Prestige Consumer Healthcare Inc (PBH) 2021 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2021 Prestige Consumer Healthcare Inc.

Earnings Conference Call.

(Operator Instructions) Please be advised that today's conference is being recorded.

(Operator Instructions)

I would now like to hand the conference over to your speaker today, Phil Terpolilli, Head of Investor Relations.

Please go ahead, sir.

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 Chris Sacco, our CFO.

On today's call, [we'll cover] the results of our third quarter and fiscal year-to-date, provide an outlook update, and then take questions from analysts.

We have a slide presentation that 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.

Please 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 today's earnings release and slide presentation.

During 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 accompanying the call.

These are important to review and contemplate.

As everyone on the call today is aware, business environment uncertainty remains heightened due to COVID-19.

These items include shutdown impacts from many areas of the economy, changes to consumer purchasing habits, potential for a disrupted supply chain, and various other economic factors.

This means that results could change at any time, and the forecasted impact of risk consideration to the best estimate based on information available as of today's date.

Additional information concerning risk factors and cautionary statements are available in our most recent SEC filings and the most recent company 10-K.

I'll now hand it over to our CEO, Ron Lombardi.

Ron?

Thanks, Phil.

Good morning, everyone, and let's start on Slide 5.

Our proven business model continues to set us up for long-term success; and the strong earnings performance and stable top line year-to-date results is continued evidence of this, as we have raised our full year revenue and earnings targets.

The business strategy we have in place is a highly adaptable one, which positions us to create value during the pandemic.

Our strategy of offering consumers a wide range of easily assessable brands they know and trust continues to work.

The ongoing objective is to grow categories while connecting with consumers over the long term.

We'll share one example of this long-term strategy, Compound W, on the next slide.

Despite the long-term nature of these investments, we are also quick to target near-term opportunities.

This important nuance allows us to adjust our brand-building strategy in real time, finding additional ways to deliver brand growth.

For example, as discussed the last 2 quarters, we've focused on prioritization on where consumers are shopping.

A result of this is that we are winning big in e-commerce, where we've seen triple-digit growth, and many of our brands actually have a higher share in the channel compared to brick-and-mortar.

Meanwhile, our nimble business continuity efforts continue to do well during COVID-19.

We continue to work strategically with our manufacturing partners to ensure consistent service levels in this dynamic supply environment.

Finally, our consistent operating model and disciplined capital strategy continue to reward shareholders.

We anticipate solid earnings and free cash flow growth for the full fiscal year, which continues to increase our capital allocation optionality.

So to recap, our business positioning remains solid, and our strategy is delivering consistent results as we close out our fiscal year.

Now let's turn to Slide 6 to discuss Compound W. Even during this unique time, we have not lost sight of the importance of long-term brand building.

Utilizing our brand-building toolkit and taking time to understand consumer insights, the goal is to drive long-term growth for our leading brands.

Shown on the page we have Compound W, which is a great example of this objective.

It's a brand with a long history with consumers, and we've invested steadily behind it through a wide range of tools over time.

One tool used is innovation.

All of our brands operate with a multiyear pipeline of product development concepts to ensure we continue to match the needs of consumers.

Compound W NitroFreeze is a great recent example with its extreme freezing technology that is not found in other OTC treatments.

We are also connecting with consumers as they think about treatment, with content that helps explain their wart treatment options.

For example, during the pandemic, we've reminded consumers of the ability to treat warts effectively at home and the solutions Compound W offers.

The result of our investment behind Compound W is clear.

We are the trusted source for retailers for insights into the wart category and how to drive long-term category growth.

This has enabled our brand to continue to gain shelf space and share.

Our results have been solid.

Over the last 5 years, Compound W has grown at a double-digit compound annual rate, vastly outpacing category growth and solidifying its number 1 market position with consumers as a preferred brand for wart treatment.

With that, I'll now hand it over to Chris to review our financial results.

Thanks, Ron.

Good morning, everyone.

Let's turn to Slide 8 and review our third quarter financial results.

As a reminder, the information in today's presentation includes adjusted results that are reconciled to the closest GAAP measure in our earnings release.

Q3 revenue of $238.8 million declined 1.6% on an organic basis versus the prior year, which excludes the effects of foreign currency.

By segment, North American revenues were down 2%.

Several segment categories grew, with the largest increases in women's health and oral care.

As expected, however, these gains were offset by lower cough and cold, as well as motion sickness and head lice, as these categories faced declines in incidence levels and usage rates related to changes in consumer behavior due to COVID-19.

Our international segment increased approximately 2% after excluding the effects of foreign currency.

The increase was primarily attributable to higher sales of Hydralyte in Australia as certain shelter-at-home restrictions were lifted related to COVID-19.

As a reminder, due to its distributor model, the timing of international segment orders can be difficult to predict, as can the uncertainty around pandemic-related restriction.

Adjusted EBITDA declined approximately 6% in the quarter versus the prior year, primarily driven by the timing of A&M spend.

EBITDA margin remained consistent with our long-term expectations in the mid-30s.

EPS for the quarter was $0.81 per share, flat to the prior year as a result of lower interest expense from debt paydown, offsetting the lower revenue and A&M timing.

Now let's turn to Slide 9 for more detail around consolidated results for the first 9 months.

For the first 9 months, revenues were down 90 basis points.

Our diverse portfolio has enabled a stable revenue performance, with strength in many brands in our portfolio helping to offset COVID-19 impacted categories.

Our broad channel diversity continues to help drive revenue performance, as we experienced strong triple-digit consumption growth in the e-commerce channel year-to-date, as consumers continue to shift to online purchasing.

Total company gross margin of 58.2% in the first 9 months was largely flat to last year's adjusted gross margin of 57.9%, and has been stable across quarters.

This was in line with our expectations, and we continue to anticipate a gross margin of about 58% for the remainder of the year.

Advertising and marketing came in at 15.9% of revenue in Q3 and 14.8% for the first 9 months.

We still expect A&M for the full year to be just under 15% as a percent of sales as we continue at a normalized rate of spend in the fourth quarter.

G&A expenses were flat in Q3 and down for the first 9 months of fiscal '21 versus the prior year, owed largely to disciplined cost management.

For the full year, we anticipate G&A expenses to approximate 9% of sales and remain below prior year in absolute dollars.

Lastly, we realized strong 15% EPS growth for the first 9 months of fiscal '21 versus the prior year.

Lower operating costs, lower interest expense and lower share count were all factors to the growth.

Now let's turn to Slide 10.

In the quarter, we generated $43.5 million in free cash flow, which, as expected, was lower than last year due to both timing of working capital and CapEx investments.

For the first 9 months of fiscal '21, free cash flow of $159.2 million grew over 3% versus the prior year.

We continue to anticipate full year '21 free cash flow at or above prior year levels.

At the end of Q3, we had approximately $1.5 billion of net debt, which equated to a leverage ratio of 4.2x.

During the quarter, we repurchased approximately $9 million in shares opportunistically, leaving the remainder of our cash generation on the balance sheet in anticipation of a potential bond refinancing event in Q4 to opportunistically capitalize on the attractive debt rate environment.

The cash accumulation was temporary to the quarter; there has been no change to our strategy of prioritizing debt pay down as our primary use of free cash flow.

With that, I'll turn it back to Ron.

Thanks, Chris.

Let's turn to Slide 12 to update our guidance and offer some initial thoughts on the upcoming year.

With less than 2 months to go in our fiscal year, we are confident with our business performance and objectives and are increasing our outlook for both sales and EPS.

For the full year fiscal '21, we now anticipate revenues of approximately $935 million.

For Q4, we anticipate consistent trends to what we have realized over the past few quarters.

However, the period will face a unique comparison to the prior year as we experienced a significant lift in March of 2020 as consumers stocked up on items as a result of COVID-19.

We now anticipate adjusted EPS of approximately $3.22 for fiscal '21.

Disciplined cost management and the benefit of our capital allocation strategy and debt reduction continued to drive our solid earnings growth.

These attributes translate into free cash flow as well, and we continue to anticipate free cash flow of $207 million or more, which is at or above the prior year's level.

We continue to prioritize debt reduction while balancing other disciplined capital allocation efforts to drive shareholder value.

Looking ahead, we continue to have confidence that our business is well-positioned heading into fiscal '22.

We will begin to lap the effects of COVID-19 that began in the spring of last year, while our long-term brand building strategy continues to set us up for long-term success.

We continue to target 2% to 3% long-term organic sales growth, which translates into mid- to high single-digit earnings growth, driven by our stable and solid financial profile and disciplined capital allocation strategy.

It's a proven strategy, and we remain confident in its ability to drive value for stakeholders.

With that, I'll open it up for questions.

Operator?

(Operator Instructions) Our first question comes from Jon Andersen with William Blair.

I guess maybe I'll start with the last comment that you made, Ron, on the long-term sales growth target of 2% to 3%.

It's been a while since you've consistently achieved 2% to 3% organic sales growth.

Talk a little bit, if you will, about your efforts to get to 2% to 3% organic sales growth.

What gives you confidence that, over the long term, you can get back there on a sustainable basis?

And how long it might be, in your opinion, given the dynamics in the marketplace -- COVID, some of the changes to your customer base, et cetera -- to get back to that long-term target?

Thanks for the question, Jon.

So first of all, we always start thinking about the opportunities for our business around consumption growth.

And if you look back over the last few years, our organic consumption growth has been in the 2% to 3% range.

Now we've had some disconnects between that as certain retailers adjusted inventory and addressed their business needs.

And then, this year, with the disruption of COVID, if you exclude the COVID-impacted categories, again, our consumption levels continued to be in that 2% to 3% range.

So really, that's why we feel good about the long-term ability to grow the business 2% to 3%.

And 2 of the things that you cited in there, one is some of the inventory efforts that retailers have made to reduce pipeline inventories.

Where do we stand with respect to that?

What are you seeing right now?

What do you expect to see over the next 12 months?

And then, the second part of the question would be on the COVID-impacted categories.

Is this just a matter -- to get those back is it a matter of just lapping the difficult March comps?

Or is there additional work that needs to be done there to get those back to a growth trajectory?

Sure, so 2 questions there.

First of all, retailers' inventory levels.

And I think we talked about this at the last quarterly earnings call.

We largely feel that this is kind of in the rearview mirror at this point, Jon.

It's not something that we're hearing our customers talk a lot about or focus on at this point.

So we don't really see that as a headwind, going forward.

And then, in terms of the COVID-impacted categories, the brands that we have, like Dramamine and Nix and some of the cough/cold businesses, they had an impact that began, call it, April of last year.

And we've been at a steady level in terms of the impact on our business, so we haven't really seen it get worse.

So the first part of it is that, once we start lapping that base level, and then as consumers begin to return to normal levels of activity and COVID restrictions lift, we would expect to see a recovery in those businesses, over time.

And the brands there continue to be well-positioned.

We've held or grown share actually during this disruptive period.

So as you pointed out, it really is just getting back to a point where we're lapping the disruptive period.

On the e-commerce portion of your business, which you mentioned has been extremely strong, you commented that you saw triple-digit growth there in the quarter.

Where does that put you now in terms of e-commerce's portion of your overall sales?

And again, I know you've talked about this before, but just help us understand again why you're so well-positioned online.

It sounds like your brands, in aggregate, may have higher share online than off-line.

And I think you've said also that the profitability is comparable online and off-line.

So you're really kind of agnostic from that standpoint.

But how big is e-commerce now as a percent of your business?

Do you expect it to stay there, even post-COVID?

And how are your brands represented?

Sure.

So first of all, our ability to be successful during this really dramatic change in channels goes back to a simple strategy that we've been executing against for a long time, which is we want our products available wherever consumers choose to buy them.

And you can go back 20 years ago or more when there was dramatic growth in mass and dramatic growth in the dollar channel, as examples, right?

Our business has grown as those channels have grown.

And then, being in a position to actively manage the margin such that there isn't any penalty to having a consumer shopping shift.

So that strategy has been in place a long time, and we simply applied it to the opportunity around e-commerce and the likelihood that consumers were going to move there in increasing numbers.

So we executed that strategy.

We were ahead of the curve, and we were well-positioned so that, when that e-commerce business from us more than doubled in one single quarter, we were ready.

Our product was available.

Our content was available online at the right cost structure so that our margins would hold.

So it really is just about execution and having a plan to support whatever consumers choose to shop.

I think you also had a question in there, is what's our current percent.

I think all in, if you total all of the e-commerce sale across all of our customers, I think we're approaching 12% or so now.

And will it stay there?

I don't know.

We'll see over time whether consumers continue to keep shopping there or whether they go back to their old habits of going into stores.

In either case, it really doesn't matter to us as our products are widely available.

Great.

One last one, and I'll get back in the queue.

Chris, you mentioned the potential for bond refinancing in the fourth quarter.

Can you just talk a little bit about the details of that?

I'm not sure which, the bond, the maturity date, the rate you're paying now, what the opportunity might be for the bond refi?

Sure.

Hi, Jon.

We are anticipating refinancing the 2024 notes.

They're currently at $600 million with that 6-3/8%.

We're going to look to continue to take advantage of the favorable market conditions, similar to the refinancing we did around this time last year on the now-2028 senior notes.

So obviously, it's too early to discuss specifics.

We haven't even launched the deal yet, but we'll certainly share any finalization of the potential outcome in May, if not sooner.

Just as a reminder, we're anticipating closing around March 1. So any impact to Q4 would really be limited to 1 month from this action.

Our next question comes from Rupesh Parikh with Oppenheimer.

This is actually Erica Eiler on for Rupesh.

So I guess, first, I just wanted to touch on international.

So it was encouraging to see that improvement in the international category this quarter.

And I can appreciate that that business can be lumpy, as you've talked about.

But maybe can you talk about your latest outlook and thoughts surrounding the international segment, and maybe just a little bit more what you started to see during the quarter with Hydralyte, maybe elsewhere, to drive that improvement?

Sure.

Why don't I, Erica, take the -- so what did we see in the quarter ended December, and then Chris can comment about what's in our outlook for the remainder of the year.

We continue to be in an environment that can change quickly and is somewhat difficult to predict.

What we saw in Australia was a sequential improvement in demand and consumption.

That was largely the driver behind the outperformance ahead of our expectations during the quarter.

Australia lifted some of their COVID restrictions.

And that, combined with the beginning of summer there, really propelled an increase in sequential consumption levels for the business.

So that was really the big driver in what we really did predict to happen during the quarter for us.

So with that, let me let Chris comment on what's in our Q4 outlook.

Sure.

So regarding our Q4 guide versus the prior year; as Ron noted earlier, obviously we have some significant impacts on comps related to the March orders around COVID.

So if we think sequentially in terms of absolute dollars, we think the U.S. will be pretty stable in its trends from Q3.

But we're actually expecting international to be down for the reasons Ron noted that helped us in Q3 kind of swinging the other way in Q4 in terms of timing of distributor order patterns.

And we have seen some of the states in Australia return to shelter-at-home restrictions.

Obviously, difficult to predict; but right now, we would anticipate international to be down somewhat sequentially in Q4.

And then, I'm not sure you can comment at this point.

But as you look towards next year, your fiscal '22, given you're going to lap easy COVID comparisons, and you're seeing stable consumption in several other categories, I mean, at this juncture could we expect to see a return to positive sales growth in FY '22?

I mean just any puts and takes you might be able to provide us as we think about the top line for next year?

Yes.

As I commented on in the prepared remarks today, as we get into our fiscal '22 that starts April 1, we enter into an environment where we have easier comps, right?

That's the best way to describe it.

Unlike calendar reporting companies, we don't have the quarter-ended March peak that's going to be in the comps next year.

So that's going to be helpful in terms of year-over-year growth.

But beyond that, it's really tough to predict to what level we might expect growth for next year, right?

It really goes all back to when are we going to see consumers start to return to normal activities, when is the impact of COVID in certain restrictions going to start getting eased.

And at this point, it's still really hard to predict when that may happen.

So we'll give an updated outlook on what to expect for fiscal '22 at our May call.

But everything else being equal, we feel good about the state of our business.

Our consumption trends, excluding the COVID-impacted categories, has been strong this year.

We continue to grow share.

As I commented earlier, we were very well-positioned to be successful in e-commerce.

And our financial profile continues to deliver solid earnings and free cash flow.

So with all of that, we continue to feel good about our positioning for next year.

Our next question comes from Stephanie Wissink with Jefferies.

This is Seb Barbero in for Steph Wissink.

I was wondering, in your presentation today, you outlined growing market share in a few categories during the pandemic environment.

Could you give us a bit more color which brands or which categories are outperforming relative to your peers?

Sure.

So we're seeing particularly strong growth in Compound W, which I called out today.

We continue to have success growing share and launching in a differentiated innovation that's helping us to grow share there.

Monistat is having a particularly good year this year, as many women look to treat at home and avoid a doctor's office visit is one example.

DenTek is kind of in the same kind of boat, where consumers have maybe not gone to see the dentist.

So they're looking to take care of their teeth and their oral health, and they're reaching for DenTek's products, as a couple of examples.

And as it relates to M&A, any change in your views in the landscape over the past few months?

And specifically, if you look in the next 12 to 24 months, are there any specific category or categories that you're looking at that would strengthen the portfolio?

Why don't I let Chris comment on that?

Sure.

So similar environment to what we've consistently seen in our space, right, highly fragmented opportunities, and they continue to be available, and we'll continue to apply our disciplined screening, if you will, for M&A opportunities.

So no real changes to what we're seeing in the marketplace around that.

From a category perspective, I would say nothing that we're lacking where we feel like we need to get into another category or expand within the category.

We really look at it from a brand perspective within the category, the brand's positioning, as we see with many of our core brands, where we're looking to grow categories.

So no change to our strategy around M&A or our screening process, and I would say the market has continued to remain fairly stable for the kinds of things that we look at.

Our next question comes from Mitch Pinheiro with Sturdivant & Company.

Most of my questions have been answered.

You talked about Compound W, Monistat being positive in terms of share performance.

What would have lost share over the last 12 months?

Anything in particular?

I think if you look across our portfolio, the cough/cold brands -- again, it's a unique situation and environment -- would be the one area that I would identify, Mitch.

But beyond that, the brands that we focus on, the 5 power core and the dozen or so core brands, have generally held up very well.

And in aggregate, our share has actually increased year-to-date versus where we were a year ago.

And then, when we're looking at the bank refinancing, I was just curious.

You guys generate attractive EBITDA margins, EBIT margins, attractive, obviously, free cash flow generation.

And you look at the '24 notes, and they're at 6-3/8, I mean, it's quite high.

Even the 2019 notes at 5 and change; to me, I would think that these rates should be half of what you're paying.

Is it just a function of having 4x leverage?

And is that simply that?

Or I would think that your interest expense should come down meaningfully, just given your fundamentals.

Can you talk about that a little bit?

Mitch, will you be available to help with the refinancing pitch?

So I guess I would say we don't think our leverage profile has ever constrained us from our ability to get disciplined and advantaged pricing in the marketplace.

And I think you see that when we compare our leverage levels with some peer companies and some other companies.

I think we have consistently been able to get attractive rates.

And so I don't think it's impeding our ability to go out and execute successfully.

So that said, I think you may be a little aggressive on going all the way to half of the current interest rate.

But yes, we would expect, in this refinancing and current market rates, to see a significant improvement in our interest expense as a result, on the 6-3/8% 2024 notes.

And I guess is it a function -- just curious what would be, in terms of, as banks look at your business, I mean, what's the one thing that I guess they're looking at that's keeping the rate maybe higher than what I think it is?

It can't be the leverage, so what would it be?

To some extent it's the leverage, but not the current leverage, right?

It's the anticipation of future M&A and our ability to flex the leverage, I would say.

Our next question comes from Linda Bolton-Weiser with D.A. Davidson.

I don't have the slides right in front of me, but did you say what your consumption growth or decline was in the quarter?

And according to IRI data, it looked like your consumption got a little bit worse sequentially through the months of the quarter; October, and then November was a little worse, and then December was a little worse.

And then, actually, the numbers ended January 10 were a little worse.

Is that the same pattern that you see in the numbers?

And why would there be some worsening of performance in terms of consumption through the months?

So first of all, Linda, and I think I say this every quarterly call; those IRI reports are Nielsen, whatever the generic reports you're getting, have always been fairly disconnected from what actually goes on with our business.

And it's never been more true than the current environment, where the biggest growth for our business has come from unchecked, untracked channels for e-commerce and certainly the international business.

So that's the first comment.

And the second is, in terms of the general consumption, our consumption continues to be steady across the business, which is why we've been talking about our business on a sequential basis quarter-to-quarter and talking about our run rate, because we're in an environment where comps to the prior year are funky, is the best way to describe it, right?

And they're about to get even more disconnected as we enter the period ended March, which was really impacted by COVID activity last year, where we saw a significant spike in the activity.

And then, for the quarter ended June, you're going to see a pretty big dip and trough.

So we continue to encourage people to think about our business on a sequential run rate basis, given the abnormalities we'll see in the comps of the prior year.

So what was your consumption in the quarter?

So let me let Chris answer that one for you.

Sure.

So consumption was down in the low single digits, and I think Ron might have noted in his prepared remarks when you were in the Q&A; when you adjust for the COVID-impacted brands, in line with our long-term target, as Ron said, and has been consistently sequentially over the past couple of quarters and actually a couple of years.

Our next question comes from Joe Altobello with Raymond James.

Apologize, I jumped on late, so I may have missed some of this.

But just in your response to Linda's last question, I was curious.

It sounds like, if you look at COVID, the impacts from COVID on consumption was about 3 points, call it, again, last quarter.

Is that -- does that gap narrow in the June quarter?

Or do you see some improvement in the March quarter?

So for the quarter ended June, we would expect the impact to be largely gone from the COVID-impacted businesses, Joe, because that was more or less in full effect for that quarter last year.

And for the quarter ended March, clearly the comps are going to be meaningfully impacted because of the spike in the business last year.

And I guess somewhat related to that, could we see a situation where your COVID-impacted categories and channels start to improve, but consumer focus on things like health and hygiene remains fairly elevated?

So could you get the best of both worlds, to some degree, in fiscal '22?

That's very likely, Joe.

One, I think consumers' focus on health and hygiene is going to continue for a while, right?

This has been a pretty significant event that we've been living through, so I would imagine that's going to continue.

So we may get the positive impact of both that continued focus, and certainly the comp against the reduced level last year.

And just one last one for me.

Have you experienced any major supply chain issues?

I know in the past you've noted some tightness in packaging and commodities.

Has it become more acute or led to increase in stock-outs?

No, it's really been pretty steady for us during this timeframe, Joe.

We haven't seen really any meaningful change in the supply environment for us.

It's challenging, but we continue to work with our partners for steady supply, and we continue to be in a good position at shelf at retail.

Our next question comes from Anthony Lebiedzinski with Sidoti & Co.

So just wondering, longer term, how should we think about the A&M spending?

And then, looking at your outlook for earnings growth of mid- to high single digits, are you already factoring in the benefit of debt refinancing, or could the debt refinancing benefit actually lead to better earnings longer term?

Chris, why don't you take this?

So we have not factored in the debt refi for this year's results.

As I noted in response to Jon's question, we would anticipate the refi closing in the beginning of March.

So the impact to this fiscal year and this quarter would be limited to 1 month.

So that's just a heads-up on that front.

And I apologize, can you repeat the first part of your question, please?

Yes.

The first part of the question was about A&M, and then kind of how should we think about that longer term.

Obviously, you made some adjustments to that when COVID hit.

Longer term, how should we think about that?

Sure.

So yes, as you pointed out, and we showed this quarter as well, the timing of A&M spend can fluctuate from quarter-to-quarter based on individual initiatives that we roll out.

So I think what you've seen historically, and can continue to expect, is A&M spend in the range of 14% to 16% of sales.

That's something we've delivered pretty consistently.

(Operator Instructions) Our next question comes from Jon Andersen with William Blair.

Just wanted to ask a couple more.

Transportation costs, we've been hearing about, obviously, increases in spot rates.

That was an issue 2 or 3 years ago, I guess, for you.

Just give us an update there on how you're positioned today versus in prior years and how you're thinking about that.

First of all, Jon, our warehouse move and change in third-party provider there continues to have us better positioned than where we were, to manage through this, is the first part of it.

The second part of it is freight costs as a percent of revenue for us is fairly small versus other companies, other CPG companies who may be shipping heavier product, or different profile products.

So although it's something that we're actively managing, we're in, I think, a little bit of a different position than many other companies in terms of being able to manage through this.

And then, it seems like, when you come up with a novel technology or approach or add a certain degree of functionality to one of your products, your brands, product lines, like with Compound W and the rapid freeze, that really sets the stage for kind of a multiyear -- that helps drive the category, helps drive brand share.

So I'm just curious, as you sit here today, how would you characterize the innovation pipeline overall and for fiscal 2022, that is?

And I mean, would you say it's a better-than-average, average or typical year of innovation?

And also, when do the majority of the resets happen in your business?

Are they spaced out through the year?

Do most of them happen at 1 point of the year?

That would be helpful.

So first of all, I think I commented on this in the prepared remarks today, is that we look to have a 3-year new product and innovation pipeline developed for all of our big brands.

So our new product innovation launches tend to be pretty steady from year-to-year.

So there isn't necessarily peaks and valleys.

Some are more successful than others, or address bigger market opportunities than others.

But in terms of kind of the number of new products and innovations that we launch each year, it's fairly steady.

And then, in terms of reset timing, it tends to happen between spring and end of summer for the majority of our categories, Jon.

I think you were asked about M&A earlier.

I'm just kind of curious, I know there's been a lot of portfolio optimization work done over the last 5, 6, 7 years.

Do you still have a part of your portfolio that you would consider divesting?

And under what kind of conditions would you consider doing that?

So right now, the tail's function in the portfolio is to generate earnings and cash flow that we can invest behind our power core and core brands.

So that's the role that it has in the portfolio.

And really, it comes down to math.

We hear from people who are interested in tail brands all the time, and we evaluate the benefits and the inherent value of those brands versus what somebody might be willing to pay for them.

So it comes down to that evaluation.

And I'm not showing any further questions at this time.

I would now like to turn the call back over to Ron Lombardi for any further remarks.

Thanks, operator.

I'd like to thank everybody for joining us this morning, and I look forward to updating you again in May.

Have a great day.

Thank you.

Ladies and gentlemen, this concludes today's conference call.

Thank you for participating.

You may now disconnect.