Colgate-Palmolive Company

Good morning and welcome to today's Colgate-Palmolive 2026 Third Quarter 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 Executive Vice President, Investor Relations, Claire Ross. Please go ahead.

Good morning and welcome to our Third Quarter 2026 Earnings Release Conference Call. This is Claire Ross, Executive President, Investor Relations. 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 at this time. Please refer to the third quarter earnings press release and our most recent filings with the SEC, including our 2025 annual report on Form 10-K and our subsequent SEC filings. all available on our website for a discussion of the factors that could cause actual results to differ materially from these statements. These remarks also include a discussion of non-GAAP financial measures, which exclude certain items from reported results, including these identified in Tables 4, 6, 7, 8, and 9 on the third quarter earnings press release. A full reconciliation to the corresponding GAAP financial measures and related definitions are included in the earnings press release. 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 his thoughts on our results and our 2026 outlook. We will then open it up for Q&A.

So thanks, Claire, and good morning, everyone. So a few thoughts. We're clearly pleased to have delivered another quarter of solid top and bottom line growth, particularly in the context of the continued global volatility we're seeing. Our strong results were broad-based, with organic sales growth in all four of our categories and four of our five divisions. We delivered solid gross margin expansion in a challenging cost environment. Base business EPS came in ahead of our expectations, even as we continued to increase our advertising. We are driving operating leverage through our productivity programs, including funding the growth and the strategic growth and productivity program, which drove lower costs. Our balance sheet and cash flow performed through the third quarter was also very strong, with free cash flow up 7%, and we've returned $2.2 billion to shareholders year-to-date. Our strong on-the-ground execution, coupled with our continued investment in our AI capabilities, helped drive our performance. As was the case last quarter, sales growth was led by emerging markets, which were up mid-single digits, driven by India, Brazil, and China. We also had strong contributions from our European markets where science-based premium innovation and our omni-channel generation model have led to record market shares. Our Hills business also had a very strong quarter across both therapeutic and wellness businesses. We are pleased with our global momentum but remain focused on executing our U.S. turnaround. As mentioned in the prepared remarks, we have seen market share improvements in toothpaste but remain focused on driving the long-term reset which starts with scaling premium innovation while we're reinforcing our core brands. We plan to increase both the pace and impact of innovation with a pipeline focused on premium opportunities that can grow at scale. We are also strengthening our marketing model and support behind our core equities with a sharper focus on high priority channels including digital, social, and emerging agenda commerce. Faster innovation, better use of AI and data, and more consistent execution will underpin that work. On a global basis, we continue to invest in our revenue growth management strategies as well as our omni-channel demand generation. We're scaling our AI capabilities globally with PromoAI now in many key markets, as well as with our proprietary AI innovation platform that has made our new product ideation process significantly faster than before. This leaves us well-positioned to deliver perceivable superior products to accelerate category growth and drive continued market share improvement. We believe our efforts in RGMAI and our funding the growth initiatives give us the flexibility needed to invest appropriately in advertising to build our brands while driving profit and compounding EPS growth, even in a period of significant cost inflation, which we expect to remain elevated in the near term. We are also focused on delivering against our SGPP program, which is helping us build a simpler, more agile organization. The goal is not simply to manage through volatility, it's to emerge with a stronger business and an even more resilient business moving forward. We are pleased with our year-to-date results, and while there are still some uncertainties ahead, we are optimistic that the strength of our global model will set us up for long-term success. And with that, let me take your questions.