Perrigo Company PLC
NYSE:PRGO
Earnings Call Analysis
Q3-2023 Analysis
Perrigo Company PLC
Perrigo's recent quarter tells a tale of a consistent and stable financial performer with a keen focus on margin growth. The company witnessed a modest net sales increase of 2.2% year-over-year, though this figure does somewhat mask an organic net sales decline of 1.2% due to strategic decisions to discontinue lower margin SKU's and transition certain product distributions. The real headline, however, is the impressive expansion of gross margin by 300 basis points to 39.5% and operating margin by 130 basis points to 13.4%. These expansions are a testament to Perrigo's diligent focus on improving profitability through strategic pricing and portfolio optimization, including the benefits gained from a supply chain reinvention program that contributed a 70 basis point margin lift.
Perrigo's earnings narrative is buoyed by double-digit growth, marking an adjusted earnings per share (EPS) increase of 14.3% compared to the same period last year. An element of this growth can be attributed to an optimized tax strategy, where a lower adjusted effective tax rate of 19.2% played a role, compared to the previous year's 21.8%.
Looking forward, Perrigo has set an expectation for organic net sales growth between 1% to 3% and reported net sales growth between 4% to 6%. The company is intending to outperform its original gross margin expansion target of 200 basis points, with current trajectory indicating a potential to exceed that figure substantially.
The infant formula segment, a stronghold for Perrigo given their two decades of leadership in store-brand formulas, is simultaneously a point of pride and a challenge. The company forecasts operational normalization by the middle of next year, with expectations that improved production paired with strong demand and recent price actions will mitigate earlier negative impacts on EPS projections. For the cough-cold segment, Perrigo notes a 0.7% gain in volume share for store brands over the last 13 weeks, a promising trend as the company approaches peak season with a more robust inventory than in previous years and anticipates additional volume and value capture.
Innovation is at the forefront of Perrigo's strategy, particularly highlighted by the upcoming launch of Opill, which is expected to hit retail shelves in the first quarter of next year. While the investment in this product is anticipated to be dilutive in 2024, the company has taken this into account within their earnings per share growth projections, which remain strong at an expected range of $2.90 to $3.00. Additionally, the company is progressing well with their SKU simplification plans, achieving 75% of their target so far for the year, which bodes well for operational efficiency and potentially, margin improvement.
Perrigo continues to strengthen its foundations with strategic planning around product reformulation and portfolio prioritization. Their proactive approach, including reformulating products like phenylephrine to avoid supply disruptions, ensures the company is prepared for market changes. On the financial side, Perrigo's liquidity position is robust, providing a firm footing for ongoing and future business initiatives.
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Good morning, everyone, and welcome to the Perrigo Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please also note today's event being recorded. At this time, I'd like to turn the floor over to Bradley Joseph, VP of Investor Relations. Sir, please go ahead.
Good morning, and welcome to Perrigo's Third Quarter 2023 Earnings Conference Call. I hope you all had a chance to review our release issued this morning. A copy of the release and presentation for today's discussion are available within the Investor Relations section of the perrigo.com website. Joining today's call are President and CEO, Patrick Lockwood-Taylor; and CFO, Eduardo Bezerra. I would like to remind everyone that during this call, participants will make certain forward-looking statements. Please refer to the important information for shareholders and investors and safe harbor language regarding these statements in our release issued earlier this morning. A few quick items before we start. First, unless stated, all financial results discussed and presented are on a continuing operations basis. They do not include any contributions from the divested Rx business, which was accounted for as discontinued operations prior to its sale. Second, organic growth excludes acquisitions, divestitures, exited product lines and currency in both comparable periods. All comments related to constant currency removed the impact of currency translation versus the prior year by applying the exchange rates used in the comparable measurement in the prior year's financial statements. And third, Patrick's discussion will focus solely on non-GAAP results, except as otherwise noted. See the appendix for additional details and for reconciliations of all non-GAAP financial measures presented. After today's agenda, Patrick will cover our solid quarterly financial results and strong business fundamentals. He will then discuss the evolving dynamics in the infant formula industry, followed by our excitement for the anticipated launch of Opill. He will then round out his comments with reflections after 4 months as CEO, provide an update on our strategy to build a sustainable and value-accretive growth engine and end with area of focus to close 2023. Eduardo will then walk through the financials, including our updated guidance.
And with that, I'd now like to turn the call over to Patrick.
Thank you, Brad, and good morning, everyone. We delivered another quarter of solid financial results, highlighted by gross margin and operating margin expansion. Net sales grew 2.2% compared to the prior year. Organic net sales declined 1.2%, including an unfavorable impact of 2.8 percentage points from discontinued lower-margin SKUs and HRA distributor transitions, both designed to expand margins. Year-over-year gross margin expanded 300 basis points, including a 70-basis point benefit from our Supply Chain Reinvention Program to 39.5%. Operating margin expanded 130 basis points to 13.4%. For the fifth consecutive quarter, Perrigo has delivered double-digit growth in gross profit, operating income and earnings per share. This performance puts us in the top quartile of our peers. Digging a little deeper into quarter 3, net sales of our global cough, cold and pain products increased 7% compared to the prior year, excluding portfolio optimization efforts, driven by seasonal sell-in, which was particularly strong in Europe. Within CSCI, organic net sales grew 6.2% as we held market share in growing markets and categories. In addition to cough, cold and pain, growth was broad-based, including skin care offerings and high single-digit growth in our U.K. store brand business. In CSCA, organic net sales declined 5.1% as favorable pricing, the acquisition of Gateway and new products was more than offset by legacy infant formula, 3.6 percentage points from the discontinuation of low-margin SKUs, normalizing consumer consumption and a comparison to the strong and an early cough/cold season last year. Importantly, store brand OTC dollar volume and value share grew during the last 13 weeks as consumers seek high-quality products at a good value. Turning to infant formula. The background for over 2 decades, Perrigo has successfully and consistently produced high quality, safe and effective infant formula as the leading player in store brand. We have proven we can deliver the most advanced and innovative infant formula, on par with the national brands while delivering value for consumers. No one else does this but it's tougher now than ever before. We're extremely proud to play an important role in this central category. In response to the updated FDA guidelines issued in March and subsequent warning letters to multiple facilities in the industry, we have shortened production campaigns to perform more frequent major cleaning of our facilities, leading to more downtime between campaigns. In addition, we implemented enhanced product testing and quality procedures, leading to longer inventory holes before product is released to customers. Due to these factors, we have been unable to replenish safety stock, leading to low customer in-stocks, intermittent SKU availability and lost sales. With these changes now implemented and production improving each week, we are focused on rebuilding safety stock for our highest volume SKUs. I anticipate our operations to normalize by the middle of next year. This improved production, continued strong demand for store brand formula and the annualization of price actions implemented in 2023 positions us well to recapture most, if not all, of the $0.35 EPS impact against our original 2023 expectations. Turning now to Opill, which will be the most unique product launch in the history of Perrigo forming an entirely new U.S. OTC category. This launch requires an innovative approach to accelerate brand awareness and consumer conversion. We will build one-to-one consumer relationships, leveraging CRM data that will self-learn and get smarter throughout a consumer's journey to maximize the Opill brand experience and its conversion. To accomplish this, we are partnering with leading technology organizations to build a marketing technology stack that we're driving great engagement through all touch points of consumer conversion for awareness to purchase. As we ramp prelaunch activity, timing of the Opill selling to retail customers is now expected in 1 '24 to ensure customer inventory levels meet the buildup of consumer demand. To maximize long-term potential in this category, we will look to extend investment beyond the Opill brand with a franchise of women's health products. Now I'd like to reflect on my first 4 months as CEO. I have immersed myself in all facets of our global organization and met with many key stakeholders, including many of you, our shareholders. Coming out of these conversations, I remain confident in our strategy, and I'm increasingly excited about the opportunity ahead. Our business is highly unique, marked by significant scale, multiple points of consumer access and value and is attractively diversified. Let me briefly explain each of these. With an addressable market of $400 billion, the global self-care segment has cemented itself as an independent industry within consumer products. Our scale is unmatched evidenced by the fact that every second of every day, 2,200 doses of our products are consumed around the world. And we're the only company that can produce most major products across entire categories. We are a leading provider of value and access through a distinct model across brand, value brand and store brand. Not only do our offerings drive savings for consumers through value pricing but also by bypassing doctor visits for their health needs and providing very significant savings for health care systems as well. Lastly, our horizontal category breadth and vertical pricing is a unique advantage. Our offerings extend through 9 major OTC product categories with our blended branded portfolio, providing consumers access across the value spectrum, wherever their point of purchase. Our portfolio is also well diversified for economic environment shift across geographies and across SKUs with no one product representing more than 3% of total revenue. This better insulates us from economic slowdowns and seasonal factors in individual categories. My interactions with all key stakeholders have clarified the next evolution of strategic thinking of Perrigo. Throughout these learnings, 4 key pillars have emerged, culminating in the blueprint designed to deliver the One Perrigo model, a model in which our portfolio, operating systems, structure and behaviors will be simplified, standardized and scaled. This will position us to win in self-care through the creation of a sustainable and value-accretive growth engine that will drive Perrigo financial performance for the long term. First, we will consumerize and digitize the company. Second, drive category growth in partnership with our customers. Third, leverage our global supply chain. And fourth, optimize into one global operating model. To provide a bit more detail on each of these. First, we will deliver consumer-preferred brands through innovation by consumerizing and digitizing Perrigo. The consumerization of Perrigo will focus on bringing consumer preferred innovation and brands to market in more value-accretive offerings. This will be enabled through the digitization of Perrigo, powering our marketing strategies with digital insights, AI that will offer real-time actionable insights and end-to-end visibility of the consumer journey. This is a transformation in how we're going to bring products to consumers. Opill is a great example of this, where we have a stack of marketing and digital tools to enhance the consumer journey and accelerate conversion. Next, we will leverage these consumer preferred offerings and our strong customer partnerships to drive growth in the OTC categories where we participate by delivering differentiated solutions benefiting all members of the value chain. All of this will be powered by our global supply chain, allowing for increased manufacturing of higher-margin products. Our Supply Chain Reinvention Program is already delivering significant benefits, including a reduction of 750 of the 1,000 SKUs planned for this year. Finally, we will evolve to a uniform operating model that will drive consistent focus across our organization on the most value-accretive opportunities. We will simplify, standardize, automate and globalize our structure to optimize our organization. This will provide tremendous opportunity to reinvest in our business and enhance financial performance by driving brand growth capability and accelerating consumer innovation. Defining key pillars is crucial and the work to operationalize these is happening now. Execution against these pillars will require skillful sequencing to strengthen our long-term foundation, and we will provide updates on these initiatives as our work continues. To wrap up, we have mobilized around the 4 key pillars that will create an advance, the sustainable and value-accretive growth engine to drive Perrigo for the long term. We must continue to focus on operational excellence and deliver our trusted self-care products. We have begun the sell-in for the cough/cold season and there is an opportunity for us to further build retail stock, particularly in the U.S. Also in the Americas, we expect store brand market share gains to continue while building safety stocks and infant formula. In international, we will continue to leverage our brands that are growing and on trend, notably in women's health and skin care. Now finally, a few brief comments regarding oral phenylephrine-containing products and acetaminophen litigation. As most of you know, an FDA advisory committee recently voted their oral phenylephrine products do not provide efficacy to consumers looking for decongestion relief. Following the vote, the FDA communicated publicly, there are no safety concerns with these products. And if a decision is made to remove or reformulate, the agency will work closely with the industry. Recently, a retail pharmacy chain removed single-entity phenylephrine products from their shelves. Our sales of this product across all of our customers is de minimis. Sales of phenylephrine-containing products accounts for approximately and only 2% of total Perrigo net sales, a very low margin in only our U.S. business. We do not currently expect retailers to pull combination products ahead of the cough/cold season as this could create a shortage. Turning to acetaminophen benefit. We have not been named in litigation, and the FDA reiterated its stance that there is no causality between ADHD and taking these products during pregnancy. Additionally, we have not agreed to indemnify any customers or indeed they ask. In closing, we delivered another solid quarter of results with double-digit growth in gross profit, operating income and EPS, in addition to meaningful margin expansion. We are single-mindedly focused on improving our cost structure, cash flow and profitability. And I'd like to thank all of our Perrigo colleagues for your commitment to our self-care vision. Now with that, I will turn over to our CFO, Eduardo, to cover the financials in more detail. Eduardo?
Thank you, Patrick, and good morning, everyone. Looking at our financials, starting with our GAAP to non-GAAP summary. The company reported GAAP income of $15 million for the third quarter or earnings of $0.11 per diluted share. Adjusted net income was $87 million and adjusted diluted earnings per share was $0.64 per share versus $0.56 per share in the prior year quarter. A few adjustments to the third quarter pretax non-GAAP P&L totaling $88 million were: first, amortization expense of $68 million; second, restructuring charges of $15 million primarily related to our Supply Chain Reinvention Program; and third, unusual litigation expenses of $3 million. Full details can be found in the non-GAAP reconciliation table attached to this morning's press release. From this point forward, all dollar amounts percentage and basis point changes are on an adjusted basis unless otherwise noted. Since Patrick covered net sales, I will begin my comments at gross profit. Both gross profit and operating income achieved a strong growth compared to last year, driven by pricing actions and contributions from new products. I will cover margin expansion in a moment. Our adjusted effective tax rate for Q3 was 19.2% versus 21.8% last year due to changes in the jurisdictional mix of earnings and the impact of benefits not realized on certain pretax losses in 2022. These factors led to double-digit adjusted EPS growth of 14.3% year-over-year. Year-to-date, EPS has expanded 30.3% compared to last year. Looking at the margin expansion in more detail, total Perrigo gross and operating margin increased 300 and 130 basis points, respectively, versus the prior year. In CSCA, gross margin expansion of 430 basis points was driven by strategic pricing and winning portfolio actions, productivity savings and the addition of the higher-margin Gateway acquisition. This led to a 90-basis points improvement in operating margin in the quarter. In CSCI, gross margin declined 120 basis points as pricing actions offset the impact of inflation in the quarter, but could not fully overcome unfavorable mix driven by top line growth in our relatively lower margin U.K. store brand business. Operating margin increased 250 basis points, driven by favorable gross profit flow-through and lower advertising and promotional spending. Year-to-date, total Perrigo delivered an adjusted gross margin of 38.5%, ahead of our expectations for the year as we continue to benefit from strategic pricing actions, acquisitions and our Supply Chain Reinvention Program. These benefits more than offset infant formula and unfavorable mix in legacy CSCI. Moving on to the balance sheet. Cash on hand at the end of the quarter was $598 million, an increase of $43 million from the end of the second quarter. Operating cash flow for the quarter was $125 million, a conversion of 143%. Third quarter operating cash flow included outflows of $12 million from restructuring, unusual litigation and acquisition-related expenses. We also invested $32 million in capital expenditures and returned $39 million to our shareholders through dividends. Looking ahead, we are reaffirming operating cash flow conversion for the full year of approximately 100%. We also continue to make steady progress in reducing our net leverage. We ended the quarter at 4.8x net debt to adjusted EBITDA versus 5.5x at the end of 2022 and continue to expect net leverage around 3x by the end of 2025. As it relates to capital allocation, we are revealing reinvestment plans and mechanisms of shareholder return while keeping our commitment to deleveraging our balance sheet. I expect to provide further details next quarter as we finalize our 2024 plans. Now to our full year 2023 outlook. As Patrick discussed, in infant formula, we are working to rebuild safety stock and production is improving while, at the same time, continue to work through the production changes. Given the totality of the dynamics, we now expect fourth quarter total Nutrition net sales to be similar to the prior year. We continue to expect a normal cough and cold season in the U.S. and Europe. And as a reminder, last year's season was both early and strong. We are in a better inventory position with liquid cough/cold products in the U.S. versus last year, which will allow us to capitalize in the event of a stronger season. We remain extremely excited about the long-term potential for Opill and expected on retail shelves in Q1 next year. The updated time of selling to retailer customers is also included in our expectations. Lastly, we are updating our assumptions for the recent moves in foreign exchange rates, which are now expected to have an unfavorable impact in the fourth quarter. Taking all these factors into account, we now expect year-over-year organic net sales growth of 1% to 3% and reported net sales growth of 4% to 6%. Our accretive initiatives include the Supply Chain Reinvention Program and synergies from acquisitions are anticipated to expand total Perrigo gross margin above our original estimate of plus 200 basis points versus prior year. We now expect a full year tax rate of approximately 14% due primarily to the release of tax reserves related to recent audit settlements. While we have updated our expectation for infant formula in currency translation, the strength of our diversified portfolio, greater margin expansion and a lower expected tax rate allows us to maintain the mid- to lower end of our original 2023 earnings per share guidance range. In closing, I would like to thank our Perrigo colleagues for their tremendous efforts in the third quarter and are working to take advantage of the many opportunities that lie ahead. Now I will turn the call back to Brad. Brad?
Thank you, Eduardo. So we now open the call for questions.
[Operator Instructions] Our first question today comes from Chris Schott from JPMorgan.
This is Ethan Brown on for Chris Schott. To start off, you mentioned, I believe, a $0.33 impact to the original 2023 guidance in lower infant formula sales. And just hoping you can talk about the progression through 2024 for that franchise, how -- more color on how you expect to recapture that EPS impact and maybe what normalized sales look like for that franchise going forward. And then I have one more follow-up from there.
Okay. Chris, this is Eduardo here. Thank you for your question. So as we highlighted into our numbers, so we saw this impact that's mainly happening in the third and the fourth quarter. So as we highlighted there, what we -- Q3 was our first full quarter operating under the new FDA guidelines. So we shortened our production campaigns to perform more frequent major cleanings and we implemented a handset product testing and quality procedures. And because of that, we were unable to replenish our safety stocks. We're now really focusing on rebuilding those safety stocks for our highest volume SKUs and production is improving week-by-week. So we anticipate our operations to normalize by the middle of next year. And then we expect to recapture most, if not all, of the $0.35 EPS impact by mid of 2024.
Okay. Great. And then my second question is just now that we're a couple of quarters into the margin recovery, can you talk about the expected gross margin progression from here and how to think about sequential trends for the overall and Americas business? And then how do you think about normalized margins longer term for the company?
Yes. So as you were able to see, we're pretty proud of the progress that we have been doing. As we highlighted in our Investor Day, we're expecting about 200 basis points improvement. But as we shared today, we're expecting we're going to outpace that given all the focus we have done, both on the winning portfolio, exiting low-margin products, but also really improving the overall margins through strategic pricing and continue to work on the prioritization of our portfolio. So we expect that to go beyond the 200 basis points this year. So as we look into 2024, we continue the same trajectory, so that we -- we originally mentioned we would be achieving 40% gross profit margin by 2025 but given the pace that we're seeing today, we most likely are going to be able to outpace that objective.
Our next question comes from Susan Anderson from Canaccord Genuity.
Thank for the details this morning, it was very help. I was curious -- I had a question on the slide on the store brand versus national brand, the latest 13 weeks, the 0.7% share gain. Was that -- I guess, overall, was that in your categories? And then I guess, just looking at the categories that you play in, did you see share gains across all of them? Or were there any categories where you saw some losses? And then I have a follow-up.
Yes. So Susan, these numbers that we shared are across the categories overall, right? So we're seeing consistently over the last 13 weeks, 0.7% there into volume share gains of store brand. And from a dollar standpoint, as you know, because of national brands have been more aggressive on pricing, as we look into the dollar share, we see slight gains. As we continue to track that into the latest information that we got in October, that continue the trend, and we believe that's very, very positive.
So it means that consumers on a volume basis, they are really trading down. We're not seeing that extensively because of the differential on price increases. But the positive thing is, as compared to last year, where you remember, we had some challenges on having enough inventories. This year, we're in a much strong position as the cough and cold season continue to progress now as we saw a little bit slow start, but we're starting to see a pickup on that. We are at the highest level of the last years on liquid cough and cold. So if the strong season -- strong cough and cold season confirms, we are very well positioned to capture additional volume and value versus our current estimates.
Great. And did you guys say how much of an impact to the top line, the U.S. Nutrition and then the branded OTC products in the Americas had?
Well, for Q3, we would say 2/3 infant formula, 1/3 the delay on the season is what we saw in the third quarter versus the original expectations.
Okay. Great. And then if I could just add one more. So you mentioned the price increases. I was curious how much did you raise price? And was it across all categories or what categories did you see price increases in? And then also, I'm curious just how the retailers and then the consumers are responding to those price increases?
Yes. So overall, we have almost 5% price increase. I would say the significant portion of that is in the infant formula business. Remember, because of the FDA guidelines and the changes in the operations that we had to do, our -- we talked with retailers about that. And so we implemented those actions in July as we talked before, and we haven't seen any pushback. Of course, we would hope to see more of that benefit. But because of the supply chain challenges to adapt to the new FDA guidelines, we haven't been able to fulfill the volumes there. But we expect that pricing benefits continue. And also next year, we should see the LEAP effect into the first half of the year.
Our next question comes from Daniel Biolsi from Hedgeye.
I wanted to follow up on the phenylephrine products. I was wondering how long it would take for you to change the production of the combination drugs, like how much of a lead time it would take to hit retail shelves?
Well, thank you for the question. So the first thing is, today, our exposure in the overall portfolio is about 2%, the total company net sales. So, so far, the impact has been very small to all retailers and it's only of all single entity phenylephrine products, right? So we do not expect any action of combination of products given the safety and potential for shortage. So we are already working to reformulate our phenylephrine products with other active ingredients if needed. So we are pretty well on track with our plans for the next season.
Okay. And then I was wondering if you could comment on the effort recently in the Senate to have the OTC birth control covered by insurance, how that would even work and what Perrigo's thoughts are on that?
This is Patrick. We are aware of those efforts. We support those efforts. We're still in discussion to also include the FSA and HSA support. And I'll describe it at the moment is work in progress, and hopefully, we can give a favorable update soon.
Okay. And then finally, if I can squeeze one more in. I was just wondering -- more of an open-ended question but what has been the response from your customers about the SKU rationalization efforts or of your learnings to date? Has it been mostly one-off decisions where one decision to not produce a product has not had any sort of impact on anything else? Or have you learned like things are interconnected and a little more complicated than it seems at first?
Yes. I'll respond first and then Eduardo with a bit more detail. Actually, generally well received. I mean, both in terms of elimination everybody understands that it's important for mutual value creation. We see movement into other SKUs. And also, as we've done SKU standardization across retailers because we saw changes in pack sizes, lid sizes, labeling, font sizes, all of which was driving tremendous complexity that just wasn't serving the consumer or driving preference. So this basically has allowed us to create more value without really any risk or trade out. So I think so far, the effort has gone extremely well. We continue to be very focused on the U.S. to the question earlier about gross margin expansion, the opportunity for further pricing and we continue to work that through with our retailers even looking into '24.
Yes. And just to complement to what Patrick mentioned is, as we highlighted, so we achieved already 750 of the 1,000 SKUs planned for this year to be simplified. And so the reaction hasn't been -- has been very positive in that sense, and we continue to our conversations with them to progress in those areas. So I think that's been very well implemented and very well communicated with the retailers at this stage.
[Operator Instructions] Our next question comes from Keonhee Kim from Morningstar.
I wanted to follow up on Opill. I assume the launch of that product will be -- maybe a little bit dilutive for some time through marketing and SG&A spending but it will eventually get to neutral or even accretive. And so I was wondering how big of a headwind should we expect from the launch, if any?
Well, so the way we were thinking about Opill on the launch. So we expected this sell-in to take place Q1, mainly because we wanted to make sure there is continuity on the product supply based on the anticipated customer repair-changing levels. But then it was highlighted we want to make sure that we invest in the franchise of the whole women's health category, we expect that to be dilutive in 2024.
But I -- it's an important question that I think is probably going to come up at some stage. Have we considered that in our balance earnings per share growth for '24? Yes -- and yes, we have. We still strongly outlook performance in the [ 2.90% ] to [ 3% ] range. So even though this will be dilutive, that standard of any brand launch, the program continues to build well. But it's just part of a sort of balanced set of investments and opportunities as we continue with double-digit earnings per share growth.
Great. That's really helpful. And just one more for me. Can you talk about how much more SKU prioritization is left over? And should we expect any of that for 2024?
SKU prioritization. SKU -- we will continue with these efforts on driving gross margin by focusing on more value-accretive offerings. So I would expect some effect into '24, but I would expect less revenue impact as we balance that with growth initiatives to a greater extent than we have in '23.
Yes. Just to complement there. As you remember, in 2024, we have additional benefit from the Supply Chain Reinvention Program. That's mainly because of the other pillars that we have there into our plants.
And ladies and gentlemen, at this time I am showing no additional questions. I'd like to turn the floor back over to the management team for any closing remarks.
Thank you for joining us today. We actually feel very good about the improving structural health of this business. The revenue impact that we've seen are essentially infant formula disproportionately in the U.S. and a slightly slower start to the cough/cold season. This means that the great majority of our programs are on track, in line with our expectation, producing upper quartile performance. And we look to continue that in '24 and '25, and we feel very good about our long-term growth algorithm as well. More of our growth in the future will be branded, both in the U.S. and the international. And we are currently working through those portfolio choices, and we hope to share more with that in the weeks and months ahead. So we feel good about our performance, and we thank you for your support.
Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.