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Operator
Good day and thank you for standing by. Welcome to the Q1 2024 Prestige Consumer Healthcare, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Terpolilli, VP of Investor Relations and Treasuries. Please go ahead.
Bill Terpolilli
Thanks, Operator, and thank you to everyone who has joined today.
spk09
On the call with me are Ron Lombardi, our Chairman, President, and CEO, and Christine Sacco, our CFO. On today's call, we'll review our first quarter fiscal 2024 results, discuss our full year outlook, and then take questions from analysts. A slide presentation that accompanies today's call can be accessed by visiting PrestigeConsumerHealthcare.com, clicking on the Investors link, and then on today's webcast and presentation. Please remember some of the information contained in this presentation today includes non-GAAP financial measures. Reconciliations to the nearest GAAP financial measures are included in our earnings release and our slide presentation. On today's call, management will make forward-looking statements around risks and uncertainties, which are detailed at a complete safe harbor disclosure on page two 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 and high inflation, 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 most recent Company 10-K. I'll now hand it over to our CEO, Ron Lombardi. Ron?
Ron Lombardi
Thanks, Phil. Let's begin on slide five. We are pleased with our start to the year as Q1 delivered solid results thanks to our leading brands with continued momentum across our portfolio. We achieved net sales of $279 million in Q1, slightly ahead of what we anticipated back in May. This performance continues to benefit from our broad portfolio and long-term brand building efforts. These attributes drove solid 1.8 percent organic sales growth, including continued strong performance from Dramamine that I'll touch on in more detail shortly. These sales translated into solid profitability as we continue to operate with a strong EBITDA margin profile generating robust earnings and free cash flow. We also experienced sequential improvement in gross margin thanks to our pricing actions and cost-saving measures that are effective against cost inflation. This stable financial profile enabled us to deploy capital efficiently. In the first quarter, we completed our $25 million share repurchase program while still reducing leverage to 3.2 times thanks to our continued emphasis on debt reduction. Now, let's turn to page six to highlight the success of Dramamine in more detail. In Q1, Dramamine experienced solid double-digit revenue growth, building on a long history of success that is driven by our time-tested brand-building efforts. We do this by leveraging consumer insights, where we look to meet ever-evolving healthcare needs and find opportunities to grow the brand. Just like all of our key brands, Dramamine's objective of using numerous brand-building tactics to grow with consumers is multifaceted. These tactics include operating a consistent innovation pipeline based on consumer insights, the ability to grow the brand into adjacent categories over time, and numerous marketing strategies that are time-tested. For example, In the early days of our brand ownership, we expanded with new forms and flavors, launching highly successful less drowsy, non-drowsy, and great flavored offerings to help match consumers' needs. More recently, we developed our insight work even further and began addressing the distinctive nausea market with new Dramamine Nausea offerings, quickly becoming the number one brand in the category. These expansive items were successful thanks to the underpinnings of our long-term brand building focus. For Dramamine, this has included highly recognizable marketing campaigns that engaged with consumers, reminding them of the benefits of the brand to treat motion sickness and nausea incidences whenever they arise. Shown in the lower right, this year our Ditch the Drama campaign features a memorable drama llama that only Dramamine can solve for. The results are clear. We've grown takeaway for the category and our brand, achieving a 12% compounded annual growth rate since fiscal 19, around the time of the 2018 campaign shown here. This proven strategy is a playbook we use across all of our brands to help expand our leading share and grow with retailers. Now, let's turn to slide seven for an update on NYX. Our NYX brand is another example of brand building. NYX head lice treatments have gradually expanded their breadth of offering with consumers over time, which has helped deepen their connection with caretakers. Our insight work uncovered that consumers were looking for offerings not only for the treatment of lice, but for products that help ensure their removal and prevention future occurrences. From this, we set to work developing new products to meet the needs of the consumer. Today, NYX offers a spectrum of head lice products that most recently includes the efficacious NYX Treat and Prevent Kit that is off to a great start. As with Dramamine, these NYX offerings are supported through effective marketing that set the brand up well to capitalize on category incident levels. As head lice season is gradually returning to more normalized pre-COVID levels, the brand is achieving sales well above the category in Q1, and as shown at the right, has expanded its leading number one market position in head lice to well above pre-COVID share levels. So in summary, both Dramamine and NYX are timely examples of our brand building that we continue to execute across our portfolio to drive financial results. Now I'll pass it to Chris to walk through the financials.
Phil
Thanks, Ron. Good morning, everyone. Let's turn to slide nine and review our first quarter fiscal 24 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 $279.3 million increased 80 basis points versus the prior year and increased 180 basis points, excluding the effects of foreign currency. As expected, EBITDA and EPS both declined slightly in Q1 from the prior year, but EBITDA margin remained consistent with our long-term expectations. Let's turn to slide 10 for more detail around consolidated results. As I just highlighted, our Q1 fiscal 24 revenues increased 1.8% organically versus the prior year. By segment, excluding FX, North America's segment revenues increased 1.8% and international segment increased 1.6% versus the prior year. The largest category growth drivers in Q1 were GI and skin care, including solid performance from Dramamine, which Ron discussed earlier. We also continue to experience year-over-year growth in the e-commerce channel, continuing the long-term trend of higher online purchasing. Total company gross margin of 55.4% in the first quarter increased sequentially but declined 240 basis points versus last year's difficult comparison. This gross margin was as we expected and attributable to cost increases, partially offset by pricing actions and cost savings across our portfolio, which offset the dollar amount of inflationary cost headwinds. For the full year, we continue to anticipate gross margin flat to up slightly versus fiscal 23, with Q2 estimated to be similar to Q1. As a percent of sales, advertising and marketing came in at 13% for the first fiscal quarter. For fiscal 24, we still anticipate an A&M rate of just over 13% of sales and up in dollars versus the prior year. G&A expenses were 9.9% of sales in Q1 due to the timing of certain expenses. We still anticipate full-year G&A dollars to decline slightly versus the prior year. Diluted EPS of $1.06 compared to $1.09 in the prior year, down from the impact of cost increases and higher interest rates. For the remainder of fiscal 24, we anticipate a Q2 interest expense similar to Q1, followed by lower interest expense in the second half. Finally, our Q1 tax rate of 22.5% was affected by the timing of certain discrete tax items. We anticipate a tax rate of approximately 24% for the remaining quarters of fiscal 24. Now let's turn to slide 11 and discuss cash flow. In Q1, we generated $46.6 million in free cash flow, down versus the prior year due to the timing of working capital. We continue to maintain industry-leading free cash flow and are maintaining our outlook for the full year. At June 30th, our net debt was approximately $1.3 billion, one billion of which is fixed, and we achieved a covenant-defined leverage ratio of 3.2 times. We still anticipate being below three times leverage by fiscal year end. Lastly, in the quarter, we repurchased approximately 425,000 shares for $25 million, completing the previously authorized share repurchase program. With that, I'll turn it back to Ron.
Ron Lombardi
Thanks, Chris. Let's turn to slide 13 to wrap up. Our business continues to have solid momentum and our fiscal year is off to a good start. We are reaffirming our full year outlook thanks to our diverse and leading consumer healthcare portfolio. For fiscal 24, we continue to anticipate revenue of $1,135,000,000 to $1,140,000,000 and organic revenue growth of approximately 1% to 2% versus fiscal 23 or organic revenue growth of 2% to 3% after excluding the planned strategic exit of non-core private label business that we discussed on our May earnings call. For Q2, we anticipate revenue of approximately $285 million, down slightly from the prior year, due largely to continued currency headwinds and the exit of private label. For EPS, we continue to anticipate diluted EPS of $4.27 to $4.32 for the full year. For Q2, we anticipate EPS of $1.07 up high single digits versus the prior year due to the timing of marketing spend. Lastly, we continue to anticipate free cash flow of $240 million or more. We still expect being below 3.0 times leverage by fiscal year end as we continue to execute our disciplined capital deployment strategy. With that, I'll open it up for questions. Operator?
Bill Terpolilli
Thank you.
Operator
At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Susan Anderson with Canaccord Genuity. Please proceed with your question.
Susan Anderson
Hi, good morning. Nice job on the quarter. I was wondering if you could talk about the dynamic between units and pricing and if you expect to take more price throughout the year. And then also, are you finally starting to see costs normalize with the chance for that to flow through to margins later in the year?
Phil
Good morning, Susan. This is Chris. So we talked about, excuse me, our full year fiscal 24 guide contemplating about a point of growth from price and a point from volume. For Q1, the majority of the growth was price. Volume was essentially flat. The majority of the pricing was executed last year. So the benefit of the price will gradually reduce as the year progresses. In terms of inflation, you know, it's coming in largely as expected, right? If you think about our inflation, it's largely wage inflation, going to be pretty consistent. So, you know, we're beginning to see some relief on certain costs sequentially, such as freight. It does take some time for that to work through the P&L. And as a reminder, you know, we talk about freight being in the low to mid single digits for us, so probably not going to have as big of an impact as you might hear from some others. So we're expecting inflation for the year to come in largely as expected and gross margin, obviously, to follow.
Susan Anderson
Okay, great. And then maybe if I could ask just about HydroLite and the international business in the quarter, I guess. Was that weaker than expected, or was it just really the FX impact it kind of overcome? And then also, how should we think about that growth going forward?
Ron Lombardi
Good morning, Susan. Ron here. So the international business excluding FX was up slightly, largely as anticipated for the year. Again, our outlook for international growth for the full year is returning back to kind of historic levels of mid-single digits.
Susan Anderson
And we continue to feel that the business is in line to deliver that for the year Okay, great, and then if I could add one last one just on inventory levels at retail I guess do you guys feel like they're kind of back to normal or are there still categories that could maybe benefit from restocking So for the most part Susan I
Ron Lombardi
The inventory level at retail of our products has been pretty consistent over the last handful of quarters as the supply chain caught up last year. So no meaningful area of benefit for restocking this year. And the levels seem to be pretty consistent. Again, it's something that we monitor on a weekly basis here.
Susan Anderson
Okay, great. Thanks so much.
Operator
Good luck the rest of the year.
Ron Lombardi
Thank you, Susan.
Bill Terpolilli
One moment for our next question. Our next question comes from Rupesh Padak from Oppenheimer & Co.
Operator
Please proceed with your question.
Monistat
Good morning. Thanks for taking my question, and congrats on the quarter. So just on women's health, if you can just update us in terms of how you think about that category for the balance of the year.
Ron Lombardi
Good morning, Rupesh. So I think, as we stated back in May, we're anticipating that our women's health business will begin to stabilize and get back in a position for long-term growth. During the quarter, we continue to see year-over-year decline for the women's health, largely due to a continuing slowdown in the category. Both of our brands, Monistat and Summer's Eve, continue to have a significant number one share in those categories and are providing leadership with new product launches planned for later this year. And when they hit retail, we'll talk about them more. But we continue to feel good about the positioning of those businesses for longer-term growth.
Monistat
Great. And then in the cough and cold category, I know incidence levels are down this past quarter, but your sales held up pretty well. So just curious, I guess, how is cough and cold inventory now in the channel? And just any thoughts on that category for the balance of the year as well?
Phil
Yeah. Hey, Rupesh, this is Chris. So Q1 for cough and cold was really reflective of what we thought when we issued a guide back in May. We're expecting more normalized trends this year in terms of seasonality from the retailers around cough cold, and we're also expecting incidences to be down from the peak levels last year, and we've seen some of that already in the southern hemisphere. So the benefit we have this year, as you kind of alluded to, is that our continuous improvements in our supply chain will serve to fill a bit of pipe at the retailer level. But as a reminder, cough cold is not a meaningful driver of our of our business in the mid to high single digits as a percent of our top line.
Monistat
Okay, great. And then maybe just one final question. As you look at your different channels, are you seeing any channel shifts or anything of note? And then just relate to, I know one, there's some speculation that one of the pharmacy chains could be in trouble and may have to file for bankruptcy. Just any thoughts in terms of any risks that you see out there from inventory stocking based on your visibility?
Ron Lombardi
Yeah. So I guess a few questions there. First of all, in terms of CHANNEL SHIFT, AND I THINK WE'VE TOUCHED ON THIS IN PAST QUARTERS, WE'VE BEGUN TO SEE SOME MOVEMENT IN SHOPPERS AS THEY LOOK FOR MAYBE DIFFERENT PRICE VALUE PROPOSITIONS. THE BENEFIT FOR US WITH A BROADLY DISTRIBUTED ACROSS ALL CHANNELS PRODUCT OFFERING IS WE CATCH UP WITH THE CONSUMER NO MATTER WHERE THEY CHOOSE TO SHOP. WE WANT ALL OF OUR RETAIL PARTNERS TO BE SUCCESSFUL. We kind of just stand back and see where they go and catch them where they end up is the first part. In terms of the drug retailer you're alluding to, it's been on our radar screen for a while. It is not a significant customer for us, so it's something that we'll continue to monitor. But at this point, we wouldn't anticipate it having any meaningful impact on our business or result in any kind of change in inventory at retail for us.
Monistat
Great. Thank you. I'll pass it along.
Bill Terpolilli
One moment for our next question.
Operator
Our next question comes from John Anderson with William Blair. Please proceed with your question.
John Anderson
Thanks. Good morning everybody. I guess I'll just start out with a question around sales. The business was up about a percent, a little less than a percent, in the first quarter on what looks like to be one of the easier comps for the year. And just wondering, it sounds like the revenue growth met your expectations, but... I think it also implies perhaps some acceleration as you move through the balance of the year. And are we thinking about that the right way to kind of hit the 1% to 2% and guidance for the year? And what are you planning or seeing from a, I don't know if it's innovation or marketing perspective or both, that might drive some modest acceleration from here?
Phil
Yeah, good morning, John. This is Chris. So you're right, we were up just under a point for the quarter. Remember, FX contributed a point of headwind in the first quarter, so almost 2% in the first quarter on an organic basis. What gives us confidence for the most part? We're not seeing anything different than what we communicated back in May. We're going to have some FX headwinds in the first half. It'll continue into Q2, and then we'll see a slight tailwind in the back half. Looking at fiscal 24 from an absolute dollar basis, The numbers are more comparable. Sequentially, we're expecting less fluctuation in fiscal 24 quarter to quarter than in the prior year. So it's really the FX piece and the comps that when you look at the growth rates for this year.
John Anderson
Okay, that's helpful. And then gross margin, as you mentioned, improved sequentially, which was good to see. Are we going, should we expect to see, you know, steady sequential improvements You know, going forward, what was the sequential improvement, I guess, in the quarter is what I'm asking. Is it was it more kind of seasonal or mixed driven or is there something more permanent going on here with with pricing catching up with commodities, other cost productivity flowing through that that could lead to, you know, a string of of sequential gross margin improvements during coming quarters?
Phil
Yeah, hey, John. So Q1, largely as expected, you're right. The upside was primarily mixed in North America and to some extent the flow of cost savings. Remember in the first quarter, usually our highest gross margin of the year as we're selling through product that was purchased in the prior year. So as we look to the outer quarters, I'm expecting a pretty consistent sequencing from off of Q1. We talked about Q2 being similar to Q1. So that'll be the impact of the new inflation for this year being offset, to your point, by cost-saving efforts that we've put into place. So we're expecting gross margin to be pretty consistent throughout the rest of this year.
John Anderson
Okay. And then you talked quite a bit about Dramamine already, and when you called out kind of the GI category strength. Skin care, I think, was another area you mentioned, or dermatologics as strength. Were you referring to Nix there? I'm just trying to understand what's maybe driving some of the strength in that category or platform.
Ron Lombardi
Good morning, John. Skin benefited from good performance both in Nix and Compound W during the quarter.
John Anderson
Okay. And then last, you know, the leverage ratio has come down quite a bit, continues to come down even with the share repo, as you mentioned. you know, if you reach three or sub three by the, the end of the fiscal year, what, how are your kind of thoughts around priorities on, on use of excess free cash, you know, evolving, um, as, as the ratio comes down to what it, you know, uh, pretty low levels, uh, historically for, for prestige, um,
Ron Lombardi
So going forward, John, I don't see us changing our capital allocation priority even when we get below three and even if we end up quite a bit below three, where we'll look to first and foremost continue to invest in brand building and in our business, and then continuing to reduce debt, building M&A capacity, and continuing to be thoughtful and disciplined in around future opportunities.
John Anderson
Great. Thanks so much.
Ron Lombardi
Thank you, John.
Bill Terpolilli
One moment for our next question. Our next question comes from the line of Mitchell Pinero with Sturtevanco.
Operator
Please proceed with your question.
Mitch
Hey, good morning. Most of my questions were asked and answered, but I did have one on advertising and marketing. So it would be advertising and marketing was down year over year due to timing. And I'm just curious where your focus is on advertising and marketing. Is there any change to your focus in channel or product mix this year versus last year?
Ron Lombardi
Good morning, Mitch. So our approach is really to move our advertising and marketing resources and investments to where the opportunity is. So every year we put together a plan based on opportunities, new product launches, and what's going on, and then evaluate and change as needed. You know, we continue to get behind Dramamine in a big way. We've got a lot of success there, some new products that are doing well, same with Nick. So no real change in the approach in terms of investing where the opportunity or new products are.
Mitch
And Channel, I mean, you know, I'm not sure. Is this – where is your advertising spent focused, meaning – Are we talking with in-store circulars? Are we talking, you know, media, other media? Where is it today? Has it changed at all from, you know, prior years?
Ron Lombardi
Yeah, over the last couple of years, it's been fairly consistent. And, again, the mix is different brand by brand, but TV, digital, search, investments in the dot-com industry, Search in particular, right? We had another great quarter with our .com and Amazon business. Grew over double digits during the quarter, I think, and we're up to 11% of, 11 or 12% of total revenue for the quarter. So again, we're pulsing the investment where we're getting growth and where the opportunity is. So no real change. Okay.
Mitch
That's all I have. Thank you very much.
Ron Lombardi
Thank you, Mitch.
Operator
As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for our next question. Our next question comes from Anthony Libidzinski from Sidoti and Company. Please proceed with your question.
Anthony Libidzinski
Hello. This is Stephan Gill on for Anthony Libidzinski. How are you guys doing?
Ron Lombardi
Good. Good morning.
Anthony Libidzinski
Thank you. My first question is, have you seen any notable changes from private label competition?
spk10
Yeah, hey, good morning. So, no, we haven't seen any meaningful changes on private label.
Phil
You know, over the long term, we look back even to pre-COVID levels, generally speaking, the majority of our categories, we've been gaining share over private labels. So, you know, we found that consumers go to the trusted brands in these categories. That's held true throughout COVID and seems to be holding true today. We saw it back when the financial crisis happened. So, over a long period of time, we've been able to hold or gain share over private label.
Anthony Libidzinski
Thank you. And given your solid free cash flow, do you have an appetite for additional share buybacks?
spk10
Yes. So the share buyback program essentially serves to offset dilution.
Phil
We'll continue, obviously, to look at it as we always do. But as Ron mentioned, right now, our cash flow priorities are to invest in the brands we have, continue to pay down debt and will continue to be mindful in the space in terms of M&A.
Anthony Libidzinski
Thank you for taking my questions.
Bill Terpolilli
Thank you.
Operator
I'm showing no further questions at this time. I would now like to turn the conference back to Ron Lombardi for closing remarks.
Ron Lombardi
Thank you, operator, and I'd like to thank everybody for joining us this morning, and I look forward to updating you on our business next quarter. Have a great day.
Operator
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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