Solid Q3 Revenue and Slight Beat to Forecast
Q3 sales of $283.4 million (down 2.4% vs. prior year, or down 2.2% excluding FX) were slightly ahead of company expectations, demonstrating resilience amid a volatile consumer backdrop.
Strong Free Cash Flow and Capital Allocation
Year-to-date free cash flow of $208.8 million, up ~13% versus prior year. Maintaining full-year free cash flow guidance of $245 million or more. Strong cash generation enabled the acquisition of Pillar Five (~$110M) and opportunistic share repurchases (~$46M in Q3; over $150M year-to-date, ~5% of shares outstanding).
Margin Strength and Earnings Outlook
Q3 gross margin approximately 55.5% (first nine months 55.7%, up 50 bps year-over-year). Company expects a ~57% adjusted gross margin in Q4. Adjusted diluted EPS was $1.14 for Q3 (vs. $1.22 prior year) with full-year adjusted diluted EPS narrowed to ~ $4.54 and FY-to-date EPS of $3.16 (vs. $3.20 prior year).
Strategic Acquisition to Improve Supply Chain (Pillar Five)
Closed Pillar Five acquisition in December (just over $110M) and installed a new high-speed production line; management expects Pillar Five to support the majority of future eye care production internally over time, helping to accelerate Clear Eyes supply improvements.
Sequential Improvement in Clear Eyes Supply
Clear Eyes supply showed sequential improvement for the second quarter in a row in Q3, with management expecting continued sequential improvement in Q4 (targeting three consecutive quarters of improvement) and additional ramping through calendar 2026.
Channel and Brand Strengths
E-commerce/consumption grew over 10% in Q3 and helped offset weaker channels. Strong performances highlighted in GI (Fleet, Dramamine), Skin (Compound W expansion into SkinTag), and Women’s Health (Monistat at historic peak share).
Healthy Balance Sheet and Leverage Position
Net debt ~ $1.0 billion with covenant-defined leverage ratio of 2.6x (mid-2s). Company retains optionality for M&A, brand investment, continued buybacks, and deleveraging.