J a n u a r y 1 2 t h , 2 0 2 1
ICR Conference
Safe Harbor Disclosure
This presentation contains certain "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements regarding the Company's expected financial performance, including revenues, EPS, and free cash flow; the Company's ability to adapt to and perform well in the current changing disrupted environment, including ensuring the health and safety of employees and maintain business continuity; anticipated inventory reductions; the Company's ability to have a disciplined capital allocation strategy, reduce debt and create value; the expected market share and consumption trends for the Company's brands; and the Company's disciplined capital allocation strategy. Words such as "trend," "continue," "will," "expect," "project," "anticipate," "likely," "estimate," "may," "should," "could," "would," and similar expressions identify forward-looking statements. Such forward-looking statements represent the Company's expectations and beliefs and involve a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include, among others, the impact of the COVID-19 pandemic, including on economic and business conditions, government actions, consumer trends, retail management initiatives, and disruptions to the distribution and supply chain; competitive pressures; unexpected costs or liabilities; the financial condition of the Company's suppliers and customers; and other risks set forth in Part I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended March 31, 2020. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this presentation. Except to the extent required by applicable law, the Company undertakes no obligation to update any forward-looking statement contained in this presentation, whether as a result of new information, future events, or otherwise.
All adjusted GAAP numbers presented are footnoted and reconciled to their closest GAAP measurement in the attached reconciliation schedule or in our November 5, 2020 earnings release in the "About Non-GAAP Financial Measures" section.
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Contents
- Introduction to Prestige Consumer Healthcare
-
Brand Building in a Dynamic World
III. Financial Profile & Capital Allocation
IV. The Road Ahead
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Introduction to Prestige Consumer Healthcare
Who We Are: Helping Consumers Care for Themselves
eye drops per year
throat drops for every cold season
doses of pain relief per week
infections treated annually
Source: Company records
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Diversified Portfolio of Leading Consumer Healthcare Brands
Total Sales* by Category
Oral | ||
Care | ||
Dermatologicals | 10% | Women's |
Health | ||
11% | 26% | |
Eye & | 12% |
Ear Care |
12% | 18% GI |
Cough / | 12% |
Cold | Analgesics |
* FY'20 Revenues, Excludes Other OTC (less than 1%)
#1 Brands Represent Two-Thirds of Total Sales*
#1 Feminine Hygiene
#1 Vaginal Anti-Fungal
#1 Enemas & Suppositories
#1 Motion Sickness
#1 Powdered Analgesic
#1 Sore Throat Liquids/Lozenge
#1 Allergy & Redness Relief Drop
#1 Wart Removal
#1 Lice/Parasite Treatments
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Proven, Consistent & Repeatable Strategy
Cash Generation
Capital Allocation Options
- Positioned for long-term 2% to 3%(1) Organic growth
- Brand building to drive long-term success
- Industry-leadingfinancial profile
- Consistent and strong FCF generation
- Enables capital allocation opportunities
- Disciplined capital allocation priorities
- Prioritization of debt reduction & liquidity
- Opportunistic share repurchases in FY20 & 1H21
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Brand Building in a Dynamic World
Investment Across Key Brands Drives Organic Growth
Invest for Growth | Manage for Cash | ||||||
Power Core | Core | International | Other OTC | ||||
50% | 10% | 10% | |||||
Sales Contribution to
Portfolio (Approximate %)
30%
# of Brands | 5 | 11 | 18+ | 40+ |
Representative Brands | ||||
Long-Term Organic | ||||
3%+ | 1-3% | 5%+ | -4% to -8% | |
Growth Target | ||||
(approximate): |
Long-Term 2% to 3% Sales Growth Target
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Portfolio Positioned To Benefit From Changing Environment
Consumers Seeking Trusted Brands
Increased consumer focus on self-care and hygiene
Accelerated trend towards shopping online
Continuing to benefit from investments and diverse positioning
I C R C o n f e r e n c e 2 0 2 1 | 10 |
Playbook Remains Consistent in an Evolving Retail Environment
Retail Traffic Driver
- Need-basedproducts sought by consumers, beginning a basket of purchases
- Retailers dedicating more shelf space and focusto health & hygiene "self-care" product
- We are retail channel agnostic; placement & content opportunities in e-commerce and other channels
Long-Term Brand Building Toolkit
- Develop and understand consumer insights
- Wide-rangingand flexible brand strategiesfocused on growing categories
- Leverage long-standingbrand heritagewith focused digital and content marketing
- New product and claim developmentthat are key to category growth
- Channel developmentopportunities
Brand-Building Differentiates versus Private Label and Branded Competition
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Nimble Marketing Efforts Balanced Against Long-Term Strategy
Long-Term Growth Toolkit Wide-Ranging
Professional
Marketing
Brand Innovation &
Extensions
Digital Marketing &
Content
Wide Channel
Availability
Real-Time Agile Marketing Strategy Across Portfolio
- Engaging customers through campaigns both in-store and online
- Investment in current initiatives leading to strong momentum
- Consumer brand promise: Brighter, whiter, and more comfortable
- New campaign across all key touchpoints
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Winning in Consumer Shift to Online
eCommerce as a % Retail Sales
+122%
- Growing eCommerce trend continued into Q2; eCommerce representing 10%+ of consumer retail sales in 1H
- Robust growth across all eCommerce partners
- Long-termfocus and heavy investment on eCommerce channel paying dividends
- Many brands in portfolio hold market share at or above offline channels
Online Tools
Increase
Consumer
Conversion
Consumers Continue to Seek Treat at Home Remedies
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Financial Profile and Capital Allocation
Cash Flow Drivers That Enable Capital Allocation
Key Attributes and Positioning
- Net Debt at September 30 of ~$1.5 billion(3), leverage ratio of 4.3x(4)
- Target leverage ratio(4) of between 3.5x and 5.0x
- Ample liquidity; $100+ million in revolver capacity
- Strong Free Cash Flow Generation
- Portfolio characteristics drives solid EBITDA margins
- Strong cash flow conversion (minimal capital expenditure outlays, low cash tax rate)
- Target approximate mid-30s EBITDA margin over time
Capital Allocation Priorities Unchanged
1 | Invest in Current Brands to Drive |
Organic Growth | |
2 | Continue Strategy of De-Leveraging |
3 | Opportunistic Share Repurchases |
4 | Pursue Accretive M&A that is |
accretive for Shareholders | |
II C R C o n ff e rr e n c e 2 0 2 1 | 15 |
…and Best-in-Class Free Cash Flow Conversion
FCF | 129% | 125% | |||||||
Conversion: | 117% | ||||||||
11% | 106% | 106% | |||||||
83% | 83% | 75% | 8% | ||||||
8% | 8% | ||||||||
58% | |||||||||
FCF | 5% | ||||||||
Yield: | |||||||||
4% | 4% | 4% | |||||||
4% | |||||||||
4% | |||||||||
CHD | CL | CLX | PG | EPC | HELE | JNJ | ENR |
Source: | FactSet data as of November 10, 2020; comparable set includes selected HPC companies |
Note: | Free Cash Flow Conversion defined as Non-GAAP Operating Cash Flow less Capital Expenditures over Adjusted Net Income; Adj. Free Cash Flow Yield defined as Free Cash Flow divided by Market Cap as of November 10, 2020 |
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Strong and Consistent Cash Flow Leads to Rapid De-Levering
Adjusted Free Cash Flow(3)
$165 | $185 | $197 | $208 | $202 | $207 | |||
$127 | $131 | |||||||
$67 | ||||||||
FY 12 | FY 13 | FY 14 | FY 15 | FY 16 | FY 17 | FY 18 | FY 19 | FY 20 |
Leverage Ratio(4)
~5.0x | ~4.3x | ~4.3x | ~5.2x | ~5.0x | ~5.7x | ~5.2x | ~5.0x | ~4.7x |
FY 12 | FY 13 | FY 14 | FY 15* | FY 16 | FY 17 | FY 18 | FY 19 | FY 20 |
Dollar values in millions.
- Peak leverage of 5.75x at close of the Insight Acquisition in September 2014
3.5x-5.0xlong-term target range
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The Road Ahead
Strategy in Place for Value Creation
Long-Term Strategy
Business Continuity
Agile Marketing
Financial Profile &
Cash Flow
- Brand-Buildingdesigned to grow categories and connect with consumers
- Strategy and tactics performing well in disrupted environment
- Continuity plans continue to protect service levels
- Investing in inventory has paid off in challenged supply environment
- Pivoted marketing efforts and returned to normalized investment levels
- Benefited from investments in winning channels wherever consumers shop
- Solid financial profile and cash flow generation
- Continued focus on debt reduction in Q2
Strategic Priorities Remain Intact
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Outlook: Staying the Strategic Course to Create Value
Top Line Trends
EPS
Free Cash Flow &
Allocation
- Business and strategy remain well-positioned in changing environment
- Market share solid and growing during pandemic environment
- Anticipate FY 21 Reported Revenue of ~$925 million
- Expect similar dollar performance to 1H; cough, cold, and travel remain under pressure
- Anticipate FY 21 EPS(5) of ~$3.18
- Strong financial profile leading to increased profitability
- Anticipate FY 21 Free Cash Flow(6) at or above $207 million generated in FY 20
- Continue to execute disciplined capital allocation strategy
- Remain focused on debt reduction
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Appendix
Appendix
-
Organic Revenue is a Non-GAAP financial measure and is reconciled to the most closely related GAAP financial measure in the attached
Reconciliation Schedules and / or our earnings release dated November 5, 2020 in the "About Non-GAAP Financial Measures" section. - Total company consumption is based on domestic IRI multi-outlet + C-Store retail sales for the period ending October 4, 2020, retail sales from other 3rd parties for certain untracked channels in North America for leading retailers, Australia consumption based on IMS data, and other international net revenues as a proxy for consumption.
- Adjusted EPS, Adjusted Gross Margin, Adjusted Operating Income, EBITDA, EBITDA Margin, Free Cash Flow and Net Debt are Non-GAAP financial measures and are reconciled to their most closely related GAAP financial measures in the attached Reconciliation Schedules and / or in our earnings release dated November 5, 2020 in the "About Non-GAAP Financial Measures" section.
- Leverage ratio reflects net debt / covenant defined EBITDA.
- Adjusted EPS for FY 21 is a projected Non-GAAP financial measure, is reconciled to projected GAAP EPS in the attached Reconciliation Schedules and / or in our November 5, 2020 earnings release in the "About Non-GAAP Financial Measures" section and is calculated based on projected GAAP EPS plus adjustments relating to discrete income tax items.
- Adjusted Free Cash Flow for FY 21 is a projected Non-GAAP financial measure, is reconciled to projected GAAP Net Cash Provided by Operating
Activities in the attached Reconciliation Schedules and / or in our November 5, 2020 earnings release in the "About Non-GAAP Financial Measures" section and is calculated based on projected Net Cash Provided by Operating Activities less projected capital expenditures.
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Reconciliation Schedules
Organic Revenue Change
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
(In Thousands) | |||||||||||
GAAP Total Revenues | $ | 237,422 | $ | 238,069 | $ | 466,816 | $ | 470,223 | |||
Revenue Change | (0.3%) | (0.7%) | |||||||||
Adjustments: | |||||||||||
Impact of foreign currency exchange rates | - | 624 | - | (729) | |||||||
Total adjustments | $ | - | $ | 624 | $ | - | $ | (729) | |||
Non-GAAP Organic Revenues | $ | 237,422 | $ | 238,693 | $ | 466,816 | $ | 469,494 | |||
Non-GAAP Organic Revenue Change | (0.5%) | (0.6%) |
Adjusted EPS
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
Net | Net | Net | Net | |||||||||||||||||||||||||
Income | EPS | Income | EPS | Income | EPS | Income | EPS | |||||||||||||||||||||
(In Thousands, except per share data) | ||||||||||||||||||||||||||||
GAAP Net Income | $ | 44,589 | $ | 0.88 | $ | 33,252 | $ | 0.65 | $ | 88,295 | $ | 1.74 | $ | 67,177 | $ | 1.31 | ||||||||||||
Adjustments: | ||||||||||||||||||||||||||||
Transition and other costs associated with new | ||||||||||||||||||||||||||||
warehouse in Cost of Goods Sold (a) | - | - | 1,407 | 0.03 | - | - | 1,407 | 0.03 | ||||||||||||||||||||
Tax impact of adjustments (b) | - | - | (344) | (0.01) | - | - | (344) | (0.01) | ||||||||||||||||||||
Normalized tax rate adjustment (c) | (5,106) | (0.10) | - | - | (5,106) | (0.10) | - | - | ||||||||||||||||||||
Total Adjustments | (5,106) | (0.10) | 1,063 | 0.02 | (5,106) | (0.10) | 1,063 | 0.02 | ||||||||||||||||||||
Non-GAAP Adjusted Net Income and Adjusted EPS | $ | 39,483 | $ | 0.78 | $ | 34,315 | $ | 0.68 | $ | 83,189 | $ | 1.64 | $ | 68,240 | $ | 1.33 | ||||||||||||
- Items related to new warehouse represent costs to transition to the new warehouse and duplicate costs incurred during the transition.
- The income tax adjustments are determined using applicable rates in the taxing jurisdictions in which the above adjustments relate and includes both current and deferred income tax expense (benefit) based on the specific nature of the specific Non-GAAP performance measure.
- Income tax adjustment to adjust for discrete income tax items.
I C R C o n f e r e n c e 2 0 2 1 | 23 |
Reconciliation Schedules (Continued)
Adjusted EBITDA
- Items related to new warehouse represent costs to transition to the new warehouse and duplicate costs incurred during the transition.
Adjusted Free Cash Flow
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
(In Thousands) | |||||||||||
GAAP Net Income | $ | 44,589 | $ | 33,252 | $ | 88,295 | $ | 67,177 | |||
Adjustments: | |||||||||||
Adjustments to reconcile net income to net | |||||||||||
cash provided by operating activities as shown in | |||||||||||
the Statement of Cash Flows | 11,374 | 14,039 | 29,775 | 28,896 | |||||||
Changes in operating assets and liabilities as shown in the | |||||||||||
Statement of Cash Flows | (3,824) | 2,932 | 9,223 | 6,927 | |||||||
Total adjustments | 7,550 | 16,971 | 38,998 | 35,823 | |||||||
GAAP Net cash provided by operating activities | 52,139 | 50,223 | 127,293 | 103,000 | |||||||
Purchase of property and equipment | (9,066) | (3,866) | (11,619) | (5,822) | |||||||
Non-GAAP Free Cash Flow | 43,073 | 46,357 | 115,674 | 97,178 | |||||||
Transition and other payments associated with new warehouse (a) | - | 810 | - | 810 | |||||||
Non-GAAP Adjusted Free Cash Flow | $ | 43,073 | $ | 47,167 | $ | 115,674 | $ | 97,988 |
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Reconciliation Schedules (Continued)
Projected EPS
Projected FY'21 GAAP EPS | $ | 3.28 |
Adjustments: | ||
Normalized tax rate adjustment for discrete income tax items (a) | (0.10) | |
Total Adjustments | (0.10) | |
Projected Non-GAAP Adjusted EPS | $ | 3.18 |
- Income tax adjustment to adjust for discrete income tax items.
Projected Free Cash Flow
(In millions) | ||
Projected FY'21 GAAP Net Cash provided by operating activities | $ | 232 |
Additions to property and equipment for cash | (25) | |
Projected Non-GAAP Adjusted Free Cash Flow | $ | 207 |
I C R C o n f e r e n c e 2 0 2 1 | 25 |
I C R C o n f e r e n c e 2 0 2 1
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Prestige Consumer Healthcare Inc. published this content on 12 January 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 January 2021 13:21:09 UTC