Prestige Consumer Healthcare Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Prestige Consumer Healthcare Incorporated Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Phil Terpolilli, Director of Investor Relations. Please go ahead, sir.

Thank you, operator, and good morning to everyone who's joined us today. On the call with me are Ron Lombardi, our Chairman, President, and CEO, and Chris Sacco, our CFO. On today's call, we're going to cover the highlights and review the results of our fiscal 2020 second quarter, discuss our full-year fiscal year outlook, and then take questions from analysts. We have a slide presentation which 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 this presentation today includes non-GAAP financial measures. Reconciliations between adjusted and reported financial measures are included in today's earnings release and slide presentation. During today's call, management will make forward-looking statements around risks and uncertainties, We detail these in a complete safe harbor disclosure on page two of the slide presentation which accompanies the call. Additional information concerning risk factors and cautionary statements are available in our most recent SEC filings and most recent company 10-K. I'll now hand it over to our CEO, Ron Lombardi, to walk through the highlights of our second quarter performance. Ron?

Thanks, Phil, and good morning, everyone. Let's begin on slide five. We were pleased with Q2 results which followed a solid first quarter performance. Starting with the top line, revenue of $238 million was essentially flat to the prior year on an organic basis in the quarter, slightly ahead of our expectations offered back in August. Sales benefited from strong top line results in our international segment which experienced growth of approximately 8% after adjusting for FX. This strong performance was led by consumption gains in Australia and the timing of distributor orders in other countries. In North America, we experienced strength in our GI and skin care categories, each benefiting from our proven long-term brain-building strategy. Offsetting this was a retail inventory reduction and changes at shelf in the oral care category previously discussed, as well as the impact from a retail-level recall of certain eye care products produced by a previous supplier. The impact of this recall was contained to the second quarter as sourcing from this supplier had largely stopped about two years ago. Consumption trends for our portfolio increased 2% in Q2, and we continue to expect consumption growth for the full year to be around this level. Total company adjusted growth margin in the quarter came in at 58%, ahead of 57.4% in Q2 a year ago, mostly driven by product mix. Adjusted EPS of 68 cents was up 5% versus the prior year. Free cash flow was $47 million in the quarter and continues to benefit from our industry-leading EBITDA margins, efficient capital spending, and low cash tax rate. Adhering to our disciplined capital allocation strategy focused on enhancing shareholder value, we used the cash flow in Q2 to opportunistically complete our authorized share repurchase program as well as to reduce debt during the quarter. Now, let's turn to slide six and discuss year-to-date results. Our fiscal year-to-date performance includes stable revenue and profitability, which gives us continued confidence in our full-year outlook. Revenues in the first half were impacted by the anticipated inventory reductions occurring in the drug channel. Despite this, Our consumption trends remain solid and we feel good about the positioning of our portfolio of leading brands. Adjusted EPS of $1.33 was as anticipated, with higher EPS expected in the second half of fiscal 20 due to the timing of A&P investments. Free cash flow was 98 million year to date. Stable and strong profit trends continue to enable the successful execution of the first and third components of our three pillar strategy, Investing for Growth, and Capital Allocation Optionality. We did this again in the first half of fiscal 20, investing in A&P behind our leading brands, repurchasing $50 million in shares opportunistically, and reducing our debt level. In summary, we are executing our proven strategy, and these first half results are a testament to our efforts. Let's turn to slide seven and discuss a key brand helping drive results Summer's Eve. Summer's Eve was acquired in January of 17 and is our largest brand. One of five power core brands, which make up about half of our sales, Summer's Eve is well positioned for long-term success through its strategic positioning and our brand building efforts. As a starting point, the brand holds the commanding number one leadership position in the category at retail, holding over a 50% share that is well over two times larger than the next branded competitor. This positioning allows us to concentrate our efforts around consumer insights that are focused on increasing category adoption which drives long-term brand growth rather than competitive share swaps in a crowded category. This also fosters a stronger relationship with our retail partners as we grow the category. This strategy is underpinned by a solid white space opportunity. Based on our consumer insight analysis, roughly half of all women are open to using products in the feminine hygiene category, yet only about 15% are doing so today. With this knowledge in mind, we are continuously working towards growing category usage over time, a win for both retailers and the brand. We are doing this by executing our brand building playbook and if you look at the right side of the slide, you will see several examples. First, we execute proven marketing efforts. For Summer's Eve, this often means iconic and creative marketing campaigns. Most recently was the launch of the Creative Elephant in the Shower marketing campaign, which has accelerated sales and increased engagement in platforms like YouTube. Second, we utilize influencers and leverage their platforms to help engage consumers. One example would be a recent feature on the Dr. Oz TV show last week, where Summer's Eve washes were discussed as a beneficial part of a woman's daily care routine. Lastly, innovation is another one of the key areas of this playbook. Our recently introduced items include Summer's Eve Fragrance Free, Sunset Oasis, and Fresh Cycle, each designed to fill a unique, unfilled set of consumer needs. In summary, This playbook is driving increased usage rates to grow both our sales dollars and the overall category, with consumption growth since our ownership averaging in the mid-single digits in line with our long-term objectives. Now, let's turn to slide 8 for an update on e-commerce. Online sales continue to be a fast-growing opportunity for Prestige, with first-half growth of nearly 50% versus the prior year. We expect this solid growth to continue and anticipate online sales reaching nearly 5% of our total sales by year end. Over the last several years, we've been proactive in this emerging channel, investing behind digital content and distribution to ensure that our trusted brands are easily available for purchase as customers research and shop for their healthcare needs online. This strategy has paid off, and the result is a well-positioned portfolio with many of our brands actually ahead of their share in brick and mortar. One example of this is Boudreaux's Butt Paste. Part of the fleet acquisition in 2017, Boudreaux's is a diaper rash ointment that is currently tied for a number three share in brick and mortar. However, our proactive investments in e-commerce have allowed the brand to experience tremendous success achieving a number two market share position on Amazon where now over 15% of Boudreaux's sales occur. In this example, our investments include consumer education through the Boudreaux's website, funny and engaging website interactive ads, and connecting with moms as they prepare baby shower registries online. Our success in e-commerce continues to be driven by proactive strategies across each of our brands, with Boudreaux's being just one of many examples. We are well positioned for continued e-commerce sales growth that remains an opportunity for our business. With that, I'll turn it over to Chris to walk through detailed Q2 financials.