Prestige Consumer Healthcare Inc. 2025 10-K Review

Table of Contents

Warren.AI 💰 7.2 / 10

1. Executive Summary
2. Business Overview

• 2.1 Products & Brands
• 2.2 Distribution Channels

1. Segment Performance

• 3.1 North American OTC Healthcare
• 3.2 International OTC Healthcare

1. Financial Highlights

• 4.1 Revenue & Margin Analysis
• 4.2 Operating Expenses & Impairments
• 4.3 Cash Flow & Liquidity
• 4.4 Capital Structure & Debt

1. Balance Sheet Strength
2. Key Risks & Mitigants
3. Investment Thesis & Score
4. Conclusion

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1. Executive Summary

Prestige Consumer Healthcare Inc. (NYSE: PBH) publishes an annual 10-K that highlights a stable, cash-generative OTC healthcare business. In fiscal 2025 (year ended March 31):

• Revenue grew to $1.138 billion (↑ 1.1%).
• Gross margin expanded to 55.8%.
• Operating income was $336.8 million (↓ 1.6%), after $12.5 million of impairment charges.
• Net income rose 2.5% to $214.6 million (≈ 19% net margin).
• Cash flow from operations remained strong at $251.5 million.
• Debt stands at $1.0 billion; leverage is counterbalanced by ample free cash and a $165.7 million revolver.
• Share repurchases totaled 737K shares for $51.5 million.

Investment Score (1–10): 7.2

Despite moderate debt and reliance on key suppliers, Prestige’s portfolio of leading OTC brands, resilient cash flow and disciplined capital return underpin a favorable risk/reward profile.

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2. Business Overview

2.1 Products & Brands

Prestige owns and markets a diversified portfolio of OTC health and personal care brands. Top names include:

• Analgesics: BC®, Goody’s®
• Cough & Cold: Chloraseptic®, Luden’s®
• Gastrointestinal: Fleet®, Gaviscon®
• Women’s Health: Monistat®
• Eye & Ear Care: Clear Eyes®, Debrox®
• Dermatologicals: Compound W®
• Other: DenTek®, Dramamine®, TheraTears®

In Australia, core brands like Fess® and Hydralyte® add 15.6% of revenues. Over 61% of sales come from #1 market-leading brands.

2.2 Distribution Channels

Products are sold through mass merchandisers (34%), drug stores (21%), food, dollar, convenience, club and e-commerce (22%). Retail concentration is modest: Walmart represents 19% of sales; Amazon 14%.

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3. Segment Performance

3.1 North American OTC Healthcare

• Revenues: $960.0 million (84.4% of total; +0.2%).
• Growth drivers: Gastrointestinal (+8.7%).
• Margin: Contribution margin of 41.8% vs. 41.5%.
• Drivers: mix improvement and modest freight savings offset by elevated marketing.

3.2 International OTC Healthcare

• Revenues: $177.8 million (15.6% of total; +6.4%).
• Growth drivers: Gastrointestinal (+14.6%), dermatologicals (+40.6%).
• Margin: Contribution margin of 43.3% vs. 44.1% (higher marketing spend weighed).

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4. Financial Highlights

4.1 Revenue & Margin Analysis

Measure	2025	2024	Δ	% Δ
Net Sales	$1,136.6 M	$1,125.0 M	$11.6 M	+1.1%
Gross Margin	55.8%	55.5%	+0.3 PP	—
Op. Income	$336.8 M	$342.4 M	$(5.6 M)	(1.6%)
Net Income	$214.6 M	$209.3 M	$5.3 M	+2.5%

Key Levers:

• Volume/mix: +1.1% overall; mid-single digits in select categories.
• Price: largely stable; modest inflation pass-through.
• Channel & product mix: heavier in higher-margin GI and dermatologicals.

4.2 Operating Expenses & Impairments

• Advertising & Marketing: $155.7 M (13.7% of sales).
• G&A: $108.2 M (9.5%).
• Depreciation & Amort.: $21.3 M.
• Impairments: $12.5 M (non-strategic tradenames).

FY2023’s $321 M tradename and $48.8 M goodwill charges underscore intangible-heavy capital allocation risks.

4.3 Cash Flow & Liquidity

Measure	2025	2024	Δ
Cash from Ops	$251.5 M	$248.9 M	+$2.6 M
CapEx	$(8.2 M)$	$(9.6 M)$	+$1.4 M
FCF¹	~$243.3 M	~$239.3 M	+$4.0 M
Share Repurchases	$(57.6 M)$	$(30.7 M)$	$(26.9 M)$
Debt Paydowns²	$(135.0 M)$	$(225.8 M)$	+$90.8 M

¹ Free cash flow = operations – CapEx ² Term-loan repayments + revolving paydowns

Liquidity remains solid: $97.9 M cash, $165.7 M revolver availability.

4.4 Capital Structure & Debt

• Total Debt: $1.00 B (100% fixed rate).
• 5.125% senior notes 2028: $400 M
• 3.750% senior notes 2031: $600 M
• Leverage: ~2.7× net debt / EBITDA (2025).
• Interest Rate: 4.7% average in 2025 vs. 5.4% in 2024.

Debt covenants and cross-defaults reinforce conservative amortization schedules. No material bank borrowings outstanding.

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5. Balance Sheet Strength

• Assets: $3.402 B.
• Goodwill/intangibles: $2.823 B (83%).
• PPE & ROU assets: $152 M (4.5%).
• Working capital: $85 M net.
• Liabilities: $1.567 B.
• Equity: $1.835 B.

Key Ratios:

• Current ratio: 4.2×.
• Debt/Equity: 0.54×.
• Book value/share: $37.28.

Intangibles-heavy balance sheet warrants close monitoring of brand performance and impairment triggers.

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6. Key Risks & Mitigants

Risk Factor	Impact	Mitigation
Supplier Concentration One supplier is ~21% of revenues; shortages hit eye care brands.	Supply chain disruptions, cost inflation.	Developing alternative sources; maintaining safety stock; vertical integration in Lynchburg.
Customer Concentration Walmart & Amazon ~33% of revenues.	Price & terms pressures; revenue volatility.	Broader channel mix; direct sales expansion; digital growth.
Intangible Impairment ~83% of assets in goodwill/trade names.	Earnings volatility; write-downs.	Prudent M&A discipline; focused marketing ROI; annual impairment testing.
Competition Store brands + industry rivals.	Margin erosion; market share loss.	Strong brand marketing; new product innovation; low-cost model.
Debt Service $1 B liabilities.	Interest/covenant risk.	Fixed-rate notes; robust cash flows; $165 M revolver.

Additional risks: inflation, regulatory changes (FDA monograph reform), public health emergencies.

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7. Investment Thesis & Score

Thesis: Prestige Consumer Healthcare commands a leading portfolio of #1 OTC brands that drive stable revenue and robust cash flow. A flexible outsourcing model and focused marketing blend with prudent capital returns (repurchases vs. no dividends) to deliver attractive shareholder value. Debt is manageable given low rates and long maturities.

Risks: supplier/customer concentrations, intangible impairment potential, intensified competition, inflation and consumer sensitivity.

Score (1–10): 7.2

Rationale:

• +1. Strong market positions & recurring demand
• +1. Consistent cash flow & disciplined buybacks
• +0.5. Margin expansion potential via cost leverage
• -0.5. Intangible risks and impairment history
• -1. Customer & supplier concentration
• -1. Elevated financial leverage

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8. Conclusion

Prestige Consumer Healthcareis a stable, cash-generative OTC leader with multi-year growth underpinned by trusted brands and disciplined capital allocation. While high intangible balances and concentration risks warrant scrutiny, the companydelivers predictable profits and free cash flow that support debt service and share repurchases. At current valuations, we rate PBH a 7.2 on a 1–10 scale, representing a balanced blend of return potential and risk.

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This review is for informational purposes only and does not constitute investment advice.