio, do you think of them as similar to yours where their exposure to private label is much lower than some of those other big categories out there?

Susan, it's Ron here. So for Breathe Right, it's got a very long history. It's been in the market for over 30 years and has defined the category. The product really does offer a leading and premium proposition. It works well. And it's really differentiated from the products that are out there based on performance. So there is private label in the category. It's been in place for a very long period of time. And just like we see across OTC, when you have a differentiated premium product with a brand that consumers trust and look for, the share for private label and others has been fairly steady. over the long term.

So very similar to what we see in our other OTC categories. And then same thing for their heritage brands with Dimetapp and Anbesol and others, they may have leading positions in very small categories, but the opportunities there will be to look for select opportunities to support them over time.

Okay. Great. And then I guess maybe just looking at kind of the big picture, how does this change the capital allocation priority is deleveraging now a top priority as we look forward? I guess, when do you think you'll look at M&A again down the road?

Susan, it's Chris. So obviously, we're very mindful of leverage. And for the near term, we'll be focused on using our free cash flow to return to our long-term target of less than 3x. So in the near term, I wouldn't expect meaningful share repurchase. We mentioned on the call and you look at one of the slides, right, just as we demonstrated with the TheraTears acquisition, again, this acquisition being accretive to our margins has low CapEx requirements because it's asset-light, has cash tax benefits.

As I stated in my remarks, we expect to be back to our long-term leverage targets in fiscal '28. So we get through integration, and I think we'll be in a similar position to continue to reprioritize M&A. But in the near term, we'll be looking to prioritize deleveraging with our cash flow.

And our next question will be coming from the line of David Shakno of William Blair.

This is David Shakno on for Jon Anderson. A couple of questions here. First, I just wanted to follow up on a question earlier on -- is the -- is Breathe Right margin agnostic by channel kind of similar to your existing portfolio?

And then a second question, Breathe Right has been around for a few decades, as you mentioned, put under, I think, PE ownership for the past 5 or 6 years or so. Can you highlight any changes that have happened with the brand in the past few years? Were there more recent innovation decisions in the past few years? Was this something on the operations side? Just any kind of historical context would be great.

So let me start with your first question there, David. So gross margin by channel is fairly consistent for the Breathe Right brand. And it was one of the areas that we dug into particularly with the club channel being a different focus for Breathe Right versus our existing business. And what we found was much like with Prestige, they've worked very hard to ensure that the product offering and the way it's promoted in each channel results in similar gross margin. So much aligned with our business.

And in terms of the Breathe Right ownership, it did come out of one of the big pharma consumer arms and it's been owned by this PE firm for quite a while. And this PE platform company has a very good marketing and brand building group, and they've done a nice job focusing on long-term growth for the brand despite the PE's shorter-term ownership focus than we would have, right? We think about owning these things in perpetuity. So really no differences in how they might think about brand building. Certainly, we'll evaluate the marketing and brand building approach and adjust as we see fit going forward. But very, very good stewardship under foundation.

And our next question will be coming from the line of Mitchell Pinheiro of Sturdivant & Company.

Congrats on the acquisition. So just 3 quick questions. One, is the e-commerce percentage of this business sort of similar to your current business? Number two, could you explain what the tax benefits are and how they flow through? And three, was this a bid process? Or were you the only bidder?

Yes. Mitch, this is Chris. So first question on e-com, yes, in aggregate, the portfolio has a similar profile in terms of e-comm percentage. And as Ron kind of mentioned, we'll be looking to increase that, obviously, with our e-com playbook that we've executed over the years. In terms of tax benefit, so this was an asset purchase. It's how it was structured. And as a result, you get to amortize goodwill and intangibles for tax purposes.

So the way to think about that is this is going to essentially reset the tranches we had from some past acquisitions back, I think Insight and GSK back a few years ago. Those tranches from a cash tax perspective, we were going to be scheduled to roll off in the next couple of years here. And with this acquisition, we'll reinforce a cash tax rate in the mid- to high teens versus our corporate effective tax rate at about 24%. So it kind of reload that.

And from a process perspective, this was a bid process. We were not the only -- we don't believe we were the only participant in play here. So started several months ago, and we've been on it and work in diligence for some time here.

And our next question will be coming from the line of Anthony Lebiedzinski of Sidoti.

Congrats on the deal as well. So I guess in light of the still current fluid tariff environment, can you comment on the product sourcing locations for Breathe Right and the other brands?

Yes. Anthony, so all of the CMOs that are providing products are in the U.S., Breathe Right as well. So not expecting a big impact from tariffs for this.

Okay. Got you. Got it. Okay. And then as far as seasonality of the acquired business, I know there's a small cough and cold business. So I guess that would skew towards the December, March quarters. But anything to highlight as far as seasonality otherwise?

Yes. Seasonality, there isn't much seasonality, Anthony, given the broad usage occasions that we described in the prepared remarks today. This really isn't an allergy cold kind of product or snoring. It really has a broad set of uses around better breathing and the advantages of breathing better every day.

Okay. Got you. And lastly, as far as the incremental CapEx, how do we think about that?

It won't be material. So we would continue to think in that 1% to 3% of sales as a company.

[Operator Instructions] Our next question will be coming from the line of Doug Lane of Water Tower Research.

Yes. No, this acquisition seems right on point. I guess my question is, after 5 years or so of ownership under Foundation, what can Prestige bring to the party? They seem to have done a pretty good job, as you mentioned, of stewarding the brand.

Yes. Doug, thanks for the question. So maybe this is a good time just to step back and talk about the opportunity here in totality. We talk about our disciplined approach to M&A. And this opportunity, I think, highlights our approach. First is we've been very disciplined over the last 3-plus years around evaluating opportunities. And what that has allowed us to do is be positioned to do a $1 billion acquisition, right? This really moves our needle. It's going to add 20% to the top line and be very accretive to EPS and our cash flow. So I think that's the first place to start, right, is our discipline has given us the opportunity to be able to manage a deal of this size and the leverage that it will bring appropriately.

The second thing, and we touched on these in the prepared remarks today, is it lines up clearly with our 3 criteria. The first is long-term brand building opportunity. So Breathe Right, in particular, it's just getting going, right? Even with the 30 years of heritage here, it's still at a 3% or 4% household penetration and just getting going internationally. So we're going to bring continued investment in our approach to brand building and long-term focus, Doug, to keep that going.

Second is it fits our business model, right? We know the customers. It's going to allow us to more than double our presence in Europe. It fits with our customer base. We know the suppliers. So integration is going to be quick and low risk. And then finally, we think this is a fantastic use of our shareholders' capital. We think the returns are very good for this investment. So when we think about it on all those fronts, we really think this is a great opportunity for us.

And I'm showing no further questions. I would now like to turn the conference back to Ron for closing remarks.

Okay. Thank you, operator, and thanks to everybody for joining us on short notice this morning. As we said earlier, today is the announcement of signing the agreement. So we've got a little bit of work ahead of us here as we work to get to the closing, and we'll look forward to providing further updates the next being on our May Q4 earnings call. So we look forward to speaking then. Thanks for joining, and have a great day.

And this concludes today's program. Thank you for participating. You may now disconnect.

Good day and thank you for standing by. Welcome to the Third Quarter 2026 Prestige Consumer Healthcare, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Philip Terpolilli, Vice President of Investor Relations and Treasury. Please go ahead.

Thanks, operator and thank you to everyone who has joined today. On the call with me are Ron Lombardi, our Chairman, President and CEO; and Chris Sacco, our CFO and COO. On today's call, we'll review our third quarter fiscal 2026 results, discuss our full year outlook and then take questions from analysts. The slide presentation accompanying today's call can be accessed by visiting prestigeconsumerhealthcare.com, clicking on the Investors link and then on today's webcast and presentation.

Remember, some of the information contained in the presentation today includes non-GAAP financial measures. Reconciliations to the nearest GAAP financial measures are included in our earnings release and slide presentation. On today's call, management will make forward-looking statements around risks and uncertainties, which are detailed in a complete safe harbor on Page 2 of the slide presentation that accompanies the call. These are important to review and contemplate. Business environment uncertainty remains heightened due to supply chain constraints, high inflation and geopolitical events, which have numerous potential impacts. This means results could change at any time and the forecasted impact of risk considerations is the best estimate based on the information available as of today's date. Additional information concerning risk factors and cautionary statements are available in our most recent SEC filings and the most recent company 10-K.

I'll now hand it over to our CEO, Ron Lombardi. Ron?

Thanks, Phil. Let's begin on Slide 5. We delivered solid results for the third quarter, which reflected the benefits of our diverse business model and strong financial profile. We are pleased with these results, especially when navigating the challenging consumer backdrop we've seen year-to-date, which includes consumers continuing to change where they shop in a fluid environment with tariffs, inflation, government shutdown, public announcements related to acetaminophen and more. All of this led to a dynamic environment in Q3, which we successfully managed through.

Sales of $283 million were slightly better than forecast. Our diverse customer base allowed us to see solid order trends in our growing channels, which more than offset the impact of other channels that are more affected by the macro issues I just mentioned. Our broad distribution allows us to benefit from changes in consumer shopping habits no matter where they look to buy our trusted and leading brands. Another positive is that we continue to see sequential improvement in Clear Eyes supply for the second quarter in a row. We anticipate further improvements based on actions we've taken that I'll discuss shortly. Moving down the P&L, both gross margin of 55.5% and adjusted EPS of $1.14 were in line with our expectations provided on our second quarter call. Free cash flow was $209 million year-to-date, up 13% versus the prior year. This impressive cash flow allowed us to repurchase approximately $46 million in stock and acquire our strategic partner, Pillar5, during the quarter, while still maintaining leverage in the mid-2s.

Our disciplined capital allocation strategy continues to enhance shareholder value. Chris is going to discuss this and specifically our year-to-date share repurchases after reviewing the financials. So despite a fast-changing consumer backdrop, we have confidence in our core business, which remains well positioned and we continue to expect free cash flow growth for the fiscal year. Now let's turn to Slide 6 for an update on eye care supply. We continue to see long-term growth opportunity in the eye care category, driven by an aging population and other factors. While we have faced challenges in supply for our Clear Eyes brand for the last several quarters, we are confident that we've taken the appropriate strategic actions shown on the left side of the page to return Clear Eyes to its leading market share position.

To start, over the last 9 months, we've brought on 2 new third-party suppliers to help ensure near-term production as well as long-term backup supply. Second, we closed on the Pillar5 acquisition in December, which unlocks the opportunity to take direct control over an important element of our supply chain. Third, with the installation of a new high-speed line that began in December, we believe Pillar5 has the capability to support the majority of our eye care production internally over time. With the combination of ownership in the high-speed line, this gives the facility the ability to have unconflicted focus on producing high-volume quality product on time for Clear Eyes, the historically #1 eye drop brand at retail.

With these strategic underpinnings, we believe this year is set up to allow us to shift towards a focus on accelerating total production. These priorities to achieve this are on the right side of the page. We expect to continue sequentially increasing supply through calendar 2026 as we increase sufficiency levels and production to higher sustainable levels. During this period, we also expect onetime investments as we transition Pillar5 from their private ownership.

As production and resulting supply improves, this will allow us to further diversify our production runs into an expanded assortment of SKUs versus today, where the focus is on our top 2 selling items, redness relief and max redness. These higher production levels will allow us to refill both retailer safety stocks and our own. Lastly, the consistency and volume of production will enable marketing efforts that should help further accelerate demand growth. So in summary, we feel good about the action steps we've taken to improve our eye care production positioning. We believe we are positioned to continue to improve supply sequentially again in Q4 and moving forward.

With that, I'll turn it over to Chris to discuss the financials.

Thanks, Ron. Good morning, everyone. Let's turn to Slide 8 and review Q3 and year-to-date financial results in more detail. Q3 revenue of $283.4 million declined 2.4% from $290.3 million in the prior year or 2.2% excluding FX. The revenue decline was mainly attributable to lower eye and ear care category sales, owing largely to Clear Eyes supply constraints. As Ron mentioned, we also benefited from our broad distribution, which drove sales growth in some of our largest channels. This helped offset continued consumer volatility and softness in certain categories like analgesics and cough and cold. Adjusted EBITDA margin remained in the low 30s. Adjusted diluted EPS of $1.14 was down slightly versus $1.22 in the prior year, which reflected the lower sales, timing of A&M spend and higher G&A costs.

Last, please note these results exclude an approximate $10 million write-off of a supplier loan. Although not often from time to time, we extend secured financial liquidity to our third-party suppliers to ensure continuity of supply. In this case, we decided to make a loan to a partner in fiscal '24 as they explored a sale of their business and we transferred our products to other suppliers. That work has been completed without any meaningful disruption in supply but the business shut down at the end of December. Our loan is secured by the assets of the company. And while we expect some recovery, we cannot estimate the outcome. And as a result, we have written the full balance off at this time.

Now let's turn to Slide 9 for a discussion around consolidated results for the first 9 months. For the first 9 months of fiscal '26, revenues decreased 3.9% organically versus the prior year. By segment, excluding FX, North America's segment revenues decreased 4.4% and International segment revenues decreased 90 basis points versus the prior year. The first 9-month sales declines were largely due to the anticipated impact of the Clear Eyes supply chain constraints. As Ron highlighted earlier, thanks to our channel diversity, we continue to benefit from strong growth in channels like e-commerce, which have offset negative trends in most other channels. Also impacting year-to-date sales was category softness in the analgesic and cough and cold categories. Ron will note the implications of this when reviewing our outlook for the remainder of the year.

Elsewhere, our International OTC segment business declined slightly year-to-date for 2 primary factors. First, we were impacted by the timing of distributor orders year-to-date but continue to see positive consumption trends. Two, similar to the U.S., our sales results continue to be impacted by the limited eye care production. Despite these near-term impacts, we continue to have confidence in our long-term growth algorithm for 5% annual segment revenue growth. Total company gross margin of 55.7% in the first 9 months was up 50 basis points versus the prior year. Looking forward, we anticipate a 57% adjusted gross margin in Q4. Our fiscal year '26 tariff outlook is unchanged at approximately $5 million. Advertising and marketing came in at 14.1% of sales for the first 9 months. For fiscal '26, we now anticipate an A&M spend rate of just under 14% as a percent of sales.

Adjusted G&A expenses were up for the first 9 months versus prior year, primarily due to the timing of certain expenses and also an increase in bad debt allowance in Q3 for one specific customer. We anticipate full year G&A of just over 10% as a percent of sales. Finally, adjusted diluted EPS of $3.16 compared to $3.20 in the prior year as improved gross margin, more favorable interest expense and share count helped offset the impact of lower revenue. Looking ahead, to reflect the latest assumptions following the closure of Pillar5 and our recent share repurchase efforts, for Q4, we expect interest expense of approximately $11 million, an approximate normalized tax rate of 24% and a share count of just under 48 million.

Now let's turn to Slide 10 and discuss cash flow. For the first 9 months, we generated $208.8 million in free cash flow, up 12.9% versus the prior year. We continue to maintain industry-leading free cash flow and are maintaining our outlook for the full year of $245 million or more. For Q4, we do expect lower year-over-year quarterly free cash flow owing to timing and investments in working capital. At December 31, our net debt was approximately $1 billion, equating to a covenant-defined leverage ratio of 2.6x. Our strong financial position and consistent business performance continues to enable multiple uses of cash flow. In Q3, this included the closure of Pillar5, as Ron discussed earlier, for just over $110 million as well as opportunistic share repurchases.

Let's turn to Slide 11 to review our year-to-date share repurchase efforts and our overall capital allocation strategy. Thanks to our strong financial profile and resulting free cash flow, optimal capital deployment is a valuable driver in enhancing long-term shareholder value. These priorities are unchanged and we anticipate disciplined cash deployment against the various options of investing in our brands, M&A, share repurchases and deleveraging to further enable the first 3 priorities. This year is another example of our powerful capital deployment strategy at work. Through the meaningful cash generation and resulting debt reduction we've achieved over the last few years, we have leeway for multiple value-adding priorities at once. To that point, beyond just the recent acquisition of Pillar5, we continue to actively assess M&A and see future opportunities to acquire leading consumer health care brands that can enhance our portfolio.

But in tandem, we've also capitalized on a unique opportunity to repurchase our shares at what we believe are particularly attractive levels while still retaining flexibility to pursue M&A and other deployment options. As part of our multiyear share repurchase authorization, we've now repurchased over $150 million in shares year-to-date or nearly 5% of shares outstanding. As shown on the right side of the page, the majority of these repurchases came in Q2 and Q3 opportunistically at attractive return levels. This is a textbook example of how our healthy leverage position and strong and steady free cash flow allows us to be nimble in capital deployment and generate incremental value.

With that, I'll turn it back to Ron.

Thanks, Chris. Let's turn to Slide 13 to wrap up. As we approach the end of all of the year, we continue to have confidence that our diversified business model and strong financial profile have set us up for long-term success. For fiscal '26, we have narrowed our sales outlook, forecasting approximately $1.1 billion in revenue. This update reflects continued consumption momentum in the growth channels of our business like mass and e-commerce but offset by slower order patterns in other channels that are facing shopper headwinds. We expect sequential improvement in Clear Eyes supply again in Q4, which equates to 3 consecutive quarters of improvement. EPS will follow sales and narrow to an anticipated adjusted diluted EPS of approximately $4.54 for the year. Lastly, we continue to anticipate free cash flow of $245 million or more. We have ample capital deployment optionality that has a history of maximizing value for our shareholders.

With that, I'll open it up for questions. Operator?

[Operator Instructions] Our first question comes from Rupesh Parikh with Oppenheimer & Company.

So Ron, just going back to your commentary just about the shopper headwinds in the weaker parts of your distribution. Just curious, as you look at those customers, are you seeing that consumption shift to other retailers? And this is just more maybe inventory stocking that's happening in that channel? So just maybe just more color in terms of that dynamic from a consumption perspective.

Sure. Yes, I think you hit it right on the head, which is, we're seeing a volatile environment, lots of things kind of distracting and impacting how consumers think about shopping. And what we're seeing is more of a continuation of a channel shift. So we're picking up the consumption based on where they end up purchasing the product. So a continuation of the trend we've talked about earlier in the year.

Okay. So you feel good about the overall consumption trends within the business. It's just more of this inventory type of destocking that's impacting the guide. Is that the right way to think about it?

Yes, exactly. And again, it's back to the benefits of our business model, right? Diverse portfolio, broad distribution allows us to pick them up where they go looking for those trusted brands.

Okay. And my last question on that topic. Any sense of when this headwind may go away? Is it more Q4 specific? Or do you expect it to bleed into the next fiscal year as well?

Yes. We're really looking at it quarter-by-quarter. It's hard to predict, right? If you go back to September, we wouldn't have predicted the level of volatility we saw in the quarter ended December. So -- but again, back to -- the good news is -- for us is that we're well positioned to manage through no matter what's going on.

Okay. Great. And then maybe my last question. I know it may be early, maybe limited what you can comment. But as you look towards your next fiscal year, is there any initial puts and takes we should be thinking about, whether on the Clear Eyes side or anything else at this point that you can comment on?

Yes. So I guess 2 things. The first is we continue to feel good about the performance of our business on an organic base. And then secondly, we've talked about the expectation of continued increases in the Clear Eyes supply chain. So we'll provide more color and details for fiscal '27 on the May call.

Our next question comes from Susan Anderson with Canaccord Genuity.

I guess maybe just a follow-up on the eye care business. It's good to see that sequential improvement there. I feel like we're starting to see better stock on the shelves. So I guess I'm curious kind of where you're at with that restocking versus where you used to be. Not sure if you could give kind of like a time frame of when you think you'll be kind of fully back to stock with all of the SKUs and everything. And then also, I was curious, was there a impact to margins during this disruption of the eye care supply? And should we expect a recovery, say, like, in gross margin as this business gets back to normalization?

Susan, this is Chris. So in terms of Clear Eyes supply, I think we continue to feel good about the strategic decision to acquire Pillar5, right? And we talked about bringing on 2 new eye care suppliers earlier in the year. And again, feel good about that. It's going to ramp, right? It's not a switch that we turn on. So in terms of restocking, right, it's going to take us some time. We're going to be probably incurring this as we work through fiscal '27. But again, sequential improvement expected, the third quarter that -- we felt it and continue to expect it for our fourth quarter as we move forward. From a margin perspective, relatively stable, right? We always talk about whether it's -- we're channel agnostic or pretty much brand agnostic, right? We do see some mix but it's not material. So not expecting a meaningful change in our margin as we move forward in terms of eye care supply.

Okay. Got it. And then I guess maybe a question on e-commerce. Obviously, it continues to grow pretty well. Maybe if you could give us an update where your penetration is at? And then also, are there certain areas of the business that's growing faster online than others? And where you think the penetration can be longer term?

So Susan, our consumption grew over 10% in the third quarter. So we continue to see solid continuing consumption growth even on top of great results year after year. Calling the ultimate channel share is hard to predict, right? It depends on what shoppers choose to do in the future. But clearly, what we're seeing today is that shoppers are flocking to places where they get broad offering of the products they're looking for, great pricing, price transparency and service. And that service is whether it's overnight or same-day shipment or order it online, pick it up in the parking lot or being able to get into the store and pick up all of the things you may want to get in the shopping trip. So that -- we've seen that change dramatically over the last 5 or 6 years. We'll see where it goes forward. But the way we think about it is, every day it's our job to work with our retail partners to help them be successful in meeting their objectives. And if we do that, we'll win with the shopper and we'll win with our brands.

Great. Okay. And then maybe one last one for me just on the women's health business. Maybe if you could give a update there. It looks like it took another dip in the quarter but sequentially, it was better. I guess, was that category susceptible to kind of these consumer shopping patterns or retailer destocking? Or is it just ordering patterns?

Yes. So again, let's talk about the 2 different brands in women's health. Monistat continues to do well. It's at kind of historic peak levels of share these days. We continue to look at opportunities to expand the brand into care. So we've got some great new wash products that are doing very well this year. So Monistat continues to do well. Summer's Eve continues to be well positioned for long-term growth. As you just said, we're seeing kind of volatility in year-to-year comps. And we talked about in the fourth quarter last year about a spike in dot-com orders and then kind of the offset in the first quarter of this year. So if you go back and look at TTM for the end of December, the women's health franchise continues to do pretty well. So we continue to feel good about it going forward.

Our next question comes from Keith Devas with Jefferies.

I guess very quickly on the capital allocation front. I believe you guys have bought back more stock this year than in recent memory. Maybe just talk through the decision process of doing that versus reinvesting? Is this something we should be accustomed to at these levels? Just kind of the go-forward path of thinking about capital returns in the absence of M&A, if this is kind of the right level that you might be expecting to continue repurchases at?

So as we've talked about, certainly investing in our brands is priority #1 but we do continue to evaluate M&A. That is our secondary use of capital preference at this point but we're going to be disciplined. So there's a lot out there. We're looking at all of it and we'll continue to evaluate it. But given the market reaction to our stock in recent periods, it's math, right? We do the math and we think we're getting a pretty good return for our shareholders by reinvesting in ourselves at this point. And so we'll continue to evaluate it on that basis. But it comes secondary to M&A. And certainly, we don't impact the business -- and investing in our brands -- by doing it. So strong free cash flow consistent and we have optionality at this point, which, in years past, maybe we didn't have. But where leverage is, I think we stand in a good position to continue to repurchase.

Our next question comes from Jon Anderson with William Blair.

So I guess my first question is on sales and the outlook. I think you mentioned in the prepared comments that the sales in the third quarter were actually slightly ahead of your expectation but then the guidance points us to the low end of the prior range, which implies slower growth than you anticipated in the fourth quarter. Can you kind of unpack that for us a little bit, what's affecting the fourth quarter outlook?

Sure. So first, consumption for the fourth quarter, we continue to feel good about it. So it's not really a consumption issue, Jon. We're really trying to reflect the order patterns that we saw in the third quarter and the volatility. The big theme we saw in the third quarter and really for this year is that the retailers and the channels that are doing well. We've got consistent order patterns. They're growing to support -- they're growing businesses. And the channels and the retailers with headwinds are adjusting their order patterns and their business accordingly. So we're trying to reflect that in the fourth quarter outlook, Jon. So that's really the big thing there.

Okay. So I want to talk about consumption though. So what did you see from a consumption standpoint in the third quarter? Maybe you want to ex out Clear Eyes. I'm not sure, so the rest of the portfolio. And what level of consumption growth are you kind of anticipating in the fourth quarter? I'm just trying to understand, are we hitting consumption? Is it running near our target, what, 2% to 3% rate?

Yes. So for consumption in the third quarter, right, with our portfolio, we always see brands and categories that do better than we might have expected, some in line and some a bit behind. So we continue to have great momentum in GI. Fleet and Dramamine are doing really well. Skin is another space that's doing well. Cough/cold for the third quarter and again, these are shipments, was fairly stable year-over-year but incident levels are behind where they were last year. The 2 other places to call out, you've heard us talk about lice. The incident levels continue to be down year-over-year. But the surprise for us in the third quarter was the analgesics category. The announcements that came out of -- out on acetaminophen early in the third quarter really impacted the category.

Other big brands in that space were down as much as 15%. We were down a couple of points. So although impacted slightly, it still wasn't what we would have expect or in line with recent trends. If you go back and look at the 3 quarters ended September, the analgesic category for us was growing nicely, our brands, BC and Goody's. So those were the outliers in the third quarter. For the fourth quarter, we anticipate the analgesics will get better. Lice will continue to be behind. Cough/cold will continue to be behind. But in general, the consumption for the portfolio, you put all the pieces together, excluding kind of the analgesics and the likes are generally in line with what we'd expect.

Okay. That's helpful. Just the last one is more referencing an earlier question on kind of sales for '27. You mentioned -- actually, Ron, I think you mentioned kind of happy with the base business performance. Obviously, there are always puts and takes to your point, across a more diverse portfolio like yours but good base level consumption. And then you have the benefit, if you will, of supply conditions improving behind your eye and ear care segment. Does that get us kind of an above algorithm year? Is that a reasonable hypothesis? Or is this kind of, hey, the consumer dynamic is so fluid and some of these retailers that aren't maybe performing as well need to -- are likely to provide an offset. I'm just trying to kind of get a little bit of a handle on how you're handicapping or thinking about the top line in '27.

Yes. So let's break it into 2 pieces. I'll talk about consumption, which is where you started with. Again, we feel good about the broad portfolio and the opportunities for '27. And then Clear Eyes, as we've talked about, we expect to have more product available at retail. So that's going to give us a lift in consumption for next year. At the May call, we'll know more between now and May in terms of what to expect for the impact for retail order patterns as we get into '27. But it always starts with consumption and brand performance. We feel good about that base and we'll provide more detail in May for '27.

Our next question comes from Mitchell Pinheiro with Sturdivant & Co.

Just a question -- just we -- just curious, we haven't talked much or at least on advertising and marketing. Is there any advertising and marketing -- do you anticipate any changes in that as e-commerce becomes bigger? I mean, are you able to take any advantage, take any money out of that bucket? Or does it become a little more -- does it require a little more focus as e-commerce grows?

Yes. Mitch, thanks for the question. So our marketing is always going to evolve based on what the consumer is doing and how best to connect with them. And in today's environment, certainly aligning your marketing initiatives to better connect with the shoppers as they're shopping differently, right, increasing their purchases on dot-com through whatever retail partner we have in their dot-com initiatives. So it's something we've been working on for quite a while to better align those investments to connect with the shoppers. It doesn't -- we're not wired to think about, hey, can we save money by this evolving change, right? We'll look for ways to be more efficient and effective. And if we can find additional dollars, we're going to invest it behind long-term brand building. But evolving how we think about better connecting with the consumers is something that's always been part of what we've been doing.

Okay. And then as it comes to -- I mean, private label is always really relatively nonexistent in your category but I'm just curious whether you're seeing anything in that regard in the current environment.

Yes. No, it's more of the same for private label's share in this environment, right? When you're in a category once every year or 2 or 3 years and you used a brand or a product, the previous time you or somebody was sick, somebody in your family was sick and it worked, you're going to continue to look for that trusted brand to treat your illness. So we don't anticipate private label share changes in this environment.

Okay. And then I guess, sort of back to advertising and marketing. But as you grow your eye and ear -- eye care business back to prior levels and -- is it going to take a little more marketing? I mean I know it's -- shelf resets are a big part of it but is it going to require like 12 months additional focus there?

Yes. We'll see an increase in marketing spending and activity for Clear Eyes as more product becomes available at retail. But we'll look to shift funds around. During the last year or so, we haven't meaningfully taken down advertising and marketing in total. We've shifted it to other places to accelerate activities or take advantage of other opportunities and we'll look to move monies around. So we wouldn't expect any impact on the profile of the P&L as we get back to chasing Clear Eyes activity.

And I guess just one last question. I mean you've done an excellent job sort of line extending, whether it's with Dramamine and nausea or whether it's with Summer's Eve, so on and so forth. You sort of once a year focus on a category with some extra new news. Anything you can talk about in 2027 that might be an extended focus?

Yes. So we don't tend to talk about product until it's at retail and we're just getting into the shelf reset timing for the year. But the one product I will point out is Compound W launched a skin tag product and it's found at mass and dot-com right now and it's quickly accelerated at mass to be the #1 skin tag product. So that's an example of us stretching that Compound W brand into skin tag treatments and the power of the brand to connect to that kind of treatment occasion, expanding beyond the legacy wart products.

Our next question comes from Yaakov Musheyev with JPMorgan.

It's actually Carla Casella. Just a question about the -- you talked about the charge you took for a facility for the loan for the supplier. Is that a facility that you would consider acquiring? Or can you give us a sense or was the supplier for a specific segment of the business? Just any more color you can give on that would be great.

Carla, it's Chris. So this particular supplier, strategic relationship with came to us over almost 2 years ago and said we're experiencing some financial difficulties, was a decent size of the business. And so immediate plans went in place to transfer out the product. But as you know, that takes some time. So over that period, we extended them about $8 million of financial assistance. That gave us enough time to get our product out of there. And they were at the time pursuing a sale. And so when I look back, I think about the return we got on that money for saving the gross margin on those particular products. There were -- it wasn't concentrated in one area. There were a few products, a few SKUs within products and brands that were there. We transferred them all out successfully. And unfortunately, they did not complete a sale during that time and they shut down in December. So a highly unusual specific situation but kind of an example of how we work with all of our suppliers and our focus is on continuity of supply. And I think we were successful in that.

And Carla, very different than the Pillar5 example. This was a liquid mix and fill facility and there's plenty of competitive liquid mix and fill capacity available that we were able to move our products to, including one moving -- moving one product to Lynchburg, our Debrox earwax removal product. We evaluated it and said, "Hey, this liquid mix and fill product would be a great candidate to move into Lynchburg." So we even moved one of the products there. So very different than sterile eye care, where as we scanned the supply chain landscape, there wasn't available capacity. So 2 very different outcomes, one where it was strategically advantage -- an advantage to us going forward with Pillar5, an example of taking advantage of capacity available out there.

Okay. Great. And then as you look to future M&A, are you mostly focused on brands? Or could some of it be vertical or facility related?

It's going to be focused on brands and long-term brand building value.

This concludes the question-and-answer session. I would now like to turn the call back over to Ron Lombardi for closing remarks.

Thank you, operator and thanks to everyone for joining us today and we look forward to providing another update on our May call. Thank you. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q2 2026 Prestige Consumer Healthcare, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Phil Terpolilli, Vice President of Investor Relations and Treasury. Please go ahead.

Thanks, operator, and thank you to everyone who has joined today. On the call with me are Ron Lombardi, our Chairman, President and CEO; and Christine Sacco, our CFO and COO. On today's call, we'll review our second quarter fiscal 2026 results, discuss our full year outlook and then take questions from analysts. A slide presentation accompanies today's call can be accessed by visiting prestigeconsumerhealthcare.com, clicking on the Investors link and then on today's webcast and presentation.

Remember, some of the information contained in the presentation today includes non-GAAP financial measures. Reconciliations to the nearest GAAP financial measures are included in our earnings release and slide presentation. On today's call, management will make forward-looking statements around risks and uncertainties, which are detailed in a complete safe harbor disclosure on Page 2 of the slide presentation that accompanies the call. These are important to review and contemplate.

Business environment uncertainty remains heightened due to supply chain constraints, high inflation and geopolitical events, each of which have numerous potential impacts. This means results could change at any time, and the forecasted impact of risk considerations is the best estimate based on the information available as of today's date. Further information concerning risk factors and cautionary statements are available in our most recent SEC filings and most recent company 10-K.

I'll now turn it over to our CEO, Ron Lombardi. Ron?

Thanks, Phil. Let's begin on Slide 5. Our Q2 results exceeded the expectations we communicated back in August, thanks to certain timing factors. Sales of $274 million declined versus the prior year, but were better than forecast due to the timing of Clear Eyes supply and accelerated e-commerce shipments late in the quarter that outpaced consumption. We expect these timing factors to come out of Q3 and still expect a second half improvement in eye care supply previously discussed that underpins our full year forecast.

I'll review our Q3 and full year outlook in detail later. Aside from these timing factors, our base business continues to perform well, benefiting from diversity of our portfolio and channels. We continue to experience double-digit e-commerce consumption growth, thanks to the long-term investments previously discussed. Moving down the P&L. Gross margin was largely as anticipated. Adjusted EPS of $1.07 was similar to the prior year, but ahead of expectations due to the sales beat. Lastly, our financial profile continues to generate strong free cash flow, which was $134 million for the first half, up 10% versus the prior year.

This valuable cash flow and our favorable leverage ratio enables multiple ways to create value for our business. For example, in Q2, we maintained our leverage ratio of 2.4x while repurchasing over 1.1 million shares. And we continue to see additional opportunities for capital deployment that can enhance shareholder value. Now let's turn to Page 6 for a review of our DenTek brand and how we are expanding the brand's reach in the dental care market. DenTek participates in the niche peg sections of a much larger oral care category. Our product offerings are diverse and include dental guards, floss picks, interdental brushes and numerous dental accessories such as temporary tooth fillings.

The wide-ranging portfolio is geared towards the dental care enthusiasts offering technology-focused solutions to meet oral care needs. Like all of our brands, DenTek's emphasis is behind differentiated product offerings where we can use long-term brand building to drive sales growth at attractive margins. With that in mind, our largest focus within the DenTek portfolio is around dental guards, which today represents well over half of the brand's revenue. By leveraging the brand's #1 share in combination with innovation and proven brand-building tactics, we've been able to drive category growth and as a byproduct, our market share, which now exceeds 50% of the category.

On the right side of the page, you'll see the most recent example of this proven marketing playbook, the Fantasy Guards marketing campaign. Fantasy Football consumes an estimated 1.2 billion hours of time annually with fierce rivalry and competition. This results in untold stress to players and fans experiencing physical symptoms, including teeth clenching and jaw pain. DenTek interjects itself in a witty way, allowing for fantasy football leagues to enter a sweepstakes and win an embarrassing grand prize fine for their lowest scorer.

Launched in Q2 with the backing of former and current NFL players, the campaign is designed to connect DenTek with both new and existing consumers in a culturally relevant way. Engagement is broad-based across all the various marketing channels. The results are early, but showing solid success with an over 5 percentage point gain over last year in DenTek Guard's market share. So in summary, through brand building behind DenTek's most differentiated products like Dental Guards, the brand continues to grow sales and market share and is set up well for continued long-term growth.

With that, I'll turn it over to Chris to discuss the financials.

Thanks, Ron. Good morning, everyone. Let's turn to Slide 8 and review our second quarter fiscal '26 financial results. As a reminder, the information in today's presentation includes certain non-GAAP information that is reconciled to the closest GAAP measure in our earnings release. Q2 revenue of $274.1 million declined 3.4% from $283.8 million in the prior year.

The revenue decline was mainly attributable to lower eye and ear care category sales, owing largely to Clear Eyes supply constraints, along with lower cough and cold category sales, which we expected. EBITDA margin remained in the low 30s. Adjusted EPS of $1.07 was down slightly versus $1.09 in the prior year with lower sales primarily offset by the favorable timing of A&M as well as improvements in interest expense and share count, thanks to the benefits of our capital allocation strategy.

Now let's turn to Slide 9 for detail around consolidated results for the first half. For the first 6 months of fiscal '26, revenues decreased 4.8% organically versus the prior year. By segment, excluding FX, North America segment revenues decreased 6.1% and International segment revenues increased 2.7% versus the prior year. The first 6 months sales declines were due largely to anticipated impacts of the Clear Eyes supply chain constraints and were also impacted by the expected order timing of a certain e-commerce customer that benefited Q4 of the prior year.

We have continued to see variability in this customer's order patterns, and Ron will touch on this when reviewing our updated outlook. In spite of this variability, we experienced impressive double-digit year-over-year consumption growth in the e-commerce business, continuing the long-term trend of higher online purchases. Our ongoing investments have paid off on a consistent basis, including during important large-scale e-commerce sales day events. Elsewhere, our International OTC segment business increased in the first 6 months, helped by higher Hydralyte sales.

Although Q2 was affected by the timing of distributor orders, which we expected, we continue to have confidence in our long-term algorithm for 5% annual segment revenue growth. Total company gross margin of 55.7% in the first 6 months was up 60 basis points versus the prior year. Looking forward, we still expect a 56.5% gross margin for the year with a Q3 gross margin of approximately 56%. For tariffs, our latest full year potential cost forecast remains approximately $5 million. As a reminder, we have a diverse predominantly domestic supplier base and have only modest exposure to high-tariff countries as well as certain products that are currently exempt from tariffs under USMCA and other specific policies.

Advertising and marketing was down as expected due to the timing of certain marketing initiatives coming in at 14.1% of sales for the first 6 months. For fiscal '26, we now anticipate an A&M percentage of approximately 14%, while Q3 A&M is expected to be the highest spend rate of the year at over 15% of sales. As expected, G&A expenses were up for the first 6 months versus prior year due to the timing of certain expenses. We still anticipate full year G&A of approximately 10% as a percent of sales.

Finally, adjusted EPS of $2.02 compared to $1.98 in the prior year as improved gross margin, the timing of A&M and more favorable interest expense helped offset the impact of lower first half revenues. We continue to expect favorable interest expense through the balance of the year. Lastly, our Q2 normalized tax rate was 24.1%, resulting in a first half normalized tax rate of 23.7%. We still anticipate a tax rate of approximately 24% for the remaining quarters of fiscal '26. Now let's turn to Slide 10 and discuss cash flow. For the first half, we generated $133.6 million in free cash flow, up approximately 10% versus the prior year.

We continue to maintain industry-leading free cash flow and are maintaining our outlook for the full year of $245 million or more. At September 30, our net debt was approximately $900 million, and our covenant-defined leverage ratio of 2.4x remained stable. Our strong financial position and consistent business performance continues to enable multiple uses of cash flow in fiscal '26 that add value for our shareholders.

For the first 6 months, we've now repurchased 1.6 million shares for approximately $110 million. The majority of this was opportunistic repurchases during Q2, which we expect to continue through the remainder of the year. Next, we remain diligent around M&A, seeking leading brands and portfolios that can enhance our portfolio and business. Lastly, we still anticipate the strategic acquisition of our eye care manufacturer, Pillar5, for approximately $100 million, which we expect to close in Q3 based on the fulfillment of certain closing conditions.

With that, I'll turn it back to Ron.

Thanks, Chris. Let's turn to Slide 12 to wrap up. Halfway through the year, we are reiterating the outlook offered in August and feel good about the performance of our business in the current dynamic retail environment. This confidence stems from our proven business strategy and well-diversified portfolio that is set up for long-term growth and success. For fiscal '26, we continue to anticipate revenues of $1.1 billion to $1.115 billion, with organic growth down approximately 1.5% to 3% versus the prior year.

Most importantly, we are on track to improve Clear Eyes supply in the second half. For Q3, we're expecting revenue of approximately $282 million, down versus the prior year. The lower revenue versus the prior year is attributable to 2 factors. First, the receipt of Clear Eyes inventory late in Q2 reduces our expected Q3 revenue by an estimated $5 million. Second, we anticipate an e-commerce retailer order adjustment in Q3 due to their September order patterns above our stable consumption levels.

We realized a similar trend in March and April earlier this year, where we saw sales shift into Q4 from Q1. For EPS, we now anticipate adjusted EPS of $4.54 to $4.58 for the full year, which is the higher end of our prior range, thanks to our share repurchase efforts. For Q3, we'd anticipate EPS of $1.14. Lastly, we continue to anticipate free cash flow of $245 million or more. We have ample capital deployment optionality that has a history of maximizing value for our shareholders. With that, I'll open it up for questions. Operator?

[Operator Instructions] Our first question comes from the line of Susan Anderson with Canaccord Genuity Corp.

Nice job on the quarter. I guess maybe just a follow-up on the Clear Eyes. So it looks like you guys are on track to return to shipments. I mean maybe if you could just give some color on how we should expect that to flow through, I guess, in the rest of the year? And then also just curious while you guys kind of were out of supply, if you lost any shelf space at any other retailers? And then also just the lower distributor orders in the year internationally, I assume has nothing to do with that, but just checking on that. And then I have a follow-up after that.

Susan, it's Chris. I'll start and maybe Ron can chime in also. Just a reminder, right, back in August, we laid out the 3 elements of our long-term efforts that we're focused on best positioning our supply chain to support Clear Eyes growth. And first phase of this was to bring on 2 new suppliers to supplement our requirements. The first of these suppliers came up towards the end of Q1 and the second came up late in Q2 as we had planned.

Pillar5, third continues to make progress with the new high-speed line we've talked about. We continue to expect some benefit in Q3 with more in Q4 when they're producing for the entire quarter. So while it takes some time to ramp a new line to full capacity, Pillar5 has already produced some commercial products that we expect to ship later in the quarter. So we continue to expect sequential improvement in Q3 over Q2 and then Q4 over Q3. And then maybe just -- I'll just take the third part of your question, and Ron can take. So yes, to your point, your question on international eye care, Pillar5 does produce some eye care products for our International segment. And so they are also feeling the effects of our constraints.

So Susan, to your question around lost share in shelf space, we certainly have seen a pretty significant reduction in share as we haven't been able to keep up with prior year's levels of product. And as we communicated to our retail partners what we would be able to supply, they made appropriate adjustments at shelf.

So if you go to shelf and look, you'll see our base redness and max redness pretty much the main available product, which is what we have focused on because it was the most significant element of the product sales. So as we get the 2 new suppliers into full production, steady production in Pillar5, new high-speed lineup, we'll begin to look at recovering that shelf space and those SKU offerings.

Okay. Great. And then maybe if you could just talk a little bit about the cold/cough season. I know you guys are not as exposed as some others. It's been pretty weak to start here and then over in Europe as well. It looks like your international, which is probably primarily Asia and Australia, though, was -- performed pretty well. And then if you could just talk about what you're expecting for the rest of the season here domestically.

Yes. So when we talk about the cold and flu category, we always like to remind everybody, as you stated, it's not a significant category with high single digits for us and we're primarily in the cold -- excuse me, in the cough segment. Our international business, right, which is in the Southern Equator, did have a good season. So that was good for us. But we're primarily in the saline nasal care segment there.

But we just reported results through September, right? So 2 quarters, we haven't even gotten into the cough/cold season yet. We'll see how illness levels play out during the important Thanksgiving to New Year's time frame. So we'll see where it goes, Susan. Too early to predict, I guess, is my final comment on it.

Our next question comes from the line of Rupesh Parikh with Oppenheimer & Co.

So I guess just starting off with retailer inventories. So I know you went through the e-commerce volatility there. But just curious, outside of that, I guess, the e-commerce channel, how would you characterize the health of retailer inventories in the U.S.?

Yes. So I'll comment on our space within the store, which is what we focus on in general. Outside of the e-comm order patterns that we talked about, the rest of our inventory at retail has been steady or predictable is the way I would describe it. So there really hasn't been any significant impact on our performance in those channels. You are hearing other companies talk about it more broadly in CPG, like even in our space.

But it seems to be more concentrated in the big categories where there's multiple brands or competitors fighting for shelf space or it's lots and lots of SKUs and big shelf space where retailers may look to reduce inventories in those spaces. So think about the cold and flu section of the store. Think about the analgesic section, right? Lots and lots of space where there's an opportunity to find ways to take cash out of the system. So for us, it continues to be steady with the exception of the e-com, as we've talked about.

Great. And then maybe my one follow-up question. So women's health, you've had momentum in recent quarters. It looks like it was down this quarter in North America. So just curious what's happening there? I don't know if it's comparisons or -- just some additional color there.

Yes. So there's kind of a lot going on to take a look at 1 quarter's comp. So over the last 3 quarters or so, we've had a lot of noise in the order patterns, not only in women's health, but across that portfolio. In women's health, in particular, we had some funny comps going on last year as the Monistat VAF category changed from vertical product offering to horizontal. So it impacted retailer order patterns and inventory levels last year as they were getting rid of the old and bringing in the new.

So if you go look at it over the 3 quarters ended September or the 4 quarters ended September versus the same comps, you'll actually see that women's health is up. So I always like to go back to we continue to feel good about the work that we've done to continue to position those 2 brands for long-term growth.

Our next question comes from the line of Keith Devas with Jefferies.

I'm curious if you guys can actually just comment what you're seeing on the macro environment. It's been volatile for some time, and we're seeing consumption across a lot of consumer health categories kind of slow into the end of the year. So any color on how that's playing out in your business? And then as it pertains to the guidance, particularly on top line, is a lot of the difference between the high and low end of the range mostly related to eye care recovery? And how are you factoring the rest of the underlying performance into that?

Keith, let me make a few comments on the macro environment, and I'll let Chris comment on the sales outlook. So first of all, you don't have to look very hard to hear and see lots of news on slowing consumer trends and concerns about momentum in the consumer environment. So if you think about a retail store, right, the stores in general are under some pressure. For our part of the store, right, we sell needs-based products, right? You wake up, someone in your household is ill, you're going to reach for that trusted brand.

So we have a certain moat around our categories that have us a little bit disconnected from the general macro environments that are going on. For us, we have broad offerings that are available in broad channels with many brands having multiple price points with either different kinds of technology or innovation or different pack sizes. So we're well positioned to catch the consumer with our trusted brand as they think about maybe shopping differently or looking for different price points. So for now, we haven't seen any meaningful impact on how we would think about the outlook for the business for the rest of the year.

And Keith, this is Chris. So your question regarding the low and the high end of the range, yes, you're correct. Eye care is the primary driver behind those 2 numbers. As Ron mentioned, rest of the business, largely as expected back in August, no real change from those comments where we talked about an international step-up just for normal seasonality in the back half versus the first half and really just updating today for the timing of the early shipments on Clear Eyes and the retailer order patterns from Q2 to Q3.

Great. That's very helpful. If I could squeeze in a follow-up. Just on capital allocation and the deal environment. We saw a large consumer health player kind of taken off the board earlier this week. Curious how that plus maybe the potential for future consolidation changes, how you think about the deal environment and in terms of where to allocate capital between reinvestment, share repos and potential M&A, if any of the activity recently kind of changes how -- what your order of preference is?

Yes. So Keith, let me start, and I'll let Chris add at the end here. So for capital allocation, our priorities continue to be consistent. We would like to do M&A. We're sitting on historically low levels of leverage and M&A capacity. Again, over the next 4 years, we expect to generate $1 billion or more of cash flow that we'll be looking to do something with. And I think the quarter ended September is a great example of that. We were out in the market opportunistically buying back our shares.

We bought back over 1 million shares, which is a great way to add value to the existing shareholders, right? That was about 2% of our float during the quarter. So we've got backups to do while we wait for those right M&A opportunities. In terms of the pipeline or the kind of opportunities that might pop up, we don't think this week's announcement really changes that. They're going to continue to look at their portfolio and make decisions about what they keep based on where they see opportunities and what fits their investment criteria.

So really nothing changed there or with any of the other big spin-outs that happened -- that have recently happened or expected to happen. And again, over time, we bought from families. We bought from private equity. We bought from big pharma and/or big consumer companies. So we expect that we'll see more opportunities. And the important thing for us is we're going to continue to be disciplined and make M&A investments where it presents long-term growth and value creation opportunities.

Our next question comes from the line of Jon Andersen with William Blair.

Sorry, I jumped on a little bit late, so I may have a duplicate question. I apologize in advance. Really just 2 things. I was wondering if you could comment on taking kind of Clear Eyes out of the equation, the kind of consumption trends in North America that you saw across the balance of the portfolio, kind of where you came in? And then any particular strengths and/or weaknesses by brand and category would be helpful.

And then I just -- back to Clear Eyes, I just kind of wondering what you're assuming around your kind of ability or visibility to reclaiming maybe some of the shelf space that you've lost during this supply constraint period and how that -- what kind of assumptions you're making around reclaiming that over what kind of time period?

Yes. So let me take those questions in reverse order, Jon. So for Clear Eyes, in terms of recovering our share, recovering shelf space, it will take a little bit of time as the retailers, quite frankly, get comfortable with our ability to sustain service levels. So we'll see how that plays out over the next 2 resets. But certainly, there will be a recovery as we get the retailers' inventories filled and the shelf filled.

But the important thing to remember there is Clear Eyes in a lot of ways defined that segment of eye care. And if you go look at the categories, the categories have actually declined -- the eye redness section, the categories actually declined as Clear Eyes supply and share has declined. So that's where we're going to start with our discussions with the retailer about the importance of getting our SKUs back online because there's consumers out there waiting to buy the product, right, and looking to get back into the category. So you just don't get it. We're going to have to invest in marketing and get that flywheel going again.

But we feel good about the historic positioning and brand recognition with consumers for that. Now back to your comment about the total company's performance. And as I commented a little while ago on women's health, over the last 3 quarters or so, there's been a lot of noise, right? Clear Eyes supply has had a big impact on company performance. And we've had these order patterns of roller coasters way up 1 quarter, way down the next, way back up again. So one of the things we're looking at here is kind of TTM performance.

So if you take a look at the total company's TTM performance through September, take out Clear Eyes and adjust for FX, total company sales up about 2.5%, in line with our long-term organic expectations of 2% to 3%. The international business is up about 5%, which is what we would have expected for the international business. And then North America has been up 1-ish percent or so. Again, a little bit -- North America is a little bit below the long-term algo. But it's all pretty consistent with what we would expect over the long term.

Callouts for areas that we've seen very strong performance, GI, not just Dramamine, but Fleet as well as Gaviscon up in Canada, in particular, has done well for us. But women's health has grown over that TTM period as well as we've continued to position those brands for long-term growth and consistency in the International business, but the list could go on and on. But I'll end my comment on this question that we continue to feel good about the position of the company and the brands as we manage through this environment, right? Lots of turmoil, lots of fluidity out there in the environment.

Yes, makes sense. Maybe one follow-up. Given the gross margin rate in the first half of the year, I guess, was a bit depressed because of some of the mix dynamics. But the guide for the year implies a pretty meaningful step-up in sequentially second half to first half. What are the building blocks there? And how much -- how confident or what kind of visibility do you have in that happening? Or is it dependent on some of these ranges you've given around Clear Eyes outcomes?

Jon, it's Chris. So just note, we have a 60 basis point step-up in the first half gross margin. So really just a continuation of the benefits of cost savings and mix. The implication to your point, is a bigger step-up in Q4 that's similar to last year, largely driven by the timing of cost savings. And when we look at our International segment, gross margin revenues were impacted by mix, but also in the quarter, we were carrying 2 warehouses as we transitioned facilities and the provider for our warehouse in Australia. So maybe a little bit of lingering cost in Q3, but we would expect to see a sequential improvement in that segment as well, which will impact the total company, obviously.

Our next question comes from the line of Mitchell Pinheiro with Sturdivant & Co.

So a couple of questions here. First, I saw inventories were up $5 million sequentially in Q2. And I assume, is that a Clear Eyes -- Is that attributed to Clear Eyes? And I didn't quite understand what's happening in the third quarter with Clear Eyes, if you could just clarify that...

This is Chris, so the inventory step-up during the quarter, no, is not really Clear Eyes. I mean what comes in on Clear Eyes goes right out the door. So when you recall that we had a very large order from our e-commerce retailer in Q4, and we've kind of been correcting on that for several brands. So that's kind of not one particular thing, just across the board.

And then for Q3, even with the about $5 million we received very late in Q2 that we kind of took out of Q3, we're still expecting sequential improvement in Q3 as we have longer periods with the 2 -- one in particular, but the 2 new suppliers that came -- have come online already for Clear Eyes and then some commercial product, the very beginning of commercial product coming out of that high-speed lineup pillar.

Okay. And then -- so from the A&M point of view, it's going to be your highest spend in Q3. Any particular initiatives there that you're focused on?

No, not particular, just really driven -- we built it from the brands up. So the timing of new product innovation could be impacting that. And there is some seasonality to some of our brands and our spend associated with that, but nothing in particular or one thing.

And then on the e-commerce order variability, is that just something that you're just going to see going forward? Or is there something unusual happening sort of with your e-commerce customer? Or is it -- is there new buyers, new -- how is -- how should we think about the variability there?

Yes. So Mitch, it's hard to predict. We don't get any insight from our e-com customers around their planned timing of their orders or what they're doing with their inventory. So our focus is on being prepared to have high service levels during these peaks and valleys. So that's the way we think about it. We dig into consumption to understand what's going on with that element of it, managing our investments by brand to find opportunities to continue to do well there.

So we always go back to, at the end of the day, we want to win with consumption and grow our share and grow with the customers who are showing up in increasing numbers in our categories and be positioned to just provide the best service we can based on when our customers no matter who they are when they decide to order.

And Mitch, I would also just comment that through our distributor, we don't think this is unique to us, maybe a different size customer to some other larger companies that may not talk about it, but we certainly don't think it's specific to Prestige.

Okay. And then sort of related to that, as you reflect on the Clear Eyes issue and the suppliers, like you have over 100 third-party outside suppliers. And I'm wondering whether -- as you look at this, are there any other areas or candidates that you'd consider bringing in-house to have sort of better control? Is that -- have you thought about that?

And then -- and related to that -- and I know maybe this is a one-off incident to Clear Eyes, but is there -- do you have any -- do you think you need more inventory to carry higher levels of inventory going forward? Maybe not a lot, but do you think there should be increased emergency sort of inventories that would be sort of higher than historical levels?

So Mitch, let me start with your comment on the suppliers. Yes, we have well over 100 suppliers. It's really a function of our broad product offering, right? We offer everything from tablets to sterile eye care products and everything in between, we take advantage of our Fleet facility in Lynchburg, and we've brought in a couple of products over the last few years to take advantage of what they do to give us an advantage in the market. And eye care is a unique situation that's evolved, right?

Available sterile eye care capacity over the last 10 years has just gotten smaller and smaller each year over the 15, 16 years I've been here, I've seen it just decline. So we got to a point where it made sense given our focus on sterile eye care, right? We added TheraTears. We've had meaningful growth on Clear Eyes. We've got a nice International business around sterile eye care. It made sense for us to invest and bring that technology in-house. But for the rest of our portfolio, there's plenty of external available capacity for the things that we need. So there isn't anything else, no other meaningful shoe to drop that we would expect that would drive a change in bringing stuff in-house. I'll let Chris comment on the inventory and service.

Yes, Mitch, certainly, customer service is our #1 priority. So there may be little pockets, as Ron mentioned, where we'll look to increase safety stock for some of the other brands, but nothing material that you'll likely hear us talking about on a call like this.

Okay. Yes, I have a couple of questions on the dental care enthusiasts, but I'll save that for offline.

Our next question comes from the line of Anthony Lebiedzinski with Sidoti.

So I wanted to follow up. I think, Ron, you said that as it relates to Clear Eyes, once the supply improves, you will need to invest more into marketing. So typically, Prestige has spent roughly 13% to 14% of its revenue on A&M. How should we think about that once we hopefully get into fiscal '27, things are kind of back to normal? Do you think that ratio for A&M will go up? Or how do we think about that going forward?

Yes. So going forward, I didn't mean to imply that we would be spending more as a company, if I did. But we'll get back to looking at reallocating A&M and spending the right amount compared to the opportunity. So spending marketing on Clear Eyes when we can't deliver enough didn't make sense. So it was reallocated to other brands to invest in anything from trying to accelerate NPD or innovation or take advantage of the momentum in the marketplace that's out there. So we'll get back to reevaluating what the right level of A&M versus the expected return on sales going forward. So we'll continue to be disciplined around having the right level of investment.

That's good to hear. And then as it relates to private label competition, are you seeing kind of more of the same? Or has anything changed meaningfully in the products that you guys sell?

Yes. No real change in market share or differences in impact from private label. You may get the private label players making comments that they're seeing share gains in this environment. As a matter of fact, this week, I think there was announcements out on that. But again, they're focused on different spaces than we are, right? Think tablet and analgesics, think about the cold and flu, smoking cessation. So it really isn't impacting us at this point.

Our next question comes from the line of Doug Lane with Water Tower Research.

Did you quantify the amount of that pull forward you think happened with the online retailer into the second quarter from the third quarter?

We talked about -- Doug, this is Chris. We talked about the Clear Eyes timing of about $5 million, and the majority of the rest of the beat was attributable to that retailer order.

Okay. Got it. And then you mentioned in Clear Eyes that third quarter should be better than the second quarter and the fourth quarter should be better than the third quarter. Are we all the way there yet by the end of the year? Are we still going to be catching up in 2027?

By the end of the year, we should be producing at a level where we're kind of already there, right? The timing of how we get that through to retailers and get it #1 on their shelves and then back in their warehouses and then build our safety stock, that will probably flow into fiscal '27 a bit.

To just to add some color to it in a different way. We expect by the end of our fiscal year that all the changes that we've been making in the Clear Eyes supply chain will be implemented and in place. So the 2 new suppliers will be in place and the new high-speed line at Pillar5 will be in place, and we'll have control and ownership of the facility, Pillar5, at that point as well.

Right. Pillar5 closes in Q3. Does anything change? Or are you already acting like you own it? Or you have to do more things that we don't know about once you own it?

Yes. So we've been partnered with Pillar for a number of years, Doug, we're certainly involved at a very deep level in the organization there and been partnering with them even before the ownership change was contemplated. So what we talked about on the last call when we announced the acquisition was essentially just we want to run this for the long term. As Ron said, there's scarcity and availability for sterile eye care out there. And we just think our -- the needs of the business to better align with our long-term focus on the category made sense for us to acquire it.

Okay. That makes sense. And just one last thing. Have you talked about how you're going to finance the $100 million?

Primarily cash on hand.

I am showing no further questions at this time. I would now like to turn it back to Ronald Lombardi for closing remarks.

Thank you, operator, and thank you to everyone for joining us today, and we look forward to providing further updates on our next quarterly call. Have a great morning.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Okay. Good afternoon, everyone. Thanks for joining us. I'm Ron Lombardi, Chairman and CEO of Prestige Consumer Healthcare, joined by Christine Sacco, our Chief Operating and Financial Officer. So today, we're going to give an update and talk a bit about our business. I'll start things off, and I'll turn it over to Chris, who will wrap up today's discussion.

So with that, let's jump into the slide that I always like to present and talk about to set up the idea of Prestige Consumer Healthcare. If you've heard us talk in the past, we describe ourselves as looking for niche categories where brands can compete and be successful over the long term. And niche doesn't necessarily do a great job of describing the categories that we compete in or the reach that we have with consumers. And I think this slide up here does a great way to, I think, add color to it, right?

So every year, we sell enough Clear Eyes and TheraTears and our other eye care brands to treat 12 billion irritated eye occasions, right? Huge number, huge amount of consumer contacts. We treat 650 million sore and dry throat occasions each year. With our BC and Goody's powdered analgesic brands, we help treat about 17 million pain occasions each week, including hangovers for those of you who may be familiar with the brands. And Monistat, we help women treat about 8 million vaginal yeast infections every year. So this gives you an idea of the breadth and depth of connections we have with consumers.

Although my favorite statistic about connections with consumers is our Fleet brand. right? We sell enimas and solid suppository products. And if you take each of the solid suppositories that we've made over the last 10 or 12 years and stack them end to end, you almost get to the moon. So about 240,000 miles of solid suppository relief over the last dozen years or so. So we really do have deep and long connections with consumers.

When we talk about our business, we often break it up into some different categories. You see on the chart, GI is our largest category followed by women's health. Eye and ear care is third and then followed by skin care and analgesics. But if you dig into each of these categories, you really see that we participate in very different ways in the GI category. So we've got Dramamine, which is the leader in motion sickness and nausea treatment and prevention, very different than fleet enemas, which is very different than our Hydralyte hydration product that we sell mainly in Australia and Australasia, but we have the rights for in most of the rest of the world.

And then same thing, if you go into the women's health care segment, we have Monistat and Summer's Eve, again, very different kinds of products that get lumped into the women's health. So we have a very diverse set of brands that treat a very diverse and different set of disease occasions and illness occasions that people may run into. And this diversity gives us a lot of benefits, and we'll talk about some of those benefits in more detail in a minute here. But it really allows us to deal with the ebbs and flows in illness levels that may happen in a given year. So for example, in the skin category, we have CompoundW and Nix lice treatment. This actually is a low lice season incident levels this year, right, back-to-school, but it's not enough to move the needle and impact the total performance of our business. So over time, some of these brands will do better than the average we would expect for them. Some are a bit below and some of them are right in line with what you'd expect for illness occasion levels over time. So lots of benefits to this diverse portfolio of brands.

So let's talk about the pillars that create value for our shareholders, right? How do we think about driving value and creating value? It always starts with doing a good job with the business you have, right? On the slide up here, we've described it as investing for growth with our proven brand-building playbook, and I'll give you some examples over the next few slides. One of the attributes of Consumer Health care is a very strong financial profile. And that's the second element of our value creation proposition. Strong gross margins, strong EBITDA margins in the low 30%. That, combined with low cash taxes and low capital spending delivers industry-leading free cash flow. Last year, we delivered about $240 million or so, $242 million of free cash flow. I think our outlook for this year is north of $245 million of free cash flow.

And those are not one-off levels of performance for us. We have a very long history of solid free cash flow that empowers the third value creator for us, which is a platform that allows us to have capital allocation optionality, right, whether it's being active in M&A, buying back our stock or delevering, which we've done very rapidly over the last 4 or 5 years, getting the company to the lowest level of leverage we've had since the company went public back in 2005 or so.

So that's how we think about creating value, right? Do a good job with the business we have, growing the brands that we have, delivering solid and consistent financial results and free cash flow and then using that cash flow to create value over time. And down at the bottom, you can see what our 5-year CAGRs were for the end of the last fiscal year. Revenue grew about 3.5% organic growth, 2.5% and our EPS grew almost 9% during that same time frame. So very solid and repeatable levels of financial performance.

So let me jump into the brand-building playbook, right? This is the -- so how do we think about growing and managing the portfolio of brands that we have. First, it all starts with understanding consumer insights and opportunities, right? How are consumers thinking about taking care of themselves, treating their illness levels, looking for and deciding what product to buy when somebody in their household, their children are ill. The second part of it is being a flexible and agile marketer, right? When we talk through some of the examples here, what you're going to find is we think very differently than most big CPG companies where we build our strategies brand by brand. We think about what is the best marketing approach for each brand based on the targeted consumers.

And that's an important differentiator for us. If we get asked, what's the secret sauce to your brand building, that's one of the big elements of it. As we think about brands individually. We also look at expanding consumer reach and the distribution of our products, right? E-commerce has been a fast-growing channel for us, not only at Amazon, but with our brick-and-mortar partners as they think about expanding their dot-com business.

And then finally, the role that new product development and innovation play in brand building. So we'll talk about these 4 elements over the next couple of slides. First, Dramamine is always the classic example we like to use when talking about building a brand over the long term. We bought Dramamine from a big pharma player back in 2011. And in the 5 years prior to us acquiring Dramamine, there hadn't been a single dollar spent on consumer marketing for the brand. And that's not a criticism for the previous owner. It's an observation of Dramamine was not an important brand for them, so it didn't get investments. We acquired Dramamine. It becomes an important brand for us. We invest behind it through marketing, through new products, through innovation over time.

And we've been able to grow the brand by nearly 5x over the 15 years or so that we have owned it. And if you look at the top left, in 2011, there was essentially 2 SKUs for Dramamine. And then over time, we built off of that base. We introduced a chewable grape flavor children's product. Prior to us having a chewable product available, if you wanted to dose your children for motion sickness, you took an adult tablet, you broke it in half and you tried to get a 6-year-old to swallow half of a tablet, right? That's not rocket science to go talk to the consumer and ask the mom, how do you think about treating your child and they tell you it's a hassle, right? How do I know I got the right dosage? How do I know it's half? What if they only take half the pill and spit the other half out kind of thing. So it's an example of the consumer insight that we worked on.

Another consumer insight that led to new products is we heard from people that said, I trust Dramamine for motion sickness. I know it's going to work. I also know it's going to make me drowsy, and that doesn't work for me because I'm driving the boat, I'm driving the car. I'm going on a cruise. I don't want to be drowsy. So we introduced non-drowsy forms of Dramamine to help connect with that insight as well. And then finally, again, as we talk to consumers and we talked about motion sickness, we often heard back, well, I don't know about motion sickness. I just feel nauseous and I feel like I'm going to throw up. So that insight led us into the nausea category. And again, new products, new forms, chews and lozenges to deliver clinical doses of ginger as a way to help treat nausea. And we quickly became the #1 brand in the nausea category.

So great example of over the long term, we can continue to bring insights and invest behind it. And we're just getting going on Dramamine. Even though it's grown by 5x, there's no reason it can't grow by multiples again over the long term.

So let's talk about portfolio diversity and being an agile marketer, right? If you've heard us talk over the last year, we've talked about supply constraints and challenges we've had with Clear Eyes. So as we've dealt with limitations around shipments, we stepped back and reevaluated our marketing plans, right? We don't want to market a product and drive people to the shelf to find empty shelves and not find the product they're looking for. So we rediverted some of those dollars away from the Clear Eyes brand to other eye care products, particularly TheraTears, Debrox, which is an ear wax cleaner and Stye, where we look to better connect and do more advertising for those brands to connect with consumers. And on the right, you can see that we've just launched a new marketing campaign for TheraTears as a result of those extra funds being available, and we'll show that now, if we can call that up.

[Presentation]

Great. We talk to consumers about TheraTears, feels great. I know it's working. It'd be great to know why, right? So we're furthering that connection with the consumer and reminding them, hey, here's what's unique about TheraTears versus the other competitors in the dry eye space as to why it's going to feel and work great in your eyes. The other thing that we've done with TheraTears is we've been able to finish work to get a 12-hour soothing comfort claim, right? It works all day long. A couple of drops in your eyes in the morning and your eyes will feel great and refreshed all day long. So another example of the marketing playbook where we can go out and do a clinical study to support what consumers are already telling us about the product, which is I put it in the morning -- put it in my eyes in the morning and it feels great 10, 12 hours later.

So a couple of examples about our agility and our ability to make changes in our marketing investment plans during the year to take advantage of different opportunities.

So let's move on to distribution and e-commerce. On the left side in the top, you'll see that we have had a lot of success investing behind e-commerce and partnering not only with Amazon, but our brick-and-mortar partners to expand our product offering and investments so that we connect with consumers when they go to their chosen dot-com platform to look for our products. We've been able to take our dot-com business from about 4% of sales around 5 years ago. We've grown it by 4x. At the end of last year, we were about 16% of sales. for our dot-com business, right? 2/3 of that is Amazon. We continue to do very well on that. We bring those learnings to our other brick-and-mortar partners to help them with what they're trying to accomplish.

But it really works for us. We know how to connect with consumers. We know how to fulfill through Amazon for that and are able to provide up-to-date content that drives not only awareness, but traffic and conversion for the brands that are out there.

The other benefit that we don't talk a lot about in terms of dot-com is we're able to have much broader distribution for our tail brands, right? The best way to describe our tail brands is really loyalty brands or heritage brands. They're brands that consumers have used for very long periods of time that they trust, but they can't find in brick-and-mortar because the velocity isn't necessarily enough to support a listing at Walmart, for example, or in the drug channel. So some examples would be like Beano does very well for us on dot-com. You might not be able to find it broadly in brick-and-mortar as an example.

But we have about 50 brands that fall under that category that if you go out to Amazon or some of the other dot-coms, you're going to find those unique brands that you might not find in the store. So it's all of those elements. We look for every opportunity to connect with consumers and provide them the products whether they're going into a convenience store, drug, mass, grocery, dollar or their dot-com. So again, we continue to expect success on this going forward and look forward as a rapidly growing channel for us.

So finally, in this area, we'll talk about new products and innovation. We often get asked, what are the elements of your 2% to 3% long-term organic growth outlook? And we always start by saying, we think the categories that we grow in -- that we compete in grow, let's call it, 1%, right? Illness levels for life, as an example, they don't change dramatically year-to-year. They generally follow population growth. So that's the first part. The next part of that algorithm is going to be driven by growing the categories that our brands define. And we do that by bringing in new products, new innovation and marketing so that non-treaters come into the categories, low treaters expand. Mistreaters get connected with the right pharmaceutical ingredients to actually help them treat their disease state.

You can drink all the ginger ale you want. It's probably not going to stop you from getting motion sickness in a car if that's what bothers you. But Dramamine will do it, right? And I gave the examples of the new products there. But over the last year up on the slide, we've got 6 or 7 examples of some new products that are doing great for us. We've got a Dramamine advanced herbals for kids, right? So if you're looking to give your child maybe not a medicine, but a ginger-based approach to helping them deal with nausea, we've got a great product for kids up here.

We launched Summer's Eve whole body deodorant in the feminine hygiene aisle, and it's doing fantastic. It's the #1 selling whole body deodorant in the hygiene section, right? We want to play where we can be successful in putting Summer's Eve in the deodorant aisle against the great big CPG companies who've got tons of money behind their whole body deodorants, whether it's a spray or a cream, we're not going to be successful there. People aren't thinking about Summer's Eve in the deodorant aisle. When women go to shop in the feminine hygiene aisle, right, they know what Summer's Eve's proposition is. It -- and this new product delivers against the expectations. Great fragrance, efficacious and great feel on the skin. So that's off to a great start for us.

We've got a new Goody's mental alertness with some extra caffeine to get you going when you need it. Fleet has expanded into the stool softener category. So Fleet has primarily been associated with enemas and suppositories, right? That's when you're really desperate and you've exhausted every other option to help cure your constipation, right? Fleet had you covered with enemas and suppositories. We're now looking to connect with you earlier in your constipation journey. You're going to trust Fleet as efficacious and that it's going to work.

We've got a couple of new flavors in Hydralyte, again, to expand with that household penetration, get folks to use Hydralyte more often as part of a more frequent hydration regimen to keep yourself healthy. And then finally, on the right, as we've looked to expand how Monistat connects with women, we've got an addition to our care line under the Maintain, a vaginal suppository to help with care over time.

So new products can come in lots of different ways, whether it's an extension into kind of a new subcategory, a new flavor or a new form is how we think about it. Again, all based on consumer insights.

And then finally, before I turn it over to Chris, we have a fantastic and fast-growing international business, largely anchored around our Care Pharma business in Australia. It's been growing in the mid-teens on average over the last 5 years or so ahead of our long-term expectation of it growing in kind of the mid- to high single digits. But again, it's due to the same approach we take in North America, which is great brands, long-term brand building and investments in them to connect with consumers and help them take care of their health.

So with that, let me turn it over to Chris. Thanks, Chris.

Good afternoon, everyone. So when Ron joined the company about 15 years ago, the company went on a journey to morph the portfolio to become the pure-play OTC company that we are today. So if you took this chart and you're looking at leverage down the number on the bottom there, and you actually went back a few years, you'll see that we touched 5.8x, about 3x in the company's history. We did that because we needed to morph the portfolio, as I mentioned. So the power of our cash flow, which I'm going to talk about, has really driven our ability to go, I think Ron mentioned, 2.4x at the end of our Q1, we're a fiscal March 31 company, is the lowest level of leverage that the company has seen.

The reason we have such strong conversion with free cash flow starts with a variable cost model. We manufacture about 15% to 20% of our product in-house. The nature of OTC, as Ron mentioned, right, you go into the store, someone in your household is sick, you're usually not looking to save $1, not an area where we get into promotion in the categories that we compete in. I can't really get you to buy head lice if no one in the house has head lice by doing a Bogo or whatnot. Low CapEx spend, given the model I just talked about, 1% to 3% of sales a year is, generally speaking, our capital spend. And then we still are benefiting from some acquisitions that we did in the past that drive about a high teens cash tax rate compared to our effective tax rate of 24% you see on the balance sheet. So all of those things really lead us to this consistent and strong free cash flow that we talk a lot about.

So what are we going to do with that cash? If you looked at this chart a few years ago, when leverage was pretty high, you would have seen #2 and #4 were reversed. Obviously, we talked about investing in the brands that we have. But over the next 4 years, we're going to generate about $1 billion of free cash flow. And the power of that today compared to the power of that some years ago is that back in the day, we had to use all of that to delever, right? Now as we sit here, we have optionality. The #1 use of cash that we prefer to use right now is M&A, and we'll talk a little bit about that. After that, we look to do share repurchases. You could probably expect us each year in the first quarter to offset dilution. And then beyond that, opportunistic repurchases. We've talked about a $300 million multiyear authorization from our Board. We have over $200 million of that left. And at today's prices, you'd probably see us be active in that arena.

And then fourth, very attractive long-term debt. We don't have any variable debt left at this point. So we'll likely build some cash on the balance sheet. So again, where we used to use all of our cash flow for deleveraging and we needed to, we don't need to do that anymore. So we actually can do all 4 of the things that you see on this page, and we're doing them this year. So different lens from our perspective.

So again, we get asked a lot of questions about M&A. And what's out there? Are you seeing and what's the environment like? And we often say it's more of the same. And this kind of speaks to why we were trying to communicate. When you think about the pie chart up on the top left there, you'll see even the large players who are here, it's still very highly fragmented from an industry perspective. And then if you look at the numbers below, you can see that consumer health care, only 27%. The top 3 brands are only holding 27% of their category. So it is highly fragmented, which creates the opportunity. I like to use the example that you don't go into a store and say, I have a skin problem. right? You say I have eczema, I have a wart. I have rosacea, I have acne. That creates a lot of opportunities.

We see whether it's family members, PE firms are always turning things, large players looking to get rid of their tail. We've bought brands from all of those players, and we'll continue to be active in that space. Again, as I mentioned before, at 2.4x leverage. We look to -- right now, we have about $1 billion of acquisition capacity. That's not going back. You're very unlikely to see us go back to leverage levels that you saw in the past, right? Market has responded. We're in a different world. This is assuming we essentially get ourselves in a couple of quarters. This is how we think about it. 2 or 3 quarters, we're back down to that 3x or less leverage level after we do an acquisition. So that's how we think about acquisitions. And again, the size could be small. As Ron mentioned, we were able to grow Dramamine quite significantly. It was a $20 million brand when we bought it to larger transformational acquisitions with $1 billion of capacity today.

So the road ahead. While we were disappointed to adjust our full year numbers for this fiscal year, really isolated to 2 things that we think we have a very good handle on, and we are addressing. And so Ron mentioned capacity constraints for Clear Eyes. We also recently announced our plans to acquire our largest provider of Clear Eyes, who has a high-speed line coming on as we enter our fiscal third quarter, which will start on October 1. We also have 2 new suppliers who are coming online at about the same time. One is online already. The other will come online around that time frame. And so we feel that we have a good handle on the issues. And as we move forward, again, the attributes of the business are unchanged, and it really speaks to the diversification of the portfolio that Ron touched on.

Even with the adjustment of our top line for this year, we're still holding our free cash flow outlook of $245 million or more. So I think that's an important thing to note.

So we talked about -- a little bit touched on the long-term growth algorithm. So Ron mentioned how we get to that 2% to 3% of organic growth. And then the power of the cash flow, whether it was paying down debt buying back shares, earning interest on the balance sheet enables us to take that EPS growth at a 6% to 8% growth rate above, obviously, our top line growth. And then we think of M&A as additive. You're going to hear -- when we think about M&A, the keyword we always talk about is discipline. It's not that we couldn't have bought things over the years, but we remain disciplined to the long-term view of these brands and what they can do in the space. And we think that served us well over the years.

But M&A, we've got a very good playbook for M&A as well, very good at integrating things very quickly, and we'll continue to stay disciplined, but the -- any M&A would be additive to this algorithm you see here.

So lastly, just to sum it up, diversification is huge. We saw it during COVID where brands like Dramamine almost had no sales, but no one wanted to go to the doctor. So brands like Monistat had a tremendous amount of sales. Then we saw it all reverse in the opposite direction afterwards. So again, just the power -- when you look at that pie chart, it's diversified way beyond what you see in that pie chart, and we think that serves us very well. And then also just the leading positions that we're holding in our categories, right? 2/3 of our sales come from brands that are holding a #1 position. And in many instances, it's a meaningful position. It's a 50% share, a 60% share with maybe a very small branded player behind it and then private label.

We talked about the brand building playbook. It starts with consumer insights. It starts -- that's in the heart of everything that we're doing. We're going to hit a lot of singles and doubles. And so again, often it comes from consumer insights and you look back and you say, well, no kidding. I can't believe there was no Dramamine for children, but there wasn't. And so we'll continue to use those insights to move forward. We talked about our financial profile. Again, our ability to generate strong and consistent free cash flow has been happening year in and year out. We see that happen over many different kinds of economic environments.

Scalable platform. People say to us, well, what do you need if you buy a couple of brands tomorrow? We probably need 1 or 2 people in operations and a few people in marketing. The brand, the platform is there. It is extremely scalable. And again, we think a lot of opportunities out there, which takes you to the repeatable M&A strategy. We'll continue to stay disciplined, but there is a lot out there. We continue to look at all of them. And when it fits our very well-defined criteria, we'll move forward. So all of those things kind of put together lead us to why we think we can drive long-term shareholder value for everyone.

I don't know if there's the ability to open this to questions. Open this up to questions, if anybody has any.

[indiscernible] a lot of things are coming out of the portfolio. What are the kind of valuation?

Sure. We haven't really seen a meaningful shift in valuations for the kinds of things we're looking for. Remember, we're looking for brands that have a leading position in niche categories. And so when we're competing with private equity who is the primary competition when we're going after a brand or a company or a deal, we have a much lower cost of capital than they do. And our platform is way more sophisticated and scalable, I believe, than many of theirs. You think about quality and regulatory and pharmacovigilance and all the things that you need to be able to do, we're certainly in a different position than some of those other companies.

[indiscernible]. Just maybe a quick one given kind of feedback we've heard from your peers about the shifting in channel -- channels from, let's say, from the traditional kind of drugstores, OTC to more club and retailers. Have you thought about how that may affect your business? And kind of can you summarize the relationship you have with kind of both channels?

Do you want to take it? I can start. I think my microphone is on. So channel shift isn't something new for us to deal with, right? If you go back to 2019 before we had this big disruption on -- from COVID in terms of where people shopped, right? We saw the drug channel was facing some headwinds, grocery and regional grocers had some headwinds. mass and dollar were doing well during that time frame. You fast forward to today, and it's kind of like we're back to where we were in 2019, right? We've got retailers that are doing well and some that are challenged.

The way we approach it is we want all of our retail partners to be successful. So we try to develop unique programs with each of them based on the positioning a brand may have in a drug channel. So it's easy to say, oh, geez, the drug channel is struggling. But it's often the first shopping point for someone who's looking to treat a serious disease. So drug is an important channel for Monistat, for lice, for example. So we're going to look to partner with drug and make the investment to support the success of those brands there, but scale back investments where shoppers may be going to a different channel to look for a different price value proposition, whether it's to mass, whether it's to the convenience of Amazon, where they can get great price transparency and get it delivered the next day or the same day depending on where you are.

So it's not -- we don't take the approach of this channel is suffering, so forget that, and we'll go someplace else. Shoppers are still going into all these retail channels, and it creates an opportunity for us to work with the retailer to help them win and for us to connect with the consumer and win wherever they're choosing to shop.

Yes. And just to piggyback on that, we're channel agnostic from a margin perspective. We used to say that to people. I don't think they believed us. And overnight in about a month during COVID, we doubled our Amazon sales from -- our online sales from 5% to 10%. And I think our margin was slightly up that period. So it doesn't happen that way by accident, right? We do not offer the same product offering in Dollar General as we do in Walmart as we do on Amazon as you have to manage it that way. And we have absolutely -- that's been a priority for us from day 1. So we just want this consumer to take the product off the shelf wherever they're going.

Great. Thanks for taking the time, everyone. Appreciate it.

Have a good afternoon.