Prestige Consumer Healthcare Inc.

Good day and thank you for standing by. Welcome to Prestige Consumer Healthcare Inc. Fourth Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will 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 one once again. Please be advised that today's conference is being recorded. And I'd like to hand the conference over to Phil Tebolili, 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 two 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 a 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 five. 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 ICARE, we continue to experience near-term volatility driven by our deliberate focus on high-quality production. In Q4, clear-eyed 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 Hydrolyte 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 three years. Moving down to 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, Pillar 5, to enhance our long-term iCare output capabilities, and bill 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 multi-year outlook. Let's turn to page six and review our strategy and our tactics that have delivered value over a longer horizon. Despite the challenging fiscal 26, our business model's three-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. The business model we operate leverages our leading financial profile to enable robust free cash flow. And third, the model uses the first two 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 five 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. Let's turn to slide 7 for a detailed update on ClearEyes and our iCare supply chain. In fiscal 26, we executed actions that supported our long-term strategic objective of best positioning our supply chain to support our iCare franchise's long-term sales This included the acquisition of Pillar 5 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, Pillar 5 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 QPOT, 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 ClearEyes 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, multi-year process, but puts us on a path to returning to historic sales levels 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. An 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 healthcare 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 Animas.

Let's turn to slide 10 to discuss this innovation and others in more detail.

Beyond executing successful marketing, innovation continues to be a key part of Prestige's brand-building toolkit. We operate with a multi-year pipeline of new product development concepts to ensure we generate new SKUs that match the needs of consumers. The Fleet Mini Anima is just one of the examples of product launches this year matching consumer needs. With its 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, CompoundW is utilizing its nitro-freeze technology to also solve for skin tags, an adjacent niche category to warts. Other product launches like new forms of Dramamine, Mental Alertness for Goodies, and Great New Flavors for Hydrolyte are further examples 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 emergent 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, with 6.4% excluding FX. The revenue decline was attributable to lower eye and ear care category sales, owing largely to clear eye 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 margins. Last, please note Q4 includes certain adjustments to reported results. These relate primarily to Pillar 5 and the expected normalized cost structure following operational efficiency improvements as we continue to improve Pillar 5's manufacturing volume. 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. Failed declines were largely due to constrained eye care supply we've discussed, which more than offset strengths 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, last 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 Pillar 5 and normalized incentive compensation versus the prior year. Finally, adjusted diluted EPS of $4.38 compared to $4.52 in the prior year, 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 31st, our net debt was approximately $900 million, and we had a covenant-defined leverage ratio of 2.6 times. 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 Pillar 5. 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 three 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 number one 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 three times following the closure of the acquisition of Breathe Right and Locorium, 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 healthcare. 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 into diversity of channels, geographies, and suppliers, each of which benefits our business in periods of uncertainty and volatility. The majority of our brands also leave their categories with a number one market share and are often synonymous with their categories, such as in the case of BC and Goodies, 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 Licorium. 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 iCare 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 pillar 5 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 87 cents, largely due to the timing of eye care supply. Lastly, we anticipate free cash flow of $250 million or more in fiscal 27. This 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 prestigious 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, Licorium generates over $40 million in sales and is headlined by the Dermotherapy brand, which will become our second largest brand in Australia behind Hydrolyte. The business has been founder-led with a focused mission to treat therapeutic skin care ailments like eczema, cold sores, and more. Macorium's marketing messages, like the It Works campaign, 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 healthcare brands.

Now, let's turn to slide 21 and wrap up.

Looking out at the next three years, we see several catalysts that we expect to strengthen our business profile and returns meaningfully. Let's begin with revenue. As the two acquisitions I just discussed closed, we believe they will provide a creative organic revenue growth in future years. Additionally, they also provide scale and accelerate a fast-growing international footprint, which we believe will approach 20% over the next few years. In addition to this, we see high-tier 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 TAGR 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 TAGR 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 breed right transaction. In aggregate, we believe there is a clear path to delivering free cash flow that could approach $900 million over the next three 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 ICARE 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?

Thank you. To ask a question now, please 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. There may be a short pause. A moment for our first question. And our first question comes from the line of Susan Anderson of Connecticut Genentee. Please ask your question, Susan. Your line is open.

Hi, good morning. Thanks for taking my questions and congrats on another acquisition. I guess maybe just to drill down a little bit more on Locorium'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. Thanks.

Good morning, Susan. So, Leporium, 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 US and Canada. It's just getting going. So the 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 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. You know, 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 Hydrolyte. 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 timeline that you guys see to recovery and a return to growth. Then 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, you know, things to go smoothly going forward? And when do you think the new plants will be folding up and running? Thanks.

Yeah. 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 here. 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. 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 Pillar 5 just about 90 days. We closed at the end of December. And we were motivated to acquire Pillar 5 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 continued to believe it was absolutely the right thing to do. But as we saw last year, there's times 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 two 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 That was a big element of the myths 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 gonna 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 output.

Yeah, 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 will have some likely period-to-period volatility. We're expecting Q1 iCare 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've 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. The one to three percent 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, things that we've discussed in the past. The bottom end of the range that we've provided assumes no improvement from fiscal 26 for iCare. And then the mid and high obviously assumes that the back half we will have increased production with efforts mainly focused around Pillar 5. So, you know, we think our outlook with the majority of the improvement in the back half gives us room for these initiatives for improvement.

Okay, great. Thank you so much for all the detail there. Good luck with acquisitions and the rest of the year. Thanks, Susan.

Thank you. A moment for our next question.

Our next question comes from the line of John Anderson from William Blair. Please ask your question, John. Your line is open.

Thank you, and thanks for the questions. 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 a prior question, but 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? Thanks.

Hey, John. Good morning. It's Chris. So about two-thirds of the MIS, the shortfall was related to ICARE and about a third related to the disruptions in the Middle East. You know, right now we're seeing lead times increase to schedule transportation into our distributors in the Middle East. Difficult to predict, obviously, when orders will catch up, you know, to the natural state of our demand right now. But these increased lead times are included in our outlook. You know, we are expecting continued pressure for international in our first quarter and that's really related to iCare Supply and the timing we just discussed really weighted towards the back half as an organization. But if you think about, you know, you take iCare 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 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 you know for 27

kind of a little bit about the cost environment and energy prices are up. And, um, obviously that affects different parts of your business in different ways. Um, what, what are you assuming if on a full year basis that, that are you assuming any improvement in, in, in, in costs? Um, or are you kind of assuming the status quo and, and then how, how confident are you in your ability to, um, you know, 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.

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

Okay. One more, if I can squeeze it in. Just, you know, I think when you announced the Breathe Right acquisition, you talked about 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 is Locorium 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. Hi, John. It's Phil. So you're exactly right. Back in March, we talked about Breathe Right being approximately 25 cents accretive to EPS on an annualized basis. So the timeline that Ryan called out earlier, expecting Breathe Right to close sometime in the June timeframe 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 locorium, obviously a smaller transaction. We talked through the details of that earlier. We'd expect it to be approximately neutral TPS to maybe a slightly positive. But we'll update everyone once that transaction closes.

Okay. Maybe, can I squeeze one more in? I'll try one more. You know, 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, you know, 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 issues. ahead of some maintenance that was being done, I guess, in the Pillar 5 facility. But when did this happen? 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 you know more shelf space when when when the retailers are resetting the shelves because i think they only do that once a year so you have you kind of missed the window for 26 on that 27 on that part of the the recovery yeah so i guess to add a little little more color uh john so um we learned about this this disruption or it happened you know late in the fourth quarter

And as we've seen in the past, right, of dealing with the previous owners and management at Pillar 5 is what would start out as an expected one-week shutdown to do something turned into two weeks, would turn into three, which would turn into four, 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.

Thank you. Thanks, John.

Thank you. In the interest of time, please limit to one question and one follow-up at a time. Thank you. Our next question comes from the line of Keith Devas of Jefferies. Please ask your question. Keith, your line is open.

Hey, good morning, guys. Thanks for the question. You had some comments on what's happening in the eyedrop industry, specifically in the US, and we've seen the recall headlines with some competitors. Um, I'm just hoping you can talk through how you're thinking about that as an opportunity. Um, you know, maybe it's a little, um, early given you have supply ramping with pillar five, but, um, just maybe what you're hearing from your customers on the retail front and how you're thinking about, you know, the recall and the absence of some competitors as an opportunity longterm.

Yeah. Good morning, Keith. It clearly there's an opportunity for our leading clear eyes brand, um, 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. You know, if you go out and you talk to the retailers, you know, 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. You know, we've talked about the importance of quality in this 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 ClearEye suppliers, we review and release the product here in our quality group. We don't rely on the third party suppliers or even Pillar 5 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. Again, back to the beginning of your question, we think that this is a solid opportunity for ClearEyes and Theratiers, quite frankly, over time.

Great. Thank you. 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 US 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. Thanks.

Yeah. 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. 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. We started our fiscal 26 off with tariffs 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, you know, 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 healthcare 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 end, 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.

Yeah, Keith, and 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.

Awesome. Thank you. I'll pass it on.

Thank you. Next question comes from the line of Rupesh Parikh of Oppenheimer and Company. Please ask your question. Rupesh, your line is open.

Good morning, and thanks for taking my question. So I guess, I mean, maybe I just want to start a high-level question. So you have two M&A transactions that you need to execute on. ClearEyes, that's been challenging recently, as it sounds like this year. Do you expect to make progress? So what's just your overall confidence in being able to execute all these different priorities this year and going forward?

Yeah. Good morning, 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 Pillar 5. We stood back and said, can we manage the complexity of this 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 breathe right opportunity came up right largest acquisition in the company's history we started with that question okay we got clear lies going on are the people involved with that also going to be involved with the breeze right portfolio that 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 internationally. 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 five years. where I think the owner and seller was avoiding our general manager in the elevator because he liked to ask him 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 Liquorium? 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 overlap. 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 pillar 5 and the sterile eye care supply chain Closing and integrating breathe, right? We would feel really good about that business opportunity and then closing and integrating the LaCourian business and 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 do you think about sell-in versus sell-out? And then within your longer-term targets from FY27, FY29, is there anything you can say at this point basing your VPS growth and just the magnitude of the clear-eyed recovery opportunity that you see during that period?

Chris, so sell-in, sell-out, we're expecting to be normalized, right? We don't have any reason to believe there'll be a large anomaly at any particular customer or channel at this point. And I believe your second question was centered around clearizing the assumptions that we have in the guide.

Yeah, so FY27, FY29, just your longer-term targets, like anything you say about the phasing of the EPS growth and just what that recovery opportunity is in your 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 production and capacity, which will meaningfully increase over the period, but not at the historical levels to get all the way back.

Okay, great. Thank you.

Thank you. A moment for our next question. And our next question comes from the line of Anthony Lubijinsky of Sedoti. Please ask your question, Anthony. Your line is open.

Thank you, and good morning, everyone, and thanks for taking the question. 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?

Yeah, Anthony, it's Chris. So, you know, limited pricing in Q4, probably consistent with historical levels, and it's anticipated for fiscal 27. We're thinking volume is going to drive about two-thirds of our growth and price a third.

Thanks, Chris. 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 platforms

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 yeah good morning Anthony so channel shifting by the consumer continues right this has been some 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 .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. um as well and the 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. got it that's very helpful thank you very much thank you anthony thank you

And our next question comes from the line of Mitchell Pierou of Sturtevant & Co. Please ask your question, Mitchell.

Your line is open. Mitchell, please unmute your line locally. Your line is open. All right. 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. Please ask your question. Doug, your line is open.

Yeah, thank you. And good morning, everybody. 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 algo 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%? Yeah.

Hey, good morning, 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, you know, one of the important messages today that we wanted to get across and why we put this medium-term outlook out there is, you know, 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 ClearEyes 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 emphasized 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?

Yeah, 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.

Okay. Okay, that's great. Thanks.

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 Labadee 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.