Q3 2024 Church & Dwight Co Inc Earnings Call
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Operator: Good morning, ladies and gentlemen, and welcome to the Church & Dwight's third quarter 2024 earnings conference call. Before we begin, I have been asked to remind you that on this call, the company's management may make forward-looking statements regarding, among other things, the company's financial objectives and forecast. These statements are subject to risk and uncertainties and other factors that are described in detail in the company's SEC filings.
Speaker Change: Good morning, ladies and gentlemen, and welcome to the Church <unk> Dwight third quarter 2024 earnings Conference call.
Speaker Change: Before we begin I have been asked to remind you that on this call. The company's management may make forward looking statements regarding among other things the company's financial objectives and forecast. These statements are subject to risks and uncertainties and other factors that are described in detail in the company's SEC filings.
Operator: I would now like to introduce your host for today's call, Mr. Matt Farrell, Chairman, President, and Chief Executive Officer of Church & Dwight.
Speaker Change: I would now like to introduce your host for today's call Mr. Matt Farrell, Chairman, President and Chief Executive Officer of Church <unk> Dwight. Please go ahead Sir.
Matt Farrell: Please go ahead, sir.
Matt Farrell: Good morning, everyone, and thanks for joining us today. I'll begin with a review of the Q3 results.
Hey, good morning, everyone and thanks for joining us today I'll begin with a review of the Q3 results.
Matt Farrell: Then I'll turn the mic over to Rick Dierker, our CFO and head of business operations. will open the call. Alright, Q3 was another solid quarter for Church & Dwight, reported sales growth was 3.8%.
Matt Farrell: Now I'll turn the mic over to Rick Dierker, our CFO and head of business operations and Rick is done well open the call up for some Q&A.
Matt Farrell: Q3 was another solid quarter for church <unk> Dwight.
Matt Farrell: Sales growth was three 8%, which beat our outlook of two and a half and that was thanks to strong results from our domestic international and specialty products businesses.
Matt Farrell: The publicamparing total unfurled for the press conference Fury Center Tuesday, Feb. 27 at 8 a.m. International, and especially proud. Volcanic Sales Group 4.0 New York, Adjusted Gross Margin, Expanded 60 Bases. at the same time we increased marketing spending and we gained market share in the majority Adjusted EPS was $0.79, which was $0.12 higher than our $0.60. Quality results were driven by higher-than-expected sales growth and growth.
Matt Farrell: Organic sales grew four 3%, which exceeded our 3% Q3 outlook with volume accounted for a very healthy three 1% of our growth adjust.
Adjusted gross margin expanded 60 basis points at the same time, we increased marketing spending and we gained market share in the majority of our categories.
Matt Farrell: Adjusted EPS was <unk> 79 cents 70.
Matt Farrell: Seven nine cents, which was 12 cents higher than our 67% outlook.
Speaker Change: A nice beat there.
Speaker Change: Quality results were driven by higher than expected sales growth and gross margin expansion.
Matt Farrell: Our online class at trade. Well, with online sales, there's a percentage of global sales at the price.
Speaker Change: Our online class of trade continues to perform well with online sales as a percentage of global sales.
Speaker Change: Currently 21% next I'm going to comment on each of the three businesses in the first half will be the U S business with three 3% organic sales growth volume growth was two 6% and this is the fifth consecutive quarter of volume growth in our U S business with five of our seven power brands.
Matt Farrell: Next, I'm going to comment on each of the three businesses. The first step will be the U.S. 3.3. Volume growth was 2.3% 5th consecutive quarter of volume growth in our U.S. Five of our seven power brands.
Speaker Change: <unk> market share in the quarter.
Matt Farrell: Now let's look at a few important categories. Innovation, of course, is a big contributor to our success this year. As I comment on the categories, I'll highlight the success of the new product launches. Arm & Hammer Liquid Laundry through 2% which outpace a flat.
Speaker Change: Now, let's look at a few important categories in the U S.
Speaker Change: Innovation of course is a big contributor to our success this year and every year as I comment on the categories I'll highlight the success of the new product launches and to start.
Speaker Change: Start off with laundry detergent arm <unk> hammer liquid laundry detergent consumption grew 2%, which outpaced a flat category.
Matt Farrell: Unknown Speaker, Unknown Speaker, The Union Votes category declined. However, Arm & Hammer unit dose saw a consumption growth of 16.5%. and we grew a share of 70 bips to 4.8. Regarding new products, this year we launched two new products into the detergent category, Armahammer Deep Clean and Armahammer Power Sheet. Deep Clean is our most premium laundry detergent, where we entered the mid-tier of liquid laundry. Deep Clean accounted for a little over 40% of Arm & Hammer's liquid laundry detergent consumption. Reporter, and it's highly incremental to our. The second new product is PowerShell. Now this is a new form of logic.
Speaker Change: Arm <unk> hammer share in the quarter, reaching 14, 7%.
Speaker Change: The year until its category declined one 1% however.
Speaker Change: However, arm <unk> Hammer unit dose saw consumption growth of 16, 5% and.
Speaker Change: And we grew share 70 bps to four 8% of unit dose regarding new products. This year, we launched two new products into the detergent category arm <unk> Hammer deep clean and Omaha power sheets deep clean is our most premium laundry detergent, where we entered the mid tier of liquid laundry.
Speaker Change: Deep clean accounted for.
Speaker Change: A little over 40% of arm <unk> hammer liquid laundry detergent consumption growth in the quarter and it is highly incremental to our franchise.
Speaker Change: The second new product is power sheets. This is a new form of laundry detergent and you may remember in August of 2023 arm <unk> Hammer was the first major brand to offer this new unit dose form in the U S. Our fresh Lin incentive she is now the number two sheet on Amazon.
Matt Farrell: And you may remember in August of 2023, Arm & Hammer was the first major brand to offer this new unit thus far. Our Fresh Linen Scented Sheet is now the number two sheet on Amazon. Since launching this product into bricks and mortar this year, we have seen high consumer interest. Armahammer is the number one Brand at Kroger. It's also the number two brand in all food. We feel great about the future prospects.
Speaker Change: Since launching this product into bricks and mortar this year, we have seen high consumer interest in the form.
Speaker Change: Arm <unk> hammer is that number one.
Speaker Change: She brand at Kroger. It's also the number two brand in all of the food, we feel great about the future prospects for this new form.
Matt Farrell: Now I'm going to switch over to Litter. The category was Flat. That's category consumption. As expected, Norman Hammer litter consumption declined 1.5%. And this reflects the absence of a competitor out of stock. which benefited our prior year. The good news is we've held on to about half of our prior years. A New Lightweight Arm-and-Hammer Clumping Leather, which is our new product. is outperforming our expectations. As our share of the lightweight category continues to grow, this is important because lightweight accounts for 17% of the clumping litter category. Hardball became the number two major brand in lightweight segment.
Speaker Change: Now I'm going to switch over to litter.
Speaker Change: The category was flat in Q3, that's category consumption.
Speaker Change: As expected women hammer litter consumption declined one 5% and this reflects the absence of a competitor out of stock situations, which benefited our prior year market share.
Speaker Change: The good news is we've held onto about half of our prior year share gains.
Speaker Change: Our new lightweight arm <unk> hammer clumping litter, which is our new product this year.
Speaker Change: Is outperforming our expectations as our share of the lightweight category continues to grow this is important because lightweight accounts for 17% of the clumping cat litter category hardware.
Speaker Change: <unk> became the number two major brands and lightweight segment in Q3.
Matt Farrell: I'm going to switch over to personal care. The gummy vitamins business continues to be a drag. The gummy vitamin category declined 0.3%, we can call that flat. which is an improvement from the category declines in the past few quarters. The bad news is, our consumption was down even greater. We were down 10%. The improvement of this business is taking far longer than we expected. And as you saw in the release, has reduced our expectations. about the long-term growth and profit. This resulted in a $357 million right. We continue to move forward with our stabilization actions, which includes new packages.
Speaker Change: I'm going to switch over to personal care.
Gummy vitamins business continues to be a drag on the company's organic growth.
Speaker Change: The gummy vitamin category declined <unk>, 3% book and call that flat in Q3, which is an improvement from the category declined for the past few quarters.
Speaker Change: The bad news is our consumption was down even greater we were down 10% the.
Speaker Change: The improvement of this business is taking far longer than we expected.
Speaker Change: And if you saw on our release has reduced our expectations about the long term growth and profit of the business. This resulted in a $357 million write them of the book value of the assets. We continue to move forward with our stabilization actions, which includes new packaging upgraded formulas to improve the consumer experience.
Matt Farrell: Upgraded Formulas to Improve the Consumer Experience and Higher Marketing Investments. gives us some degree of optimism for the business is the innovation that we... 2025.
Speaker Change: <unk> and higher marketing investments, which gives us some degree of accuracy optimism for the business as the innovation that we have coming in 2025.
Matt Farrell: Next up is Batiste, which continues to see strong growth, with consumption up 6% in Q3, growing share to 46%. Teix continues to be the global leader in dry shampoo. This year we launched Batiste SweatActivated and Batiste TouchActivated. These innovations continue to bring new users to the category, which is very important. And already these two new products account for 2% of the dry shampoo category. Sweat Activate is the number one new product.
Speaker Change: Next up is batiste, which continues to see strong growth with consumption up 6% in Q3 growing share to 46%.
Speaker Change: <unk> continues to be the global leader in dry shampoo.
Speaker Change: This year, we launched batiste sweat activated entities touch activated these innovations continue to bring new users to the category, which is very important.
Speaker Change: And already have these two new products accounted for 2% of the dry shampoo.
Speaker Change: Category and sweat activated as the number one new product on dry shampoo.
Matt Farrell: over in Mouthwash. The third breath continues to perform extremely well. The mouthwash category was up 5% in Q3, but here's a few stats. Alcohol-based mouthwash was down Well, non-alcohol category group 11. Fairbeth is the number one alcohol-free mouthwash with a 35 share and is the number three brand in total.
Speaker Change: Over in mouthwash.
Speaker Change: <unk> continues to perform extremely well the mouthwash category was up 5% in Q3, but here Here's a few staff alcohol based mouthwash was down 1%, while non alcohol category grew 11%.
Their breath as the number one alcohol free mouthwash with 35 share and as the number three brand in total mouthwash with an 18 sure.
Matt Farrell: Again, over to New Products. This year we entered the antiseptic segment of the category with the launch of Thoroughbred Deep Clean Oral Lint. It's important to note that the Anticeptor Subcategory represents about 30% of the $2 billion mouthwash category. are launching to anticipate. for a hundred basis points of our 400. you will be a So, great indicator of the future.
Speaker Change: Get them over to new products. This year, we entered the antiseptic segment of the category with the launch of Thoroughbred deep clean oral lens.
Speaker Change: Important to note that the antiseptic subcategories.
Speaker Change: Subcategories represents about 30% of the $2 billion mouthwash category and our launch into antiseptic says accounted for 100 basis points out of about 400 basis points.
Speaker Change: Year over year growth in market share.
Speaker Change: So great indicator of the future.
Speaker Change: The antiseptic wash.
Matt Farrell: Hero is the number one brand in acne care with a 22 share and continues to drive the majority of the growth in the category. The patch category grew 42%. I'll hear a group hatch market share by 1.7 57 share. So Hiro continues to launch innovative solutions and patch.
Speaker Change: <unk> is the number one brand in acne care with a 22 share and continues to drive the majority of the growth in the category.
Speaker Change: Category grew 42%.
Speaker Change: Zero grew patch market share by $1 seven basis points to 57 shares of hero continues to launch innovative solutions in patches.
Matt Farrell: very bullish about I'm going to provide you with a couple of remarks on promotional levels in our house. Liquid Lard Detergent we've seen stable sold on promotion in the low 30s over the last over in UNITO. Much the same story. Percentage sold on promotion. Stable, averaging in the low 30s.
Speaker Change: Very bullish about the future of that brand.
Speaker Change: To provide you with a couple of remarks on promotional levels in our household categories.
Speaker Change: And the liquid laundry detergent.
Speaker Change: We've seen stable sold on sold on promotion in the low thirties over the last few quarters.
Speaker Change: Over in unit dose them pretty much the same story percentage sold on promotion is also stable averaging in the low thirties over the last few quarters later is a different story.
Matt Farrell: Later is a different story. In later conditions of different and promotional levels have increased. Here's the trend line. So if you look at Q1. III, it was nineteen and a half. like it's going to be even higher. We're sold on D.O. 40%.
Speaker Change: In litter conditions are different and promotional levels have increased then.
Speaker Change: Here's the trend lines. So if you look at Q1.
Speaker Change: So long ago was 15, 5% Q2 was a little over 18%.
Speaker Change: Q3, it was 19.5%.
Speaker Change: It's going to be even higher in Q4, the increase in litter promotions is primarily driven by one major competitor were sold on deal.
Speaker Change: It's 40%.
Matt Farrell: All right, turning now to international and specialty products, our international business delivered organic growth of 8.1% in Q3, that's right on our algorithm of 8%. This was driven by strong growth in every one of our subsidiaries as well as our global Finally, specialty products. Organic sales increased 7.5%. That's three-quarters now of solid organic growth. There's 5% organic sales growth this year and we'll hit our evergreen growth target. So it's so great about that progress.
Speaker Change: Alright.
Speaker Change: Turning now to international and specialty products, our international business delivered organic growth of eight 1% in Q3, that's right on our algorithm of 8%.
This was driven by strong growth in every one of our subsidiaries as well as our global markets group.
Speaker Change: Finally specialty products organic sales increased seven 5% that's three quarters now of solid organic growth for this business were confident that this division will achieve 5% organic sales growth this year, and we'll hit our evergreen growth targets.
I feel great about our progress and specialty products.
Matt Farrell: This is a commentary on the consumer, and in July we noted a deceleration in consumption in our economy. This continued in Q3 as we expected. After seeing 4.5% growth in our categories for the first five months of the year, June, July, and August, we're closer to... Now in September, we saw consumption in our category strengthen to about 3%. And then in October, category consumption was up five. But let's all remind ourselves that the hurricane and the port strike no doubt influenced... So, we remain cautious in Q4 regarding the U.S. consumer and categories.
Speaker Change: This commentary on on the consumer.
Speaker Change: In July we noted a deceleration in consumption in our categories.
Speaker Change: This continued in Q3 as we expected.
Speaker Change: After seeing four 5% growth in our categories for the first five months of the year in.
Speaker Change: June July and August were closer to 2.5%.
Speaker Change: In September we saw consumption in our categories strengthen to about 3% and then in October category consumption was up 5%, but let's all remind ourselves that the hurricane and the port strike no doubt influenced those results. So.
Speaker Change: We remain cautious in Q4 regarding the U S consumer and category growth rates.
Matt Farrell: I want to wrap up my comments by reiterating that the company is performing well with all three divisions delivering strong growth. I'd like to thank all the Church & Dwighters out there for doing such a great job each and every day. Great team.
Speaker Change: I want to wrap up my comments by reiterating that the company is performing well with all three divisions delivering strong growth.
Speaker Change: Thank all of the church <unk> Dwight is out there for doing such a great job each and every day great team.
Matt Farrell: And now I'm going to turn it over to Rick to provide more color on the quarter and full year.
Speaker Change: And now I'm going to turn it over to Rick to provide more color on the quarter and full year outlook.
Rick Dierker: All right, thank you, Matt, and good morning, everybody. We'll start with EPS. On a reported basis, made a loss of 31 cents a share, primarily due to a non-cash asset impairment of our vitamin business. Third quarter adjusted EPS with 79 cents. Almost 7% from the prior year. 79 cents was better than our 67 cent Outlook and is a high quality beat.
Rick Dierker: Alright, Thank you, Matt and good morning, everybody, we'll start with EPS on a reported basis made a loss of 31 cents a share primarily due to a noncash asset impairment of our vitamin business third quarter. Adjusted EPS was <unk> 79 up almost 7% from the prior year.
Rick Dierker: 79 cents was better than our 67th outlook and is a high quality beat primarily driven by higher than expected operating profit.
Rick Dierker: Permanently driven by higher than expected... Reported revenue was up 3.8% and organic sales were up 4.3%. Organic sales were driven by volume of 3.1% and positive price. Volume was again the primary driver of organic growth. I expect volume growth to continue in Q4. Our third quarter adjusted credit margin was 45%. The US has seen a 50 basis point increase from a year ago, primarily due to productivity, volume, mix, and that of the impact of higher manufacturing.
Rick Dierker: Reported revenue was up three 8% and organic sales were up four 3% organic sales were driven by volume of three 1% and positive price mix of one 2%.
Rick Dierker: <unk> was again the primary driver of organic growth and we expect volume growth to continue in Q4.
Our third quarter adjusted gross margin was 45%.
A 60 basis point increase from year ago, primarily due to productivity volume and mix net of the impact of higher manufacturing costs. Let me walk you through the Q3 bridge gross margin was made up of the following positive 140 basis points impact from volume and bags.
Rick Dierker: Let me walk you through the Q3 bridge. Curious Margin was made up of the following, positive 140 basis points, impact from volume and value. Positive 130 Basis Point Impact from Productivity and a 10 Basis Point Impact from Productivity Positive Impact Related to Acquisition.
Rick Dierker: Positive 130 basis point impact from productivity, and a 10 basis points positive impact related to acquisitions.
Rick Dierker: partially offset by $225. Moving to marketing, marketing was up 18 million year over year, marketing expenses, percent of net sales was 12.3% or 80 basis points higher. Q3SG&A Adjusted SG&A increased 20 basis points year-over-year, primarily due to international R&D and IT investments. Other expense decreased by $11.9 million. We now expect other expense for the full year to be approximately $65 million. Q3, there was a tax benefit of $25.9 billion. And this is related to the vitamin. Included in that impact, our effective rate was 23.8% and that compares to 24.1%. The expected adjusted effective tax rate for the full year is now approximately 22.5% versus the previous outlook.
Rick Dierker: Partially offset by 220 basis points from higher.
Rick Dierker: <unk> costs.
Rick Dierker: Moving to marketing marketing was up $18 million year over year marketing expense as a percent of net sales was 12, 3% or 80 basis points higher than Q3 of last year and helped drive share gains.
Rick Dierker: For Q3, SG&A adjusted SG&A increased 20 basis points year over year, primarily due to international R&D and it investments.
Rick Dierker: Other expense decreased by $11 9 million, we now expect other expense for the full year to be approximately $65 million unadjusted basis.
Rick Dierker: In Q3, there was a tax benefit of 25, 9% and.
Rick Dierker: And this was related to the vitamin impairment, excluding that impact our effective rate was 23, 8% and that compares to 24, 1%.
Rick Dierker: Q3 of 2023.
Rick Dierker: We expected adjusted effective tax rate for the full year is now approximately 22, 5% versus the previous outlook of 23%.
Rick Dierker: And now to cash. For the first nine months of 2024, cash from operating activities was $864 million, an increase of almost $70 million, driven by higher cash earnings. You now expect a four-year cash flow from operations to be approximately $1.5 We're having a great year in regards. CapEx for the first nine months was $125 million, almost a $4 million increase from the prior year as capacity expansion projects proceeded as planned. We expect 2024 CapEx of approximately $180 million as we complete the majority of those investments that were initiated in 2023. continue to expect CapEx to return to historical levels of 2%...
Rick Dierker: And now to cash for the first nine months of 2024 cash from operating activities was $864 million, an increase of almost $70 million driven by higher cash earnings.
Rick Dierker: We expect full year cash flow from operations to be approximately $1 1 billion, we're having a great year in regards to cash.
Rick Dierker: Capex for the first nine months was $125 million almost a 4 million increase from the prior year as capacity expansion projects proceeded as planned we expect 2020 for Capex of approximately $180 million as we complete the majority of those investments that were initiated in 2023.
Rick Dierker: Continue to expect Capex to return to historical levels of 2% of sales in 2025 and beyond.
Rick Dierker: Sleafod and beyond.
Rick Dierker: And now for the full year outlook. As Matt mentioned. While we saw U.S. consumption in our categories improve slightly towards the end of the third quarter, we remain cautious regarding the U.S. consumer and category growth rates for the remainder of the year. We continue to expect organic revenue outlook to be approximately 4% and reported sales growth to be approximately 3.5%. We do expect full year adjusted EPS to be approximately...
Rick Dierker: Now for the full year outlook.
Speaker Change: Matt mentioned.
We saw U S consumption in our categories improve slightly towards the end of the third quarter, we remain cautious regarding the U S consumer and category growth rates for the remainder of the year.
Speaker Change: Do you expect organic revenue outlook to be approximately 4%.
<unk> sales growth to be approximately 3.5%.
Speaker Change: We continue to expect full year adjusted EPS to be approximately 8%.
Rick Dierker: are in the gross margin. We now expect expansion of approximately 110 basis points, the high end of the previous We now expect marketing as a person of sales to be above 11%. And as you read in the release, to the extent our business does better than our outlook, we plan on incrementally investing behind marketing and SG&A to help enter 2025.
Speaker Change: Turning to gross margin, we now expect expansion of approximately 110 basis points at the high end of the previous range and we now expect marketing as a percentage of sales to be above 11%.
Speaker Change: And as you read in the release to the extent our business is better than our outlook. We plan on incrementally investing behind marketing and SG&A to help enter 2025 with momentum.
Rick Dierker: And with that, Matt and I would be happy to take.
With that Matt and I would be happy to take any questions.
Operator: At this time if you would like to ask a question please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.
Speaker Change: At this time, if you would like to ask a question. Please press the star Antoine on your telephone keypad, you may remove yourself from the queue at any time by pressing star to you. Once again that is star and one if you would like to ask a question and we will take our first question from Chris Carey with Wells Fargo Securities.
Operator: Once again that is star and 1 if you would like to ask a question and we will take our first question from Chris Carey with Wells Fargo Securities. Please go ahead your line is open.
Speaker Change: Please go ahead your line is open.
Chris Carey: Hey, good morning, guys. Thanks for the question. Hey, how are you?
Chris Carey: Hey, good morning, guys. Thanks for the question Hey, how are you.
Chris Carey: We're going to start with the outlook for Q4.
Chris Carey: I'm going to start with the outlook for Q4. I want to understand if there are any inventory timing dynamics, which are going into Q3 or Q4, or if this outlook is primarily reflecting, I guess, a view that consumption trends should start to decelerate, you know, through the quarter as you have some of these atypical benefits that maybe you've seen of late. And so we should be expecting that.
Chris Carey: I wanted to understand.
If there are any.
Chris Carey: Inventory timing dynamics, which are going into Q3, or Q4, Q3 or Q4 or if this outlook.
Chris Carey: Is primarily reflecting I guess the view that consumption trends.
Chris Carey: Start to decelerate through the quarter as you lap some of these.
Chris Carey: A typical benefits that maybe you've seen of late and so we should be expecting that.
Rick Dierker: And perhaps just some lingering conservatism about not trying to call any improvement in category growth rates, versus say, you know, again, some sort of inventory or shipment timing dynamic. Yeah, I'll take the first one, part of it on inventory, and then Matt will talk about the category. We hear small things on retail inventory, but not anything that we would call out and not enough to impact anything. There's small examples, but not enough to influence what we would call out. Yeah, and Chris, as far as the categories grow...
Chris Carey: And perhaps just some lingering conservatism about not trying to call any improvement in category growth rates.
Chris Carey: First I'd say.
Chris Carey: Some sort of inventory or shipment timing dynamic.
Speaker Change: Yeah, I'll take the first one part of it on inventory and as Matt will talk about the category consumption growth rates.
Speaker Change: We hear small things on retail inventory, but not anything that we would call out and not enough to impact anything there's there's a small.
Speaker Change: Small examples but not enough to.
Speaker Change: But we would be calling.
Matt Farrell: Yeah, and Chris as far as the categories grow your issue.
Matt Farrell: I'm going to look at Q1, Q2, and Q3 for... Some of our major categories. We looked at liquid laundry detergent, Q1, Q2, Q3, the category was up three, up We look at litter, up five, up two, flat. We go to mouthwash, up 13, up 9, and then 5. Patches are pretty steady, you know, high. You know, the acne category is important. Hero is being patched. Somewhat unaffected by that, but if you just look at the trend, you can see a deceleration. So that's one of the reasons why we say, hey, you know, we're still on caution.
Matt Farrell: You kind of look at Q1, and Q2 and Q3 for a little bit.
Matt Farrell: Our major categories. So.
Matt Farrell: If you looked at the liquid laundry detergent Q1, Q2 Q3, the category was up three up one flat.
Matt Farrell: When you look at litter up five up to flat and then go to <unk>.
Matt Farrell: Wash up 13 up nine and then five.
Matt Farrell: Patches are pretty steady.
Double digits.
Matt Farrell: You know that the acne category.
Matt Farrell: 14, eight seven.
Speaker Change: Obviously hero being patches, so growth somewhat unaffected by that but if you just look at the trend you can see a deceleration.
Speaker Change: So that's one of the reasons why I would say Hey, you know, we we're still cautious about the economy and that's the category. So we tend we tend to be doing better because some of them could taking share.
Matt Farrell: about the economy.
Matt Farrell: That's the categories. We tend to be doing better because we're taking share. But that's always the only lever you have. So yeah, we feel good about our performance, we call it 3%. 3. We put up a 4. Good performance in our grants and some share take. I kind of like where we are.
Speaker Change: But that's always.
Speaker Change: Only lever your cabinets when things are starting to slow down. So so yeah, we feel good about our performance as we call. It 3% in Q3, we've put up before you had some good good performance in our brands.
Speaker Change: Sure take but.
Like where we are going into Q4.
Chris Carey: Okay, that makes sense.
Speaker Change: Okay that makes sense then one quick follow up would be.
Chris Carey: Then one quick follow up would be, you know, there's an expectation over time for the US business to be delivering 4% top line growth. Clearly, you're still trying to figure out what the appropriate level is in the current environment, you know, relative to where the categories are going. But how much visibility do you think you have? And, you know, that top line growth objective in the US from here?
Speaker Change: There's an expectation over time for the U S business to be delivering.
Speaker Change: 4% top line growth clearly, you're still trying to figure out what the appropriate level has been in the current environment relative to where the categories are growing but how much visibility do you think you have been that topline growth objective in the U S.
Chris Carey: It's not really a 2025 guidance question per se, but, you know, just the, you know, the ability to deliver against an objective, which, which came up by about a point relative to past in the current environment, and if not, how long do you think you'd need to get there again?
Speaker Change: From here.
Speaker Change: Yeah, it's not really a 2025 guidance question per se, but.
Speaker Change: Just the.
Speaker Change: The ability to deliver against that objective, which.
Speaker Change: Which came up by about a point relative to past in the current environment and if not how long do you think you'd need to get there again. So thanks so much.
Matt Farrell: So thanks so much. Yeah, that was sort of a veiled attempt at... I want to correct you on one thing, you know, as far as our algorithm goes, You know, when we moved to...
Speaker Change: That was sort of a veiled attempt that.
Speaker Change: 2025 guidance.
Speaker Change: Guidance.
Well thanks.
Speaker Change: I want to correct you on one thing as far as our algorithm goes when you know when we moved to from 3% to 4% top line in the U S portion of that was going from two to three.
Speaker Change: And obviously, that's the big dog is the lion share of our business. So.
Speaker Change: The expectation is that right.
Speaker Change: We're gonna grow at 3% going forward, so 3% for the domestic business of about 8% for international five for SPD. That's the way, how we get to our 4% comp, yes, sorry, if I didn't come across that was that was really exciting.
Matt Farrell: Unknown Attendee We've got to look at our portfolio and say... Home Algorithm, Accenture's 25. So we look at the strength of our brands, we look at the innovation we have planned over a three-year basis, 25, 26, 27. I encourage them, if you look back... over a year. You know yourself over the last 10 years, we've hit... It's one of the reasons why...
Speaker Change: Question.
Speaker Change: And.
Speaker Change: We kind of look at our portfolio and say you know when you have all.
Speaker Change: The long term algorithm of Sensus 'twenty five 'twenty five 'twenty six 'twenty seven.
Speaker Change: So.
Speaker Change: The strength of our brands, we look at the innovation we have planned.
Speaker Change: For your basis 'twenty, five 'twenty six 'twenty seven and consequently, we are.
Encourage that but if you look back our history as we hit our algorithm in just about every year in fact.
Speaker Change: You know yourself over the last 10 years, we've hit 4%.
Speaker Change: When this one it was one of the reasons why we said hey, we make.
Matt Farrell: that are. Yeah, and I think, you know, just to add to that, you know, why do we take share over time? Well, one of the reasons is we have great innovation, and we're putting support behind innovation to go drive trial to grow, to grow households. And, and that's kind of also where we're reinvesting as we over deliver in 2024. So that's why we think we're going to enter 2025.
Speaker Change: Make that are our algorithm going forward.
Speaker Change: Just to add to that.
Speaker Change: Why do we take share over time, well one of the reasons is we have great innovation and we're putting support behind innovation to go drive trial to grow to grow households.
Speaker Change: And that's kind of also where we're reinvesting as we over deliver in 2024. So that's why we think we're going to enter 2025 with momentum.
Matt Farrell: So when you have contracting categories.
Speaker Change: So when you have a contracting categories.
Speaker Change: The way home is always going to be innovation and share gains.
Chris Carey: Okay, thanks a lot guys.
Speaker Change: Okay. Thanks, a lot guys.
Speaker Change: Okay.
Operator: Thank you.
Speaker Change: Thank you we'll take our next question from <unk> with Us.
Rupesh Parikh: We'll take our next question from Rupesh Parikh with Oppenheimer. Your line is open.
Speaker Change: At the time or your line is open.
Rupesh Parikh: Good morning, and thanks for taking my question. So just going back to the vitamin business, so an impairment this quarter, how are you thinking about the path to stabilization and then growth? Do you think in 25, we may start to see stabilization in that in that business and just any green shoots maybe you're seeing with the effort? Yeah, what would the We've been at this now for probably more than a year. Things such as graphics and packaging and messaging, those things that we can control. As far as innovation goes, that has not hit the market.
Speaker Change: Good morning, and thanks for taking my question, So just going back to the vitamin business. Soon impairment. This quarter. How are you thinking about the path to stabilization and then growth do you think in 'twenty five we maybe start to see stabilization in that business. I mean, just any green shoots maybe youre seeing with your efforts there.
Speaker Change: Yes, what would be.
Speaker Change:
Speaker Change: We've been at this now for probably.
Speaker Change: More than a year and a half.
Speaker Change: The things such as graphics and packaging and messaging those things that we can control alright are in place.
Speaker Change: As far as innovation goes that has not hit the market. We really haven't had any meaningful innovation for a few years now and that's what as I said in lines early remarks, but that's what gives us some optimism about stabilizing this business in 2025.
Rick Dierker: And that's what, as I said... That's what gives us some optimism that's stable. Yeah, maybe maybe some other green shoots. And as Matt said, we have, you know, probably 10 different things are happening at the core of it is we got to get the consumer being delighted in our product again, right and making sure that we're doing all of our reformulation. Consumers. Our products and our brand that they know. But some green shoots, I would say, you know, we've seen some lifts and some retailers where a few of these things are kind of ahead of the curve, and so that's been encouraging.
Speaker Change: Yeah, maybe maybe some other green shoots and as Matt said, we have probably 10 different things that are happening at the core of it is we've got to get the consumer.
Speaker Change: Being delighted and our product again, right and making sure that we're doing all of our re formulations so that the.
Speaker Change: Consumers are picking our products and our brand they know and they love for a long period of time.
Speaker Change: But some green shoots I would say, we've seen some lift and some retailers where a few of these things are kind of ahead of the curve and so thats been encouraging.
Speaker Change:
Rick Dierker: You know, we did, you know, one of the 10 levers was looking at price gaps, and we adjusted the price gap.
Speaker Change: We did one of those 10 levers was looking at price gaps and we adjusted the price gap and.
Rupesh Parikh: Starr, William Garcia, Frank Lynch, Shathon Madoff, Teresa Raulio, Heider Eberstein, Gretchen Ashforth, Bill Beldi, Paul Hanson, arrested for corruption, Yeah, I'm looking for Kareem Shoots. The one, this is a small part of the business, but Little Critters has been really Farifat, and Little Critters gained some share in the past quarter. It's a good thing, but really, the lion's share of the business is adult, and that's Great.
Speaker Change: Couple of areas and units are up dramatically so theres good progress.
Speaker Change: That said innovation really is coming in March April of next year. So we've got to give that a shot and we're optimistic.
Speaker Change: Sure.
Shoots the one this is a smaller part of the business, but little critters as Ben.
Speaker Change: It's been really responsive so far if that little Curtis games.
Speaker Change: Gained some share in the past quarter. So that's a good thing, but really that's the lion share of the business as adult and that that's where we need the innovation.
Rupesh Parikh: Oh, thank you.
Speaker Change: Great. Thank you. Thank you all possible.
Operator: Thank you, impossible.
Speaker Change: Hey.
Operator: Thank you.
Bonnie Herzog: We'll take our next question from Bonnie Herzog with Goldman Sachs. Your line is open. All right. Thank you. Good morning. I had a question on your marketing investments. You called out expected stepped-up spend in Q4, and you raised your guidance a bit this year to more than 11% as a percentage of sales.
Thank you we'll take our next question from Bonnie Herzog with Goldman Sachs. Your line is open.
Bonnie Herzog: Great. Thank you good morning.
Bonnie Herzog: I had a question on your marketing investments you called out expected stepped up spend in Q4 and you raised your guidance a bit this year to more than 11% as a percentage of sales. So could you give us more color behind the greater investments in terms of types of spend any changes with strategy either Chan.
Bonnie Herzog: So could you give us more color behind the greater investments in terms of types of spend, any changes with strategy, either channel, medium, etc.? And then I would be curious to hear if more of the dollars will be shifted internationally.
Bonnie Herzog: All medium et cetera.
Bonnie Herzog: And then I would be curious to hear if if more of the dollars will be shifted internationally.
Bonnie Herzog: And then, if I may, finally, just on a go-forward basis, should we assume you're going to continue to step up this spend as a percentage of sales in the next several years to support your 4% organic sales growth expectations, as you've called out in your evergreen model? Thank you.
Bonnie Herzog: And then if I may finally, just on a go forward basis should we assume youre going to continue to step up.
Bonnie Herzog: This spend as a percentage of sales in the next several years to support your 4% organic sales growth expectations as you've called out in your evergreen model. Thank you.
Rick Dierker: Hey, Bonnie, that's a good detailed question. I'll start and I'm sure Matt wants to add a couple thoughts. But when you look at our raise of marketing spend and go into 11 to somewhere between probably 11 and 11 and a half percent, that's that's meaningful. That's 20 plus million dollars in some cases, and some of that is international across markets because we're driving different brands and they're doing really well too, but TheraBreath expansion, Hero expansion, Stereomar, Batiste internationally. But in the U.S., we have a lot of places where we're spending, but most of that spends behind our innovation again.
Speaker Change: Bonnie that notice.
Speaker Change: Good detailed question.
I'll start and I'm sure Matt wants to add a couple of thoughts, but when you look at our raise of marketing spend and then go into 11 to somewhere between probably 11 and 11, 5% that's meaningful that's.
Speaker Change: Oh 2009.
Plus the billion dollars and in some cases and some of that is international across markets, because we're driving different brands and they're doing really well too, but thorough breadth expansion Harrow expansion.
Speaker Change: There are more parties internationally, but in the U S. We have.
Speaker Change: A lot of places, where we're spending but most of that spend behind our innovation again.
Rick Dierker: This is one of our best years of innovation. We believe that's why we're getting share in many cases, that's why we're doing so well and over-delivering even our top line expectations. A lot of the marketing spend goes behind things like deep clean on laundry, things like sheets on laundry, things like hardball on litter, and our new Batiste touch and move.
Speaker Change: This is one of our best years of innovation, we believe that's why we're gaining share in many cases that's why.
Speaker Change: We're doing so well and over deliver and even our topline expectations and so a lot of the marketing spend goes behind things like deep clean on laundry things like sheets on laundry things like.
Speaker Change: Hardball on litter and our new batiste touching move.
Matt Farrell: And the only thing I would add to that is that 85% of our advertising... We have a great ability. of the Year. by brand.
Speaker Change: Yeah, and the other thing I would add to that is 85% of our advertising is digital.
Speaker Change: Right now so we have a great ability to move around and take advantage of different vehicles at different times of the year. So I wouldn't say any more than that.
Speaker Change: Go brand by brand, but Rick's right.
Matt Farrell: But Rick's right. International is part of where the Spann Reporter. Even a little bit in especially products and as far as our future looking, you know, marketing as percentage, you know, our algorithms around 11%. It all depends on how our share, share is the scorecard. So our shares are doing fantastically well. You heard in the release five or seven, I think year to date, we're 10 of 14 for all of our brands, all of our old power brands. So that scorecard is what really matters. And as long as we're gaining share and more often than not, I think that's the right level.
Speaker Change: Internationally as part of where the spend is.
Speaker Change: Fourth quarter is that domestic even a little bit in our specialty products and as far as our future looking now marketing as a percentage of our algorithms around 11%.
Speaker Change: It all depends on how our share shares the scorecard. So our shares are doing fantastically well you heard in the release five to seven I think year to date, we're kind of 2014 for all of our brands all of our old power brands. So that scorecard is what really matters and as long as we're gaining share and more often than not I think that's the right level.
Bonnie Herzog: And if we feel like it's not then we'll just All right, thank you. I did ask multiple questions in one, so I'll pass it along. Thank you.
Speaker Change: And if we feel like it's not been real adjustment.
Speaker Change: Alright. Thank you I did ask multiple questions in one so I'll pass it along thank you.
Steve Powers: We'll take our next question from Steve Powers with Deutsche Bank. Your line is now open.
Speaker Change: Thank you we'll take our next question from Steve Powers with Deutsche Bank. Your line is now open.
Steve Powers: Thanks very much. Actually, to follow up on that, sorry, I might have missed it in your answer, but the marketing spend in the third quarter came in a little bit lower than at least external expectations, you know, obviously made up for in the fourth quarter. But was there anything, you know, from your perspective that shifted? I would even call it timing, it's probably just a disconnect between the outside models. Okay, okay, cool.
Steve Powers: Thanks, very much actually to follow up on that sorry, I might have missed it in your answer but the marketing spend.
In the third quarter came in a little bit lower than at least the external expectations.
Steve Powers: Obviously made up for in the fourth quarter, but was there anything from your perspective that shifted shifted.
Steve Powers: That marketing support from <unk> to <unk> or was this just more of an anomaly versus how we all the outside model but.
Speaker Change: Yes, I think it is more of an anomaly I mean, we're getting very specific but we were up 80 basis points in Q3, which is a significant increase.
Speaker Change: We had told everybody that we were going to be down a few hundred in Q4, because we were spreading that that spend that was maybe a little higher in Q4 of last year over to Q1, Q2, and Q3 to better support innovation and I.
Speaker Change: I wouldn't even call it timing of it's probably just the disconnect.
Speaker Change: Between the outside models and what we're gonna do okay.
Steve Powers: And I guess more of an overarching question, you've kind of touched upon some of this, some of what I think is going to be in your answer. But, you know, the perception among many investors of late, is that, you know, Church & Dwight's in a relatively fragile position here, navigating this second half, and heading into next year, just given that so much growth has been driven by TheraBreath and Hero, whereas investors view the core legacy business as being a bit more choppy, probably with, you know, out of focus there on categories like vitamins and litter of late.
Speaker Change: Okay, Cool and I guess more of an overarching question you've kind of touched upon some of this some of what I think is going to in your answer but.
Speaker Change: The perception among many investors of late.
Is that the church and Dwight and a relatively fragile position navigating this second half and heading into next year, just given that so much growth has been driven by thorough breath of hero, whereas investors view, the core legacy business as being a bit more choppy probably with.
Added focus there on categories like vitamins and literally.
Matt Farrell: But just how do you respond to that, either with respect to reasons to believe in the resilience of TheraBreath and Hero, or conversely, reasons for more holistic confidence in that in that legacy core business?
Speaker Change: But just how do you respond to that either with respect to reasons to believe in the resilience of their breath and hero or Conversely reasons for more holistic confidence in that legacy core business.
Matt Farrell: Yeah, hey, I'll take a swing at that. Look, we manage a portfolio, we're in a lot... Yeah, it's true that Therabreath and Hero. Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES Trang. So I think the new products that we have in those, some of the categories. are going to be a big part of our growth in the future. That would be sheets, and that would be hard. and also the innovation and other categories outside. Well, but if you look long term, TheraBreath is not done. When we bought this business, we said, hey, this can be a half-a-billion-dollar business over time.
Rick Dierker: Yeah, Hey, I'll take a swing at that Rick.
Rick Dierker: Brick and kind of pile on I look we are we manage our portfolio.
Rick Dierker: We're doing lots of different categories and yes. It is true that a third breath and hero.
Rick Dierker:
Rick Dierker: Delivering outsized outperformance over the past year.
Rick Dierker: But it just ebbs and flows over the years. If you look back over many years is different times with different businesses pull the train. So I think the new products that we have in those some of the categories that you may be referring to like laundry and litter are going to be a big part of our growth in the future that would be sheets.
Rick Dierker: That'd be hard ball.
Rick Dierker: And also the innovation and the other categories outside of.
Speaker Change: Uh huh.
Speaker Change: Patches.
Speaker Change: As well, but if you look long term.
Speaker Change: The third breath as is not done when we bought this business. We said hey, this can be a half a billion dollar business over time so.
Matt Farrell: Whereas, you'd say, yeah, the distribution for that business is probably... Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES I think there's still significant growth ahead of us. And as far as Hero goes, we don't want to get distracted by moving into other categories. Patches and created more awareness around that You're a brand. to spread into adjacent categories going forward. I think investors should be confident that those two brands will continue to grow in the future. Laundry and Litter. We have a differentiated product.
Speaker Change: Whereas you would say yeah. The distribution for that business has probably been a achieved as far as number of doors. We havent done is spread out on shelf with the other variance. So I think there's still a significant growth ahead of us but their breath.
Speaker Change: And as far as hero go so we don't want to get distracted by moving into other categories. We wanted to make sure we nailed in Peru.
Speaker Change: Patches and created more awareness around that and more household penetration but.
The hero brand has.
Speaker Change: Has the appetite to spread into adjacent categories going forward. So I think.
Speaker Change: There should be confidence that those two brands will continue to grow in the future and that's.
Speaker Change: Because of the innovation, we have in laundry and litter.
Speaker Change: Can't prove et cetera.
Speaker Change: We have a differentiated products will drive growth in the future as well, yeah, and I would just echo a few of those comments I think their breadth as euro have years of runway you know T. D piece in some cases, but just.
Matt Farrell: Yeah, and I would just echo a few of those comments. I think therapeuths and heroes have years of runway. You know, TDPs in some cases, but just... Mouthwash is an example of 65% household penetration, and TheraBreath is around 9%. Now, the number two mouthwash. So there's lots of runway for those two.
Speaker Change: Household penetration like mouthwash as an example, a 65% household penetration at their breath is around nine.
Speaker Change: It's now the number two mouthwash, so theres lots of runway for those two but really the crux of your question is well what about your base business and so I would say a lot of optimism.
Matt Farrell: But really, the crux of your question is, well, what about your base business? And so I would say a lot of optimism on how to figure out how to base business. You know, litter, for example, kind of messy right now, as you look at your comps, because some competitor was out of stock for such a long period of time. But if you look back, before the outage that they had, at our share, and at our share today, we've maintained about 40% of those share gains. And so I don't really look at the week over week or month over month numbers are kind of meaningless right now.
Speaker Change: Our base business litter for example, kind of messy right now as you look at year over year comps because some competitor a competitor was out of stock for such a long period of time, but if you look back before the.
Speaker Change: The average that they had at our share and our share today, we've maintained about 40% of those share gains and so I don't really look at the week over week or month over month numbers are kind of meaningless right now, but if we look at baseline and that's what I look at and so I feel like litter is strong and getting stronger.
Matt Farrell: But if we look at baselines, that's what I look at. And so I feel like litter is strong and getting stronger. Innovation, as Matt said, laundry, laundry, we're still at all time high shares, we feel like over a long period of time, we have Governor, diesem Doral Kaup, Charles G дней, Nicolas Thurston, Anny Macaluso, Solomon Davis, Great.
Speaker Change: <unk> as Matt said laundry.
Speaker Change: I'm wondering a.
We're still at all time high shares we feel like over a long period of time, we have.
Speaker Change: The same stair step up that we've experienced before we were entering the mid tier with deep clean that's doing well, it's driving incremental category growth for retailers unit doses are hitting all time highs.
Speaker Change: Going into sheets and sheets the category, that's growing 30% so a lot of optimism.
Steve Powers: Thank you very much. Thank you.
Speaker Change: Great. Thank you very much.
Dara Mohsenian: We'll take our next question from Dara Mohsenian with Morgan Stanley. Your line is now open.
Speaker Change: Thank you we'll take our next question from Dara <unk> with Morgan Stanley. Your line is now open.
Dara Mohsenian: Hey, good morning, guys. So first, just to follow up on category growth. Matt, you didn't sound particularly excited about the pickup in category growth in September, October. Is that just because you think a lot of it was driven by hurricane volume? And as you parse the underlying data, you didn't necessarily see as much of a pickup? Is it just a short enough period of time that you're not much more enthusiastic around category growth?
Speaker Change: Hey, good morning, guys. So.
Speaker Change: First just a follow up on category growth, Matt you didn't sell particularly excited about the pickup in category growth in September October is that just because you think a lot of it was driven by hurricane volume and as you parse the underlying data.
Speaker Change: Not necessarily see as much of a pick up is it just.
A short enough period of time, but youre not much.
Matt Farrell: And I know you touched on it a bit, but just trying to get a sense as we look beyond Q4, if we're in this more muted category growth environment, given a lack of pricing, or if you think you're starting to see some green shoots from a category perspective? Thanks. Yeah. I guess I must have curbed my enthusiasm, so I would say this, Dara, that if you look at the first couple of weeks of October, you'd feel like double-digit consumption growth in some categories. So that's not sustainable. so different from what we saw. any week in September or since.
Speaker Change: A much more enthusiastic around category growth.
Speaker Change: I know you touched on it a bit but just trying to get a sense as we look beyond Q4.
Speaker Change: If we're in this more muted category growth environment, given the lack of pricing or if you think youre starting to see some green shoots from a category perspective. Thanks.
Speaker Change:
Speaker Change: I guess I must have curbed my enthusiasm, so I wouldn't say that.
Speaker Change: Tara.
Speaker Change: If you looked at the first couple of them.
Speaker Change: So October is still a double digit consumption growth in some categories and say well that that's not sustainable and it's and it was so different from what we saw in.
Any week in September of course since then.
Matt Farrell: We would say the hurricane and the porch strike, no doubt. The Result If there's some pantry loading that went on in the first couple of weeks, that's just pulling forward. So we would say, hey, I'm going to kind of look at that as October is maybe an and maybe the quarter is more like September. where we inflected from June, July, August, being our categories up 2.5% versus 3%. In September, but you know, it's not. Our remarks are not necessarily a broad category, broad commentary. U.S. Economy. We look at our category. That is what. I think 3% to me is pretty high.
Speaker Change: We would say is the hurricane and the port strike no doubt influence the results. So consequently, if theres some pantry loading that went on in.
Speaker Change: In the first couple of weeks.
Speaker Change: That's just pulling forward from somewhere else in Q4, So we would say hey, I'm going to kind of look at that as a <unk>.
Speaker Change: <unk> may be an anomaly.
Speaker Change: And maybe if the quarter is more like September.
Speaker Change: Where we inflicted from June July August are categories up but.
Speaker Change: Two 5%.
Speaker Change: Is it 3%.
Speaker Change: Yeah.
Speaker Change: [laughter] September but.
Speaker Change: Not.
Speaker Change: Our remarks are not necessarily a broad categories for a commentary on the U S economy, we're commenting on our categories.
Speaker Change: So we look at the our categories.
Speaker Change: That is what we're commenting on.
Speaker Change: 3% to me.
Speaker Change: It's pretty healthy.
Matt Farrell: Yeah, if you look back at history, you know, If we were growing 4% as a company, many times the categories would be growing two or 3%, we'd be taking share and that's how we got So that's just kind of in line with history. Great, that's helpful.
Speaker Change: If you look back in history.
Speaker Change: If we were growing.
Speaker Change: Growing.
Speaker Change: 4% is a company many times of categories would be growing two or 3%, we'd be taking share and that's how we got to the 4%. So I'd say, it's kind of in line with history.
Speaker Change: Great. That's helpful and then on hero and Terra brands can you give us an update on how much of the business is international today for each of those brands and how.
Matt Farrell: And then on Hero and TheraBrat, can you give us an update on how much of the business is international today for each of those brands and how much incrementality you see looking out to 2025 in terms of expansion potential? Yeah, what I can tell you, without quoting numbers for sale. We've been we've been running really hard to get service. And our goal is to have a hero registered in 40 countries by the end of 2024. were there. Thank you. Regulatory Body. We're pleasantly surprised that... Both brands do travel well. Even TheraBreath. Now TheraBreath is the highest priced alpha wash on the market.
Speaker Change: How much incremental do you see looking out to 2025 in terms of expansion potential.
Speaker Change: Yeah, what I, what I can tell you.
Speaker Change: Quoting numbers for sales is that we've been we've been running really hard to do.
Speaker Change: Get their breath and hero registered in other countries and our goal is to have them.
Speaker Change: Hiro registered in 40 countries by the end of 2024.
And were there so we feel good about that.
Speaker Change: The impediment of courses is regulatory bodies and they vary from.
Speaker Change: As a country.
Speaker Change: We were pleasantly surprised that you know both brands do travel well you've been Thoroughbred so surprising to see.
It's priced mouthwash.
Speaker Change: Market today in the U S.
Matt Farrell: International. Raised Eyebrow. Jeez, I'm telling you. Spence's mouthwash, but yet it has been. We'll keep that in mind for...
Speaker Change: When you go to international markets.
Speaker Change: There's a raised eyebrow, but I'm curious, how we should be successful with respect to the expensive mouthwash, but yet it has been so it's we'll keep that in mind for.
Dara Mohsenian: May be end of January when we talk to you guys, you have an analyst day, and we'll frame out a little bit better Hero and TheraBrite. Volunteer, Great. Thanks. I'll pass it on. Thank you.
Speaker Change: Maybe end of January when we talked to you guys have an analyst day.
Speaker Change: Well frame out a little bit better I'm careful and thorough breath percentage U S versus international and how many countries were registered in and what are what our expectations are.
Speaker Change: Yeah.
Speaker Change: Great. Thanks, I'll pass it on.
Speaker Change: Right.
Peter Grom: We'll take our next question from Peter Grom with UPS. Your line is now open.
Speaker Change: Thank you we'll take our next question from Peter Grom with UBS. Your line is now open.
Peter Grom: Thanks, operator.
Rick Dierker: Good morning, everyone. I just wanted to follow up on Dara's question. there. I mean, maybe just to be clear, can you just help us understand what you are assuming for category growth in 4Q? Matt, I think you just said you're kind of assuming the September trends for the for the quarter rather than the stronger October or the weaker July and August. So just I just wanted to clarify that. And then I guess if that is the case, if you are assuming slightly stronger, you know, category growth this quarter, and I apologize if I did miss it, but can you maybe help us understand what's driving the sequential slowdown in the 4Q organic sales?
Peter Grom: Thanks, operator, and good morning, everyone I just wanted to follow up on <unk> question.
Peter Grom: There I mean, maybe just to be clear can you just help us understand what you are assuming for category growth in 14.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Got it.
Peter Grom: Okay.
Okay great.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Rick Dierker: Thanks.
Peter Grom: Okay.
Peter Grom: Okay.
Rick Dierker: Well, let's go to your first question with respect to categories. It was four and a half for the first five months of the year. The next three months were two and a half. October was a really State's Q4 on average would be 2.5. So we'll say, we'll take, we'll say, uh, hey, the, by the October's and. Remember, the seminal will be a lot longer. And that's what's so different than what we thought in July. Consequently, yeah, we had a really. 3rd quarter but we beat our number organically but we're saying yeah for second half we still feel good about three percent.
Peter Grom: Sure.
Peter Grom: Okay.
Peter Grom: Excellent.
Peter Grom: Okay.
Peter Grom: Right.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Okay.
Peter Grom: Oh yeah.
Peter Grom: Okay.
Peter Grom: July.
Peter Grom: Consequently, yeah, we had a really good for third.
Third quarter, but we beat our number organically, but we're saying yeah for second half, we still feel good about 3% in total for the second half and that's why we said two to three is fine.
Rick Dierker: And that's why we said two to three is fine as a call. Got it.
Peter Grom: Call for Q4.
Peter Grom: I'll pass it on. Thank you.
Speaker Change: Got it I'll pass it on thank you.
Anna Lizzul: We'll take our next question from Anna Lizzul with Bank of America. Your line is open.
Thank you we'll take our next question from Ana <unk> with Bank of America. Your line is open.
Anna Lizzul: Hi, good morning. Thanks so much for the question. I wanted to touch on gross margin, which outperformed this quarter. The guidance for the full year seems a bit conservative. So I was just wondering if you could talk about your outlook on commodity costs and manufacturing. I think you noted in Q3 that manufacturing costs were a bit higher. Is that also expected to impact Q4? Thank you.
Speaker Change: Hi, good morning, Thanks, so much for the question.
Speaker Change: I wanted to touch on gross margin, which outperformed this quarter the guidance for the full year. It seems a bit conservative. So I was just wondering if you could talk about your outlook on commodity cost in manufacturing and <unk>.
Speaker Change: Q3 manufacturing costs were a bit higher is that also expected to impact Q4. Thank you.
Rick Dierker: Yeah, hey, Anna, it's Rick. I think from a gross margin perspective, you're right, it's a little bit more conservative. If you say the full year is at 110, it means Q4 is up slightly. I would just remind everyone that Q4 a year ago was our high watermark at 44.6. That's part of it. Some of the commodities were flat in the first half, like ethylene, they're up in the back half, around 9%. Same for liner board. We have investments in our warehouse. So we talked about it at analyst day, and our network and that built throughout the year.
Speaker Change: Yeah, Hey, it's Rick I think from a gross margin perspective, youre right its a little bit more conservative if you say the full year.
Speaker Change: Is it 110. It means Q4 is up slightly I would just remind everyone that Q4 year ago was our high watermark at 44 six.
Speaker Change: Part of it some of the commodities were flat in the first half like ethylene or opt in the back half around 9% same for linerboard.
Speaker Change: We have investments in our warehouse that we talked about at analyst day, and all the kind of our network and that built throughout the year.
Rick Dierker: So, yeah, could that be a little conservative? Maybe. I think also we have... As we look forward, we still are seeing inflation. Like, that is, that's what we're seeing, and our job is to offset that with protests. focused on. And another thing on gross margin is, you know, as we make investments to support these new products, like in trade or couponing that also Gross Margin.
Speaker Change: So yeah, it could could that be a little conservative maybe I think also we have.
As we look forward, we still are seeing inflation like that is that's what we're seeing and our job is to offset that with productivity.
Speaker Change: We're focused on.
Speaker Change: And.
Speaker Change: And then the other thing on gross margin is low as we can.
Speaker Change: And make investments to support these.
Speaker Change: These new products like can trade or couponing that also impacts.
Rick Dierker: So that's kind of an eclectic and wide-ranging view, but there's a All right, thank you. That's helpful.
Speaker Change: Gross margins, so that's kind of a an eclectic and wide ranging view, but that's the detail.
Speaker Change: Alright. Thank you that's helpful and just as a follow up on the category discussion here are you seeing any different than customer purchasing habits between retail channel or on quantities here. Thanks.
Matt Farrell: And just as a follow up on the category discussion here, are you seeing any difference in customer purchasing habits between retail channels or on quantities here? Thanks. Now, I would say, you know, remember, we've been growing volume for five quarters in a row, row, row, and, and we continue to see, you know, most of the categories are volume driven growth, our categories and purchasing patterns are Okay, great. Thank you so much. Thank you.
Speaker Change: No I would say remember we've been growing volume for five quarters in a row row row, and and we continue to see.
Speaker Change: Most of the categories are volume driven growth at <unk>.
Speaker Change: <unk> and purchasing patterns are are the same.
Speaker Change: Okay, great. Thank you so much.
Lauren Lieberman: We'll take our next question from Lauren Lieberman with Barclays. Your line is now open.
Speaker Change: Thank you we'll take our next question from Lauren Lieberman with Barclays. Your line is now open.
Lauren Lieberman: Great, thanks.
Matt Farrell: Good morning. I just want to talk a little bit about promotional environment and laundry in particular. In last year's fourth quarter, you talked about pulling, you know, some of the unprofitable promotional activity and scanner sales were down. So just want to think about for a few, is it kind of like an easy comp as you get into fourth quarter? Or is it we're like the right base now and last year was the adjustment period and anything else you'd add on kind of promo environment in laundry? Thanks. Yeah, I'd say you're right about that, Lauren. We did eliminate some of what we thought...
Lauren Lieberman: Great. Thanks, good morning.
Lauren Lieberman: Just talk a little bit about promotional environment in laundry in particular in last year's fourth quarter, you talked about pulling some of the unprofitable promotional activity.
Lauren Lieberman: And scanner sales were down so just wanted to think about <unk> is it kind of like an easy comp as you get into the fourth quarter or is it more like the rate base now and last year was the adjustment period and anything else you'd add on kind of promo environment in laundry.
Speaker Change: Yeah, I'd say, you're right about that Lauren we did eliminate some what we thought were not.
Matt Farrell: Profitable or Uneconomical. Investments. What's different this year is we have such a great year in new product. That'll be one of the places we'll be investigating. One of the things that Rick called Yeah, okay. The one thing I noticed also, I know Deep Clean has been really successful, and I, maybe me being too picky, but it was interesting to me that in some of the Q&A thus far, when you've been talking about laundry innovation, you're putting, seems like a bit more emphasis on sheets versus Deep Clean. Can you just maybe talk about like the direction of travel you see for category development?
Lauren Lieberman: Profitable or when it uneconomical invest.
Speaker Change: Investments.
Speaker Change: What's different this year is we have such a great year of new products.
Speaker Change: And particularly in household litter with hard ball.
Speaker Change: And Cleveland.
Speaker Change: And.
Speaker Change: With the largest churches that'll be flown into places, we'll be investing in Q4 and trade promotion.
Speaker Change: One one of the things that we called out in <unk>.
Speaker Change: What's the gross margin yes.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: The one thing I noticed also new deep clean has been really successful.
Speaker Change: So maybe me being too picky, but it was interesting to me than some of the Q&A, thus far when you've been talking about laundry innovation youre, putting it seems like a bit more emphasis on sheet sources deep clean.
Speaker Change: Can you maybe talk about like the direction of travel you see for category development. How significant do you think she can be because procter you'll know of question has been doing a trial of this and as they go.
Matt Farrell: How significant do you think sheets can be? Because Proctor, you know, of course, you know, has been doing a trial of this, and as they go, it probably really helps to amplify awareness in the category of this form. So just curious, you know, your thoughts on, you know, the relevance of sheets as a, as a new form, and then the profitability of that versus, you know, the traditional liquid business, even the higher price point Deep Clean. Yeah, no, you're right, it is a good question, and it's true, we're very excited about Cheats, but let me go back to DeepClean.
Speaker Change: It really helps to amplify awareness in the category of this form.
Speaker Change: So just curious your thoughts on.
Speaker Change: Yes, the relevance of sheets.
Speaker Change: A new form and then the profitability of that versus the traditional liquid business, even the higher price point deep clean.
Speaker Change: Yes.
You're right. It is a good question and it's true we're very excited about sheets, but let me go back to deep clean so the whole idea around deep clean was to have a good better best strategy. So the good is the orange bottle space I'm a hammer.
Matt Farrell: So the whole idea around DeepClean was to have a good, better, best strategy. So the good is the orange bottle, it's the base, our arm and hammer. The better... Midtier, you know, it's our highest priced laundry detergent. some sense. It's got a 90% premium to the yellow box. Yeltsin, not the yellow box, but yellow bottle, and it's got like a 40% premium. But we're still at, you know, 15 plus percent discount to premium. And if you look at the trends, it's mid-tier. So we feel kind of good about the timing of our... It's important that that sticks, so we have...
Speaker Change: The better.
Speaker Change: I'm here with Oxiclean.
Speaker Change: And the best is as deeply and deep clean is a mid tier you know, it's our highest priced.
Speaker Change: Detergent.
Speaker Change: To give you some sense.
Speaker Change: So I've got 90% premium.
Speaker Change: The yellow box.
Speaker Change: Not a whole bunch, but yellow bottle and felt like a 40% premium.
Speaker Change: The Army Hammer Oxiclean.
Speaker Change: But we're still 15 plus percent discount to premium.
Speaker Change: And if you look at the trend it's mid tier that's been growing.
So we feel good about the timing of our launch.
Speaker Change: It's important that that sticks. So we have we have good better best going forward long term.
Matt Farrell: Good, better, best going forward. and we think that DeepClean can be a source of growth for us. Errar!! Make a correction if something wrong appear UAY You know, that's, that's. I would say, if you go back to Steve Powers' question about why you feel good going forward about your big business. and Leonard Laundrie in particular. for reasons like that. And then Sheets. Sheets is in its brand new form. Communications, there's no plastic. Yeah, could it cannibalize some of your existing... That's true, but it's, you know, we're the first major brand to launch. It's good to be first, so we think that'll be a bigger emphasis for us going forward.
Speaker Change: And we think that deep clean can be a source of growth for us.
Speaker Change: In the future and.
And that's it.
Speaker Change: I would say if you go back to Steve Powers' question about why you feel good going forward about your your.
Speaker Change: Your big businesses like laundry and litter laundry in particular.
Speaker Change: Reasons like that.
Speaker Change: And then sheets sheets.
Speaker Change: It's brand new for them and it's efficacious Theres no plastic.
Speaker Change: Hum.
Yeah could cannibalize some of your existing business, Yeah, that's true, but it's you know we're the first major brand to launch in this form scripted.
Speaker Change: It's good to be first so we think that'll be a bigger emphasis for us going forward.
Matt Farrell: The unit dose today is like 22-23% of the category. We have not had a big sharing unit though. Boucher, and between four and five. that very big subcategory. is the way home for us. I appreciate the questions. This all fits together, and that's why we put... is a good position going forward.
Speaker Change: Unit dose today is like.
Speaker Change: 22, 23% of the category, we have not had a big share in unit dose historically.
Speaker Change: And bounce around between four 5% of that very big subcategory.
Speaker Change: Sheets then in addition to our existing parts is the way home for us to grow and unit to us.
Speaker Change: I appreciate the question because we.
Speaker Change: All fits together and that's why we think we're in a good position going forward in the detergent.
Matt Farrell: Okay, thanks so much for all that.
Speaker Change: Okay. Okay. Thanks, so much for all that I really appreciate it.
Operator: I really appreciate it.
Operator: Thank you.
Kevin Grundy: We'll take our next question from Kevin Grundy with BNP Paribas. Your line is open.
Speaker Change: Thank you we'll take our next question from Kevin Grundy with BNP Paribas. Your line is open.
Kevin Grundy: Great. Thanks.
Kevin Grundy: Great. Thanks, good morning, everyone.
Kevin Grundy: Morning, everyone. Question on litter and the promotional environment there and how you potentially intend to respond. Matt, as you mentioned, Clorox has stepped up promotion levels to remarkably high levels. Most of the regained share that you're seeing with Fresh Death is coming at the expense of Arm & Hammer. So a couple of questions. Have you been surprised by the magnitude of the spend here on trade support from Clorox? It's taken dollars out of the category. It doesn't do anything to impact consumption. It seems like you're trying to get the share back in sort of one quick swing.
Kevin Grundy: On the litter and the promotional environment, there and how you potentially intends to respond Matt you mentioned Clorox has stepped up promotion levels to remarkably high levels.
Kevin Grundy: Most of the regained share that youre seeing with fresh step is coming at the expense of arm <unk> Hammer. So a couple of questions have you been surprised by the magnitude of the <unk>.
Kevin Grundy: <unk> here on trade support from Clorox is taking dollars out of the category doesn't do anything to impact consumption. It seems like you're trying to get the share back and sort of one quick swing and then how do you intend to respond.
Rick Dierker: And then how do you intend to respond? It kind of feels like it has the ear markings of a potential price war, like we saw on Laundry like over a decade ago. But Rick, if I'm interpreting your tone correctly, it seems like you're generally okay relinquishing the share gains over the past year. So your thoughts there would be appreciated.
Speaker Change: Kind of feels like it has the markings of a potential price war like we saw on laundry like over a decade ago, but but Rick if I'm interpreting your tone correctly. It seems like you are generally okay relinquishing the share gains over the past year. So you thought there would be appreciated and then I have a unrelated follow up thanks.
Rick Dierker: And then I have an unrelated follow-up. Thanks. Yeah, I'll give you a couple comments and then Matt will chime in, I'm sure. My comments, we're really, we're really happy with where we are at Litter. You know, this year over year, as Clorox comes back in stock, is what it is. Our baseline volumes are higher than they were. Our shares are higher than they were.
Speaker Change: Yes, I'll give you a couple of comments and then that will will chime in I'm sure.
Speaker Change: My comments were really we're really happy with where we are at later this year over year.
Speaker Change: As as <unk> comes back in stock.
Speaker Change: Is is what it is our baseline volumes are higher than they were.
Speaker Change: Our shares are higher than they were.
Rick Dierker: We are really happy with a 40% or so share gain, if you look back We're not going to chase share on a race to the bottom to go promote. If we promote, it's going to be behind our innovation to go drive a fair share in lightweight litter, because we think that's where the opportunity is. That's what we're doing. I'm optimistic that we're going to retain share, because that, over time, it's difficult for cats to switch litters. It just is. After they've been out for a while, and they have one product, that's what they get used to.
We are really happy with a 40% or so share gains are if you look back when this whole stuff started we're not going to go chase share on a race to the bottom to go promote.
Speaker Change: If we promote its going to be behind our innovation to go drive a fair share in lightweight litter, because we think that's where the opportunity is so.
Speaker Change:
Speaker Change: That's what we're doing.
Speaker Change: I'm optimistic that we're going to retain share because that overtime.
Speaker Change: It's difficult for her caps to switch litter. So just as you know after they've been out for a while.
Speaker Change: And they have one product, that's where they get used to them. So that's and that's also why maybe the effectiveness of some of the competitor promotions arent as high as they used to be because it's hard to switch are litters are harder. So anyway, that's some context, Matt anything like that.
Matt Farrell: So that's also why maybe the effectiveness of some of the competitive promotions aren't as high as they used to be, because it's hard to Litters or Harder. So anyway, that's some context, Matt, anything? I know, when you see numbers like 40-45% sold on deals. I'm not going to chase that. The extent we promote it, it's going to be behind hard... And yeah, obviously, you know, when you're hit with a, with a, you know, like a cyber The expectation was...
Speaker Change: No when you see numbers like a 4% to 45% sold on deal.
Speaker Change:
Speaker Change: So we're not going to chase that.
Speaker Change: Kevin.
Speaker Change: Extent, we promoted it's gonna be behind hard ball, which is part of the product and yeah. Obviously, you know when you hit with that with that.
Speaker Change: I guess the cyber event.
Speaker Change: Yeah, obviously, the expectation was that yes of course.
Speaker Change: But it is going to spend back to try to win back consumers, but.
Kevin Grundy: Yeah, we're going to be on the sidelines as far as there's been a lot of Okay, very quick follow up, and then I'll pass it on. Just on portfolio pruning. So Rick, I think you've expressed an openness here, which is generally not been part of the company strategy for a very long time. We naturally have the CEO transition, which is going to be occurring in March, you need to bring a CFO on board.
Speaker Change: Yeah, we're going to be on the sidelines as far as.
Speaker Change: Spent a lot of money to chase that number.
Speaker Change: Okay.
Speaker Change: A quick follow up on that and then I'll pass it on.
Speaker Change: Just one portfolio pruning so Rick I think you've expressed an openness here, which is generally not been part of the company strategy for a very long time.
Speaker Change: We naturally have the CEO transition, which is going to be occurring in March you need to bring a CFO onboard.
Rick Dierker: If you could just give us an update on potential parameters, scope, timing of what seems like it will be a potentially newer sort of leg to the stool, if you will, of the company strategy, and then I'll pass it on. Thank you. Yeah, I mean, as a backdrop, we got to remember a lot of stuff that we, that we do, we're going to keep doing. The company is performing extremely well. The strategy is sound. We're leaders in e-com growth, as an example. M&A is best in class. We can identify, acquire, integrate, and grow acquisitions. You know, we do a few things uniquely in the company.
Speaker Change: If you could just give us an update on potential parameters scope timing of what seems like it will be a potentially newer sort of leg to the stool. If you will.
Speaker Change: Of the company's strategy and then I'll pass it on thank you.
Speaker Change: Yes, I mean, as a backdrop, where you got to remember a lot of stuff that we are that.
Speaker Change: But we do we're going to keep doing the company is performing extremely well the strategy is sound.
Speaker Change: We're leaders in E comm growth as an example, M&A as best in class, we can identify acquire integrate and grow acquisitions.
Speaker Change: We do do a few things uniquely in the company every every year we go.
Rick Dierker: Every year, we go value every brand that we have, and we know what brands or businesses are creating value or destroying value. And we take that back, and we usually have internal teams that go turn that around or address root causes. And to the extent that we don't, then that's when things – more strategic conversations are had. Now, I'm not going to front-run any of that. I'd say – You know, early to mid next year, we'll talk more about that. But it's, it's, it's really we've been doing it for a long time. It's what we do internally.
Speaker Change: Value every brand that we have and.
Speaker Change: We know what brands or businesses are creating value or destroying value and we take that back and we usually have internal teams to go turn that around or address root causes and to the extent that we don't then that's when things are more strategic conversations or half I'm not going to front run any of that I'd say.
Oh, maybe in.
Speaker Change: Early to mid next year, we'll talk more about that but it's a it's really we've been doing it for a long time, it's what we do internally and we got a whole kind of mirror up to all of our brands just like we do when we when we do acquisitions, so but remember we have a great portfolio of brands, we have a high performing company, we're gaining share in most of our businesses. So.
Rick Dierker: And we got a whole kind of mirror up to all of our brands, just like we do when we do acquisitions.
Rick Dierker: So but, but remember, we have a great portfolio of brands, we have a high performing company, we're gaining share in most of our business, So we're coming from a position of strength. Yeah, hey, Kevin, I want to remind everybody, too, you know, if I think back to when... Within a couple of years... Head of Marketing, Supply Chain, R&D, Sales. Three of those four came from the outside. So we've been here before. We just got such a rock solid. Corp of the company, there's just a lot of talent here. There's no way we could get the numbers.
Speaker Change: We're coming from a position of strength.
Speaker Change: Yeah, Hey, Kevin I wanted to remind everybody too you know if I think back to when.
Speaker Change: I got the job and January.
Of 16.
Speaker Change: Within.
Speaker Change: A couple of years.
Speaker Change: Had a new head of marketing supply chain R&D.
Speaker Change: Sales.
Speaker Change: Three of those four came from the outside.
Speaker Change: We've been here before and we just got such a rock solid.
Speaker Change: The core of the company. This is a lot of talent here, there's no way, we could get the numbers that we get your theory.
Speaker Change: A lot of talent, the up and down the line.
Rick Dierker: Yeah, I think we're all excited about a couple searches. New Ideas, New Energy. I think we're in a real good place.
Speaker Change: Yeah.
Speaker Change: We're all excited about.
Speaker Change: There's a couple of searches and get some new people in the company new ideas new energy.
Speaker Change: I think we're in a real good place.
Rick Dierker: Okay, very good. I appreciate it. Thank you both. Thank you.
Speaker Change: Okay very good I appreciate it thank you both.
Andrea Teixeira: We'll take our next question from Andrea Teixeira with J.P. Morgan, your line is now open.
Thank you we'll take our next question from Andrea Teixeira with Jpmorgan. Your line is now open.
Andrea Teixeira: Thank you.
Rick Dierker: Good morning. So on the gross margin side, how should we be thinking about the potentials ahead of commodities and the timing of certain contracts influence your view, especially in fiscal 2025? And a follow-up on the M&A, I think that's the only question we haven't answered, we haven't asked yet, in terms of like how you're seeing the landscape.
Speaker Change: Jim. Thank you good morning, so on the gross margin side.
Andrea Teixeira: How should we be thinking about the puts and takes ahead of all commodities and the timing of certain contracts influence your view, especially for fiscal 2025.
Speaker Change: And a follow up on the M&A I think the best selling motion we have an answer we havent asked yet in terms of like how you're seeing the landscape I know youre very purposeful and cautious about why do you and your targets are but just as.
Rick Dierker: I know you're very purposeful and cautious about what your targets are, but just as a, you know, a follow-up and an update on how you're thinking about inorganic growth. Thank you.
Speaker Change: I'll follow up and an update on how you're thinking about.
Inorganic growth. Thank you.
Rick Dierker: I'll take the gross margin question. I would say I kind of commented already on, we do see inflation, as we look forward we see inflation, our job is to offset that through productivity.
Speaker Change: Yes, I'll take the gross margin.
Speaker Change: Question I would say.
Speaker Change: I kind of commented already on we do see inflation as we look forward, we see inflation, our jobs to offset that through productivity.
Speaker Change: No.
Rick Dierker: As you take a big step back, though, you know, the difference... macroeconomic indications like China demand and, and Unknown Speaker, Unknown Speaker, the U.S.
You can take a big step back though.
Speaker Change: It was a different.
Speaker Change: Macroeconomic indications like China demand in it.
Speaker Change: And.
Speaker Change: And really the the.
Speaker Change: The U S.
Rick Dierker: Autonomy, Stable but Not Outsized Growth. We have taken a position of not hedging as much as we usually do, believing that some of those commodities will come down over time. So I would tell you that's probably a good indication of our expectations.
Speaker Change: Economy.
Speaker Change: Cable, but not not the outsized growth.
Speaker Change: We have taken a position of not hedging as much as we usually do believing.
Speaker Change: Believing that some of those commodities.
Speaker Change: Come down over time, so I would tell you is that that's probably a good indication of our expectations for them as they before Andrew could you clarify your other question about M&A.
Rick Dierker: Yeah, Andrea, could you clarify your other question about... Yeah, no, thank you. Thank you, Matt. I was just like thinking more how, you know, it's been I know, it's part of your algorithm long term, not necessarily, of course, what you're giving the evergreen model does not include that. But indirectly, it does. Because whether you as you create, as you buy this code, this brands and companies, you create future growth, and it's part of your long term algorithm. So I was thinking, like more, it's been a while since you and you're accumulating cash, since you've done acquisitions, of course, the last two were very good, very creative.
Andrew: Yeah no. Thank you. Thank you Matt I was just like thinking of more how.
And I know, it's part of your algorithm long term.
Andrew: Fair enough.
Andrew: Giving the evergreen model does not include that but indirectly does because as you create.
Andrew: You buy this call just brands and companies to create future growth and as part of your long term algorithm.
Andrew: I was thinking like more it's been a while since you in neocon related cash since you've done acquisitions of course, the last year were very good very accretive.
Rick Dierker: So just thinking of how we should be approaching that, or we should be thinking, you're focusing more inorganic at this point. Well, look, we're, uh, we're always on. Our criteria is pretty strict, so we... It is true that you can buy a couple of businesses that can be fast growing for a couple of years, but then they have to grow. 3-4% or faster. I would say no, we're not saying that we're focusing solely Fowler, Richard Dierker, Anna Lizzul, Korinne Wolfmeyer, Robert Moskow, Richard Dierker, 11, but still if you look at that through a three-year period.
Andrew: Just thinking of how we should be approaching that or we should be thinking.
Andrew: Youre focusing more inorganic at this point.
Speaker Change: Well look at.
Speaker Change: We're always on the hunt.
Generally so much cash.
Speaker Change: Our criteria is pretty strict so we'd do.
Speaker Change: Pretty fussy about the things that won't buy it is it is true that you can buy.
Speaker Change: A couple of businesses that can be fast growing for a couple of years, but then they have to grow.
Speaker Change: 3% to 4%.
Speaker Change: Faster, depending on which categories are going forward. So I was I would say no we're not saying that we're focusing solely on.
Speaker Change: The existing portfolio, but I'll remind everybody. If you go back in time, we've had periods, where we've had droughts before where we didn't buy a business. So I think the longest one was probably between that.
Speaker Change: Oh wait and 11, when we bought Orajel.
Speaker Change: Oral gel in the next one was batiste in 2011, but still if you look at that two or three year period, we had three great great years. So.
Rick Dierker: Great Year. So, you know, it's, it's, it's, we're not, our algorithm is. Yeah, and the reason we as you look back, the reason we're we are more successful than most to identify, acquire, integrate and grow acquisitions, because we're really fussy. And so that's, that's part of the model.
Speaker Change: It's we're not our algorithm isn't dependent upon.
Speaker Change: Pull off an acquisition and the reason we as you look back the reason, where we are more successful than most to them.
Speaker Change: Identify acquire integrate and grow acquisitions, because we're really fussy and so that's.
Rick Dierker: And that's what we're going to continue to be, we want to make sure we do the right deal when we do the Okay, thank you. Thank you.
Speaker Change: That's part of the model and that's what we're going to continue to be we want to make sure. We do the right deal when we did the deal.
Okay. Thank you.
Speaker Change: Okay.
Filippo Ferrari: We'll take our next question from Filippo Ferrari with Citi. Your line is open.
Speaker Change: Thank you we'll take our next question from Filippo <unk> with Citi. Your line is open.
Filippo Ferrari: Hey, good morning, everyone. I want to ask you about innovation, and maybe you can give us some context of the contribution from innovation this year in laundry and the rest of your business, and just any plans for 2025 and areas of potential further innovation. And then a quick follow up.
Speaker Change: Hey, good morning, everyone.
Speaker Change: I wanted to ask you about innovation and maybe you can give us some context of the contribution from innovation this year.
Speaker Change: Laundry and the rest of your business and just any plans for 2025 and like areas of potential further innovation.
Speaker Change: And then a quick follow up.
Rick Dierker: So on the gross margin, as we think about elections and potential for tariffs, last time there was some implication on the water pig business from some portion that were imported from China. Maybe can you remind us any potential exposure on China tariffs? Thank you.
Speaker Change: So on the gross margin as we think about elections and potential for tariffs.
Speaker Change: Last time, there was some implication on the water business from some parts of a portion of that were imported from China and B can you remind us any potential exposure on China tariffs. Thank you.
Rick Dierker: Yeah, thanks for the question on innovation. We're actually super excited about innovation. It's close to around 2% incremental net sales for us. So remember, we have a high bar, we don't call gross sales, we don't call gross new product contribution, it's incremental net sales. So about half of our growth is kind of coming from innovation, which is fantastic. That's been accelerated, it used to be one, one and a half percent. And so we've built that muscle, we have a lot of different inputs, you know, Carlos, our leader in R&D, Leslie, our leader in NPD, you know, all across the commercial team, we are we are doing really well on innovation.
Speaker Change: Yes. Thanks for the question on innovation, we're actually Super excited about innovation, it's close to around 2% incremental net net sales for us in 2020.
Speaker Change: Four so remember we have a high bar, we don't call gross sales, we don't call gross new product contribution it's incremental net sales so.
Speaker Change: About half of our growth is coming from innovation, which is fantastic that's been accelerated it used to be 115%. So we've built that muscle that we have a lot of different inputs.
Speaker Change: Carlos our leader in R&D Wise, we are leader in N. P. D. All across our commercial team. We are we're doing really well on innovation.
Rick Dierker: I expect that to continue. I think as we look forward, we have great pipelines over the next two or three years. We don't, we're not really even talking about 2025. Right now we're talking about 2026 and even early conversations on 27.
Speaker Change: I expect that to continue.
Speaker Change: I think.
Speaker Change: As we look forward, we have great pipelines over the next two or three years. So we don't we're not really even talking about 2025 right now we're talking about 'twenty 'twenty six and even early conversations on 27th.
Rick Dierker: So Reards, Tony Rammel, Steven Blankfast, Adam Zasmi, Pete Buettner, Don Evan, Amber Sands, Chris Pratt, Peter Barr, Reclass, a lot of our SIC codes, import codes, and so that has helped, and as you draw a circle around what may or may not be impacted.
Speaker Change: That muscle is alive, and well and we're going to keep investing behind it and driving our investment behind it when China right just like everybody.
Speaker Change: We're well aware of.
Implications there I would say two things one is we did.
Speaker Change: Re class a lot of our S. ICD codes important codes.
Speaker Change: And so that.
Speaker Change: That has helped.
Speaker Change: And as you draw a circle around what may or may not be impacted the second thing is we have moved some production outside of China.
Rick Dierker: The second thing is we have moved some production outside of China. So it's most material for the Waterpik business, but there are plans in place and actions that we've taken to mitigate that.
Speaker Change: And.
So it's it's most material for the Waterpick business, but there are plans in place and actions that we've taken to mitigate that impact.
Rick Dierker: All right, thank you.
Alright, thank you.
Rick Dierker: Thank you.
Bill Chappell: We'll take our next question from Bill Chappell with Trost Securities. Your line is now open.
Speaker Change: Thank you we'll take our next question from Bill Chapell with true Securities. Your line is now open.
Bill Chappell: Good morning, and thanks for squeezing me in. Going back to vitamins. So I guess I'm having a tough time or help me understand two things. One, just from a business standpoint, I mean, are you now thinking you need to spend more money behind it in 25? Or is it because With you being down 10% and the category being down basically flat, I'm not sure I understand the green shoots. It seems like things are getting worse. And so you can either step up and put a lot of money behind it, or you can kind of ease back and manage it more and more for cash.
Bill Chapell: Good morning, and thanks for squeezing me in.
Speaker Change: Yes.
Speaker Change: Dawn.
Speaker Change #101: Going back to <unk>.
Speaker Change #101: <unk> vitamins.
Speaker Change #101: I guess.
Having a tough time or maybe help me understand two things one.
Speaker Change #101: From a business standpoint, I mean are you now thinking you need to spend more money behind this in 'twenty five.
Speaker Change #101: Or is it because.
Speaker Change #101: With <unk> being down 10% in the category being down basically flat if I am not sure I understand the green shoots it seems like things are getting worse and so you can either step up and put a lot of money behind it or you can kind of ease back and manage it more and more for cash. So are we at that point in a decision standpoint, and then second kind of related I guess.
Bill Chappell: So are we at that point in a decision standpoint?
Rick Dierker: And then second, kind of related, I also don't fully understand maybe the impairment charge 10 years after acquiring the business. So maybe can help me understand why that was there and the timing and what that says, if anything. Thanks so much. Yes, sure, Bill. I would say. Let me take the second one first is when you when we do an impairment charge, all that is is just a looking forward of our model on what our growth rate and we say, oh, we have a gap and future growth and profits aren't as strong as they used to be.
Fully understand maybe the impairment charge.
Speaker Change #101: Years after acquiring the business. So maybe you can help me understand why that was there and the timing and what that says if anything thanks. So much.
Speaker Change #102: Sure Bill.
Speaker Change #103: I would say.
Speaker Change #103:
Speaker Change #103: Okay.
Let me take the I guess the second one first is when you when we do it and impairment charge all of that is just are.
Speaker Change #103: But looking forward of our model on what our growth rates.
Speaker Change #103: Both rate assumption is and that has what the category is growing at and what our.
Speaker Change #103: Expectations are as well as our margin expectations and they've come down since we originally put all of those assets on the books and so it's.
Speaker Change #103: It's a kind of a reconciling.
That right.
Speaker Change #103: Original expectations to what our current number is after we have amortization or.
Speaker Change #103: And we have value that versus the intangible numbers in and we say that we have a gap in and future growth and profit turned as strong as they used to be and so that's how you take the charge 10 years after.
Rick Dierker: And so that's how you take the charge 10 years after. Your first question was on, oh, why do we think, well, we're putting more money behind We're not going to go chase incremental spending on promotions and trade and advertising. That was a few of the levers that we pulled this year, and you're right, some of that is not working as we had hoped. Some of the things are working, and they do have green shoots. The biggest, most important single thing that we can do is make sure that our core products are delighting the consumer, and that's why we're so focused on the innovation piece.
Speaker Change #104: Your first question was.
Speaker Change #105: On Oh, why why why do we think are well.
Speaker Change #105: Well, we've been putting more money behind it.
Speaker Change #105: We're not going to go chase incremental spending on promotions and trade in and advertising that.
Speaker Change #105: It was a few of the levers that we pulled this year and you're right. Some of that is not working as we had hoped some of the things are working and they they do have green shoots the biggest most important single thing that we can do is make sure that our our core products are delighting the consumer and that's why we're so folks.
Speaker Change #106: Just on the innovation piece. So we think this is the first time in a few years that we've put the full strength of the company on reformulated and vitamins or did they take we have the our taste advantage back.
Rick Dierker: We think this is the first time in a few years that we've put the full strength of the company on reformulating vitamins so that we have our taste advantage back. We're hitting key marks in the market on sugar-free, on plussing up our vitamins, so all those things are, I think, putting us in a better position to compete, and they're way more important than... Spending more on trade or.
Speaker Change #106: We're hitting key marks in the in the market on sugar free.
Speaker Change #106: <unk> plus enough our vitamin so all those things are.
Speaker Change #106: Putting us in a better position to compete in either the way more important than that.
Speaker Change #106: Sending more on trade or display.
Rick Dierker: Smith, https://www.youtube.com.uk I don't think the answer to that is... by Business, the Excessive Purchase Price Overtangling Asset. Largely going to be goodwill. So that's always going to be a big part of it.
Speaker Change #106: Displays or or do another packaging stuff.
Speaker Change #106: Yes.
Add to that is.
Speaker Change #107: When you buy a business the excess of the purchase price over tangible assets is largely.
Speaker Change #106: Largely going to be goodwill.
That's always going to be a big part of any write off and it's all dependent upon the DCF model and as far as green shoots.
Rick Dierker: And as far as green shoots go, that was not in our commentary. I think somebody offered up that they were asking about. We would say that we've done. Amat. This business really struggled through and post-COVID. And in the meantime, we've been just working on improving our supply chain. which is now we have in a good place and in doing the work on a new project. We thought 2024 was going to be an inflection point, it was not. In the end, it's going to be the innovation. So this time next year, hopefully we'll be having a different conversation.
Speaker Change #108: So that was not in our commentary I think somebody offered up that they were asking about green shoots.
Speaker Change #108: We would say that we've done the things we can control we have seen some benefit and some growth in little critters, it's not the lion's share of the business and as you know.
Speaker Change #108: <unk>.
Speaker Change #108: We have this business really struggled through and post Covid Ria clients right.
Speaker Change #109: By the retailers.
Speaker Change #109: And in the meantime, we've been just working on on.
Speaker Change #109: Proving our supply chain, which is now we have in a good place and in doing the work on new products. So the innovation is ahead of us.
Speaker Change #110: Uh huh.
Speaker Change #110: We thought 2024 was going to be an inflection point it was not.
Speaker Change #110: That was dependent upon all the things, we have talked about packaging and graphics and.
The positioning and messaging and advertising, but Indiana, it's gonna be innovation building.
Speaker Change #110: Rick went through the some of the things were changing and that's ahead of us in 2025. So this time next year.
Speaker Change #110: Hopefully, having a different conversation with you.
Bill Chappell: Got it.
Bill Chappell: Which leads me to this time next year, we won't be having a conversation. So congratulations on that. And we will have you for a few more months, Matt, on the retirement and Rick on the promotion. Thanks. Okay Bill, I hope you make it to New York in January. Good message. Thanks, Bill.
Speaker Change #111: Got it.
Speaker Change #112: Leaves me to this time next year, we won't be having a conversation so congratulations.
Speaker Change #112: And then we'll have you start a few more months, Matt on the retirement and Rick on the promotions. Thanks.
Speaker Change #113: Bill I hope you make it to New York in January.
Bill Chapell: I would miss it.
Bill Chapell: Thanks Bill.
Olivia Tong: We'll take our next question from Olivia Tong with Raymond James. Your line is now open.
We'll take our next question from Olivia Tong with Raymond James Your line is now open.
Olivia Tong: Great, thanks so much.
Olivia Tong: Great. Thanks, so much and congrats on retirement and promotion to you guys as well.
Olivia Tong: And congrats on retirement and promotion to you guys as well. My question is primarily around some of the more recent premium price innovation that you've benefited from, particularly laundry with deep clean in the power sheets and then in litter as well. So, you know, as we go into a potentially more, or we are in a more challenging backdrop, does, does your trade up opportunity become more challenging relative to your peers? When macros get more challenging, since, you know, your consumers, obviously, view a little bit more towards value tier, therefore, would imagine that they're a bit more pressured relative to consumer average.
Olivia Tong: My question is primarily around some of the more recent premium priced innovation that you benefited from particularly in laundry with deep cleaning the piracy timna and later as well so yeah.
Olivia Tong: Go into a potentially more or we are in a more challenging backdrop.
Olivia Tong: Does your trade up opportunity become more challenging relative to your peers when macro get more challenging.
Olivia Tong: Hey.
Olivia Tong: Tumors, obviously skew a little bit more towards value tier therefore, what imagine if they're a bit more pressured relative to consumer habits. So just wondering about your ability there and then the mix of locations given that you obviously have been able to continue to eke out a bit of mix benefit in the domestic business.
Matt Farrell: So just wondering about your ability there. And then the mixed implications, given that, you know, you obviously have been able to continue to ease out a bit of mixed benefit in the domestic business, despite obviously all the pricing lapping.
Olivia Tong: Despite obviously all the pricing lapping thank you.
Matt Farrell: Thanks. Okay, you got a lot in there. I think if I wanted to boil it down... because of our premium offerings of Lake, would that...
Okay got.
Speaker Change #115: We've got a lot in there.
Speaker Change #116: I wanted to boil it down.
Speaker Change #117: Because of our premium.
Speaker Change #117: <unk> of late.
Speaker Change #117: Would that disadvantage us and I would say if you just take them one at a time for us harmful windows Hartzell.
Matt Farrell: And I would say if you could just take them one at a time as far as harm. We're going to move into our share growth, you know, quarter after quarter. last year. There was like four and a half percent of the category. Man, you know, that's grown quite a bit. Row, and it's because of the performance of the product. or As Hard As A Rock. There's nothing in the category like it. is It's Laundry in a Box. Given over time, maybe it's been a slow roll as far as the consumer loans. sustainable products, but this one seems to be a winner for us.
Speaker Change #117: <unk> has been contributing to our share growth.
Speaker Change #117: You know quarter after quarter end.
Speaker Change #117: Last year.
Speaker Change #117: There was like four 5%.
Speaker Change #117: The category.
Speaker Change #117: The lightweight category and that's grown quite a bit.
Speaker Change #117: We will update everybody.
Speaker Change #117: In January about what our share gain was on the entire year, but we think that's going to continue to grow and it's because of the performance of the product, which is just stuff seizes up.
Speaker Change #117: He's closer as hard as Iraq Theres nothing in the category.
Speaker Change #117: Like it.
Speaker Change #117: Our sheets.
Speaker Change #117: Is its laundry in a box and.
Speaker Change #117: Given over time, maybe it's been a slow roll as far as the consumer willing to pay for.
Speaker Change #117: Stable products, but this one seems to be a winner for us. So we don't think that.
Matt Farrell: Don't think that For more information visit www.FEMA.gov because we now have the product. Laundry and Litter, where are. Corp Products, Our Values, for the yellow box. The Yellow Bottle. Those are value products. But over time, we've offered premium products, and our consumer has traded up to them.
Speaker Change #117: Simply because our category historically, our portfolio historically has been focused on value.
Speaker Change #117: 'cause we now have.
Speaker Change #117: Alex in laundry and litter, where are our core products our value so the yellow box in litter and the yellow bottle.
Speaker Change #117: Laundry detergent those are value products.
Speaker Change #117: But over time as well for golf offered premium products and our consumer has a trade it up to them and we've had other consumers and the other for other brands trade over to.
Matt Farrell: And we've had other For other brands, trade- So, again, in the end, I think for most consumer products... Innovation is always going to be All very positive.
Speaker Change #117: To us so again and he ended up at for most consumer products companies innovation is always going to be the story in any environment in any economy.
Speaker Change #117: We feel very positive about those too.
Matt Farrell: Thank you. Yeah, and just an example, like for deep plans, mid-tier in the laundry category, that's still a value to the premium tier. So folks can still trade down to that. It's growing categories, though, because folks are trading down and trading up. Value, and other areas. So net-net, we still think it's a positive.
Speaker Change #117: Innovations in particular, yes, just as an example for deeply into mid tier in the laundry category, that's still a value to the premium tiers. So folks can still trade down to that it's growing categories, though because folks are trading down and trading up.
Speaker Change #117: From value in other areas. So net net we still think it's a positive in most any economic environment.
Matt Farrell: And what was your gross margin question, Olivia? It was just around mix more importantly, you know, and the impact of mix as time progresses, but I think you answered that.
Speaker Change #118: And what was your gross margin question Olivia.
Olivia Tong: It was just around mix more and more importantly, the impact of mix as time progresses, but I think you answered that with them whether it would be within that.
Olivia Tong: Top of mind question.
Matt Farrell: Okay, thanks. Thanks so much. Really appreciate it.
Olivia Tong: Okay. Thanks.
Speaker Change #119: Thanks, so much and I appreciate it I'll pass it along.
Operator: I'll pass it along.
Operator: Thank you.
Javier Escaline: We'll take our next question from Javier Escaline with Evercore.
Speaker Change #120: Thank you we'll take our next question from Javier <unk> with Evercore. Your line is open.
Javier Escaline: Your line is Hi, good morning, everyone. I wonder whether you can expand on the international business in the context of the increase In reinvestment in Q4, if you can flag geographies or brands that you are seeing on Astrachan, and also whether there is any measurable contribution of the businesses you acquire in Japan, or it's just too early. And I have a follow up. Yeah, I would say with respect to international, you know, when we're doing well like this, considering we have so many and so many brands including The call goes out to... So consequently, where we...
Hi, Good morning, everyone I Wonder whether you can expand on the international business in the context of the increase.
Speaker Change #121: Is there any investment in Q4, if you count slag geographies or brands that you are seeing more stretched Shen and also whether there is any measurable contribution of the business that you acquired in Japan or is just too early and then I have a follow up.
Speaker Change #122: Yeah, I would say with respect to our international.
Speaker Change #122: Doing well like this considering we have so many countries.
Speaker Change #122: And so many brands, including regional brands as the call goes out to our general managers and.
Speaker Change #122: City areas.
Speaker Change #122: So consequently, where we think we can spend to drive growth.
Speaker Change #122: Positioning ourselves well for next year is where we're going to go but I wouldn't say, there's any one particular and international one particular category.
Matt Farrell: I wouldn't say there's any one particular in international, one particular category or brand. 4.
Speaker Change #122: And that we would be open.
Speaker Change #122: In Q4, if this opportunistic spend.
Matt Farrell: Another question was Japan. It's probably too early to talk about that, Javier. I mean, we're optimistic. It is a relatively small business, but we're excited about the opportunity to add a few of our global brands into Japan with a great team that is doing a great job with OxyClean. We think they can also do a great job with a handful of other brands.
Speaker Change #123: Understood got it.
Speaker Change #124: It was Japan.
Speaker Change #124: It's probably too early to talk about that Javier I mean, we are we're optimistic.
It is a relatively small business, but we're excited about the opportunity to add a few of our global brands into Japan to.
Speaker Change #124: With a great team that is doing.
Doing a great job with Oxiclean, we think they can also do a great job with a handful of other brands.
Matt Farrell: Thank you guys. And the follow up is on the legacy, let's call it that way, detergent business, Deep Clean doing well. You try, this is kind of like the second iteration that you go into the tiers. You did the OxiClean detergent, I believe, and did in Panal. So, what is driving the success this time around, do you feel is the consumer, something with the competition from our friends in Germany, is that the retailers are more susceptible to this mid-tier, anything that you can contrast relative to the OxiClean extension in detergent that did in Panal as well as Deep Clean, that would be very helpful.
Speaker Change #125: Thank you guys and the follow up is on the legacy let's call it that way.
Speaker Change #125: <unk> business deep clean doing well.
Speaker Change #126: Do try this is kind of like the second one eight duration that you're going to be tiers, you need the oxiclean detergent I believe and didn't pan out.
Speaker Change #127: So what is driving the success this time around or use it as a consumer or something where the competition from our France and Germany is that the retailers are more so.
Speaker Change #127: Susceptible to these mid tier anything that you can that you can contrast, what it did to oxy.
Speaker Change #127: Oxiclean extinction in detergent that didn't pan out Escuela typically that would be very helpful. Thank you.
Matt Farrell: Thank you.
Matt Farrell: Yeah, it's a fair question.
Speaker Change #128: Yes, it's a fair question I think it's actually a simpler answer.
Matt Farrell: I think it's actually a simpler answer. OxiClean is a brand, but it's an additive brand, and it was not, there was consumer confusion as we tried to go into laundry, just didn't make the connection. Here, Arm & Hammer is well known for laundry, and just going up and down the tiers is a much easier proposition, and that's why I think we're finding early success. Thank you.
Speaker Change #128: I believe.
Speaker Change #128: Dan.
Speaker Change #128: But it's an additive brand.
Speaker Change #128: And it was not a consumer there was consumer confusion as we tried to go into laundry.
Speaker Change #128: The connection.
Speaker Change #128: Your arm <unk> Hammer is well known for laundry and just gone up and down the tiers is much easier proposition and that's why I think we're finding an early success.
Speaker Change #129: Thank you.
Korinne Wolfmeyer: We'll take our next question from Korinne Wolfmeyer with Piper Famler. Your line is open.
Speaker Change #130: Thank you we'll take our next question from Korean <unk> with Piper Sandler Your line is open.
Korinne Wolfmeyer: Hey, good morning. Thanks for taking the question. As we think about some of your innovations next year, and particularly around the VMS business, how should we be thinking about this R&D spend and some of this extra innovation spend? Is there any risk to the SG&A as we head into next year due to these investments? And then anything else we should be considering? I think you called out some IT spend, that was a bit of a headwind. Anything else to consider for SG&A as we head into Q4 next year?
Speaker Change #131: Hey, good morning, Thanks for taking the question.
Speaker Change #132: Do you think about some of your innovation next year, and particularly around the C&I business.
Speaker Change #132: Should we be thinking about.
Speaker Change #132: R&D spending from this extra innovation spend is there any risk to the SG&A as we head into next year due to these investments and then anything else we should be considering I think you called out.
Speaker Change #132: And that was a bit of a headwind anything else to consider for SG&A as we head into Q4 next year.
Rick Dierker: Thanks. Yeah, we don't I mean, over a long period of time, we spent around 2% of our of our CNA and R&D. And that's been a pretty good number for us. You know, next year, we're, we're we're implementing an SAP project, redoing our updating our ERP system, just last time we did that was 2009. It's just time for for an upgrade. But I wouldn't really qualify or call it anything at this point in time.
Speaker Change #134: Yeah, we don't I mean over a long period of time, we spent around 2% of our SG&A and R&D and that's been a pretty good number for us.
Speaker Change #132: And our next year, where we were implementing an SAP project.
Speaker Change #132: We are updating our ERP system, just like last time, we did that was 2009. It was just time for a for an upgrade.
Speaker Change #132: But I wouldn't really qualify or call out anything at this point in time, we will do that in January at our analyst day.
Rick Dierker: We'll do that in January or Analyst Day. Great, thanks.
Speaker Change #134: Great. Thanks.
Matt Farrell: And that was our last question.
Speaker Change #135: And that was our last question I will turn the call back over to Matt for any additional or closing remarks.
Matt Farrell: I will turn the call back over to Matt for any additional or closing remarks. No, I think that kind of wraps it up for today. We're looking forward to seeing everybody at our Analyst Day in New York City at the Exchange at the end of January. And until then, so long.
Matt Farrell: Oh, no I think that kind of wraps it up for today, we're looking forward to seeing everybody at our analyst day in New York City at the exchange at the end of January and until then.
Speaker Change #135: Hello.
Speaker Change #135: Okay.
Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day.
Speaker Change #136: This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful day.
Speaker Change #136: [music].