Good day, and welcome to the Q1 2023 Berry Global Group Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Dustin Stilwell. Please go ahead. Thank you. Good morning, everyone. Welcome to Berry's First Fiscal Quarter 2023 Earnings Call. Throughout this call, we will refer to the first fiscal quarter as the December 2022 quarter. Before we begin the call, I would like to mention that on our website we have provided a slide presentation to help guide our discussion this morning. After today's call, a replay will also be available on our website at berryglobal.com under our Investor Relations section. Joining me from the company, I have Berry's Chief Executive Officer, Tom Salmon, and Chief Financial Officer, Mark Miles. Following Tom and Mark's comments today, we will have a question-and-answer session. In order to allow everyone the opportunity to participate, we do ask that you limit yourself to one question at a time with a brief follow-up, and then fall back into the queue for any additional questions. As referenced on slide two, during this call, we'll be discussing some non-GAAP financial measures. The most directly comparable GAAP financial measures and the reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and investor presentation on our website. Please note that in our commentary today and within our presentation, when we compare our results to the prior year quarter or full year, we have adjusted to present on a constant currency basis and remove the impact of divested businesses to provide the appropriate comparable results. Reconciliations to reported results have been provided in our earnings release in the appendix of our presentation. Finally, a reminder that certain statements made today may be forward-looking statements. These statements are made based upon management's expectations and beliefs concerning future events impacting the company, therefore involve a number of uncertainties and risks, including but not limited to those described in our earnings release, our annual report on Form 10-K and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward-looking statements. Now I'd like to turn the call over to Berry's CEO, Tom Salmon. Thank you, Dustin. Welcome, everyone, and thank you for being with us today. Turning to our key takeaways for the quarter on slide four. Our business delivered solid first quarter results, including 3% operating EBITDA growth and strong adjusted earnings per share growth of 11%. Throughout the last two years, we have made concentrated investments to gradually pivot our portfolio into higher growth markets and regions. We have a robust pipeline of investment opportunities ahead of us in several areas, such as food service, healthcare dispensing, and pharmaceutical markets, including sustainability-focused customer link projects. Also, we've seen significant cost inflation, taken proactive pricing actions, invested in cost reduction projects, and worked diligently on cost productivity across all of our businesses. During the quarter, those cost reduction efforts, along with a modest easing of inflation, helped offset short-term soft market demand across our businesses. Furthermore, we continued our focus on returning capital and repurchased another $178 million of shares outstanding, nearly 3 million shares or 2.4% of total shares outstanding, and expect to repurchase at least $600 million of shares in fiscal 2023. We've lowered our long-term leverage target to 2.5x to 3.5 x net debt to Adjusted EBITDA. We are confident in our ability to sustain earnings growth and have reaffirmed our guidance provided on our last earnings call, which includes an 8% EPS growth target at the midpoint and strong free cash flow generation, which will continue to support our focus on investments for long-term earnings growth along with strong capital returns to shareholders. Turning now to the financial highlights on slide five. The December 2022 quarter performance for both earnings per share and EBITDA met our expectations, including strong price cost spread, primarily driven by our cost reduction efforts. These internally driven actions were partially offset by a 6% volume decline, primarily driven by short-term softer market demand, which was in line with what our global customers have reported. From an earnings perspective, operating EBITDA was up over 3% and adjusted EPS increased 11% from the comparable prior year quarter, including a $55 million benefit from positive price cost spread. As we've demonstrated historically and during the most recent quarter, we remain committed to driving cost improvements, passing through inflation, and believe we are well-positioned given our scale along with our ability to service customers from our facilities in close proximity to their location, which provides both cost and sustainability advantages. During the quarter, we've taken additional actions to reduce our cost structure, optimize our assets, and further automate our facilities, which will bring our total savings from cost initiatives for the fiscal year to over $100 million. In line with our long-term strategy to provide strong capital returns to our shareholders, we returned $211 million to shareholders through both share repurchases and dividends in the quarter. Before I hand over to Mark, I want to review Slide six and what we are focused on in both the near and long term. We remain focused on driving consistent, dependable, and sustainable organic growth and continue to invest in each of our businesses to build and maintain our world-class, low-cost manufacturing base with an emphasis on key end markets which offer greater potential for differentiation and long-term growth, such as healthcare and the pharmaceutical markets. Additionally, we will continue to invest and expand our emerging market position in support of our commitment to global growth. We believe that by increasing our presence in faster-growing end markets, along with continuing to invest into emerging market regions, we will further enhance our ability to provide consistent, dependable, and sustainable long-term growth. We've done a great job since our IPO in 2012, growing our emerging markets from less than 2% to now 15%. Longer term, we believe our emerging market presence can be 25% or more of our total revenues. Lastly, innovation and sustainability are increasingly embedded in everything we do, and we continue to believe this represents a great opportunity for growth and differentiation. These drivers, when combined with our ability to deliver continual cost improvements by leveraging our scale advantages and capabilities, give us the confidence we will continue to consistently deliver solid earnings growth from our stable portfolio of businesses. I'll turn the call to Mark, who will review Berry's financial results. Mark? Thank you, Tom. I would like to refer everyone to slide seven for our quarterly performance by each of our four operating segments. Our businesses continue to perform well and focus on inflation recovery and generating cost productivity while driving long-term sustainable revenue and earnings growth. Our Consumer Packaging International division reported modestly lower revenue dollars, primarily driven by softer demand from our customers, partially offset by higher pricing from the pass-through of inflation. Demand was relatively stable across our consumer-facing categories, such as retail food and beverage, with weaker overall customer demand in discretionary markets such as automotive and surface coatings. The outbreak of COVID in China also negatively impacted volumes and earnings in the quarter. Operating EBITDA was essentially flat as positive price-cost spread offset softer customer demand. The positive price-cost spread was driven by cost productivity, inflation recovery, and our focused effort to improve our product mix by increasing our presence in healthcare packaging, pharmaceutical devices, and dispensing systems. We continue to recover cost inflation through pricing actions and cost reduction initiatives while driving revenue growth from our sustainability leadership. On slide eight, revenue in our Consumer Packaging North America division was down 10% from the prior year quarter from lower selling prices as a result of the pass-through of lower resin costs in the U.S. and softer overall customer demand, primarily in our industrial markets. We continue to deliver strong growth in our food service market as we continue to see conversion from other substrates to our clear polypropylene cup. We continue to add incremental supply for cups, including an additional manufacturing location for this technology as demand continues to outpace supply. Operating EBITDA increased by an impressive 23% over the prior year quarter, primarily driven by our internal cost reduction efforts along with continued inflation recovery and improved product mix. On slide nine, revenue in our Engineered Materials division was down 15% for the quarter, due primarily to volume declines and lower selling prices from the pass-through of lower resin costs. The volume decline was related to soft overall customer demand, including our European industrial markets. Volumes were also impacted by our focused effort to mix up in certain categories like shrink and transportation films, along with customer destocking as supply chains normalize. Operating EBITDA was up an impressive 15% over the prior year quarter, primarily from our focused effort on improving sales mix to higher value product categories and internal cost reduction efforts. On slide 10, revenue in our Health, Hygiene, and Specialties division was down 17% due to volume declines along with lower selling prices from the pass-through of lower resin costs. We continue to see stable demand inside our hygiene markets, while portions of our business continue to see ongoing inventory destocking along with softer demand in our specialties markets such as building and construction. Operating EBITDA was down 21% for the quarter as expected, due to a timing lag in recovering inflation on costs other than polymer. We continue to pass through these cost increases to our customers and expect earnings will improve sequentially. Our fiscal 2023 guidance and assumptions are shown on slide 11. Today, we are reaffirming our guidance for both adjusted EPS and free cash flow. We have a strong track record of EPS growth, improving every single year as a public company, and continue to expect between $7.30-$7.80 of adjusted earnings per share, which at the midpoint would be another fiscal year record and our tenth consecutive year of delivering EPS growth. Additionally, we expect free cash flow to be in the range of $800 million-$900 million, with cash from operations of $1.4 billion-$1.5 billion, plus capital expenditures of $600 million. Our cash flow year in and year out has been a dependable core strength and core value of our company. It provides us the opportunity to invest in our businesses to grow and become more efficient while returning capital to shareholders. As you can see on slide 12, our capital allocation strategy is return based and includes continued investment in organic growth and cost reduction projects, share repurchases, debt repayment, and a growing quarterly cash dividend. In fiscal 2023, we expect to return $700 million or more to shareholders via share repurchases and dividends, including further reducing our shares outstanding by 80% at current valuation levels. During the quarter, we repurchased another $178 million of shares, or 2.4% of shares outstanding, and paid our first quarterly dividend, thus returning $211 million back to shareholders in the first fiscal quarter. As Tom mentioned earlier, given our strong dependable cash flows and earnings, we have moved our long-term leverage range down to 2.5x to 3.5x as we continue to focus on driving long-term value for our shareholders. We believe we are well positioned for continued value creation through both our resilient business model and strategic portfolio management opportunities. This concludes my financial review, and now turn it back to Tom. Thank you, Mark. Our business model has proved resilient, including a broad portfolio of polymer-based packaging solutions with strong, dependable, and stable cash flows to allow us the flexibility to drive strong returns for our shareholders. Our in-house design centers, footprint, and ability to serve local and regional customers and markets, all while being both a top five global tool maker and a top five recycler in Europe, provides us with scale advantages and differentiation capabilities unmatched by our competitors. While the demand environment has remained choppy, we've been able to offset softer customer demand with stronger price recovery and productivity improvements. From our current viewpoint, we believe our industrial markets will be in line with our global customers demand and remain challenged throughout much of fiscal 2023. We will focus our internal cost reduction efforts and inflation recovery while also driving strong cost benefits through efficiencies and asset optimization throughout our global footprint to offset any demand challenges. We believe Berry's stable and dependable portfolio will allow us the ability to provide earnings growth and demand stability as we have historically demonstrated. As you can see on slide 13, we have consistently driven top-tier results in nearly all key financial metrics, including strong compound annual growth rate for revenue, earnings, and free cash flow, including growing our adjusted earnings per share every year as a publicly traded company. The targets we've set over the past several years, including our focus on driving shareholder value, continues to be our top priority. Starting several years ago, in each of our four segments, we began investing more heavily in growth with the emphasis in faster-growing markets and regions while working to improve the mix of our product portfolio. As you can see on slide 14, we delivered results at or above the peer average from these strategies and commitments. Historically, we have used the majority of our cash to reduce our debt and improve our balance sheet post an attractive acquisition opportunity. Now, we've chosen to make a concerted effort to keep our leverage in a lower range, providing us the opportunity to return the majority of our cash to shareholders via share repurchases, and now, similar to our peers, initiated a quarterly dividend. We believe our new long-term leverage range of 2.5x to 3.5x will further strengthen our balance sheet and be rewarded in the equity market over time. Believe these strategies will continue to close our valuation gap, which provides a very attractive opportunity for investors. Next on slide 15. Since the RPC acquisition in mid-2019, over the past three years, and including our expected use of cash in fiscal 2023, we've reduced our net debt by nearly $3 billion. Furthermore, in fiscal 2022 and fiscal 2023, we will have returned over $1.3 billion to shareholders via share repurchases while also paying our first-ever quarterly dividend. These uses of cash from debt reduction, share repurchases, and dividends will total $4.3 billion of value returned to shareholders while growing our adjusted earnings per share more than 70% since the RPC acquisition. We believe our capital return model underscores our commitment to enhancing long-term value for our stakeholders and the stability and consistency of our portfolio. The RPC acquisition has provided substantial cost and revenue synergies over the past several years, and we believe there are additional attractive opportunities ahead. The ability to leverage our combined know-how, including sustainability and innovation, product development, and technology, has created significant value for shareholders. On slide 16, we're excited to announce a new international center of excellence and circular innovation hub that will be located in Barcelona, Spain. This new location is designed to foster our One Berry spirit and demonstrates Berry's commitment to global growth, sustainability, and talent development. Several locations were considered for the new center, with Barcelona being the preferred option due to its high scoring in international talent, sustainability, diversity, and economic indicators. Barcelona was elected recently as one of the best cities to live in the world. This new innovation hub will house an in-interactive and learning customer experience center, a showpiece for Berry's designs and innovation capability, and be a focal point for circularity and sustainability, underlining how Berry's products are part of the solution in achieving a net zero economy. Furthermore, as you can see on slide 17, through our strategic customer linked investments, innovation and sustainability have been a strong part of our value creation. We believe we are well positioned to deliver significant value for our customers and shareholders through investments like these recent innovations presented here with an unmatched global footprint and design capability to support circularity. We're proud to highlight a few recent innovations, starting with Berry's SuperLock container that provides healthy spreads with an innovative and reusable packaging solution, combining improved imaging and longer shelf life. As you might have seen in a recent press release, I'm pleased to announce our collaboration with Coca-Cola to provide tethered caps in the European Union market. Berry was recently given a prestigious sustainability award at PACK EXPO International for this circular solution. We became the first plastic packaging manufacturer in Europe to supply the Coca-Cola company with a lightweight, tethered closure for its carbonated soft drinks in PET bottles. The new tethered closure for Coca-Cola is designed to remain intact with the bottle, making it less likely to be littered and more likely to be recycled. Finally, we worked together with a leading German dairy customer, Milchwerke Schwaben, and met their sustainability needs and goals by providing 19% weight reduced product offering, while at the same time providing smarter logistics and efficiency improvements for their filling lines. Innovation and sustainability are core strengths of Berry. We have leading R&D and material science capabilities and considerable expertise. When coupled with our unmatched scale and geographic reach, these capabilities provide unique, ongoing opportunities to develop differentiated products to meet the needs of our global customers. Next on slide 18, I want to discuss key investment highlights for Berry along with our long-term targets for our key metrics. We are a global leader across several manufacturing platforms with extensive innovation technologies and design capabilities. With our more than 255 locations around the world, our scale benefits from both procurement and proximity to our customers provide us with a low-cost platform, providing products to the largest CPG customers in our primarily stable, nondiscretionary market. We have a proven history of earnings growth, as shown earlier on slide 13, along with exceptionally stable and consistent set of cash flow businesses. We've taken a sustainability leadership role as one of the largest packaging manufacturers in the world, evidenced by a portfolio of products innovated with our customers and a focus on reducing greenhouse gas emissions, supporting the net zero economy. Our long-term targets further evidence the consistency and dependability of our model, which includes operating EBITDA growth of 4%-6%, EPS growth of 7%-12%, and total shareholder returns of 10%-15%. As you can see, over the past three years, we've met or exceeded these long-term growth targets and expect to similarly do so going forward. We expect our newly initiated dividend to grow annually. We've updated our long-term leverage target to be in the range of 2.5x to 3.5x. We believe we can achieve these similar metrics while operating the business with lower leverage and providing consistent capital returns to shareholders. Our strategic priorities remain unchanged. Our entire global team's emphasis on working safely and servicing our customers remains our number one priority. It has made us a stronger, better, and safer company. We will continue to operate with agility as we navigate current market dynamics to drive sustainable growth while recapturing inflation. At the same time, we remain focused on executing our long-term strategy of driving shareholder value, expanding our competitive advantages, and delivering on our financial priorities to position Berry for long-term success. I'm very pleased with the hard work of our employees, delivering solid results in the face of persistently higher costs and a dynamic global economy. Thank you for all for your interest, continued interest in Berry. Before we turn to Q&A, I want to note that we announced today that I plan to retire at year-end. As we make the transition throughout 2023, the company remains very well positioned to continue to deliver significant value for all stakeholders. With that, Mark and I will be glad to answer any questions you may have. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. You may then return to the queue. Please stand by while we compile the Q&A roster. First question will come from Ghansham Panjabi with Baird. Your line is open. Yeah. Hey, guys. Good morning. Tom, congrats on your announcement on your retirement. Thank you. Yeah, I guess first off, on just the volumes you know, down 6%, based on your December quarter, it's very, very similar to volumes being reported by the major CPG companies. Do you have a sense as to where we are on the inventory destocking cycle across your core end markets? You know, maybe split that between consumer and also some of the industrial markets as well. Yeah, I think certainly from a consumer side, anytime there's uncertainty, you know, the proven measure they take is to reduce the inventory count. They frankly, you know, have higher expectations that we can deliver, you know, in smaller quantities on a more regular basis. I expect that to continue until there's greater certainty in terms of, you know, specific cadence of consumer demand. I don't expect that to change dramatically. You know, we are certainly seeing some green shoots. I would describe it of demand improvement, you know, being seen, you know, in January. As there's more certainty, the destocking will become less prevalent in people's prints, if you will. From an industrial basis, you know, we've showcased that we expect, industrial demand to remain, you know, relatively sluggish, for a better part of fiscal 2023. Okay, thank you. Maybe the question for Mark on the EBITDA bridge for the first quarter. It looks like price cost was about a $55 million benefit. What are you sort of embedding for that number for fiscal year 2023, you know, relative to your EBITDA guidance? I'm just asking because it looks like resin will start to be heading higher, you know, It's sort of correlating with typical early year seasonality. Sure. Yeah, thanks, Ghansham. Yeah, I'd say on the price cost side, you know, we had gone into the year thinking a $100 million. We're now feeling better about that number. I think we're, you know, we're thinking now more like $125 million for fiscal 2023. That's, you know, driven by the cost reduction activities that the company has taken action on. Perfect. Thanks so much. Thank you. One moment for our next question. From the line of Anthony Pettinari with Citi, your line is open. Good morning. Tom, congratulations and, you know, best wishes on the next chapter. Thanks, Anthony. You know, just following up on Ghansham's question, you know, on the last call, you talked about, you know, full year EBITDA guidance, assuming flat volumes with, you know, earnings growth coming from cost recovery and cost reductions. So the accelerated cost reductions, which I think are now $100 million, should we think about that as maybe offsetting volumes a bit weaker than expected or maybe a weaker than expected view on volumes for the fiscal year? If so, you know, where is that, maybe where is that concentrated along the four segments? Yeah, you know, if you consider the operating plan for 2023, primarily incorporate two areas. One, cost reduction, the other, offsetting inflation with price. Clearly, any type of deviation we see on the demand front, we'll leverage, we'll variabilize our cost structure to get it done. I would say the following: The company is performing on all cylinders right now operationally. You know, we've made, in the last three years alone, over $250 million in capital improvements to remove over 5 million labor hours from our operations through deploying more automation. You know, from a energy efficiency and sustainability perspective, which is a huge component of cost, we've invested over $100 million to remove over 200 million kilowatt hours from our operations. Not only are we making the right financial messaging and decision, but we're also doing the right thing, you know, from a sustainability. Actually improving what is ultimately, you know, the material with the best carbon footprint and making it that much better. And, you know, not to mention, you know, what we continue to do in terms of safety. Again, safety is our number one priority, but keeping our people safe, keeps them in the game, you know, productive inside the site. Those are some of the areas that we've had a heavy focus on. When you think about the scale of our company overall, it can have some really significant benefits. That's where, you know, Mark Miles had quoted that we're estimated to be, you know, in the range of, you know, +$125 million. We've taken the right actions from an investment to get that done and make that happen. Okay. That's very helpful. Just on the updated 2.5x to 3.5 x leverage target, you know, that definitely makes sense. I think in the slides, there's a reference to 2023 leverage potentially staying at 3.7 x, which is, I guess, unchanged from last year. You know, understanding it's not too far from your target range, but I'm just wondering if you'd talk about debt paydown versus repurchases as sort of a priority for 2023 and how you balance those. You know, it's a great question. We didn't anticipate being within that target range at the end of fiscal 2024. The reason is that, you know, the compelling opportunity to repurchase our shares right now, given the dislocation in our valuation, takes precedent. We believe it is a unmatched opportunity for us. We're gonna continue to focus on buying back our shares as part of our capital allocation program in 2023. Certainly, as we see improvement in the valuation of those shares, you know, we can ultimately pivot further to debt reduction. Again, we believe we'll be in that range by the end of fiscal 2024. I think, I mean, the, you know, the stability and just quantum of cash that we generate and the earnings growth of the business, we can do all three. You know, we can continue to grow our dividend, we can buy back a substantial portion of shares, and repay debt. I think we have a great opportunity to do all three. I think, Anthony, one of the enablers is, you know, we're starting to see some improvement, you know, in the financing markets out there. We clearly have showcased that, you know, we have opportunities inside our portfolio to perhaps look at businesses that are better suited, you know, for other operations. As such, that should get easier to do as the financing markets improve, and we'd expect that to be a big component, you know, of Our energy and focus here throughout 2023 and beyond. It's a big opportunity for a portfolio of our size, and that clearly allows us then to pivot some of those proceeds to, you know, the capital allocation wheel that we've built, if you will. Okay. That's very helpful. I'll turn it over. Thank you. One moment for our next question. That will come from the line of Kieran de Brun with Mizuho. Your line is open. Hi, good morning. Maybe just to follow up on the capital allocation. You know, when we think past 2023 into 2024, like how do you think about M&A now fitting into kind of your longer-term growth strategy? Where are the areas where you'd like to kind of see that focus, I think, going forward? I mean, should we be thinking about that more focused on the circularity side of things, which seems to be a big opportunity or, you know, any thoughts on that front would be helpful. Thank you. You know, Berry's in a unique spot right now. There's no, you know, large scale acquisitions that we have to do to create scale. The real focus is on how we ultimately utilize bolt-on acquisitions as a means to accentuate organic growth. We clearly believe that, some of the more attractive markets that we've articulated in the past, like healthcare, pharmaceutical dispensing solutions, sustainability solutions are all right, not to mention and least of which, growing our access to emerging markets. You know, while we just recently announced a greenfield site in Bangalore, clearly at some point it will provide the opportunity for bolt-on to complement that healthcare and pharmaceutical site to take advantage of that growth. Again, all that can be supported by, you know, as we look, as I just mentioned, we look inside our own portfolio, having opportunities to dispose of pieces of that, of the portfolio today that could be better utilized by others can allow us to deploy some of those proceeds against those objectives. That's why, as Mark said, it's a balanced approach. We really believe we can operate the company at a lower leverage range. We can continue our balanced capital allocation between buybacks and dividends. And we continue to invest in organic growth to reaffirm our commitment as growth as a priority for us. Great. Thank you. Then maybe a quick follow-up. On China specifically, I mean, it seems like the rebound in China has been gradual throughout the first quarter. I'm just curious on your thoughts on what you're seeing. Are you seeing kind of that acceleration post the Chinese Lunar New Year, or is it something that you still expect to kind of, you know, gradually increase throughout the year and how that impacts your volume outlook for the fiscal second quarter and the back half of the year? You know, China is a relatively small part of our portfolio overall. That said, you know, there was some impact relative, you know, to the COVID related shutdowns. As those normalize inside China, I think it will provide a steadier, a more consistent glide path for growth in the coming quarters. That would certainly be a tailwind for sure. Great. Thank you. Thank you. One moment for our next question. That will come George Staphos with Bank of America. Your line is open. Thanks very much. Hi, everyone. Good morning. Thanks for all the details. Tom, I'll echo everyone else's comments. Congratulations to you. Company's evolved significantly over your time, so congratulations on that. Couple of questions, the first on targets and then the last on price cost. In terms of the targets, you talked again to the deleveraging target now being 2.5x to 3.5 x. We certainly would agree with that view. In your view, what changed most in terms of why this is the right target now? Is it where Berry's matured to in terms of you don't need to do acquisitions anymore to continue the growth? Is it the cost of capital you see being applied to companies with higher leverage? Was there anything that changed in your view in terms of why this is now the better place to be? Relatedly, you mentioned a number of targets on slide 18, and that's terrific. I don't see a return on capital target. Will you expect to have one, you know, in the near future? Do you have a view in mind in terms of what return on capital growth could be over the next several years? No doubt, George, we're maturing as a company. You know, we've doubled in size in a relatively short amount of time. As Mark mentioned, you know, the robustness of our cash flow gives us an amazing amount of flexibility. We're fortunate that the company has grown to the point that, you know, scale is not the predominant focus for us. What is the predominant focus is how we ultimately can add pieces to the portfolio that accentuate our global growth then allow us to scale those, you know, given our global market presence. That's the real driver, you know, relative to larger target or the lower leverage range. Again, it also is consistent with some shareholder feedback that we've received as well in terms of the drivers. Yeah, on the return of capital, George, I mean, Our return of capital the last several years has been around 14% as a company. That's pre-tax. You know, as we look for incremental investments, you know, we tend to target something north of that. We're looking to, obviously, to grow that number. I don't think 14, you know, plus, is a bad way to think about it because obviously that, you know, that number includes a lot of different things, including acquisitions that were larger in size, and therefore just naturally had a little bit lower, return of capital on them. I think 14% is a good spot overall for the company, but on incremental investments, I think we can drive to 20%. Thanks for that, Mark. The other question, kind of nearer term or more micro. Your other segments, other than HH&S did a real good job on price cost. Again, congratulations to you on that. In the quarter, you mentioned for HH&S, it was a lag, but was there anything else going on that made it a more difficult price cost period? When do you expect HH&S to be positive on price cost over the course of this year? Thank you, and good luck in the quarter. Yeah, I think on your first part of your question, you know, relative to what impacted the quarter, mix certainly was a factor. You know, as we mentioned, some of our more specialty product categories that carry a little higher margin, negatively impacted the results. As those markets improve over the course of the year, you know, I would expect that component of the relationship to get better. We've also got, you know, as mentioned in the prepared comments, incremental price impacting that business ongoing over the course of the next several quarters. I think we're gonna continue to make progress. I think as to when we go to positive, you know, outside of something changing relative to inflation, we would expect the back half of 2023 to inflect to positive. You know, George, the hygiene piece of that business continues to be, you know, very stable. You know, some of those niche spaces that ultimately there was some discretion, you know, areas like dryer sheets, filtration, house wrap, these are all really very solid franchises, and any improvement in terms of customer outlook or demand or customer confidence is only gonna benefit those businesses. But as Mark said, we'll see, you know, sequential improvements as contracts are renewed and implemented. Thank you very much. Thank you. One moment for our next question. Will come from the line of Philip Ng with Jefferies. Your line is open. Hey, Tom. Thanks for all the help over the years, and you'll certainly be missed. We really appreciate it. I guess, first off, how do you guys see volumes tracking this year by segment? Is flat volume still a realistic goal at this point? Do you kinda see the declines in volumes in 2Q being less bad and potentially inflecting in the back half? Like, how should we think about the progression this year? You know, I would first start by saying that, you know, the demand that we're seeing is pretty consistent with our customers, around the world, you know, frankly. You know, for the prick we had in the quarter, I think, you know, we fared really quite well, in that regard, you know, based on, you know, some of the other peer reports that are out there. That said, certainly would anticipate the front half being softer than the back half. But as we've demonstrated, you know, we've got plenty irons in the fire that, you know, should that not materialize, we can further variablize our cost structure, as the team's done. I'm really excited that, you know, these investments that have been concentrated and they have been made over the last several years, put us in a really good position, going forward, both in terms of, soft demand as well as enhanced productivity and profitability as demand ramps. All pieces of that puzzle. Difficult, you know, to ultimately call it exactly. You know, our performance is very consistent with our customer base, which we would expect. Gotcha. I guess a question for Mark. I think you called out $125 million on price cost this year, so up $25 million. Is that largely from self-help productivity stuff? How are you thinking about just your inputs, whether it's resin from here and maybe some of your non-resin cost profile? Are you seeing any deflation there that could be potentially a good guy and provide some upside to that number? Sure. Yeah, I would say, you know, I think Tom mentioned the breakout, but $100 of that, you know, $125 is on the cost side. Obviously, our largest cost is material. Anything we can do to drive down material costs, you know, our sourcing and operations teams are working diligently to, you know, cross-approve different products to generate cost savings. We've got a long pipeline of cost reduction projects. Tom mentioned some of the labor is our next largest cost category. We got a lot of great productivity improvement initiatives, including investments in automation that are driving reductions in our labor costs. As Tom said, we've got a number of levers we can pull, obviously focusing on the largest cost categories of material and labor, generate the largest savings. Certainly energy falls right behind that. We've got a lot of initiatives across the company to reduce our energy usage. Okay. Yeah. As Mark said, you know, resin being the biggest part of it. You know, I mentioned the teams are and operationally are working at very high level right now. Just to give you a sense, since 2020 alone, you know, we've seen an over 20% improvement in our net yield across our sites, meaning generating that type of efficiency. You're reducing your scrap, you're generating more efficiency across your operations, and that provides, as I said, you know, a near-term benefit as well as a long-term opportunity as your volumes continue to grow and ramp. Okay. Thank you. Appreciate the call. Thank you. One moment for our next question. Of Angel Castillo with Morgan Stanley. Your line is open. Hi. Thanks for taking my question. Tom, again, congratulations on your retirement. Wishing you all the best. Just quick question on the long-term targets. I was hoping we could break those down a little bit more and, you know, give us a little bit more color as to how you're seeing, particularly as we think about, for instance, the EBITDA growth of 4%-6%. How are you thinking about that in terms of, you know, the sales breakdown, how much of that is organic versus inorganic potential bolt-on opportunities? Then, you know, beyond that, how much would it be kind of EBITDA or margin expansion? Then lastly, kind of on the EPS line, how are you kind of breaking that down in terms of underlying growth and buybacks? Sure. I think in the aggregate, you know, we think our business has grown in the low single-digit range. You know, we've got a lot of focused effort to, you know, as we talked about in the prepared comments and have now for many quarters pivoting to higher growth markets. Certainly over time, you know, we're looking for a higher result. But at the moment, our current mix of business supports low single-digit growth on the volume side, you know, which we can again deliver something higher than that on EBITDA as we get the benefit of leverage on our fixed costs, as well as mix improvement opportunities. You know, bolt-on acquisitions, you know, how to predict those year-to-year, I think is very difficult. Obviously, it depends on market conditions and sellers in the market, you know, is it a price that's attractive to the company that meets our return thresholds, et cetera, et cetera. Those, those targets are meant to be long-term targets. You know, year to year, the contribution of bolt-on acquisitions is gonna vary, could be higher in one year and lower in another. Again, that low single digit volume growth should provide something incremental on the EBITDA side, supplemented by acquisitions. On the EPS side, curious kind of longer term how you're thinking about, if it's just kind of 4%-6%. Is the rest more buybacks or anything else we should be mindful of there? Yeah, same thing. You know, the market's gonna provide us with different opportunities at different times. Right now our share price is very attractive, it's providing us, you know, a very great investment opportunity that we're taking advantage of, and that's bolstering our EPS results, certainly. You know, depending on the situations and what the market provides us, we'll be able to respond accordingly to drive to hit those results. Got it. That's helpful. Just lastly on the destocking question. Earlier you mentioned seeing some green shoots in January. Could you give us a little bit of color as to what you're seeing or hearing from your customers, you know, maybe what those green shoots might be and how are those kind of conversations with customers evolving? It sounds like frequency and size of orders maybe changes a little bit, yeah, just any incremental color would be helpful. Yeah. It's, it's not an uncommon strategic path that's been taken. Whenever there's uncertainty in demand, they take their inventories down, and ultimately it requires us to be more agile relative to meeting, you know, peaks and valleys relative to that demand. We'd expect that to continue to play out, you know, here in the coming months, you know, with an improvement as we get into the back half of our fiscal year. We're in regular conversation with our customers and have as much visibility to that consumer demand as possible. It's changing and it's evolving, and they're learning what that means in terms of their order patterns and what type of inventory levels they need to meet that demand. We'll be flexible with them while that gets worked out. Nonetheless, we'll be in a really good position, you know, given the proximity of our plants to their locations, to meet their needs, as expeditiously as possible. We feel very good though that, you know, as part of those discussions, you know, the pipeline of opportunities that we have from a growth perspective continues to be very, very robust. You heard Mark mention in, you know, some of his commentary relative to the success and advances that we're seeing inside of food service with additional investments forthcoming, to meet demand that continues to be incredibly robust. You know, certainly in North America, with our quick serve focus on carryout, with our all polypropylene cup and lid. Growing in Europe is around, you know, reusable cups that are ultimately being marketed, you know, by some of the largest QSRs in the world. That Berry is participating in the creation of those programs and execution of those programs as well. Lots going on in the pipeline. A lot of compelling reasons for us, you know, to continue our targeted investments alongside our customers to support growth as we work through this choppiness in demand. Very helpful. Thank you. Thank you. One moment for our next question. That will come from the line of Kyle White with Deutsche Bank. Your line is open. Hey, good morning. Thanks for taking the question. How are you thinking about your portfolio of assets here? Obviously, you're improving the mix in Engineered Materials. You have the newly established capital allocation committee. Is there any more pruning to be done, and where do you see the most opportunity for optimization within the portfolio? Yeah. We're a diverse portfolio of businesses around the globe. You know, as we've shared on previous calls, it's a priority and a key area of concentration by our board, relative to the opportunities to dispose of certain assets and then redeploy those proceeds towards opportunities that can support our growth or other capital allocation needs. That continues to be front and center for our teams and for our board. We disposed of three businesses in fiscal 2022. I'd expect that to be as financial markets begin to improve, and we are seeing some of that I think it's gonna create an opportunity for greater velocity in those types of dispositions that will continue to be an area of concentration and focus for us. All these ultimately allow us then to take those proceeds, redeploy them against our capital allocation wheel based on what's gonna maximize shareholder value. Got it. On Engineered Materials, where are we at in the purposeful shedding of the lower margin business as you improve the mix there? How many more quarters should we expect to see these actions impacting top line, but obviously improving returns? The business has done a fantastic job, you know, in a hyperinflationary market, offsetting that inflation with price as well as enhancing their mix of business, which did two things. One, that was already supported by capital investments, but then the opportunity to further support it, you know, throughout this inflationary period, curates a nicer mix of business inside EM. Same thing as the year plays out, I think that you'll see more of the same in the front half of the year and improvement towards the back half of the year. No different as we see the consumer and the industrial network start to improve, they'll similarly benefit from that. Got it. I'll turn it over. Thank you. Thank you. One moment for our next question. From the line of Arun Viswanathan with RBC Capital Markets, your line is open. Great. Thanks for taking my question. Congratulations on the retirement announcement, Tom. Thanks. I just wanted to, I guess, to ask a couple questions. You know, you provided some long-term targets, the 4%-6% EBITDA growth and the 7%-12% EPS growth. Just wondering if we do need to see organic growth in the low single-digit level to achieve that kind of operating leverage. You know, I know it's been a little bit of a challenging environment the last couple years, and there's been some culling of business, and inflation and so on. Assuming that the environment kind of stays a little bit challenging for the next 12 to 24 months, would you still be able to achieve that kind of growth in, say, a flat volume environment? What are some of the levers you have to still hit those long-term targets in a, you know, maybe more sluggish environment? Yeah, I mean, that's. Unfortunately, right, we're seeing that right now with weaker demand, and we're delivering on those commitments. You know, obviously when the market's weaker, it gives us more opportunity on the materials side to do exactly what we're doing is executing on, you know, optimizing our costs on materials. You know, while we would certainly rather get there through incremental volume, we're certainly in a good spot that we think we can derive positive results even in a weaker economic backdrop. Okay. Thanks, Mark. Just on the, you know, on some of the outlook items on free cash flow. You know, assuming that, you know, you deliver the $800 million-$900 million in fiscal 2023, how should that evolve in 2024 and 2025? I mean, maybe do you expect a little bit greater free cash flow growth from here going forward? Just given the potential pivot in the strategy to less M&A and more internal focus, would that help working capital and potentially accelerate your free cash conversion? Just wondering if that, if that algorithm has changed as well. Thanks. Yeah. I mean, look, we're always trying to improve our results. Obviously, there's a number of different things that can impact it. Yeah, certainly, you know, earnings and cash are ultimately the same thing outside of changes in working capital. We gave earnings target goals and we're looking to continue to achieve those. If I could just ask one more quick one. Just on the strategy now, for the 2.5x to 3.5x leverage, are you effectively saying... You know, you made the point that you're not necessarily looking for scale from here on. Are you effectively saying that there aren't as many attractive consolidation opportunities in the market anymore and you can deliver, you know, better growth by investing organically? I would still think that there's potentially some scale advantages on the procurement side that, you know, you could reap from, you know, potential acquisitions. Has that changed as well? Thanks. It has not changed at all. The market still remain fragmented, still presents an opportunity. But for our portfolio, and again, given the number of acquisitions we've done, we understand, you know, where we have scale, and its significance in certain pockets. As such, we feel very comfortable that the right approach for us is targeted bolt-on acquisitions that support our organic growth investments, again, to get us access to faster-growing markets, faster-growing geographies, which is consistent with what we've been doing. We're very bullish because, again, as these financing markets begin to improve, it's gonna facilitate more of those dispositions, and opportunities. Like we said, for us, it's, we've got, we've got a circle, and it, provides a number of opportunities. One of those is the opportunity to look internally at our own portfolio, find opportunities to market those externally, use proceeds then to support our various capital allocation needs that maximize shareholder return. Thanks. One moment for our next question. Will come from the line of Michael Roxland with Truist. Your line is open. Thanks, Tom, Mark, and Dustin. Tom, I'll just reiterate what everybody else has said. Congrats on your retirement. Thank you. Just wanted to get a little more color around potential dispositions. I know you've spoken about it a number of times in response to some of the other analysts, but would they be focused on some more of the cyclical elements in your portfolio, maybe looking at your industrial exposure, your automotive surface coatings that you've highlighted in CPI, maybe some of the more of those industrial elements in CPNA in order to make your portfolio maybe less cyclical, and more consumer oriented? Yeah, I think frankly, it's a pretty fair characterization that, you know, the more we can build up, you know, the stable, non-discretionary piece of our portfolio falls in line with our strategy. Again, you know, we're not gonna be specific on which businesses are gonna be divested by and when, but you know, I think the premise that you laid out is very accurate. Makes very good sense for us. Again, it just further helps build our value add to our customers as we do that. Got it. Just one, quickly on HH&S and the volume weakness there. I think last quarter, you mentioned that the volume weakness was due to destocking related to COVID benefits, which at that point was fully cycled through. You know, what really occurred this quarter where you saw destocking? Was it more of just the fact that consumers, you know, dialed back their purchases or were there some other factors driving the volume weakness in HH&S? Areas like filtration, areas like house wrap, the dryer sheet space as well, you know, was modestly destocked in the period. We don't expect that to be a long-term phenomena. As I said, these are great franchises, inside our HH&S portfolio. We expect those to pivot, you know, as we see a general improvement, you know, in the economy. Thank you. Thank you. One moment for our next question. That will come from the line of Gabe Hajde with Wells Fargo. Your line is open. Tom, Mark, Dustin, good morning. Echo everyone else's regards to you, Tom. Thank you. I hate to put you on the spot here, Tom, but kind of being obviously, you know, in Covalence and as part of the organization through the IPO process and just the company's maturation, as the company looks out to search for the next person in charge, you know, where would you expect some of the focus to be within the organization? You talked about obviously, not looking for scale, being more focused on maybe some bolt-on M&A. Something that comes to mind that maybe wasn't some, you know, a focus or priority for the organization in the past was, I mean, I know you guys have done things in the plants to be more efficient, but footprint consolidation and things like that. You know, maybe someone with more of an, I wanna say, operational background, but just any color you can give us on sort of what that might look like. Perhaps the answer is, we're not gonna tell you. Well, no, I appreciate the question. Thanks for the kind words. Remember, Berry has a very structured and a long-term planning succession process that we adhere to. We're incredibly fortunate to have fantastic internal candidates to consider for my replacement, which, again, isn't until the end of the year, so you guys are stuck with me for a while. We also have, you know, contracted with Spencer Stuart to also take a look externally as well, to make certain that we're making the best, most informed decision. You know, as we have more information that we can share with you along the way, we'll do so if appropriate. That's really all I can say at this stage. The bottom line is, I know the company is in an amazing spot right now. When you stop to think about the changes that we've made, the catalysts that we have today, it's an exciting time. You know, we've articulated a long-term leverage ratio, 2.5x to 3.5x, EBITDA growth of 4%-6%, a 10%-15% TSR growth. We've established an annual dividend. We're buying back our shares because it's a compelling opportunity. When you consider where we trade versus our peer group, and you contrast that with our results, this is exciting times. This is a great franchise that will be focused on how we take it to the next level. Our targeted investments around organic growth are absolutely paying dividends. As you can see in the investor deck, in terms of how we've been trending versus our peer groups since 2019, the story around Berry and Berry's growth, you know, it's addressed in that slide. We're in line with our peer group right now. When you couple that with our scale, our geographic footprint, our leadership position and sustainability, we're in a great spot, Gabe. I'm proud to be part of this team. I'm proud of what the team's doing. Whoever has the opportunity to take this seat is in a great spot to take the company to the next level. We're in a great place. Thank you very much. Thank you. One moment for our next question. Will come from the line of Josh Spector with UBS. Your line is open. Hey, guys. Thanks for squeezing me in. Echo my congrats, Tom. I wanted to ask on Consumer International, you know, if I look at when you first bought that business, first 12 months, it did about $650 million in EBITDA. Last 12 months, it's done about $650 million in EBITDA. Consensus is forecasting that same level for this year. I mean, I understand FX probably slight negative over two years, but you have synergies rolling through. I guess, how much is that business, or is that business under earning in your view? Can you help us think about what the normal level of earnings is for that business today? Thanks. Yeah, it's Mark. I didn't exactly follow all your numbers, but I would say, you know, the other thing that you've got to consider is divestitures. You know, the divestitures that Tom mentioned were in that business. It has grown its EBITDA, and we think it will continue to be able to deliver that. We've got a lot of great opportunities. You know, Tom mentioned some of the investments that we're making in that business. You know, healthcare dispensing solutions, pharmaceutical devices continue to be areas of opportunity. And we've also got the global growth dynamics, you know, in India, China, et cetera. We think that business can... We're doing the right things. Team's doing a great job, and we're opportunistic about the future of that business. Okay, thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to management for any closing remarks. Thanks, everybody, for your time and attention today. We appreciate your interest in Berry. We look forward to seeing you all and hearing from you on the next call. Thank you. Thank you all for participating in today's call. This concludes today's program. You may now disconnect.