Good day, thank you for standing by. Welcome to the Prestige Consumer Healthcare Fiscal 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You'll hear an automated message advising you your hand is raised. To withdraw your question, please press star one one again.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Phil Terpolilli, Vice President of Investor Relations and Treasury. Please go ahead.
Thanks, operator, thank you to everyone who has joined today. On the call with me are Ron Lombardi, our Chairman, President, and CEO; and Christine Sacco, our CFO. On today's call, we'll review our fourth quarter and fiscal 2023 results, discuss our full-year outlook for fiscal 2024, and then take questions from analysts. The slide presentation that accompanies today's call can be accessed by visiting prestigeconsumerhealthcare.com, clicking on the Investors link, and then on today's webcast and presentation.
Remember, some of the information contained in the presentation today includes non-GAAP financial measures. Reconciliations to the nearest GAAP financial measures are included in our earnings release and slide presentation. On today's call, management will make forward-looking statements around risks and uncertainties, which are detailed in a complete safe harbor disclosure on page two of the slide presentation that accompanies the call. These are important to review and contemplate.
The business environment uncertainty remains heightened due to supply chain constraints, high inflation, and various geopolitical factors which have numerous potential impacts. This means results could change at any time, and the forecasted impact of risk consideration is the best estimate based on the information available as of today's date. Further information concerning risk factors and cautionary statements are available in our most recent SEC filings and most recent company 10-K. I'll now hand it over to our CEO, Ron Lombardi. Ron?
Thanks, Phil. Let's begin on slide five. We are very pleased with our record fiscal 2023 results that delivered strong growth thanks to our diversified portfolio of brands that consumers know and trust. Revenues of $1.128 billion for the full year grew 3.5% organically. This was set against a record fiscal 2022 that grew over 10%, as well as the backdrop of a challenging macro environment. Our base business trends were strong across the majority of our portfolio, fueled by our long-term brand building efforts and solid consumer demand. For the year, our international segment experienced outsized growth, as well as the cough and cold and GI categories in North America, led by Luden's, Chloraseptic, and Dramamine.
Many of these categories had declined meaningfully just a few years ago at the start of COVID, and their resurgence, as well as our strong overall performance over the last few years, is a testament to the benefits of the diversity of our portfolio. We'll talk about this in further detail later on. Our strong sales continue to translate to solid profitability.
For the year, we generated adjusted EPS of $4.21 and free cash flow of over $220 million. We remain focused on delevering over time and achieved a year-end leverage ratio of 3.3 x, even after $50 million in share repurchases and significant inventory investments during the year. We are set up to continue this long-term leverage reduction in fiscal 2024 while retaining flexibility. Chris will discuss this further later on. Now, let's turn to slide six.
Our record fiscal 2023 performance, driven by strong 3.5% organic growth, is underpinned by our proven value creation strategy that's shown here. By executing this disciplined strategy over time, it's resulted in a resilient business model that continues to deliver value, not just in fiscal 2023, but over the long term.
First, we use our proven marketing strategies to leverage our leading portfolio of brands. Using consumer insights, we drive efficient marketing, channel development, and innovation that are the cornerstones to our success. Second, the business model we operate leverages our leading financial profile to enable robust free cash flow. Third, the model uses the first two points to enable strategic capital allocation optionality that further amplifies shareholder returns. Our ability to use cash flows both effectively and efficiently through disciplined capital deployment creates value.
The results of this execution is clear in our financial performance. We've had a successful multiyear compound annual growth rate over the last three years. This includes organic growth above our long-term target of 2%-3%, as well as double-digit earnings growth. The performance is especially noteworthy against the backdrop of COVID-19 variants, supply chain challenges, and inflation.
By executing these strategic value creation strategies, we continue to position our business for long-term success and value creation. With that, let's turn to the next section and review how we've driven this growth in more detail. Slide eight is a reminder of our distinct portfolio attributes that sets us up for success. The efficient deployment of capital and investments in our brands has both diversified our portfolio into many categories and enabled leading market shares for the majority of our brands.
First, on the left side of the page is the diversity of the portfolio that is further subdivided by consumer ailments. With a diverse portfolio of brands across many categories, we are nimble in identifying opportunities for investment. We are also able to better mute the impact of any short-term category changes.
Second, the right of the page shows many of our leading brands, which are sub-segments within these platforms. Our sales most often come from number one brands and brands with long consumer heritages, which enables us to focus on brand building using our category leadership and proven brand-building tactics. Both of these business attributes are foundational to our success. Now, let's turn to slide nine. Here, we can see the benefits of category diversity.
Over the last three years, the disrupted and volatile environment led to a host of factors to navigate, including changes to consumers' habits, supply chain, and inflationary challenges. With this backdrop, any one category may face short-term challenges and fluctuations, but the power of a diverse portfolio allows us to be positioned for consistent overall long-term growth.
For example, the Summer's Eve on-the-go format of products were impacted over the last few years as consumer habits shifted at the start of COVID-19. Although this doesn't change our ability to grow the brand and category long term, and we anticipate growth again in fiscal 2024, it was a factor in our women's health performance over the last three years. Our diversity offsets these pressures.
The three categories shown on the page, eye and ear care, skin care, and GI, are embodiments of this as key contributors to growth over the last three years. In eye and ear care, we've had success using a wide variety of tactics across Clear Eyes and TheraTears. The launch of Clear Eyes Sensitive leveraged consumer insights, which captured incremental consumers who believe they have sensitive eyes.
In skin care, gains have been fueled by our Compound W brand, which continues to expand its number one share with consumers by offering a broad product assortment that appeals to a range of people who suffer from warts. Marketing efforts have emphasized this in ad placements across digital and other formats. Lastly, in GI, we've experienced solid growth in both our Dramamine and Hydralyte franchises.
For Dramamine, we've successfully leveraged the brand's heritage in motion sickness and nausea, where we are now the number one brand in the category. For Hydralyte, we continue to chip away at the brand's long-term opportunity, expanding with consumers across their hydration needs for everyday health in areas such as travel, sports, and exercise.
In summary, the benefits of category diversity are clear. By opportunistically investing in growth in each of these categories, we've helped fuel solid organic growth over the last three years for the total company. Let's turn to slide 10 for a reminder of our brand-building tactics. Our numerous brand-building strategies shown here on the page focus around driving long-term category growth. Each are executed based on opportunities identified from consumer insights that are specific to each brand.
We continue to operate with leading, established brands that are well-positioned to leverage these tactics for long-term growth. The end goal is long-term success across channels and growth of the categories to which we are stewards. To start, we leverage learnings from consumer insights to identify where our opportunities are, then providing consumer solutions that solve identified issues.
Next, we remain agile marketers, investing in timely messaging to raise awareness of product efficacy and brand knowledge around the proven consumer solutions we offer. We also operate with a multi-year new product development pipeline to ensure we continue to match the needs of consumers. Last, we use the ability to align our investments and product offerings with channels that are important to consumers, including fast-growing channels like e-commerce. This broad distribution strategy helps underpin the marketing tactics just discussed.
In summary, each of these key marketing strategies play a valuable role in our success. They reinforce our long-term organic growth objective of 2%-3% annually, which we continue to feel good about delivering. With that, I'll turn it over to Chris for a review of financials and an update on capital deployment.
Thanks, Ron. Good morning, everyone. I'll start by reviewing our fourth quarter and fiscal 2023 financial results, then talk about our business attributes and resulting cash flow that have driven rapid deleveraging and capital allocation optionality. As a reminder, the information in today's presentation includes certain non-GAAP information that is reconciled to the closest GAAP measure in our earnings release.
Let's turn to slide 13 to begin with fourth quarter results. Q4 fiscal 2023 revenue of $285.9 million increased 7.1% and 8% on an organic basis versus the prior year. The growth was approximately split between international and North American segments. North America revenues were up 4%. The largest growth category in dollar terms was skincare, where we experienced growth across brands including Compound W, Boudreaux's Butt Paste, and Nix.
The international segment increased approximately 33% in Q4 after excluding the effects of foreign currency. This capped an impressive year, with the segment growing over 30% on a full year basis. The record performance benefited from favorable consumer trends in many of our categories previously impacted by COVID-19 and continued strong sales for the Hydralyte brand.
Despite difficult comparisons, we anticipate further growth for the international segment in fiscal 2024. Adjusted EBITDA increased approximately 14% in Q4 and EBITDA margins remained consistent in the mid-thirties. Adjusted diluted earnings per share for the quarter was $1.7, up 18% versus the prior year, with higher sales being the largest driver. Let's turn to slide 13 for more detail around consolidated results for the full year.
Record revenues of $1.13 billion for the full year fiscal 2023 increased 3.8% versus the prior year and 3.5% on an organic basis. Our broad and diverse portfolio enabled this result, with strong revenue growth in cough and cold, GI, and our international segment more than offsetting a dynamic supply chain landscape.
By channel, we continue to experience solid consumption growth in e-commerce. Total company growth margin of 55.4% for fiscal 2023 compared to last year's adjusted growth margin of 57.3%, with the change attributable to cost increases, partially offset by pricing actions across our portfolio, which offset the dollar amount of inflationary cost headwinds.
For fiscal 2024, we anticipate a similar focus to fiscal 2023, where we have and will continue to institute pricing actions and cost saving measures across our portfolio to offset the dollar amount of inflationary headwinds. In aggregate, we anticipate growth margin flat to up slightly versus fiscal 2023, with Q1 estimated to be approximately 55%.
Advertising and marketing came in at approximately 13% as a percent of revenue for the fiscal year, as expected, owing primarily to the timing of initiatives and reduced spending around certain categories due to strong consumer demand. For fiscal 2024, we'd anticipate an A&M rate of just over 13% of sales and up in dollars versus the prior year. G&A expenses were 9.5% of sales in fiscal 2023. For fiscal 2024, we anticipate G&A to decline slightly in dollars versus the prior year.
Adjusted diluted earnings per share for the full year of $4.21 grew about 4% versus the prior year. Sales growth and disciplined cost saving efforts helped offset the impacts of cost increases and rising interest rates. Below the line for fiscal 2024, we'd anticipate a normalized tax rate of approximately 24% and interest expense of $67 million, including $18 million of interest in Q1.
Although the magnitude of increases in variable interest rate targets have begun to stabilize, we will continue to face higher year-over-year rates through the first half of our fiscal year before beginning to see the effects of a more stable rate environment as well as lower variable interest rate exposure from our ongoing debt reduction efforts.
Last, adjusted results on this page exclude the impact of $281 million net of tax, non-cash goodwill and intangible impairments primarily related to the company's Summer's Eve, DenTek and TheraTears brand names. The charge resulted from our annual valuation assessment, which was affected by a significantly higher discount rate applied to future cash flows versus the prior year.
As a reminder, accounting rules do not write up the value of brands that have a fair value that exceeds book value. Most importantly, please note these adjustments have no impact on our long-term outlook for the company as a whole. Now let's turn to slide 14 to discuss cash flow. For the full year fiscal 2023, we generated $222 million in free cash flow, as expected.
As previously discussed, we strategically invested behind inventory in light of the current supply chain environment, finding opportunities to increase inventory to better support targeted service levels. Our stable EBITDA margins and strong cash flow enabled us to invest behind our brands while continuing to reduce leverage for the year and complete a $50 million share repurchase effort.
We finished fiscal 2023 at 3.3 x leverage, with approximately 75% of our debt fixed and no maturities until 2028. For fiscal 2024, we anticipate a more normalized free cash flow profile of at least $240 million in free cash flow and anticipate achieving around 2.7 x leverage. As shown on the right side of the page, this cash generation is underpinned by our leading attributes that enable our financial profile.
Our business model, where the vast majority of revenue is externally manufactured, results in low capital expenditures of 1%-2% of sales annually. We are anticipating CapEx of approximately 1% of sales in fiscal 2024. Our products have strong margins driven by the characteristics of the categories we participate in, their importance to consumer self-care and the highly regulated nature of OTC that creates high barriers to entry.
We have meaningful tax benefits from past acquisitions that result in a cash tax rate in the high teens. We also remain focused on profitability with continuous cost saving efforts that help us maintain our strong mid-30s EBITDA margin profile. The result of this model is clear. We generate best in class and sustainable free cash flow, and our free cash flow conversion remains strong.
This attractive profile gives us the ability to continue to deploy capital in multiple ways as shown on page 15. As Ron highlighted earlier, efficient and disciplined capital allocation is a critical third pillar to our business strategy, balancing the use of our cash generation against various priorities of investing in our brands, deleveraging, M&A, and share repurchases.
Thanks to our leading cash flow profile and successful long-term business growth, we now anticipate to operate at long-term leverage of less than 3 x. We have confidence in our ability to achieve this lower leverage objective while still investing behind strategic uses of capital that are shown on the page. These uses of capital, such as strategic M&A opportunities, may cause us to temporarily operate above this threshold objective, we anticipate our strong cash flows to bring us back to target levels rapidly.
As a result, we continue to expect disciplined M&A and other cash uses to remain an important part of our strategy to adding shareholder value while remaining cognizant of this revised leverage target. With that, I'll turn it back to Ron.
Thanks, Chris. As we move forward into our next fiscal year, we are confident in our business attributes that leave us well-positioned for future growth. It's a proven business model that delivered value creation throughout disrupted environments, thanks to a variety of attributes. Our brands are trusted and diverse, which gives us the ability to limit the impact from any individual category slowdowns. This diversity stretches beyond just brands, but into diversity of channels, geographies, and suppliers, each of which benefits our business in periods of uncertainty and volatility.
This enables us to leverage our proven brand-building strategy opportunistically that grows categories and as a by-product, our brands. Our superior financial profile has generated consistent and increasing cash flows over the long term. Finally, the model continues to be scalable. We have the right resources to continue our disciplined capital deployment playbook while reinforcing investments in our existing business.
Let's flip to the next slide to discuss our fiscal 2024 financial outlook. For fiscal 2024, building off a very strong prior year, we anticipate revenues of $1.135 billion-$1.140 billion and organic revenue growth of approximately 1%-2% versus fiscal 2023 or organic revenue growth of 2%-3% after excluding the planned strategic exit of non-core private label business that we have historically operated as a service for certain retailers.
Q1 revenues are anticipated to be approximately $278 million, up slightly from the prior year. We anticipate EPS of $4.27-$4.32 for fiscal 2024. Regarding EPS, our outlook for fiscal 2024 reflects the continued temporary impact of higher interest rates that accounts for an over 2 percentage point headwind to earnings.
Thanks to our disciplined P&L management, this is more than offset by efficient brand building and cost management efforts, leading to our outlook for earnings growth at a faster rate than sales growth. For Q1, we expect EPS of approximately $1.01. Lastly, we expect solid free cash flows of $240 million or more in fiscal 2024. This will enable the mindful approach to capital deployment optionality Chris discussed.
We've announced a $25 million share buyback plan today and plan to reduce leverage to below 3 x during the fiscal year while continuing to invest in our brands to ensure long-term success. Our company has a track record of value creation, and these anticipated uses of cash will help reinforce that. With that, we'll now open the lines up for questions. Operator?
Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Susan Anderson of Canaccord Genuity. Susan, your line is live.
Thank you. Nice job on the quarter. I was wondering if maybe you could give a little bit of color on the gross margin, the puts and takes there for the fourth quarter, and then how we should think about it for this year, and then also any cadences throughout the different quarters.
Yeah, good morning, Susan, this is Chris. For Q4, as anticipated, you know, inflationary pressures and distribution costs were just over 150 basis point headwind year-over-year for us. Our pricing and cost-saving efforts offset the dollar impact of that dollar for dollar. Impacted the margin obviously, the dollar impact was negligible.
We had a little bit of unfavorable mix in the quarter. We guided Q1 of fiscal 2024 to about 55%, guided the year to flat to up slightly. You know, we're calling for some additional inflationary pressures in fiscal 2024, again, we expect cost savings and pricing actions to offset those dollar for dollar in fiscal 2024 as well.
Little bit of a negative margin impact from that, but additional cost savings enable us to call the margin flat to up slightly. We expect some sequential gross margin improvement from the 55% in the first quarter. You know, as a reminder, we're really laser focused on managing our EBITDA margin, right? As we continue to progress on our march towards more normalized gross margins, we would look to invest that back into different levels of A&M and maintain our EBITDA margins in the mid-30s%.
Okay, great. That's really helpful. On the international business, it looks like it even picked up sequentially off of very strong numbers this year. I'm assuming that's all Hydralyte. I guess, is that new products or just continued growing demand for the brand in Australia? I'm just curious on your thoughts in the U.S., I know you guys don't have rights to the brand here, but is there maybe potential and opportunity here? It seems like the hydrating beverages are kind of picking up steam here and challenging Gatorade. Just wanted to get your thoughts there.
Yes, good morning, Susan. First of all, really, we saw growth across the international portfolio, not only the Hydralyte business, the care business in Australia, but the small business that we have in Europe as well, have all been firing on all cylinders over the last couple of years.
Primarily, Hydralyte drives the big dollar move because it's the majority of the sales, but really the international business has been growing well there. For 2024, we continue to expect strong growth, more in line with our long-term outlook in the mid-to-high single digits for that international business after a couple of record years, but we continue to feel good about the momentum for that business in total.
In terms of the U.S., you know, we've got a lot of other opportunities to focus on across our portfolio. You know, we had the slide in our prepared remarks today that shows the success we've had broadly across the portfolio over the last three years. We're really focused on continuing to support that momentum. The hydration market in North America really isn't something we've got on the agenda.
Great. Just one last one on the women's business. How are you thinking about that for this year? I guess, do you expect it to normalize after, kind of stabilizing off of those COVID numbers? I guess, is it still consumers just not returning to the doctor's office, or do you think, you know, they've kind of, gotten back to their normal routines now? Thanks.
Yeah, you know, interestingly, as we sit here today and look back over the last three years, you know, excluding cough, cold, the women's health category is the one that seems to have been most impacted and impacted the longest during this disrupted period. Not only were shopping habits impacted, but kind of the underlying usage occasions as we talked about, I think, last quarter as well.
As we sit here today for fiscal 2024, we expect our women's health businesses, both Summer's Eve and Monistat, to get back to growth for fiscal 2024, and we continue to feel good about their long-term growth opportunity. Despite those two franchises being disrupted over the last couple of years, we continue to feel good about their leading positions and their opportunities going forward.
Great. If I could just maybe follow up really quick. It sounds like Compound W was strong in the quarter. If you could just remind us, was this the first quarter where you saw that strength also come back?
No. Some Compound W has been performing pretty well throughout the year, so, expanded usage, distribution and such. Really, a great year for Compound W. It's not really linked to COVID. It performed well throughout the period.
Great. That sounds good. Thanks so much. Good luck the rest of the year.
Thank you, Susan.
One moment for our next question. Our next question comes from Mitchell Pinheiro with Sturdivant & Co. Mitchell, you are live.
Yeah, hi. Good morning. I was curious from an A&M spend on. If you said this, I apologize, the sort of the sequence throughout the year, whether there's any unusual timing. Then second, what you intend to focus the A&M spending on.
Yeah, Mitch, maybe I'll take the first part of that, which is, you know, as you know, our A&M plans are built from the ground up with our marketers and various initiatives. As we saw in this year, the cadence was shifted, weighted more towards the first half of the year based on certain new product launches and various marketing initiatives. As we look to Fiscal 2024, we would expect that to be spread more evenly throughout the year.
Mitch, in terms of your questions around where our focus is going to be, it's going to continue to be around our largest brands. Our power core brands will continue to get investments above the company average. As we have historically, we'll post investments to different core brands where we have new product launches or other opportunities to support during a given year. Again, another comment, you know, our advertising and marketing spend over the last three years has fluctuated a bit and quite a bit from quarter to quarter. We continue to build our plans up from the bottoms up based on our brand opportunities.
Like any good CPG company, we talk about always wanting to invest more for the long-term support of our brands, but we feel good about where we've been investing and how we're set up to support growth long-term and specifically for fiscal 2024.
Okay. To that end, also, do you intend to launch any new line extensions, in fiscal 2024?
Yeah, we'll have a stream of some new products out in 2024 like we do every year. We don't talk about them ahead of them showing up at retail, again, new product development and an innovation pipeline is an important part of what we do here to make sure we've got a funnel of things coming in. In this space, it takes time to get things to market.
It's more of the same for us, which is always starting with consumer insights to understand where the opportunities are and then getting them out to market. I think Compound W and Dramamine are two great examples of the long-term success of bringing out a steady pipeline of new products.
In the last year, it's also been true for Summer's Eve, where we've had the spa launch, and then DenTek with NiteGuard. If you look at across the portfolio of brands, you see evidence of it, happening every year, Mitch.
Okay. Just one last question on revenue. Do you, how do we look at the private label exit? Is it sort of evenly? Is it sort of the first three quarters, and then you lap some of it in the fourth quarter? On the foreign currency headwind, I don't know if you said it, but what type of headwind do we expect this year?
Sure. For the private label business, it'll be pretty much even, for the whole year for the most part. Chris, you wanna take the FX comment?
Sure. FX is expected to be a headwind for the year of about $2 million. You know, our exposure is largely around the Australian and Canadian dollars, and the Australian in particular really swung in fiscal 2023. We're actually gonna have some headwinds, unfavorability from FX in the first half, and then we expect it to shift to favorability in the back half. Netting out to about $2 million for the year.
Got it. All right. Thank you much. Appreciate it.
Thanks, Mitch.
One moment for our next question. As a reminder, to ask a question, you will need to press star one one on your telephone. Our next question comes from Jon Andersen with William Blair. John, you are live.
Morning, everybody.
Morning, Jon.
I was wondering, it looks like, in the fourth quarter, you shift perhaps in North America, shift ahead of consumption, at least, you know, the consumption that we can see through syndicated data. Is that the case? You know, if so, what were some of the dynamics that kinda caused that? I was wondering if you could give us your, you know, perspective on kind of all channel consumption, both for the fourth quarter and the full year.
For starters, right, those generic consumption reports you get are missing a whole bunch of our fastest growing segments, particularly international. If you look at it in total, it might look like it was ahead. It wasn't too far ahead with the exception that, you know, the inventory investments that we made back in the third quarter allowed us to begin to catch up on some of the categories like cough, cold, where we had been kind of going hand to mouth all year. There was a little bit of catch up in some of those categories, but for the most part, it wasn't too far ahead of consumption for the majority of our categories.
That makes sense. And with respect to that point on kinda catch up, because I know you have, as others have, been trying to catch up in certain categories. Where do you know, broadly speaking, where do you think, you know, you sit, retailers sit with respect to, you know, having kind of the pipeline and shelf stock that they, that they want or prefer? Is there more catch up to come in fiscal 2024, or are we back to kind of, you know, more normal levels?
Yeah. For the most part, I think inventory at retail is in good shape. A little bit of catch up in cough, cold still to come for us. Again, in particular, we added liquid cough capacity in Q3, late Q3, Q4. That helped us catch up a bit, we're still catching up on the lozenge business. The other categories, for the most part, are in pretty good shape. As we head into fiscal 2024, we don't think that retailer inventory will be much of a headwind or tailwind in total for the whole year.
Okay, that's helpful. Then, I guess I just wanted to make sure I understand, you know, given the kind of the gross margin trend and the absolute gross margin rate in the fourth quarter, how we kinda get back to 55%, you know, percent or, excuse me, how we kind of flat to up year-over-year? What's coming that, you know, is going to drive, you know, a reversal in the trend, you know, more towards, you know, gross margin expansion, you know, going forward? Is it just a matter of more price, or are there other things, you know, mix or accretive, you know, new product innovation? Just trying to get a sense for how you're seeing that. Thanks.
For starters, if you look at what we expect sequentially for gross margin, we kinda hit the bottom in Q3 and Q4. As we get into 2024, we expect to lift off of those levels and be fairly static through fiscal 2024. We expect, you know, a multiyear recovery back to the 58%. It'll be some price, but it's really gonna be more cost savings and a program where we're focused on improving the margins of the product that we sell through new products at incremental gross margins and other programs over time.
Again, as Chris has mentioned, I don't know today, but on past calls, our focus has been managing the inflationary impact dollar for dollar through price increases during the short term, which is how we've been able to manage our consistent EBITDA margins around 34%. We'll step off of that over time as we recover back to 58%, Jon.
Okay, thanks. Last one. you know, you mentioned, looking forward, you know, over time operating the business with a lower leverage ratio than you have historically, sub- three, I think you said. Does that mean, you know, you're going to be less, likely or aggressive on the M&A fronts? How are you kinda thinking about, you know, changes to capital allocation then more broadly? Thanks.
Yeah, you know, the new leverage target of operating at 3 x or less over the long term really doesn't have any impact or change to the capital allocation, either priorities or thoughts that we have about the business. You know, Jon, you've heard us say many times in the past, our job is to figure out how to get things done the right way so that the investors appreciate it and it continues to position the business for long-term value creation. You know, talking about operating at less than three over the long term doesn't put a ceiling or limit the way we think about investing for the long term.
As opportunities come up for M&A, we'll continue to evaluate them, and if they make sense, just like we have over the long term, we'll figure out how to get them done the right way. This new less than three doesn't really change the way we think about running the business, and it doesn't put any limitations on what we wanna do for the business.
Great. Thanks for all the details. Appreciate it.
Sure. Thank you, Jon.
I would now like to turn it back to Ron Lombardi for closing remarks.
Thank you, operator, and thanks to everybody joining us on what I think is a busy earnings morning. We look forward to updating you all on our continued progress at the end of the first quarter. Thanks for joining us and have a good day.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.