AptarGroup, Inc. ($ATR)

Good afternoon. I'm Gabe Hajde, Wells Fargo's paper and packaging analyst, I'm joined by my colleagues today. I think maybe 1 of them might be in the room, [ Bailey Gordon ]. [ Richard Carlson ] as well, we'd like to welcome you today to AptarGroup. Representing the company is CFO, Vanessa Kanu, who has been with the company for about 18 months. And also attending from Aptar is Mary Skafidas in the room as well. As many of you may or may not know, Aptar is the global leader in dosing, dispensing and protection technologies for drugs and consumer products. Pharmaceutical is by far its largest segment in EBITDA terms with the other 2 segments being Beauty and Closures. Thank you all for attending, again. This is intended to be a fireside chat to the extent folks have questions in the room, don't hesitate to ask. And with that introduction of, Vanessa, I think you guys have a couple of slides and prepared remarks to go through.

We have a presentation which -- let me just make sure this clicker works. Are you ready?

And yes, I'd love to hear everything about Aptar today.

Okay. Fantastic. Well, thank you, Gabe. Thanks, everyone, for joining us on, and thank you for describing what we do. I think if I were to synthesize this, really just means that we are an expert in the end user. So we create experiences for patients, for consumers. At the core, we are a technology company. We create -- we own the IP of everything that we manufacture. So we're not a contract manufacturer. We're truly global, operating in about 20 countries across 4 regions. The lion's share for us being in Europe. And as you can see here for the year ended 2025, $3.8 billion in revenue, about 46% of that from Pharma; Beauty being 35%; and Closures 19%. And you can kind of see there as well what the split of our adjusted EBITDA is by segment. I'll also add, as you kind of look at our segments across all of these end markets, we've got really good growing end markets and really good growth potential. We have a strong balance sheet. Our leverage is actually towards the lower end of many of our peers, if not most of them, so feeling very proud about that. And really, that strong balance sheet is also very helpful to us, particularly for our pharma customers as you kind of think through the long development cycles in pharma, our customers want to make sure that they're dealing with a partner who is very financially strong and can stay through the course of those long development cycles as well. Also very proud of our capital allocation and return of capital to shareholders. In the last 5 years, we've returned about $1.2 billion to shareholders through dividends and through buybacks. And of course, we're very proud of our sustainability credentials, we get a lot of awards for sustainability. I won't go through all of them that you see on the slides here, but certainly, this is a differentiator for our customers, particularly in the consumer businesses and also for our employees in terms of retention -- attraction and retention of our employees. This really just looks at technologies and industrial capabilities and how these are shared across our different end markets. So when you look at the verticals here, you see the different end markets that we play in and the horizontal kind of show you how we share these technology and technology platforms across our end markets. So for example, whether it's dispensing fine mist pumps or frankly, airless systems or even aerosol valves and bag on valves, you see how we share these technologies across different end markets that we serve. And you look at the different industrial capabilities, precision injection molding, high-speed assembly AI-assistant quality control. These are all areas where we share these capabilities across our entire footprint. And you may also know that our Pharma business rather was actually born from our Beauty business, speaking also to the synergies that we share across our different end markets and platforms. I mentioned earlier that we are a technology company, and we own the IP of everything that we manufacture. And this really gives you a little bit more color around that. So we've got about 7,300 patents across our portfolio. You see there pharma being just around 2/3 of that. And for us, though, these patents are obviously know-how, trademarks and patents. And this is really important to us, really, really important to us, and this is why we defend our partners when we need to because clearly, from our perspective, this is what differentiates us relative to a lot of our competition. Innovation is how we drive change and growth across all 3 of our segments. And frankly, it's also a lot of the time also reprice and price support is through coming to market with new innovative solutions. And so patents and IP being a key component of that. I mentioned earlier that we are in growing end markets. And I really like this slide because when you think about any market, the first question is what are the secular trends in that market, right. And when you look across our 3 businesses: Pharma, Beauty, and Closures. You can see the size of our TAM on this slide, but you can also see here, these are market growth rates, not Aptar growth rates, but we are in a pharma packaging end market, that's $165 billion, and the market growth is 7%. You can see what the market growth there is for Beauty as well as for Closures. And I will say, going back to my earlier comments around innovation, when you think about Closures, for example, we have consistently grown better than market, higher than market, and that's through category conversion. And the category conversion comes through driving innovation and new innovative products to the market. So this is what makes us, frankly, excited about our long-term growth potential because we are in markets that do have secular tailwinds. And also, it's a highly diversified model. So as we typically say no single product is going to make or break our long-term target. Of course, on a shorter-term basis, you'll have some products be stronger contributors than others. But when you look at the over longer-term picture, no one product is going to make or break our overall long-term trajectory. I talked a bit earlier about capital deployment and $1.2 billion return to shareholders. When you look at our capital allocation and you look at the last several years, typically about 2/3 of our capital has been reinvested back in our business. Why? We are a growing business. And we also get really good returns. And these are investments, both organic capital investments as well as M&A. So really good returns. And of course, we preferentially allocate capital to Pharma given the higher growth, higher profitability profile of Pharma relative to other segments. And then of course, as I mentioned earlier, about 1/3 of that being returned to shareholders, 32 years of annually increasing dividends. And of course, we also do some share buybacks. We've been very active in share buybacks, particularly over the past 12 to 14 months. And again, that remains a more discretionary element of our capital allocation framework. And then we already talked about sustainability and all the different awards that we see there. So just taking a little bit closer look at Pharma. This is the growth engine of our business and will continue to be the growth engine of our business. And we are differentiated here not only through our very, very strong patent portfolio, but also the know-how that we've built over the last 4 years. When you look at the key strengths and we've been so deeply involved in this market over the last 40 years through a lot of technical regulatory know-how. And that's what we help our customers with. And we help our customers through the life cycle both from -- obviously from the very beginning where we start earning service revenues right through to different parts of the drug development cycle. So a lot of know-how we've built here over the last 40 years, a lot of engineering and scientific know-how. And when you look at the customers that we serve, we are serving a lot of the big pharma companies and also delivering to their larger CMO partners as well. This shows drug sales by delivery route. And we like this slide because it's a good way to sort of characterize the end market. So $1.7 trillion in the end market, oral being the largest part of that in market followed by injectables, respiratory, which is where a lot of our revenue comes from today is a smaller part of the market, but actually a market that we do very, very well in. When you look at the margins across our portfolio, we actually make very strong margins in that part of the business, respiratory, nasal, but we're also doing quite well in ophthalmic solutions. Our injectables business is growing really well. and doing quite well from a margin perspective as well. And we also play a role in the oral route of delivery through our active materials sciences portfolio. This gives you a sense for our historical growth trajectory. And I think it's important to level set on this because, obviously, we've got some near-term headwinds with emergency medicine. We've quantified that to investors. And -- but these are near-term headwinds. When you look at over a longer period of time, we've got long-term target growth of 7% to 11% in Pharma. When you look at the last 10 years, you see here, we've done 9% CAGR. Not every single quarter was in that range. Not every single year was in that range, but it's a CAGR. And this is why, again, when we look at our targets, these are long-term growth targets, and you'll see that they are very much anchored in our historical growth profile, which we've achieved and also in our pipeline, which we're very excited about. So speaking of the Pharma pipeline, the pipeline here, you'll hear us say Pharma is a pipeline business. It's all about -- and it's a numbers game for us, right? We want a pipeline that, there's a lot of attrition in the pharma cycle. So we won a pipeline that is big, that's growing and that as that pipeline converts, that obviously contributes to revenue growth. When you look at the pipeline over the last 5 years, it has grown significantly, not only in terms of scale but also in terms of scope. The pipeline has become a lot more diversified. This goes -- this shows you what the top 8 areas are therapeutic areas in our pipeline. I won't go through all of them. But you can see here fairly well diversified. It was very exciting to us because, again, no single product is going to make or break that long-term growth profile. Top 3 items, respiratory, biologics and systemic nasal drug delivery, SNDD, which is essentially delivering medicines through the nose to get to brain, a very exciting area of growth for us in the future. We're seeing more and more drugs being administered nasally, which bodes very, very well for us. Given what I said earlier in terms of our participation and really our level of experience in easily administered therapies. This slide is really important because it really shows you how we actually grow over the life cycle of a drug. In the early days, we typically provide services to our customers. So we are earning revenues from the early days. And then it shows you what happens when the drug goes to originator to generic to over-the-counter. So you can see there how we generate revenue in those early days with the originator. Drug then goes off patent, it's the API that goes off patent. We are part of the drug master file. And so when the generic comes online, they tend to use our products as well. Why? Because if they don't, they have to go back through because we are part of the drug master file, they have to go back through clinical trials. So that adds a level of stickiness to our revenues. And our margin profile doesn't change when we go from originator to generic, which is pretty exciting. And then, of course, when the drug then goes over the counter, market expands, volumes continue to expand and our delivery devices are also part of that. And so volumes expand we participate in that volume growth and our margin profile doesn't change. It's actually the same and sometimes even better, depending on the particular product. So this tells you how our revenues tend to grow and compound over time. And again, this is just really adding more color to my earlier comments about how we support a number of our customers through the drug development life cycle. And again, this also speaks to all the different therapeutic areas that we're seeing growth in our pipeline. And the key message here is diversification. Diversification, no one product, no one area, and this is what really excites us, particularly in the nose to brain area. Very quickly touching on Beauty, $1.3 billion business. Beauty, we went through a destocking cycle, particularly with high-end fragrance in the last couple of years. We're now seeing growth again in beauty. We saw growth overall, 2% core sales growth in '25. We ended 2025 with positive growth in Q4. We also just had a good growth in Q1 of this year. And as we've said, on our last earnings call, we do expect to see strong growth in beauty also through the rest of 2026. So we're very excited about that. We do have some short-term operational challenges that we talked about last quarter. We're impacted by a certain supplier, and we're working through some of those issues. So we do expect the margins to improve, particularly as we get through the balance of 2026. But you can see here, again, the diversification not only geographically speaking. And by the way, the 60% that goes to Europe, our customers tend to ship that to other regions as well. So that's just where we're shipping to the customer. They tend to actually ship that outward. So a very globally diversified business for us. And you can see all the very large names and brands that you'll recognize in terms of the customers that we serve in Beauty. Also a very diversified portfolio from fragrance pumps to airless systems to turnkey solutions that we provide for our customers. And then last but not least, Closures, which is a newer segment for us that was created just a few years ago by consolidating our food and beverage business. And some personal care out of our Beauty business. That business is doing quite well for us. We continue to have very good product growth in Closures margins have generally been at the lower end of our long-term target range. We also had some operational challenges there in the last couple of quarters, which we are working through, but we see good growth potential in Closures, and also the opportunity to get our margins more consistently in the long-term target range. And again, here, a very diversified portfolio, just looking at the breadth of all the different products that we bring to the market in this part of our business. And so key takeaways, I think it's very clear. The fundamentals of our Pharma business, we've been very, very strong. What excites us is, frankly, the pipeline. So it's good that we -- our growth historically has been consistent. But as we look outward, very excited about the breadth of the pipeline and the growth in the pipeline as well. Injectables is doing very well. You would have seen from the last few quarters of our earnings call, double-digit growth in injectables, and so we're excited about that. Innovation, a key driver of our growth, not only in the past, but also going forward. And of course, the strong balance sheet that I spoke to, which is something that we're very proud of because it gives us the flexibility to invest back into our business but also return capital to our highly valued shareholders. So with that, Gabe, let me stop there. That was a quick fly by. Thank you, Mary. That was more than a couple of slides.

Well, I appreciate it. So it's a general session and it's an equities conference here at Wells Fargo today. We recently got more constructive on the name, March 20. And then part of it was the strong balance sheet and the resilience of your Pharma segment. There's a lot of detail in here that, it's tough to walk through everything that you do for your customers. We'll start on the negatives first. You mentioned this emergency medicine destocking. That's been a little bit of a nagging issue. And you talk about hitting singles and doubles, I've covered the stock now for close to 20 years. And that's historically speaking, been the case. That singles and doubles you consistently deliver. Narcan and naloxone as a little bit of an exception to that. And you kind of framed up for us that is going to be down about 35%, maybe 40% this year, going from maybe 87% of revenue to 5% of revenue. Can you just talk about how that's kind of the cadence of that through the first half, is it playing out the kind of what you expected? And then from a profitability standpoint, I think it tends to be 1 of the more attractive areas within your portfolio. Operating leverage, deleverage. Is there anything unique about that product relative to everything else that you'd like to call out for us?

Yes. So maybe just stepping back, Narcan naloxone. Pharma generally has a pretty long cycle. It takes a while to bring these products to target because -- so let's talk about why we saw such rapid growth in a short amount of time. Clearly, we're in a crisis opioid crisis and the FDA accelerated the time lines. And so we saw a very large amount of growth over a much, much truncated cycle. And it got to a point where we did start to see that inventory was likely building up, but this is a channel that is very, very opaque. There's not a lot of data, third-party external data. You can't go to IQVIA. You can't go to Nielsen and you can't go to other credible sources of external data to say, oh, just plug these numbers into my model and just see what it spits out, right? And we just -- that's a very opaque channel. And frankly, what's the channel for these products, hospitals, fire departments, libraries and so on. And so there's not really one single source of information. But we started to see that we thought inventory was building up. And of course, our customers, however, because where B2B kept on ordering. And of course, you're going to fulfill your customers' orders. You're not going to tell your customers, no thanks, I'm going to hold your order. I think you might be building up inventory. So they also had some of their data possibly incorrect. So we suspected that we're building up inventory, and so we started to put our own information together and shared these concerns. And were able to quantify it, to your point, Gabe, and we did quantify that Q4 of 2025 would be a pretty big impact, and we shared what that was. And then for 2026, we said it was about a $65 million full year headwind is what we expected. And we also said roughly 2/3 of that would be the first half impact and about 1/3 of that would be the second half impact. And we are so far tracking pretty close to those estimates. So partly good forecasting on our end, partly luck, because we can all take the credit for everything that goes well. But it's tracking pretty closely so far. So that all bodes well. To your point, this is a very high-margin part of our portfolio. Emergency medicine, saving lives, controlling the dosage, [ 99.999% ] of reliability and quality. And of course, in Pharma, these are the kinds of medicines that come at a pretty high price points. So very, very good margins for us. And so as we experienced these headwinds to the top line driven from Narcan, of course, that is having an outsized impact to the bottom line. With all that being said, we're super proud of the fact that even in Q1, when we looked at the year-over-year impact, pharma still was in its long-term target margin range. And so I think that also speaks to the strength of the rest of our portfolio. But also other mitigating factors that we're taking internally just so that we're not seeing all of this flows straight through to the bottom line.

I would agree with that. Just maybe specifically on emergency medicines or however you guys kind of track that internally. What would you consider that, I mean, anecdotally, what we hear from first responders is that, unfortunately, it's still something that they're using on a day-to-day basis. And oftentimes, they administer 3 at a time because you may not always necessarily get the response you want after the first one. But just any sort of dialogue with customers that would suggest this will be a stable-ish growing product line for Aptar or is it too soon to tell?

Yes. I mean, certainly, we want to get with the destocking dynamics. We think that the destocking should be behind us at the end of this year. And back to my earlier points about we're tracking to that. Now the question is what happens after, right? There was a period of uncertainty around the funding climate, that seems to have stabilized. And funding is important for this product because it's largely funded by the government. That's how states and locals get the budget to buy these life-saving products. So funding is really important. And we've kind of -- we had a period of early last year, there's a lot of uncertainty. Is it cut? Is it not cut. And then we got some clarification from the administration. And so that climate is now stabilizing. And in fact, I think the funding expectations for 2027 are looking pretty healthy based on what we're seeing right now, which is good. And so once we pass these destocking dynamics, unfortunately, the crisis is not behind us, right? And so the need for these life-saving medications will continue. And the originator in this space has certainly said publicly that they do expect this to be a high single to mid-single-digit grower over time. And for us, we think that's the right range once we're past this period.

So fairly consistent with kind of the portfolio overall.

Yes. Yes.

Okay. One question that I'm trying to ask all the companies that are at our conference. I think it's relevant. How would you compare this recent acceleration in input cost to what we observed during the pandemic or 2021, 2022 time frame. I mean, obviously, everyone's pretty laser-focused on oil, petrochemical derivatives, which are somewhat impactful for your business from a raw material standpoint. But obviously, day-to-day transportation, diesel, those types of things. Internal meetings or however you characterize it? How are you thinking about that? And then relationship with your customers, your ability to recover that?

Yes. I would say we're just -- we're better organized, having experienced it before, what's different this time is we're better organized. At least from our organization, we were able to hit the ground running relatively quickly, because we had already developed this muscle internally through COVID, through our periods of inflation, but frankly, also through tariffs last year. Just kind of name your inflation. There's been a lot of inflation in the last few years, right, and tariffs were similar to that extent. And so this time, we didn't see a lot in Q1. We started to see it towards the tail end of March. So it didn't a lot in our commentary in our Q1 earnings, but we did talk about it in terms of Q2 and beyond, and we are seeing a significant amount of inflation. For us, the biggest impact is resin. So resin prices, particularly in our Closure segment. Why closures? Well, Closures just has a higher percentage of resin in the actual product itself compared to, say, Pharma and Beauty. Closures is the biggest impact. And in Closures, we have indexation clauses in our contracts. And so we pass that on to customers. The company has also done a really good job learning from those earlier experiences, game, where we're not passing that on a much shorter time lag than before. So if you go back many, many years, you would have seen a bit of a time differential where we incurred the cost, but we didn't quite pass it through right away. And so you saw some margin degradation and then we caught up I think it's a lot smoother this time. So we've built up that muscle internally, which is great. And then in Beauty and in Pharma, where we don't quite have the same level of indexation, just again for reasons I just mentioned, we're actually passing those cost increases through as discrete line items as surcharges. And so it's raw materials cost, but frankly, it's also transportation, I mean, energy prices are higher across the board, which has ripple effects across a number of things, and we've been passing those through. And again, so far, so good. Nobody likes getting a price increase. I don't like getting a price increase, but we're very transparent. And again, that's because we've built that muscle over time where we're showing them and sharing with our customers exactly why and where the cost increases are coming from.

No, I think the muscle memory is an important distinction. And what's interesting is, I mean, you see that over time, these companies develop that. And things have changed for sure, I think, in terms of how kind of go-to-market used to be versus where it is today. So that's good to hear. And what we also hear is your product typically as a portion of the -- whether it's the retail price on the shelf or think about a drug is typically a small fraction. So they're focused on some other items.

That's correct. Yes.

Tariffs, I've got a different question about it. But just -- we kind of have this [ 103 days ]. I think now we're focused on Section 301 tariffs is how we're going to get this through. But as you kind of look at the business, is there anything that jumps out at you and I'm thinking more maybe in the closures or beauty segment where -- whether it's to get ahead of price increases, whether it's -- we've got some certainty on tariffs where customers may be trying to sneaky build some inventory? Or is that not something that...

We haven't really seen that. And we were watching for that. Is -- are people going to prebuy to get ahead of expected changes in tariffs. And we were very acute in looking for this even last year, but also now we don't really see that. We may have a couple of anecdotal cases where we've heard that, okay, maybe that could be a driver, but we have not seen this as anything sort of notable across the board. So not really any big impact there.

Okay. I want to get to the exciting stuff because Aptar is 1 of the few stocks in the group when you look over a long period of time, that is a compounder, and it's been driven by the investment in pharma. So you mentioned pipeline in your prepared remarks, nasal delivery is a big part of that. Injectables is a big part of that. I think other folks this is not a health care conference. But to the extent that we're seeing more and more biologics and biosimilars that are out there in the marketplace for a variety of different treatments. When you look at the pipeline, and I'm looking at things that are out there in the public domain that we know about, [indiscernible] neffy, things that are more -- it's easier for -- from a patient compliance standpoint, getting back to that 7% to 11% growth which seems to be sort of a [ linchpin ] for the stock. Are those the types of drugs and introductions? Number one, are there other ones that I'm missing? And then number two, you kind of gave us that flow chart, which almost looks like it was, I want to say, 17 to 20 years. When you kind of go...

I think it was 30 years.

30 years. Okay. As you look out maybe over the next 12 to 18 months, we feel good that we can get back into that range assuming a normalized backdrop, whatever that looks like.

Yes. Yes. So let me just maybe start with the range is a long-term range. So it's not a 12-month range. But I think -- so -- but -- so again, emergency medicine, you kind of get this onetime effect, but when you look at over a longer-term period, absolutely expect to continue that compounding that you just described. And honestly, Gabe, I think a lot of the examples you gave are just exactly the reasons why we're very excited. The examples give us neffy, Enbumyst and so on. These are cases where an existing molecule was taken where the molecule was delivered in a particular way. So in the case of neffy, it's epinephrine which is, we all know, you jam it into your thigh as an injection and now being nasally delivered. You've got a big part of the population that may not miss my children to start with, right? They don't like needles. And so they would be perfect case studies for why neffy, for example, is a very exciting development. Now it takes time in pharma. It's not just you don't launch the product tomorrow, and all of a sudden, it grows like gangbusters, these things do take years to grow insurance companies adoption and so on and so on. But this is a very exciting development for us. And some of the other items that you mentioned as well, right, where, again, existing molecule, new method of delivery, nasal administration it's a lot more efficacious. It's a lot more convenient. When you think about the broader population and demographics, but also other broader pressures across health care. So aging population but also the cost of hospitalization is very, very high. It's 1 of the biggest problems that we have. And so this move towards self-administration. Patients can treat themselves at home without a nurse or some kind of a supervision you can administer through the nose versus having somebody help you with an injection or God forbid you do it wrong, because you're so careful about your fears around needles and so on. So this is a lot more convenient and efficacious, right? So these are broader trends that actually work in our favor. And we're also seeing more and more research around the nose to brain overall. And depression is a key area. Also, other diseases such as Parkinson's, Alzheimer's, all of these areas being researched for nasal administration of the drug. So very, very exciting for us as I kind of shared that slice of the market that we play so well in. This is all just fantastic. This is exactly our sweet spot.

So at risk of...

[indiscernible] that grows very good for our margins as well.

I think you shared a press release on May 28. And unfortunately, [indiscernible] was not here is CEO elect at a pharma. So maybe he can speak a little bit more eloquently about this. But I think it was kind of like patent applications for preclinical data supporting intranasal delivery for or pulmonary of GLP-1.

Yes. Semaglutide? Yes.

Which a lot of people are really excited about it. Again, we're not at the health care conference. But so again, just from the packaging guys perspective, presumably, people -- patient compliance may go up, maybe adoption could go up, and there's a lot of, I guess, net benefits of that. But -- is this something where the molecule has already proven. Can you walk us through maybe some of the technical aspects. Is it a truncated time line that we should think about as like or...

So this is not going to deliver revenue tomorrow, but it really speaks to our level of innovation, and it comes back to the whole nasal administration, right? This is GLP-1 being delivered not only as an injectable, not only as an oral, but potentially through the nose. And Aptar, just given our know-how in this space, we just filed patents on this to gives point a couple of weeks ago. And we're very, very excited about this. Clearly, we're not a pharmaceutical company. So we're not going to start developing the drug to sell, but we could -- there's so many different potential routes to market for this licensing many other opportunities that may come along with it. And of course, you got the device sale as well. So this really shows our innovation in this area, really leading in this area. But also, this is something that could unleash a lot of potential future revenue for us. And the other -- it goes back to the nasal administration. But it's also interesting, back to the innovation thing, as we talk about GLP-1, maybe getting a little bit less questions now, but a quarter or 2 ago, it was all about what's going to happen to your injectables, because now GLP-1s are going to be through oral? And we always said that this is -- there will be a market, right? We don't see this as being cannibalistic to the injectables portfolio. We do think that it expands the market. And there will be coexistence of oral solutions to injectable solutions. And now we're looking at potentially delivering GLP-1 through the nasal truck. So very, very exciting, and this is exactly the area where Aptar is, frankly, leading the pack.

Well, I guess if we were in the business of [ Tuning Horns ], you guys are the only company out there that can do all 3. You have active packaging for oral, [ dose ] right? You have injectables and you also have the...

100%. 100%. So very exciting. And then the other thing is, I would say just to -- as we think -- as we talking about no injectables, GLP-1s are, of course, very important, but that's not the only driver of our injectables growth. Biologics are a huge driver of our injectables growth. When you looked at the slide on the pipeline, just a few slides ago, we saw biologics being a big part of that. It's in fact, I think it was a the second biggest area in our pipeline. We're very excited about that. And so while we will participate in GLP-1 growth. It's not the only driver of growth in our injectables business, [ X1 ] also being a big driver. And so these are all areas to your earlier question, Gabe, that we are quite excited about and we think supportive of that long-term 7% to 11%.

I want to ask a general corporate question and then maybe 2 on the other businesses. Stephan told us that he's going to be retiring in March. He was an outside CEO. Now like I said, Gael, who heads up Pharma is an internal candidate. Just a fresh set of eyes. You've worked with him now, obviously. I think at least maybe for me, it seemed he was kind of being groomed. I think it's going to be a good internal promotion. Are there any things that you see that during the Touya era that might be in focus operationally, commercially or anything like that you'd call out for us?

Yes. I mean, yes, Gael is -- has been -- so first, we wish Stephan the best in his retirement. He chose to retire. He is very excited about its future plans with his wife, they fly planes, they go hiking, I mean he's got the whole -- frankly, the rest of us are just jells about all the things, the fun things he plans to do when he retires. But we're very happy for him. He certainly deserves it. And now we welcome Gael. And as you say, Gael is a very, very strong leader, very well known and very well respected within the organization. And I think one of the unique things about Galas well is not only an internal candidate, but he also knows all the segments very, very well. And I think that's important, and obviously has run the Pharma business for the last 10 years and has been quite successful in running the Pharma business for the last 10 years. I think Gael, I've worked with them very closely for the last 18 months since I joined the organization. And of course, even more closely now since the Board made its succession decision as is now going through the transition with Stephan. You'll find in Gael, a very sort of -- Gael is -- he likes to study things. He's very much data-driven, very thoughtful. Once the facts, which as a CFO, goodness gracious, thank you. Let's only talk facts. But you'll also seem Gael a very, very strong drive for innovation. And I think you're going to see that from him as well. But I think you're going to see being somebody who's been with Aptar for a long time and loves the organization, a very strong focus on culture, values, I think that's going to be important. But also performance, right? Gael holds his team accountable. He's looking for excuses. He's looking for show me the data, show me where you're growing and let's dig into the details. He's very detail-oriented, which, again, I think for CFO, I couldn't be more grateful for that because I think those are all the attributes that will bode well as we go forward. So excited to have him on board and looking forward to what potentially comes next.

Data-driven.

Data-driven.

Beauty, I think Q1 growth was in the 3% range. margins a tick below. You talked about having to requalify a supplier on some particular applications. Target is 15% to 17%. You're pretty close. Do we need that -- you also mentioned...

We're also close. That's the frustrating part, Gabe. Let's just call it [indiscernible]. We're really close.

No. You're close. I wanted to ask about -- you mentioned destock, high-end fragrance versus kind of mass -- do we need that incremental volume bump to kind of get in that range? Or are there things that we can do internally to get there?

We've done a lot, which is -- my comments about the frustrating part is we've done so much and we've come so close. And then, of course, we saw some of these operational challenges, which set us back a little bit. So that's the my comments around just being frustrated. It really is within distance. If you look at the work we've done in Beauty for the last couple of years, we've shut down 10 plants. We've rightsize the labor force to the tune of 10%, 11%, 12%. So the organization has not set back, has done a lot of work around cost management in Beauty and continues to do a lot of work around cost management in Beauty. We did go through this destocking cycle, which obviously was a headwind to the top line. And in manufacturing, volumes matter right? Volume is more -- for your absorption and all those different things, right? So we are excited that we're now seeing volume growth in beauty after that long period of destocking. So we saw growth in Q4. We start saw growth in Q1. The margin is just -- they don't just rebound in your first quarter of growth. So we do need to see this consistently, but we are absolutely optimistic that we will start to see improvement in the Beauty margins, and we need to get through these short-term operational hiccups that you mentioned, like the fire and the new supplier and having to incur additional costs. And that should all be behind us, we think, by the end of the first half. And hopefully, we're expecting to see sequential improvement in the margins as we go forward.

And similar -- last question for you, a similar line of questioning for Closures. Just kind of the path forward for profitability. Starting the year, I think food and beverage at least customers were optimistic they can promote. We're hitting another wave of inflation. How should we think about that?

Yes. Closures, again, newer segments, as I mentioned earlier, and we've been pretty good from a growth perspective in closures. Our products, again, that reported growth tends to -- depending on rest and pass-through and so on. But if you just kind of strip that out and just look at what happened to the products revenue and Closures, we've done pretty well. and we've typically grown better than market, as I mentioned earlier, through innovation, converting categories and so on. And we actually expect that to continue. We're expecting 2026 to be a good growth year for Closures. There, again, as we kind of look at the last 12 to 18 months, we've been at the lower end of our target margin range. We have not been in the last couple of quarters because of some operational challenges, some maintenance issues that we've had to deal with. The Closures team continues to work pretty diligently through those issues. And again, we did say that we expect that to continue into the first half. But again, we expect sequential improvement in the Closures margins going forward.

Perfect. I think that wraps it up. Unless there's any questions from the audience.

You asked all the questions.

We tend to do that. Thank you very much.

Thank you, Gabe. Thanks, everyone.