Q4 2023 Perrigo Company PLC Earnings Call
Operator: New York Sky Arcade Shops, Good morning and welcome to the Perrigo 4th Quarter and 2023 Financial Results Conference Call. At this time, all lines are in a listen-only mode.
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Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Please be advised that this call is being recorded today, Tuesday, February 27, 2024. I would now like to turn the conference over to Bradley Joseph. Please go ahead.
Bradley Joseph: Good morning, and welcome to Perrigo's fourth quarter and fiscal year 2023 earnings conference call. I hope you all had a chance to review our release issue this morning. A copy of the earnings release and presentation for today's discussion are available in the investor section of the Perrigo.com website.
Bradley Joseph: I would like to remind everyone that during this call, participants will make certain forward-looking statements. Please refer to the important information for shareholders and investors and safe harbor language regarding these statements in our release issued earlier this morning. A couple of housekeeping items before we start.
Good morning, and welcome to the Berry Gulfport quarter in 2020 financial results Conference call. At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.
Any time during this call you require immediate assistance. Please press star zero for operator, please be advised that this call is being recorded today Tuesday February 27, 2034, I would now like to turn the conference over to Bradley Joseph. Please go ahead.
Bradley Joseph: First, unless dated, all financial results discussed and presented are on a continuing operations basis. They do not include any contributions from the divested RX business, which was accounted for as discontinued operations prior to its sale. Second, organic growth excludes acquisitions, divestitures, exited product lines, and currency in both comparable periods. All comments related to constant currency remove the impact of currency translation versus the prior year by applying the exchange rates used in the comparable measurement in the prior year's financial statement. And third, Patrick's discussion will focus solely on non-GAAP results, except as otherwise noted. See the appendix for additional details and for reconciliations of all non-GAAP financial measures presented. And with that, I'm pleased to turn the call over to Pat. Thank you, Brad. Good morning, and good afternoon, everyone.
Bradley Joseph: Good morning, and welcome to <unk> fourth quarter and fiscal year 2023 earnings Conference call.
Bradley Joseph: Hope you all had a chance to review our release issued this morning.
Bradley Joseph: A copy of the earnings release and presentation for today's discussion are available within the Investor section of the Perrigo Dot Com website.
Bradley Joseph: Joining today's call are president and CEO, Patrick Lockwood, Taylor and CFO Eduardo Bezerra.
Bradley Joseph: I would like to remind everyone that during this call participants will make certain forward looking statements. Please refer to the important information for shareholders and investors.
Bradley Joseph: Safe Harbor language regarding these statements in our release issued earlier this morning.
Speaker Change: Couple of housekeeping items before we start.
Speaker Change: First unless stated all financial results discussed and presented on a continuing operations basis and do not include any contributions from the divested Rx business, which was accounted for as discontinued operations prior to its sale.
Patrick Lockwood-Taylor: I'll start the call with a few opening comments. First, I'd like to thank all of our 9,000-plus strong Perrigo team who work relentlessly to deliver world-class self-care products to consumers. I truly appreciate all that you do each and every day.
Speaker Change: Second organic growth excludes acquisitions divestitures exited product lines and currency in both comparable periods.
Speaker Change: Comments related to constant currency remove the impact of currency translation versus the prior year by applying the exchange rates used in the comparable measurement in the prior year's financial statements.
Patrick Lockwood-Taylor: We ended 2023 with our international business firing on all cylinders. While our US OTC business is performing well, as well, amid a normalizing consumer environment, store brands continue to gain market share from national brands. In addition, our recruiting initiatives with synergies from the HRA acquisition and our supply chain reinvention program are adding value and remain on track. We were proud to also achieve a multi-decade effort to win FDA regulatory approval for OPEL. It was the first women's contraceptive to be available over the counter in the United States.
Speaker Change: Third Patrick's discussion will focus solely on non-GAAP results, except as otherwise noted.
Speaker Change: The appendix for additional detail and for reconciliations of all non-GAAP financial measures presented.
Speaker Change: And with that I'm pleased to turn the call over to Patrick.
Patrick Lockwood: Thank you Greg good morning, good afternoon, everyone.
Patrick Lockwood: I'll start the call with a few opening comments first I would like to thank all of our 9000 plus strong PARAGARD.
Patrick Lockwood: What relentlessly to deliver world class products to consumers.
Patrick Lockwood: Really appreciate all that you do each and every day.
Patrick Lockwood-Taylor: During 2023, these positive benefits offset the impact of evolving regulatory guidelines in our infant formula business. In 2024, our team is working to quickly implement a new action plan to augment and strengthen our infant formula business amid these evolving regulatory expectations. We now expect stabilization during the second half of 2024, slightly later than previously planned.
Patrick Lockwood: We ended 2023 within our international business borrowing all cylinders, while our U S. OTC business is performing well as well amid a normalizing consumer environment as store brands continue to gain market share from national brands.
Patrick Lockwood: In addition, our accretive initiatives with synergies from the HRA acquisition, and our supply chain reinvention program alrighty value I remain on track.
Patrick Lockwood: We're proud to also achieve a multi decade asset.
Patrick Lockwood: FDA regulatory approval.
Patrick Lockwood: The first women's contraceptive to be available over the counter in the United States.
Patrick Lockwood: During 2023, these positive benefits offset the impact of evolving regulatory guidelines in Q4.
Patrick Lockwood-Taylor: Now looking at the fourth quarter and our 23 financial highlights. Net sales in fiscal 23 grew nearly 5%, driven by our international and core US OTC business, in addition to benefits from acquisitions which more than offset headwinds in the legacy infant formula business. Organic NET sales to the year increased 2%, including an unfavorable 2 percentage points. Askew prioritization action.
Patrick Lockwood: The business.
Patrick Lockwood: 2020 for a team is working to quickly implement a new action plan to augment and strengthen our infant formula business, Amit These evolving regulatory expectations.
Patrick Lockwood: We now expect stabilization during the second half of 2024 slightly later than previously planned.
Patrick Lockwood: Now looking at the fourth quarter.
Patrick Lockwood: 'twenty three financial highlights.
Patrick Lockwood: Net sales in fiscal 'twenty three grew nearly 5% driven by our international core U S. OTC businesses. In addition to benefits from acquisitions, which more than offset headwinds in the legacy infant formula business organic net sales for the year increased 2%, including an unfavorable.
Patrick Lockwood-Taylor: Gross Margin, which has been a major focus for improvement, expanded 260 basis points to 38.8%, and Operating Margin expanded 130 basis points to 12.3% for the full year. Fourth quarter EPS grew 15%, leading to a full year EPS of $2.58, an increase of 25% compared to the prior year. And, importantly, we delivered very strong cash flow conversion of 115% for the full year. 23 Top-line growth was broad-based, across nearly every category. We realized meaningful growth in skin care, nutrition, and women's health, which was partially fueled by the HRA and Gateway Acquisition. Healthy Lifestyle also contributed strong growth. Driven by the U.S.
Patrick Lockwood: <unk> two percentage points from <unk>.
Patrick Lockwood: <unk> prioritization actions.
Patrick Lockwood: Gross margin, which has been a major focus for improvement expanded 260 basis points to 38, 8% and operating margin expanded 130 basis points to 12, 3% for the full year.
Patrick Lockwood: Fourth quarter, EPS grew 15% leading to a full year EPS of $2 58, an increase of 25% compared to the prior year.
Patrick Lockwood: And importantly, we delivered very strong cash flow conversion of 115% for the full year.
Patrick Lockwood: 'twenty three top line growth was broad based.
Patrick Lockwood: Across nearly every category, we realized meaningful growth in skincare nutrition, and women's health, which were partially fueled by the HRA and gateway acquisitions health.
Patrick Lockwood-Taylor: Smoking Cessation Product. Category performance in the fourth quarter, however, was mixed, driven by growth in healthy lifestyle and digestive health, in addition to low single-digit growth in cold products. COVCODE sales in the US grew mid-single digits, driven in part by share gains and restocking of liquid COVCODE products, which were constrained in the prior year. However, these benefits were offset by infant formula, skewed prioritization actions, and lower cough-cold cells in Europe due to lower incidence levels.
Patrick Lockwood: Healthy lifestyle also contributed strong growth.
Patrick Lockwood: Given by the U S smoking cessation products.
Patrick Lockwood: Category performance in the fourth quarter, However was mixed driven by growth in healthy lifestyle and digestive health. In addition to low single digit growth in co products.
Patrick Lockwood: Core sales in the U S grew mid single digits, driven in part by share gains a restocking of liquid Coke coke products, which were constrained in the prior year.
Patrick Lockwood: These benefits were offset by infant formula SKU prioritization actions and lower Coke Coke sales in Europe due to lower incidence levels.
Patrick Lockwood-Taylor: Importantly, store brand dollar share of USOTC increased 70 basis points during the last 13 weeks according to IRI as consumers continue to embrace value offerings. In Q4, our sell-in to US retailers was higher than consumption, leading to a slightly elevated retail inventory level as we entered Q24. The margin improvement I just mentioned included benefits from our ongoing accretive initiative. In fiscal year 23, the team delivered $30 million in expense synergies from the HRA acquisition, which were offset by one-time costs related to the transition of third-party HRA distributors to the internal Perrigo network. Now that this transition is complete, we will realize the full benefit in 2024. We also advanced our supply chain reinvention program, delivering $40 million of net savings during the year, while SKU prioritization actions in CSCA delivered 30 basis points of growth margin benefit to total Perrigo.
Patrick Lockwood: Importantly store brand dollar share of U S. OTC increased 70 basis points. During the last 13 weeks. According to IRI as consumers continue to embrace value offerings.
Patrick Lockwood: In quarter, four offset into U S retailers was higher than consumption, leading to a slightly elevated retail inventory level as we enter 2004.
Patrick Lockwood: The margin improvement I, just mentioned, including benefits from our ongoing accretive initiatives in 'twenty three the team delivered $30 million and expense synergies from the HRA acquisition.
Which were offset by onetime costs related to the transition of third party HRA distributors to the internal cargo network.
Patrick Lockwood: This transition is complete we will realize the full benefit in 'twenty four.
Patrick Lockwood: We also advanced our supply chain reinvention program delivering $40 million net savings during the year, while SKU prioritization actions in CA delivered 30 basis points of gross margin benefit to total PARAGARD.
Patrick Lockwood-Taylor: We have now delivered more than one-third of the expected $100 to $120 million in annualized savings by 2025 from this program, excluding targeted benefits from infant formula. For 2024, we have identified clear actions to achieve our operational and cash flow priorities, including delivering on the remaining HRA cost synergies, executing on our supply chain reinvention program, and successfully driving our growth plan. In addition, we must also augment and strengthen our informant base.
Patrick Lockwood: We have now delivered more than one third of the expected $100 million to $120 million in annualized savings by 2025 from this program.
Patrick Lockwood: Excluding benefits from infant formula.
Patrick Lockwood: For 2024, we have identified clear actions to achieve our operational and cash flow priorities, including delivering on the remaining HR rate cost synergies executing on our supply chain reinvention program and successfully driving our growth plans.
Patrick Lockwood: In addition, we must also augment and strengthen our former business accelerate our journey one pair ago by evolving our organization.
Patrick Lockwood-Taylor: Accelerate our journey to One Perrigo by evolving our organization, our portfolio, and our processes through the launch of Project Energize, which I will cover in a few minutes. We also need to enhance our brand building capabilities and successfully launch OPIL. Looking at these in more detail, during 2023, our team was working to adapt to the evolving U.S. infant formula regulatory landscape, which triggered a major overhaul of long-standing industry standards. In response to these changes, we made considerable investments in our infant formula manufacturing site, including enhanced cleaning and sanitation protocols, enhancements to our environmental monitoring programs, and added additional quality assurance personnel. These changes resulted in lower manufacturing output and production yields across our network. Then, in late November of last year, the FDA issued a Form 483 to our Wisconsin facility, which we acquired in November 2022. This followed the receipt of a warning letter issued to this facility earlier in the year.
Patrick Lockwood: Our processes.
Patrick Lockwood: The launch of project and the joys, which I'll cover in a few minutes.
Patrick Lockwood: We also need to enhance our brand building capabilities and successfully launched roku.
Patrick Lockwood: Looking at these in more detail during 2023, a team would be working to adapt to the evolving U S infant formula regulatory landscape.
Patrick Lockwood: Triggered a major overhaul of long standing industry standards in response to these changes we made considerable investments.
Patrick Lockwood: Forward of manufacturing sites.
Patrick Lockwood: <unk> enhanced cleaning and sanitation protocols enhancements to our environmental monitoring programs and added additional quality assurance personnel.
These changes resulted in lower manufacturing output and production yields across our network.
Patrick Lockwood: In late November of last year, the FDA issued a form 483 to our Wisconsin facility, which we acquired in November 2022.
Patrick Lockwood: This follows the receipt of a warning letter issued.
Patrick Lockwood: Earlier in the year.
Patrick Lockwood-Taylor: Now it was clear to me, as a new CEO with over 20 years of experience in regulated industries such as health care and having led other good manufacturing process plant remediation, that we need to put ourselves on an accelerated plan to augment and strengthen this business by investing in and making facility enhancements and revising our quality protocols to ensure quality-assured manufacturing in line with these new regulatory expectations. As a result, we bolstered our internal resources and brought in additional outside expertise to help revise, enhance, strengthen, and accelerate comprehensive standards and processes across our infant formula network, which we believe will position us well for the future. I personally chair the steering committee that oversees the... As part of this plan, our manufacturing facilities have either undergone or are undergoing a site-specific evaluation, which may entail a pausing of production for comprehensive cleaning, infrastructure improvement, and further enhancement to quality protocols and manufacturing processes. A Wisconsin facility recently completed a plant-wide reset and is now back in production. Our other two infant formula facilities are under evaluation or set to begin and reset in the coming weeks. Cash costs to achieve this critical remediation plan are estimated at $35 to $45 million.
Patrick Lockwood: No. It was clear to me as a new CEO with over 20 years of experience regulated industries, such as healthcare and having led other good manufacturing process plant remediation that we needed to put ourselves in an accelerated plan to augment and strengthen this business by investing and making <unk>.
Patrick Lockwood: T enhancements are revising our quality protocols to ensure quality assured manufacturing in line with these new regulatory expectations.
Patrick Lockwood: As a result, we bolstered our internal resources and <unk>.
Patrick Lockwood: Boarding additional outside expertise to help revise in Hong strengthen and accelerate comprehensive standards and processes across our infant Formula network, which we believe will position us well for the future.
Patrick Lockwood: I personally chair of the steering committee that oversees these efforts.
Patrick Lockwood: As part of this plan our manufacturing facilities.
Patrick Lockwood: Have either undergone or are undergoing.
Patrick Lockwood: Site specific evaluation, which may entail a pausing production for comprehensive cleaning infrastructure improvement further enhancement to quality protocols and manufacturing processes.
Patrick Lockwood: Wisconsin facility has recently completed a plant wide reset and is now back in production or other to infant formula facilities are under evaluation.
Patrick Lockwood: To begin a reset in the coming weeks cash costs to achieve this critical remediation plan are estimated at $35 million to $45 million.
Patrick Lockwood-Taylor: Due to unabsorbed overhead and depressed sales volumes resulting from these resets, interim formula operating income in 2024 is now expected to be below 2023 levels, where previously we expected a recovery. In the context, normalized full-year operating income generated from our infant formula business should be about $140 million or more. In 2023, it was approximately half of this. To think of it deeper,
Patrick Lockwood: Due to unabsorbed overhead and depressed sales volume, resulting from these resets.
Patrick Lockwood: <unk> operating income in 2024 is now expected to be below 2023 levels, where previously we expected a recovery.
Patrick Lockwood: Context normalized full year operating income generated from our infant formula business should be about $140 million or more 2023. It was approximately half of this.
Patrick Lockwood: To dig a bit deeper.
Patrick Lockwood-Taylor: We expect quarter one, 24 infant formula operating income to be approximately $50 million lower than prior year, building back to flat versus prior year in the second quarter. As our facilities ramp up production and work to replenish inventories, we anticipate this business stabilizing and returning to growth in the second half of the year. Adapting to regulatory change and maintaining compliance is core to Perrigo's business and culture. Our infant formula products provide superior value to consumers and customers and play an important role during the first years of life.
Patrick Lockwood: We expect quarter, one 'twenty for infant formula operating income to be approximately $50 million lower than prior year voting back to flat versus the prior year in the second quarter.
Patrick Lockwood: As all facilities ramp up production work to replenish inventories.
Patrick Lockwood: We anticipate this business stabilizing and returning to growth in the second half of the year.
Patrick Lockwood: Adapting to regulatory change in maintaining compliance with court apparel business and culture.
Patrick Lockwood: Our infant formula products provide superior value to consumers and customers.
Patrick Lockwood: And play an important role during the first years of life.
Patrick Lockwood-Taylor: I am confident that with this augmented and accelerated effort, we will stabilize and strengthen this business, which is the right thing to do for our consumers, our customers, and our investors. Now turning the product energized. As we embark on the next stage of our self-care journey and evolve to one Perrigo, we are focused on creating a sustainable, value-accrued growth strategy through a blended, branded business, which I'll expand on in a few moments. To support this strategy, we have accelerated the launch of a three-year global investment and efficiency program, which we have called Project Energize, to drive the next evolution of capabilities and Efficiency generated by Project Energize will enable us to drive global capability, including brand building and consumer-led innovation, unify our platforms and technologies, and support global business service models.
Patrick Lockwood: I am confident that with this augmented an accelerated effort, we will stabilize and strengthen this business, which is the right thing to do for our consumers our customers and our investors.
Patrick Lockwood: Now turning to product energized.
Patrick Lockwood: As we embark on the next stage of US Okay journey and evoke to one pair ago, we are focused on creating a sustainable value accretive growth strategy through a blended branded business.
Patrick Lockwood: Which I'll expand on in a few moments to support this strategy, we have accelerated loan through the three year global investment and efficiency program, which we call project energized.
Patrick Lockwood: To drive the next evolution of capabilities and increased organizational agility.
Patrick Lockwood: <unk> generated by project will enable us to drive global capabilities, including brand building and consumer led innovation unify our platforms and technologies and support global business service models.
Patrick Lockwood-Taylor: Energise will also increase our organizational agility and maintain a competitive cost structure by centralizing and scaling our operating model in CSCI and streamlining commercial operations. CSCA, Benefits from Project Energize will also help us mitigate the near-term impact from actions we are taking to augment and strengthen the infant formula business. We expect approximately 60% of the efficiencies from Energise to be achieved through non-headcount related actions as we streamline and focus the organization. These efficiencies will be driven by several initiatives, including optimizing global advertising and promotional spend, eliminating planned investments that are not aligned to our One Perrigo vision, and procurement savings. The remaining 40% of the targeted efficiencies will be generated by centralizing CSCI and streamlining CSCA, resulting in a net role reduction of approximately 6%, thereby generating meaningful operating savings.
Patrick Lockwood: <unk> will also increase our organizational agility and maintain a competitive cost structure by centralizing is scaling our operating model.
Patrick Lockwood: Streamlining commercial operations.
Patrick Lockwood: CA.
Patrick Lockwood: Benefits from project <unk> will also help us mitigate the near term impact from actions, we are taking to augment the strength of the infant formula business.
Patrick Lockwood: We expect approximately 60% of the efficiencies from energize to be achieved through non head count related actions as we streamline and focus the organization. These.
Patrick Lockwood: These efficiencies will be driven by several initiatives, including optimizing global advertising and promotional spend eliminating planned investments that are not aligned to our one pair ago vision and procurement savings the remaining 40% of the targeted efficiencies will be generated by centralizing CFS CRE.
Patrick Lockwood: And streamlining <unk>.
Patrick Lockwood: <unk> and the net ROE reduction of approximately 6%.
Patrick Lockwood: By generating meaningful operating savings.
Patrick Lockwood-Taylor: This production includes the elimination of current and open roles, as well as the creation of new roles as we invest in brand building and innovation capabilities. Energize is expected to deliver annual pre-tax savings of $140 to $170 million by the end of 2026, of which approximately $40 to $60 million will be reinvested to build the necessary capabilities and processes I discussed earlier. The estimated cash cost to achieve Energize is $140 to $160 million, including $20 to $40 million in investments to enhance our capabilities in digital tools and systems.
Patrick Lockwood: This reduction includes the elimination of current and open roles as what is the creation of new roles as we invest in brand building and innovation capabilities.
Patrick Lockwood: <unk> is expected to deliver annual pre tax savings of $140 million to $170 million by the end of 2026 of which approximately 40% to $60 million will be reinvested to build the necessary capabilities and processes I discussed earlier.
Patrick Lockwood: The estimated cash cost to achieve and the joys is $140 million to $160 million, including $20 million to $40 million in investments to enhance our capabilities in digital tools and systems.
Patrick Lockwood-Taylor: These costs and investments are anticipated to be incurred by the end of 2026. While the decision to reduce the number of roles at Perrigo was not an easy one, it will enable organizational dexterity across our segments by enhancing decision-making and simplifying commercial operations. Now turning to O... As we progress our work to enhance brand building capabilities, we're excited about the upcoming launch of Opal. This is by far the most revolutionary and holistic product launch in the history of Perrigo and will be a benchmark for future branded launches. The OPAL program encompasses a 360-degree approach to establish OTC oral contraception awareness.
Patrick Lockwood: These costs and investments are anticipated to be incurred by the end of 2026.
Patrick Lockwood: While the decision to reduce the number of roles at Perrigo was not an easy one it will enable organizational dexterity across our segments by enhancing decision, making and simplifying commercial operations.
Patrick Lockwood: Now turning to outlook.
Patrick Lockwood: As we progress our work to enhance brand building capabilities. We're excited about the upcoming launch of April. This is by far the most revolutionary and holistic product launch in the history of repair ago. It will be a benchmark for future branded launches.
Patrick Lockwood: The <unk> program encompasses a 360 degree approach to establish OTC oral contraception awareness.
Patrick Lockwood-Taylor: Omni-channel activation plans are in place to drive awareness in-store, online, and at pharmacy, building a reassurance bridge to guide consumers through their decision journey. We expect OPO to be available to consumers in-store and online within a few weeks. In addition, we view OPAL as a key pillar to our growing women's health care business. Perrigo intends to be a global leader in women's health, and we believe we have the core portfolio and personnel to implement this strategy. Translating these tangible operational priorities into our 24 EPS Outlook. First, we have several favorable trends, including momentum in our international and U.S. OTC businesses. Benefits from Project Energize, contributions from our Supply Chain Reinvention Program, and synergies from the HRA Acquisition. These drivers are expected to be partially offset by the absence of tax benefits in the prior year and the operating income impact from expected exited businesses and products.
Patrick Lockwood: Only channel activation plans are in place drive awareness in store online and that pharmacy.
Patrick Lockwood: Building, a reassurance bridge to guide consumers through the decision journey.
Patrick Lockwood: We expect <unk> to be available to consumers in store and online within a few weeks.
Patrick Lockwood: In addition, we view <unk> as a key pillar to our growing women's health care business.
Patrick Lockwood: <unk> intends to be a global leader in women's health I believe we have the core portfolio and personnel to implement this strategy.
Patrick Lockwood: Translating these tangible operational priorities into a <unk> 24 EPS outlook.
Patrick Lockwood: First we have several favorable trends, including momentum in our international and U S. OTC businesses benefits from project and the joys contributions from our supply chain reinvention program as synergies from the HRA acquisition. These.
Patrick Lockwood: These drivers are expected to be partially offset by the absence of tax benefits in the prior year and the operating income impact from expected exited businesses and products.
Patrick Lockwood-Taylor: Putting this together, we expect 2024 EPS to grow in the mid-teens as a percent versus 2023, excluding infant formula. Taking infant formula into account, 2024 EPS is expected to be relatively flat compared to 2023. For context, earnings from our infant formula business are expected to be impacted by approximately 65 cents from our expectations at our last earnings call in November. While we are taking a conservative approach to our former expectations in 2024, we have a clear action plan to recapture those lost earnings as we head into 2025. Now, I would like to share the progress we are making on our blueprint for One Perrigo, including our new vision and purpose, which will serve as our North Star.
Patrick Lockwood: Putting this together, we expect 2020 full EPS to grow in the mid teens as a percent versus 2023, excluding infant formula taking infant formula into account 2024, EPS is expected to be relatively flat to 2023.
Patrick Lockwood: For context earnings from our infant formula business are expected to be impacted by approximately 65%.
Patrick Lockwood: From our expectations at our last earnings call in November.
Patrick Lockwood: While we have taken the conservative approach our former expectations in 2020 full we have a clear action plan to recapture those lost earnings as we head into 2025.
Patrick Lockwood: Now I would like to share the progress we are making on our blueprint for one PARAGARD, including a new vision and purpose, which will serve as our new work style.
Patrick Lockwood-Taylor: We have made significant progress on our long-term enablers of our strategic principles. Specifically, work to identify our winning portfolio is swiftly moving ahead. We currently compete in nine categories across multiple continents in more than 20 countries.
Patrick Lockwood: We have made significant progress on our long term enablers of our strategic principles, specifically work to identify a winning portfolio swiftly moving ahead, we currently competing nine categories across multiple continents.
Patrick Lockwood: Continents in more than 20 countries to win and so I believe we require a more focused approach to market one of that is simplified and scalable.
Patrick Lockwood-Taylor: To win in self-care, I believe we require a more focused approach to the market, one that is simplified and scalable. We're also centralizing our capital allocation decision. This approach will be standardized for all investments from capital expenditures to Advertising and Innovation to Shareholder Returns.
Patrick Lockwood: We are also centralizing our capital allocation decisions.
Speaker Change: This approach will be standardized, but all investments from capital expenditures, so advertising and innovation to shareholder returns governance will be owned by newly established capital allocation office, which will report to me.
Patrick Lockwood-Taylor: Governance will be owned by a newly established Capital Allocation Office, which will report to me. And with the upcoming launch of Opel, we're taking a sizable step in our brand building capability. Launches such as this will help build our blended branded model, which we introduced at our last earnings. I want to spend a moment on a good UK example of a blended branded business. Our business model is a portfolio of consumer-preferred branded, better-value, and store-brand solutions. This model is well-established in many consumer categories but has yet to be broadly adapted to the OTC arc. Perrigo is uniquely positioned to bring this model to market.
Speaker Change: And with the upcoming launch of <unk>, we're taking a sizable step in our brand building capabilities launches such as this will help build a blended branded model, which we introduced at our last earnings call.
Speaker Change: I want to spend a moment on our good UK example, blended branded business.
Speaker Change: Our business model is a portfolio of consumer preferred branded better value store brand solutions.
Speaker Change: This model is well established in many consumer categories.
Speaker Change: Yet to be broadly adapted to the OTC.
Speaker Change: Perrigo is uniquely positioned to bring this model to market and importantly, we already have a proven framework within our portfolio today.
Patrick Lockwood-Taylor: And importantly, we already have a proven framework within our portfolio today. Our UK business provides unique value to customers as it is vertically inclusive, allowing Perrigo to partner and drive strategies aligned to specific retailer objectives. It also provides value to consumers as it is price-inclusive and allows Perrigo to provide high-quality self-care products across all consumer price points. And, of course, to Perrigo, as the top-line growth and margin structure are both highly accretive to our overall business, and, of course, to our shareholders as this will drive long-term sustainable value accretive growth. This model will be powered by the breadth and scale of our So, the key takeaway...
Speaker Change: Our UK business provides unique value to customers.
Speaker Change: As vertically inclusive.
Speaker Change: Purgo to partner and drive strategies aligned to specific retailer objectives.
Speaker Change: It also provides value to consumers as it is price inclusive and lab, Paraguay to provide high quality, so care products across all consumer price points and.
Speaker Change: And of course to pair ago as.
Speaker Change: As the top line growth emergence structure, both highly accretive to our overall business.
Speaker Change: And of course to our shareholders as this will drive long term sustainable value accretive growth.
Speaker Change: This model will be powered by the breadth and scale of our world class manufacturing and quality assured supply chain and the innovation capabilities that we have across those categories, where we choose to play.
Speaker Change: So the key takeaways.
Eduardo Guarita Bezerra: While we have achieved EPS Outlook in 2023, we need to improve the quality of our business performance by augmenting, accelerating, and strengthening infant formula, achieving project energized targets, and launching OPIL with excellence. In addition to these priorities, we will continue to consumerize, simplify, and scale our business, all while focusing on cash and returns. With that, I will now turn the call over to Eduardo, our CFO, to cover the financials.
Speaker Change: While we have achieved EPS outlook in 2023, we need to improve the quality of our business performance, but mentoring accelerating and strengthening infant formula achieving projects energized targets and launching <unk> with excellence. In addition to these priorities will continue to consumer eyes.
Speaker Change: Simplify and scale our business.
Speaker Change: Focusing on cash and returns.
Speaker Change: With that I will now turn the call over to Eduardo our CFO to cover the financials headwater.
Eduardo Guarita Bezerra: Thank you, Patrick. Good morning and good afternoon, everyone. Look at our fiscal 2023 financials, starting with the gap to non-gap summer. The company reported a gap net loss of $4 million, or a loss of $0.03 per diluted share. Adjusted net income was $352 million, and adjusted diluted earnings per share was $2.58 versus $2.07 in the prior year. Primary adjustments to our 2023 Pre-Tax Non-Gap P&L were, first, amortization expenses of $272 million, second, a $90 million goodwill impairment charge related to the HRA rare disease reporting unit in the CSEI segment, and third. We're structuring charges of $40 million, primarily related to our supply chain reinvention program. Full details can be found in the non-GAFR constellation table attached to this morning's press release.
Eduardo Guarita Bezerra: Thank you Patrick good morning, and good afternoon, everyone.
Looking at our fiscal 2023 financials, starting with the GAAP to non-GAAP summary.
Eduardo Guarita Bezerra: The company reported a GAAP net loss of $4 million or a loss of <unk> <unk> per diluted share adjusted net income was $352 million and adjusted diluted earnings per share was $2 58.
Eduardo Guarita Bezerra: Versus $2 seven.
Eduardo Guarita Bezerra: Prior year.
Eduardo Guarita Bezerra: The primary adjustments to our 2023 pretax non-GAAP P&L War.
Eduardo Guarita Bezerra: Amortization expenses of $272 million second a $19 million goodwill impairment charge related to the HMA rare disease reporting unit in the ECS segment, and third restructuring charges of $40 million primarily related to <unk>.
Eduardo Guarita Bezerra: Our supply chain reinvention program.
Eduardo Guarita Bezerra: Full details can be found in the non-GAAP reconciliation table attached to this morning's press release.
Eduardo Guarita Bezerra: From this point forward, all financial results discussed will be on an adjusted basis unless otherwise noted. Turning to our fourth quarter and full year P&L on slide. I'll cover sales, margins, and EPS on the next few slides, but first, I want to briefly touch on the 2023 tax rate. The effective tax rate for 2023 was 12.7% compared to 18.5% in the prior year. This 580 basis points decline was primarily due to the favorable impact of $12 million associated with the release of reserves related to the prior year and all these settlements, which are not expected. Now to net sales for the fourth quarter and fully. Organic net sales for the fourth quarter declined 0.6%, which included base business growth of 1.7%, driven by performance in the healthy lifestyle and digestive health categories.
Eduardo Guarita Bezerra: From this point forward all financial results discussed will be on an adjusted basis unless otherwise noted.
Eduardo Guarita Bezerra: Turning to our fourth quarter and full year P&L on slide five.
Eduardo Guarita Bezerra: I'll cover sales margins and EPS over the next few slides, but first I want to briefly touch on the 2023 tax rate the effective tax rate for 2023 was 12, 7% compared to 18, 5% in the prior year. This 580 basis points decline was primarily due to the <unk>.
Eduardo Guarita Bezerra: <unk> bought back $12 million associated with the release of reserves related to the prior year audit settlements, which are not expected to repeat.
Eduardo Guarita Bezerra: Now to net sales for the fourth quarter and full year.
Eduardo Guarita Bezerra: Net sales for the fourth quarter declined one, 6%, which included base business growth of one 7% driven by performance in healthy lifestyle and digestive health categories.
Eduardo Guarita Bezerra: This growth was more than offset by 2.3 percentage points from SKU prioritization actions in CSCA. Report on net sales was flat as the positive impacts from currency translation and acquisitions were offset by exited products. Four-year organic net sales increased 1.7 percent, including base business growth of 3.5 percent, again driven by performance in the health, lifestyle, and digestive health categories. This growth was partially offset by SKU prioritization actions in CSEA of 1.8%. Reported net sales for the year grew 4.6%, including the HRA and gateway acquisitions, which were partially offset by divested profits.
Eduardo Guarita Bezerra: This growth was more than offset by two three percentage points from SBU prioritization actions and the FCA.
Eduardo Guarita Bezerra: Reported net sales were flat as the positive impact from currency translation and acquisitions were offset by exit this products.
Eduardo Guarita Bezerra: Full year organic net sales increased one 7%, including base business growth of three 5% again, driven by performance in health lifestyle and digestive health categories.
Eduardo Guarita Bezerra: This growth was partially offset by SKU prioritization actions in CCA, a one eight percentage points.
Eduardo Guarita Bezerra: Reported net sales for the year grew five 6%, including the HRA and gateway acquisitions, which were partially offset by accident products.
Eduardo Guarita Bezerra: Turning to margins, the team has consistently delivered margin expansions since 2020. In fact, this quarter marks the sixth consecutive quarter of year-over-year growth and operating margin expansion, which was achieved through, first, strategic pricing actions, second, higher margin acquisitions, and third, benefits from our supply chain renovation program. Fiscal 2023 gross margin expanded by 160 basis points to 38.8%, driven by the factors I just mentioned, including a 30 basis point benefit from SKU prioritization. Operating margin for the year expanded by 130 basis points to 12.3% as gross margin expansion was partially offset by higher operating expenses, including advertising and promotion investments and the addition of the gateway. The fourth quarter adjusted earnings per share was 86 cents, an increase of 14.7% year-over-year.
Eduardo Guarita Bezerra: Turning to margins.
Eduardo Guarita Bezerra: Team has consistently delivered margin expansion since 2002.
Eduardo Guarita Bezerra: In fact that this quarter marks the sixth consecutive quarter of year over year gross and operating margin expansion, which was achieved through first strategic pricing actions cycling the higher margin acquisitions and third benefits from our supply chain reinvention program.
<unk> got plenty of 23 gross margin expanded 260 basis points to 38, 8% driven by the factors I just mentioned, including at 30 basis points benefit from SKU prioritization actions.
Eduardo Guarita Bezerra: Operating margin for the year expanded 130 basis points to 12, 3% as gross margin expansion was partially offset by higher operating expenses, including advertising and promotion investments and addition of the gateway business.
Eduardo Guarita Bezerra: Fourth quarter adjusted earnings per share was $8 <unk>, an increase of 14, 7% year over year.
Eduardo Guarita Bezerra: This increase was driven by business growth, benefits from our supply chain reinvention program, and HRA synergy. These benefits were partially offset by infant formula, FQ prioritization actions, and nexus product. Full-year adjusted earnings per share of $2.58 increased almost 25% driven by business growth, including benefits from our supply chain reinvention program, acquisitions, and non-repeating tax benefits. These were partially offset by higher interest expenses.
Eduardo Guarita Bezerra: This increase was driven by business growth benefits from our supply chain reinvention program NHRA seniors.
Eduardo Guarita Bezerra: These benefits were partially offset by infant formula our SKU breadth physician actions and exited product lines.
Eduardo Guarita Bezerra: Full year adjusted earnings per share of $2 58.
Eduardo Guarita Bezerra: Kris almost 25% driven by business growth, including benefits from our supply chain reinvention program acquisitions, and now repeating tax back.
Eduardo Guarita Bezerra: These were partially offset by higher interest expense FTE operationalization actions exited product lines.
Eduardo Guarita Bezerra: SKU prioritization actions, exit this product line, and the Legacy in Transforming. Looking back on our prior year earnings call in November of last year, we provided color on our initial outlook for 2024, based primarily on a recovery in infant formula during the second half of 2020. Given what you heard from Patrick today, the actions we are taking to augment and strengthen infant formula will have a dilutive effect on this initial outlook, as we now expect full infant formula recovery for fiscal year 2025. Also, given the cash required to implement Project ENERGIZE and infant formula investments, we will pay down $400 million in bonds due at the end of the year versus our initial thoughts to pay these bonds, which has a negative earnings per share impact of $ Also not contemplated in the November initial outlook was the operating income reduction from expected portfolio refinement and exited products.
Eduardo Guarita Bezerra: The legacy <unk> business.
Eduardo Guarita Bezerra: Looking back on our prior year earnings call in November of last year, we provided color on our initial ultimately for 2020 four based primarily on a recovering infant formula during the second half of 2024.
Eduardo Guarita Bezerra: Given what you heard from Patrick today, the actions, we're taking to augment and strengthened infant formula we will have a diluted effect from these initial outlook as we now expect full infant formula recoveries for fiscal year 2025.
Eduardo Guarita Bezerra: Also given the cash required to implement project energized and infant formula investments will pay down $400 million in bonds due at the end of the year versus our initial thoughts to pay these bonds.
Eduardo Guarita Bezerra: Which has a negative earnings per share impact of <unk> to our initial outlook.
Eduardo Guarita Bezerra: Also not contemplated in the November initial outlook was the operating income reduction from expected portfolio refinement and exited products.
Eduardo Guarita Bezerra: Pulling this together, we expect 2024 earnings per share to grow in the mid-teens as a percent, excluding infant formula. Taking infant formula into account, 2024 earnings per share is expected to be flat compared to. Turning now to cash. Exiting 2023, we had $751 million of cash on the balance sheet, an increase of $150 million from the end of 2020. This increase includes 2023 operating cash flow generation of $406 million.
Eduardo Guarita Bezerra: Putting these together, we expect 2024 earnings per share to grow in the mid teens as a percent.
Eduardo Guarita Bezerra: Excluding infant formula.
Eduardo Guarita Bezerra: Taken in from Farnell into account 2024 earnings per share expected to be flat compared to 2023.
Turning now to cash.
Eduardo Guarita Bezerra: Exiting 2023, we had $751 million of cash on the balance sheet.
Eduardo Guarita Bezerra: <unk> of $150 million from the end of 2022.
Eduardo Guarita Bezerra: Please and close 2023 operating cash flow generation.
$406 million.
Eduardo Guarita Bezerra: 115% conversion to adjusted net. Looking at our cash sources for 2024, we expect operating cash flow conversion between 90% and 100%. This conversion includes costs and investments related to Project ENERGIZE, our Supply Chain Reinvention Program, and Augmenting and Strengthening Infant Formula, all totaling approximately $200 million. We also continue to expect portfolio refinement to be a source of cash in 2021. As for cash uses during the year, we expect to pay down the $400 million in debt, make capital investments, and provide returns to shareholders through dividends. Last night, we issued a press release that the Perrigo board approved a 2024 dividend increase of 1% versus 2023, making this the 21st year in a row Perrigo has increased its annual dividend.
Eduardo Guarita Bezerra: 115% conversion to adjusted net income.
Eduardo Guarita Bezerra: Looking at our cash sources for clients and four we expect operating cash flow conversion between 90 and 100%.
Eduardo Guarita Bezerra: This conversion includes costs and investments related to project energize, our supply chain reinvention program, and augment and strengthen infant formula all totaling approximately $200 million.
We also continue to expect portfolio refinement to be a source of cash in 2024.
Eduardo Guarita Bezerra: As for our cash usage during the year, we expect to pay down the $400 million in debt make capital investments and provide returns to shareholders through dividends.
Eduardo Guarita Bezerra: Last night, we issued a press release that the <unk> Board approved a 2024 dividend increase of 1% versus 2023, making this the 21 year in a row <unk> has increased its annual dividend.
Eduardo Guarita Bezerra: Regarding capital investments, over the past three years, we have invested nearly $90 million in our infant formula business. On top of that, we are increasing capital investments in this business to consistently deliver on regulatory expectations. And we are confirming our commitment to expand capacity at our Wisconsin facility by investing an additional $6 billion. Importantly, we reduced net leverage by a whole turn over the past year to 4.5 times and expect to end 2024 with a net leverage ratio of between 3.8 and 4 times.
Eduardo Guarita Bezerra: Regarding capital investments over the past three years, we have invested nearly $90 million in our infant formula network on top of that we are increasing capital investments in this business to consistently deliver on regulatory expectations and we are confirming our commitment to expand capacity.
At our <unk> facility by investing an additional $60 million.
Eduardo Guarita Bezerra: Potently will reduce net leverage by a whole turn over the past year to four five times and expect to end 2024 with a net leverage ratio of between three and four times.
Eduardo Guarita Bezerra: Now to our 2024 out, starting with organic net sales which are expected to grow in the range of 1% to 3% over the prior year. New products, including OPL, Margin Recovery Pricing Actions, and the absence of the HRA distributor transitions are expected to more than offset volume declines primarily in infant form, and a negative impact of one percentage point to organic growth from SKU prioritization actions to enhance All in, net sales growth is expected to be flat compared to 2023 as organic growth is offset by exited products and, Excluding infant formula from both years, we expect the gross margin to continue to grow strongly in 2024, due in part to benefits from our supply chain reinvention program. Including infant formula, gross margin is expected to be flat compared to the project.
Speaker Change: Now to our 2024 outlook.
Speaker Change: Starting with organic net sales, which expect to grow in the range of 1% to 3% over the prior year.
Speaker Change: New products, including <unk> appeal margin recovery pricing actions and the absence of the HOA distributor transitions are expected to more than offset volume declines primarily in infant formula.
Speaker Change: And a negative impact of one percentage points to organic growth from SKU prioritization actions to enhance margins.
Speaker Change: All in net sales growth is expected to be flat compared to 2023 as organic growth is offset by exited products and businesses.
Speaker Change: Excluding infant formula from both years, we expect the gross margin to continue to grow strongly in 2024 due in part for benefits from our supply chain reinvention program.
Speaker Change: Including infant Formula gross margin expected to be flat compared to the prior year. Despite this temporary impact operating margin is anticipated to expand due to the actions being taken under project energize as Florida cost synergies related to the HMA acquisition.
Eduardo Guarita Bezerra: Despite this temporary impact, operating margin is anticipated to expand due to the actions being taken under Project ENERGIZE and further cost synergies related to the HRA economy. We also assume business exits with a corresponding reduction in... A year-adjusted effective tax rate is expected to normalize to approximately 20.5%, and interest expense will be slightly higher for the year at approximately $180 million. Full-year earnings per share are expected to be in the range of $2.50 to $2.65, leading to mid-teens percentage growth excluding infant formula, and Operating Cash Flow Conversion is expected to remain healthy at 90 to 100% as a percentage of adjusted net worth.
Speaker Change: We also assumed business exits with a corresponding reduction in earnings.
Speaker Change: Full year adjusted effective tax rate is expected to normalize to approximately 25% and interest expense will be slightly higher for the year at approximately $180 million.
Speaker Change: Full year earnings per share expected to be in the range of <unk> $52 65.
Speaker Change: Leading to mid teens percentage growth excluding infant formula.
Speaker Change: And operating cash flow conversion do you expect it to remain healthy at 90% to 100% as a percentage of adjusted net income.
Eduardo Guarita Bezerra: Now to phasing throughout the year. Q1 2024 net sales are expected to decline a high single-digit percentage compared to the prior year due to InfoFormula, lower sales in the US OTC as customer inventory is normalized, and a negative impact from SKU prioritization actions in CSA. The launch of OPO and continued momentum in our CSEI business are expected to partially offset this headwind. Driven primarily by an estimated negative $0.30 earnings per share impact from the infant formula, Q1 earnings per share is expected to decline by nearly half compared to the Look into the balance of 2024 as our infant formula facilities begin to stabilize. We anticipate this business to be flat compared to the prior year in the second quarter and returning to year-over-year growth in the third and fourth quarters. This leads to approximately two-thirds of total Perrigo earnings per share being generated during the second half of 2020.
Speaker Change: Now to phasing throughout the year.
Speaker Change: Q1, 2024, net sales are expected to decline high single digit percentage compared to the prior year due to infant formula lower sales in the U S OTC as customer inventories normalize and the negative impact from the <unk> actions in.
Speaker Change: The launch of appeal and continued momentum in our <unk> business are expected to partially offset these headwinds in Q1.
Speaker Change: 300, primarily by any estimate the negative.
Speaker Change: 30 <unk>.
Speaker Change: Earnings per share impact from the infant Formula Q1 earnings per share is expected.
Speaker Change: It to decline by nearly half compared to the prior year.
Speaker Change: Looking to the balance of 2024 as our infant formula facilities begin to stabilize we anticipate this business to be flat compared to the prior year in the second quarter and are returning to year over year growth in the third and fourth quarters.
Speaker Change: <unk> to approximately two thirds of total perrigo earnings per share being generated.
Speaker Change: Second half of the year.
Eduardo Guarita Bezerra: In closing, we're making considerable progress on our journey to become one Perrigo and execute on our strategy. We have initiated Project Energize, which will make us more efficient and agile while providing a bridge to 2025, where we expect our infant formula business to be augmented and strengthened for the full year and beyond. I would also like to thank our Perrigo colleagues for their tremendous efforts in delivering our 2023 results and for the dedication and commitment to delivering on our One Perrigo. Now, I will turn the call back to Brad. Thanks, Eduardo.
Speaker Change: In closing, we're making considerable advancements on our journey to become one pair ago and as Keith on our strategy.
Speaker Change: We have initiated project energized, which will make us more efficient and agile while providing a bridge to 2025 were expect our infant formula business to be augmented and strengthened for the full year and beyond.
Speaker Change: I would also like to thank our <unk> colleagues for their tremendous efforts in delivering our 2020 results and for their dedication and commitment to delivering on our <unk>.
Speaker Change: Now I will turn the call back to Brad.
Brad: Thanks, Eduardo let me now turn the call back to Patrick for a few last remarks.
Bradley Joseph: Let me now turn the call back to Patrick for a few last remarks. Thank you, Brad. The first thing I want to start with is, of course, information.
Patrick Lockwood: Thank you Brad.
Patrick Lockwood: The first thing I want to start with is a cause of infant formula.
Patrick Lockwood-Taylor: After five months in the role, in late November 23, it became abundantly clear to me that we had to make an intervention in our infant formula manufacturing GMP and quality assurance for the good of the company. We need to take the actions that we've outlined today; we need to get on a different course. The path we are on was costing us a lot. Approximately between 80 to 100 million OI dragged over 12 months from a combination of lost production, scrap, and higher operating costs we had to address. More importantly, we were not getting to where we needed to be from a compliance standpoint.
Patrick Lockwood: After five months and role in late November 'twenty three it became abundantly clear to me that we had to make an intervention.
Patrick Lockwood: Manufacturing GMP and quality assurance for the good of the company.
Patrick Lockwood: We need to take the actions that we've outlined today, we need to get on a different calls.
Patrick Lockwood: The pulp were wrong was costing us a lot.
Patrick Lockwood: Approximately between $80 million to $100 million, otherwise drive over 12 months.
Patrick Lockwood: From a combination of lost production scrap at higher operating costs.
Patrick Lockwood: To address that.
Patrick Lockwood: More importantly, we were not getting to where we needed to be from a compliance standpoint. This was evidenced by another FDA 483 in late November at Wisconsin.
Patrick Lockwood-Taylor: This was evidenced by another FDA 483 in late November at Wisconsin. Now we have significantly increased and accelerated our investment to change the compliance performance of our three sites. It's absolutely the right thing to do in this supply-constrained environment. Wisconsin has gone through this reset successfully, and we're on a path to come out of this disruptiveness there.
Patrick Lockwood: Now, we have significantly increased and accelerated our investments.
Patrick Lockwood: The compliance performance of all three sites.
Patrick Lockwood: It's absolutely the right thing to do in this supply constrained environment.
Patrick Lockwood: Wisconsin is green through this reset successfully and we're on a path to come out of this disruptive to miss that.
Patrick Lockwood-Taylor: We now need to replicate that at our other two sites; we're in the process of doing it. You heard today that we are facing costs of about $200 million. I wanted to expand on that from a cash cost standpoint to reassure you they truly are one-time in nature. For infant formula, we're spending $40 million to remediate and... eliminate the disruption we're currently seeing in infant form. On Project Energize, we have about $80 million of one-time staff severance costs.
Patrick Lockwood: We now need to replicate that at our other two sites during the process of doing that.
Patrick Lockwood: You heard today that we are facing cost of about $200 million.
Patrick Lockwood: I wanted to expand on that from a cash cost standpoint.
Patrick Lockwood: To reassure you that truly all one time in nature.
Patrick Lockwood: And then from Formula we're spending $40 million.
Patrick Lockwood: To remediate.
Patrick Lockwood: Yes.
Patrick Lockwood: Eliminate the disruption we're currently seeing in infant formula.
Patrick Lockwood: On project and a joint we have about $80 million of one time people severance costs.
Patrick Lockwood-Taylor: And then our supply chain reassurance, we have out-of-pocket expenses of about $20 million as we execute our supply-side reinvention. They are the three largest... Cash Cost Elements, All of that, a 200 million investment. We have to execute now with extra...
Patrick Lockwood: And then our supply chain reassurance, we have out of pocket expenses of about $20 million as we execute our supply side reinvention.
Patrick Lockwood: The three largest.
Patrick Lockwood: Cash cost elements of that $200 million investment.
Patrick Lockwood: We have to execute with excellence the two biggest drivers of our performance and upside to 'twenty four.
Patrick Lockwood-Taylor: The two biggest drivers of our performance and upside, the 24, and, of course, Infant Formula, Remediation and Acceleration, and Project Energize. And this is where I'm spending the vast majority of my time. We are working on portfolio refinement and our long-term growth story, and as you heard me say, that is moving well, and we will come back with full investor day oversight of that in the fall. So, in summary, our business is performing well and is in line with expectations, except for formula, which needs to be remediated with excellence and urgency in light of the March 23 FDA revised regulatory guidelines. Let's expand on that a little.
So of course infant formula remediation acceleration on project tenant jaws, and this is where I'm spending the vast majority of my time.
Patrick Lockwood: We are working on portfolio refinement on our long term growth story and as you heard me say that is moving well and we will come back with a full investor day.
Patrick Lockwood: <unk> of that in the fall.
Patrick Lockwood: So in summary, our business is performing well and is in line with expectations, except in some formula.
Patrick Lockwood: It needs to be Remediated with excellence and urgency.
Patrick Lockwood: As of March 23, FDA revised.
Patrick Lockwood: Regulatory guidelines.
Speaker Change: Just to expand on that a little bit.
Patrick Lockwood-Taylor: Excluding infant formula, the balance of our business for 2024 is expected to grow between 3% and 5%, which is in Limeway, slightly ahead of expectation. Gross Margin in 2024 is expected to expand to 40%, which is in line with expectations. And Earnings Per Share, excluding infant formula, is growing mid-teens, which is again in line with expectations.
Speaker Change: Excluding infant formula the balance of our business to.
Speaker Change: <unk> to 'twenty four is expected to grow between three and 5% which is in line with to slightly ahead of expectations.
Speaker Change: Gross margin in 'twenty four is expected to expand 40% 2024 in line to ahead of expectations.
Speaker Change: On earnings per share, excluding some formula it's growing mid teens, which is again in line to ahead of expectations. Our number one priority is to build back positive earnings per share impact from 'twenty four from infant formula.
Patrick Lockwood-Taylor: Our number one priority is to Build Back Positive Earnings Per Share Impact in 24 from Infant Formula, and that is what we're extremely focused on. Thank you. Great. Operator, can we please open the call for questions? Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you would like to cancel your request, please press start. Please ensure you lift the handset if you are using a speakerphone before pressing any key.
Speaker Change: That is what we are extremely focused on thank you Bob.
Speaker Change: Great operator can we please open the call for questions.
Speaker Change: Certainly the addition, gentlemen, we will now conduct the question and answer session. If you have a question. Please press star followed by the number one on your Touchtone phone.
Speaker Change: Here at Cleveland prompt acknowledging your request.
Speaker Change: We should like to construct your request please press hard to please.
Speaker Change: Please ensure you lift the handset if you're using a speaker phone before pressing any keys.
Operator: Your first question comes from the line of Susan Anderson from Canaccord. Your line is now open. Hi, good morning.
Speaker Change: And your first question comes from the line of Susan Anderson from Canaccord. Your line is now open.
Susan Kay Anderson: Hi, good morning, Thanks for all the details this morning.
Susan Kay Anderson: Thanks for all the details this morning on the infant formula business. I guess maybe just to clarify on the top line, so it sounds like you expect the first quarter top line for infant formula to be the worst, and I think you're cycling the recall from last year too. I guess we should expect it to incrementally get better from a top line perspective as we go throughout the year? And then also, maybe you can give some thoughts on just what you expect the annual run rate of the business to be in the longer term. Yeah, thank you. Thank you, Susan. So you're right.
Susan Kay Anderson: Format Formula business.
Susan Kay Anderson: Maybe just to clarify on the top line. So it sounds like you expect first quarter topline for him to be the worst and I think you're cycling.
Susan Kay Anderson: I recall from last year.
Susan Kay Anderson: I guess should we expect that to incrementally get better from a top line perspective as we go throughout the year and then also maybe if you can give some thoughts on just what you expect the annual run rate of the business to be longer term.
Speaker Change: Yes. Thank you. Thank you Susan so youre right. So the first and the second quarter on nutrition, we expect to be.
Eduardo Guarita Bezerra: So the first and second quarter on nutrition, we expect to be below last year. And remember, you know, last year we had the first quarter that recall, but we also had a significant acquisition related to the acquisition of the Wisconsin facility. And then in the second half, the second quarter, we also had a very strong performance. Looking to the second half of the year, this is when we started to see the major impacts related to adapting to the new regulatory guidelines and some of the other impacts that we talked about before. So this year we're expecting the opposite. First quarter is going to be a strong impact, as we have outlined and Patrick mentioned about this quantum facility has gone through a major site-wide, you know, reset, and so that has a significant impact on volume and also pricing. That, you know, continues a little bit into the second quarter.
Speaker Change: Below last year I remember.
Speaker Change: Last year, we had the first quarter that recall, but also we had significant.
Speaker Change: A question related to the acquisition of the Wisconsin facility and then in the second half second quarter. We have also a very strong performance looking to the second half of the year is when we started to see the major impacts related to adapting to the new <unk>.
Speaker Change: Regulatory guidelines and some of the other impact that resulted before so this year, we're expecting the opposite.
Speaker Change: Quarter is going to be a strong impact as we have outlined and Patrick mentioned about this quantity facility has gone through a major site wide.
Speaker Change: And so that has a significant impact in volume and also pricing.
Speaker Change: Debt.
Speaker Change: <unk> continues a little bit into the second quarter, we expect it to be flat to last year and that the majority of the recovery, we expect in the third and the fourth quarter.
Eduardo Guarita Bezerra: We expect it to be flat to last year and then the majority of the recovery we expect in the third and fourth quarters. Okay, great. And then just on operating profits, so I guess you guys expect to get back to historical profit levels prior to the FDA regulations, or is it going to be a lower profit business going forward now? Well, so remember, as we mentioned, we talked about on a run rate business, this should give us about $140 million or so. That's really our ambition and aspiration to get back to those levels. And remember, originally, when we talked in November, when we talked about the recovery of those $0.35, we were expecting to get back to close to those levels. And we did not expect that to happen in 2024.
Speaker Change: Okay, Great and then just on operating profit. So I guess do you guys expect to get back to historical profit levels.
Speaker Change: Prior to the FDA regulations or is it going to be lower profit business.
Speaker Change: Going forward now.
So remember as we mentioned we are talking about on a run rate business. This should give us about $140 million of wide that's really our.
Speaker Change: Ambition and aspiration to get back to those levels and remember originally when we talked in November when we talked about the recovery of those 35 cents, we are expecting to get back to close to those levels.
Speaker Change: We do not expect that to happen in 'twenty, four, but we should expect that to returning to normalcy.
Eduardo Guarita Bezerra: But we should expect that to return to normalcy next year, and we are upset. You know, the phasing of that during the year as some of these developments unfold. Okay, great. That sounds good. And then, if I could just add one more.
Speaker Change: Next next year and we are obsessed.
Speaker Change: The phasing of debt during the year as some of these developments unfold.
Speaker Change: Okay, great that sounds good and then if I could just add one more so on <unk> I guess, maybe if you could talk about how or how should we think about the rollout to stores and online I guess is it going to be what storage will be available in and is that net nationwide.
Susan Kay Anderson: So on Oak Hill, I guess maybe if you could talk about how we should think about the rollout to stores and online. I guess it's going to be, what stores will it be available in? And is it a nationwide rollout? You know, what online sites?
Speaker Change: Nationwide rollout online sites and then how are you thinking about the revenue ramp there I think that's part of the year.
Patrick Lockwood-Taylor: And then how are you thinking about the revenue ramp there as we go through the year? Yeah, Susan, it's Patrick. It's nice to hear from you. We are a couple of weeks away from starting the rollout. You'll find it in every store, and you'll find it everywhere online.
Speaker Change: Yes, Hi, Susan this Patrick it's nice to hear from you.
Patrick Lockwood: We are a couple of weeks away.
Patrick Lockwood: From starting the rollout.
Patrick Lockwood: You will find in every store and Youll find a.
Patrick Lockwood-Taylor: We have a very high ACB distribution plan for this, a very strong retail launch plan, a very strong online, a very good digital program, and very good communication. This OCO launch has really improved commercially over the last six or seven months as we've brought in new brand building capability, new agency partners, etc. So I'm hopeful you're going to see a world-class CPG launch. In terms of revenue ramp, obviously, we'll have an initial pipeline, then we get into consumer offtake. About half the volume expected is from those moving who are currently on the product through RX, of course. So you will see quite a surge and then probably somewhat of a flattening if we get a dampening, not a flattening, of that off-take curve as we get into quarters three and four, just because you picked up the full switch volume earlier on.
Patrick Lockwood: We're online we have very high.
Patrick Lockwood: ACB.
Patrick Lockwood: <unk> planned for this very strong retail wound plan very strong online very good digital program very good communication.
Patrick Lockwood: <unk>.
Patrick Lockwood: Has really improved commercially over the last six or seven months as we build in.
Patrick Lockwood: New brand building capability, New agency partners et cetera, So I'm hopeful you're going to see.
Patrick Lockwood: I.
Patrick Lockwood: We'll call CPG launch.
Patrick Lockwood: In terms of revenue ramp obviously would have initial pipeline then we get into consumer off take about half the volume expected from those moving recovery on the product of course.
Patrick Lockwood: So you will see quite an initial surge and then probably is somewhat of a flattening that we get.
Patrick Lockwood: Adapalene another platform.
Of that uptake curve as we get into quarters, three and four just because you picked up the full switch volume.
Patrick Lockwood-Taylor: We will be reading the effectiveness of this program literally weekly, and as is possible now in this digital environment, so we frankly optimize our A&P spend. We're excited about this. It looks very good. Great. That sounds exciting.
<unk>.
Patrick Lockwood: We will be reading the effectiveness of this program literally weekly.
Patrick Lockwood: Is it possible now in this digital environment, So we frankly optimize.
On the spend.
Patrick Lockwood: We're excited about this and looks very good.
Speaker Change: Great that sounds exciting. Thanks, so much good luck the rest of the year.
Susan Kay Anderson: Thanks so much. Good luck for the rest of the year. Thank you. Your next question comes from the line of Chris Schott from JP Morgan. Your line is now open.
Speaker Change: Thank you. Thank you.
Speaker Change: Your next question comes from the line of Chris Scott.
Speaker Change: Martin Your line is now open.
Chris Schott: All right, great. Thanks so much for the questions. I guess maybe this first one, Patrick, just on nutrition.
Chris Schott: Alright, great. Thanks, so much for the questions I guess, maybe just first one Patrick just on Nutritionals.
Chris Schott: What is your level of confidence that these issues are gonna fully be behind Perrigo once you complete this remediation effort? It just, you know, it seems like it's been kind of a bumpy ride over the last year, and I just wanted to get, just trying to get, just like, an overall level of comfort that this is kind of the last iteration we're gonna be seeing on Nutritional? Yeah, hi, Chris.
Chris Schott: What is your level of confidence that these issues are going to fully be behind cargo. Once you complete this remediation effort. So just.
Chris Schott: It seems like it's been kind of a bumpy ride over the last year I just wanted to make just trying to get just like overall level of comfort that this is kind of the last iteration, we're going to be kind of seeing on nutritionals.
Speaker Change: Yeah, Hi, Chris Thanks.
Patrick Lockwood-Taylor: Thanks. And I understand and have thought about the question. I've been here before in regulated industries, including in food, okay, where actually the manufacturing process was remarkably similar to, um, We were also facing some regulatory hurdles in that particular business, and I worked with some outstanding GMP remediation experts. At the end of November, when it became apparent to me that we needed to make a more significant Screeners intervention, I reached out to the same partners and actually the same person. That person did two site remediations with me in a different company, which were highly effective and really changed the reliability and the compliance of those farms at that moment in time.
Chris: I understand and the thought about the question.
Speaker Change: I have been here before in regulated industries, including food.
Chris: Well actually the manufacturing process was remarkably similar to this.
Chris: We were also facing some regulatory hurdles in that particular business.
Chris: And I worked with some outstanding GMP remediation experts.
Chris: At the end of November when it became apparent to me that we needed to make a more significant definitive intervention I reached out to the same partners and actually the same person.
Chris: That person to site remediation with me.
Chris: Different a different company, which were highly effective.
Chris: Yes.
Chris: And really step change the reliability and compliance was palm so that moment in time.
Patrick Lockwood-Taylor: As I've looked at what we've done at Wisconsin, it... a very significant intervention with a different level of protocol, corrective actions, preventative actions, quality assurance application, and Environmental Monitoring and Cleaning and Sanitization. What I'd say is, so far, so good; that site is up, it's a different level of adherence. The team on the ground there has gone through extensive training, and I am confident that that farm is absolutely on the right track. Okay, I need more time, all right, because this is a recent restart, whilst I'm confident, and we will continue to learn our way there, working in combination with the FDA, who we update monthly on our progress. I certainly think this is our best shot and it is a different level of GMP and quality assurance to what we were historically in the past. So, I'm as confident as I can be at this stage. I just need a bit more...
Chris: As I've looked at what we've done at Wisconsin.
Chris: It's a very significant intervention with a different level protocol corrective action preventative actions quality assurance application.
Chris: And environmental.
Chris: Monitoring on cleaning Sanitize Asian, what I'd say is so far so good that slightly is up.
Chris: It's a different level of adherence from our team on the ground and they are going through extensive training.
Chris: And I am confident that Paul is absolutely on the right track Okay.
Speaker Change: We need more time.
Speaker Change: This is a recent resolved whilst I'm confident and we will continue to learn our way there.
Speaker Change: Working in combination with the FDA, who we update monthly.
Speaker Change: Monthly on our progress.
Speaker Change: I certainly think this is our best shot and it is a different level of.
Speaker Change: GMP and quality assurance.
Speaker Change: Historically on the path towards.
Speaker Change: So I'm as confident as I can be at this stage.
Speaker Change: Just need more evidence.
Patrick Lockwood-Taylor: Okay, appreciate the color there. And then just in terms of the competitive landscape here, how do you think about share loss and, once you've completed these efforts, the willingness of your customer base to kind of re-engage with Perrigo? Yeah, I mean, we're dealing in, you know, the most sensitive of categories, all right?
Speaker Change: Alright, I appreciate the color there and then just terms of the competitive landscape here, how do you think about share loss and.
Speaker Change: Once you've completed these efforts kind of the willingness of your customer base to kind of Reengage with Paragon.
Speaker Change: Yes, I mean.
Speaker Change: We're dealing in the most sensitive with categories alright.
Patrick Lockwood-Taylor: We have a moral and business obligation, obviously, that this is a safe and effective product. We're talking about instant imperformance; everybody agrees that everybody wants that, and finished product testing alone cannot be sufficient to confirm product safety. It has to be a final indication of a quality-controlled manufacturing environment. With this investment, there is no doubt that that moves us to that. This is what all parties want. And we are working with our retailers to explain what we're doing, try to minimize that disruption, and retain our partnerships, obviously with... This is not a standard just for Perrigo.
Speaker Change: We have a moral and business obligations. Obviously this is safe and effective product.
Infant formula.
Speaker Change: Everybody shares that everybody wants that.
Speaker Change: And finished product testing alone cannot be sufficient to confirm product safety okay.
Speaker Change: It has to be a final indication of the quality controlled manufacturing environment.
Speaker Change: This investment.
Speaker Change: There is no doubt that that moves us to that.
Speaker Change: Policies once.
Speaker Change: And we are working with our retailers to explain what we're doing and try to minimize that disruption and retain our partnership obviously with them.
Speaker Change: This is noticed stand at just pair ago. This is a standard for any provider internationally or nationally.
Patrick Lockwood-Taylor: This is a standard for any provider, internationally or nationally. I know what we've had to do. I think we are operating at normal industry standards. I think what we're doing is probably ahead of what is being done by many other manufacturers. So I hope at the end of the day, our customers will allow us to do this, and we'll then come back as a high-value, quality-assured manufacturer of infant formula. And just one final question for me, just to comment on the broader kind of Perrigo 2025 targets. It seems like the business x Infinutrition is really on track, and we've got some good momentum there. And it sounds like, directionally, you're hoping that this is something that, you know, you can recapture some of these earnings. So I'm just trying to get some perspective on, like, should we still be thinking about those 25 targets? Or is that something we should maybe hold off until analyst day later this year?
Speaker Change: No what we've had to do I think we were operating at normal industry standards I think what we're doing is probably.
Speaker Change: Head of what is being done.
Speaker Change: By many other manufacturers so I hope at the end of the day.
Speaker Change: Customers will allow us to do this.
Speaker Change: They can come back to a high value quality assured manufacturer.
Speaker Change: Miller.
Speaker Change: Perfect and just one final question for me.
Speaker Change: Comment on the broader kind of Purgo 2025 targets. It seems like the business ex nutritional is really on track and we've got some good momentum there.
Speaker Change: Directionally you are hoping that this is something that you can recapture some of these earning so I'm trying to get some perspective on like should we still be thinking about those 25 targets or is that something we should maybe hold off until they.
Chris Schott: Thank you. Yeah, thank you for the question. Chris, as you heard from Patrick and me, we really must execute these actions on infant formula and Project ENERGIZE. Those are our critical priorities.
Speaker Change: At the Analyst day later this year. Thank you.
Speaker Change: Yes. Thank you for the question, Chris as you heard from from Patrick and I, We really must execute.
Speaker Change: These actions on infant Formula and project energized those are critical priorities and in parallel we are revisiting our portfolio to make sure it's going to be sustainable in the long term right. So as we shared before we're expecting to have.
Eduardo Guarita Bezerra: And in parallel, we're revisiting our portfolio to make sure it's going to be sustainable in the long term. So, as we shared before, we're expecting to have a much clearer view on our growth perspectives in the fall when we expect to do an investor day. And so we expect to share more at that. Appreciate all the college today.
Speaker Change: A much more clear view on our growth perspectives in the fall when we expect to do an investor day, and so we expect to share more but at that time.
Speaker Change: I appreciate all the color today. Thank you.
Chris Schott: Thank you. Transcribed by https://otter.ai. Your next question comes from the line of Corinne Wolfmeyer from Piper Sandler. Your line is now open. Hey, good morning, team.
Speaker Change: Thanks, Chris.
Speaker Change: Your next question comes from the line of Korean walls Meyer from Piper Sandler Your line is now open.
Speaker Change: Hey, good morning team and thanks for taking my question.
Corinne Wolfmeyer: And thanks for taking the questions. On Opal, can you just discuss, you know, how much sales and benefit there may be here in Q1, as you're selling the product to retailers before it hits the shelves? And then can you just touch a little bit on the kind of supply chain processes you have in place to ensure minimal disruption to getting the product to consumers once it is launched? Yeah, so thank you for the question. So again, Q1, we're just about to do the first launch now in the coming weeks. So that's mid to the end of March.
Speaker Change: On <unk> can you just discuss how much benefit there may be here in Q1, and you're selling the product into the retail like before it hits the shelf.
Speaker Change: And then can you just touch a little bit on that.
Speaker Change: Kind of like supply chain, you have in place to ensure minimal disruption of getting product to consumers. Once it is launched.
Speaker Change: Yes. So thank you for the question. So again Q1 were just about to do the first.
Speaker Change: <unk> now and in the coming weeks. So Thats me to the end of March and so we expect from a margin standpoint gross margin is going to have a benefit but remember the first year.
Eduardo Guarita Bezerra: And so we expect from a margin standpoint, gross margin is going to have a benefit. But remember, the first year, you know, there will be a dilutive effect because we're really investing in the brand. And we're going to see significant investments, you know, mainly at the retailer and online in the second quarter. So I would expect a minimum accretion at the bottom line in Q1, but an improvement in gross profit margin. Unfortunately, that is significantly offset by the infant formula impact that we just talked about.
Speaker Change: There'll be a dilutive effect because we are really investing in the brand and are going to see significant investments.
Speaker Change: Mainly at the retailer.
Speaker Change: And online in the second quarter, So I would expect the minimal accretion at the bottom line in Q1, but an improvement in gross profit margin. Unfortunately that is significantly offset by the formula.
Speaker Change: In fact that we just talked about.
Eduardo Guarita Bezerra: On the supply side of the second part of the question, actually, very good. We've ramped up extremely well. We've shipped. The product is here, waiting to be distributed. All batches for year one consumption have been produced.
Speaker Change: On the supply side for the second part of the question actually very good.
Speaker Change: We've ramped up extremely well we shipped the product is here.
Speaker Change: Waiting to be distributed for batches for year, one consumption is being produced.
Patrick Lockwood-Taylor: It's good, and we have a buffer for upside as well, a very well-tested supply chain. Very helpful. Thank you. And then can you touch on some of the ski rationalization efforts you're undergoing?
Speaker Change: Good and we have Buffalo for upside as well this is a.
Speaker Change: Very well tested supply chain.
Speaker Change: Very helpful. Thank you and then can you touch on some of them.
Speaker Change: The SKU rationalization effort, you're undergoing and as is that mainly in the past right now or is that something youre going to continue to do going forward.
Corinne Wolfmeyer: Is that mainly in the past right now? Or is that something you're going to continue to do going forward, both this year and in the longer term? Yeah, so we expect that to have an impact in 2024. And that should be it, right? Because remember, last year, we talked about 1000 FDUs that we were, you know, rationalizing. And so we expected another 1000 this year, and we should, You know, do the majority of the other benefits by that. Coming from the supply chain reinvention are mainly the planning process and how we work in our facilities through our Perrigo work systems, but that should be. Yeah, and Corinne, this is Brad.
Speaker Change: This year and over the longer term.
Speaker Change: Yes, so we expect that to have.
Speaker Change: And impacting 2024 and that should be right because remember last year, we're talking about 1000, Skus that we were rationalizing and so we expect that another one this year and we should be.
Speaker Change: Done by debt the majority of the other benefits coming from the supply chain reinvention are mainly on the planning process and how we work in our facilities to one dollar.
Speaker Change: <unk> system, but that that should be.
Speaker Change: Yes.
Speaker Change: This is Brad so for the impact on the topline that take what Eduardo said, it's about a one point impact to organic growth 2024.
Eduardo Guarita Bezerra: So for the impact on the top line, to take what Eduardo has said, it's about a one point impact on organic growth to 2024. Very helpful, thank you. Great, thank you. Your next question comes from the line of Daniel Bielce from Hedgeye. Your line is now open.
Speaker Change: Very helpful. Thank you.
Speaker Change: Great. Thank you.
Speaker Change: Your next question comes from the line of Daniel <unk> from <unk>. Your line is now open.
Daniel Bielce: Thank you. So are the headwinds to CSCA oral care still the skew rationalization efforts and then the promotion? Yes, that's mainly it.
Daniel: Thank you so are the headwinds to the CSC a oral care still the SKU rationalization efforts and then the promotions.
Daniel: Yes.
Eduardo Guarita Bezerra: But the important thing to say is, We're seeing the business on a positive trajectory, right? So remember, we had a significant impact in 2022, mainly because of the disruptions after COVID and additional logistic costs. All those things have been significantly addressed during 2023. And also importantly, from a cash standpoint, the team did an amazing job and contributed almost $50 million in inventory reduction at the end of 2023. So I would say the health of the business has improved significantly. We need to continue to work there to make sure that our portfolio is in line with what our customers want. And even on that side, on the brands that we had, we exited some brands that didn't make sense for the long run.
Speaker Change: That's mainly but important to say.
Speaker Change: We're seeing the business.
Speaker Change: Paul steep trajectory right. So remember we had significant impacting 2020, Q, mainly because of the disruptions after colby.
Speaker Change: And additional logistic costs all of those things have been significantly addressed during 2023 and also importantly from a cash standpoint.
Speaker Change: <unk> did an amazing job and had contributing almost $50 million.
Speaker Change: The reduction in inventories at the end of 2023, So I would say the health of the business has improved significantly we need to continue to work there to make sure that our portfolio is in line with.
Speaker Change: Our customers want.
Speaker Change: But even on that side on the brand as we had exited some brands that didn't make sense for the long term.
Daniel Bielce: Thanks, and if I can squeeze one more in. On CSCA, the cost of goods inflation, are there pricing actions being taken, or are we sort of nearing the end of this inflationary impact? No, that's a great question, and that's a great point.
Speaker Change: Thanks, and if I can squeeze one more in on <unk>. The cost of goods inflation are there pricing actions being taken or are we sort of nearing the end of this inflationary impact.
Speaker Change: That's a great question.
Eduardo Guarita Bezerra: So, we're seeing very positive, you know, pricing actions taken. I think it's because inflation is still, you know, while in CSCA, we saw significant deceleration during 2023, you know, at the beginning of the year, in CSCA, that's still taking longer. And so, we're taking the backseat of that, and we're seeing very great momentum, you know, that continues from Q4 to Q1 in our international business, which may be filled by crisis. Thank you. There are no further questions at this time. I will now hand the call back to Brad Joseph. Please continue. Thanks, John. Thanks, everybody, for your interest in Perrigo. I'm looking forward to catching up soon. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Great point, so we're seeing very positive pricing.
Speaker Change: Pricing.
Speaker Change: Actions taken I think it's because the inflation in steel.
Speaker Change: No.
Speaker Change: While in <unk>, we saw significant deceleration during 2023.
Speaker Change: In the beginning of the year and CACI that steel has taken longer and so we're taking a backseat of that and we're seeing very great momentum.
Speaker Change: That continues from Q4 into Q1 in our international business, mainly fueled by pricing increase.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time I will now hand, the call back to Brad Joseph Please continue.
Bradley Joseph: Thanks, Shawn and thanks, everybody for your interest in parallel looking forward to catching up soon.
Bradley Joseph: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Bradley Joseph: Yes.
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