Perrigo(PRGO) - 2024 Q2 - Quarterly Results

Perrigo Q2 2024 Financial Performance Overview Second Quarter 2024 Performance Highlights Perrigo's Q2 2024 net sales declined 10.7% to $1.1 billion, with a 9.1% organic decrease, driven by infant formula and seasonal product demand Q2 2024 Key Financial Metrics | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1.1B | $1.19B | -10.7% | | Organic Net Sales | - | - | -9.1% | | GAAP Gross Margin | 37.0% | 35.9% | +120 bps | | Adjusted Gross Margin | 40.6% | 38.7% | +190 bps | | GAAP Operating (Loss) Income | ($27)M | $57M | n/m | | Adjusted Operating Income | $139M | $137M | +1.5% | | Reported Diluted EPS | ($0.77) | $0.06 | n/m | | Adjusted Diluted EPS | $0.53 | $0.63 | -15.9% | - The organic net sales decline of 9.1% was primarily caused by a -6.8 percentage point impact from lower infant formula sales and a -4.0 percentage point impact from reduced demand in Upper Respiratory and Pain & Sleep Aids categories[2] - Excluding the year-over-year impact from infant formula, adjusted operating income demonstrated strong growth of 16.7%[2] - The company completed the divestment of its HRA Pharma Rare Diseases business on July 10, 2024, receiving upfront proceeds of $205 million[1][2] First Half 2024 Performance Highlights H1 2024 net sales decreased 9.6% to $2.1 billion, with an 8.1% organic decline, attributed to lower infant formula and seasonal product sales H1 2024 Key Financial Metrics | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $2.1B | $2.37B | -9.6% | | Organic Net Sales | - | - | -8.1% | | GAAP Operating (Loss) Income | ($82)M | $105M | n/m | | Adjusted Operating Income | $232M | $257M | -9.6% | | Reported Diluted EPS | ($0.74) | $0.06 | n/m | | Adjusted Diluted EPS | $0.83 | $1.08 | -23.1% | - The organic net sales decline in H1 was driven by: -5.3 percentage points from infant formula, -3.3 percentage points from lower seasonal demand, and -2.4 percentage points from SKU prioritization actions[4] - The decline in adjusted diluted EPS was primarily due to a year-over-year negative impact from infant formula of -$0.43 per share and discrete tax benefits in the prior year period of $0.08 per share[4] Business Segment Performance Consumer Self-Care Americas (CSCA) CSCA Q2 net sales fell 15.5% to $634 million, with organic sales down 15.1%, driven by infant formula and seasonal product sales CSCA Q2 2024 Financials | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $634M | $751M | -15.5% | | Organic Net Sales Growth | - | - | -15.1% | | Adjusted Gross Margin | 31.7% | 30.5% | +120 bps | | Adjusted Operating Income | $91M | $114M | -19.9% | | Adjusted Operating Margin | 14.4% | 15.2% | -80 bps | - Key drivers for the organic sales decline were a -10.8 percentage point impact from lower infant formula sales and a -4.4 percentage point impact from lower sales in Upper Respiratory and Pain & Sleep Aids categories[23] - Adjusted gross margin expansion was driven by strategic pricing actions and cost savings from the Supply Chain Reinvention and Project Energize programs[23][24] CSCA Performance by Product Category - Nutrition: Net sales plummeted 48.8% to $86 million due to lower shipments amid infant formula plant remediation[96] - Pain & Sleep-Aids: Net sales decreased 15.6% to $82 million, primarily from lost distribution of lower-margin products and SKU prioritization[96] - Upper Respiratory: Net sales fell 13.4% to $119 million, driven by lower consumer demand and portfolio optimization actions[96] - Women's Health: Net sales surged 31.4% to $17 million, mainly due to the successful launch of Opill®[96] Consumer Self-Care International (CSCI) CSCI Q2 net sales decreased 2.5% to $431 million, but organic sales grew 1.0% in Skin Care and Women's Health, with operating income up 29.5% CSCI Q2 2024 Financials | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $431M | $442M | -2.5% | | Organic Net Sales Growth | - | - | +1.0% | | Adjusted Gross Margin | 53.6% | 52.6% | +100 bps | | Adjusted Operating Income | $91M | $70M | +29.5% | | Adjusted Operating Margin | 21.0% | 15.8% | +520 bps | - Organic sales growth was driven by market share gains in key brands in the Skin Care and Women's Health categories, offset by lower sales in Upper Respiratory and Pain & Sleep Aids due to lower seasonal demand and supply constraints[31] - The significant increase in adjusted operating income and margin was primarily due to lower advertising and promotion investments and cost savings from Project Energize[34][36] CSCI Performance by Product Category - Skin Care: Net sales grew 3.8% (8.7% constant currency) to $128 million, driven by strong performance of Compeed® and Sebamed®[100] - Women's Health: Net sales increased 15.6% (16.9% constant currency) to $37 million, led by higher sales of EllaOne®[100] - Upper Respiratory: Net sales declined 21.9% (21.4% constant currency) to $51 million due to lower seasonal demand and supply constraints[100] - Pain & Sleep-Aids: Net sales fell 4.8% (4.7% constant currency) to $50 million, impacted by supply constraints for Solpadeine®[100] Strategic Initiatives and Outlook Project Energize Project Energize is a three-year global efficiency program targeting $140-$170 million in annualized pre-tax savings by 2026, with a 6% workforce reduction - The program aims to deliver annualized pre-tax savings of $140 million to $170 million by 2026[11] - The company expects to reinvest $40 million to $60 million of these savings to drive its blended-branded business model[11] - Restructuring and related charges are estimated to be in the range of $140 million to $160 million, and the program will result in a net reduction of approximately 6% of total Perrigo roles[11] - Year-to-date, Project Energize has achieved gross savings of approximately $53 million[11] Fiscal 2024 Outlook Perrigo lowered its FY2024 net sales outlook due to lower H1 demand but reaffirmed adjusted diluted EPS guidance, expecting profitability improvements Updated and Reaffirmed FY2024 Guidance | Metric | FY2024 Outlook | Previous Outlook | Status | | :--- | :--- | :--- | :--- | | Organic Net Sales Growth | -3% to -1% | +1% to +3% | Updated | | Total Net Sales Growth | -5% to -3% | Flat | Updated | | Adjusted Diluted EPS | $2.50 to $2.65 | $2.50 to $2.65 | Reaffirmed | | Interest Expense | ~$180M | - | Reaffirmed | | Adjusted Tax Rate | ~20.5% | - | Reaffirmed | | Operating Cash Flow Conversion | 90% to 100% | - | Reaffirmed | - The net sales outlook was lowered primarily due to lower seasonal demand in H1 2024 and expected lower distribution in U.S. store brands in H2 2024[4][38] Financial Position Cash Flow and Balance Sheet Q2 2024 cash from operations was $10 million, with $543 million in cash and $4.1 billion in total debt, excluding $205 million from a recent divestiture Key Financial Position Data (as of June 29, 2024) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Cash from Operations | $10M | $53M | | Capital Expenditures | $29M | $20M | | Dividends Paid | $38M | - | | Cash and Cash Equivalents | $543M | - | | Total Debt | $4.1B | - | - The cash balance does not include $205 million in proceeds from the HRA Pharma Rare Diseases business divestment, which was completed on July 10, 2024[37] Financial Statements and Reconciliations Consolidated Statements of Operations This statement details revenues, costs, and expenses, resulting in a net loss of $108.4 million for Q2 and $106.4 million for H1 2024 Consolidated Balance Sheets This statement presents the company's financial position, showing $10.4 billion in total assets and $5.85 billion in total liabilities as of June 29, 2024 Condensed Consolidated Statements of Cash Flows This statement outlines cash flows from operating, investing, and financing activities, showing net cash from operations of $8.1 million for H1 2024 Reconciliation of Non-GAAP Measures This section reconciles GAAP to non-GAAP measures like adjusted gross profit and operating income, offering transparency into business performance