Good day. Welcome to today's Colgate-Palmolive Company First Quarter 2021 Earnings Conference Call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. Now for opening remarks, I would like to turn the call over to Chief Investor Relations Officer, John Faucher. Please go ahead, John. Thanks, Sarah. Good morning, and welcome to our 2021 First Quarter Earnings Release Conference Call. This is John Faucher, Chief Investor Relations Officer. Today's conference call will include forward-looking statements. Actual results could differ materially from these statements. Please refer to the earnings press release and our most recent filings with the SEC, including our 2020 annual report on Form 10-K and subsequent SEC filings, all available on Colgate's website, for a discussion of the factors that could cause actual results to differ materially from these statements. This conference call will also include a discussion of non-GAAP financial measures, including those identified in table six of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the earnings press release and is available on Colgate's website. Joining me on the call this morning are Noel Wallace, Chairman, President, and Chief Executive Officer, and Stan Sutula, Chief Financial Officer. I will provide commentary on our Q1 performance, as well as our latest thoughts on 2021 guidance before turning it over to Noel to discuss our 2021 priorities. We will open it up for Q&A. As usual, we request that you limit yourself to one question so that as many people as possible get to ask a question. If you have further questions, you are welcome to reenter the queue. We started 2021 in positive fashion with strong organic sales growth despite a very difficult comparison, which included some consumer pantry loading in March of last year. Our net sales grew 6% in the quarter. Organic sales growth of 5% was driven by 0.5% organic volume growth and a 4.5% increase in pricing. Foreign exchange was a 1% tailwind in the quarter. While the tough comparisons particularly impacted our trends in developed markets, which were flat on an organic sales basis in the quarter, we delivered double-digit organic sales growth in emerging markets, with volume up 5.5% and pricing up 6%. We also delivered organic sales growth in three of our four categories, oral care, home care, and pet nutrition, while personal care organic sales declined due to difficult comparisons. We believe our strategy to deliver more impactful premium innovation, which Noel and Pat Verduin talked about at CAGNY, is bearing fruit, and we will continue to focus in this area to drive future growth. Our efforts on premiumization and pricing, along with our focus on productivity, like our Funding the Growth initiatives, drove improvement year-over-year in our gross margin despite a worsening raw materials environment. This gross margin expansion was a key factor in allowing us to deliver base business earnings per share growth in line with our full-year guidance despite higher logistics costs, incremental advertising spending, and investment to build capabilities. In the first quarter, our gross profit margin was 60.7% on both a GAAP basis, where we were up 50 basis points year-over-year, and a base business basis, where we were up 40 basis points. For the first quarter, pricing was 170 basis points favorable to gross margin, while raw materials were a 310 basis point headwind. This is a large impact for a first quarter. It was driven by increases in the cost of raw materials like resins, fats and oils, agriculture-related costs, and the transactional impact from foreign exchange. Productivity was a 180 basis point benefit. Our SG&A was up 90 basis points as a percent of sales for the first quarter on both a GAAP and base business basis. This was primarily driven by a 50 basis point increase in advertising to sales as we drove strong activation on brand building, innovation, and e-commerce. Our SG&A ratio was also impacted by increased logistics costs, primarily in the U.S., and investments behind growth and innovation. Excluding advertising and logistics, our SG&A ratio declined year-over-year. For the first quarter on a GAAP basis, our operating profit was up 5.5% year-over-year, while it was up 5% on a base business basis. Our EPS was down 4% on a GAAP basis and up 7% on a base business basis. Our free cash flow was down year-over-year in the quarter against a very difficult comparison. The decline was primarily driven by the negative impact of accounts payable and other liabilities, which was mostly due to changes in the timing of payables and income tax payments. A few comments on our divisional performance. North America net sales were down 0.5% in Q1, with organic sales down 1.5%, a 50 basis points benefit from the Hello acquisition, a 50 basis points benefit from foreign exchange. Our volume declines in the quarter were primarily due to a combination of category deceleration in the face of difficult comparisons as we cycled last year's COVID pantry loading, logistics issues related to a warehouse transition on our U.S. business that impacted our shelf availability and our market shares, and the winter storms in February. The logistics issues lessened over the last month of the quarter as service levels improved. We expect service levels to return to normal by the end of the second quarter. Pricing grew mid-single digits in the quarter as our efforts in revenue growth management drove pricing growth across all our categories. The combination of higher raw materials costs, higher underlying logistics costs, and costs related to remediating the company's specific logistics issues pressured margins in the North America division. Despite these headwinds, we continue to invest in advertising, particularly behind premium innovation like Colgate Optic White Renewal and the Colgate Optic White Overnight teeth whitening pen, and behind the continued strength of Colgate Optic White Renewal. Latin America net sales were up 2% as 9.5% organic sales growth was mostly offset by the negative impact of foreign exchange. We continue to deliver broad-based organic sales growth in Latin America, with organic sales growth in all three categories and in every hub. As we highlighted at CAGNY, our innovation in Latin America is driving growth in the premium segment of the toothpaste category. In Brazil, Colgate Total is gaining share behind Colgate Total Anti-Tartar, and our Natural Extracts line is gaining share particularly behind charcoal. Our toothpaste value share is flat year-to-date in Brazil in measured channels and is up year-over-year in e-commerce. Europe net sales grew 6% in the quarter. Organic sales were down 2%. Volume declined 3.5% in the quarter as we lapped strong shipments in the year-ago period, which was driven by COVID-related demand and pantry loading. Pricing was +1.5% as we took pricing across all categories to help offset raw material inflation. We're launching equity campaigns across our core oral care equities, Colgate, Meridol, and Elmex. We're excited about the launch of Sanex Microbiome, which Pat talked about at CAGNY. We delivered 16.5% net sales and 11% organic sales growth in Asia Pacific, led by volume growth across our biggest markets, Greater China, India, and the Philippines. While China and India benefited from comparisons that included COVID-related shutdowns in 2020, our innovation continues to drive improved underlying performance, particularly in e-commerce. Over the next several quarters, we will begin to roll out more premium innovation in brick-and-mortar in China, like our Colgate Enzyme Whitening Toothpaste, leveraging the success we have had online in transforming our portfolio. Africa/Eurasia net sales grew 8.5% as we delivered strong organic sales growth throughout the division. Volume grew 5% in the quarter, while pricing was up 8%. Foreign exchange was a 4.5% headwind. This growth was led by our toothpaste and manual toothbrush businesses, although we also delivered organic sales growth in personal and home care. Our business in Turkey delivered strong sales and market share performance and launched significant premium innovation in naturals, charcoal, and whitening. Hill's started the year with another quarter of strong net sales and organic sales growth, despite lapping significant growth in the year-ago period. Developed markets led the growth, particularly the U.S., Canada, and Europe, led by e-commerce. Emerging markets grew organic sales greater than 20% in the quarter through a combination of volume and pricing growth. We're very excited about our Hill's equity campaign addressing pet obesity. This global campaign is leveraging digital, in-store, in-office, and traditional media assets to drive growth in our weight control products across both our prescription and wellness businesses. Now for guidance. We still expect organic sales growth to be within our 3%-5% long-term target range. As we think about our current organic growth assumptions versus where we were three months ago, we're probably a little more cautious on developed markets. As you have seen from the scanner data, our categories moved negative more quickly than we had anticipated, and we expect that to continue in the short term. Hopefully, this allows for some of the volatility to play itself out sooner in the year, and we will see trends stabilize more quickly. Coming into this year, in categories where consumption rose last year due to COVID, we expected 2021 consumption levels to be below 2020, but above the levels we saw in 2019. That is the case so far across our developed markets businesses, although year-to-date, these categories are slightly weaker than expected. Categories like toothpaste, where usage did not spike in relation to COVID, should normalize more quickly as we move past some of the aggressive pantry loading in March and April of last year, and we're beginning to see that happen. Scanner data has returned to growth in the last several weeks. We're encouraged by how we started the year in emerging markets. We saw broad-based organic sales growth in our emerging markets across all the divisions, with a good balance of volume and pricing. Comps will get more difficult as we go through the year. We believe we have solid momentum. Please note that given widespread COVID outbreaks in countries like Brazil, Mexico, and India, we could still see an impact from government actions to stem the spread of COVID and other disruptions related to COVID, and this is not in our guidance. Using current spot rates, we expect foreign exchange to be a low single-digit benefit for the year, although slightly less favorable than when we gave guidance in January. All in, we still expect net sales to be up 4%-7%. Our gross margin guidance remains unchanged as we expect our gross profit margin to be up year-over-year in 2021 on both the GAAP and base business basis. As we mentioned on our 2020 year-end call, raw materials began the year moving higher and faster than we had expected. This trajectory has continued through the first quarter, as you all know. The significant increase in costs across our materials base obviously requires additional pricing and productivity. Advertising is still expected to be up on both the dollar and a percent of sales basis. Logistics also continues to be a headwind, particularly in the U.S., where costs also have risen faster than anticipated. We expect these costs to remain elevated in the near term but to moderate later in the year. Our tax rate is expected to be between 23.5% and 24.5%. We point out that our guidance does not account for any changes in U.S. corporate tax rates given the recent change in administration. On a GAAP basis, we still expect earnings per share growth in the low to mid-single digits. On a base business basis, we continue to expect earnings per share growth in the mid to high single digits. The adverse moves in foreign exchange and raw materials have moved us slightly lower in that range over the past few months, but it is still early in the year. With that, I'll turn it over to Noel. Thanks, John. Good morning, everyone. I'll keep my commentary brief so we'll have plenty of time for the Q&A. I think the results for the quarter really speak for themselves. Obviously, we're really pleased with our performance in the first quarter. Despite the significant volatility and headwinds, we delivered strong results around the world and up and down our P&L. While we've made progress on our strategic areas we've been discussing, we still have a lot to do in the balance of the year. Here are our key priorities for the remainder of 2021. Continue to drive broad-based growth. Our priorities here are the same as we've discussed for the past several years. We need to grow volume and pricing. We need organic sales growth in every category and in every division, in both emerging and developed markets. In order to do this, we'll continue to ramp up our breakthrough and transformational premium innovation. We delivered high single-digit growth in toothpaste in the first quarter, despite lapping solid growth in the year-ago period, which helped us drive high single-digit growth in our oral care business. We're driving growth through innovation like Colgate Renewal in the U.S., Colgate Enzyme Whitening Toothpaste in China, and our Natural Extracts line and Colgate Total Anti-Tartar line in Latin America. As Pat and I discussed at CAGNY, this is a marathon, not a sprint, but we're making good progress, which will continue as we shift our resources, continue to build new skills, and even adapt how we motivate our teams. Pricing is also an important element of growth, and behind our revenue growth management efforts, we continue to drive strong pricing as we look to increase our price index versus the market, as well as offsetting rising costs. You're hearing about rising costs from every company this quarter, and we're seeing inflation on pretty much every line of the P&L, but especially raw materials, warehousing, and logistics. Naturally, our pricing plans are focused. We just discussed we're battling the cost inflation across the board. We're also driving savings through funding the growth and other efficiency initiatives, which helped offset these headwinds and efforts Stan, our new CFO, is spearheading for us. We do not expect these headwinds to abate anytime soon, so we have to continue to invest in marketing and building capabilities for future growth while delivering on our earnings guidance. We know we need to be disciplined and efficient in this area. The third is maintaining our focus on building out the key pillars of our long-term strategy while simultaneously managing through all of the volatility. That includes building our capabilities on innovation, e-commerce, digital, and data and analytics, progressing on ESG, including increasing our commitments on DE&I, and advancing our 2025 sustainability targets, and then ultimately navigating to a return to work for most of our office-based employees. We are building a team and a culture at Colgate that is focused on adapting and changing to this volatile world. We're embracing new strategies and new ways of working, and it's paying off. We've had a good start to 2021, and we're looking to maintain our momentum through the rest of the year. With that, why don't I open up to questions? All right. Thank you so much. Today's question- and- answer session will be conducted electronically for the telephone audience. If you would like to ask a question, you may do so by pressing the star or asterisk key, followed by the digit one on your touch-tone telephone. We also ask that if you are listening to the conference on the Internet, that you please turn down the volume on your computer speakers when asking a question. Okay, we will take the first question from Dara Mohsenian with Morgan Stanley. Hey, good morning, guys. Hey there. Can you give us an update on category growth rates in some of your key emerging markets as we cycle COVID? Obviously, there's a lot of volatility short term, but I'm thinking more looking out longer term. Just an update here on volume growth and per capita consumption development opportunity going forward, as well as any thoughts on pricing mix and trade-up potential. Has anything changed here longer term, more structurally as we think about the consumer, and what are your strategy adjustments? Obviously it won't be a monolithic answer, so maybe you can compare and contrast some of the different emerging markets and how that might be different. Thanks. Yeah. Thanks, Dara. If you go back, obviously it depends on the geography. What we've talked about consistently, I think, is the volatility that we're seeing all over the world and highly dependent on how countries have treated and dealt with COVID and the rate of incidence in those countries. Obviously, if you start with Asia, the categories are coming back, although still not back to where we were pre-COVID due to some of the store closures that we continue to see across Asia, but particularly China and Southeast Asia is coming back in terms of a category development standpoint. That's based on the fact that particularly in China, you see the COVID issues being put to rest and consumers returning to some level of normality. Thailand continues to be a challenge. You've heard, I think, consistently from others that that market highly dependent on tourism, so it's impacted that category. India, we won't talk a lot about India, as we haven't announced yet, but suffice it to say that they had easy comps from last year from a category standpoint, but you're starting to see those numbers come back quite nicely. Moving on to Latin America. Again, surprisingly, we've seen a very resilient Latin America, particularly our business there. In terms of where we see the categories playing out, toothpaste is starting to come back, although it started off quite slowly. We've seen, particularly in the recent readings, the category returning to growth, which is good. Africa continues, I think, to perform okay. I think Africa is a real uncertain environment right now relative to the rate of vaccinations in that geography, so that will have an impact. If you take that holistically across emerging markets, I think the important area here is that obviously those markets were, from a GDP standpoint, severely impacted in 2020. As you see oil prices come back, those tend to benefit emerging markets, and that will play out in higher GDP. Some inflation obviously allows us to continue to take pricing in those markets, and I think as you see the rate of vaccinations increase, those markets are likely to come back quite nicely, particularly in the back half of this year. From a pricing standpoint, consistently across all emerging markets, we've been able to take strong pricing, given the strength of our businesses, and that really started back in 2020. You've seen a competitive environment that is obviously having to offset a lot of the raw material inflation that we've seen, taking pricing, which has allowed the emerging markets to take a little bit more value in their categories. Clearly there, from a per capita standpoint, we continue to be investing in our per capita programs, particularly across Africa, parts of Asia, and Latin America, and that is consistent. I think that margin growth that we've had has allowed us to continue to invest in areas like per capita, which we think obviously bode well for the long term. We will take the next question from Lauren Lieberman with Barclays. Great. Thanks. Good morning. Thanks. I know pricing obviously is a key part of your strategy, Noel. I was particularly intrigued by the pricing in Europe this quarter. I know it was discussed in relation to cost inflation and maybe a little bit less on the side of the longer-term strategic revenue growth management initiatives. I was just curious because the ability to get pricing through in Europe, even from a consumer, from a competitor standpoint, is pretty notable, and I believe a large HPC and food player this week talked about an actual tougher pricing environment in Europe. I'd love some more color on that if possible. Thanks. Sure. Two things. I think the pricing environment in Europe historically has been extremely difficult, as we all know. That being said, if you go back to a lot of the strategies that we've been putting in place around revenue management, which is a discipline that we're really trying to embed broadly across our commercial organizations, we're finding ways to get pricing into the P&L, particularly through how we manage gross to net. Also in Europe is the strength of the Elmex brands. Obviously, Meridol and Elmex being strong premium brands with a strong brand loyalty allow us to take more aggressive pricing in those markets, and we've been disciplined to do that on a pretty sequential basis across that continent. That has obviously played nicely through the P&L. I'd say a combination of revenue growth management discipline really taking hold, more work to do, to be sure, and some of the strength of our toothpaste equities in that region, which have allowed us to take more pricing. To a certain extent, as we saw more lockdowns early on in the year, the promotional environment was probably a little bit more benign, but we've anticipated that will continue to accelerate as store traffic increases in the back half of the year. All right. Once again, that is star one if you would like to ask a question. If you find your question has been answered, you may remove yourself from the queue by pressing star two. We will take the next question from Andrea Teixeira with JPMorgan. Hi. Good morning. Thank you. I just want to go back to the pricing comment. I think what you said, obviously, we have been able to price to inflation in some of these countries. In particular, you sounded, Noel, very positive about LatAm. Do you think you can still pull those levers there? To John's comment before, if you have to take more pricing in some places, is that like you're trying to price to inflation so that it can go into the guide? The two other sentences at the end of the prepared remarks implied is if you're not tracking to the high end of your guide, you're tracking more at this point in the low end. What would take you to the high end of the EPS guide? Yeah. Two aspects to talk to. There's two implications on how we think about pricing. There's the foreign exchange aspect, which obviously moves through transactionally into the margin line, and we tend to try to offset that. There's obviously then commodity inflation that we see locally in the markets, and we obviously look to gauge our price increases based on where the market is and what the consumer will bear. If you take a step back for a minute, it's the strength of our brands, I think, in emerging markets that have really allowed us to do more on the pricing line. You talked about Latin America. If you go back last year in Latin America, we took 9.5% pricing in the third quarter, 9.5% pricing in the fourth quarter. Even if you look at it across emerging markets, it was getting ahead of some of the pricing environment that we've incurred, the raw material pricing environment we've seen this year. As you build that pricing into your P&L, it really set us up for strong growth on the pricing side in 2021. We've continued to take pricing as we've seen an elevated pricing inflation environment around raw and pack, and that's allowed us, obviously, to deliver the gross margins in the quarter. Again, we continue to look at the marketplace. As I mentioned earlier, our competitors are facing the same level of inflation that we are, and as a result, that environment versus just foreign exchange, creates a healthier environment to take pricing, particularly in emerging markets. Okay, we will take the next question from Jason English with Goldman Sachs. Hey, good morning, folks. Hey, Jason. Hey, thank you for slotting me in. I guess I'll come at the gross margin question since no one's really pushed into it yet. The inflation rate this quarter, 310 basis points drag. It's almost 8% year-over-year COGS inflation. Is it safe to assume that that number should escalate as we progress through the year? Assuming that's the case, which I think seems to be a reasonable assumption, what are the offsets that will escalate in kind, to try to help you still get gross margin expansion in this environment? Which would truly be phenomenal. Are we looking for more productivity than is typical in the year, price continuing to climb, or are there other offsets we should consider? Yeah, thanks, Jason. I think we would anticipate, as we have built into our guidance, that costs will continue to remain inflated as we move through the year. As we start to lap some of the increases that we saw later in the back half of last year, it will become a little bit more benign in that regard. A couple things. Obviously, continuing to be highly disciplined about taking pricing and taking it quickly, that will continue to be the case. We've got to be courageous and bold in that regard. Obviously, we watch that carefully based on what's happening in the local marketplace, just straight price increases will continue to be an important element as we look at the back half of the year. The revenue growth management aspect we've referred to a couple times, that is an important discipline that we really need to embed across our organizations, and I think we've seen some fruits of that, at least last year and coming into the first quarter this year. That will continue to happen. The other important aspect to look at is if you look at the mix of our business, last year, we saw significant lifts from some of the lower-margin categories that were driven by COVID, so things like bar soap and liquid hand soap. As oral care begins to normalize and the category returns to historical trends, that will certainly help from a mix standpoint. Likewise, our professional health business, which obviously was significantly impacted by closures, although that business is starting to come back quite nicely, it's still not back to where it was from a store opening standpoint, as well as travel retail. As that continues to unfold through the balance of the year, that will likewise help a bit. Obviously, as foreign exchange, we talked a little bit, not seeing the benefit we initially anticipated, but still somewhat of a benefit that will ultimately help through the P&L. The other aspect, I'd say, Jason, is getting volume moving through the P&L in the back half. Obviously, taking pricing allows us to support the advertising and innovation, which is critically important. We've always said that's part of our strategy. Make sure we get the margin to support the advertising and the investment, and that will obviously bode well for the pricing that we see in the volume that we anticipate to improve in the back half of the year. The next question is going to be from Chris Carey with Wells Fargo Securities. Hi, Chris. Hey, good morning. How are you? If we're not mistaken, this is the best two-year stack in Hill's, I guess in, like, 20 years. I want to understand just how you view sustainability of consumption trends in the business today, whether you think there are incremental distribution opportunities as pet ownership has increased, or if you're just gaining market share. Obviously, this one's a little bit harder for us to track given the channels in which it sits. Basically, the concept here is quite a bit of momentum, and just want to get your thoughts on sustainability and what you see as the opportunities going forward. Thanks. Yeah. Thanks, Chris. Clearly, really, really happy with the progress because it really underscores and gives us confidence in our strategy. 7% organic on 2020, comping 2020 last year is terrific. A couple of aspects that excite us relative to the category. One, you mentioned that the pet ownership is up. That's an annuity, quite frankly, for the category. As you see pet ownership increase, obviously those pets need to be fed, and that will ultimately play back in the dynamics of the category moving forward. Second is the aspects associated with our business. Low-penetrated business for Hill's, low brand awareness business for Hill's. That, again, underscores and underpins the strategy that we have. Continue to increase investment, continue to drive core innovation, continue to drive premium innovation on the Prescription Diet, particularly as we see consumers returning into the vet space or returning to visit their vets. That will obviously bode well for the Prescription Diet business. Again, tough comps moving forward, to be sure. The business has real momentum, not only in the U.S., which continues to perform exceptionally well, but emerging markets likewise had a terrific quarter. A lot of head space there for us. We're being very methodical and thoughtful on how we generate this growth. We're looking for long-term sustainable, profitable growth, building the brands and markets and doing that the right way. We have the momentum to do that and the flexibility in the P&L. Obviously, we've seen some rising prices on agricultural commodities, and we need to take some pricing as we did. Overall, the health of the business underscored by pet ownership, the low brand awareness and penetration that we have gives us confidence that we can continue to drive this business forward. All right, your next question comes from Wendy Nicholson with Citi. Hi, good morning. Hey, Wendy. First a housekeeping. The plant in India, correct me if I'm wrong, I think this has a fair bit of export business throughout the rest of the region. Just wondering if you're worried about that, if you think there could be any disruption there. You should be getting people to the plant. I know you don't want to comment on the operations. I'm just thinking about your business in the region, whether that plant is still a big deal from an export perspective, and if there could be any pressure from the outbreak right now. My other question is, you haven't talked much about the skincare business. I'm just wondering, sort of big picture, how are trends there? Again, apart from COVID, I know you were going to expand distribution, for example, in China. How's that going? How are you feeling about the prestige skincare business, et cetera? If you could just give an update there. Thank you. Sure. Obviously, we're concerned about India, obviously, given what's going on with the case counts in the country. That being said, you've heard us talk time and time again for the last 15 months that the health and safety of our employees remains number one. We have taken significant precautions across India to ensure that the health and safety of our employees is there. With those efforts, we're pleased to say that we continue to operate all of our plants in India with no disruption. Our most significant plant there, a good percentage of the employees have been vaccinated, which is terrific. We're seeing, obviously, the performance of that plant relative to not only India for the region, continue to deliver against expectation. That being said, we can't control whatever the government decides to do in terms of further lockdowns. At this stage, the plant is being run extremely well, and the business across the region is benefiting from that capacity. Relative to professional skin, obviously a tough year for Professional skin, particularly given the channels that we're focused on, whether it be spas, dermatologists, or travel retail. All those businesses are slowly coming back. We saw good performance of the skin health business in the first quarter. In fact, that business was up double-digit. We're seeing a return to offices and the foot traffic going back into the professional space increasing month in and month out. Obviously not back to where we were pre-COVID, but the trends are positive, particularly across North America. The one outlier is obviously still the travel retail business in China. While travel retail has moved internal to China, the real travel retail historically, which was a good part of the business, has not returned, and we expect to start to see that loosen up a bit in the back half. Again, we spent a lot of time in 2020 building capabilities and really learning the business, getting the innovation profile right to set us up for good growth in 2021. Okay, your next question comes from Kevin Grundy with Jefferies. Great. Thanks. Morning, everyone. Noel, my question this morning relates to profitability in your North America business. Sales growth clearly under pressure, cycling some difficult year-over-year comparisons. You had volume de-leverage, higher commodities, logistics and supply chain issues. Nevertheless, it was a low water mark for segment margins in a very long time. Been a lot of discussion on pricing, but I wanted to, at a more granular level, talk about what percentage of your portfolio in North America, specifically in the U.S., really do you think that you can cover through pricing what has already been announced to retailers? The environment here certainly seems a lot more amenable currently than it had been even just a few months ago for obvious reasons here in terms of retailer receptivity. Just sort of rounding it out, what should the market expect in terms of margin recovery here in this segment for the balance of the year? Thanks for that. Sure. We kind of experienced the perfect storm in the U.S. in the first quarter. Obviously, the category expectations that we had declined more than we anticipated, faster and deeper, quite frankly. On top of that, we obviously saw a significant increase in raw materials, more than expected. Third, this was the biggest piece versus our expectation, it was logistics. Two issues there. Obviously, the capacity and cost of logistics broadly across the U.S. have gone up quite significantly, and that was exacerbated by a specific event that we had in a warehouse that we were opening up, and had some transition issues associated with that compounded our problems. With that, the warehouse issues are quickly moving behind us. Our service levels are quickly returning to where they were, but it certainly had a short-term impact, both from a sales standpoint, a market share standpoint, and importantly, from an operating margin standpoint. That being said, if I characterize a little bit about what's going on in the U.S., I mean, the categories were quite concerning, obviously, moving through the March period, where we saw significant declines more than we anticipated. The silver lining here, I think on North America is we've seen categories in the last two weeks come back nicely. In fact, particularly around the toothpaste category, which is rebounding up double digits in the last two weeks, particularly as we see store traffic and foot traffic return to stores. We've got a good innovation pipeline planned, and as you saw, we've maintained our support, which we think is extremely important to continue to obviously drive volume and share in the back half, and we're laser-focused on logistics and raw material costs. Relative to pricing, again, revenue growth management, we're not going to talk to our plans on price increases at this time. It's a market where everyone is certainly looking at that aspect very closely, and I anticipate that you'll see more price increases across the sector given the headwinds that everyone has faced in this space. Again, we are focused on this. I think the team's got a good handle on what's going on, get the service issue behind us, which it is, and we'll move forward. Q2 will continue to be a very difficult comp for the U.S. As you saw last year, we had significant growth in Q2 as well. That will be a difficult comp, but it'll be dependent highly on where the categories end up as we move forward. All right, we'll take the next question from Steve Powers with Deutsche Bank. Hey, thanks. We've talked a lot about pricing. You just mentioned again there, Noel. I'm thinking about in the context of your underlying strategy, the mix shift towards premium innovation. In light of the uncertainties that you called out on emerging markets and some of the volatility we've seen in developed market category trends, and just the notion that there's inflationary pressure building on the consumer shopping basket, not only in your categories but more broadly. Does that impact at all what you anticipate in terms of consumer appetite for that premium innovation that you're bringing to market, especially if the prices associated with it are going higher? I'm just curious how you're thinking about that, whether those considerations vary at all by region or across categories, and whether it's impacted at all how you're choosing to prioritize investments over the balance of the year. Thank you. Thanks, Steve. No, it has not distracted us from our strategy. Premiumization continues to be a very important element. We've talked a lot with you regarding our refocused orientation on innovation between H1, H2, and H3. Very much focused on the aspects of H1 and H2, which are premium brands. If you look at the growth of oral care in the first quarter, particularly toothpaste, a good percentage of that came from our premiumization strategy. I'll give you a good example. Good shares in Brazil, holding shares despite a pretty competitive environment. Our premium business in Brazil alone was 27% of our business, roughly, I think, in 2018. It's up to 30% of our business year to date, and it's up 120 basis points versus last year. A good indication that the launch of the Colgate Tartar Control, some of the Colgate Natural Extracts bundles, the launch of Elmex in the market there, those are important initiatives to continue to close our index, and we still have a ways to go to close the index that we talked about. I don't think, quite frankly, even though some of these markets will be under pressure economically, the fact that we have innovation across all of our price points, and historically we've played very aggressively, both in the opening as well as the mid-price. We think we have the ability to leverage our portfolio effectively as we see the economic circumstances change. Again, premiumization will continue to be a focus. You saw it in Asia, particularly where we're launching and leading with premium innovation in our online business in Asia. Our online business continues to grow. I think it was up over 200 basis points year to date. Again, supporting the fact that the premiumization strategy is working, and we'll be agile relative to how we see the market evolve. Need be, we will play more in the mid and opening, should that be necessary. I think what's important is we get more and more consumers back into stores. Historically, that is where we have performed so well, our ability to generate more volume and pricing opportunities as consumers track back into the shopping environment bodes well. That being said, I'd also say our e-commerce business continues to perform exceptionally well. That was a big growth driver for our business, comping a difficult number last year. We continued to show strong growth, our shares are pretty consistently up across the board in the online environment. We will take our next question from Bill Chappell with Truist Securities. Thanks. Good morning. Good morning. Just a question around capital allocation, and any thoughts there. For years, the company had a pretty steady share repurchase program that's faded over the past two, three years. M&A activity seems to be really picking up within the industry as everybody's looking for a new home as we get into 2021. Any changes to the thought process over the next year? No. Actually, no. Our strategy continues to be very consistent with what we've articulated in the past. Reinvesting in the business with the high ROIC that we have. We continue to see real opportunities to invest in capacity and cost-saving projects around the world, and that is indeed exactly what we're doing. That will continue to be our priority. Obviously, as M&A comes available, we've been conservative in that regard. We'll be selective, as we see some strategic gaps in our portfolio, we may look to bring those in. Right now, we're very focused on what we have in the current portfolio. We think we've got significant opportunities still to expand and really build our skin health business out the way we want to. We've got the Hello acquisition coming in, obviously some of the challenges that the natural segment experienced, particularly North America, getting those behind us and moving forward with the expansion of that brand around the world. We're focused on what we have, then obviously, we'll continue to pay the dividend, we've increased the share buybacks this year as we had outlined in our guidance coming out of 2020 when we were paying down the debt. That comes back to historical numbers. No real change there. We continue to be very flexible as we see opportunities, maintaining a strong balance sheet continues to be of paramount importance to us. The next question is from Mark Astrachan with Stifel. Yeah, thanks, and morning, everyone. Morning. I wanted to ask about ad spend and market share. Ad spend has grown ahead of sales since at least 2018. How long does that continue, and where does it normalize as a percentage of sales? I guess related to that, does market share factor into that thinking, especially given the numbers that you disclose in the releases around what has been sustained share loss in oral care, especially now that FX is favorable, as well as the commentary earlier in the call about the importance of the category to gross margin. Maybe if you could tie that in together, that'd be helpful. We don't have a specific target in mind for advertising. There's so many inputs that go into thinking about how and where we spend money. We're being more strategic on where we spend our money. That is underscored by the innovation strategy that we've outlined relative, particularly premiumization, which, in our view, requires the right level of advertising to seed it. As a result of that, there's not a specific number we're looking at. I think the most important aspect for us is continued sustainable, profitable growth. You've seen that now quite consistently over the previous couple of years, and that's the barometer we're holding ourselves to, is to continue to drive that top line. We obviously now have the ability as we shift more and more of our money into digital to really assess the performance of that spend, that makes the economics and efficiency of our advertising that much better as we think about how we want to spend and where we want to spend. As we see the opportunities unfold, as we see the plethora of brands and innovation that we have to support, we'll continue to put money in advertising as we're seeing a return on that investment, and I think you've seen that. It's all kind of obviously linked. We've got premium innovation driving gross margin. That puts more dollar margin into the P&L that ultimately transfers into better advertising, more advertising support, more capabilities, and more EPS. It's a balance across all of it. There's not one specific goal we're looking to achieve, and I think we're getting better at putting our advertising where we see the right returns and being selective, both category and a geography standpoint on how we do that. Hill's is a great example of that. We've obviously deliberately and strategically put more money into that business, and you've seen the payback on that quite clearly. All right, your next question is from Kaumil Gajrawala with Credit Suisse. Hey, everybody. Good morning. Noel, you just mentioned there's a lot of inputs into where you spend your money. As you're kind of thinking about moving out of COVID, and you think about the various pieces of your portfolio, has anything changed in terms of where you want to deploy capital? Maybe specifically to talk about, are you thinking about the cleaning side any differently? There's other parts of the business you might be thinking about differently, like doubling down on Hill's, for example. Can you maybe just talk about what has evolved a little bit now that we're on the other side of this, or likely on the other side of this? Yeah, without getting into too much detail, we've spent a significant amount of time looking at our 2025 strategic plan. In that strategic plan, I think very notable and different for us is making tough choices on where we're going to invest our money. Rather than being so democratic in that process, we're being much more strategic in not only where we spend our money in terms of geographies, but the categories we spend our money against. As a result of that coming out, we're going to continue to be laser-focused on executing against our strategy, and that involves us taking money and putting it where we think the best return through the P&L on that. It's in businesses and geographies that we believe will deliver long-term sustainable profitable growth. It's building businesses that have the right demographic opportunity in terms of growth potential for them, obviously making sure that the mix of our spending and the mix of our innovation continues to be premiumized, which requires that investment. You couple that with obviously the need to continue to a lot of that organic stuff that we do on the market. We talked about per capita consumer programs as a result of our focus, communication, and doing things of that nature. All these aspects are important to driving the investment strategy, so to speak. Again, it's just built on, I think, a well-thought strategic plan. It's anchored against making good choices of where we want to spend, certainly as we see the categories unfold in the back half of the year, we'll continue to allocate accordingly based on where we see the best growth opportunity. Once again, if you would like to ask a question or if you have already asked one and would like to ask another, please press star one to enter the queue. The next question is from Rob Ottenstein with Evercore. Great. Thank you very much. First, just a detail question. I'm sorry I missed it. Your corporate were a good bit higher than most people modeled. Did that have to do with the warehousing issues that you referenced? If so, how much of it was related to that, or what other sorts of investments are you doing there? Second, you mentioned that in general, you're in e-commerce. Can you just give us a little bit more detail in terms of the percentage of the business that's in e-commerce? Maybe detail on the growth rates in the U.S., China, Europe. Just a little bit more granularity would be terrific. Thank you. Sure. Thanks, Rob. On the corporate, actually, when you look at the SG&A line, that was driven by logistics and advertising. If you strip out just our corporate fixed costs, pleasingly, we're actually down in that equation. I think a lot of the productivity initiatives that we're focused on across the P&L and managing cost, actually delivered a fixed cost reduction in the quarter, which was terrific to see. Moving on to specifically e-commerce, obviously, the growth numbers are terrific across the board relative to our focus there. As you look at market share increases, we've seen those in North America, we've seen those in Hill's. We're seeing those in Asia quite nicely. We're seeing those in Latin America. In fact, I got some India numbers that look outstanding. Again, where we're focusing time and effort, and certainly putting the investment there, we're seeing a good return on that. I think that bodes well as we continue to see the growth of e-commerce. We exited the year at double-digit on e-commerce, and that number has accelerated in the first quarter. I think the focus and strategies we have in place continue to be well received in the marketplace. I'll give you one data point. We're up 260 basis points versus the first quarter last year on a percent to sales on our e-commerce business. Again, I think it's growing quite nicely and importantly, driving market share and new users into the franchise. Thank you, Mr. Wallace. It appears there are no further questions at this time. Okay. Well, thanks everyone. That obviously concludes our call. Again, we're really pleased on how we started the year, and we've got a lot to do. We're excited about what's ahead of us, but there's no question, a lot of volatility and challenges. We've got an incredible culture at Colgate-Palmolive, and our entire team of 34,000 people are deeply focused on delivering strong results while ensuring that we adapt to a rapidly changing environment. Thank Thank everyone for their continued support on our business, and look forward to talking to everyone very soon. Thank you.