... Good evening, everyone. Thanks for joining us. I'm Ron Lombardi, Chairman and CEO of Prestige Consumer Healthcare, joined by Christine Sacco, our Chief Operating and Financial Officer. So today, we're gonna give an update and talk a bit about our business. I'll start things off, and I'll turn it over to Chris, who will wrap up today's discussion. So with that, let's jump into the slide that I always like to present and talk about to set up the idea of Prestige Consumer Healthcare. If you've heard us talk in the past, we describe ourselves as looking for niche categories where brands can compete and be successful over the long term.
And niche doesn't necessarily do a great job of describing the categories that we compete in or the reach that we have with consumers, and I think this slide up here does a great way to, I think, add color to it, right? So every year, we sell enough Clear Eyes and TheraTears and our other eye care brands to treat 12 billion irritated eye occasions, right? Huge number, huge amount of consumer contacts. We treat 650 million sore and dry throat occasions each year with our BC and Goody's powdered analgesic brands. We help treat about 17 million pain occasions each week, including hangovers, for those of you who may be familiar with the brands. In Monistat, we help women treat about 8 million vaginal yeast infections every year.
So this gives you an idea of the breadth and depth of connections we have with consumers. Although my favorite statistic about connections with consumers is our Fleet brand, right? We sell enemas and solid suppository products, and if you take each of the solid suppositories that we've made over the last 10 or 12 years and stack them end to end, you almost get to the moon. So about 240,000 miles of solid suppository relief over the last dozen years or so. So we really do have deep and long connections with consumers. When we talk about our business, we often break it up into some different categories. You see on the chart, GI is our largest category, followed by women's health.
Eye and ear care is third, and they're followed by skin care and analgesics. But if you dig into each of these categories, you really see that we participate in very different ways in the GI category. So we've got Dramamine, which is the leader in motion sickness and nausea treatment and prevention, very different than Fleet enemas, which is very different than our Hydralyte hydration product that we sell mainly in Australia and Australasia, but we have the rights for in most of the rest of the world. And then same thing, if you go into the women's healthcare segment, we have Monistat and Summer's Eve. Again, very different kinds of products that get lumped into the women's health.
So we have a very diverse set of brands that treat a very diverse and different set of disease occasions and illness occasions that people may run into. And this diversity gives us a lot of benefits, and we'll talk about some of those benefits in more detail in a minute here. But it really allows us to deal with the ebbs and flows in illness levels that may happen in a given year. So, for example, in the skin category, we have Compound W and Nix Lice Treatment. This actually is a low lice season incidence levels this year, right, back to school, but it's not enough to move the needle and impact the total performance of our business.
So over time, some of these brands will do better than the average we'd expect for them, some are a bit below, and some of them are right in line with what you'd expect for illness occasion levels over time. So lots of benefits to this diverse portfolio of brands. So let's talk about the pillars that create value for our shareholders, right? How do we think about driving value and creating value? It always starts with doing a good job with the business you have, right? On the slide up here, we've described it as investing for growth with our proven brand building playbook, and I'll give you some examples over the next few slides. One of the attributes of consumer healthcare is a very strong financial profile, and that's the second element of our value creation proposition.
Strong gross margins, strong EBITDA margins in the low 30%. That, combined with low cash taxes and low capital spending, delivers industry-leading free cash flow. Last year, we delivered about 240 or so, $242 million of free cash flow. I think our outlook for this year is north of $245 million of free cash flow, and those are not one-off levels of performance for us. We have a very long history of solid free cash flow that empowers the third value creator for us, which is a platform that allows us to have capital allocation optionality.... Right?
Whether it's being active in M&A, buying back our stock, or de-leveraging, which we've done very rapidly over the last four or five years, getting the company to the lowest level of leverage we've had since the company went public back in 2005 or so. So that's how we think about creating value, right? Do a good job with the business we have, growing the brands that we have, delivering solid and consistent financial results, and free cash flow, and then using that cash flow to create value over time. And down at the bottom, you can see what our five-year CAGRs were for the end of the last fiscal year. Revenue grew about three and a half %, organic growth two and a half %, and our EPS grew almost 9%, during that same timeframe.
So very solid and repeatable levels of financial performance. So, let me jump into the brand building playbook, right? So how do we think about growing and managing the portfolio of brands that we have? First, it all starts with understanding consumer insights and opportunities, right? How are consumers thinking about taking care of themselves, treating their illness levels, looking for and deciding what product to buy when somebody in their household, their children, are ill? The second part of it is being a flexible and agile marketer, right? When we talk through some of the examples here, what you're gonna find is, we think very differently than most big CPG companies, where we build our strategies brand by brand.
We think about what is the best marketing approach for each brand based on the targeted consumers, and that's an important differentiator for us. If we get asked, you know, "What's the secret sauce to your brand building?" That's one of the big elements of it, is we think about brands individually. We also look at expanding consumer reach and the distribution of our products, right? E-commerce has been a fast-growing channel for us, not only at Amazon, but with our brick-and-mortar partners as they think about expanding their .com business. And then finally, the role that new product development and innovation play in brand building. So we'll talk about these four elements over the next couple of slides. First, Dramamine is always the classic example we like to use when talking about building a brand over the long term.
We bought Dramamine from a big pharma player back in 2011, and in the five years prior to us acquiring Dramamine, there hadn't been a single dollar spent on consumer marketing for the brand, and that's not a criticism for the previous owner. It's an observation of Dramamine was not an important brand for them, so it didn't get investments. We acquired Dramamine, it becomes an important brand for us, we invest behind it through marketing, through new products, through innovation, over time, and we've been able to grow the brand by nearly five X over the 15 years or so that we have owned it, and if you look at the top left, in 2011, there was essentially two SKUs for Dramamine, and then over time, we built off of that base. We introduced a chewable, grape-flavored children's product.
Prior to us having a chewable product available, if you wanted to dose your children for motion sickness, you took an adult tablet, you broke it in half, and you tried to get a six-year-old to swallow half of a tablet, right? That's not rocket science, to go talk to the consumer and ask the mom, you know, "How do you think about treating your child?" And they tell you, "It's a hassle," right? "How do I know I got the right dosage? How do I know it's half? What if they only, you know, take half the pill and spit the other half out?" Kind of thing. So it's an example of the consumer insight that we worked on. Another consumer insight that led to new products is, we heard from people that said, "I trust Dramamine for motion sickness.
I know it's gonna work. I also know it's gonna make me drowsy, and that doesn't work for me because I'm driving the boat, I'm driving the car, I'm going on a cruise. I don't want to be drowsy." So we introduced non-drowsy forms of Dramamine to help connect with that insight as well. And then finally, again, as we talked to consumers, and we talked about motion sickness, we often heard back, "Well, I don't know about motion sickness. I just feel nauseous, and I feel like I'm gonna throw up." So that insight led us into the nausea category, and again, new products, new forms, chews, and lozenges to deliver clinical doses of ginger as a way to help treat nausea. And we quickly became the number one brand in the nausea category.
So great example of over the long term, we can continue to bring insights and invest behind it, and we're just getting going on Dramamine. Even though it's grown by five X, there's no reason it can't grow by multiples again over the long term. So let's talk about portfolio diversity and being an agile marketer, right? If you've heard us talk over the last year, we've talked about supply constraints and challenges we've had with Clear Eyes. So as we've dealt with limitations around shipments, we've stepped back and reevaluated our marketing plans, right? We don't want to market a product and drive people to the shelf to find empty shelves and not find the product they're looking for.
So we rediverted some of those dollars away from the Clear Eyes brand to other eye care products, particularly TheraTears, Debrox, which is an earwax cleaner, and Stye, where we look to better connect and do more advertising for those brands to connect with consumers. And on the right, you can see that we've just launched a new marketing campaign for TheraTears as a result of those extra funds being available, and we'll show that now, if we can call that up.
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It's great. When we talked to consumers about TheraTears, they said, "It feels great in my eye. I know it's working. It'd be great to know why." Right? So we're furthering that connection with the consumer and reminding them, "Hey, here's what's unique about TheraTears versus the other competitors in the dry eye space as to why it's gonna feel and work great in your eye." The other thing that we've done with TheraTears is, we've been able to finish work to get a twelve-hour soothing comfort claim, right? It works all day long. A couple of drops in your eyes in the morning, and your eyes will feel great and refreshed all day long.
So another example of the marketing playbook, where we can go out and do a clinical study to support what consumers are already telling us about the product, which is, "I put it in the morning, put it in my eyes in the morning, and it feels great 10, 12 hours later." So a couple of examples about our agility and our ability to make changes in our marketing investment plans during the year to take advantage of different opportunities. So let's move on to distribution and e-commerce. On the left side, in the top, you'll see that we have had a lot of success investing behind e-commerce and partnering not only with Amazon, but our brick-and-mortar partners, to expand our product offering and investments so that we connect with consumers when they go to their chosen dot-com platform to look for our products.
We've been able to take our dot-com business from about 4% of sales around five years ago. We've grown it by 4X. At the end of last year, we were about 16% of sales for our dot-com business, right? Two-thirds of that is Amazon. We continue to do very well on that. We bring those learnings to our other brick-and-mortar partners to help them with what they're trying to accomplish, but it really works for us. We know how to connect with consumers. We know how to fulfill through Amazon for that, and are able to provide up-to-date content that drives not only awareness, but traffic and conversion for the brands that are out there.
The other benefit that we don't talk a lot about in terms of dot-com is, we're able to have much broader distribution for our tail brands, right? The best way to describe our tail bands, brands is really loyalty brands or heritage brands. They're brands that consumers have used for very long periods of time, that they trust, but they can't find in brick-and-mortar because the velocity isn't necessarily enough to support a listing at Walmart, for example, or in the drug channel. So, some examples would be like Beano, does very well for us on dot-com. You might not be able to find it broadly in brick-and-mortar, as an example.
But we have about fifty brands that fall under that category, that if you go out to Amazon or some of the other dot-coms, you're gonna find those unique brands that you might not find in the store. So it's all of those elements. We look for every opportunity to connect with consumers and provide them the products, whether they're going into a convenience store, drug, mass, grocery, dollar, or they're dot-com. So again, we continue to expect success on this going forward and look forward as a rapidly growing channel for us. So finally, in this area, we'll talk about new products and innovation.
And we often get asked, "You know, what are the elements of your 2%-3% long-term organic growth outlook?" And we always start by saying, "You know, we think the categories that we grow in, that we compete in, grow, let's call it 1%," right? Illness levels for lice, as an example, they don't change dramatically, year to year. They generally follow population growth. So that's the first part. The next part of that algorithm is gonna be driven by growing the categories that our brands define, and we do that by bringing in new products, new innovation, and marketing so that non-treaters come into the categories, low treaters expand, mistreaters get connected with the right pharmaceutical ingredients to actually help them treat their disease state.
You can drink all the ginger ale you want, it's probably not gonna stop you from getting motion sickness in a car if that's what bothers you, but Dramamine will do it, right, and I gave the examples of the new products there, but over the last year, up on the slide, we've got six or seven examples of some new products that are doing great for us. We've got a Dramamine Advanced Herbals for Kids, right? So if you're looking to give your child maybe not a medicine, but a ginger-based approach to helping them deal with nausea, we've got a great product for kids up here. We launched Summer's Eve Whole Body Deodorant in the feminine hygiene aisle, and it's doing fantastic. It's the number one selling whole body deodorant in the hygiene section, right?
We wanna play where we can be successful, and putting Summer's Eve in the deodorant aisle against the great big CPG companies who've got tons of money behind their whole body deodorants, whether it's a spray or a cream, we're not gonna be successful there. People aren't thinking about Summer's Eve in the deodorant aisle when women go to shop in the feminine hygiene aisle, right? They know what Summer's Eve's proposition is. It delivers and this new product delivers against the expectations. Great fragrance, efficacious, and great feel on the skin. So that's off to a great start for us. We've got a new Goody's Mental Alertness with some extra caffeine to get you going when you need it. Fleet has expanded into the stool softener category, so Fleet has primarily been associated with enemas and suppositories, right? That's the...
When you're really desperate, and you've exhausted every other option to help cure your constipation, right, Fleet had you covered with enemas and suppositories. We're now looking to connect with you earlier in your constipation journey. You're gonna trust Fleet as efficacious, and that it's gonna work. We've got a couple of new flavors in Hydralyte, again, to expand with that household penetration, get folks to use Hydralyte more often as part of a more frequent hydration regimen to keep yourself healthy. And then finally, on the right, as we've looked to expand how Monistat connects with women, we've got an addition to our care line under the Maintain, a vaginal suppository to help with care over time.
So new products can come in lots of different ways, whether it's an extension into kind of a new subcategory, a new flavor, or a new form, is how we think about it. Again, all based on consumer insights. And then finally, before I turn it over to Chris, we have a fantastic and fast-growing international business, largely anchored around our Care Pharma business in Australia. It's been growing in the mid-teens, on average over the last five years or so, ahead of our long-term expectation of it growing in kind of the mid to high single digits. But again, it's due to the same approach we take in North America, which is great brands, long-term brand building, and investments in them, to connect with consumers and help them take care of their health.
So with that, let me turn it over to Chris. There you go. Thanks, Chris. Thanks.
Good afternoon, everyone. So when Ron joined the company about fifteen years ago, the company went on a journey to morph the portfolio to become the pure-play OTC company that we are today. So if you took this chart, and you're looking at leverage down, the number on the bottom there, and you actually went back a few years, you'll see that we touched five point eight times about three times in the company's history. We did that because we needed to morph the portfolio, as I mentioned. So the power of our cash flow, which I'm gonna talk about, has really driven our ability to go. I think Ron mentioned two point four times at the end of our Q1. We're a fiscal March 31st company. [This] is the lowest level of leverage that the company has seen.
The reason we have such strong conversion with free cash flow starts with a variable cost model. We manufacture about 15%-20% of our product in-house. The nature of OTC, as Ron mentioned, right? You go into the store, someone in your household is sick, you're usually not looking to save a dollar. Not an area where we get into promotion in the categories that we compete in. Can't really get you to buy head lice if no one in the house has head lice by doing a BOGO, or whatnot. Low CapEx spend, given the model I just talked about, 1%-3% of sales a year is, generally speaking, our capital spend.
And then we still are benefiting from some acquisitions that we did in the past that drive about a high teens cash tax rate compared to our effective tax rate of 24% you see on the balance sheet. So all of those things really lead us to this consistent and strong free cash flow that we talk a lot about. So what are we gonna do with that cash? If you looked at this chart a few years ago when leverage was pretty high, you would've seen number two and number four were reversed. Obviously, we talked about, you know, investing in the brands that we have, but over the next four years, we're gonna generate about $1 billion of free cash flow.
And the power of that today, compared to the power of that some years ago, is that back in the day, we had to use all of that to delever, right? Now, as we sit here, we have optionality. The number one use of cash that we prefer to use right now is M&A, and we'll talk a little bit about that. After that, we look to do share repurchases. You could probably expect us each year in the first quarter to offset dilution, and then beyond that, opportunistic repurchases. We've talked about a $300 million multi-year authorization from our board. We have over $200 million of that left, and at today's prices, you'd probably see us be active in that arena. And then fourth, very attractive long-term debt.
We don't have any variable debt left at this point, so we'll likely build some cash on the balance sheet. So again, where we used to use all of our cash flow for de-leveraging, and we needed to, we don't need to do that anymore. So we actually can do all four of the things that you see on this page, and we're doing them this year, so different lens from our perspective. So again, we get asked a lot of questions about M&A, and, you know, "What's out there? Are you seeing it? What's the environment like?" And we often say, it's more of the same. And this kinda speaks to why.
We were trying to communicate, you know. When you think about the pie chart up on the top left there, you'll see even the large players who are here, it's still very highly fragmented from an industry perspective. And then if you look at the numbers below, you can see that consumer healthcare only 27%. The top three brands are only holding 27% of their category, so it is highly fragmented, which creates the opportunity. I like to use the example that you don't go into a store and say, "I have a skin problem." Right? You say, "I have eczema, I have a wart, I have rosacea, I have acne." That creates a lot of opportunities.
You know, we see, whether it's family members, PE firms are always turning things, large players looking to get rid of their tail. We've bought brands from all of those players, and we'll continue to be active in that space. You know, again, as I mentioned before, at 2.4 times leverage, we look to... Right now, we have about $1 billion of acquisition capacity. That's not going back. You're very unlikely to see us go back to leverage levels that you saw in the past, right? Market has responded. We're in a different world. This is assuming we essentially get ourselves in a couple of quarters. This is how we think about it.
You know, two or three quarters, we're back down to that three times or less leverage level after we do an acquisition, so that's how we think about acquisitions. And again, the size could be small. As Ron mentioned, we were able to grow Dramamine quite significantly. It was a $20 million brand when we bought it to larger transformational acquisitions with a $1 billion of capacity today. So the road ahead. You know, while we were disappointed to adjust our full year numbers for this fiscal year, really isolated to two things that we think we have a very good handle on and we are addressing. And so, Ron mentioned capacity constraints for Clear Eyes.
We also recently announced our plans to acquire our largest provider of Clear Eyes, who has a high-speed line coming on as we enter our fiscal third quarter, which will start on October first. We also have two new suppliers who are coming online at about the same time. One's online already, the other will come online around that timeframe, and so we feel that we have a good handle on the issues, and as we move forward, again, the attributes of the business are unchanged, and it really speaks to the diversification of the portfolio that Ron touched on, you know, and even with the adjustment of our top line for this year, we're still holding our free cash flow outlook of $245 million or more, so I think that's an important thing to note.
We talked about, a little bit, touched on the long-term growth algorithm. Ron mentioned how we get to that 2-3% of organic growth, and then the power of the cash flow, whether it was paying down debt, buying back shares, earning interest on the balance sheet, enables us to take that EPS growth at a 6-8% growth rate, above obviously, our top-line growth. We think of M&A as additive. You know, you're gonna hear... When we think about M&A, the keyword we always talk about is discipline. It's not that we couldn't have bought things over the years, but we remain disciplined to the long-term view of these brands and what they can do in this space, and we think that's served us well, over the years.
But M&A, we've got a very good playbook for M&A as well. Very very good at integrating things very quickly, and we'll continue to stay disciplined, but any M&A would be additive to this algorithm you see here. So lastly, just to sum it up, you know, diversification is huge. We saw it during COVID, where brands like Dramamine almost had no sales, but no one wanted to go to the doctor, so brands like Monistat had a tremendous amount of sales. And then we saw it all reverse in the opposite direction afterwards. So again, just the power, when you look at that pie chart, it's diversified way beyond what you see in that pie chart, and we think that serves us very well. And then also, just the leading positions that we're holding in our categories. Right?
Two-thirds of our sales come from brands that are holding a number one position, and in many instances, it's a meaningful position. It's a 50% share, a 60% share, with maybe a very small branded player behind it, and then private label. We talked about the brand-building playbook. It starts with consumer insights. You know, that's a part of everything that we're doing. We're gonna hit a lot of singles and doubles, and so, again, often it comes from consumer insights, and you look back and you say, "Well, no kidding! I can't believe there was no Dramamine for children." But there wasn't, and so we'll continue to use those insights to move forward. We talked about our financial profile.
Again, our ability to generate strong and consistent free cash flow has been happening year in and year out, and we see that happen over many different kinds of economic environments. Scalable platform. You know, people say to us, "Well, what do you need if you buy a couple of brands tomorrow?" We probably need one or two people in operations and a few people in marketing. The brand, the platform is there. It is extremely scalable. And again, we think a lot of opportunities out there, which takes you to the repeatable M&A strategy. We'll continue to stay disciplined, but there's a lot out there. We continue to look at all of them, and you know, when it fits our very well-defined criteria, you know, we'll move forward.
So all of those things kind of put together lead us to why we think we can drive a long-term shareholder value for everyone. Don't know if there's the ability to open this to questions. Open this up to questions, if anybody has any?
Are you saying that a lot because we're seeing all these products that you are trying to? I think a lot of things are coming out of the portfolio. What are the kind of valuation?
Sure. We haven't really seen a meaningful shift in valuations for the kinds of things we're looking for. Remember, we're looking for brands that have a leading position in niche categories. And so, when we're competing with private equity, who is the primary competition when we're going after a brand or a company or a deal, we have a much lower cost of capital than they do, and our platform is way more sophisticated and scalable, I believe, than many of theirs. You know, you think about quality and regulatory and pharmacovigilance and all the things that you need to be able to do. We're certainly in a different position than some of those other companies.
Hey, Keen Howard from Media Land. Just maybe a quick one, given kind of feedback we've heard from your peers about the shifting in channels, from let's say the traditional kind of drugstores, OTC, to more club and retailers. Have you thought about how that may affect your business, and kinda can you summarize the relationship you have with kind of both channels?
Sure. You wanna take it?
I can start. I think my microphone's on. So, you know, channel shift isn't something new for us to deal with, right? If you go back to 2019, before we had this big disruption from COVID in terms of where people shopped, right? We saw the drug channel was facing some headwinds. Grocery and regional growth, grocers had some headwinds. Mass and dollar were doing well during that timeframe. You fast-forward to today, and it's kind of like we're back to where we were in 2019, right? We've got retailers that are doing well and some that are challenged. You know, the way we approach it is, we want all of our retail partners to be successful.
So we try to develop unique programs with each of them based on the positioning a brand may have in a drug channel. So it's easy to say, "Oh, geez, the drug channel is struggling," but it's often the first shopping point for someone who's looking to treat a serious disease. So drug is an important channel for Monistat, for lice, for example. So we're gonna look to partner with drug and make the investment to support the success of those brands there, but scale back investments where shoppers may be going to a different channel to look for a different price value proposition. Whether it's to mass, whether it's to the convenience of Amazon, where they can get great price transparency and get it delivered the next day or the same day, depending on where you are.
We don't take the approach of, "This channel is suffering, so forget that, and we'll go someplace else." You know, shoppers are still going into all these retail channels, and it creates an opportunity for us to work with the retailer to help them win and for us to connect with the consumer and win wherever they're choosing to shop.
Yeah, and just to piggyback on that, we're channel-agnostic from a margin perspective. You know, we used to say that to people, I don't think they believed us, and overnight, in about a month, during COVID, we doubled our Amazon sales from... or our online sales from 5% to 10%, and I think our margin was slightly up that period. So, it doesn't happen that way by accident, right? We do not offer the same product offering in Dollar General, as we do in Walmart, as we do on Amazon, as... You have to manage it that way, and we have absolutely, that's been a priority from, for us from day one. So we just want this consumer to take the product off the shelf wherever they're going. Great. Great, yeah. Thanks for taking the time, everyone. Appreciate it.
Thanks, everyone.
Have a good day.
Have a good afternoon.