Ladies and gentlemen, thank you for standing by. Welcome to Aptar'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 Skafidas, 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 Stephan Tanda, our President and CEO; and Vanessa Kanu, our Executive Vice President and CFO. Our 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 Stephan. Stephan, 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 Kanu, our CFO, will provide additional details on key drivers for the quarter. Starting on Slide 3, 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 buildup. 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 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 improvement in sales, including in Europe from certain fragrance companies and progressive improvement in China. Turning to the Closures segment, the solid product sales results in the quarter were offset primarily by 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 4, 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 US companies for the seventh consecutive year. We also achieved the coveted EcoVadis' 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 5. 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. 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 improving the platform's effectiveness. We expect that SmartTrack will help our customers speed up ANDA approvals and make generic inhaled medicines more accessible to patients. We anticipate the study will 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, O Boticario has selected our pump for a new men's fragrance and our custom dispensing pump is on the Beiersdorf Eucerin brand lotion. In Asia, our customized cosmetics pump is used on P&G's OLAY serum facial skincare product. Our buildable drop-by-drop dispenser is featured on the BYOMA suncare brand in the US. Moving to Closures, Hidden Valley Ranch 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 disc top solution on its Garnier Fructis hair care products. And in China, our Sports Closure is featured on the 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 0.5 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, Stephan, and good morning, everyone. Let me begin by summarizing the highlights for the quarter. Starting on Slide 6, 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 diluted 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's 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 probiotics 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 point 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 Masstige 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 hair 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 Closures 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 healthcare, core sales increased 7%, driven 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 gross 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 Stephan 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 a 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 8 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 Stephan. 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, Stephan 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, for-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 US 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 for Closures. 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, Stephan. We will now start the question-and-answer session. Your first question comes from George Staphos with Bank of America. Please go ahead.

Hi, everyone. Good morning. Hope you're doing well. Thanks for the details. I guess, first question I had, Stephan, 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.

Good morning, George. Overall, it seems the company is recovering from a somewhat slow fourth quarter and first quarter, with a reacceleration into the second quarter across a wide range of end users. We are observing strong new orders and projects in beauty and particularly robust demand in Closures. On the pharmaceutical side, our proprietary drug delivery system is operating effectively, and injectables are performing well with solid demand. The focus is on enhancing our capabilities and validating our equipment. Additionally, our active material is performing well, though there is a notable exception with cold and cough products. We’ve noticed that US inventories have not been depleted but are returning to more normal levels following a strong cold and flu season. However, we haven’t observed the same trend in other regions, and it seems likely there will be another quarter of destocking, with visibility being limited. We will have more clarity next quarter. That said, navigating these inventory buildup and destocking cycles can be complex due to various factors. For example, if we are short on a specific SKU and cannot meet customer demand, customers might order extra on their next order to compensate. We didn’t anticipate this additional demand, leading to further shortages, perpetuating the cycle until the customer has stockpiled more than usual without informing us due to concerns about further short shipments. This situation is compounded across multiple levels of the value chain. While we track retail sales in the US, IQVIA data reflects a significant lag. This situation is not straightforward, and we’re not trying to evade accountability but rather explain our position. Typically, supply chains are stable, but the cold and cough segment presents challenges. Regarding GLP-1, we see strong demand and are continuing to increase our capabilities. You've likely seen one of our lines in operation, which enables us to meet the demand effectively. We're gaining good traction with customers and have a generally positive outlook on that. You had a follow-up.

Thank you, Stephan. Point of clarification, you said other areas haven't seen it yet. So, meaning, outside of the US, you haven't seen cough and cold inventories necessarily depleted. You don't have to go into detail. I just want to make sure I got that right. And then...

Yeah, that's...

Vanessa, I know tax rates kind of circular. Thank you so much. I know tax rate is circular because it relies on the full year, and you don't guide on the full year. But if you're in our seats and we need to model Aptar, what tax rate would you use broadly for second half of the year? Thank you.

Thank you, George, for the question. Before I address that, I'll briefly mention the Q2 guidance tax rate, as I expect someone would inquire about what is influencing it. We guided for a rate of 19% to 21%, with 20% at the midpoint. This guidance is primarily due to a one-time expected tax benefit, which comes from the anticipated realization of deferred tax assets that were not recognized before. Through our efforts to enhance profitability in certain entities that had been experiencing losses, we are now able to recognize these tax assets. This is the key factor driving the Q2 guidance, and it is indeed an unusual situation. Looking ahead at the remainder of the year, excluding this one-time effect and considering other ongoing tax planning initiatives, I would expect the effective tax rate to be in the range of 22% to 24%.

Okay. Thank you very much.

Thank you, operator. Good morning, everybody. Just following up on George's questions. On the cold and cough, where do you think the inventory lies? Is it in distribution? Is it in 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 difficult to provide a clear answer. However, regarding our order book, we've noticed a change occurring in the US, but we haven't observed it yet outside of the US. The visibility across various levels of the supply chain is even more limited beyond the US. At this point, we believe we'll need to extend this situation for another quarter, and we'll provide an update at the next quarterly call. Historically, even during extreme circumstances, we rarely had extensions that lasted more than a year. By the summer, we will be three quarters into this.

And so the US 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 US, so quarter four and quarter one, I think now we've quoted, yeah.

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

We view this as a long-term opportunity rather than a short-term one. There is significant capacity available for auto injectors and contract manufacturing organizations, and many consumers are adapting to auto injectors. I don't believe there will be a withdrawal from these investments. Ultimately, the decision to launch or not lies with the customers. We have also observed growth in distribution for some auto injectors due to these investments. Therefore, I wouldn't focus on immediate changes over the next few years. Personally, I anticipate a more sequential approach; first, there could be progress with auto injectors, followed by oral medication serving as a maintenance treatment. However, this is speculation, and it's not something our customers have indicated will change in the near future.

Got it. And just one final one. Can you provide more details on the differences in sales between Masstige fragrances and Prestige? Is there a significant difference between the two, or is it mostly due to market conditions and customer demographics?

Well, it's more what our customers' decisions went to do launches. And clearly coming out of COVID, the first big swing was with prestige fragrances, and we're almost lapping that. Whereas Masstige 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 are positive and maybe even saying that they're gaining share. 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 see some of the prestige launches coming back, especially also in Europe. And on the broader beauty picture, we also see the Chinese consumer coming back. 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.

Hey, Stephan, Vanessa, and Mary. Good morning, everybody. If I could first expand on Ghansham'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, it makes us pretty resilient here plus whatever tariff we encounter we pass on. We see a bit more muted engagement in terms of new launches based on just the uncertainty that we may have 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 effects 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 a transfer price and there's a lot of room in absorbing or passing on tariffs in the short term.

It's helpful, Stephan. Thank you. I would like to ask a broader question because I find it challenging to keep track of regulatory headlines and understand if the likelihood or speed of drug approvals has improved or declined. I'm not sure if you can clarify that for me, but considering the long-term core growth of 7% to 11% in Pharma, how does the changing regulatory landscape influence your confidence in that outlook for the medium-term, perhaps over the next two to three years? Are there specific areas within the pipeline where you feel more or less secure, considering that your clients range from small biotech firms to large pharmaceutical companies? How is each segment approaching their pipelines? Thank you for addressing my questions.

As you know, our average project takes about ten years. If the approval process is delayed by 6 to 12 months, it may not significantly impact our profit and loss. Most of our products treat chronic diseases like diabetes, COPD, and asthma, and we expect this trend to continue. Customers are understandably worried about the FDA’s responsiveness, but we haven’t seen much concrete evidence of any issues so far; right now, it’s largely concern. Overall, pharmaceutical R&D budgets increased in 2024, and our pipeline is growing steadily. I suggest we wait for a bit to see how things settle before making any conclusions. We are optimistic about our pipeline, and the long-term trends I mentioned are favorable. Regarding your earlier mention of Beauty and tariffs, I want to emphasize that, due to our strong presence in the U.S., we’ve noticed a significant increase in requests. Specifically, our requests for new quotations have risen by 30% from customers looking to move away from sourcing products from China. Thus, the tariff situation is creating both opportunities and a busy environment for us.

Appreciate that and providing a little comfort going to the weekend. Thank you, Stephan.

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

Hi, thank you for taking my question. How are you doing? Regarding the tariff situation, could there be a potential benefit? From my understanding in the Beauty sector, your production is based in Europe, and the finished products are sent to China. Are we seeing or could we see an increase in demand due to the current issues between the US and the rest of the world, if that makes sense?

Sure. Hi, Dan. The Chinese market is evolving, and we definitely observe increasing confidence along with rising patriotism due to geopolitics. This is resulting in local brands gaining market share. Since we are producing for China, we are pleased to supply local brands, and some multinational companies have established operations there, such as L'Oreal, which has a significant presence in China. The idea that there might be a shift in luxury product shipments away from the US to China is an interesting hypothesis, but it’s too early to have data on that.

You mentioned difficult comparisons in injectables. I was curious if that's expected to be an issue in the first quarter or if it's something that will be relevant for the rest of the year.

No, I know it was some time ago, but we had an ERP deployment where the previous year, we were nearly unable to ship for about half the quarter. Last quarter, we caught up with that, and the comparison shows we were up around 56%. So, we shipped for a quarter and a half last year. When you compare it to that, it begins to indicate growth. However, demand in injectables is not a problem for us; the demand is there. We are taking a moment to catch up. We are installing equipment and getting it validated.

Okay. And finally, regarding foreign exchange, you projected it to be $1.14. What was the average rate in the first quarter? Was it around $1.08 or $1.09? What is the expected change compared to what it was?

If you're looking at our guidance from the end of the last quarter, we estimated it at about $1.04. There was a small increase, and January and February were quite consistent with that. In March, we saw it rise to around $1.08, and the current spot rates are approximately $1.14. That's our current guidance. In terms of year-over-year impact, we're looking at roughly a $0.04 change.

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

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

Good morning. I wanted to follow up on growth in Pharma. Obviously, you've called out the sort of the cough and cold destock, but you also referenced on the call, continued strength on the emergency med Narcan side. If I think about the last decade here, the CAGR is around 9%, sort of right in that 7% to 11% range, but the quarters themselves, particularly over the last couple of years, have been much, much choppier. Maybe if we think about the next few quarters as the destock 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 currently account for about 5% of our overall revenue. Narcan plays a significant role in that. I agree with you; this segment tends to be quite volatile. The distribution chains are unconventional, as they often involve state harm reduction agencies. Additionally, we have a number of generics competing for market share, leading to fluctuations in stock levels. This creates a more unpredictable and uneven business landscape. However, as we discussed earlier, the availability of Narcan has contributed to a decrease in opioid overdose deaths, which enjoys bipartisan support. We anticipate this business will grow positively in the long run, although we expect it may eventually return to a more stable growth path. Over the past five years, we have experienced significant disruptions due to the COVID supply chain issues. Therefore, while we do not provide specific guidance for future quarters, we uphold our long-term growth targets. We remain optimistic about the trajectory, aiming for a growth rate of 7% to 11%. Although we may not achieve that target every quarter or even every year, our long-term performance has demonstrated that we can meet it, largely driven by a strong pipeline, which is in good health.

Okay, very good. Vanessa, I wanted to clarify regarding tariffs. You mentioned that the net impact is anticipated to be limited. Does your guidance, or at least your outlook for the year, take this net effect into account, or does it reflect more of a gross effect with the assumption that you might be able to mitigate it? This year, it seems like each company is approaching this matter differently regarding the expected impact versus what they factor into their forecasts. I just want to ensure that we're on the same page about this.

We observed little to no impact in the Q1 results. For Q2, our guidance includes the limited net effect. We anticipate that for the remainder of the year, the situation will remain similar. Stephan noted earlier that where tariffs are increasing, we are already passing those costs onto customers. He also mentioned that while this might pose a challenge, it could also present opportunities, depending on how the situation evolves. At this time, we expect the overall impact to be minimal.

Okay, very good. Thank you for the questions.

Thank you.

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

Stephan, Vanessa, good morning. Just one quick point of clarification.

Hi, Gabe.

Hello. I want to clarify something and share a data point. You mentioned some destocking in consumer healthcare and were quite open about it. However, in your prepared remarks, you indicated that the US is beginning to return to normal order patterns, while the rest of the world may not be experiencing the same. We could speculate for a long time about inventory movements and the supply chain, but I'm curious about the size of that business compared to the US.

Yeah, I don't think we give you that detail, but you wouldn't be wrong to have the US 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 the 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 destock in OTC/consumer healthcare. And is it fair to say, Stephan, that there's nothing that you see sort of over the next 12 months, 18 months that would kind of prohibit you from being in that long-term window?

Vanessa is looking up the information for injectables. We don't provide guidance for the year because experience over the last five years suggests it's unreliable. However, we are confident in our long-term targets, as we've demonstrated. I won't specify whether it will be achieved in 18 months or 8.5 months. I do want to remind you about the regional split of consumer healthcare that you inquired about. Consumer healthcare represents just over 20% of our total pharma sales. Hence, while Rx has increased by 10% and consumer healthcare has decreased by 10%, the two figures do not negate each other. We still see growth because Rx constitutes a much larger portion of our proprietary drug delivery systems.

And Gabe, we did not talk about injectable volume.

Got it. Thank you.

But again, demand is not an issue in injectables. It's our ramping up and validating of supply.

Thank you. We have another question from George Staphos with Bank of America. Please go ahead when you are ready.

Thanks so much. Two quick follow-ups for me. Stephan, to the extent that you have any view on this, I realize it would be very difficult to have one. With the pressure on the consumer that we keep hearing about, reading about obviously tariff considerations and what that might mean for supply chains and cost material, 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? Maybe less of an issue in pharma, but perhaps in Beauty and/or in Closures. 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, the best is to first say, in terms of recessions or lower consumer confidence, in general, Aptar 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 cut 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 half. So the consumer pressure, while clearly something that some people are forecasting in the US, is not causing deep concern for us. And at the same time, if 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, there is a lot more government spending that will stimulate the economy. So I'm not so negative about the world at large. And having said that, even then, in a recessionary environment, Aptar is 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 lighter weight product or having 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 the growth is not going to end after quarter two.

I'm sorry, what was that, Stephan? 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?

Yeah, that's fair. And we certainly see tooling on the way up in quarter two.

Okay. Thank you very much.

Thank you. I can confirm that concludes the question-and-answer session. I'd like to hand it back to Mr. Stephan Tanda for some closing comments.

Thank you for your questions. I'd like to conclude the call by highlighting the bigger picture. Our teams have had a strong start to the year. While we faced some challenges with demand in certain markets along with tax and foreign exchange pressures, we are entering the second quarter with renewed confidence for several reasons. Firstly, we are witnessing a resurgence in demand across various markets and regions in all segments, with the temporary exception of cough and cold products. Our profit engine and proprietary drug delivery systems are operating effectively, and the demand for injectables and active materials is robust. Additionally, our long-term trends in the Pharma market and our pipeline remain strong. Our teams have implemented innovative strategies to lessen the impact of tax pressures, and foreign exchange issues have mostly subsided for now. Importantly, our local supply chain structure helps us navigate tariff and supply uncertainties with flexibility, enabling us to seize opportunities as customers reassess their regional sourcing. While we didn’t emphasize it during the call, our teams are dedicated to achieving productivity improvements throughout the company by executing ongoing projects, enhancing automation, and brainstorming future initiatives. Furthermore, as we anticipated potential economic downturns in the US or globally, it's essential to recognize that Aptar is well-positioned in several resilient markets, such as medications for chronic conditions, emergency treatments, and everyday consumer staples. In challenging economic times, our resilience is a significant advantage. Finally, due to our strong business performance, we increased returns to shareholders in the first quarter while maintaining strategic flexibility in our balance sheet. Thank you for joining the call, and we look forward to future discussions.

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