AptarGroup, Inc. (NYSE:ATR) Q2 2024 Earnings Conference Call July 26, 2024 9:00 AM ET Company Participants Mary Skafidas - Senior Vice President, Investor Relations and Communications Stephan Tanda - President & Chief Executive Officer Bob Kuhn - Executive Vice President & Chief Financial Officer Conference Call Participants Ghansham Panjabi - Baird George Staphos - Bank of America Daniel Rizzo - Jefferies Matt Larew - William Blair Gabe Hajde - Wells Fargo Operator Ladies and gentlemen, thank you for sta ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-11846 AptarGroup, Inc. Delaware 36-3853103 (State of Incorporation) (I.R.S. Employer Identification No.) 265 EXCHANGE DRIVE, ...

AptarGroup (ATR) came out with quarterly earnings of $1.37 per share, beating the Zacks Consensus Estimate of $1.36 per share. This compares to earnings of $1.23 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 0.74%. A quarter ago, it was expected that this maker of consumer-product dispensing systems would post earnings of $1.13 per share when it actually produced earnings of $1.26, delivering a surprise of 11.50%.Over the la ...

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) Aptar reported strong financial results for Q2 and H1 2024, driven by robust Pharma segment growth and improved margins across the business [Second Quarter 2024 Performance](index=1&type=section&id=Second%20Quarter%202024%20Performance) Aptar reported solid Q2 2024 results with a 2% increase in reported sales and a 3% rise in core sales, driven by strong performance in the Pharma segment and margin improvements. Net income grew 9% to $90 million, and adjusted EPS increased 12% to $1.37 Q2 2024 Financial Highlights | Metric | Q2 2024 | Change (YoY) | | :--- | :--- | :--- | | Reported Sales | $910 million | +2% | | Core Sales | - | +3% | | Net Income | $90 million | +9% | | Reported EPS | $1.34 | +8% | | Adjusted EPS | $1.37 | +12% | | Adjusted EBITDA | $193 million | +6% | Q2 2024 Segment Sales Growth | Segment | Reported Sales Growth | Core Sales Growth | | :--- | :--- | :--- | | Aptar Pharma | 6% | 7% | | Aptar Beauty | (2)% | (1)% | | Aptar Closures | (1)% | 0% | | **Total AptarGroup** | **2%** | **3%** | - Margins continued to improve over the prior year quarter, driven by sales of higher value products, improved operational performance, and cost management efforts[3](index=3&type=chunk) [First Half 2024 Performance](index=1&type=section&id=First%20Half%202024%20Performance) For the first six months of 2024, Aptar achieved 4% growth in both reported and core sales, reaching $1.83 billion. The company delivered double-digit EPS growth and a significant increase in cash flow, with net cash from operations rising to $236 million and free cash flow reaching $92 million H1 2024 Financial Highlights | Metric | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Reported Sales | $1.83 billion | $1.76 billion | | Reported EPS | $2.57 | $2.07 | | Adjusted EPS | $2.63 | $2.18 | | Net Cash from Operations | $236 million | $182 million | | Free Cash Flow | $92 million | $27 million | H1 2024 Segment Sales Growth | Segment | Reported Sales Growth | Core Sales Growth | | :--- | :--- | :--- | | Aptar Pharma | 10% | 10% | | Aptar Beauty | (1)% | (1)% | | Aptar Closures | 0% | 0% | | **Total AptarGroup** | **4%** | **4%** | [Segment Performance Analysis](index=2&type=section&id=Segment%20Performance%20Analysis) The Pharma segment was the primary growth driver with 7% core sales growth in Q2, while the Beauty and Closures segments saw sales stabilize. Pharma's growth was led by proprietary drug delivery systems, Beauty saw volume improvements in North America offset by lower tooling sales, and Closures' volumes were offset by lower resin cost pass-throughs [Aptar Pharma](index=2&type=section&id=Aptar%20Pharma) The Pharma segment's core sales grew 7% in Q2, driven by strong demand for proprietary drug delivery systems for various therapies. The Injectables division's sales normalized after a strong Q2 2023, but grew 14% in H1 2024. The Active Material Science division also returned to growth - Strong performance was driven by continued growth for proprietary drug delivery systems used for allergic rhinitis, central nervous system therapeutics, emergency and pain medicines, as well as eye care and nasal decongestants[7](index=7&type=chunk) - Sales in the Injectables division declined in Q2 compared to a strong prior year quarter but grew **14%** for the first six months of the year[7](index=7&type=chunk) - The Active Material Science division returned to growth after a period of destocking due to COVID[7](index=7&type=chunk) [Aptar Beauty](index=2&type=section&id=Aptar%20Beauty) The Beauty segment's core sales declined 1% in Q2. While volumes improved, particularly in North America, this was offset by higher tooling sales in the prior year. Margins improved despite softer sales due to operational performance and cost management - Volume growth in North America showed progressive improvement but was offset by higher tooling sales in the prior year period[8](index=8&type=chunk) - Margins improved year-over-year due to operational performance and ongoing cost management, even with softer sales[8](index=8&type=chunk) [Aptar Closures](index=2&type=section&id=Aptar%20Closures) The Closures segment reported flat core sales in Q2, as increased volumes were offset by the pass-through of lower resin costs. Margins were also flat compared to the prior year - Core sales were flat as increased volumes were offset by the pass-through of lower resin costs[8](index=8&type=chunk) - Margins were flat as cost containment and operational performance were offset by the timing of passing through lower resin costs[8](index=8&type=chunk) [Outlook and Corporate Actions](index=2&type=section&id=Outlook%20and%20Corporate%20Actions) Aptar provides Q3 2024 adjusted EPS guidance, anticipating continued growth from proprietary drug delivery systems and North American consumer dispensing, alongside an increased quarterly dividend and share repurchases [Third Quarter 2024 Outlook](index=2&type=section&id=Third%20Quarter%202024%20Outlook) Aptar anticipates continued growth in Q3 2024, projecting adjusted EPS between $1.38 and $1.46. Growth is expected from proprietary drug delivery systems, particularly for CNS drugs and allergy therapies, and growing demand for elastomeric components for GLP-1 drugs. The company also sees progressive recovery in its consumer dispensing businesses in North America Q3 2024 Guidance | Metric | Q3 2024 Guidance | | :--- | :--- | | Adjusted EPS | $1.38 to $1.46 | | Effective Tax Rate | 23.5% to 25.5% | - Key growth drivers for Q3 include: - Increased demand for nasally delivered central nervous system drugs and allergy therapies - Growing demand for elastomeric components used for GLP-1 - Progressive recovery in North American consumer dispensing technologies[13](index=13&type=chunk) - The guidance includes an estimated currency exchange rate headwind of approximately **$0.02** per share compared to Q3 2023[14](index=14&type=chunk) [Capital Allocation](index=3&type=section&id=Capital%20Allocation) The company demonstrated confidence in its financial position by increasing its quarterly dividend by approximately 10% to $0.45 per share. During the second quarter, Aptar also repurchased 34 thousand shares for about $5 million - The Board of Directors increased the quarterly cash dividend by approximately **10%** to **$0.45** per share[15](index=15&type=chunk) - During Q2 2024, the company repurchased **34 thousand** shares for approximately **$5 million**[15](index=15&type=chunk) [Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Aptar's unaudited consolidated statements of income, balance sheets, and cash flow highlights for Q2 and H1 2024, detailing key financial positions and operational cash generation [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) For Q2 2024, Net Sales were $910.1 million, leading to an Operating Income of $126.0 million and Net Income Attributable to AptarGroup of $90.5 million. Diluted EPS was $1.34. For H1 2024, Net Sales reached $1.83 billion, with Operating Income of $238.1 million, Net Income of $173.6 million, and Diluted EPS of $2.57 Consolidated Statements of Income (In Thousands, Except Per Share) | (In Thousands, Except Per Share) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $910,063 | $895,906 | $1,825,511 | $1,755,973 | | Operating Income | $126,010 | $116,557 | $238,093 | $200,496 | | Net Income Attributable to AptarGroup | $90,454 | $83,072 | $173,558 | $137,836 | | Diluted EPS | $1.34 | $1.24 | $2.57 | $2.07 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2024, Aptar's balance sheet remained strong with Total Assets of $4.45 billion, largely consistent with year-end 2023. Total Liabilities stood at $2.04 billion, and Total Stockholders' Equity was $2.41 billion Consolidated Balance Sheets (In Thousands) | (In Thousands) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $1,593,650 | $1,549,279 | | Total Assets | $4,453,257 | $4,451,890 | | Total Current Liabilities | $1,168,109 | $1,251,309 | | Total Liabilities | $2,043,042 | $2,130,592 | | Total Stockholders' Equity | $2,410,215 | $2,321,298 | [Cash Flow Statement Highlights](index=10&type=section&id=Cash%20Flow%20Statement%20Highlights) The company generated significantly improved cash flow in the first half of 2024. Net cash provided by operations for H1 2024 was $235.9 million, up from $182.2 million in H1 2023. Free cash flow for H1 2024 increased to $92.0 million from $27.2 million in the prior year period Cash Flow Statement Highlights (In Thousands) | (In Thousands) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Cash Provided by Operations | $143,579 | $83,897 | $235,912 | $182,201 | | Capital Expenditures | ($68,205) | ($77,187) | ($143,866) | ($155,012) | | **Free Cash Flow** | **$75,374** | **$6,710** | **$92,046** | **$27,189** | [Non-GAAP Financial Reconciliations](index=7&type=section&id=Non-GAAP%20Financial%20Reconciliations) This section provides reconciliations for non-GAAP financial measures, including Adjusted EBITDA and Adjusted EPS, detailing adjustments made to reported figures for a clearer view of operational performance [Reconciliation of Adjusted EBITDA](index=7&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA) In Q2 2024, Adjusted EBITDA increased 6% to $192.8 million, with an Adjusted EBITDA margin of 21.2%. The Pharma segment contributed the majority with $141.5 million. For H1 2024, total Adjusted EBITDA was $371.6 million, with a margin of 20.4% Adjusted EBITDA by Segment (In Thousands) | Adjusted EBITDA (In Thousands) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Aptar Pharma | $141,488 | $125,866 | | Aptar Beauty | $44,638 | $43,100 | | Aptar Closures | $27,118 | $27,772 | | **Consolidated Total** | **$192,768** | **$181,237** | Adjusted EBITDA Margin by Segment | Adjusted EBITDA Margin | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Aptar Pharma | 34.1% | 32.2% | | Aptar Beauty | 13.9% | 13.1% | | Aptar Closures | 15.6% | 15.8% | | **Consolidated Total** | **21.2%** | **20.2%** | [Reconciliation of Adjusted EPS](index=9&type=section&id=Reconciliation%20of%20Adjusted%20EPS) After adjusting for items like restructuring initiatives and net investment losses, Q2 2024 Adjusted EPS was $1.37, a 12% increase from $1.22 in the prior year. For H1 2024, Adjusted EPS was $2.63, up 21% from $2.18 in H1 2023 Reconciliation of Adjusted EPS (Per Diluted Share) | Per Diluted Share | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | **Reported EPS** | **$1.34** | **$1.24** | **$2.57** | **$2.07** | | Restructuring initiatives | $0.03 | $0.02 | $0.06 | $0.15 | | Net investment loss (gain) | $0.00 | ($0.03) | $0.00 | ($0.04) | | Foreign currency effects | - | ($0.01) | - | $0.00 | | **Adjusted EPS** | **$1.37** | **$1.22** | **$2.63** | **$2.18** |

Company Overview - AptarGroup (ATR) is expected to report quarterly earnings of $1.36 per share, reflecting a year-over-year increase of +10.6% [2] - Revenues are anticipated to reach $925.42 million, which is a 3.3% increase from the same quarter last year [2] Earnings Estimates and Trends - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [2] - The Most Accurate Estimate for AptarGroup is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.29%, suggesting a bearish outlook from analysts [5][6] Earnings Surprise History - In the last reported quarter, AptarGroup exceeded expectations by posting earnings of $1.26 per share against an estimate of $1.13, achieving a surprise of +11.50% [7] - The company has beaten consensus EPS estimates in each of the last four quarters [7] Market Expectations and Stock Movement - The stock price may increase if the upcoming earnings report exceeds expectations, while a miss could lead to a decline [1] - The combination of a negative Earnings ESP and a Zacks Rank of 3 makes it challenging to predict a positive earnings surprise for AptarGroup [6] Industry Context - Packaging Corp. (PKG), a peer in the Containers - Paper and Packaging industry, is expected to report earnings of $2.12 per share, indicating a year-over-year decline of -8.2% [9] - PKG's revenues are projected to be $2.03 billion, up 4% from the previous year, with a positive Earnings ESP of 0.66% and a Zacks Rank of 2, suggesting a likely earnings beat [9]

Dividend Increases Overview - The article discusses recent dividend increases, highlighting six companies, including Lowe's, which has a 62-year dividend growth streak with a 4.5% increase [2][6] - The average increase across the group is 10.8%, with a median of 11%, potentially the highest seen this year [2] Company Data - Lowe's Companies, Inc. (Ticker: LOW) has a forward yield of 0.47% and a dividend increase of 4.5% [7] - Caterpillar Inc. (Ticker: CAT) has a 31-year streak, a forward yield of 0.39%, and an 8.5% increase [7] - The Bank of New York Mellon Corporation (Ticker: BK) has a 14-year streak, a forward yield of 0.73%, and an 11.9% increase [7] - AptarGroup, Inc. (Ticker: ATR) has a 31-year streak, a forward yield of 0.31%, and a 10% increase [7] - Marsh & McLennan Companies, Inc. (Ticker: MMC) has a 15-year streak, a forward yield of 0.37%, and a 14.8% increase [7] - Unum Group (Ticker: UNM) has a 16-year streak, a forward yield of 0.78%, and a 15.1% increase [7] Performance Metrics - The article provides historical pricing data, including current prices, 52-week lows, and highs for each company [12] - The P/E ratios for the companies are as follows: CAT at 29.69, BK at 8.85, LOW at 21.46, ATR at 40.42, MMC at 29.15, and UNM at 5.08 [13] - The percentage off the 52-week low and high is also detailed, indicating the current market position of each stock [14] Dividend Growth Rates - The article includes a table of historical dividend growth rates over 1, 3, 5, and 10 years for each company, with LOW showing a 5-year growth rate of 18.1% [16] - The "Chowder Rule," which combines current yield and 5-year dividend growth rate, is also presented, with LOW scoring 20 [16] Historical Returns - The article compares the performance of the companies against the Schwab U.S. Dividend Equity ETF (SCHD), noting that LOW has returned 514% over the past decade, significantly outperforming others [20] - Underperformers include ATR (157%), BK (116%), and UNM (115%), while top performers include LOW (514%), MMC (407%), and CAT (328%) [20]

Core Viewpoint - AptarGroup, Inc. announced a 10% increase in its quarterly dividend, marking the 31st consecutive year of annual dividend growth, reflecting the company's solid performance and growth opportunities [1] Financial Performance - The new quarterly dividend will be 45 cents, payable on August 15, 2024, to shareholders of record as of July 25, 2024, increasing the dividend yield from 1.15% to 1.26% [1] - AptarGroup has a three-year dividend growth rate of 2.6% and a payout ratio of 32.2% [1] - Over the last five years, the company has returned more than $780 million to shareholders through dividends and share repurchases [1][2] Cash Position and Debt - As of March 31, 2024, AptarGroup had approximately $200 million in cash and cash equivalents, maintaining a strong balance sheet [2] - The total debt-to-total capital ratio was 0.29 as of March 31, 2024, down from 0.36 a year earlier [2] - The company repurchased shares worth $12 million in the first quarter of 2024 [2] Stock Performance - ATR shares have increased by 23% over the past year, outperforming the industry average rise of 7.3% [3] Zacks Rank and Comparables - AptarGroup holds a Zacks Rank of 2 (Buy) [4] - Other top-ranked stocks in the Industrial Products sector include Intellicheck, Inc. (IDN), Applied Industrial Technologies (AIT), and Cintas Corporation (CTAS) [4] - IDN and AIT have Zacks Rank 1 (Strong Buy), while CTAS has a Zacks Rank 2 [4]

The U.S. manufacturing sector is finally showing signs of recovery after months of struggle that saw demand slowing due to inflationary pressures and higher borrowing costs. However, with inflation finally showing signs of cooling, demand is rebounding.The U.S. Census Bureau reported that orders for U.S. manufactured capital goods, made to last more than three years, rose 0.1% in May, higher than the consensus estimate of a decline of 0.1%.Although the rise was lower than April’s jump of 0.6%, the positive ...

AptarGroup (ATR) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #2 (Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Individual investors often find i ...

Core Insights - AptarGroup, Inc. reported first-quarter 2024 adjusted earnings per share of $1.26, exceeding the Zacks Consensus Estimate of $1.13, and reflecting a 31% increase from $0.95 in the same quarter last year [1] - Total revenues for the quarter rose 6.4% year over year to $915 million, surpassing the Zacks Consensus Estimate of $897 million [1] - The company estimates second-quarter 2024 adjusted earnings per share to be between $1.30 and $1.38 [5] Operational Update - Cost of sales increased by 4.5% year over year to $583 million, while gross profit rose by 9.9% to $333 million, resulting in a gross margin of 36.3% compared to 35.2% in the prior year [2] - Selling, research, development, and administrative expenses increased by 3.3% year over year to $153 million, with adjusted operating income rising 21.3% to $114.5 million, leading to an adjusted operating margin of 12.5% [2] - Adjusted EBITDA increased by 16.4% year over year to $179 million in the first quarter [2] Segment Performances - Pharma segment revenues increased by 14.4% year over year to $407 million, although it missed the estimate of $431 million; adjusted operating income rose 20.8% to $103 million [3] - Beauty segment revenues rose by 0.3% year over year to $327 million, below the estimate of $333 million; operating income improved 17.6% to $19.9 million [3] - Closures segment revenues increased by 1.8% year over year to $181 million, slightly above the estimate of $180 million; operating income decreased to $13.6 million from $13.9 million in the prior year [3] Financial Performance - As of March 31, 2024, AptarGroup reported cash and cash equivalents of $200 million, down from $224 million as of December 31, 2023; cash flow from operations was $92 million compared to $98 million in the previous year [4] Price Performance - ATR shares have gained 20.4% over the past year, outperforming the industry average increase of 13.2% [6] Peer Performance - Greif reported adjusted earnings per share of $1.27 for the first quarter of fiscal 2024, beating estimates, while sales decreased by 5.1% year over year to $1.20 billion [8] - Packaging Corporation reported adjusted earnings per share of $1.72, beating estimates, with a slight sales increase of 0.2% year over year to $1.98 billion [9] - Graphic Packaging reported adjusted earnings per share of 66 cents, beating estimates, but total revenues decreased by 7.5% year over year to $2.26 billion [9]