Keith Davos

Keith Davis questioned Prestige Consumer Healthcare's capital allocation strategy, specifically the increased stock buybacks this year compared to previous periods, and whether this level of repurchases should be expected to continue, particularly in the absence of M&A opportunities.

Answer

Chris Sacco, CFO and COO, reiterated that investing in brands is the top priority, followed by disciplined M&A. He explained that opportunistic share repurchases were driven by attractive market valuations, providing good shareholder returns without impacting core business investments. Sacco emphasized the company's strong free cash flow and healthy leverage position, which offers flexibility for continued repurchases.

Keith Davis asked about Prestige Consumer Healthcare's capital allocation strategy, specifically the decision process behind the increased stock buybacks this year compared to reinvestment. He also questioned if this level of repurchases should be expected to continue in the absence of M&A opportunities.

Answer

Chris Sacco, CFO and COO, reiterated that investing in brands is the top priority, followed by M&A, where the company maintains a disciplined approach. He explained that the increased share repurchases were opportunistic, driven by the market reaction to the stock, which presented an attractive return for shareholders. Sacco emphasized that the company's strong free cash flow and healthy leverage position provide flexibility for capital deployment, allowing for repurchases without compromising brand investment or M&A pursuits.

Keith Davos asked about IDEXX's pace of innovation, questioning if the aggressive agenda might be too much for the market to absorb, especially given the macro environment. He also asked if the planned reinvestment for this year and next is sufficient, and how IDEXX might course correct if performance exceeds expectations.

Answer

Jay Mazelsky, President and CEO, affirmed that IDEXX's innovation agenda is intentionally aggressive, representing a portfolio of solutions (assays, instruments, software) that customers desire. He emphasized that the large and expert commercial organization is capable of effectively introducing these solutions to customers, driving sector development. The Q&A concluded before the reinvestment course correction part of the question was addressed.

Keith Davos asked about IDEXX's pace of innovation, specifically if the aggressive agenda (MUDX, CancerDx, future launches) risks doing too much too soon or more than the market can absorb, especially given the macro environment.

Answer

Jay Mazelsky, President and CEO, stated that the innovation agenda is aggressive but intentional, representing a portfolio of solutions (assays, new instruments, software) that customers are eager for. He emphasized that IDEXX's large commercial footprint and subject matter experts are capable of digesting and effectively bringing these testing solutions to customers, driving testing growth, and views innovation as a key driver for sector development.

Keith DeVos of Jefferies inquired about the infant formula business, asking for context on retailer feedback and competitor actions, and how the second-half recovery is expected to unfold. He also asked for confirmation on the building blocks for achieving the full-year EPS guidance despite a lower top-line forecast.

Answer

President & CEO Patrick Taylor described the infant formula market as "fluid" and "volatile" due to heavy promotions but affirmed confidence in their second-half ramp-up. EVP & CFO Eduardo Bezerra added that the second-half EPS target only requires a 3% year-over-year increase, which is supported by new OTC store brand contract wins and infant formula growth, giving the company confidence in its reaffirmed guidance.