Prestige Consumer Healthcare Inc. Small-Cap Virtual Conference

Sure. Good morning, everyone. This is Chris. I apologize, I'm not on video. I'm having a little trouble here in a hotel room, but hopefully, I'll pop up soon for you all. Prestige, we're marketers and stewards of leading brands in niche categories, needs-based categories, brands that consumers know and trust that have a long heritage with consumers. Our investment thesis is essentially we've been executing on a three-part strategy, three-pillar strategy over the past several years. The first is to invest behind our leading brands, use consumer insights to drive awareness to either get more users into categories that we compete in, bring users that are light users in to become heavy users, and use consumer insights to do that, to grow categories. We do that. We look to our second pillar, which is essentially our operating model.

These are over-the-counter medicine, OTC brands that are important to consumers. They come with strong gross margins. Our gross margin guide is about 57% for the year. We use that money to invest in A&M to drive top-line growth, and we maintain our EBITDA margin in the low to mid 30% consistently. Again, brands that consumers need when they're not feeling well. The consistency and stability of the P&L leads to our third pillar, which is essentially our strong free cash flow, industry-leading free cash flow. The guide for this year is $270 million or more. We use that cash flow to create optionality for our shareholders. That comes in the form of additional M&A, reducing debt to drive that EPS growth beyond our top-line organic growth. We've done share repurchases over the years.

So creating capital allocation to create value for the shareholders, and that's probably Prestige. If I had to sum it up quickly in a nutshell, that's what I would say.

Yeah, sure. FY 2026 in the near term, certainly our biggest challenge as a company to top-line growth has been Clear Eyes, the Clear Eyes brand, which I am sure we will get into some more details on. It has been limited in terms of our supply, not on the demand side, not on the consumer side, not on the retailer side. It is really on the supply side. I like to say as fast as we can make it, we can ship it. That was really the biggest restraint to our organic growth. The rest of the portfolio has been performing well. Consumption has been strong for most of our brands. When we went out in May, we tried to frame, I am sure we will get into our acquisitions.

We tried to step back and show folks, "Hey, this is our model for the next three years." It comes with organic growth of 2%-3%, came with a top-line CAGR of about 10%. The power of the cash flow that I just talked about in terms of deleveraging led to a high single-digit EPS growth. Again, largest variable at this point in terms of the guide, even for FY 2027, which is 1%-3% organic growth. The biggest mover of the 1% versus the 3% will be in the Clear Eyes supply.</seg <seg id="3">Mm-hmm. How has consumer shopping behavior evolved across your core categories and sales channels, particularly as we still deal with a challenging and dynamic operating environment?

I'll take that one, Anthony. If we kind of step back and you see a pressured consumer in other sections of the store when they shop every day, our category is a little bit different. When consumers are taking care of their everyday health, it is typically not the time they are looking to trade away from their trusted brand that they have used for 30 years. So, a reminder to everyone, we sell needs-based products that Chris introduced at the start of the conversation. When it is needs-based in nature, you either need it or you do not, and you go to that trusted brand. For the most part, our products continue to be bought on a consistent basis. We have not seen meaningful trade away from our products to, say, store brand or other competing products out there.

What we have seen in the challenging environment that is out there is really the channel shift. We see consumers gravitating from perhaps higher ring channels like CVS and Walgreens into more value-oriented retailers. Think Walmart, dollar stores, even Amazon. That trend has been going on for a while. We continue to see that in the marketplace as consumers kind of seek out value. The only other point you should think about there is that we also, although that shift is happening, we manage all of our channels to be product agnostic in terms of profitability and availability. We ensure our goal from our sales team and their objectives is to make sure, hey, all of our products are broadly distributed, so wherever the consumer is showing up to shop, that the product is there and available to buy.

From a profitability standpoint for us, we are managing our assortment and our relationship with the retailers to ensure it is not margin dilutive in any form as those channel shifts are occurring. That is how we think about the evolving environment.

Yeah, most of it is volume. When we think about pricing, other than obviously through COVID, where we were able to offset inflation dollar for dollar, where we were still, by the way, growing volume, just at a lower rate. We are mostly volume driven. So how we get price in our categories is largely through innovation, right? We come up with a better proposition for a consumer and our edict to our folks is, every new innovation has to be margin accretive to the brand.

Innovation is really important in OTC. Every one of our strategic plans has a path towards innovation. That is how long it takes to put them out there. So it is consumer for new innovation to get out there. It is what distinguishes us from private label and other brands. That is largely how we get price for the journey of volume driven.