Good day, ladies and gentlemen, and welcome to Prestige Consumer Healthcare's Second Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to introduce your host for today's conference call, Phil Terpolilli, Vice President, Investor Relations. 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. On today's call, we'll review the second quarter fiscal 2025 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. Remember, some of the information contained in the presentation today includes non-GAAP financial measures. Reconciliations to the nearest GAAP financial measure are included in our earnings release and slide presentation. On today's call, management will make forward-looking statements around risks and uncertainties, which are detailed in a complete safe harbor disclosure on Page 2 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 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. Additional information concerning risk factors and cautionary statements are available in our most recent SEC filings and our most recent company 10-K. I'll now hand it over to our CEO, Ron Lombardi. Ron?

Thanks, Phil. Let's begin on Slide 5. Our Q2 results exceeded the expectations we communicated back in August and improved on Q1. Sales of $284 million declined slightly versus the prior year, largely due to Clear Eyes supply chain limitations and Q1 timing. I'll provide an update on Clear Eyes in our wrap-up. Thanks to our diverse portfolio, we offset most of this decline in other business areas, led by strong and broad-based growth in our International segment and its Hydralyte brand, as well as our Canadian portfolio, which I'll touch on shortly. Resulting earnings and cash flow were stable in Q2 thanks to our business strategy and disciplined capital deployment. Gross margin improved sequentially and was approximately stable to the prior year. And we generated EPS of $1.09, up slightly to the prior year. Strong free cash flow of $68 million grew double digits versus the prior year and continues to enable capital deployment that is used to enhance shareholder value. In Q2, we reduced debt by $40 million that resulted in a leverage decline to 2.7x while still repurchasing shares opportunistically. Now let's turn to Page 6 for a review of our Canadian business. In addition to a fast-growing international business, we also have a well-positioned portfolio in Canada that represents about 5% of our annual sales. Our Canadian business is comprised of many leading #1 brands in niche categories, the highlights of which are shown on the left side of the page. Many of these are similar brands to the U.S. with the addition of Gaviscon, Sleep-eze and newly added Hydralyte, which we acquired the rights to in early October. On the right side of the page, you'll see that, in total, our portfolio grew at a sales CAGR of approximately 4% since fiscal '20 with even stronger high single-digit growth year-to-date. This solid performance is driven by execution of our proven brand-building tactics, just like our U.S. business. One example driving this performance is Gaviscon, which is our largest brand in the country and growing in excess of the overall Canadian growth rate. Our marketing for Gaviscon is targeted around the benefits of having one product to both treat and protect against heartburn. The communications are wide-ranging across video, social media, search and targeted partnerships. We then support these efforts with targeted shopper programs like the display shown on the page as well as consistent, long-term innovation. Most recently, Gaviscon introduced Flavor Blend, which is gaining momentum and now one of the top-selling SKUs in the category. Launched in late 2023, Gaviscon Flavor Blend is a great-tasting, lower-sugar version of our top-selling chewable tablet designed to relieve heartburn due to acid reflux. In aggregate, these brand-building efforts continue to drive growth for our largest Canadian brand over the long term. In summary, our Canadian portfolio shares similar growth strategies to our U.S. business and is further enhanced by long-term growth of Gaviscon. These tactics and portfolio positioning have us set up well for continued success. With that, I'll turn it over to Chris to discuss the financials.

Thanks, Ron. Good morning, everyone. Let's turn to Slide 8 and review our second quarter fiscal '25 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. Q2 revenue of $283.8 million declined 90 basis points from $286.3 million in the prior year. We experienced broad-based growth in the GI category, including strong performance across brands such as Fleet, Dramamine and Gaviscon. We also experienced growth in our International segment, headlined by Hydralyte. As we expected, this growth was offset by declines in our eye and ear care category, owing to Clear Eye supply constraints as well as the timing of cough and cold ordering patterns. EBITDA margin was consistent, in the low 30s%, but down slightly to prior year, owing to the timing of marketing spend. EPS increased 1.7% versus prior year thanks to the benefits of our capital allocation strategy and improvement in interest expense and share count. Let's turn to Slide 9 for detail around consolidated results for the first half. For the first 6 months of fiscal '25, revenues decreased 2.5% organically versus the prior year. By segment, excluding FX, North America segment revenues decreased 3.7% and International segment revenues increased 4.8% versus prior year. The first 6 months sales declines were due to anticipated impacts of the Clear Eyes supply chain constraints previously discussed, the planned impact of retail ordering in the cough and cold category and pressure in women's health, largely in the first quarter. As targeted, we are experiencing sequential improvements in Summer's Eve with the second quarter sales flat with prior year. As discussed on recent calls, our brand positioning, new products and marketing campaigns are improving consumption trends, and we continue to feel good about further improvements moving forward. We also continued to experience nice growth in the International OTC segment in the first 6 months, led by Hydralyte, along with impressive double-digit year-over-year growth in the e-commerce business, continuing the long-term trend of higher online purchases. Total company gross margin of 55.1% in the first 6 months was down slightly versus the prior year, as we expected, owing to the expense associated with the continued expedited freight of Clear Eyes. For the full fiscal year, we still anticipate a gross margin of approximately 56%. We still expect the increase from the prior year to be driven by pricing actions and cost savings that more than offset inflationary cost headwinds. Q3 gross margin is estimated to be approximately 55%. Advertising and marketing was up in dollars and as a percentage of sales, coming in at 14.7% of sales for the first 6 months. For fiscal '25, we still anticipate A&M up in dollars versus prior year, while we expect Q3 A&M to approximate 13% of sales. G&A expenses were 10% of sales in the first 6 months due to the timing of certain expenses. We still anticipate full year G&A of approximately 9.5% as a percent of sales. Finally, adjusted EPS of $1.98 compared to $2.13 in the prior year, down from the impact of lower Q1 revenues, air freight costs as well as the timing of A&M and G&A spend, partially offset by more favorable interest expense. We expect more favorable interest trends to continue thanks to our long-term debt reduction efforts and now anticipate full year interest expense of less than $50 million. Our Q2 tax rate was 24.1%, resulting in a first half tax rate of 23.6%, and we still anticipate a tax rate of approximately 24% for the remaining quarters of fiscal '25. Now let's turn to Slide 10 and discuss cash flow. For the first half, we generated $121.4 million in free cash flow, up double digits versus the prior year. We continue to maintain industry-leading free cash flow and are maintaining our outlook for the full year of $240 million or more. At September 30, our net debt was approximately $1 billion, and we achieved a covenant-defined leverage ratio of 2.7x. For the first 6 months, we've now repurchased 566,000 shares for approximately $38 million. These repurchases were enabled by our low leverage and consistent business performance, which gives us strategic flexibility with our capital. We will continue to evaluate further opportunistic repurchases as well as M&A as part of a disciplined capital deployment strategy. With that, I turn it back to Ron.

Thanks, Chris. Let's turn to Slide 12 to wrap up. As expected, halfway through the year, we are realizing accelerating business momentum thanks to our proven business strategy and diversified brand portfolio. For fiscal '25, we continue to anticipate revenues of $1.125 billion to $1.140 billion and organic revenue growth of approximately 1% versus fiscal '24. We're expecting [Q2] revenue of approximately $286 million, returning to year-over-year growth. In Q3, we expect momentum in multiple brands and categories to offset pressure from Clear Eyes supply constraints. We continue to work with our partners as they execute upgrades that will support high-quality products, long-term supply chain reliability and inventory recovery. For our third quarter, we expect revenue for Clear Eyes to improve sequentially versus the second quarter. For EPS, we continue to anticipate adjusted EPS of $4.40 to $4.46 for the full year, but anticipate the higher end of the range thanks to our debt reduction efforts. For Q3, we'd anticipate EPS of $1.16. Lastly, we continue to anticipate free cash flow of $240 million or more. We have ample capital deployment optionality that has a history of maximizing value for our shareholders. With that, I'll open it up for questions. Operator?

Thank you very much. At this time, we will conduct the question-and-answer session. [Operator Instructions] Our first question comes from Rupesh Parikh of Oppenheimer & Company.

So I had 2 questions, starting with Clear Eyes and Summer's Eve. So on Clear Eyes, I would love to get the latest update in terms of how you guys are thinking in the back half of the year? And then when do you think you'll be past all the supply chain headwinds? And then for Summer's Eve, upbeat commentary and improvement you're seeing sequentially. I just wanted to get a sense of how you're thinking about the back half of the year there.

So let's start with the Clear Eyes question. So in terms of Clear Eyes' supply chain, we finished really right where we expected for the first half in terms of sales. As we communicated back in August, higher Q1 sales benefited from some shipment timing at the end of the quarter and balanced out in Q2 to our original forecast for the first half. As I mentioned in my prepared remarks today, we're starting to see sequential improvement in Clear Eyes and expect sales improvements in Q3 versus Q2. We believe inventory levels at retail are hitting their low point now, based on the sales outlook, and we expect to see stabilization of trends during the remainder of Q3. More importantly, we're still taking decisive action to strengthen the brand's supply chain through 2 key initiatives, first, implementing strategic improvements with current partners, including upgrades and expanding capacity, while executing a long-term strategy to further diversify and expand our supply base. We think these are the right long-term steps that will enhance the brand long term. Clear Eyes is still the largest OTC brand in the category in units at retail. And given its iconic nature, we think it's well set up for a return to growth as supply improves. So for Summer's Eve, we've talked previously in last quarter about some of the new products introduced as well as new digital messaging that's out there, and it's largely taking hold, right, and starting to move the brand forward. So in Q2, Summer's Eve was flat in North America, and we're making good progress towards returning the brand to growth. It is still the clear market leader in this segment, and we think there's a number of ways the brand can continue the momentum we've started in Q2 through the end of the year. And I think, just as importantly, or more importantly, we actually began to see a share gain at the end of the second quarter for the first time in about 3 years. So we continue to feel really good about our execution against these long-term brand-building strategies and the new products and the momentum we're beginning to see in Summer's Eve.

Great. And then maybe one follow-up question. A lot of concerns out there on the drugstore channel. And I know we've seen closures within that channel in recent quarters. So historically, what have you seen from drug -- some of these drugstore players closing stores? And it seems like a lot going forward from a closure perspective. So how do you guys think about that for impacting your business?

Sure. Actually, over the last month or so, we actually have seen some clarity on what to expect out of the drug chain. And the clarity and what we're hearing is that the expected store closures are going to be fairly consistent with what's been going over -- going on over the last couple of years, Rupesh. So the level of store closures that's anticipated is kind of in the base business already. And for us, we really don't care where the consumer buys the product. Our product is broadly available. Our gross margin is consistent around -- across channels. So we just look to win with the consumer wherever they choose to shop and then continue to work with the retailers to help them be successful in their objectives. So I'd really say it's more of the same in terms of what we expect from the drug channel.

Our next question comes from the line of Susan Anderson of Canaccord Genuity.

Nice job on the quarter. I was wondering if you could maybe talk about the international business, particularly Hydralyte. It obviously continues to do very well over there. I'm just curious what you're seeing in that market. It feels like, in the U.S., we're definitely seeing a number of new hydration companies jump into the category, and then you have the old brands such as Gatorade and POWERADE. So it seems to be getting more competitive. Just curious if you're seeing that same dynamic over in Australia and how that competitive landscape has changed.

Susan, it's Chris. So International had another strong segment performance for the quarter, right, up about 5%, which is consistent with our long-term algorithm. Hydralyte, as you noted, had nice growth. Consumption was up double digits. We're seeing new entrants in the category over in Australia. But remember, different than the U.S. maybe, Hydralyte has a very long-standing history and connection with consumers, starting at over a 90% share. So Hydralyte is still growing very nicely. We've made investments there with -- behind the brand, and it seems to be paying off. It's worth noting, for this quarter, international, it wasn't just Hydralyte or Australia. We had a few other brands and geographies doing well. Latin America, for example, had a pretty strong quarter. So diversified a bit over there, just as it is here in North America.

Okay. Great. And then maybe just on cash flow, it was pretty strong in the quarter, I guess. Is there any change to how you're thinking about capital allocation between balancing share repurchases and then M&A? And then just in terms of the M&A landscape, I guess, are you seeing anything -- any brands becoming more attractive out there, any more opportunities?

Yes. Great. So yes, our quarter was strong from a cash flow perspective, obviously enables our ability to do multiple things at once to drive value where -- with our leverage at 2.7x. So we're still anticipating reducing leverage in fiscal '25. As we sit here today, we're still looking to buy back shares opportunistically. In the first quarter, we offset share grant dilution, and we did some more opportunistic share buybacks in Q2, now almost $40 million year-to-date. So we think there'll be further buybacks in the back half balanced against the M&A landscape, right, which is our preference, and likely to pay off our remaining variable debt, which stands at $60 million at the end of September, likely heading to $0 by the end of the fiscal. So we have ample remaining authorization under our repurchase program. Remember, it was about $300 million. And thus far, we've completed about $38 million of that, so really a testament to the long-term consistent robust cash flow. And we'll -- we would expect those trends to continue. From an M&A perspective, I guess I would say more of the same, as we usually say. We're looking at multiple things. We'll continue to do that. We think there'll be further opportunity as you continue to hear from some large players around spinouts and such, and so definitely a preference -- first use of cash flow after investing in the business now that leverage is standing where it is.

Okay. Great. If I could ask maybe one more just on, I guess, the promotional or competitive environment in the U.S., Walmart and Target have talked about lowering prices. We've definitely seen some of that across the personal care category. I mean, maybe it's a little bit different for you guys since your products are so niche-based. But I guess maybe just any thoughts on that front in terms of are you seeing the environment get any more competitive from promotions or any type of lowering of prices?

Susan, it's Ron here. So for our categories, right, which are quite a bit different than personal care and other aisles in the store, right, if -- our products are used for incident-based, largely. You wake up, someone in your household is sick, you need the product. So it's a different usage occasion. In addition to that, during the high inflationary period, we didn't have the kind of cost and selling price increases that other categories had. I think, at the peak, our pricing -- selling price increase is about $25 million in a given year. So we're not facing the same kind of inflation in our categories that others are facing, so we're not seeing that.

Good luck for the rest of the year.

[Operator Instructions] Our next question comes from Anthony Lebiedzinski of Sidoti & Company.

So just in terms of your exposure to e-commerce, can you speak to that as far as what percentage of your revenue is coming through e-commerce now? And maybe if you could separate that for North American versus international? How do you see that trending going forward?

Anthony, it's Chris. So right now, e-com is at about 15% of our business overall, and it's largely based in North America. So as we continue to see the e-com platform roll out internationally, certainly, we've got the playbook, and we'll utilize it. But for right now, it is very largely driven by North America.

Got you. And then in terms of your organic growth, so for this year, you're guiding to roughly 1%, excluding FX. Obviously, the performance has been affected by the Clear Eyes situation. And that being said, do you guys think that you can get back to that 2% to 3% growth algorithm, whether it's next year or sometime after that? How do you think about the business longer term?

Yes. So we talked about this year's guide at about 1% and Clear Eyes supply impacting that by about 1%. So certainly, we just talked on the call about expecting sales for Clear Eyes in the third quarter to improve sequentially over Q2. And Ron talked about some of the strategic investments that are being made along the supply chain front around our eye care products. So as we sit here today, obviously, nothing fundamentally happening that gives us pause on our long-term algorithm.

Great. Okay. And then my last question, as far as gross margin, there was some impact from higher air freight costs in the second quarter. Do you still expect that to be an issue in the back half of fiscal '25? And just overall, how do you guys think about gross margins longer term?

Yes. So you're right. We are expecting some continued air freight to support customer service levels. Our guide anticipates that. We are expecting to incur less airfreight as the year progresses. But just generally speaking, if you think about the guide for the year at approximately 56% gross margin, we'll continue to apply continuous cost improvements, and we believe that pricing actions and cost improvements can offset future inflation. So the march back -- again, nothing fundamental to our business that would prevent us from marching back to a historical gross margin level.

Thank you very much. At this time, I am showing no further questions. I would now like to turn it back to Ron Lombardi for closing remarks.

Thank you, operator, and thanks for -- to everyone for joining us today, and we look forward to providing another update at the end of Q3. Have a great day.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.