Colgate-Palmolive Company

Good morning. Welcome to today's Colgate-Palmolive 2024 Fourth Quarter and Year-End Earnings Conference Call. This call is being recorded and is being simulcast live at www.colgate-palmolive.com. Now, for opening remarks, I'd like to turn this call over to Chief Investor Relations Officer and Executive Vice President, M&A, John Fauché.

Thanks, Betsy. Good morning and welcome to our fourth quarter and full year 2024 earnings release conference call. This is John Poche. Today's conference call will include forward-looking statements. Actual results could differ materially from these statements. Forward-looking statements inherently involve risks and uncertainties and are made on the basis of our views and assumptions this time. Please refer to our fourth quarter and full year 2024 earnings press release and related prepared materials and our most recent filings with the SEC including our 2023 annual report on Form 10-K and subsequent SEC filings, all available on Colgate's website, for 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 Tables 4, 6, 7, 8, and 9 of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the fourth quarter and full year 2024 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 Satula, Chief Financial Officer. Noel will provide you with his thoughts on our results and our 2025 outlook, and then we'll open it up for Q&A.

Noel? Great. Thanks, John, and good morning, everyone. And thank you all for joining us today as we discuss our 2024 results as well as our outlook for 2025. Let me make a few points on 2024 before I tell you why we continue to be very confident in our ability to deliver against our goals for this year. I couldn't be prouder of the results of the Colgate team that they delivered in 2024. which drove strong growth and exceeded our initial financial guidance. Net sales of $20 billion in 2024, which is one year ahead of our strategic plan ambition. This was driven by our sixth consecutive year of organic sales growth, either in line or ahead of our long-term target of 3% to 5%. We delivered high single-digit organic growth in 2024 on top of high single-digit growth in 2023. We delivered pricing and volume growth in all four quarters. For the year, we grew volume in every division and in every category. We're focused on driving household penetration, which we believe is the best way to deliver long-term sustainable growth. We had another year of increased advertising spending of 15% and up 130 basis points as a percentage of sales. This increase, which is on top of a 19% increase in 2023, is driving significantly improved brand health. Our third consecutive year of global toothpaste category value share growth highlights that our strategy of driving category growth in order to drive market share growth. Our strategy to build and scale our innovation capabilities is paying off as well. as the incremental sales contribution from innovation has risen by 45% from 2021 to 2024. We delivered gross and operating margin expansion despite significant foreign exchange headwinds and the increased spending on advertising, compensation, and capabilities through another year of strong productivity, particularly for our funding the growth initiatives. Double digit based earnings per share growth ahead of our initial guidance despite incremental foreign exchange headwinds on both the net sales line and in gross margin. Record operating cash and free cash flow, record cash return to shareholders along with continued improvement in our top tier return on invested capital. So another very strong year, but let me now move on to 2025. In 2025, we'll see many of the same challenges and opportunities. All through 2024, I have been speaking to you about how our strategy was designed so that we could deliver in 2025 and beyond by investing in future growth, building more flexibility into our P&L, and strengthening our balance sheet. The strong investment levels behind advertising and innovation and the continued improvement in returns on that spending give us confidence in our ability to continue to drive volume through household penetration. The increased investment is also improving brand health. As I will discuss at Cagney next month, higher brand health is the key to our revenue growth management strategy, which will be key to sustaining pricing growth in a less inflationary environment. We will deliver another year of strong innovation led by the relaunch of Colgate Total, with superior new offerings in toothpaste, manual toothbrushes, and mouthwash. Our investments in data, analytics, and AI will also be key to driving pricing growth in 2025. We utilized our strong gross profit growth in 2023 and 2024 to invest ahead of the curve in capabilities, which also give us additional flexibility to control SG&A spending going forward. Our strong cash flow gives us additional levers for EPS growth through debt paid out to lower interest expense or share repurchases, even as we continue to invest in our business for growth and productivity. So we enter 2025 confident in our strategy and in our ability to deliver consistent, compounded growth to deliver on our guidance and drive strong total shareholder return. So with that, I'll hand it over to you for questions.