AptarGroup, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to APTA 2023 second quarter conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Introducing today's conference call is Ms. Mary Grafides, Senior Vice President, Investor Relations and Communications. Please go ahead.

Thank you. Hello everyone and thanks for being with us today. Joining me on today's call are Stefan Tanda, President and CEO, and Bob Kuhn, Executive Vice President and CFO. Our press release and accompanying slide deck have been posted on our website. If you are following along on our website, you can advance the slides by hovering over the presentation screen and clicking on the arrows on the right and left. As always, we will post a replay of this call on our website. Today's call includes some forward-looking statements. Please refer to our SEC filings to review factors that could cause actual results to differ materially from what we are discussing today. I would now like to turn the conference call over to Stefan.

Thank you, Mary, and good morning, everyone. We appreciate you joining us on the call today. I will begin my remarks by highlighting our results for the second quarter. Later in the call, Bob Kuhn, our CFO, will provide additional details. Starting on slide three for the second quarter, I'm pleased to report that Aftar achieved core sales growth of 4% and delivered double-digit adjusted EPS growth with Q2 lending at $1.23 per share due to the continued strong demand for our pharma proprietary dosing and dispensing systems, as well as our fragrance dispensing technologies. We guided our adjusted earnings per share for the second quarter to be in the range of $1.11 to $1.19. Our adjusted EPS result includes a $0.04 impact from startup costs related to our injectables expansion program and the rollout of a new enterprise resource planning or ERP system. Our pharma segment had a very strong first half of the year. In Q2, the robust demand for our proprietary drug delivery systems once again grew across the majority of end-use categories, including nasal decongestants, saline rinses, eye care, and cold and cough, as well as allergic rhinitis, emergency medicines, asthma, and COPD therapies. Our growth in these categories was largely in line with market demand except for emergency medicine. Revenue from our proprietary drug delivery systems represents about 26% of total company revenue for Aptar in 2022 and is our most profitable area due to our institutional know-how and experience navigating the stringent regulatory requirements in the industry. Over the course of the first half of 2023, more than 85 products and medications using our proprietary drug delivery systems were launched globally. These launches will help us continue to deliver consistent growth well into the future. Today, more than half of all drugs being developed are initiated by small to mid-sized pharma companies. A drug product can take anywhere from 5 to 12 years to come to market. These early developers have limited experience with the long regulatory approval processes, relying on our decades of regulatory expertise to help support their efforts. Over the last several years, we have also added a suite of services ranging from clinical trial and regulatory filing support, to patient onboarding and digital therapeutic capabilities, reinforcing the stickiness of our business and further positioning Aftar as a pharma partner of choice. These upstream and downstream services also add additional revenue in the form of service fees, milestone payments, and or royalties. As we mentioned last quarter, the one area where we currently anticipate inventory buildup in the chain is in emergency medicines. such as Narcan and generic Naloxone in preparation for these opioid overdose reversal medications going over the counter or OTC later this summer. We anticipate demand for the OTC channel to moderate over time. However, this has historically been a very lumpy business for us and demand is hard to predict. In addition to opioid overdose reversal medications, technologies for the dosing and dispensing of emergency medicine include allergic reaction therapies and medicines that help regulate glucose levels, representing less than 3% of total company revenue for AFTR in 2022. While this is a growing area for us, the success of our pharma segment is due to our robust pipeline across many application fields. For injectables, the impact of startup costs and the implementation of a new ERP system was about 4 cents. The main issues of the ERP implementation have been addressed. However, we expect to continue to experience a drag of 3 to 4 cents per quarter due to startup costs for the new investment. This is a slight increase from the previous range of 2 to 3 cents. Our injectables division sales in quarter 2 were flat compared to the previous year's quarter. But when compared to quarter 1, 2023, sales increased by more than 50%. Recently, there has been a lot of news coverage on GLP-1 drugs and their projected growth. As we stated last quarter, we are supplying components to three of these drugs, with customers starting to secure their future capacity requirements. Sales from Elastomeric components were approximately 9% of total company revenue for Aptor in 2022. Our new capacity expansions coming online through the end of 2024 will increase our ability to focus on premium solutions and higher value products, which are ideal for biologics such as GLP-1 drugs. In our beauty segment, we saw solid volume growth of our dispensing solutions for prestige and mass fragrance, as well as color cosmetics. Two exciting milestones for our beauty business also took place recently. Some two weeks ago, we were joined by key customers local and national government officials at the grand opening of our new state-of-the-art beauty site in Ollant France, focused on providing our fragrance, color cosmetic, and facial skin care customers with unique, customized packaging solutions that help differentiate their branded products and enhance the consumer experience. Currently, only very few companies around the world can produce these types of highly technical solutions with the same level of quality. We are excited about the opportunities that this new site will afford us, and customer feedback continues to be very positive. Early in the month, our beauty plant in Le Nebois, France, which produces many of our fragrance pumps and is the site where our pharma business originally started out, celebrated 60 years of manufacturing excellence. Moving to slide four, we are pleased to share our ESG milestones and achievements from the past year with the release of our annual Corporate Sustainability Report, which is prepared in accordance with the Global Reporting Initiative or GRI standards and shows our alignment to the UN Sustainable Development Goals. We continue to view our leading position in the sustainability space as a competitive advantage. Doing right by the planet Designing products that foster circularity and attracting and retaining top talent aligned with our mission is simply good business. APTAR continues to be recognized for our achievements in this space, most recently being named one of America's Climate Leaders 2023 by USA Today on its inaugural list of 400 US companies. We are first in our industry sector and 24th among companies who achieved the greatest reduction in their core emissions intensity between 2019 and 2021. That is, Scope 1 and Scope 2 greenhouse gas emissions in relation to revenue. We were also named a 2023 Diversity Champion by Capital, a leading economic magazine in France, in collaboration with Statista. Out of 6,000 participating companies, APTA ranked 96th overall And within the pharma industry was ranked number four out of 162 companies assessed. During the quarter, we also launched a number of new products as outlined on slide five. In pharma, a new pain management medication in Europe has selected our proprietary spray pump with an electronic counter and lockout device. Bayer's anti-inflammatory and pain relieving throat spray is using our proprietary dispensing technology. And our proprietary metering valve technology is featured on an asthma and COPD inhaler in China. Our active material moisture protection solution, ActiveVial, will be featured on a probiotic in France. In beauty, our fully recyclable monomaterial pump is the dispensing solution for J&J's Neutrogena hydration body lotion in Europe. And Guerlain uses our pump on a hair care and skin care foundation line. In closures, our snap-top closure with flow control valve is used in Helman's new inverted garlic aioli product. In personal care, Bath and Body Works is featuring our desktop dispensing closure on a new line of hair care products. Looking to slide six, in the first half of 2023, we returned approximately $79 million to shareholders through dividends and share repurchases. Additionally, on July 13, we announced an almost 8% increase in our quarterly dividend, underscoring our Board of Directors' confidence in our strong performance and financial position. We are on track for our 30th consecutive year of paying an increased total annual dividend, and we'll continue to focus on creating value for our shareholders. Now I would like to turn the call over to Bob.