Q3 2024 AptarGroup Inc Earnings Call
Thank you Raphael patients today's corporate school with Okta will be starting shortly.
[music].
Speaker Change: Ladies and gentlemen, thank you for standing by.
Speaker Change: Welcome to outcast 'twenty 'twenty four third quarter conference call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: Later, we will conduct a question and answer session.
Speaker Change: Introducing today's conference call is Mrs. Mary Scafidi Senior Vice President Investor Relations and Communications. Please go ahead.
Speaker Change: Good morning, Hello, everyone and thanks for being with us today.
Mary Scafidi: Our speakers on the call today are Stefan tandem President and CEO and Bob Kuhn Executive Vice President and CFO also joining us on the call today is Vanessa kind of our CFO designate our press release and accompanying slide deck has been posted on our website under the Investor Relations page.
Mary Scafidi: During this call we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measure and the reconciliations are set forth in the press release. Please refer to the press release disseminated yesterday for a reconciliation of non-GAAP measures to the most comparable GAAP measures discussed during the earnings call.
Mary Scafidi: Paul.
Paul: As always we will post a replay of this call on our website I would now like to turn the conference call over to Stephane.
Stephane: Thank you Mary and good morning, everyone. We appreciate you joining us on the call today.
Stephane: I'll begin my remarks by highlighting our third quarter results later in the call Bob <unk>, our CFO will provide additional details on key drivers for the quarter.
Stephane: Starting on slide three for the third quarter.
I'm pleased to report that after achieved core sales growth of 2%.
We delivered adjusted EPS of $1 49 per share a 6% increase over the prior year's quarter.
Stephane: Grew adjusted EPS by 15% for the first nine months of the year and are well positioned to grow adjusted EPS double digits for the full year. The positive results in the quarter was driven by strong operational improvements ongoing demand for our pharma proprietary drug delivery systems.
Growing pharma royalty revenues and increased demand for our food closures technologies.
This quarter after its adjusted EBITDA margin was at the top end of our long term range of 23%.
Stephane: While our pharma segment has consistently performed within its long term target range for both core sales and adjusted EBITDAR margin.
Closures joins farmer this quarter with core sales up 4%.
Stephane: Just the EBITDA margins of 17%.
Stephane: We closed the segment returned to its core sales long term target range was driven by increased demand around the world are focused on converting end market to higher value dispensing closures and the reinvigoration of innovation globally altogether delivering improved top line sales.
Stephane: The segment's increased margins were also driven by consistent focus on reducing costs, including the recent plant closing in France, the steady improvement in plant utilization up about 10% over the past 18 months and an ongoing focus on efficiency.
Stephane: Now turning back to our pharma segment, we continued to see good demand for our proprietary drug delivery system, especially for LNG sprays central nervous system and emergency medicine with 12% core sales growth in the quarter. Following the 15% of course, you have the growth in the third quarter of 2023 pharma.
Stephane: Pharma delivered adjusted EBITDA margins at the high end of the long term target range due to sales of higher value products and increasing royalty revenues royalties are in newer steadily growing revenue stream that would be perhaps caused some lumpiness down the road we.
We believe the growing revenue stream from royalties is a testament to the value of the regulatory expertise and services that we offer to our customers, especially in the early stages of the drug development process.
Stephane: Smaller clients often startup ventures choose to award after royalties on final product sale in lieu of service fees.
Stephane: In the quarter. We also had a number of exciting developments for our pharma business. As a reminder, one of the first nasally deliberate emergency medicine approved by the F. D was narcan naloxone using after as unit dose device, but a year ago. This medicine was approved by the FDA for over the counter distribution.
Stephane: Hi to stem the tide of opioid deaths in the U S and recently the centers for disease control and prevention released preliminary data showing the drug overdose deaths fell by almost 13% in the last 12 months. We are extremely encouraged by the significant drop in drug overdose deaths.
Stephane: Additionally in August the FDA and European Commission approved another important nasally delivered emergency medicine Murphy and your nephew.
Stephane: Italy deliberate epinephrine is now available on the market we have been working on this project for about six years and it capitalizes on our delivery system prudent FDA required reliability of 99.9, 99% for emergency medications.
Stephane: Reliability is backed by some 30 years of field data, which is essential when youre dealing with the dosing and dispensing of lifesaving medications.
As we have said when a new medication is launched it generally takes a few years to hit this Debbie feels trajectory over time, we believe we will see nasally delivered epinephrine become an exciting new application.
Stephane: Over the last few years, we have focused our capital allocation toward organic growth for our pharma business.
Stephane: But we are always exploring potential acquisitions that can strengthen our market position and deepen our moat.
Stephane: So recently, we acquired all technology assets from the proprietary portfolio of Sip knows the company focused on intranasal delivery platforms for local systemic and central nervous system indications all growth areas for up to a farmer.
Stephane: This transaction offers additional intellectual property to fit a wide range of therapies and offers the opportunity to precisely target areas of the nasal cavity to enable enhanced systemic local or even direct most of brain delivery.
Wiring Vips's dipnote expands our patent product portfolio and support new product development to further supplement intranasal delivery applications and R&D innovation platforms.
Stephane: Two weeks ago, our board of directors visited our new state of the art injectable facility.
Stephane: And normally in France, just as some of our newly installed highly automated manufacturing lines are being tested.
Stephane: We are bullish about the future of our Injectables business. The majority of new drugs that come on the market or an injectable format and 50% of those are biologics.
Stephane: To meet this growing market need on Normandy, France, and Congress in New York facility will be focused on higher value components and services, including premium Phil and premium coat.
Stephane: Which are designed to optimize drug integrity and patient safety.
Stephane: Requirements for our ready to use components with just airlines only increasing with the launch of M X. One in Europe. In 2023 looking ahead, we see a number of biologic projects filling our pipeline, including G. O P. One blood factor drugs developed from blood derivatives.
Stephane: As an aside we recently celebrated a capacity expansion at our Congress, New York facility, a key step in our global expansion program, which supports growing proprietary drug delivery system and our injectable business in North America.
Stephane: The building expansion enhancements warehousing clean room, and manufacturing capabilities and add some additional nearly 30000 square feet of manufacturing footprint.
Stephane: I also want to touch on two exciting announcements from our active materials Science Division.
Stephane: Earlier this week, we announced that we were awarded a contract from the U S. Federal government to advance development of our active shield sterilization technology. This innovative solution sterilizing medical devices without the need for a power source.
Stephane: Ideal for remote environments military settings, and health care facilities with limited or no current sterilization capabilities.
Stephane: In September we also announced that <unk>, a technology that mitigate nitrosomine impurities has been accepted into the Fda's emerging technology program, which helps promote the adoption of innovative approaches to pharmaceutical product design and manufacturing.
Stephane: Our ability to mitigate and chosen information with active material science introduces a critical quality control element designed to ensure patient safety. We are eager to collaborate with the F. D. A to empower pharma brands with its innovative offering.
Stephane: Before I touch on recognition and new innovations for quarter three I want to provide an update as we recently closed on the previously announced JV with a pump manufacturing China acquire.
Stephane: Acquiring a 40% stake.
As a reminder, through this partnership after we will have access to cost effective manufacturing fast that go to market agility and then more complete end to end local supply chain all of which will further strengthen our competitiveness in the region and beyond.
Additionally, we will have access to competitive moat in machine building capabilities that can be used globally.
Stephane: Will provide us with high quality and lower cost capital investment alternatives and finally, the partnership will also give us access to much needed an organization capabilities used across pharma and beauty segments now turning to the recent recognitions we received in the quarter.
Stephane: <unk> named after among the worlds best companies of 2020 for this great recognition.
Stephane: Ignition reflect our steadfast commitment to employee satisfaction and transparency in environment, social and governance data reporting.
Stephane: We were also recently named to <unk> ranking of the 100 best corporate citizen.
Stephane: This ranking evaluate Russell 1000 companies based on 223 ESG factors across seven pillars.
Stephane: Now switching to new launches and innovation that is shown on slide four for our pharma segment, a nasal spray in bag on valve technology was featured on new nasal saline launches in the U S, including one for the brand suite of it.
Stephane: We have also entered into an exclusive collaboration agreement with <unk> to lead the development and promotion of the coli breed non propellant liquid inhaler platform.
Stephane: Providing a robust support services and will be the main point of contact for customers.
Now turning to our beauty business.
Stephane: Huge is featuring our prestige fragrance pump on its petco rebound leading million fragrance in Europe.
Stephane: Dispensing pumps are featured on pressing me hair care products by Unilever in Latin America, and the bias of Eucerin brand cleansing gel in Europe finally, our neo droplet technology for the control application of theorems and featured with the freed up brand hair care product in Asia.
Stephane: Enclosures, we continue to bring innovation to store hours without solutions.
Stephane: Campbell launched its pace Taco sauces, and an easy squeeze inverted bottle using a closure was simply squeeze valve.
Stephane: <unk> and I hope teamed up to launch its Europe without pour spout closure in personal care, our new lightweight desktop is the dispensing solution for Paul Mitchell clean beauty shampoo and conditioner now I would like to turn the call over to Bob.
Bob Kuhn: Thank you Stefan and good morning, everyone.
Bob Kuhn: Starting on slide five I would like to summarize the quarter.
Bob Kuhn: Our reported and core sales increased 2% as currency and acquisition effects did not impact our quarter results for Q3 was driven by strong growth in farmers proprietary drug delivery systems as well as strong closure sales worldwide.
Bob Kuhn: As shown on slide six we reported third quarter adjusted earnings per share of $1 49.
Bob Kuhn: Which is a 6% increase over the prior year's adjusted EPS.
Bob Kuhn: During the quarter, we achieved adjusted EBITDA of $208 million, which increased from the prior years third quarter by 8% driven by expanding margins free cash flow more than doubled to $255 million for the nine months ended September 30th compared to $124 million in the prior year due to improved profitability.
Bob Kuhn: <unk> and strides we've made in better managing our working capital turning to the details by segment for the quarter, our pharma segments core sales increased 7% due to volume growth, especially in our proprietary drug delivery systems and active materials science solutions looking at sales in the pharma segment by end market I will start by breaking out.
Bob Kuhn: Our proprietary drug delivery systems, which performed well in the quarter.
Bob Kuhn: Ascription core sales increased 20% driven by strong sales of emergency medicine, and central nervous system therapeutics as well as allergy medications.
Bob Kuhn: Core sales for consumer health care decreased 6% due to non product revenue in the prior year that did not repeat in 2024.
Bob Kuhn: Injectables core sales decreased 12% over the prior year period, while revenue from elastomer components was down slightly the division faced a difficult comparison due to substantial service revenue from our customer's product launch in the prior year quarter that did not repeat however, we continue to see demand for our higher value elastomer.
Bob Kuhn: <unk>, including those used for DLP one applications.
Bob Kuhn: For the first nine months of the year sales of injectable components grew 13%.
Bob Kuhn: Core sales for active materials science solutions improved in the quarter growing 10% with increased demand across a number of end markets, particularly probiotics.
Bob Kuhn: Pharma is adjusted EBITDA margin was 36% a one point improvement from the prior year quarter due to increased sales of higher value products increased royalties on customer sales and ongoing efforts around operational improvements.
Moving to beauty. This segment's core sales decreased 6% in the quarter with approximately 4% of the decline attributed to lower tooling sales and 2% due to less favorable product mix prestige fragrance faced a difficult comparison this quarter up against double digit growth in the prior year period.
Bob Kuhn: Personal care and home care markets grew globally in the quarter with North America, showing modest volume growth across all beauty and markets.
Bob Kuhn: As we look closer at the beauty end market, which includes fragrance facial skincare and color cosmetics.
Core sales decreased by 14% in the quarter.
Bob Kuhn: Overall softer demand for prestige fragrance dispensing solutions after a period of substantial growth and lower tooling sales drove the decline.
Bob Kuhn: Core sales for the personal care market increased 5% due to demand for body lotions and hair care products, mainly in Europe and North America.
Bob Kuhn: Homecare core sales increased 18% driven by rebounding sales in North America, primarily for our products used on air care applications.
Bob Kuhn: <unk> adjusted EBITDA margin for the quarter was approximately 13% more than a half point improvement over the prior year period, even with lower core sales.
Bob Kuhn: Turning to the closure segment core sales increased 4%, which is within our long term target range due to increased demand across each region. When looking at sales by end market for closures core sales to the food market increased 10% driven by strong sales growth in Europe, North America, and Latin America for our products used on sauces and condiments.
Bob Kuhn: Average core sales increased 1% with sales of our products used on functional sports drinks contributing positively to the results.
Speaker Change: Sales grew across all regions with the exception of North America, which saw lower demand.
Core sales for personal care closures decreased 3%.
Speaker Change: Growth in Latin America, and Asia could not offset the decline in Europe for the quarter.
Speaker Change: And our fourth category, which includes beauty home care and health care core sales decreased 3% due to large tooling sales in the prior year quarter.
Speaker Change: Product sales were up 10% driven by growth in home care.
Speaker Change: The segment's adjusted EBITDA margin was 17% for the quarter, a nearly two point improvement compared to the prior year quarter.
Speaker Change: In the third quarter of 2024, we had capital expenditures of approximately $66 million the majority being allocated to our pharma segment.
Reported depreciation and amortization expense increased by almost $4 million over the prior year quarter to approximately $67 million or 7% of sales.
Speaker Change: Slide seven and eight cover our year to date performance and show a core sales increase of 3% and our adjusted earnings per share which were $4 12.
Speaker Change: Up 15% compared to $3.58, a year ago, including comparable exchange rates.
Speaker Change: Moving to slide nine, which summarizes our outlook for the fourth quarter.
Speaker Change: We anticipate our growth to continue and expect fourth quarter adjusted earnings per share, excluding any restructuring expenses acquisition costs and changes in the unrealized fair value of equity investments to be in the range of $1 22 to $1 30 per share.
Speaker Change: The estimated tax rate range for the fourth quarter of 'twenty to 'twenty, 2% includes a potential tax benefit as part of our ongoing tax planning, which more than offset anticipated retroactive tax rate increases in France with the comparable adjusted prior year effective tax rate of 24%.
Speaker Change: Based on our fourth quarter guidance full year, adjusted EPS would be in the range of $5 34.
Speaker Change: To $5 42.
Speaker Change: A double digit increase over full year 2023.
Speaker Change: We currently estimate depreciation and amortization for 2020 for it to be between $260 million to $270 million.
Speaker Change: We expect our capital expenditures in 2024 to be between 280 and $300 million with the majority.
Speaker Change: You already have capital allocated toward our pharma segment.
Speaker Change: In closing we continue to have a strong balance sheet with a leverage ratio of approximately $1 one.
Speaker Change: Which allows us to continue to invest in our business pursue strategic opportunities and continue to return value to shareholders in the form of dividends and repurchases.
Speaker Change: In addition to a cash dividend payments to shareholders, which totaled approximately $30 million in the quarter, we repurchased about 95000 shares for approximately $14 million.
Speaker Change: Over the last five years, we've returned more than $780 million to shareholders through dividends and share repurchases.
Speaker Change: At this time Stefan will provide a few closing comments before we move to Q&A.
Stefan Tandem: Thanks, Bob looking to the fourth quarter, we anticipate a solid finish to a strong year. The topline is expected to grow in the fourth quarter, even with some customers having indicated seasonal inventory right sizing in the beauty and cough and cold and markets.
Stefan Tandem: Farm out we expect continued growth across a number of end markets, especially for proprietary drug delivery systems for allergy emergency medicine, and central nervous systems therapies.
Stefan Tandem: At the same time, we do see demand for cup and cold OTC remedies softening.
Stefan Tandem: After a week 'twenty three 'twenty, four cold and flu season.
Stefan Tandem: On the other hand initial indications from the southern hemisphere, owing to strong or 'twenty, four 'twenty five cold and flu season.
Stefan Tandem: Pharma segment will deliberate solid double digit adjusted EBITDA growth in 2024, due in part to sales of higher value products and royalties we.
Stefan Tandem: We anticipate 2025 to be another solid year for our pharma business.
I'll close the segment has returned to growth and we expect it to finish the year strong with healthy adjusted EBITDA margin improvements over the prior year.
Stefan Tandem: Beauty is battling a tough microenvironment with progressive market recovery in North America.
Continued weakness in China, and facing very challenging comparisons after substantial growth of fragrance dispensing solutions in 2023 innovation cost mitigation improved operational leverage and accelerating efficiencies remain key priorities for our teams.
Stefan Tandem: Before we open the call for questions I want to recognize that this will be bumped last earnings call with after our CFO search.
Stefan Tandem: Not as a shareholder.
Stefan Tandem: <unk> has decided to retire after 37 years with apt on 16 of those years as CFO.
<unk> has become a trusted friend and colleague and has been a strategic partner in driving the overall growth of the company over the years.
Stefan Tandem: I would also like to officially welcome Vanessa <unk>, who has joined as CFO designate and will take on the role of CFO on January one.
I'm really pleased to welcome Vanessa to the after team she brings with her tremendous experience as a CFO and financial reporting global operations and cost management that afternoon, and all shareholders will benefit from greatly.
Stefan Tandem: You'll see in the CFO role through the end of the year and then will be available as an adviser through 2025 to ensure a smooth transition Bob has always put what is best for after above all else.
Stefan Tandem: While he will be greatly missed we are happy he will have a bit more time for himself and his family in this next phase of life.
Congratulations Bob and welcome to the team Vanessa.
Stefan Tandem: I'm glad that some of our shareholders and sell side analysts.
Stefan Tandem: Opportunity already meet Vanessa while touring fringe beauty and pharma plans a few weeks ago.
Stefan Tandem: Look forward to introducing many more of you to here over the coming quarters with that I would like to open up the call for questions.
Speaker Change: Thank you Stephane you will now begin the question and answer session.
Speaker Change: If you would like to ask a question. Please press star Philip I went on you kind of think keypads.
Speaker Change: I'm pleased nights in the interest of time and fairness to all participants please limit yourself to three questions and then come back in the queue. If you have more questions as time allows.
Speaker Change: And as a reminder that style Philip I wanted to ask any questions today.
Speaker Change: Coppola briefly last question.
Speaker Change: We have the first question on the phone lines from.
Speaker Change: George Staphos with Bank of America, you May proceed.
George Staphos: Hi, Thanks, everyone. Good morning, I guess.
I'll start.
And I'm sure I'm going to say this.
George Staphos: The bottom of our Hearts.
George Staphos: Thank you for everything you've done to support our researchers trying to industry over the years.
George Staphos: We really really appreciate it and we will Miss you and we welcome Vanessa.
Speaker Change: Thanks, Bob.
Speaker Change: I guess my first.
Speaker Change: Yes.
Bob Kuhn: All of our baseball debates notwithstanding.
Speaker Change: The first question I had for you.
Speaker Change: The team.
Speaker Change: Do you have given the macro holding everything else constant recognizing comparisons are tough in China is weak.
Speaker Change: Do you have the elements in place so that beauty, which is making progress can.
Speaker Change: It can be at 15% margin in 2025, what do you need to do what needs to go right can you get there.
Related question, how far off right now is China, Inc.
Speaker Change: Beauty from normal if there's a way to dimensionalize that and then a follow on.
Speaker Change: Yeah, Thanks, George and thanks for your nice words too Bob.
Speaker Change: Look.
Speaker Change: As he said beauty is progressing and we had very strong fragrance launches and.
Speaker Change: And as we can do for them.
Speaker Change: As the dust settled from that pipeline.
Speaker Change: Pipeline field, probably was more than two X what the sell through was so the comparisons in the fragrance Oh, he's holding beauty back at the same time.
Speaker Change: North America is coming back after a long period of.
Speaker Change:
<unk> sales growth so.
Speaker Change: Better.
Speaker Change: Sure.
Speaker Change: Many years seem to paint myself in a corner, but if all regions.
Speaker Change: Fear then.
Speaker Change: Quite confident that beauty will do well.
Speaker Change: On China. It does so much a matter of <expletive>.
Speaker Change: A decline, it's a matter of not growing not rebounding with vigor from Covid.
Speaker Change: The whole industry had expected.
Speaker Change: So and that depresses not only our Asia sales.
Speaker Change: But also our sales in Europe.
Speaker Change: You know because there are a lot of our beauty clients feel there and sell their products to China. So its the lack of growth, especially for western clients, we actually see decent progress from our Chinese clients.
The toll.
Speaker Change: Notion that you've got to have a western brand.
Speaker Change: Gradually.
Speaker Change: <unk> from the Chinese consumer.
Speaker Change: The Chinese consumer is still seeing much more on the sidelines that he would like.
I think there is some caution about the stimulus package.
And as we all know comprehensive loss temporary needs to be rebuilt overtime.
Speaker Change: So it's not a decline, but it's the lack of a bounce back from.
Speaker Change: From Covid.
Speaker Change: And that's really what needs to happen with China.
Speaker Change: Yeah.
Speaker Change: And I recognize that maybe kind of a point of clarification on that question and then my follow on.
Recognizing China beauty touches more than just China itself, obviously, it affects your production around the world and particularly in Europe.
Speaker Change: Is there a way to say, okay. Your level of activity as much as you can.
Speaker Change: Analyzed is that X right now related to China beauty demand and it would be at X time, some number or indexed in a normal environment and then my follow on is there a way to dimensionalize some of the inventory issues that you mentioned.
Speaker Change: In the fourth quarter for cough and cold.
Speaker Change: And I think you're all set for beauty. Thank you.
Speaker Change: Yeah on the first question.
Speaker Change: I'm sure we can run some analysis and the folks do but nothing that.
Speaker Change: I would like to share here.
Speaker Change: Again.
Speaker Change: Solid top line and in the regions with continued productivity work is what.
Speaker Change: The attractive beauty zhan.
Speaker Change: A lot of good productivity work that has been done and we will continue to drop to the bottom line next year and we have additional ideas.
Speaker Change: On your second question.
Speaker Change: A little broader.
Speaker Change: Look if I start with consumer healthcare a lot of these consumer health care companies that spun out of big pharma start to behave more like packaged food companies.
Speaker Change: Much more of a sharpened their working capital management and department of.
Speaker Change: Pharma companies that used to be part of.
I think that's played them an element.
Speaker Change: I think as people get ready for to 'twenty four 'twenty five.
Speaker Change: Okay.
Speaker Change: We're anticipating that this is more of a.
Speaker Change: Seasonal more stringent working capital management approach.
Speaker Change: Certainly nothing like what we had back in 'twenty, one or 'twenty two.
Speaker Change: And.
Speaker Change: I think with respect to beauty the fragrance hangover.
Speaker Change: Not having to sell through as much as we had in with that.
Speaker Change: The launches.
Speaker Change: Okay. Thank you I'll turn it over.
Speaker Change: Thank you George we now have Ghansham Punjabi with bad you May proceed.
Ghansham Punjabi: Thank you operator, good morning, everybody and yeah, Bob I, just want to Echo George's comments as well I congratulate you and your family.
Ghansham Punjabi: You say very successful career, you'll definitely be missed by all of US and also best wishes to Vanessa in her new role as well.
Ghansham Punjabi:
Ghansham Punjabi: I guess first off on the pharmaceutical side and the new products that you highlighted is that a higher new product cadence than is typical or is it just part of what underpins the aggregate growth of 7% to 11% for that segment and I guess I'm thinking more specifically about the outlook for 2025.
Speaker Change: It didn't quite dramatically here, what you said, but.
Speaker Change: I mean, the headline is we are quite confident in the continued growth of the pharma segment within its target range, even though we kind of expected growth for a couple of years and some of the segments, but when we.
Speaker Change: I can pull up the natural next year, there's no reason that we see.
Speaker Change: We should be outside that range.
Speaker Change: I would just maybe okay and then.
Yep.
Speaker Change: Sorry, I was just going to I was just going to say that as we continue to come out with our.
Speaker Change: Our devices on new products those continued to grow in the categories that were already in.
Speaker Change: Also continue to grow so you get that kind of increase of the new therapies that we're on as well as the continued growth in some of our core.
Speaker Change: And at some of our core areas.
Speaker Change: Yes, so I guess, that's the point, so would that point towards a higher portion of that 7% to 11% range.
Speaker Change: I don't think we're going to have to be very specific about that at this point we're still.
Speaker Change: Those are Alaska.
Speaker Change: Carl you know.
Speaker Change: Hi.
Speaker Change: Alright, I will let that go for now.
And then also in terms of prestige fragrances and the volumes you know I understand the comps are difficult and so on and so forth.
Speaker Change: Having covered the ingredients pretty producers as well they make the molecules, where the fragrances I mean, theyre still seeing decent growth there.
Speaker Change: Some of the major customers that are also seeing moderation, but decent growth as well. So I'm wondering what specifically are you seeing as it relates to weaknesses that seems to be a little bit more disproportionate to you.
Sure I'll try to take that one ghansham.
Speaker Change: You're correct I mean, the retail consumer sell through it's still positive right. It was it was strong single digits last year.
Speaker Change: But remember we were selling double digit growth of our products right now we have no visibility into what the inventory channel it looked like at that time.
Speaker Change: It continues to grow in 2024, but were down right. So what that's telling us is that the consumer hasn't walked away from the prestige fragrance side. It's just a it's a it's a normal channel I would say destocking and as we as you know as we head into the holiday season, and then quickly.
The Valentine's day and mother's day.
Speaker Change: Then we'll be able to know better.
Speaker Change: Where where the rebound is going to come but we're still optimistic that it's going to bounce back that this is a this is a short term issue. So it's not that consumers are walking away from fragrance products that continues to sell through I would say we are encouraged by our win rates. So there is certainly nothing there that concerns us with respect to share.
Speaker Change: Maybe the opposite.
Doesn't mean that.
Speaker Change: The other way.
Speaker Change: Okay, and then in terms of the half a billion.
Speaker Change: Share repurchase authorization, which is a pretty substantial number.
Speaker Change: Is this sort of a new pivot towards you know maybe returning capital to shareholders more directly through share buybacks or is it just.
Speaker Change: The extension.
Speaker Change: As it relates to Optionality for yourselves.
Speaker Change: Sure. So you know the last authorization really dates back to pre Covid. It was April of 2019, and you're right at that time, it was $350 million, but we were a much smaller company at a much lower share price right. So I wouldn't say that the outside 500 million is unusual or signals any change.
Speaker Change: And in philosophy, I think it's just more in line with where the current share prices.
Speaker Change: Ideally.
Speaker Change: We want to use that as our discretionary lever with.
Speaker Change: With the low leverage that we have today at $1 one.
And we'll use that to make sure that we don't go much lower than that but at the same time, if theres actionable items that we can invest and we can always pull back as well. So I wouldn't I wouldn't think from from your perspective, it signals anything different philosophically on what we're gonna do.
Speaker Change: Okay very helpful. Congrats again Bob.
Bob Kuhn: Thank you concept I appreciate it very much.
Speaker Change: Thank you. Your next question comes from Daniel Rizzo with Jefferies.
Bob Kuhn: Hum.
Daniel Rizzo: Hi, everyone and thanks for taking my call. My question excuse me you mentioned in the I think in the prepared remarks or in the released it.
Daniel Rizzo: It takes a couple of years I think for new products to kind of ramp I was wondering if OTC narcan is like that too where we still haven't hit.
Daniel Rizzo: It kind of a run rate yet or is it kind of a different product because of its unique use where it's already kind of ramped up.
Daniel Rizzo: No.
Speaker Change: It is almost impossible to answer because every product is different that we know for sure but just to give a few data points. So takes probot, though.
Speaker Change: Spread out, though we thought it would be.
Speaker Change: Going to be a huge blockbuster right out of the gate.
Speaker Change: I mean.
Speaker Change: Saving lives and.
Speaker Change: Launches before Covid and it was a dead for a while but.
Speaker Change: You may have seen the Wall Street Journal article earlier this week I mean, it's taking off like a rocket ship now five years later.
Speaker Change: As the doctors have gotten.
Speaker Change: Comfortable with it.
Speaker Change: Narcan I don't think we're done at all.
I'm really encouraged with the CDC data that ER opioid deaths are down for the first time ever.
Speaker Change: I think he was 12, 13%.
Speaker Change: The.
Speaker Change: And we're not claiming this is the one to one relationship with Narcan, but certainly.
Speaker Change: People say, hey, the broader availability of Narcan is one of the components to fight this.
Speaker Change: Discourage and certainly hear anecdotally that the municipalities are eating.
Doubling down on distribution.
Speaker Change: Nor can available free vending machines and things like that so I certainly don't think that has run its course.
And you know now.
Speaker Change: We'll see we'll see I think there's a good case, where it certainly our customer is very bullish on it but you know.
Speaker Change: It takes a few years for prescribers to get comfortable with the product our consumers to pick up on it so.
As we always say no single product changes the trajectory of after but the collectively.
Having built up quite a head of steam here.
Speaker Change: Thank you that's helpful. And then you talked a little bit about club called about consumer.
Speaker Change: Your customers kind of managing inventory, a little bit differently than they used to as it been spun out but the rest was kind of garbled. It just in terms of just this winter.
Speaker Change: Garbled in terms of what I heard because my phone.
Speaker Change: Is the cough and cold season is starting off slower than expected I mean is it just been mild mild winter winter being an issue yet or is it too soon to say that or how should we think about it.
Speaker Change: Yes, I tried to enunciate better.
Speaker Change: So the point on that actually.
Speaker Change: No worries.
Speaker Change: Just broken.
Speaker Change: The point was that the 'twenty three 'twenty four cough and cold season turned out to be a light to one.
Speaker Change: And as people now to the balance is getting ready for the 'twenty four 'twenty five cough and cold season, they are a bit more inventory than they would like.
Speaker Change: I think that's the long and short of it anecdotally and our customers tell us who check is much more closely in the southern hemisphere.
Speaker Change: Uh huh.
Speaker Change: Cough and cold season, even stronger, meaning worse, where people better for us.
Speaker Change: This year than it was last year so for what it's worth. So we think this is a year end effect and not much more.
Speaker Change: And for the record it was my phone that you there was garbled.
Speaker Change: No worries.
Speaker Change: And sorry last question, what's the sales cycle for beauty products, how long it should take to get like a new product I guess it kind of varies depending on what you are creating but I was wondering as you kind of take.
Speaker Change: Take back North America. So to speak does is there a couple of years kind of ramp time and I'm just talking about from a from a revenue perspective.
Speaker Change: Yes that really ranges.
Speaker Change: Can't imagine in China, it can be as quickly as four months in.
Speaker Change: With western clients, it's usually more like 18 to 36 months with the Indies in North America can be six to eight months. So that kind of gives you a distribution.
Speaker Change: We certainly continue to do well with <unk> in North America through our fusion <unk> unit.
Speaker Change: <unk>.
Speaker Change: And we certainly have all the capacity to react quickly to an uptick.
Speaker Change: Alright, Thank you very much.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Hi, Matt.
Speaker Change: I mean, Rick Williams.
Speaker Change: Your line is open.
Rick Williams: Hi, Good morning, I wanted to ask about Injectables, obviously up year to date here, but down in the quarter.
Rick Williams: Other peers had talked about destocking you'd referenced that there really hasn't been an issue for you I just wanted to check to make sure that was still the case and then I guess thinking about or maybe asking about when we can get back to perhaps a more regular cadence of growth and injectables I, obviously in light of capacity coming online in Normandy and at Congress.
Rick Williams: <unk>.
Rick Williams: Yes, so fundamentally clearly.
Lynn: This is Lynn.
Lynn: <unk> given the comparisons.
Lynn: Last year, the ERP and so on.
Lynn: Plus some of the Destocking and more on the Antithrombotic area.
Lynn: But.
Lynn: Fundamentally the pipeline continues to build and we are quite bullish for next year.
Lynn: GOP won't keeps growing.
Lynn: Biologic projects keep coming in so.
Lynn: Without giving you an outlook for 'twenty five certainly continue to see that.
Business growing very nicely.
Lynn: High single digit low double digits.
Lynn: In that range.
Okay, and then maybe just on profitability for the injectable side, obviously here.
Lynn: Nathan Olympic Pendulous much larger more mature you've recently added a lot of capacity for Injectables, if you'd give us a sense for where you are seeing profit dying right now and what the opportunity is.
Lynn: Prevent their as you scale.
Speaker Change: Yes, so the.
Speaker Change: General.
Speaker Change: Sequence.
Speaker Change: As you rightly say, a proprietary drug dispensing devices, but by far the most profitable followed by active materials.
Speaker Change: <unk> and Injectables kind of beating when everything is steady state and with capacity utilization around in line with company profitability.
Speaker Change: So as that business growth.
Speaker Change: The profitability, we will continue to improve but if it goes much faster than the rest of the pharma portfolio.
Speaker Change: To put a little late on the overall profitability.
Speaker Change: Okay. Thanks.
Speaker Change: Sure Bob Congrats.
Speaker Change: Thanks, Matt appreciate it very much.
Speaker Change: Your next question comes from Gabe Haiti with Wells Fargo.
Speaker Change: You May proceed.
Speaker Change: Stefan Barb Mary good morning.
Gabe Haiti: Echo all the kind words to you.
Gabe Haiti: <unk>.
Gabe Haiti: Hi, Stefan you said it.
You guys have kind of a story of kind of singles and doubles I noticed the sudafed kind of nasal.
Gabe Haiti: Product that you highlighted.
Gabe Haiti: New.
Gabe Haiti: Made them this quarter.
Gabe Haiti: Can you talk about.
Gabe Haiti: At least meeting sometimes you're talking about Europeans more inclined to use nasal cleansing and things like that as part of their daily routine.
Based on sort of your dialogue with the customer here or.
Gabe Haiti: Is that sort of there in terms of maybe.
Gabe Haiti: Bringing some of that type of behavior here with a branded product.
Gabe Haiti: Just maybe again, it's over the counter is more accessible for consumers and you might get a bigger pop initially from them over the counter versus maybe something like Murphy, just trying to dimensionalize the opportunity there.
Gabe Haiti: Yeah.
Speaker Change: Yes, I think the product that was referring to was the sudafed nasal rins. So that's.
Speaker Change: Nice to have another strong U S brand on the amazing Rins is another.
Breakthrough innovation, but in additional adoption.
On your larger point, though it is true that historically when it comes to the congestion when it comes to LNG sprays Europe was a bit more ahead with adoption of these nasal sprays, whereas the U S consumer was used to.
Speaker Change: Popping pills.
Speaker Change: And that is that gap is still there, but it is narrowing we have high hopes for our haley on with it.
Speaker Change: Actuated.
Speaker Change: Nasal spray that they have launched with the <unk> brand in Europe, and they will bring in the U S.
Speaker Change: With a more U S brand.
Speaker Change: That will make further inroads, but I think it's too early to call that in terms of P&L impact.
Speaker Change: And remember Haley on if the spin out from GSK.
Speaker Change: Okay. Thank you for that and then you mentioned.
Speaker Change: Kind of working on Murphy for first tiers Amgen they try to.
Speaker Change: <unk> question, you said good growth for 25 to talk about.
Speaker Change: As you look across.
Speaker Change: <unk>.
Speaker Change: The platform and pharma, we go into the presentation you guys provided at the France.
Speaker Change: Site visits I think.
Speaker Change: Weighted value of pipeline fill up 41%, which is pretty robust given the lot of the commercialization.
So just.
Speaker Change: I know, it's tough but.
Speaker Change: You know.
Speaker Change: Maybe from a stage gate perspective projects that youre working on that you're excited about.
Maybe over the next two to three years that we can be be hearing about or just how to think about it again. It just gives you confidence in the 70% to 11% growth.
Speaker Change: Shall we think about it.
Speaker Change: Sure.
Speaker Change: Thanks for.
Speaker Change: I'm, referring to that indeed, the pipeline keeps filling and if I walk through the pharma side of this.
Speaker Change: On the LNG side, more and more combination products, where several active ingredients combined with new launches.
Speaker Change: Then you've talked several times about the.
Speaker Change: The large increase in project for central nervous systems keying off of the success of Provote, though in Narcan and.
Speaker Change: Yeah.
Speaker Change: Hello, Glycemia what was it.
Speaker Change: But <unk> and so on in pain management and there are many more of these types of <unk>.
Speaker Change: Programs in the pipeline.
Speaker Change: On the consumer health care Ophthalmic continues to go from strength to strength.
Speaker Change: Tom.
Speaker Change: Dispenser that allows for no preservation and the solution.
Speaker Change: The we just talked about the new site activation.
Speaker Change: We think it will be a long term growth driver for our consumer health care durable and so on and then we have mentioned on this call, but as you know within Injectables. If that's just a volume story. It's also an upgrading of the.
Speaker Change: Product mix was much more high.
Speaker Change: High value products, whether that's for GOP ones, where the bits for biologics.
Speaker Change: Whether it's in response to Nx, one in Europe, So, it's not only growing with the market, but mixed enriching and therefore.
Speaker Change: You see the margin active material we mentioned.
Speaker Change: Contract with the FDA I mean that the pipeline frankly, that's an early stage ideation, but.
Clearly another nod to the FDA recognizing.
Speaker Change: The strengths of our materials science it goes back.
Speaker Change: If you remember.
Speaker Change:
Speaker Change: In during Covid, we were working on sterilizing masks.
Speaker Change: We didn't have enough masks, we got a government contract Tibet and the FDA.
Speaker Change: Now also gives US an award for the <unk>.
Speaker Change:
Speaker Change: What was there.
And so yes, the nitrosamine nitrosamine mitigation so.
Speaker Change: Just obviously, there's a lot of technology under the Hood, there keeps feeding the pipeline.
Speaker Change: Just talked about with sterilization and absorb those are very early stage.
Speaker Change: I'm not going to give any timeline, but six would be extremely short yeah.
Speaker Change: That's just the nature of the pharma business, it's the pipeline business, we keep filling the pipeline and great things come out of the pipeline.
Speaker Change: Great. Thank you and Bob maybe one for you just.
Speaker Change: So we can calibrate I know Q1, you can have a little bit.
Speaker Change: <unk>.
Speaker Change: Incentive comp or I should say stock based comp expense flowing through is there anything else that we should be mindful of when thinking about kind of the first half or the first quarter for 25.
Speaker Change: No.
Speaker Change: Not that comes to mind Gabe.
Speaker Change: Youre right with the substance of vesting that rules that we have we do have a higher <unk>.
Speaker Change: Higher stock comp expense in Q1, but now.
Speaker Change: Now that I'm, leaving that should go down a little.
<unk>.
Speaker Change: <unk>.
The old people like myself, but.
Speaker Change: No nothing else really comes to mind, that's material I'd have to I'd have to really scrub through to see if theres anything unusual I mean, it's to me it's more the.
Speaker Change: Some of these trends empty stocking things how quickly they rebound and you know how quickly they come back, but nothing else that I would mention.
Speaker Change: Thank you.
Speaker Change: Thank you Dave as a reminder, today's style followed by one if you wish to ask any further questions.
Speaker Change: And we now have a follow up from George Staphos with Bank of America.
Speaker Change: Please go ahead.
George Staphos: Thanks, so much.
George Staphos: Follow on question on pharma.
George Staphos: When we were visiting you a few weeks ago, and then I think even on today's call there were some reference to.
George Staphos: Basil nasally delivered treatments targeting.
George Staphos: The brain.
George Staphos: And so.
George Staphos: I was wondering if there's a way to again, recognizing it's not necessarily going to move next quarter, what that opportunity might look like and if I misheard. Please correct me, where youre going with.
The trends, there and what that revenue opportunity might look like.
Does it come through your traditional devices does it come through powder any thoughts there that you can share would be great.
Thank you and good luck in the quarter.
Speaker Change: Yeah. Thanks George.
Speaker Change: Not too precise with our language, but basically any drug that you deliver through the nose for the purposes of crossing the blood barrier to the brain through the nasal cavities, so sometimes referred to as the central nervous system drugs, sometimes referred to direct to.
Speaker Change: The brain delivery methods.
Speaker Change: This is extremely attractive for our pharma clients for several reasons one.
Speaker Change: Often it's just a better delivery routes.
Two it gives a lifecycle management opportunity to regain.
Speaker Change: Long periods of exclusivity from the FDA.
Speaker Change: Repurposing.
Speaker Change: Molecules and many of the things we talked about from naloxone.
Speaker Change: Two epinephrine those are old molecules that have a new lease in life with a much greater delivery method, but of course, there are also new treatments.
Speaker Change: If people are thinking about that can be more efficacious if they are.
Speaker Change: Delivered through the nasal cavity to the brain.
Speaker Change: We are excited about that category of projects.
Speaker Change: Pipeline.
Speaker Change: Is there a way to.
Speaker Change: I'm guessing it's going to be a reason why you think.
Speaker Change: Comfortably about the 711% growth, but is there a way that that perhaps add some margin or incremental revenue beyond the trend line.
For pharma in the next three years and then.
Speaker Change: Separate totally unrelated.
Speaker Change: Question to the extent that you have been <unk>.
Speaker Change: Successful and recognizing it's a challenging topic, it's never happy topic about right sizing your footprint.
Speaker Change: Closing facilities, where you needed to.
Speaker Change: Is there potentially more of that required to get to the margin that you need over the next couple of years.
Speaker Change: In beauty or.
Speaker Change: Not necessarily you just need the markets too.
Speaker Change: Do what they would normally do.
Speaker Change: And good luck again in the quarter.
Speaker Change: Yeah on the first question.
Speaker Change: Don't break down the pipeline, but by subcategory I think we've informed view of that.
Emergency medications are around 6%.
Our total revenue 5% of total revenue for.
Speaker Change: For the company and it's a rapidly growing area.
Speaker Change: <unk> number two this is the sweet spot.
Speaker Change: For us in terms of profitability, our proprietary drug delivery system. So if you have very good traction not only in sales with things like spread out though.
And narcan and so on but also.
Speaker Change: In the most profitable part of the portfolio.
Speaker Change: By the way, we havent talked more about it.
Speaker Change: If you go back through the press release in my remarks, that's also the area, that's generating more and more of royalty revenue.
Speaker Change: All of that certainly bodes well for the future. It's quite simple if your most profitable segment is growing fast and has a strong pipeline.
Speaker Change: That will bode well.
Speaker Change: On the second part.
Have more ideas, but I would not.
Speaker Change: And we will execute them once the to fruition, but I wouldn't.
Characterize them as a prerequisite to get to the 15.
Speaker Change: Two more like to get beyond that.
Speaker Change: Understood. Thank you so much.
Speaker Change: Okay.
Speaker Change: Thank you I can confirm that does conclude today's Q&A session.
Speaker Change: Like to hand, it back to you.
Speaker Change: Todd deficit final closing remarks.
Todd: Thank you. So let me end the call by assuming out a quarter three was a very strong quarter. We are on track for a solid finish to the year with good organic growth and double digit EPS growth for the full year.
Todd: As we've discussed we execute quite a number of productivity actions and will continue to fall to the bottom line in 225 and beyond and we also have additional ideas.
Todd: To use that productivity muscle or muscle that we have developed on an ongoing basis and when you use those muscles, they trigger additional ideas and opportunities, especially in Europe and also in the U S.
Todd: Now several of you have remarked.
Todd: We're able to look a little bit on the devote so to speak with the recent visits to some of our French and U S facilities to judge the organization's capabilities and.
Todd: The ability to increase the depth and width of our moats.
Todd: So.
Todd: Even in a slowing economy, we are confident in the resilience of our portfolio of course, our pharma business is very strong.
Todd: We are encouraged credit continued scaling of our pipeline not only in pharma, but also in beauty and closures.
Todd: Customers are engaging very positively with a more agile and more competitive avatar.
Todd: Our customers recognize that.
Todd: Nations the value, we bring to that brand and the direct development from very early stage ideation to full scale global deployment.
We are well positioned with increasingly competitive regional footprints around the world strengthened even further with the closing of the pump JV in China.
And lastly at least our strong balance sheet affords us the strategic flexibility.
Todd: To pursue.
Todd: Optionality as you know we are fans of bite sized bolt on partnerships and acquisitions and have a track record of delivering on those.
So all of this bodes well not only for quarter, four but 25 and beyond.
Speaker Change: One more time, a huge thanks to Bob and all the best.
Speaker Change: And Vanessa Mary and I look forward to discussing more with you on the road and if we don't speak before I wish you all the best for the holidays.
Speaker Change: Yes.
Speaker Change: Thank you all for joining everyone.
Speaker Change: Thank you that concludes the <unk> 'twenty 'twenty four <unk> freight results and it was cool.
Speaker Change: Please enjoy the rest of your day and you may now disconnect from the call.
Speaker Change: [music].