AptarGroup, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to APTA's 2025 First Quarter Results 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 Mrs. Mary Scafidis, Senior Vice President, Investor Relations and Communications. Please go ahead.

Thank you. Hello, everyone, and thanks for being with us today. Our speakers for the call are Stefan Tanda, our President and CEO, and Vanessa Canu, our Executive Vice President and CFO. A press release and accompanying slide deck have been posted on our website under the Investor Relations page. During this call, we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measure and the reconciliations are set forth in the press release. Please refer to the press release disseminated yesterday for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this earnings call. As always, we will also post a replay of this call on our website. I would now like to turn the call over to Stefan. Stefan, over to you.

Thank you, Mary, and good morning, everyone. We appreciate you joining us on the call today. I will begin my remarks by highlighting our first quarter results. Later in the call, Vanessa Canu, our CFO, will provide additional details on key drivers for the quarter. Starting on slide three, for the first quarter, we delivered adjusted earnings per share of $1.20. Neutralizing for currency effects and tax, earnings per share would have increased approximately 5% over the prior year period. We saw solid demand for our pharma segment's proprietary drug delivery systems, especially technologies for emergency medicines, central nervous system therapeutics, asthma, COPD, and ophthalmic treatments. Additionally, strong active material sales in diabetes solutions and royalties contributed positively to our quarterly results. Core sales for our proprietary drug delivery systems grew 4% in the quarter, following high single-digit core sales growth in the prior year period. As we expected, quarter one 2025 was impacted by softer demand for dispensing technologies in nasal saline and nasal decongestants. The strong cold and flu season is helping to deplete some of the inventory built up. At this time, aside from the US, we are not yet seeing an inflection point in our order book, indicating that there is still inventory in the system. Our proprietary drug delivery systems reported sales have grown over the prior year period for 12 quarters in a row, growing double digits in six of those quarters. We are very proud of the success of the team, fueled by record launches, new innovations, and the quality and the reliability of our products, essential in administering life-saving medications. And while we anticipate there will be phases of rapid growth and more moderate growth, we remain confident in our growth prospects. Our long-term growth is driven by strong macro trends, such as the decentralization of healthcare, growth of generic medicines, the switch of drugs to over-the-counter markets, and always worsening allergies. The injectables division had a challenging comparison over the prior year period, Our order book for injectables in 2025 is robust, and we expect to continue to see good demand from GLP-1 and Biologics. We continue to ramp up equipment capacities and our validation efforts to service the attractive growth in this end market. In our beauty segment, prestige fragrance and facial skincare end markets remain challenged. However, we saw sequential improvements in sales, including in Europe from certain fragrance companies, and progressive improvement in China. Turning to the closure segment, the solid product sales results in the quarter were offset primarily by meaningfully lower tooling sales and the discontinuation of activities in Argentina. Improving utilization rates and continuous cost management efforts coupled with our strong innovation pipeline are contributing to top line and bottom line results. Moving to slide four, I am proud to highlight recent corporate awards and recognitions. We believe operating in a sustainable manner and developing more sustainable product solutions is an important competitive advantage for Aptar. As a reflection of our progress during the quarter, we were named one of Barron's most sustainable U.S. companies for the seventh consecutive year. We also achieved the coveted Echo Rates Platinum level rating in recognition of our sustainability efforts for the fifth consecutive year. The platinum rating places us among the top 1% of more than 150,000 companies rated by EcoVadis across all industries. Turning to innovation, I want to highlight a few recent technologies and product launches as shown on slide five. Starting with our pharma segment, our nasal delivery system is the solution for nasal saline rinse in Germany. In China, our ophthalmic squeeze dispenser is the solution for the multi-dose preservative-free drops by VisionX Lab. Last but not least, we recently announced a clinical validation study for our SmartTrack services platform. After almost a decade of development, aiming to reduce the need for clinical trials in generic inhaled drug approvals by leveraging in vitro, in silico methods to predict clinical outcomes. The validation study is scheduled for the second quarter of 2025 and is a key step forward in proving the platform's effectiveness. We expect that SmartTrac will help our customers speed up ANDA approvals and make generic inhaled medicines more accessible to patients. We anticipate the study to also support efforts such as creating low global warming potential powder meter dose inhaler formulations. developing new drug combinations, repurposing drugs, and advancing new chemical entities. In beauty, our refillable fragrance pump is the dispensing solution for L'Oreal's new Yves Saint Laurent fragrance in Europe. In Latin America, Oboticario has selected our pump for a new men's fragrance, and our custom dispensing pump is on the Beiersdorf Eucerion brand lotion. In Asia, our customized cosmetics pump is used on PNGs or Layserum facial skincare product. Our buildable drop-by-drop dispenser is featured on the Boima Suncare brand in the US. Moving to closures, Hidden Valley Rant inverted salad dressing features our new lightweight closure with fully recyclable valve, now on the grocery store shelves in North America. In Latin America, L'Oreal is featuring our fully recyclable e-commerce capable desktop solution on its Garnier Fructis hair care products. And in China, our sports closure is featured on the New Lean brand sports drink. Before I turn the call over to Vanessa to share further details on the quarter, I want to highlight that we ramped up our share repurchases in the first quarter, repurchasing more than half a million shares for about $80 million. Our share repurchases underscore our belief in the future trajectory of the company. Now I will turn the call over to Vanessa.

Thank you, Stefan, and good morning, everyone. Let me begin by summarizing the highlights for the quarter. Starting on slide six, our reported sales decreased 3%, which included a foreign currency translation headwind of approximately 3%. Therefore, core sales were flat compared to the prior year period. As shown on slide 7, we achieved adjusted EBITDA of $183 million, an increase of 3% from the prior year period. We reported adjusted deleted earnings per share of $1.20 versus the prior year's $1.22 at comparable exchange rates. The effective tax rate for the first quarter was 25.8% compared to 20.5% in the year prior. the higher effective tax rate reflects the estimated impact of the temporary 2025 surtax enacted in France during the quarter, lower tax benefits from share-based compensation, and certain non-recurring incentives received in the prior year quarter. If we were to adjust Q1 2024 earnings per share, keeping tax rates constant, the comparable adjusted EPS would be $1.14. Neutralizing for currency effects and tax, EPS would have increased 5% over the prior year quarter. With those high-level comments, let's take a closer look at segment performance. Our pharma segment core sales increased 3%. Let me break that down by market, starting with our proprietary drug delivery system. Prescription core sales increased 10%. primarily due to continued strong demand for dosing and dispensing technologies for emergency medicines, as well as central nervous system, asthma, and COPD therapeutics. Consumer healthcare core sales decreased 10%, driven by softer demand for nasal decongestants, nasal saline rinse solutions, as well as cough and cold medicines, as inventory management continued at the customer level. the continued growth in sales for ophthalmic solutions could not offset this decline. Injectables core sales decreased 8% due to a tough comparison from the prior year's quarter, a catch-up quarter post the division's implementation of its enterprise resource planning system. And for our active material science solutions, core sales increased 11%, driven by increased demand for our diabetes and probiotic solutions. In addition, we benefited from higher tooling sales in the quarter. Pharma's adjusted EBITDA margin for the quarter was 34.8%, a 230 basis points improvement from the prior year. The margin improvement was driven by increased sales of higher value products and services, including royalties and continued cost efficiency initiatives. Moving to our beauty segment, core sales decreased 3% in the quarter. Looking at the beauty segment by market, Fragrance, facial skincare, and color cosmetics core sales decreased 11%, due largely to lower sales of higher-value Prestige fragrance products, particularly in Europe. While core sales of Mastige fragrance grew double digits, it could not offset the softer demand for dispensing solutions in Prestige fragrance and facial skincare. Although we do believe that sales for dispensing technologies in these end markets should start to improve progressively. Personal care core sales increased 9%, with continued demand for body care and hair care applications. Home care core sales increased 15%, primarily due to continued growth of air care applications and surface cleaning products. This segment's adjusted EBITDA margin for the quarter was 12.1%, a decline of 50 basis points, largely driven by lower prestige fragrance volumes. In the closure segment, core sales decreased by 2% compared with the prior year. The segment saw product sales growth in virtually all end markets. These positive results were offset by lower tooling sales and unprofitable sales that the company chose to no longer service. Without these headwinds, core sales would have increased by 3%. When looking at the market fields for closures, food core sales were flat, Higher product sales were offset by significantly lower tooling sales compared to the prior year period. Product sales for food were driven by increased demand for granular powder, Asian sauces, and salad dressing, somewhat offset by a decline in sales for food protection. Beverage core sales were flat. As with food, the higher beverage product sales were offset by significantly lower tooling sales compared to the prior year. Product sales growth was driven by increased demand for functional drinks and concentrates. Personal care core sales decreased 15% due to softer demand in two of its larger categories, body skin care and hair care products. While in our other category, which includes beauty, home care, and health care, core sales increased 7% given by higher sales for dish care and laundry care solutions. This segment's adjusted EBITDA margin was 15.8%, representing an 80 basis points improvement over the prior year, primarily due to product volume growth and continuing cost management. The contribution from our segments resulted in our consolidated growth margins expanding by 160 basis points, while consolidated adjusted EBITDA margins expanded by 120 basis points to 20.7%, compared to 19.5% in the prior year period. Indeed, driven by improved revenue mix and the positive impact from our ongoing cost improvement and productivity efforts. Moving over to cash flow. Free cash flow was $26 million for the quarter, resulting from cash from operations of $83 million, net of capital expenditures of $57 million. Free cash flow increased by $9 million from the prior year quarter. As Stefan mentioned, we stepped up our share repurchases in the quarter and returned approximately $110 million to shareholders in the form of roughly $30 million in dividends and $80 million in share repurchases. You may recall that in October of 2024, our board authorized the repurchase of up to $500 million of common stock. As of the end of Q1, there was approximately $383 million of authorized share repurchases remaining under the existing authorization. Finally, we ended the quarter with a strong balance sheet once again, reflecting a cash balance of $126 million as of March 31, net debt of $870 million, and a leverage ratio of 1.16. Now moving on to outlook. Slide eight summarizes our outlook for the second quarter. We anticipate second quarter adjusted earnings per share which, as a reminder, excludes any restructuring expenses, acquisition costs, and changes in the unrealized fair value of equity investments, to be in the range of $1.56 to $1.64 per share. Our effective tax rate range for the second quarter is 19% to 21%, primarily due to a one-time tax benefit as well as ongoing tax optimization planning. Additionally, I wanted to touch on tariffs. before handing over the call to Stefan. With the evolving tariff situation, we are closely monitoring potential impacts. At this point in time, the net effect is expected to be limited. In our portfolio, we have some pharma products exported from Europe, while our beauty and closure segments have more exposure to Mexico, both in terms of manufacturing and material sourcing. Given how quickly things are changing, it's difficult to draw definitive conclusions at this stage. Once the landscape settles, we expect supply chains will adapt as they have in the past. What positions us well is our truly global footprint, operating in 20 countries with around 49 manufacturing sites, giving us the flexibility to shift and respond as needed. At this time, Stefan will provide a few closing comments before we move to Q&A.

Thank you, Vanessa. In times of economic uncertainty, our resilience becomes our greatest asset. At Aptar, we are dedicated to providing the essential products that keep our community strong and healthy. Our position as a leader in dosing, dispensing, and protection technologies across a number of resilient end markets, including medications to treat chronic conditions and consumer staples that are relied on by millions of people every day, underpin our business. Additionally, our robust, largely in-region, four-region supply chain structure that we adopted decades ago allows us to adapt with agility and flexibility to the changing needs of our customers. Regarding tariffs, while we need to remain watchful, changing dynamics also bring opportunities, especially with our strong North American footprint. As a reminder, we have 11 plants in North America nine of those in the U.S. and two in Mexico, giving us a competitive edge in production capacity across each of our segments. Our large and unique North American footprint strengthens our reliability and responsiveness. Additionally, we are expanding distribution opportunities for our beauty segment as market demand increases, particularly in response to tariff-related concerns, leading to a notable rise in sample requests. And when it comes to our closure segment, our mostly localized approach ensures proximity to customers, enhancing service and efficiency. The environment around us continues to change almost daily, and while we will remain vigilant, we are also aware of the opportunities that this disruption will bring. Looking ahead, we expect a strong second quarter with positive contributions from all three segments. In addition to the contribution from our strong pharma franchise, we anticipate a stronger quarter two for beauty and foreclosures. We are excited and encouraged by the order book and by our innovations that are winning the hearts and minds of our customers, patients, and consumers. As we navigate the challenges and opportunities ahead, we remain committed to supporting and investing in these fundamental needs that have propelled our company's growth. With that, I would like to open up the call for your questions.

Thank you, Stephane. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind and would like to remove that request, you can do so by pressing star then two. And as a reminder, that is star followed by one to ask any questions. We'll pause here briefly whilst questions are registered. Your first question comes from George Staffos with Bank of America. Please go ahead.

Hi, everyone. Good morning. I hope you're doing well. Thanks for the details. I guess the first question I had, Stefan, if you can give us a little bit more color in terms of what you're seeing in terms of order patterns and inventory levels. You mentioned that you haven't gotten past perhaps the inflection point in pharma and restocking on CHC, add and amend as you wish there. Just appreciate a bit more color there. And then can you give us a bit more color in terms of what's happening with GLP-1s and how that's helping injectables? I don't know if you're going to be in a position to quantify, but if you can give a bit more color there, that would be helpful, too. And I had one follow-on.

Great. Good morning, George. Hey, Stephan. General sense is that the company is, after a somewhat slow Q4 and Q1, are re-accelerating into Q2 across a broad range of end users. So we see good poise in new orders and new projects in beauty. We see continued good strong demand in closures. And on the pharma side, proprietary drug delivery engine is humming along. Injectables is doing well, good demand. Frankly, it's more about us ramping up our capability and validating equipment. And then as you saw, active material is doing well. Indeed, the notable exception is cold and cough. We certainly see that U.S. inventories have been not depleted but come to a more normal level based on a strong U.S. flu season. We have not seen that yet in other areas, and at this point, we probably see another quarter of destocking. The visibility is not great. We'll know more in the next quarter. Having said all that, when we get in these inventory buildup and then destocking cycles, It's a non-trivial exercise to tease apart all the variables. And just for argument's sake, let's say we are short a particular SKU and cannot meet demand for a customer and short-shift the customer, then next time the customer places an order, they add a little extra for good measure. We didn't expect an additional demand, so we, again, cannot meet. And then the story keeps going on until... the customer has hoarded a bunch without obviously telling us. Otherwise, they're concerned that we short-shift them even more. And then you have this multiplied by four levels in the value chain. So, of course, we track retail sales in the U.S., but we don't see IQVA comes out with a significant lag. And so it's a non-trivial exercise. We're not trying to be – evasive here or have that as an excuse, but more of an explanation. Usually, the supply chains are pretty steady, but here with cold and cough, it's a little tricky. Now, coming on the GLP-1, we see very strong demand and continue to ramp up capability. I think you've seen one of our lines run in Le Boudreau. So we continue to meet the demand. We get good traction with customers and, yeah, generally positive on that. Thank you, Stefan.

Point of clarification, you said other areas haven't seen it yet, so meaning outside of the U.S. you haven't seen cough and cold yet. inventory is necessarily depleted you know you don't have to go into detail i just want to make sure i got that right and then yeah vanessa i know tax rates kind of circular oh thank you so much i know tax rates circular because it relies on the full year and you don't cut on the full year but you know if you're in our seats and we need to model after what tax rate would you use broadly for a second half of the year thank you so george um

Thank you, George. Thanks for the question. Maybe before I dive into that, I'll just quickly touch on the Q2 guide tax rate then, because I'm certain somebody would ask, you know, what's driving the Q2 guide. We did guide 19 to 21%, so 20% at the midpoint. And we did mention that that was largely due to a one-time expected tax benefit. And really where that's coming from is, you know, the expected realization of deferred tax assets that were previously not recognized. And so we're now in a position through all the work that we've been doing around increasing profitability, et cetera, in certain of our entities that were previously loss-making, we can now recognize that tax asset. So that's really what is driving that for Q2. And that is a big anomaly. If I think about the balance of the year and sort of isolate this one-time impact, but also other ongoing tax planning work that we're doing, I would expect somewhere in the sort of 22% to 24% ETR range. OK.

Thank you very much.

Thank you. Your next question comes from with . Please go ahead.

Thank you, . Good morning, everybody. Just following up on George's questions, you know, on the cold and cough, where do you think the inventory lies? Is it in distribution? Is it in, you know, the upstream in terms of production at the pharmaceutical level? Just any color there, and what is the realistic sort of timeline for that inflection if you kind of look at parallels in the past where the company has gone through these before as well?

It's very hard to tell. I think the color we can give you is that in terms of our order book, we've seen the inflection happen in the U.S. We have not seen it yet outside the U.S. And as you can imagine, the visibility of the different levels of the supply chain is even lower outside of the U.S. So our best call right now is that we extend this for another quarter, and we'll give you an update at the next queue. I mean, even when it was extreme, I think we rarely had this extend for more than a year. So we are now about... But somewhere we'll be three quarters into it.

And so the U.S. was how many quarters? You mentioned an inflection. So how many quarters was the correction, you think?

Well, I would say two quarters in the U.S., so quarter four and quarter one.

Got it. Okay. Thank you for that. And then in terms of, you know, GLP-1 and Your targets you outlined a couple years ago at your analyst meeting about doubling the sales base, et cetera. How does the potential for an oral pill change the calculus of that, if at all, for injectables?

Yeah, certainly the way we think about this is this is not a short-term prospect. You have a lot of capacity going in. for auto injectors, for CMO capacity. There's a lot of consumer adaptation to these auto injectors. So I don't think anybody will abandon these investments. And in the end, it's a decision by customers what to launch, not to launch. And in addition, you've seen distribution growing for some of these auto-injectors with the Novo Telehealth investment. So for the next few years, I would not look at that. And then personally, I would expect it to be maybe more of a sequential thing. First, you know, you get the weight off with the auto-injector, and then the oral will be more of a maintenance regime. But I'm speculating at this point. But certainly nothing that our customers... flag in the foreseeable future.

Got it. And just one final one. The divergence in sales between Mastige fragrances and Prestige, is that just a bit more color on that in terms of your share position? Is it obviously different one versus the other, or is it just the market conditions and maybe customer mix?

Well, it's more what our customers' decisions when to do launches and clearly coming out of COVID, the first big swing was with Prestige fragrances, and we're almost lapping that, whereas Mastiche came later. Of course, it's always a question, are you on the launches that are successful? In terms of share position, we feel very good. So certainly, If you ask our teams, they're positive and maybe even saying that they're gaining share. You know, you're talking to salespeople, no disrespect. But we have a pretty sophisticated tracking, so I'm confident that we are certainly gaining a bit of ground there. And as we indicated, going into the second quarter, we think some of the prestige launch is coming back, especially also in Europe. And on the broader beauty picture, we also see the Chinese consumer coming back. You know, the overall sense has been quite positive there. Who knows what the whole trade and negotiations will do to that, but for now it looks pretty good.

Okay, perfect. Thank you so much.

Thank you. We now have a question from Matt Roberts with Raymond James.

Good morning, everybody. If I could first expand on Ganshan's question there on the prestige fragrance. I believe you said it was isolated to Europe, but are you seeing any early impacts of lower discretionary spending amongst that prestige income cohort? or are your customers passing along tariff-related price already that is being absorbed? And if so, would APTAR have to share in any of that cost?

Let's start with the second part of your question. When it comes to tariffs, we are mainly in region for region in terms of our supply chain setup. So while we have some tariff exposure, for example, for aluminum, And for some isolated cases, our region-for-region supply chain setup makes us pretty resilient here, plus whatever territory in Canada we pass on. We see a bit more muted engagement in terms of new launches based on just the uncertainty. compared to what we would have expected three months ago. But nevertheless, we see a solid increase compared to prior year, and that's why we are confident about the Q2 contribution of beauty to growth. Now, when it comes to what our customers do in terms of their sourcing decisions and where they send products, Those are secondary and tertiary facts, and that will take some time. More kind of CEO math. The Prestige products probably have the biggest room to pass on things. Remember, the selling price is not the transfer price, and there's a lot of room in absorbing or passing on tariffs in the short term.

Thank you. Maybe if I could ask a more holistic question, because I can't keep up with regulatory agent headlines and whether the odds or pace of drug approval is any better or worse. And I'm not sure you can make that easier for me. But when you think about the longer term 7% to 11% core growth in pharma, How does the evolving approach at regulatory change your conviction on that here in the medium term, maybe in the next two to three years? Are there certain areas you're more or less comfortable with in the pipeline, given your customers, and you spend small biotech companies to very large pharma companies? How is each end of that customer range approaching their respective pipelines? Thanks for taking the questions.

Yeah. As you know, our average project is about a decade. So if an approval process gets pushed out by six to 12 months, I'm not sure we will find it in the P&L. Most of our medications are treatment of chronic diseases, whether it's diabetes, whether it's COPD or asthma. And so we see that continue ongoing. Clearly, customers are concerned if the FDA is not as responsive as it used to be in terms of getting on cases. But so far, we have not really seen a lot of evidence of that. I think that right now it's more concerns. Overall, pharma R&D budgets were up in 2024, and our pipeline continues to grow. So I would let the dust settle here for a little bit before making any calls. We feel very good about the pipeline and the long-term trends I referred to are really good. I wanted to come back on your earlier point on beauty, though, and the tariffs. I would also like to point out, again, that given our local presence in the U.S., and here the U.S. is particularly impacted, we see a lot more requests. In fact, our requests for new quotations are up 30% for people who need to switch away or want to switch away from having things coming from China. So for us, the terrorist situation is as much an opportunity as it is keeping us busy with passing on things there.

Appreciate that and providing a little comfort going there again. Thank you, Stefan.

Thank you. We now have Daniel Rizzo with Jefferies on the line.

Hey, thank you for taking my question. And just to kind of, how are you doing? Just to kind of go with the tariff thing, is it also possible that tariffs could have a benefit for, I mean, My understanding in beauty, you produce in Europe or your end products are in Europe and they are shipped to China. Are we seeing or can we see that demand go up because of issues between the U.S. and the rest of the world, if you kind of follow what I'm saying?

Sure. Hi, Dan. The Chinese market is evolving, I would say. We certainly see more confidence. but we also see more patriotism given geopolitics. So there is a gaining of market share of local brands. Since we are in China and producing for China, we are quite happy supplying the local brands, and some of the multinationals have local operations there, like L'Oreal has a big footprint in China. whether there's some rerouting of luxury products rather than shipping them to the U.S., shipping to China. I think it's a good hypothesis. I think it's too early to have data on that.

Okay. And then you mentioned tough comps and injectables. I was wondering, I think in Q1, I was wondering if that's something that's going to be kind of an issue or just something that's highlighted for the remainder of the year.

No, I know it's some time ago, but remember we had this ERP deployment where the prior year we were almost not able to ship for, I think, half the quarter. And then last quarter one, we caught up with all of that. And the comparison was, I think we were up like 56%. So we shipped for a quarter and a half last year. So when you compare to that, it starts to show growth. But I Demand is not an issue in injectables. It's for us. The demand is there. We're catching our breath or our little window catching up with it, getting equipment installed, getting equipment validated.

Okay. And then finally, with FX, you guided to 1.14. What was... I guess the average rate in Q1 was like 108 or 109. What's the kind of a change or what's expected versus what was?

Yeah. So if you're thinking of where we guided at the end of when we guided Q1, that was about $1.04. There was a little bit of an uptick. So January, February were pretty consistent with that. March came in at about $1.08. And current spot rates are about $1.14. So that's where we're guiding at right now. you know, so the impact of that, if you're thinking about sort of year over year, is roughly about 4 cents.

That's perfect. That's exactly what I was looking for. Thank you.

Thank you. We now have Matt LaRue with William Blair.

Good morning. I wanted to follow up on growth in pharma. um obviously you've called out the uh sort of the coffin cold d stock um but you've also referenced on the call continued strength on the emergency med uh narcan side um if i think about the last decade here you the the kegger is around nine percent so sort of right in that seven to eleven percent range but the quarters themselves particularly over the last couple of years have been much much choppier um maybe if we think about the next few quarters as the D stock ends, do we get back to a more normal cadence? Maybe as part of that answer, it would be good to hear an update on where emergency medicine stands as a percentage of sales. Thanks.

Hi, Matt. Emergency medicines today are about 5% of overall company revenue. That's not only Narcan, but Narcan is an important part of that. And, yeah, I can only agree with you. This is much more of a choppy business. Distribution chains are non-traditional. You're dealing with states' harm reduction agencies. In addition to that, you had, after Emergent coming in, a bunch of generics who fight for share and stock up, destock, and so on. So it's a much more choppy business, a lumpy business, but overall, you know, as we mentioned before, with deaths from opioid overdoses being clearly reduced through the availability and wide availability of Narcan and this having bipartisan support, we continue to expect this business to develop nicely, but I think it's also reasonable to expect that at some point it will kind of resume a more normal growth trajectory. The Beyond that, of course, if you look at the last five years, we had the tremendous whiplash with the COVID supply chain. I think I would be prudent to say we don't guide for future quarters of the year, but we do stand by our long-term targets. We feel very good about the long-term growth trajectory. And as you mentioned, we will not hit it every quarter. We'll maybe not even hit it every year. But we feel good about the 7% to 11%. And over the longer period of time, we have shown that we do that. And if anything, it's driven by our pipeline, and our pipeline is in good shape.

Okay, very good. And then... Vanessa, I just wanted to make sure on tariffs, you referenced that the net effect is expected to be limited. Does your guidance, or at least the way you're thinking about the year, incorporate that net effect, or does it incorporate sort of a gross effect with an expectation you might mitigate? I think each company seems to be thinking about it differently in terms of the impact they expect versus what they incorporate into their outlook. So I want to make sure we're clear about that.

Yes. Thanks, Matt. So we saw little to no impact in the Q1 results. In Q2, our guidance does incorporate the limited net effect. And for the balance of the year, we expect that to essentially be the same. Stefan mentioned earlier that where we are seeing an increase in tariffs, we are already passing it on. And he also talks about the fact that it's not only a potential headwind, but it's also a potential benefit, as well as there are other opportunities available to us, depending on how all of this unfolds. So at this point in time, we're expecting the net impact to be limited.

Okay, very good. Thank you for the questions.

Thank you. Thank you, Matt. We have another question on the line from Gabe Hady with Wells Fargo.

Stefan, Vanessa, good morning. Just one quick point of clarification. A point of clarification and maybe a little data point for us. Consumer health care, you talked about some destocking and you were very transparent about it. But I think on the In your prepared remarks, you said U.S. was actually starting to get back to normal in terms of order patterns. Rest of the world, maybe not so much. Again, we could probably sit here and speculate all day about how things move around and what the inventory supply chain looks like. But how big is that piece of business relative to U.S.? ?

Yeah, I don't think we give you that detail, but you wouldn't be wrong to have the U.S. share at or maybe less than the company average, which is about 30% of the business. It might be even a little bit less than that.

Okay, got it. And then I guess in pharma, maybe what we're all trying to understand is it feels like there's been a little bit of noise across a couple of different product lines. And Vanessa, did you give us specifically the number, and I apologize if I missed it, injectables, what the volume was in Q1. But if I'm hearing you correct, we get through sort of this D-Stock and OTC slash consumer healthcare. And is it fair to say, Stefan, that there's nothing that you see sort of over the next 12 to 18 months that would kind of prohibit you from from being in that long-term window?

Well, Vanessa looks up that information for injectables. Again, we don't guide for the year. If the last five years have taught us anything, it would be a fool's errand. But we feel comfortable about the long-term targets and have demonstrated that. I'm not going to get into, okay, it will be there in 18 months or it will be there in eight and a half months. I do want to, though, remind you, next to the regional split of consumer health care that you asked about, also remind the consumer health care itself is maybe a bit over 20% of total pharma sales. So that's why RX up 10%, consumer health care down 10%. That doesn't even top out. We still have growth. because our X is a much bigger part of the proprietary drug delivery systems.

And Gabe, we did not talk about injectable volume.

Got it. Thank you. Yeah, we... But again, demand is not an issue in injectables. It's our ramping up and validating of supplies.

Thank you. We have another question from George Stafford with Bank of America. Please go ahead when you're ready.

Thanks so much. Two quick follow-ons from me. You know, Stefan, to the extent that you have any view on this, I realize it'd be very difficult to have one. With, you know, the pressure on the consumer that we keep, you know, hearing about, reading about, obviously, you know, tariff considerations and what that might mean, for supply chains and cost of material, you know, recognizing on that latter point, material costs usually aren't that big of a deal for you anyway. Are you seeing any emerging trends in terms of the types of constructions that your customers are looking for across any of the key segments? You know, maybe less of an issue in pharma, but, you know, perhaps in beauty and or enclosures. And then second question, and I'll turn it over. Overall, what's the outlook over the next quarter, two quarters? If you had a view for 25, we'd obviously love to hear it on sort of tooling and sort of the appetite for new products, new opportunities for you as measured by your tooling activity. Thanks and good luck in the quarter.

Thanks, George. Maybe best is to first say, in terms of recessions or lower consumer confidence, in general, APTA is very well positioned. I mean, just as a reminder, we supply patients with their everyday medications to treat chronic diseases, asthma, COPD, allergic rhinitis, and diabetes and so on, plus food staples, personal care, home care staples. Those are not the things people talk back on. They may go to a private label brand. They may go to smaller sizes. All of those things are neutral to net positive for us. So we are not that concerned about a – garden variety recession, if that's even a thing that is possible. And those who go back to 2008, 2009, remember Pharma was about 20% of the company at that time. Today it's almost 10%. So the consumer pressure, while clearly something that some people are forecasting in the U.S., is not causing deep concern for us. And at the same time, the situation is pretty unique to the US. Of course, the US will impact the rest of the world in certain ways, but that recession talk is not as strong in other parts of the world. Latin America is doing really nicely. As I said, China is much more on the front foot. Let's see how things develop over the next few months. Europe will invest a lot more in its defense, which means that a lot more government spending that will stimulate economies. So I'm not so negative about the world at large. And having said that, even then, in the recessionary environment, it's very well positioned. Second, at the end of the day, our customers pay for our innovation. And they look to differentiate themselves. And what that... way of differentiating is might be a little bit different when the consumer money is a bit more tight, but clearly customers look to continue to differentiate themselves. And sometimes that's with having a more lightweight product or having a changing product format. In the end of the day, that's innovation, that's project activity, and that is good for us. Yeah, we don't guide for the year, we don't guide for the quarter, but everything I just said tells me, you know, the world's not going to end after quarter two.

I'm sorry, was that step on? So everything we just said means that tooling activity is probably doing fairly well given customers are exploring different ways of continuing to differentiate, but in a very sort of quickly evolving world. Would that be a fair summary?

Philippe Metzger- yeah that's fair and you know we certainly see tooling on the way up in this quarter to.

Thank you very much.

Thank you, just as a quick reminder that I started by one to ask any further questions today. I can confirm that does conclude the question and answer session, and I'd like to hand it back to Mr. Stephan Tander for some closing comments.

Very good. Thanks for all your questions. Let me end the call by attempting to cut through the noise and remind us all of the bigger picture here. Our teams have delivered a very solid start to the year. While we started the year with softness in demand in certain end markets, as well as tax headwinds and foreign exchange headwinds, we now head into the second quarter with confidence based on a few points. First, we see a reacceleration of demand in several end markets and geographies across all segments, albeit with the temporary exception of cough and cold. The profit engine and proprietary drug delivery systems is humming along smoothly, and the demand picture in injectables and active materials is solid. As we discussed, our long-term pharma and market trends are solid, and the pipeline is solid. Our teams have found some innovative ways to mitigate the tax headwinds somewhat, and the FX headwinds have largely abated, at least for the moment. And then importantly, our longstanding local for local supply chain structure allows us to deal with the tariff and supply chain uncertainties with agility and equally important at the same time, it allows us to take advantage of opportunities as customers rethink their regional sourcing strategies. We didn't talk about it as much in the call today, but our teams are proudly focused on delivering productivity gains in all areas of the company through execution of ongoing projects, increasing automation, and developing additional ideas for future measures. Last but not least, as we just discussed, if you're forecasting for the U.S. or even a global recession, it's important to remember that APTAR is well positioned across a number of resilient end markets, including medications for chronic diseases such as allergies, diabetes, asthma, COPD, emergency treatments that patients want to have at the ready, and consumer staples that people consume and use every day. In times of economic uncertainty, our resilience becomes our greatest asset. Lastly, given the strength of our business, we accelerated returns to shareholders in quarter one while, of course, retaining the strategic optionality of our balance sheet. With that, thanks for attending the call, and we look forward to follow-up discussions.

Thank you all for joining. I can confirm that does conclude today's conference call with APTA. You may now disconnect and please enjoy the rest of your day.