Good morning. Welcome to today's Colgate-Palmolive 2023 first quarter earnings conference call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. For opening remarks, I'd like to turn this call over to Chief Investor Relations Officer and Senior Vice President, M&A, John Faucher. Thanks, Allison. Good morning and welcome to our 2023 first quarter earnings release conference call. This is John Faucher. 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 related prepared materials and our most recent filings with the SEC, including our 2022 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 6 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. Noel will provide you with some thoughts on our Q1 results and our 2023 outlook. We will then open it up for Q&A. Noel? Thanks, John, good morning, everyone. As you can tell from our press release and the earnings materials, we had a strong start to 2023, the momentum on our business gives us confidence to raise our net and organic sales growth guidance and to raise the lower end of our base business earnings per share growth guidance for the year. We did this because with a quarter of the year gone, we see less risk from some of the macroeconomic and geopolitical issues that we were concerned about earlier in the year. That said, there is still notable uncertainty surrounding the balance of the year, particularly in the second half. Since the commentary focuses on the results, I wanna focus my remarks on three of our priorities that Colgate people are focused on. Priority one is driving organic sales growth as we face tougher comparisons. We will utilize our enterprise-wide capabilities in innovation and Revenue Growth Management, along with a firm commitment to marketing spending, to return to a balanced algorithm of pricing and volume growth. The pricing we have taken over the past two years helps provide us with the flexibility to fund increased brand investment to support our pricing, build brand health, and drive volume and household penetration. We know that the competitive environment is going to be difficult. We have a brand portfolio that is built for times like these. We look forward to driving growth and market share performance moving out. Priority two is delivering our productivity to fund the brand investment while we're also delivering on our earnings targets. We had a strong start to the year for both Funding the Growth and our 2022 Global Productivity Initiative, we are laser-focused on delivering against or exceeding our goals for the year. We still foresee year-over-year headwinds to earnings per share growth from raw and packaging materials, foreign exchange, and below-the-line items, driving productivity in the middle of our P&L is vital. Finally, we are focused on improving our cash flow performance. Again, we had a strong start to the year with both operating cash flow and free cash flow up, we know there is still opportunity for further improvement. We will utilize this cash flow to fund the growth in capital expenditures, to return cash to shareholders through dividends, and to drive earnings leverage through paying down debt and repurchasing shares. I'm pleased with how we started the year, but I'm also well aware of the challenges and uncertainty ahead for us. Colgate-Palmolive, however, has the brands, the capabilities, and the people to deliver in this environment. With that, I'll take your questions. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please limit yourself to one question. If you have further questions, you may re-enter the question queue. Once again, if you would like to ask a question, please press star then one. Our first question today will come from Dara Mohsenian of Morgan Stanley. Please go ahead. Hey, guys. Good morning. Morning, Dara. Clearly strong top-line results in Q1, but we're also obviously in a period of outsized pricing, and the question is sort of where do we land as the pricing trails off? Just, A, I guess can you discuss your confidence that volume will recover going forward as pricing drops off? I know it's a bit of an unanswerable question at this point, but how do you think about that dynamic ahead of time and manage your business to drive sustained volume growth as you look out longer term? B, maybe as a bit of a window into that performance when category pricing drops off, can you just talk about your market share performance in Q1 in some of your key regions and product categories and, you know, if the strategies are working in terms of driving improved market share trends? Thanks. Yeah. Yeah. Thanks, Dara. Let me come back again to the strategy that we've been deploying over, obviously the last couple years and continues to execute against the initiatives that we've talked about, particularly at CAGNY, and that's driving the core and adjacencies and channels. You see the progress we're making against all three of those, obviously delivering sequential volume growth in the quarter. We had 5 of the 6 divisions sequentially up in the 1st quarter. North America was down, but if you pull the Fabuloso recall out of the North America business, North America would have been up sequentially as well. All this plays back to our belief that the strategy clearly is working to deliver improved volume despite the fact that we continue to take significant pricing across all of our geographies and our categories. Quite frankly, we're very pleased with the progress we're seeing, and we expect sequential volume improvement as we move through the year to go here. That is contemplated on a consumer environment that remains where it is. We shall see where the consumer goes relative to the level of inflation being absorbed in the marketplace. We feel strongly that we've got the right portfolio of brands across price points, the right innovation, the right channel strategies, particularly where consumers are shopping today, to continue to drive growth. Importantly, as we saw in the quarter, our oral care business was up double-digit, and that's both positive pricing and positive volume in toothpaste. We saw good share growth in the first quarter on toothpaste in North America. Good very strong share growth across Europe. Flat shares in Europe, excuse me, in Latin America, and good share growth in Asia. Overall, we feel good about where we are from a consumption standpoint and the strategies that we're executing and expect a sequential volume improvement as we move through the back half of the year. As you said, pricing will get more challenging as we lap the back half. Certainly in the second quarter, which was a strong quarter for us, where we had strong pricing and volume in that quarter, we'll expect a little bit of pullback from there. Overall, we feel good about the momentum behind the business right now. Our next question today will come from Filippo Falorni of Citi. Please go ahead. Hey, good morning, everyone. Hey, Filippo. Morning. Can you talk about the consumer health in your key emerging markets? What are you seeing in terms of response to recent price increases? As you mentioned, like the second half, obviously a lot of uncertainty. Maybe compare and contrast, how do you see the consumer environment evolving in emerging markets compared to your more developed markets like the U.S. and Europe? Thank you. Yeah, emerging was strong. You saw obviously double-digit organic in the quarter, sequentially, again, you know, volumes performing better than they did in the first quarter. If you look at the pricing that we've taken in emerging markets over the last three quarters, quite frankly, we're pretty pleased with the fact that the volume sequentially continues to improve. Now, that being said, you know, we've got strong innovation in emerging markets, and you've seen the level of advertising that we're putting back into the business. That gives us, again, confidence that we're able to sustain that advertising as we move into the back half of the year. We intend to continue to do everything we can to increase that advertising support in the back half, particularly in emerging markets, in order to one, support the innovation we have. Second, drive the pricing into the market and continue to accelerate volume growth in the category. Overall, emerging pretty good. We were really pleased with the progress in both Latin America, Africa and Asia, particularly in China. Strong growth in all three of those regions, particularly in the key markets of Mexico, Brazil and China and South Africa. Good progress across emerging markets and shares holding up. A little more elasticity, as you would expect, given the level of pricing that we've taken in emerging market. Overall, we feel pretty good about where we stand in that regard. As it relates to the second half, time will tell. You know, as I mentioned up front, we'll see the compounding impact of pricing across many categories as we move into the back half and I expect a better balance between pricing and volume as we move through the back half, but we shall see. The good news is we've got strong innovation, we've got the pricing in the P&L, which is really important in order to get the flexibility that we need to drive the business in the back half of the year. We feel we've got a good channel strategy to ensure, as I mentioned up front, that we're capturing the omni-channel impact of how consumers are shopping today. The next question will come from Peter Grom of UBS. Please go ahead. Thanks, Operator, good morning, everyone. I appreciate all the commentary on inflation in the prepared remarks. Maybe as a point of reference, Stan, is the $300 million-400 million headwind that, you know, we discussed on the last call, is that still a reasonable range? I guess what I'm trying to get at is the dollar impact from the 700 or 770 basis point headwind in the bridge this morning would put you pretty close to that range from a dollar perspective. And I realize there's more than just inflation in that line, but is there just any way to frame either what inflation was within that number or how to think about that component of the bridge more broadly as we move through the balance of the year? Yeah. Thanks, Peter. First, as we look at that inflation level, that 300-400 range is still the range that we're seeing on commodities. There's really a tail underneath this, and in particular around ag that affects predominantly Hill's. Those prices still remain elevated. We don't see a lot of relief coming on those, and we see that kinda continuing as we go through the year. That's the main driver of our range, which is why we haven't seen it come down more. If you look at the other categories, like we do for toothpaste, home care, oral care and personal care, those have moderated more, and that was reflected in our guidance for the year. They stayed reasonably balanced. As we look out, remember, we're essentially locked in here for Q2. We have locking already in place for Q3 and a little bit less for Q4. I still see that as the viable range going into the back end of the year. What happens is, on a year-on-year impact, we wrap around on the very significant increases last year. The pricing that we've taken helps to moderate this. As you saw, we had an exceptionally good start to Funding the Growth this year, and that has also helped to mitigate that. That gives us the confidence to say that we will increase margins as we go through the year, despite the fact that we expect that the commodities are still going to be in this range due to inflation. The next question will come from Kevin Grundy of Jefferies. Please go ahead. Great. Thanks. Good morning, everyone, and congrats on a strong result here. Noel, question for you on reinvestment. Obviously, strong result here. You guys are getting the top line payback that you'd hope for. You've seen gross profit come through. You've made it a point since you came in to increase advertising levels and seen that. The advertising and marketing as a percent of sales was high, even by historical standards. That's a good thing, of course. How are you thinking about reinvestment levels should you exceed on gross profit, number 1? Then number two, realizing that it's top line payback and profit growth that's sort of driving the decisions and not necessarily the percent of sales. Are you comfortable with where you are? I mean, it's high. 12% of sales is high relative to historical standards, which dipped to 9% of. If we go back here to 2015, 2016. How are you thinking about that? How should we think about that as gross margin begins to improve? Thanks for all that. Sure. Thanks, Kevin. Yeah, we're, you know, we're really pleased with the level of advertising we're getting in the P&L, and that is obviously driven by, you know, the circular nature of how we're driving the business. Obviously, more advertising is driving the top line. We're able to get more leverage through the P&L to continue to support that. We feel as we move out, getting the pricing in the P&L was critically important to sustaining and increasing our levels of advertising. We've obviously moved more money into digital. We're seeing great ROIs on digital and our programmatic and the personalized content that we're delivering in the market. We're seeing growth in market shares, relative to where we're spending the money, particularly around the Hill's business and our oral care and skin health businesses. We're really pleased with the fact that the advertising levels continue to deliver against the expectations that we have. We balance that off with, obviously, a broad portfolio of offerings that we think are attracting and building the brands that we speak. You know, we have high household penetration with many of the brands around the world. Our ability to drive reach and continue to sustain that reach is very, very important to the growth that we're seeing in the business. We look forward, we would anticipate to continue to spend behind those businesses. We still have some businesses that, in my view, need more support, particularly businesses in parts of Europe and some of the categories in the US, and we would expect to continue to fund those as we get more gross margin accretion through the back half of the year because we're seeing the results. Ultimately, the brand equity, which is obviously the big testament to the brand support and are we getting what we want out of it, continues to show a strengthening of our brands. That bodes well for continuity and sustainability of the growth moving forward, and that's how we're kinda running that flywheel right now. Continue to invest, drive leverage in the middle of the P&L, accelerate the top line, and ultimately deliver better margins, better earnings per share for our shareholders. Our next question will come from Olivia Tong of Raymond James. Please go ahead. Great. Thanks. Good morning. I wanted to talk a little bit about gross margin. Clearly Funding the Growth start of the year materially better than expected. I imagine it's a function of supply chains improving a bit, if you could expand on that a bit. Usually, your savings contribution builds as the year progresses. Should we assume sort of a regular quarterly cadence from here, or is there something one-timish that happened this quarter to result in the strong funding-of-growth contribution? Thank you. Yeah. Thanks, Olivia. you know, this was very intentional. As we went through the back half of last year, we were deliberately looking to make sure that we had projects in place for the first half of this year in order to accelerate gross margin accretion given the inflationary pressures that we were seeing. In addition, I would say that we've done a lot of work on getting our facilities to run far more efficiently, whether that's the Hill's facilities, where capacity utilization has come down, which has allowed us to put more Funding the Growth projects onto the line to determine their feasibility. We've had the teams obviously very much focused on the opportunities that we see in the first half in order to ensure that we get that gross margin back in quickly to once again sustain the advertising and the increases we wanna see in the back half of the year. It was deliberate and strategic to make sure that we got more of that funding to growth up front, and the teams have really done a wonderful job in that regard, as you saw in the numbers, and we would certainly expect that focus to continue as we move through the balance of the year. Let me throw it over to Stan. He'll give you a little bit more color on what we're seeing again around commodities and some of the other projects that we have underway, particularly around our Global Productivity Initiative. Yeah. Thanks, Noel. Just a quick comment on the FTG. Noel highlighted that you know, we had a very strong start here. That skew, I think, is gonna be a little bit different than prior years. In prior years, you saw a build through the year. This was very deliberate. Supply chain has moderated in terms of the volatility around that. In particular, the Hill's team has actually had time to work on some of these as we've had a little bit better improvement on capacity utilization. The strong start we have to the year, I think you should think that this would be more equal as you go through the year versus growing through the year, so from a skew point of view. This is important because as we look at, you know, the materials cost, there's still gonna be a headwind as we go through the year, so we need that to help offset, you know, that impact. You know, we have our GPI program. We continue to get benefit from that. You saw a small charge in the quarter, but the team is driving productivity throughout the P&L, not just in the GP line, but also in the MBO line as we look for things to offset that materials headwind. Our next question today will come from Chris Carey of Wells Fargo Securities. Please go ahead. Hi, good morning. Hey, Chris. Stan, I just wanted to, you know, confirm one comment, you know, about commodities. I think it was somewhat clear, but, you know, to Peter's question, just around $300 million-400 million range, is that what you're expecting for the full year from an inflation standpoint? just, you know, a little bit related, on the North American operating margin, that has been stepping up, kind of sequentially and then, slowed a little bit this quarter, obviously. I would have thought maybe with the transportation and logistics relief and building productivity and a little bit of easing inflation, maybe that can keep going. I know there was obviously some noise with, you know, the North American business this quarter with, you know, recall and otherwise. Is there any way you can maybe just, you know, unpack, you know, that, you know, North American margin performance and where you see things going? Thanks for, you know, that clarification on commodities and the comment on North America. Why don't I start here? On North Am-- first let's start with the commodities. As we said, still $300 million-400 million range on that impact. I don't see that moving a lot, in the short term. Keep in mind are locking, right? We're already into almost May, 2Q is largely locked. As we go into the back half of the year, hopefully we'll see a little bit of relief come through, but keep in mind, the closer we get, the more we lock, in order to ensure we have supply. If we think about the North America margin and go through. North America margins here, still improved on a year-on-year basis. They also improved on a sequential basis. As you look at the progress on what we're doing from a GP point of view, you know, that's important. We do see some logistics benefits here. Logistics have come down versus the start of the year, but again, we start to lock in some of that activity. We've seen it mostly in the ocean side of logistics, which will certainly help the overall margin. You know, if we think about North America in total, clearly Fabuloso recall had a impact in the quarter. That's getting largely behind us, we expect that we'll see improvement as we go through the year. Yeah, maybe a couple of things. You know, as Stan said, obviously, operating profit was up nicely, which has been the big focus for our North America business. We were up roughly 300 basis points on operating profit in the first quarter. We feel we're making the right step, taking the right decisions, and making the right progress against the middle of the P&L, particularly around gross profit and controlling our overheads and managing logistics. That was an important element, and we're making sure that that progress is then reinvested in the business. A couple other highlights on North America. Obviously, ex-Fabuloso volume would have been up on the quarter. Great quarter for toothpaste. Toothpaste was up double digit in the quarter for North America, with growth including volume growth on that business. Toothbrushes, a little softer. You remember, we were lapping a resupply of our product last year and some out of stocks from some of our competitors. Volumes were a bit down there. Personal care up high single digits. Home care was soft, as we mentioned, due to the Fabuloso recall, overall, really good progress. The other aspect to North America that I would call out is the significant progress we're making in non-measured channels. Again, this is part of our strategy of growing in faster growth channels, where we saw significant growth in non-Nielsen channels, which was terrific for North America, has obviously helped to drive some of that top-line growth. Overall, good quarter for North America, very focused on the middle of the P&L moving forward, we see opportunities. The good news is we're seeing good progress on the top line, and that's translating through the P&L. Just one point of clarification on that. North America volume would have been up sequentially from Q4 to Q1, performance from Q4 to Q1, not up year-over-year ex-Fabuloso. Correct. Stan. Yeah, the operating margin, it's up year-over-year. Versus fourth quarter, you see it's down about 100 basis points or so. That's really driven by the Fabuloso impact combined with the increased investment in advertising as we're bringing both innovation to market and supporting the pricing that we've taken in the market. Our next question today will come from Nik Modi of RBC Capital Markets. Please go ahead. Yeah, thank you. Good morning, everyone. If I could just ask a quick clarification on the raw material, the ag stuff. Stan, can you just give us any more detail on exactly what, you know, what ags are causing the pressure and what's driving that? Then my broader question is now on the whitening innovation and just the whitening strategy. I'm curious if you've done any halo work on the impact it has on the core oral care franchise, you know, toothpaste, toothbrush. Any perspective around that would be helpful. Thanks. Sure. Let me, Nik, let me take that, and then we'll have Stan get to some more specifics around the Hill's commodities and particularly the ag prices. Yes, the strategy that we have on whitening is very much about building the brand, particularly here in if you take North America, the Optic White brand, and as we've expanded into at-home whitening at very significant premium prices and the significant efficacy that those products deliver in the market and to the consumer, we've seen very nice halo impacts across the entire Optic White range as well as the Colgate brand. The short answer to your question is clearly, the halo effect is transferring to the entire Optic franchise as well as improving the Colgate brand. Yeah, Nik, on the commodities, it's kind of across the board with most of the ag. Corn, wheat, soybean, you know, the risk of the drought in the U.S. and the effect on crops, even though some other areas of the world are a little bit better, the risk of Ukraine, all has been pushing pressure on that. Don't forget as well that the protein side of this, you know, things like chicken livers, et cetera, with some of the impacts have been out there, has all put pressure on Hill's. That remains the real driver of that $300 million-400 million range. The next question will come from Jason English of Goldman Sachs. Please go ahead. Hey, good morning, folks. Good morning. That's a great segue because I wanted to talk about Hill's and the pressure that's been on it. Good quarter, obviously not for Hill's, with the profitability and the margins. We've lost over 1,000 basis points in margin the last few years. I was hoping you could unpack the components of it, and the cadence at which you can recover, if you can recover them. How much are we looking at from the mix effects of recent acquisitions? What's the cadence of bringing your capacity on there and improving that? How much is related to the slack capacity, the underutilization of the assets that you're standing up and maybe some of the stress in the supply chain that's resulted from capacity utilization? Then I think the third bucket, and tell me if there's other buckets, I think the third bucket is the pricing out of cost. How large is that bucket of the roughly $1,000? Is it reasonable to think that could come back, and if so, when? Thank you. Sorry for the multi-part long question. No, thank you, Jason. Let me top line Hill's a bit, and then Stan can provide a little more of the specificity that you were looking for. You know, structurally and strategically, this business continues to perform very well. A continued sequential improvement in volume and strong organic growth despite the difficult comps, you know, that we continue to come up against. Overall, pleased with the 14%. Again, that's 14% on 13% last year, pricing of 11.4% on 9% last year, obviously, sequential improvements in volume. A couple things there. you know, Stan will get into, obviously, the key drivers of the operating margin dilution, which would be the following: obviously, ag cost, the manufacturing integration of the 3 Red Collar facilities, plus the Italian facility that we have as we move through the variances associated with that. Red Collar in the current quarter is a significant portion of that, the private label business. We've continued to obviously significantly increase our advertising support. We said we would do that as we built up more capacity. That is very strategic and deliberate, we're seeing the results of that in the marketplace, particularly as we drive new innovation into the market and we drive pricing in the market. The ability to sustain and elevate that moving forward is gonna be largely driven by our ability to sustain the strong levels or even increase our advertising levels. As we look forward strategically, margins will improve sequentially as we move through the back half of the year. Plant efficiencies will continue to deliver progress in that regard. We'll get the constraints out of our existing plants, which we're running at full throttle. That will allow us to be far more efficient in those plants, put more Funding the Growth into those plants as we look forward. Overall, strategically, the business is doing very, very well, and we feel all the steps we've taken to improve capacity, ultimately delivering good, strong line growth. We need to focus on the middle of the P&L, as you rightfully say, and the progress is there to do that. Yes. Let me pick up here. First, if you take a look, these investments in the business, and if you look at the net sales, keep in mind, you go back just a couple of years ago, you know, we're up well over $200 million quarter versus first quarter of 2021. The investment in our brand is paying off. If we look at margin, the private label what we said has a 90 basis point impact to the total company, it has slightly over 400 basis points impact to Hill's. As you take a look at that margin impact, that is a material impact to Hill's on a GP basis. Through time, that private label will wind down, and that will be over the next couple of years, as we slowly wind down that contract and then backfill it with Hill's volume at Hill's margins. As we've already talked about, all of the raw material impact inflation has predominantly been against Hill's, also impacting their margin. Keep in mind, you know, they've taken significant pricing here over the last several quarters, and that is helping to mitigate this. The fact that we're now, as the Red Collar facilities have come on, that's helping us manage utilization, not just of Red Collar, but of the entire manufacturing footprint. That's enabled Hill's to contribute materially to the Funding of the Growth savings. I think where Hill's is right now is well-positioned. I think we'll see sequential improvement in margin as we go through the year. We're gonna manage that carefully so we can continue to supply our clients, and we saw material improvement in case fill rates coming out of first quarter. Our next question will come from Bryan Spillane of Bank of America. Please go ahead. Hey. Thanks, Operator. Good morning, everyone. I got a quick clarification first for Stan. I think in the guidance, we talk about net interest expense, maybe going higher than your original plan. Could you put some If you can just put some color, put a number on that. I'm assuming, is this related to the refinancing? I think you refinanced some debt in March. Is it just related to the refinancing of the debt, or is it exposure to, you know, like, short-term financing variable rates? I have a follow-up. Sure, Brian, thanks for the question. First on interest here as we looked, this is, while we want to call it out because we saw rates going up, this is not a large number, you should think around $20 million for the year. It's not really related to the first quarter debt issuance. We are very happy with that. We had very good demand on that bond. It's really the assumptions on the number of rate increases and predominantly in Europe. As we look at the ECB and the changes there's slight difference to what we had anticipated coming into the year. As we all know, that's a moving target, and it's gonna depend on inflation, moves the central banks, but that's our best guess right now. That's a modest impact for the year. Okay, great. Thank you. A question for Noel. Just you talk about, I guess, risks in the second half, maybe if we just kinda think about that at a, at a higher level. It sounded to me from listening to the, to the Q&A and reading the prepared remarks that a lot of that risk is what the consumer may or may not do, less so than concerns about volatility and input costs or supply chains. You know, risk has got a lot of definitions, right? If you could just maybe. Sure. -talk a little bit about, like, what the specific risks are and maybe how Colgate is in a position to, you know, manage that risk maybe a little bit more, you know, with a little bit more agility than maybe was the case two years ago. Sure. Good morning, Bryan. Thank you. Clearly, the consumer environment is the one that's the big unknown, I think, to everyone, and that's been a consistent theme through the first quarter print by most in terms of what's really gonna happen in the back half and the compounding impact of pricing. You know, I'll address the fact that historically, when we've seen significant inflation in our categories, we've weathered those periods really, really well. A combination of great value-oriented innovation and the fact that the breadth of our portfolio at various price points affords us the opportunity to really push different segments at the appropriate time anywhere around the world. We're pleased with that. We're also pleased with the fact that you tend to see in times like this, a squeeze in the middle of the of the category with premium growing and the value growing. That's been our focus, quite frankly. Premium has been the key focus for us, and we're seeing great progress, particularly across our toothpaste business in new channels and at the premium end of the market. We obviously have a very strong base business that is well-positioned based on some of the relaunches we have. You know, raw packing materials, we shall see. We've seen a stabilization across at least the Colgate side. You've heard a lot about the ag prices that continue to elevate. We've seen a stabilization on those as we move. We've got more predictability on that, hence the reason why we felt more confident with the raising guidance across multiple dimensions there, 'cause we see a little bit more transparency to that. As Stan mentioned, we've got some contracts that will obviously come off. The unknown there is what our suppliers would do. They're facing rising wage inflation. We'll have to deal with that as it comes, particularly in the second half of the year, relative to how they decide to adjust pricing on some of the key commodities that we will ultimately be purchasing. The other aspect is China. We will see where China impacts not only the Asia business, but the world's, quite frankly. We expect, obviously, a slow progress in that market. I don't expect it to be vertical. I expect it to be a progress from quarter to quarter. We have not seen the travel retail business come back yet, and that is an expectation that we will probably see in the second half of 2023, not in the first half, but we shall see. We'll get into Asia and China, I'm sure, as the Q&A progresses. We had, obviously, a very strong quarter there, and we think we're well-positioned as that economy comes back to deliver on it. The last is foreign exchange. That clearly is always a risk. As you saw in the prepared remarks, we're at a low single-digit foreign exchange impact through the P&L. We'll see where that moves. The Latin American currencies have come back a little bit here, as has the euro. It's been very volatile and we'll adjust to that going forward. That has been a big driver in the past. We think we're well-positioned right now from the fact, again, of getting strong pricing into the P&L, both in the fourth quarter and the first quarter. Our next question will come from Lauren Lieberman of Barclays. Please go ahead. Thanks. Good morning. Two questions, sort of like everybody else. The first was, is just pretty basic, and I was curious if you could offer any perspective on volume performance by category that you've seen. I know that's not typically something you discuss, but as we kind of think about that path forward and that shift, you know, towards a more balanced revenue algorithm, I'm just curious where you stand on kind of volume growth by segment. The other question was, Noel, in your prepared remarks, you mentioned something about, you know, in the competitive environment would be difficult. I just-- you know, we haven't heard that from a lot of other companies, and I didn't know if it was sort of a particularly pointed comment, or just a, you know, general commentary on your ability to compete in confidence in the innovation pipeline and advertising support. Just curious on a little bit more color behind that commentary on the competitive environment. Thanks. Sure. Thanks, and good morning, Lauren. Let me take the second question first. You know, the competitive environment will likely intensify, particularly as you see costs come back. That will be a function of both local brands and private label getting more aggressive. The good news is our categories, if you take North America and private label, were benign. No progress in private label shares, so to speak, with exception of a little bit in liquid hand soap and a little bit in cleaners. A little bit more acute of private label growth in Europe, as you saw price discrepancies or the gap between private label and global brands increase. We'll see how that translates in the back half as we expect them to have to take pricing in the first quarter as we did as well. We think local brands and private label likely to elevate in terms of their competitive nature in the back half. As costs stay flat in the back half, which is what I think we're hearing from most, we expect the competitive environment to increase in that regard. Obviously, you'll see more promotional volumes probably come into the category. It's been quite constructive so far, I will say that. We need to anticipate that things could worsen based on where the costs are, and we're well prepared for that. On your first question, volumes. Category volumes, if I take just the market volumes in general, flat to slightly negative across most of the world on the volume side, obviously driven by the fact that there's so much pricing that's gone into both oral care, personal care, and home care. If you look at us specifically, really strong growth on the oral care side, as I talked about, double-digit growth across most markets in toothpaste. Good volume progress in most markets on toothpaste, so we're really pleased with what we're seeing there. Personal care up mid to high single digits, depending on the marketplace, both from a pricing standpoint. A little bit more challenged on the volume side, given the strong pricing we've taken there, particularly in categories like liquid hand soap and bar soap. On home care, mid-single digits to low single digits in terms of growth, depending on the marketplace. That one is experienced a little more elasticity, particularly around the cleaner side of the business, where we've seen more price competitiveness in that side of the business and a little bit more trade-down. Overall, again, sequentially up and really pleased with sequentially up, given the fact that we had a lot more pricing in this quarter than we had in the 4th quarter. Good progress overall. We'll have to watch the volumes carefully, and we're all over that. Our next question will come from Mark Astrachan of Stifel. Please go ahead. Yeah, thanks, morning, everybody. I wanted to ask about EBIT margins in North America and Europe. You know, you take a look at where you are today versus where you were a few years ago, it seems like it's, you know, outside of Hill's, one of the biggest drop-offs relative to historical levels. I appreciate inflation effects, et cetera, but it also seems like maybe those markets are a little bit more competitive than some of the others. You know, is it levels of spend that has potentially impacted that? Kinda how do you think about progression of margins? Is it realistic to think that you could eventually, you know, no sort of timeline around that, but get back to those levels? You know, why or why not would be helpful. Thank you. Yeah. Thanks, Mark. Yeah, your answer is clearly around the spending. That's the answer. The spending is up, quite notably in North America. That's very strategic. We see that as a growth market for us moving forward, not only on the top line, but on the bottom line. We really wanted to reinvest behind the business in some of our brands, and we're clearly demonstrating that as we've gone through the last couple quarters. Getting gross profit in the middle of the P&L sorted out in North America has clearly been a key focus, and we've had good gross profit progress in North America. We're getting better overhead leverage through the P&L. We're getting a lot better efficiency in our plants, and so we'll see that translating moving forward. We will continue to invest behind that business moving forward to drive the top line. Europe, a little bit driven obviously by the foreign exchange environment to a certain extent, and obviously more increased inflation in Europe than we've seen in other markets around the world, particularly around the high gas prices and the falloff effects of higher gas prices and some of the raw materials that we purchase into our European plants. So overall, there's been a little bit more pressure there. But again, we've taken strong pricing in the back half of 2022 and pleased that we were able to execute our pricing in the first quarter of 2023 towards the latter end of the quarter, and we'll see that benefit us as we move forward. Overall, your observation is correct. We feel we've got a good handle of getting the gross margins and the operating profits up sequentially as we move through the back half of the year, and importantly, sustaining or increasing our advertising levels to continue to drive the top line. Our next question will come from Stephen Powers of Deutsche Bank. Please go ahead. Hey, thanks. Good morning. Just Hey, Stephen. Hey, good morning. Just a couple of cleanups, I guess. Just the first one on, just on the Fabuloso recall, just 'cause I've received some confusion in my inbox during the call. Is there a way to, you know, quantify what the impact was, you know, in the quarter, and does that reverse out as a benefit in the second quarter? That's question number one. Question number two, on the logistics topic, I don't know if there's a way to quantify what the benefit was or how you're thinking about the expected benefit over the course of the year, but that would be helpful as well. The last piece is, I guess it kind of builds on Jason's question on Hill's margins, but I was specifically on the Tonganoxie plant, just where that is, and what the timeline is to get that up to scale. Is that a material driver of the margin bridge as well, or is it more on the margin? Thank you. Great. Thanks, Stephen. Let me take the Fabuloso and the Hill's question, and I'll have Stan come back to you on logistics. The Fabuloso impact was Q1. It was a material impact to the North America volume line. We're not gonna quantify that, but it was quite significant to the volume performance in North America. That is behind us as we move into the second quarter. We'll see the benefits of the Fabuloso business coming back into the P&L as we move forward. Again, if you take the Fabuloso business out of the North America number, they were up sequentially versus the fourth quarter of 2022 in volume. It was a very time-driven event in the first quarter, and the good news is that's behind us. Tonganoxie progressing. As you know, strategically, that's a very important plant for us, given the strong demand we have on the wet side of the business at Hill's and our inability to supply the current demand for wet products all around the world. Getting that plant up and running will be strategic for the continued growth of that business. That will happen towards the tail end of the third quarter. We anticipate, obviously, we'll have some start-up costs associated with that as we move through the transition of that facility. Overall, we should see that benefit us moving into 2024, particularly at the margin line, as our wet business is margin accretive to us and will certainly benefit the Hill's business longer term. Let me pick up on logistics here. You saw logistics was 9.5% of sales. If we look, it's been an incremental headwind to our overheads. Remember, it's in our overheads in SG&A for several years. In Q4, we saw the first year-on-year decline as a percent of sales in 12 quarters. It was down again this quarter, and we expect it to be down for the year. I expect as we kind of look out through the remainder of the year, it's gonna come down slightly. I don't see it coming down materially. We're at 9.5% now. I still think it'll probably start with a 9 as we go through the remainder of the year. Certainly a help year-on-year, but as we kind of look out through the rest of the year, I think that's how you should think about as a percent of sales. It'll moderate and stay just above 9%. Our next question will come from Robert Ottenstein of Evercore ISI. Please go ahead. Great. Thank you very much. two follow-ups. The first one, a quick one. You mentioned that the you were very strong in non-measured channels in North America. Was that more e-commerce or club stores? Can you give us some metrics around that? That would be helpful. Then my core question is really on the advertising spend pickup. You know, 14%, it's a big number. You mentioned for the full year that you would be up absolutely and as a percent of sales. Can you give us a little bit more sense of where that money is going? Is it more innovation and longer-term focused or maybe more short term? Following into that, do you expect to see, you know, this elevated level going forward, either because you have very high return projects or you need to catch up? You know, just trying to get a sense of what the income statement may look like, you know, longer term. Thank you very much. Sure. Yeah. Good morning, Rob. let me take both those questions. First on the non-measured channels. Again, this plays back to the strategy that we've been talking about, for quite a few years now. Certainly I highlighted again at CAGNY that we are very focused on growing channels that particularly are not measured by Nielsen, which are the faster grower channels. As you mentioned, e-commerce, club stores, discount stores, value discount stores, some of the big box stores that we're seeing, emerge in Latin America. Overall, and some of the new, obviously, platforms that we're seeing coming out of China. This has been strategic and deliberate for us. If you take the North America number, we've seen significant growth in non-measured channels to the tune of 4-5x what we're getting in measured channels. Obviously good growth there. The key is to sustain that growth. Our e-commerce business was up double digit in the quarter, now roughly 14% of our total sales. Overall, and we're seeing good share growth in those businesses. In fact, if you take some of the progress we're seeing in China, very much driven by the strong e-commerce shares that we had. I demonstrated that at CAGNY. In fact, since CAGNY, we've continued to increase our e-commerce shares in China and likewise in the brick-and-mortar business. Overall, we feel the strategy is working for us. Again, largely driven by the fact that we're supporting our businesses. We're using a widespread of different mediums to grow brand awareness and brand penetration. Obviously, TV for a lot of reach and frequency, given the scale and scope of our brands in many markets. Really fine-tuning behind our digital transformation, our ability to drive higher ROI spending in the digital space. Clearly, as we see more ROI coming, we see continued growth in terms of penetration, in terms of consumption, and in terms of ultimately delivering share growth and category growth for our retailers. We'll continue to elevate our spending. We're measuring it very quickly. This is not just for the sake of increasing spending. We wanna be sure and absolutely deliberate in making sure that the spending is returning back to the brands driving category growth. There's not a specific number we're aimed at, Rob. We're looking to obviously continue to accelerate and sustain the top line and grow the health of our brands. We're seeing good results from the strategy we've put in the marketplace. Our next question today will come from Fulvio Cazzol of Berenberg. Please go ahead. Yes, good morning, thank you for taking my questions. Mine is on the medium-term outlook for the pet nutrition category. How should we think about the medium-term growth prospects as the tailwinds ease from increased pet ownership during COVID, et cetera? I was also interested in your view on the competitive standpoint, like if, you know, you're making some investments on capacity, and I think some of your peers are making significant investments. I think Nestlé is doing quite a bit on manufacturing. Is there a risk that the supply-demand balance turns less favorable in the coming years and result in softening industry pricing power? That's my question. Thank you. Yeah. Yeah. Thank you very much. Let me take. Let me answer a couple ways on the first part. First, you know, obviously coming through COVID, pet adoptions increased quite significantly. Those pets will continue to obviously age, and we will have obviously therapeutic and wellness products delivered for an aging pet population, so we feel good about that. You'll recall we've talked about the low brand penetration and brand awareness of the Hill's franchise, so we feel even if the market softens a bit, which we have not necessarily seen, a little softness in volume, but not necessarily in value, as you see premiumization continuing to grow the market today. We feel we have the right portfolio of brands to continue to grow and the right investment strategy, hence the aggressiveness of the advertising to ensure we're building brand awareness and penetration off the lower levels that we have today. We also feel we've got opportunities internationally that we have yet to exploit given some of the capacity constraints that we have. We'll continue to obviously go after those moving forward. You know, we feel. I can't address the capacity issues, or, where the capacity is in the market. We're obviously putting capacity for our business, we see that obviously as a real plus for us as we move forward, not only to drive better efficiencies in the plants that we currently produce in, but as we bring Tonganoxie up to line, as we bring the Italian facility up to speed relative to our recipes. We feel we have real growth opportunities to continue to expand those segments where we weren't competing nearly as aggressively in the past. Overall, that will not only drive our business, but will drive the category as well, given the levels of support that we'll continue to bring to our retailers. Our last question today will come from Andrea Teixeira of JP Morgan. Please go ahead. Thank you. Good morning. Noel, Stan, you appreciate the sequential improvement in volumes that you called out worldwide. Are you still seeing a premiumization playing out, starting to see consumers down trade into the entry-level price points in some parts of the world? I know mix is part of your volume numbers. I was wondering if you can speak apples to apples into the volume increase that you're seeing sequentially. A clarification on the Latin America and in European, including EMEA. I understood the share stabilized, especially in LatAm. Assuming it was mostly value share, given that obviously you're the leader and you're leading in pricing. How about the volume share in those regions, and how are you seeing that play out as you progress, especially as you over-skew in personal care, in particular, hand soap and the other categories within that sub-category? Thank you. Yeah, thanks for the question. Clearly, as we've seen in, in prior challenging markets with a lot of inflation, you kinda have the tales of two cities, which is the premium segment continues to grow, and that's the area where we're under-indexed in. Clearly that's fueling a lot of our advertising investment and our channel strategies, particularly in oral care and in the skin health business. We see that segment continuing to grow, the middle getting squeezed a bit and the lower end with, the point you made, a little bit more trade down into the lower end. Remember that some of our lower end businesses, while the absolute margin dollars might be lower, the margin percent might be as good or better than some of our premium segments. Overall, we feel pretty good about the mix of our business, and that continues to be, in our view, a real advantage for our portfolio relative to the breadth of our portfolio. Relative to volume shares, particularly in the emerging markets, we have taken significant pricing in emerging markets, and we've clearly done that to ensure we get the flexibility in the P&L as quickly as we possibly can, that we sustain the advertising numbers or increase them to drive the innovation and deliver the pricing, particularly for the premium side of the market. We've seen a little trade down, particularly more in the home care businesses. The cleaner segment, I would point out the dish segment, a little bit of trade down, particularly in Latin America. Personal care holding up okay. Bar soap tends to be more pricey, less elastic than many of our categories, but we've seen a lot of constructive pricing from our competition, so there hasn't been a significant amount of trade down to private label as of yet, but we'll watch that very carefully. Home care a little bit more challenged, particularly around the cleaner segment worldwide and personal care in the bar soap segment. Oral care looks okay. As I mentioned, we're up double digit in toothpaste with both positive pricing and positive volume. This concludes the Q&A portion of our call. I will now return the call to Noel Wallace, Colgate's Chairman, President and CEO, for any closing remarks. Yeah. Thanks everyone for your interest in our company. Let me just extend a personal thanks to the 34,000 Colgate people who have worked tirelessly to deliver a stronger momentum in the first quarter, getting us off to a strong start for the year. We greatly appreciate their steadfast resolve and the innovation that they're bringing to the market and the strong execution. Look forward to talking to everyone in the second quarter. Thank you. The conference has now concluded. We thank you for attending today's call. You may now disconnect.