Q1 2024 Colgate Palmolive Co Earnings Call

Unknown Executive: Good morning and welcome to today's Colgate-Palmolive First Quarter 2024 Earnings Conference Call. This call is being recorded and is being simulcast live at www.ColgatePalmolive.com. Now for opening remarks, I'd like to turn this call over to Chief Investor Relations Officer and Executive Vice President, M&A, John Faucher.

Good morning, and welcome to today's Colgate Palmolive first quarter 'twenty 'twenty four earnings conference call.

This call is being recorded and is being simulcast live at Www Dot Colgate Palmolive dotcom.

Now for opening remarks, I'd like to turn this call over to Chief Investor Relations Officer, and Executive Vice President M&A John Boucher.

John Faucher: Thanks Betsy.

John Faucher: Good morning, and welcome to our first quarter 2024 earnings release conference call. This is John Faucher.

John Faucher: And welcome to our first quarter 2024 earnings release Conference call. This is Jonathan.

John Faucher: Today's conference call will include forward-looking statements. However, actual results could differ materially from these statements. Please refer to the first quarter 2024 earnings press release and related prepared materials and our most recent filings with the SEC, including our first quarter 2024 quarterly report on Form 10-Q and subsequent SEC filings, all available on Colgate's website, for a discussion of the factors that could cause actual results to differ materially from these statements. This conference call will also include a discussion of non-GAAP financial measures, including those identified in Tables 3, 5, and 6 of the Earnings Press Report.

John Faucher: Today's conference call will include forward looking statements actual results could differ materially from these statements. Please refer to the first quarter 2024 earnings press release and related prepared materials and our most recent filings with the SEC, including our first quarter 2024 quarterly report on Form 10-Q.

John Faucher: And subsequent SEC filings all available on Colgate's website for a discussion of the factors that could cause actual results to differ materially from these statements.

John Faucher: This conference call will also include a discussion of non-GAAP financial measures, including those identified in tables, three five and six of the earnings press release a.

John Faucher: A full reconciliation to the Corresponding Gap Financial Measures is included in the first quarter 2024 earnings press release and is available on Colgate's website. Joining me on the call this morning are Noel Wallace, Chairman, President, and Chief Executive Officer, and Stan Sutula, Chief Financial Officer. Wallace will provide you with some thoughts on our Q1 results and our 2024 Outlook, and we will then open it up for Q&A.

John Faucher: A full reconciliation to the corresponding GAAP financial measures is included in the first quarter 2024 earnings press release and is available on Colgate's website.

John Faucher: Joining me on the call. This morning are Noel Wallace, Chairman, President and Chief Executive Officer, and stands the Tula Chief Financial Officer.

Noel R. Wallace: No. We will provide you with some thoughts on our Q1 results and our 2024 outlook and we will then open it up for Q&A.

Noel R. Wallace: Thanks, John. Hey, good morning, everyone.

No.

Noel R. Wallace: Thanks, John Hey, good morning, everyone and thanks for joining us to discuss our strong start to 2024.

Noel R. Wallace: And thanks for joining us to discuss our strong start to 2024. I would like to make two points today about why we think we are well-positioned to continue to drive shareholder value through delivering consistent, compounded earnings-per-share growth. The first is the importance of balanced top-line growth. You've heard me speak over the past several years about our focus on delivering balanced organic sales growth. Growth in all of our categories, growth in all of our divisions, and growth in both volume and price. That's what we did this quarter.

Noel R. Wallace: I'd like to make two points today and why we think we are well positioned to continue to drive shareholder value through delivering consistent compounded earnings per share growth.

John: The first is the importance of balanced top line growth.

John: You've heard me speak over the past several years of our focus on delivering balanced organic sales growth growth in all of our categories growth in all of our divisions and growth in both volume and pricing.

John: That's what we did this quarter, we delivered organic sales growth in all four of our categories. All six of our divisions and volume and pricing growth on a total company basis.

Noel R. Wallace: We delivered organic sales growth in all four of our categories, and in all six of our divisions, as well as volume and pricing growth on a total company basis. The balance allowed us to deliver on a base business 6% net sales growth on top of 6.5% net sales growth in Q1 2023, despite a nearly 4% headwind from foreign exchange. The focus on balance between pricing and volume growth allowed us to deliver solid volume growth this quarter, even with the continued volume softness in China and the expected headwind from lower private label growth as we transferred more Hill's volume into our pet nutrition manufacturing network. Oral care, personal care, and home care each grew volume in the quarter, with volume growth of 3% for all three categories combined.

John: The balanced allowed us to deliver on our base business, 6% net sales growth on top of six 5% net sales growth in Q1 2023.

John: Despite a nearly 4% headwind from foreign exchange.

John: The focus on balanced between pricing and volume growth allowed us to deliver solid volume growth this quarter, even with the continued volume softness in China and the expected headwind from lower private label growth as we transferred more hills volume into our pet nutrition manufacturing network oral care personal care and home.

John: Care each grew volume in the quarter with volume growth of 3% for all three categories combined.

Noel R. Wallace: Our revamped strategy and increased advertising spending have allowed us to drive growth across a greater percentage of our portfolio, and our focus on core innovation is keeping our biggest brands relevant and vibrant in consumers' minds. We still have work to do, but our balanced strategy continues to yield results, including continued growth in our global oral care share. Which leads me to my second point, which is flexibility in the P&L.

John: Our revamped strategy and increased advertising spending have allowed us to drive growth across a greater percentage of our portfolio and our focus on core innovation is keeping our biggest brands relevant and vibrant in consumers' minds we.

We still have work to do but our balanced strategy continues to yield results, including continued growth in our global oral care shares.

John: Which leads me to my second point, which is flexibility in the P&L.

Noel R. Wallace: Our focus on revenue growth management and driving our Funding the Growth initiatives enabled us to achieve a 60% gross margin in the quarter despite significant headwinds from transactional foreign exchange. Our commitment to productivity in the middle of the P&L allowed us to drive 30 basis points of overhead leverage while still continuing to invest in strategic capabilities like digital, data, and analytics, all topics we discussed at CAGME. And prudent balance sheet management allows us to deliver 18% based business earnings growth despite the year-over-year increase in interest expense and the impact of devaluations around the globe.

John: Our focus on revenue growth management, and driving our funding the growth initiatives enable us to achieve a 60% gross margin in the quarter, despite significant headwinds from transactional foreign exchange.

John: Our commitment to productivity in the middle of the P&L allowed us to drive 30 basis points of overhead leverage while still continuing to invest in strategic capabilities like digital data and analytics all topics we discussed at Cagny.

John: And prudent balance sheet management allowed us to deliver 18% base business earnings growth. Despite the year over year increase in interest expense and the impact from devaluations around the globe.

Noel R. Wallace: And most importantly, despite an expected mid-single-digit negative impact from foreign exchange, we're guiding to mid-to-high single-digit business earnings per share growth. And we're doing this in the context of meaningful increases in brand investment that will set the stage for growth in the future. This is a testament to the ability of our team to consistently execute our strategy and seize growth opportunities while also preparing to better withstand the inevitable headwinds of running a global business. So with that, I'll take your questions.

John: And most importantly, despite an expected mid single digit negative impact from foreign exchange, we're guiding to mid to high single digit base business earnings per share growth and we're doing this in the context of meaningful increases in brand investment that will set the stage for growth in the future. This is a testament to the ability of our team.

John: To consistently execute our strategy and she's growth opportunities, while also preparing to better withstand the inevitable headwinds of running a global business so with that I'll take your questions.

John: Yes.

Speaker Change: We will now begin the question and answer session.

Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. To withdraw your question, please press star, then 2. Please limit yourself to one question. If you have further questions, you may re-enter the question queue. The first question today comes from Steve Powers of Deutsche Bank. Please go ahead.

Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.

To withdraw your question. Please press Star then two.

Speaker Change: Please limit yourself to one question.

Speaker Change: If you have further questions you may reenter the question queue.

Speaker Change: Okay.

Speaker Change: The first question today comes from Steve powers with Deutsche Bank. Please go ahead.

Stephen Robert R. Powers: Good morning, everybody. Good morning, Noel, Stan, John. Good morning, morning.

Speaker Change: Yeah.

Stephen Robert R. Powers: Good morning, everybody good morning to all Stan Jon Good morning, Good morning.

Noel R. Wallace: So, really exceptional business performance this quarter, more or less, on all fronts. But I wanted to drill down into your organic growth guidance for the year. It seems, you know, about half of that two-point increase is being driven by inflationary pricing as an offset to FX, and fair enough on that. But there also seems to be, you know, at least a point beyond that attributable to upside that you're seeing in real terms across the portfolio.

Stephen Robert R. Powers: So really exceptional business performance this quarter more or less on all fronts.

Stephen Robert R. Powers: But I wanted to drill down into.

Stephen Robert R. Powers: Into your organic growth guidance raise for the year. It seems that you know about half of that about two point increase is being driven by inflationary pricing as an offset to FX and fair enough on that but there also seems to be you know at least a point beyond that attributable to upside that you're seeing in in real terms across the portfolio. So I'm curious if you could expand.

Noel R. Wallace: So, I'm curious if you could expand on where that upside is coming from versus your prior expectations, and if you'd say more of that is being driven by category growth, or it's more being driven by your own market share momentum. Thank you.

On on where that upside is coming from versus your prior expectations and if you'd say more of that is being driven by category growth or its more being driven by your own market share momentum. Thank you.

Noel R. Wallace: All right, thanks, Steve. I come back to the points I made in my upfront comments around balanced organic sales growth. I mean, we're getting really good quality coming through on the volume line. You saw the 1.3.

Speaker Change: Great. Thanks, Steve I'd come back to the points I made in my upfront comments around balanced organic sales growth I mean, we're getting really good quality coming through on the volume line you saw the one three that was with the headwind of private label.

Noel R. Wallace: That was with Hedwin, a private label that we were obviously exiting in the Hills business, and strong pricing across the board, mid-single-digit pricing X the impact of Argentina. And, as you point out, we're seeing nice share growth consistently around the world. That's driving, obviously, that top-line organic growth and top-line sales growth. But we're most pleased with, I think, the balance we're getting both on volume and price. We're able to still get pricing, not just inflationary pricing, but we still have pricing going through the categories, particularly in some of the markets where we've had more inflationary impact from raw materials. Hills would be a good example of that.

Speaker Change: We're obviously exiting on.

Speaker Change: On the Hill's business and strong pricing across the board a mid single digit pricing ex the impact of Argentina, and as you point out we're seeing nice share growth consistently around the world. That's driving obviously that top line organic growth in the topline sales growth, but we're most pleased with I think is the balance we're getting both on volume and price.

Speaker Change: <unk>, we're able to still get pricing not just inflationary pricing, but we still have pricing going through the categories.

Speaker Change: Particularly in some of the markets, where we've had more inflationary impact from raw materials Hills would be a good example of that we took some more pricing in the first quarter.

Noel R. Wallace: We took some more pricing in the first quarter. The pricing has obviously led to good value accretion in the category and allowed us to drive some value shares. The other important point is we've seen really good momentum in our volume shares. The U.S. had good growth in volume share in toothpaste. We've seen consistent volume share growth both in Europe and in Latin America across our portfolio, so it's really broad-based across the strategy that we're trying to execute.

Speaker Change: The pricing has obviously led to good value accretion in the category and it allowed us to drive some value shares. The other important point is we've seen really good momentum in our volume shares. The U S had a good growth on volume share in toothpaste, we've seen consistent volume share growth both in Europe and in Latin America across our portfolio. So it's really broad.

Speaker Change: <unk> based across the across the strategy that we're trying to execute.

Noel R. Wallace: Balance volume, balance price, good initiatives through the innovation that we're putting into the market. And then, importantly, there is the continued robust investment. We're seeing that really pay out in terms of driving not only category growth in the markets where we're spending money, but most importantly, allowing us to grow share in the categories where we're spending money. So overall, it's, I think, a reflection of strategy and a reflection of the balance that we have across both price and volume.

Speaker Change: Balanced volume balanced price good initiatives through the through the innovation that we're putting into the market and then importantly, as the continued robust investment we're seeing that really pay out in terms of driving not only category growth in the markets, where we're spending but most importantly, allowing us to grow share in.

Speaker Change: In the categories, where we're spending money. So overall, it's a I think a reflection of the strategy and a reflection of the balance that we have across both pricing and volume.

Speaker Change: The next question comes from Melanie Hill with Evercore ISI. Please go ahead.

Unknown Executive: The next question comes from Melanie Schultz with Evercore ISI. Please go ahead.

Robert Einstein here.

Robert Edward Ottenstein: Robert Ottenstein here. Let's kind of maybe do a deep dive on oral care. Can you talk a little bit about the market share trends by region? And a little bit more specifically, are you gaining market share more from other international players that may have more similar types of products, or local players that are maybe more idiosyncratic? And, you know, what are the key drivers of share growth? Is it more the fact that you're increasing your share of voice? Or are there particular product areas, like whitening, that are really engaging consumers now more than they did in the past?

No.

Melanie Hill: Let's maybe do a deep dive on oral care.

Melanie Hill: Can you talk a little bit about the market share trends by region.

Melanie Hill: And you know more is a little bit more specifically are you gaining share more from other international players that may have more similar type of products or local players that are maybe more idiosyncratic and what are what are the key drivers to those to the share grew.

Melanie Hill: Is it more the fact that youre increasing share of voice or are there particular product areas like whitening that are really engaging consumers now more than they did in the past. Thank you.

Noel R. Wallace: Thank you. Yeah, thanks, Rob.

Noel R. Wallace: Yeah, thanks, Rob. It's a little bit of everything you've just said. So, you know, overall, really pleased with the growth and the acceleration of market shares globally. You saw that in the prepared remarks.

Speaker Change: Yes, thanks, Rob it's a little bit of all of what you've just said so overall really pleased with the growth and the acceleration of market shares globally. You saw that in the prepared remarks, you saw that in some of the slides that we provided particularly on the whitening segment and it's really a function of the strategy that we've been executing for the last couple.

Noel R. Wallace: You saw that in some of the slides that we provided, particularly in the whitening segment. And it's really a function of the strategy that we've been executing for the last couple of years, and we are really starting to see the fruits of all that effort. So the growth is coming, you know, obviously from good growth in Europe, which we talked about. We're at record shares in Europe, but that's a balance between Colgate and our therapeutic brands of Elmex and Meridol, so good spending behind those businesses, and we're seeing that translating to good share growth, particularly in some of the big markets across Europe.

Speaker Change: Years, and really starting to see the fruits of all of that effort.

Speaker Change: So the growth is coming obviously from a good growth in Europe, which we talked about we're at record shares in Europe, but that's a balanced between Colgate and our therapeutic brands of <unk> and Merit also good spending behind those businesses and we're seeing obviously that translate into good share growth, particularly in some of the big markets across Europe Likewise were.

Noel R. Wallace: Likewise, we're seeing the benefits of that deployed across Africa, where we've launched some of those high-end therapeutic brands as well. North America, the scanner data's been improving, as you've seen, but the shares will continue to be a bit choppy there as we move forward, given some of the strategic changes we've taken with some of the drug classes of trade in the promotional environment. Latin America had growth in both value and volume.

Speaker Change: Seeing the benefits of that deployed across Africa, where we've launched some of those high end therapeutic brands is well.

Speaker Change: North America, the scanner data has been improving as you've seen but the shares will continue to be a bit choppy there as we move forward given some of the strategic changes we've taken with some of the drug class of trade on promotional on the promotional environment Latin America had growth in both value and volume that was driven both from I think the the <unk>.

Noel R. Wallace: This was driven both by, I think, the mix and diversity of our portfolio across Latin America, both at the high end and at the entry price point, given the breadth of portfolio offerings that we have there, and obviously, the increased spending that we're putting behind some of the good innovation. So it's really broad-based, good spending, good innovation across the board, and importantly, credit to the teams and their execution on the ground.

Speaker Change: Mix and diversity of our portfolio across Latin America, both at the high end and at the entry price point, given the breadth of portfolio offerings that we have there and obviously the increased spending that we're putting behind the good innovation. So it's really broad based good spending good innovation.

Speaker Change: Across the board and importantly credit to the teams and their execution on the ground and so we see that obviously continuing as we continue to hold investments through the balance of the year and that sure.

Noel R. Wallace: And so we see that obviously continuing as we continue to hold investment through the balance of the year, and that share growth is coming from both multinational competitors as well as local competitors, so broad-based across the board. We're pleased with where we are.

Speaker Change: <unk> is coming from both the multinational competitors as well as local competitors. So broad based across the board. We're pleased with where we are we have more work to do particularly in North America, but overall a good performance.

Unknown Executive: The next question comes from Peter Grom with UBS. Please go ahead.

Speaker Change: Okay.

Speaker Change: The next question comes from Peter Grom with UBS. Please go ahead.

Peter K. Grom: Thanks, Operator. Good morning, everyone. I hope you all are doing well.

Peter K. Grom: Thanks, operator, good morning, everyone Hope you all are doing well.

Noel R. Wallace: I had a question on gross margin performance and just kind of how to think about the path from here. We've kind of seen this sequential margin progression over the last six quarters or so, but in the prepared remarks, you touched on certain costs will increase as you move through the year. So, just any thoughts on how we should think about the gross margin progression from here would be helpful. And then, within that, cost savings, any commentary you can share in terms of how we should be thinking about funding the growth in the context of a very solid start to the year. Thanks.

Peter K. Grom: I had a question on the gross margin performance and just kind of how to think about the path from here, we've kind of seen this sequential margin progression over the last six quarters or so.

Remarks, you touched on certain costs will increase as you move through the year. So just any thoughts on how we should think about the gross margin progression from here would be helpful. And then just within that cost savings and any commentary you can share in terms of how we should be thinking about funding the growth just in the context of a very solid start to the year.

Noel R. Wallace: Great. Good morning.

Speaker Change: Great. Good morning, Thanks, Let me talk about more conceptually and strategically and I'll, let Stan handle some of the more specifics on your question.

Noel R. Wallace: Thanks. Let me talk about it more conceptually and strategically, and I'll let Stan handle some of the more specifics on your question. You know, so overall, as we think about the year unfolding, as we've talked about, I think, quite consistently, we'll see pricing start to ladder down as we move through the balance of the year. Although we will get inflationary pricing, we still have some pricing that we're taking in some markets. And I would say we're deeply pleased with the revenue growth management efforts that we have around the world and what that's delivering for us in terms of pricing in the market and driving category value.

Stan: Overall, as we think about the year unfolding as we've talked about I think quite consistently we'll see pricing start to loud are down as you move through the balance of the year, Although we will get inflationary pricing, we still have some pricing that we're taking in some markets and I would say, we're deeply pleased with the revenue growth management.

Stan: That we have around around the world and what that's delivering for us in terms of pricing in the market and driving category value.

Noel R. Wallace: You've obviously seen the impact on raw materials in the first quarter. We'll start to see that elevate a bit more in the back half, and obviously, the significant impact from transactional due to the foreign exchange headwinds that we face. That being said, we feel very good about the guidance that we've provided strategically about growing gross margins in 2024. We'll get that through, obviously, the funding and the growth efforts that we have, a good mix in terms of how we're deploying some of our therapeutic brands around the world, taking pricing where we need to take it to offset particularly inflationary foreign exchange, and obviously, very focused on the middle of the P&L, making sure we continue to get leverage there.

Stan: <unk> seen obviously the impact on raw materials in the first quarter will start to see that elevate a bit more in the back half and obviously the significant impact from transaction all due to the foreign exchange headwinds that we face that being said, we feel very good about the guidance that we've provided strategically about growing gross margins in 2024, we will get that through.

Stan: Obviously the funding the growth efforts that we have good mix in terms of how we are deploying some of our therapeutic brands around the world, taking pricing, where we need to take to offset particularly inflationary of foreign exchange and obviously are very focused on the middle of the P&L and making sure. We continue to get leverage there. So overall strategically we feel good but we will see pricing ladder down.

Noel R. Wallace: So overall, strategically, we feel good, but we'll see the pricing ladder down. It won't have as much impact in the year to go as it has had in the first half, but overall, we feel good about where we are.

Stan: Don't have as much impact in the year to go as it had in the first half, but overall, we feel good about where we are Stan yeah. So I'd pick up that look we're very pleased with the margin performance in Q1 up 310 basis points year to year and improved sequentially, we had a slight benefit from Argentina, but the overall underlying margin improvement was quite.

Stanley J. Sutula: Stan? Yeah. So I'd pick up that.

Stanley J. Sutula: Look, we're very...

Stanley J. Sutula: Yeah, so I'd pick up that. Look, we're very pleased with the margin performance and Q1 up 310 basis points year to year and improved sequentially. We had a slight benefit from Argentina, but the overall underlying margin improvement was quite good. We've guided for margin expansion for the year, and we're confident we can deliver. There are a couple of headwinds here and tailwinds.

Stan: Good.

We've guided for margin expansion for the year and we're confident we can deliver theres a couple of headwinds in here in <unk>, we talked about the modest raw material inflation as you've heard from others as well, we expect that will slightly escalate as we go through the year and then we've all watched FX FX transactional impact has been bouncing around.

Stanley J. Sutula: We talked about modest raw material inflation, as you've heard from others as well. We expect that to slightly escalate as we go through the year. And then we all watched FX.

Stanley J. Sutula: FX, the transactional impact has been bouncing around, but that will be a headwind as we go into the year as well. Now, on the tailwinds, as Noel mentioned earlier, we've got great revenue growth management programs in place globally, and we're seeing the benefit from all of those. And we have a proven track record on our funding for growth. We had a very good start to funding growth. We've got a very good pipeline for funding growth.

Stan: But that will be a headwind as we go into the year as well now on the tailwind as Noel mentioned earlier, we've got great revenue growth management programs in place globally, and we're seeing the benefit from all of those and we have a proven track record on our funding the growth we had a very good start to funding of the growth. We've got a very good pipeline for funding the growth.

Stanley J. Sutula: And the teams, I think, have that dialed in here as we go forward. And, importantly, we've talked about the return to volume growth. And in that, we get some scale benefits and leverage as that volume flows through our manufacturing facilities. So overall, we expect to expand margin. You'll see that on a year-on-year basis. I think as you think sequentially, that will be more modest. But we are expanding margin for the year, and the efforts around RGM and FTG will be able to compensate for the headwinds that we see in FX transactional and raw materials.

Stan: And the teams I think have that dialed in here as we go forward and then importantly, we've talked about the return to volume growth and in that we get some scale benefits in leverage as that volume flows through our manufacturing facilities. So overall, we expect to expand margin.

Stan: See that on a year on year basis, I think as you think sequentially that will be more modest, but we expand margin for the year and the efforts around our GM in FTE G will be able to compensate for the headwinds that we see at FX transactional and raw materials.

Stan: The next question comes from Filippo <unk> with Citi. Please go ahead.

Unknown Executive: The next question comes from Filippo Falorni with Citi. Please go ahead.

Filippo Falorni: Hey, good morning everyone. So Noel, you mentioned in the prepared remark for the Heal's pet food business that you are expecting sequential volume improvement throughout the year. Maybe you could give us some color of the puts and takes with less impact from private label volumes in the top line and also just any sense of the contribution from innovation, expansion into wet pet food, and any color on the trajectory of the business would be helpful. Thank you.

Filippo: Hey, good morning, everyone.

Filippo: So no all you mentioned in the prepared remarks for the heels. That's a business that you are expecting sequential volume improvement throughout the year, maybe you can give us some some color of the puts and takes we had less impact from private label volumes in top line and also just any.

Filippo: Sense of the contribution from innovation and expansion into wet.

Fast food and any color on the trajectory of the business.

Noel R. Wallace: Sure. Good morning, Filippo.

Speaker Change: Thank you.

Speaker Change: Sure Good morning, Filippo Thank you so.

Noel R. Wallace: Thank you. So, you know, as we said in the prepared remarks, we were really pleased with the performance at Hills in the quarter in what's a pretty tough operating environment. Volume was closer to flat, minus the impact of private label, and that was sequentially up, which is good. And we had very good pricing, as we discussed, coming out of the year 2023 and our need to continue to offset some of the agricultural inflation that we saw in the back half of 2023 moving into 2024.

Speaker Change: We said in the prepared remarks really pleased with the performance at hills in the quarter.

Speaker Change: And what's a pretty tough operating environment volume was closer to flat ex the impact of private label and that was sequentially up which is good and we had very good price and as we discussed at coming out of the year in 2023, and our need to continue to offset some of the agricultural inflation that we saw in the back half of 'twenty three moving into 'twenty for a category.

Noel R. Wallace: Category volume overall has been, you know, a bit sluggish in the category, but I think what's most important is to see that the sluggishness has been more of a decline in treats and a little bit of conversion from wet to dry.

Speaker Change: Volume overall has been a bit sluggish in the category, but I think what's most important is to see that the sluggishness has been more of a decline and treats and a little bit of conversion from.

Speaker Change: From wet to dry and Thats.

Noel R. Wallace: And that's obviously important for us to think about as we strategically move some of a bigger part of our businesses, which are in the dry segment, going forward. Really important, though, is the fact that we generated really strong share growth in the first quarter of the year behind the Hills business. We're across up in pet specialty, and up in neighborhood pet.

Speaker Change: And that's obviously important for us to think about as we strategically moved some of our bigger part of our businesses, which are in the dry segment going forward really importantly, though is the fact that we generated really strong share growth in the first quarter of the year behind the Hill's business, where cross up in pet specialty up a neighborhood pet penetration.

Noel R. Wallace: Penetration continues to grow. We had both share growth in our science diet business as well as prescription diets. And I think this is a reflection of the continued strategy that we're deploying. Great innovation, great partnership with pet specialty in terms of driving their categories and making sure that we have ample advertising to talk about the science-driven nutrition that we provide to the market. So overall, we feel very good about where the Hills business is going.

Speaker Change: <unk> continues to grow.

Speaker Change: We had both share growth in our science diet business as well as prescription diet and I think this is a reflection of the continued strategy that we're deploying great innovation, great partnership with pet specialty in terms of driving their categories and making sure that we have ample advertising to talk about the science driven nutrition that we provide to the market so over.

Speaker Change: Raul, we feel very good about where the Hill's business is that business grew a high mid single high single digits ex the impact of private label. So we feel we're well positioned but we're not immune to some of the sluggishness in the category, but again, if you've talked about in the past, we have low brand awareness and low brand penetration so a lot of upside.

Noel R. Wallace: That business grew high single digits X the impact of private labels. So we feel we're well positioned, but we're not immune to some of the sluggishness in the category. But again, as we talked about in the past, we have low brand awareness and low brand penetration. So there is a lot of upside to continue to go after as we execute our strategy. The other thing I'd add is that the investment and capacity have also enabled us to bring in some products that were being co-manufactured before, which improves reliability of delivery and also will improve our margins over time.

Speaker Change: Due to continued to go after as we execute our strategy well the thing I'd add there is the investment in capacity has also enabled us to bring in some product that was being co manufacturer before which improves reliability of delivery and also will improve our margins over time.

Noel R. Wallace: And to your point, Filippo, on wet, obviously, there are some opportunities for us. We're very low indexed for wet, and particularly in segments like cats, where there's a lot of wet food consumed, we have an opportunity to leverage the new manufacturing that we have and get more formulas into the market and, obviously, more growth for the business.

Speaker Change: And to your point on you Filippo on wet obviously, there is some opportunities for us as we're very low indexed and wet.

Speaker Change: And particularly in segments like Cat, where theres a lot of wet food consumed we have an opportunity to leverage the new manufacturer that we have and get more more formulas into the market and obviously more growth for the business.

Unknown Executive: The next question comes from Andrea Teixeira of J.P. Morgan. Please go ahead.

Speaker Change: The next question comes from Andrea Teixeira with Jpmorgan. Please go ahead.

Andrea Faria Teixeira: Thank you and good morning. Noel, we spoke about the underlying volume growth in all regions, and your revenue growth management definitely sets you apart. But can you comment on how you see consumer behavior, in particular among low-end consumers in the U.S. and China, which seems to be a concern to some of your peers? And you have historically protected your price points and kept consumers in the category. But we would love to see the examples that you may highlight from your team in the U.S. and in China and how they have been using this portfolio management to balance affordability and premiumization. Thank you. Yeah, I think it is.

Andrea Faria Teixeira: Thank you and good morning, no I always spoke to the underlying volume growth in all regions and in your revenue growth management definitely sets you apart, but can you comment on how you see the consumer behavior, particularly at the low end consumer in the U S.

Andrea Faria Teixeira: China, which seems to be a concern to some of your peers and.

Andrea Faria Teixeira: And you have historically protect your price points and keeping close someone's in that category, but would love to see the examples that you may highlight by your team.

Andrea Faria Teixeira: As in China, and how they've been using this portfolio management to two barbell between affordability and monetization. Thank you.

Noel R. Wallace: Yeah, I think as we've talked about, thanks for the question, the consumer has been quite constructive. I mean, we've seen, obviously, significant inflation move through the category over the last year. We expected that we would see a return to volume growth as inflation became more benign and as pricing started to stabilize in the categories, and that's principally what happened. But interesting to note that, you know, as you take the aggregate of our categories by and large, the categories are still negative.

Speaker Change: Yes, I think as we've talked about thanks for the question the.

Consumer has been quite constructive I mean, we've seen obviously the significant inflation moved through the category over the last the last year, we expected that we would see a return to volume growth as inflation became more benign and has pricing started to stabilize in the categories and thats principally whats happened interesting to note that as you take the.

Speaker Change: Our categories are buying.

Speaker Change: By and large the categories are still negative so the volumes the volume growth that we had and delivered in the quarter, which suggest obviously that we're growing good volume share and I think that's a reflection of the broad based strategy that we're deploying one we have good innovation at the top end of the category, particularly on the therapeutic side, whether that's in widening and the premier.

Noel R. Wallace: So the volume growth that we had and delivered in the quarter would suggest, obviously, that we're growing good volume share, and I think that's a reflection of the broad-based strategy that we're deploying. One, we have good innovation at the top end of the category, particularly on the therapeutic side, whether that's on the whitening and the premium side, whether that's the total plaque that we've launched, whether that's therapeutic with Meridol and Elmex, as well as a lot of big core innovation.

Speaker Change: Side, whether thats. The total plan that we've launched whether that is therapeutic with <unk> and <unk> as well as a lot of big core innovation, we've talked about the fact that a lot of our big core.

Noel R. Wallace: We've talked about the fact that a lot of our big core portfolio, particularly in toothpaste, is at that entry or mid-price level, and so we've spent a lot of time innovating at the core to ensure that we keep those brands vibrant, and we offer consumers real value and real benefits as they come into the category, or they're trading down from mid-price to perhaps entry. You've seen some of the sluggishness in China, which comes, to your point, from the rural segment.

Speaker Change: Portfolio, particularly in toothpaste is at that entry or mid price level and so we've spent a lot of time innovating at the core to ensure that we keep those brands vibrant and we offer consumers real value and real benefits as they come into the category or they're trading down from mid price to perhaps entry you've seen some of the sluggishness in Chile.

Speaker Change: Ana to your point come from the rural segment, clearly that consumers a bit more challenged in China right now the premium segment continues to be quite robust.

Noel R. Wallace: Clearly, that consumer is a bit more challenged in China right now, but the premium segment continues to be quite robust, but our Darley franchise is well-positioned, longer term, we think, to continue to leverage some of the rural softness that we're seeing in the category and make sure that we drive share. The Colgate business had a terrific quarter in China, and that's, I think, a reflection of the move to the premium side of the business as we've really gone a lot more into e-commerce with premium offerings.

Speaker Change: But our Darlie franchise is well positioned longer term, we think to continue to leverage <unk>.

Speaker Change: Some of the rule.

Speaker Change: Softness that we're seeing in the category and make sure that we drive share of the Colgate business had a terrific quarter in China, and Thats I think a reflection of the move to the premium side of the business as we've really gotten a lot more on e-commerce with premium offerings, but overall, we're seeing I think a balanced consumer the key is making sure.

Noel R. Wallace: But overall, we're seeing, I think, a balanced consumer. The key is making sure that we're providing the reasons to use our products, and the advertising that we're executing across the market is very, very important to, one, justify the price increases that came through the category last year, but really to drive trade-up in the categories to ensure consumers see the real value and science-driven benefits of our products in our portfolio.

Speaker Change: Sure that we're providing the reasons to use our products and the advertising that we're executing across the market is very very important to one justify the price increases that came through the category last year, but really to drive trade up in the categories to ensure consumers see the real value and science driven benefits of our products in our portfolio.

The next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead.

Unknown Executive: The next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead.

Bonnie Herzog: All right, thank you. Good morning, everyone. I had a question on your ad spend, which is, you know, one of the highest as a percentage of sales among your peers. Noel, you touched on this, but I was hoping you could talk a little further about your strategy to continue to increase spend and then, you know, ultimately, what you believe is the right level of marketing spend moving forward, as well as, you know, maybe opportunities to improve ROIs. Thank you. Yeah, thanks, Bonnie.

Bonnie Herzog: Alright. Thank you good morning, everyone.

Bonnie Herzog: Had a question on your AD spend which is you know one of the highest as a percentage of sales among your peers.

Bonnie Herzog: What's not in there.

Bonnie Herzog: Hoping you could talk a little further about your strategy to continue to increase spend and then ultimately what you believe is the right level of marketing spend moving forward is as well you know maybe opportunity to improve rois. Thank you.

Noel R. Wallace: Thanks, Bonnie. I'll start with the end of your question, which is that we're seeing terrific ROI in the business, and I think that's translated into the results in the quarter. Obviously, good volume growth, helping to – certainly above the category, share growth pretty much consistently around the world in both value and volume, we're seeing our premium innovations take share, and we're obviously spending a disproportionate amount of our advertising to drive premiumization and category value.

Speaker Change: Yeah. Thanks, Bonnie I'll start with the end of your question, which is we're seeing terrific ROI in the business and I think that's translated into into the results in the quarter, obviously, good volume growth, helping to certainly above the category share growth pretty.

Speaker Change: Consistently around the world in both value and volume were seeing our premium innovations take share and we're obviously spending a disproportionate amount of our advertising to drive premium position in category value.

Noel R. Wallace: You heard Diana talk at Cagney about, I think, a lot of the discipline that we're putting into our media spend on using data and analytics to really justify the spend everywhere we are, driving more personalization and return on that investment.

Speaker Change: You heard Diana talk at Cagny about I think a lot of the discipline that we're putting into our media spend on using data and analytics to really justify the spend everywhere. We are drive more personalization and return on that investment. So again, we're very pleased with our with the increase in advertising and ultimately what is delivering as I.

Noel R. Wallace: So again, we're very pleased with the increase in advertising and ultimately what it's delivering. As I mentioned in my introduction, what's also terrific for the business right now is the broad-based spending we have on the portfolio. And what I mean by that is we've moved from exclusively oral care and PET, which received a significant amount of spend over the last couple years, to making sure that some of our strong brands around the world are getting their fair share of the advertising, and we've seen a great return on that investment. Europe would be a great example of that.

Speaker Change: Mentioned in my upfront what's also.

Speaker Change: Terrific for the business right now is the broad based spending we have on the portfolio and what I mean by that is we've moved from exclusively oral care and pet which was getting a significant amount of spend over the last couple of years to making sure that some of our strong brands around the world are getting their fair share of the advertising and we've seen a great return on that.

Investment Europe would be a great example of that where spending behind our personal care business in Europe. <unk> is just an extraordinarily strong brand there the spa.

Noel R. Wallace: We're investing behind our personal care business in Europe. Sanix is just an extraordinarily strong brand there. The spending behind some of our innovations is driving good share growth and good execution in stores. So overall, it's having a pretty systematic impact on the business, and we're pleased with the results that we're getting. Moving forward, as I've consistently said, I think over the last three or four quarters, we will continue to invest in this business for the long term. And building brand saliency and keeping our brands vibrant is the best way to drive that consistency.

Speaker Change: Pending behind some of our innovations driving good share growth and good execution in store. So overall thats, having a pretty systematic impact on the business and we're pleased with the results that we're getting moving forward as I've said consistently I think over the last three or four quarters. We will continue to invest in this business for the long term and build.

Speaker Change: Brand saliency in keeping our brand is vibrant as the best way to driving that consistency.

Unknown Executive: The next question comes from Olivia Cheang with Raymond James. Please go ahead.

Speaker Change: The next question comes from Olivia Tong with Raymond James. Please go ahead.

Olivia Tong Cheang: Great. Thanks. Good morning.

Olivia Tong Cheang: Great. Thanks, Good morning, I wanted to ask you a little bit of a batch of organic sales guide for the rest of the year, obviously things actually.

Noel R. Wallace: I wanted to ask you a little bit about your organic sales guide for the rest of the year. Obviously, conceptually, I understand why you wouldn't blow the 10 points if you continued, but why would organic sales decelerate as the comps ease? Presumably, you're getting more pricing. Clearly, we understand that this is a very dynamic environment, but we'd love to get a little bit more color in terms of your expectations for the rest of the year, because it sounds like you're very bullish on innovation, on pricing possibilities, on volume acceleration, et cetera. So we'd appreciate a little bit more color there. Thank you. Sure. Thanks, Olivia.

Olivia Tong Cheang: I understand why.

Olivia Tong Cheang: Yeah.

Olivia Tong Cheang: Well the 10 points.

Speaker Change: Can you unpack that.

Speaker Change: Why what organic sale.

Speaker Change: Salary as the comps.

Speaker Change: Hopefully, you're getting more pricing clearly, but I understand that.

Speaker Change: Uh huh.

Speaker Change: The dynamic environment, but I'd love to get a little bit more color in terms of your expectations for the rest of the year.

Speaker Change: We're very bullish on innovation on pricing.

Speaker Change: Volume acceleration et cetera.

Speaker Change: Yes.

Speaker Change: What are we seeing a little bit more color. Thank you sure. Thanks Olivia.

Noel R. Wallace: Thanks, Olivia. So clearly, some of the competitions get more difficult as you go through the year. We took, obviously, a lot of pricing. We'll see that pricing become more benign or slow in the back half of the year. That will be determined how much of that comes back in volume. The good news is that the first quarter and some of the success that we saw in the fourth quarter give us confidence that the volume is returning as we expected. The elasticities are in line with what we expected.

Speaker Change: So clearly some of the comps get more difficult as you go through the year to go we took obviously a lot of pricing, we'll see that pricing.

Speaker Change: I have become more benign or was slow in the back half of the year that was to be determined how much of that comes back into volume. The good news is the first quarter and some of the success that we saw in the fourth quarter give us confidence that the volume is returning as we expected. The elasticities are in line with as we expected so we feel pretty good.

Noel R. Wallace: So we feel pretty good about where we are. Again, I think that the biggest differentiator here in terms of how we think about it is that we're only in the first quarter. There's a lot of economic uncertainty out there in terms of what's happening. But we still see foreign exchange being a headwind. That will certainly have an impact as we have to take pricing in some markets. However, interest is going to stay stubbornly high, we expect, through the balance of the year.

Speaker Change: At about where we are again I think the biggest differentiator here in terms of how we think about is we're only in the first quarter. There is a lot of economic uncertainty out there.

Speaker Change: In terms of what's happening, we still see foreign exchange being a headwind that will certainly have an impact as we have to take pricing in some markets.

Speaker Change: Interest is going to stay.

Speaker Change: Stay stubbornly high we expect through the balance of the year. So overall, we're still early in the year very confident in the guidance, we've provided and the strategy that we're executing but we want to make sure we maintain operational flexibility through the balance of the year to ensure we continue to execute the strategy that we've been communicating to drive consistent compounds.

Noel R. Wallace: So overall, we're still early in the year, and we're very confident in the guidance we've provided and the strategy that we're executing. But we want to make sure we maintain operational flexibility through the balance of the year to ensure we continue to execute the strategy that we've been communicating to drive consistent compounded earnings growth.

Speaker Change: Earning share growth.

Unknown Executive: The next question comes from Chris Carey with Wells Fargo. Please go ahead.

Speaker Change: The next question comes from Chris Carey with Wells Fargo. Please go ahead.

Christopher Michael Carey: Hi, good morning, everyone. One quick follow-up on gross margin and then a question on North America. So, on gross margin, I think there was an expectation that Q1 would be down quarter over quarter relative to Q4, clearly, very strong delivery in the quarter. Stan, you mentioned a bit of benefit from Argentina, or are you seeing better developments elsewhere, whether that's in commodities, perhaps some of the new pricing on hills, or maybe you're over-delivering on productivity.

Christopher Michael Carey: Okay. Good.

Christopher Michael Carey: Morning, everyone. One quick follow up on gross margin and then a question on North America. So on gross margin.

Christopher Michael Carey: There was an expectation that Q1 would be down quarter over quarter relative to Q4, clearly very strong delivery in the quarter.

Dan you mentioned a bit of a benefit from Argentina or are you seeing better developments elsewhere, whether that's in commodities, perhaps some of the new pricing on hills or maybe are over delivering on productivity. So just maybe an extra.

Christopher Michael Carey: So, maybe contextualize what seems to have come in a bit better there. And just in North America, it was the best volume growth in nearly two years. I realize Fabuloso was a benefit there. But Noel, you also mentioned needing to work on market share. Can you maybe just help us understand the underlying momentum of the business right now and how to think about this going forward? Thanks.

Christopher Michael Carey: <unk>, what seems to have come in a bit better there and just on North America. It was the best volume growth of nearly two years I realize fabulous. So was a benefit there but you also mentioned needing to work on market share can you maybe just help us understand the underlying.

Christopher Michael Carey: Some of the business right now and.

Christopher Michael Carey: How to think about this going forward.

Noel R. Wallace: Sure, thanks for the question. Let me take North America, and I'll let Stan jump into some of your questions around gross profit. You know, overall, the strategy in North America that we're executing, we feel good about it. We've been very focused, as we've talked about before, on improving the middle of the P&L, getting gross margins back to where they needed to get to, getting operating margins where they needed to get back to, and reinvesting that into the business in order to drive market share.

Speaker Change: Sure. Thanks for the question, let me take the North America, and I'll, let Stan jump into some of your questions around gross profit.

Stan: Overall the strategy in North America that we're executing we feel good about it we've been very focused as we've talked about before on.

Stan: Improving the middle of the P&L getting gross margins back to where they needed to get to get the operating margins, where they need to get back to any reinvesting.

Stan: That into the business in order to drive market shares the value shares as I mentioned, we have been a little bit choppy and will continue to be a little bit choppy for the reasons. I stated earlier. However, we are seeing better execution of our innovation and our promotional strategies and that's helping to drive nice volume share in the quarter, both across toothpaste, which was up nicely and.

Noel R. Wallace: The value shares, as I mentioned, have been a little bit choppy and will continue to be a little bit choppy for the reasons I stated earlier. However, we are seeing better execution of our innovation and our promotional strategies, and that's helping to drive nice volume shares in the quarter, both across toothpaste, which was up nicely, and toothbrushes from a volume standpoint. So, again, we feel good about that, and we still have a lot of work to do across the business, as we've talked about on prior calls, and I've got great confidence in Jesper and his team and the strategy that we're deploying with real patience, because we know it's going to take some time, but we feel in the long term we're going to end up in a much better place from that.

Stan: Russia is from a volume standpoint, so again, we feel good about that and we still have a lot of work to do across across the business as we've talked about on prior calls and I've got great confidence in Jesper and his team and the strategy that we're deploying with real patients because we know it's going to take some time, but we feel in the long term, we're going to end up in a much better place from that.

Noel R. Wallace: The other thing I'd say is that non-Nielsen business in North America continues to grow at multiples of the Nielsen business. And obviously, that's not captured in market share, so we feel good about the overall health of the business, but we'll consistently continue to drive the opportunities that we see in Nielsen-based accounts.

Stan: The other thing I'd say is that non Nielsen business in the North America business continues to grow at multiples of the Nielsen business.

Stan: And obviously, that's not captured in the market share. So we feel good about overall of the overall health of the business, but we will consistently continue to drive all of the opportunities that we see in the Nielsen based accounts and Chris Your question on the sequential margin improvement first of all we're pleased with that sequential margin improvement, Argentina was a little bit less of a headwind and as you've watched.

Stanley J. Sutula: And, Chris, your question on the sequential margin improvement. First of all, we're pleased with that sequential margin improvement. Argentina was a little bit less of a headwind.

Stanley J. Sutula: And as you've seen with that FX, it's been very volatile. We've taken actions to address it, including sourcing changes, pricing changes, et cetera. And then the team candidly executed really well.

Stan: That FX, it's been very volatile we've taken actions to address it including sourcing changes pricing changes.

Stan: Et cetera, and then the team candidly executed really well I mean, we get a little bit of scale benefit from volume.

Stanley J. Sutula: I mean, we get a little bit of scale benefit from volume, and we get some improvement from RGM. And the funding, the growth, was a great execution start to the year. So we love the start to the year. And we know FX is going to continue to be volatile, not just in Argentina but in many areas around the world. So, a solid start to the year, slightly better than we anticipated on a sequential basis, but pleased with the progress. The next question comes from Lauren Lieberman with Barclays. Please go ahead. I was wondering whether...

Stan: Get some improvement from our G M and the funding the growth was great execution, starting the year. So we love the start to the year and we know FX is going to continue to be volatile not just in Argentina, but in many areas around the world. So solid start to the year slightly better than we anticipated on a sequential basis, but pleased with it.

Stan: Progress.

Stan: The next question comes from Lauren Lieberman with Barclays. Please go ahead.

Stan: Okay.

Lauren Rae Lieberman: Great. Thanks.

Lauren Rae Lieberman: Whenever you talk a little bit about Europe numbers were super strong.

Unknown Executive: The next question comes from Lauren Lieberman with Barclays. Please go ahead.

Lauren Rae Lieberman: Little bit of context around where you're seeing particular areas of strength in volume with <unk>.

Noel R. Wallace: Yeah, thanks, Lauren. A great quarter for Europe. And again, terrific execution from the team on the ground. Overall, really, really strong with growth across the vast majority of our business. And it wasn't just oral care; it was, it was pretty broad. And obviously, as you saw, volumes inflected positively, given that we're still getting pricing in the category. So pricing will ramp down as we move through the balance of the year.

Lauren Rae Lieberman: And then just any recent thoughts on private label Unilever brought up yesterday seemed a little more incremental pressure from private label in Europe. So just curious to hear your perspective on that as well.

Speaker Change: Yes, thanks, Laura on a great quarter for Europe, and again, a terrific execution from the team on the ground overall really really strong with growth across the vast majority of our business and it wasn't just oral care. It was it was pretty broad based and obviously as you saw volumes inflected positively.

Speaker Change: Given that we're still getting pricing in the category, so pricing will ramp down as we move through the balance of the year.

Noel R. Wallace: The big change, I think, is our investment strategy in Europe. We see real opportunities for growth, particularly in the oral care and personal care segment, excuse me, as we execute some of the innovations that we have there. The Meridald and Elmec shares, broadly based across Europe, are at record levels and growing really, really nicely. Again, that is a shift in strategy.

Speaker Change: The Big change I think is our investment strategy in Europe, we see real opportunities for growth, particularly in the oral care.

Speaker Change: Personal care segment excuse me.

Speaker Change: As we execute some of the innovations that we have there the marigold and <unk> shares are broad based across Europe are at record levels and growing really really nicely again that is a shift in strategy and what's nice is we're getting the complementary growth on the Colgate side of the business, particularly as we're more focused on the whitening opportune.

Noel R. Wallace: And what's nice is we're getting complementary growth on the Colgate side of the business, particularly as we're more focused on the whitening opportunity that we have. So a great portfolio of brands that we're leveraging, we think, more strategically around the region. So the market shares overall look pretty good. In terms of private label, as you know, private label has higher penetration in Europe than it does anywhere else in the world.

Speaker Change: That we have so a great portfolio of brands that we're leveraging we think more strategically around the regions. So the market shares overall look pretty good in terms of private label as you know private label has higher penetration in Europe and it does anywhere else in the euro in the world.

Noel R. Wallace: We have seen some acceleration in some of the home care categories, whether it's dish liquid or fabric softeners or floor cleaners. But that being said, we continue to have, you know, good growth across our business, particularly as we, as I mentioned earlier, broaden the investment strategy across a wider array of our brands in Europe.

Speaker Change: We've seen some acceleration in some of the home care categories, whether it's digitally greater fabric softeners or floor cleaners, but that being said we continue to have good growth across our business, particularly as we as I mentioned earlier broaden the investment strategy across a wider array of our brands in Europe.

Okay.

Unknown Executive: The next question comes from Bryan Spillane with Bank of America. Please go ahead.

The next question comes from Bryan Spillane with Bank of America. Please go ahead.

Bryan Douglass Spillane: Hey, thanks, operator. Good morning, everyone.

Bryan Douglass Spillane: Hey, Thanks, operator, and good morning, everyone.

Stanley J. Sutula: Hey Stan, just had a couple of questions just related to cash flow. One, I don't know, maybe I missed it, but if we have a guide for capital spending for the year, and then I think you refinanced or you funded a maturity in the middle of the quarter with commercial paper. Just kind of curious there if you're just looking to pay it down, or will you look to refinance that or term it out at some point?

Bryan Douglass Spillane: Hey, Stan just had a couple of questions just related to cash flow. One I don't I don't know maybe I missed it but if we have a guy.

Bryan Douglass Spillane: For capital spending for the year and then.

Bryan Douglass Spillane: You've refinanced or you funded a maturity in the middle of the quarter with commercial paper.

Bryan Douglass Spillane: Just kind of curious there will you if you're just looking to pay it down or will you look to refinance that or term it out at some point.

Stanley J. Sutula: And then maybe just more broadly, as we're thinking about cash flow, given where exchange rates have moved, interest rates have moved, any other thoughts on how we should be thinking about free cash flow conversion this year and uses of free cash?

Bryan Douglass Spillane: And then maybe just more broadly as you were thinking about cash flow.

Bryan Douglass Spillane: Given where exchange rates have moved interest rates that move just just any other thoughts on how we should be thinking about like free cash flow conversion. This year and uses of free cash flow.

Stanley J. Sutula: Yep, Bryan, thanks for the question. First, we're pleased with the cash flow performance, a really solid start for the quarter. We're down a little bit year-over-year, but I remind you last year was a terrific cash quarter, and this was really driven by receivables, which were impacted by the timing of Easter. In fact, we've looked at the first couple days of the quarter, and that collection period completely brought DSO back in line, so we're very comfortable with that.

Speaker Change: Yeah, Brian Thanks for the question. So first we're pleased with the cash flow performance, a really solid start for the quarter were down a little bit year over year, but I'll remind you last year was a terrific cash quarter and this was really driven by receivables, which were impacted by the timing of Easter in fact, we've looked at the first couple of days of the quarter end.

Speaker Change: Debt collection period completely broad DSO back in mind, so we're very comfortable with that.

Stanley J. Sutula: So our cash profits really have been helped from the top-line growth and the networking capital execution. I was very pleased with what the team accomplished here in the first quarter, particularly around inventory. So even with the Red Sea challenges and building up a little safety stock in certain areas, great execution on inventory. We saw the inventory days improve, and DSO strictly timing.

Speaker Change: So our cash profits really have been helped from the topline growth and the networking capital execution I was very pleased with what the team accomplished here in first quarter, particularly around inventory, so even with the Red Sea challenges and building up little safety stock in certain areas great execution.

Speaker Change: On inventory, we saw the inventory days improved DSO strictly timing.

Stanley J. Sutula: In regards to your question on CapEx, we had said previously that we expect CapEx as a percent of sales to be lower than last year, and it's really driven by Teganoxy kind of coming online and investment dollars dropping off. You know, if we look at our leverage, the strong cash flow and execution has allowed us to bring our leverage using the S&P methodology down to 1.8 times, so an improvement from year-end. And to your point, we did pay back a bond here in the first quarter of $500 million, and we did that with CP. And there are two reasons.

Speaker Change: In regard to your question on Capex. We had said previously that we expect capex as a percent of sales to be lower than last year, that's really driven by tiger oxi kind of coming online and that investment dollars dropping off.

Speaker Change: If we look at our leverage.

Speaker Change: <unk> cash flow and execution has allowed us to bring our leverage using the S&P methodology down to one eight times. So an improvement from year end and to your point, we did pay back a bond here in first quarter of $500 million and we did that with CP and two reasons. One we had very good strong cash flow and.

Stanley J. Sutula: One, we had a very good, strong cash flow. And two, at some point, we expect interest rates to come down, though that appears to be sliding farther out to the right, and that will help us keep our fixed floating rate back in balance. So again, as we look at cash flow, we see strong performance. And as we think about that, it kind of goes back into capital allocation. And I think you've seen that manifest itself in our strategy.

Speaker Change: Two at some point, we expect interest rates will come down, though that appears to be sliding further out to the right and that will help us keep our fixed floating back in balance. So again as we look at cash flow strong performance and as we think about that kind of goes back into the capital allocation.

Speaker Change: And I think <unk> seen that manifest ourselves in our strategy that cap allocation hasnt changed and best in the business and you're going to see Capex go up and down we're investing in advertising returned to shareholders. We had a dividend increase and you saw our share buyback in the quarter and then M&A, where we look at options to improve our overall portfolio.

Stanley J. Sutula: That capital allocation hasn't changed. Invest in a business, and you're going to see CapEx go up and down. We're investing in advertising. Return to shareholders. We had a dividend increase, and you saw our share buyback in the quarter. And then M&A, where we look at options to improve our overall portfolio. Yeah, Bryan. The only thing I would change is

Speaker Change: <unk>.

Speaker Change: Yes, Brian the only thing I would add is again picking up on the theme of flexibility, it's not only flexibility throughout the P&L, but it's having a really strong balance sheet that gives us the flexibility to deploy capital as we see the best return on that investment and I give stand in the finance organization huge credit and the discipline there.

Noel R. Wallace: Yeah, Bryan, the only thing I would add is, again, picking up on the theme of flexibility. It's not only flexibility throughout the P&L, but it's having a really strong balance sheet that gives us the flexibility to deploy capital as we see the best return on that investment. And I give Stan and the finance organization huge credit for the discipline that they're bringing around the world to ensure that cash generation continues to be robust.

Speaker Change: Bringing around the world to ensure that the cash generation continues to be robust.

Unknown Executive: The next question comes from Mark Astrachan with Steepl. Please go ahead.

Speaker Change: Okay.

Speaker Change: The next question comes from Mark Astrachan with Stifel. Please go ahead.

Mark Stiefel Astrachan: Hey, thanks. Good morning, everybody.

Mark Stiefel Astrachan: Yeah, Hey, thanks, good morning, everybody.

Mark Stiefel Astrachan: I wanted to go back to North America and in the.

Noel R. Wallace: I wanted to go back to North America and the outperformance of these untracked channels. We can now start to see in some of the data the distinction between the new and the legacy channels, and it's pretty stark in your business in particular, Hills specifically, but overall, there's just a lot more growth in those channels. I get that they're smaller, but curious to hear your take on what is driving that exceptional outperformance.

Mark Stiefel Astrachan: The outperformance of these untracked channels, we can now start to see in some of the data the distinction between the new and the legacy channels and it's pretty stark in your business in particular hills, specifically, but overall, there's just a lot more growth in those channels I guess theyre smaller but.

Mark Stiefel Astrachan: Curious your take on what is driving that exceptional outperformance and how sustainable is it in terms of these other places like Costco, Amazon et cetera, that's contributing to that growth overall.

Noel R. Wallace: How sustainable is it in terms of these other places like Costco, Amazon, etc., that's contributing to that growth, you know, overall, and, you know, I'm specifically looking at it in terms of Phil's, which is really doing quite well on those new channels. Thanks. Yeah, thanks.

Mark Stiefel Astrachan: Specifically looking to it which is really.

Mark Stiefel Astrachan: Doing quite well in those new channels.

Noel R. Wallace: Yeah, thanks. So again, you know, we've been talking about that for quite some time. And that has been, I think, a reflection of the strategy that we've talked about for three years, which is core adjacencies and channels and getting back to real focus and understanding the consumer journey across all of the markets in which we compete has been fundamental to making sure that we have strategies to capture and deploy our investments in areas where we think we're going to get the best return for that.

Speaker Change: Yes. Thanks.

Speaker Change: So again, we've been talking about that for quite some time and that has been.

Speaker Change: A reflection of the strategy that we've talked about for three years, which is core adjacencies and channels.

Speaker Change: Getting back to real focus and understanding the consumer journey across all of the markets in which we compete has been fundamental to making sure that we have strategies to capture and deploy our investments in areas, where we think we're going to get the best return for that and some of these emerging channels that are not captured by Nielsen or very very.

Noel R. Wallace: And some of these emerging channels that are not captured by Nielsen are very, very important, whether that's hard discount stores in parts of the world, whether that's the club store environment, where the value pack and large sizes continue to be a big growth driver, whether that's the ease and convenience of shopping online, and some of the digital execution and understanding the digital shelf and the discipline that we brought to that, that ultimately is being seen through the success that we're We don't anticipate that that will change, I think, as some of the classical brick and mortar retailers really up their game, and we're certainly seeing that across the U.S. markets, where the big players are certainly becoming far more sophisticated and progressive with their offerings and their shopper experience.

Speaker Change: Important whether thats hard discount stores in parts of the world, whether that's the club store environment, where the value pack in large sizes continue to be a big growth driver, whether thats, the ease and convenience of shopping online and some of the digital execution and understanding the digital shelf and the discipline that we brought to that that ultra.

Speaker Change: He is being seen through the success that were having in those alternative channels. We don't anticipate that that will change I think is some of the classical brick and mortar retailers really up their game and we're certainly seeing that across the U S markets, where the big players are certainly becoming far more sophisticated and progressive with their offerings and their shop.

Speaker Change: Her experience, we're partnering with them to ensure that our brands are involved in that journey that they're on and making sure that we're bringing our digital capabilities to the entire omnichannel environment, and making sure that Colgate and the brands that we offer at the forefront of that so it's again shopper journey the experience at the shoppers are getting.

Noel R. Wallace: We're partnering with them to ensure that our brands are involved in that journey that they're on and making sure that we're bringing our digital capabilities to the entire omni-channel environment and making sure that Colgate and the brands that we offer are at the forefront of that. So it's, again, the shopper journey, the experience that shoppers are getting, the value orientation on some of those channels, and our ability to be much more targeted with some of our spend, and that's particularly related to online retailers.

Speaker Change: The value orientation on some of those channels and our ability to be much more targeted with some of our spend and thats, particularly related to the online retailers.

Unknown Executive: The next question comes from Brett Cooper with Consumer Edge Research. Please go ahead.

Speaker Change: Okay.

Speaker Change: The next question comes from Brett Cooper with consumer Edge Research. Please go ahead.

Brett Cooper: Thank you. Good morning.

Noel R. Wallace: Question for you on the competitive environment and outlook. It would appear to date that promotional activity and competition haven't ramped up to the extent that some have feared. And some of your large peers are looking to accelerate growth via reinvestment. So we'd love to hear first whether that assessment of the environment is accurate, generally, and then your perspective on whether there's enough opportunity to elevate category growth via things like household penetration growth, premiumization, and share gain to net higher levels of growth, or is all of this reinvestment just the new cost of doing business? Thanks. Yeah, thanks, Brad.

Brett Cooper: Thank you good morning, a question for you on the competitive environment and outlook. It would appear to date that the promotional activity and competition hasnt ramped to the extent that some of your.

Brett Cooper: And some of your large peers are looking to accelerate growth via the Reinvestments. So would love to hear first whether that assessment on the environment as accurate generally and then your perspective on whether there is enough opportunity to elevate category growth.

Brett Cooper: Things like household penetration growth for immunization and share gain to net higher levels of growth or is all of this reinvestment just new cost of doing business.

Noel R. Wallace: Yeah, thanks, Brad. What's interesting is you're seeing, I think you're hearing, that a lot of the competitive set has focused on building healthy category growth in two ways: one with increased media investment, and the second is with increased innovation. We have not seen a fundamental shift around the world to more volume sold on promotion. It's still below where we were pre-COVID.

Speaker Change: Yes. Thanks, Brad What's interesting is you are seeing I think youre hearing that a lot of the competitive set has has focused on building healthy category growth in that two ways, one with increased media investment.

Speaker Change: And the second issue with increased innovation, we have not seen a fundamental shift around the world to more volume sold on promotion. It is still below where we were pre COVID-19 now as volume becomes.

Noel R. Wallace: Now, as volume becomes the important aspect here, you may see some players move to that strategy of doing more promotions. But overall, the category has been very constructive in terms of big players spending money on media, driving value to categories through innovation and offerings that are differentiated in the marketplace. And so it's incumbent upon us to ensure that our innovations continue to drive real value to the category and differentiation in a very competitive market, and to make sure that we're using the analytics and the data that we have to drive balanced promotional strategies in the categories.

Speaker Change: The important aspect here you may see some players move to that our strategy of doing more promotions, but overall the category has been very constructive in terms of big players spending money on media driving value to the categories through innovation and offerings that are differentiated in the marketplace and so it's incumbent upon us.

Speaker Change: To ensure that our innovations continue to drive real value to the category and a differentiation in a very competitive market and making sure that we're using the analytics and the data that we have to drive balanced promotional strategies in the categories will be competitive where we need to be I mentioned, we've made some difficult decisions in the U S business to <unk>.

Noel R. Wallace: We'll be competitive where we need to be. I mentioned we've made some difficult decisions in the U.S. in business to not chase a lot of deep down promotions, particularly in certain retail environments that will have a short-term impact on Nielsen shares. But long term, we feel we're going to deploy that money in an effective way. And again, it's making sure that we continue to drive the saliency of our brands and the health of our brands long term. And we do that through media and innovation, not necessarily through promotion. The next question comes from Alejandro Zamacona of HSBC. Please go ahead.

Speaker Change: Chase a lot of deep down in promotions, particularly in certain retail environments that will have a short term impact on the Nielsen shares, but long term, we feel we're going to deploy that money in an effective way and again, it's making sure that we continue to drive saliency of our brands and the health of our brands long term and we do that through media and innovation.

Speaker Change: Necessarily through promotions.

Speaker Change: The next question comes from Alejandro Zama Kona with HSBC. Please go ahead.

Unknown Executive: The next question comes from Alejandro Zamacona with HSBC. Please go ahead.

Speaker Change: Okay.

Speaker Change: Thank you good morning.

Speaker Change: I know Paul.

Speaker Change: I'm very careful.

Speaker Change: Given the strong organic Seo tool.

Alejandro Zamacona: Yeah, good morning, Alejandro. Again, let me contextualize Latin America, obviously a really strong organic sales growth quarter. With and without Argentina, there was good volume growth across every single hub, led by Brazil, which was up double digits. If I take the last four quarters of Latin America, in terms of volume, 0.5, 5.4, 8, and 6.2.

Speaker Change: Last few quarters.

Speaker Change: What should we expect going forward I mean, what's interesting the consumers.

Speaker Change: We will accept meaningful price increases.

Speaker Change: Giving up volumes.

Speaker Change: Yes, good morning, Alejandro again, let me Contextualize Latin America, obviously, a really strong organic sales growth quarter with and without Argentina. There was good volume growth across every single hub are led by Brazil, which was up double digits. If I take the last four quarters of Latin America.

Speaker Change: In terms of volume <unk> 5548, and six two so again very consistent with what we talked about our ability to get pricing early in the market has allowed us now to see the volume returned to the categories and ultimately into our business. Our marketing is really strong and innovation is very strong on the <unk>.

Noel R. Wallace: So again, very consistent with what we talked about. Our ability to get pricing early in the market has allowed us now to see volume return to the categories and, ultimately, into our business. Our marketing is really strong, and innovation is very strong on the ground. And so we feel very good about where we're going. And that's been translated into really positive share growth for the business. So ex-Argentina, very good organic growth, you know, organic growth is up significantly in the region, I think, and you saw double-digit growth in Brazil, which has been terrific. Oral care, particularly, has been really strong in the quarter. That was up double digits, excluding Argentina.

Speaker Change: Round and so we feel very good about where were seeing and thats been translated into really positive share growth for the business. So ex Argentina very good organic growth organic up.

Speaker Change: Significantly in the region I think you saw a double digit growth in Brazil, which has been terrific oral care, particularly has been really strong in the quarter that was up double digits, excluding Argentina shares in value and volume up it's been quite some time since we saw both of those move in the right direction and again, a reflection I believe of the strategy.

Noel R. Wallace: Shares in value and volume up, it's been quite some time since we saw both of those move in the right direction. And again, a reflection, I believe, of the strategy of increased investment and making sure that we have a breadth of offerings in that market. That is a market that is accustomed to inflationary pricing across many of the markets in which we compete. The key for us is making sure that we continue to advertise strongly in those markets, and we bring real innovation across the entire portfolio.

Speaker Change: Increased investment and making sure that we have a breadth of offerings in that market that is a market that is accustomed to inflationary pricing across many of the markets in which we compete being key for US is making sure that we continue to advertise strongly in the markets and we bring real innovation across the entire portfolio.

Noel R. Wallace: That keeps the categories vibrant, and allows us to work with our retailers to drive category growth and, hopefully, capture share at the same time. So overall, we think Latin America is well-positioned for continued growth, and we like what we're seeing there.

Speaker Change: That keeps the category is vibrant allows us to work with our retailers to drive category growth and ultimately capture share at the same time. So overall, we think.

Speaker Change: Latin America is well positioned for continued growth and we like what we're seeing there.

Unknown Executive: This concludes our question-and-answer session. I would like to turn the conference back over to Noel Wallace, Colgate's chairman, president, and CEO, for closing remarks.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Noel Wallace Colgate's, Chairman, President and CEO for closing remarks.

Noel R. Wallace: Great. Well, thanks everyone for joining the call today. Obviously, we're really pleased with the quarter and how we've gotten off to a strong start that we believe sets us up for continued sustainable growth moving forward and generates that long-term growth algorithm that we've been talking about for quite some time for our shareholders. Let me particularly reach out to all the Colgate employees around the world for their incredible dedication and resilience and their hard work in really executing a strategy around the world and for getting us off to So, thanks everyone. We'll see you and talk to you soon.

Noel R. Wallace: Great well, thanks, everyone for joining the call today, obviously, we're really pleased with the quarter and how we've gotten off to a strong start that we believe sets us up for continued sustainable growth moving forward and generating that long term algorithm that we've been talking about for quite some time for our shareholders. Let me, particularly reach out to all of the Colgate employees around the <unk>.

Noel R. Wallace: World for their incredible dedication and resilience and their hard work and really executing a strategy around the world and for getting us off to a great start. So thanks, everyone. We'll see you and talk to you soon.

Unknown Executive: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: Yes.

Speaker Change: Yes.