Financial Data and Key Metrics Changes - For Q3 2025, organic net sales declined by 4.4%, impacted by a 1.6% decline from the global OTC business and a 2.8% decline from businesses under review [11][12] - Year-to-date, organic net sales decreased by 1.7%, primarily driven by a 0.8% impact from businesses under review and a 0.5% impact from the absence of last year's Opill launch stocking benefits [12][24] - Q3 EPS was $0.80, down one cent from the prior year, while year-to-date EPS grew 21% to $1.97 [11][21] Business Line Data and Key Metrics Changes - In the US OTC market, Perrigo gained volume share of 90 basis points across nearly every category, particularly in smoking cessation, allergy, and women's health [6][13] - The CSCI segment saw a 5.3% decline in organic net sales for Q3, primarily due to soft OTC category consumption trends, while year-to-date organic net sales grew by 0.7% [19][20] - The infant formula business experienced a 3.8% decline in Q3, with share recovery taking longer than expected [14][20] Market Data and Key Metrics Changes - US OTC volume consumption declined by 3.2%, while European OTC grew by only 0.6%, falling short of original assumptions [13][24] - The overall market consumption trends have been softer than anticipated, impacting Perrigo's net sales outlook by an estimated $150-$170 million [13][24] Company Strategy and Development Direction - The company is focused on its 3S plan: stabilize, streamline, and strengthen, which has guided its actions and priorities [8][16] - A strategic review of the infant formula business is underway, with the aim to optimize its long-term role within the Perrigo portfolio [14][47] - The sale of the dermocosmetics business is on track to close in Q1 2026, with proceeds aimed at reducing leverage [23][47] Management's Comments on Operating Environment and Future Outlook - Management noted that the current consumption trends are dynamic and unpredictable, with expectations for stabilization in 2026 [41][46] - The company remains committed to deleveraging and sustaining dividends while focusing on high-potential OTC portfolio growth [15][47] - Management expressed confidence in Perrigo's ability to capture durable demand for consumer health solutions despite current challenges [17][46] Other Important Information - The company has achieved $163 million in gross annual savings from Project Energize, exceeding initial expectations [9][18] - Operating cash flow for Q3 was $52 million, with year-to-date cash flow at $63 million [22][23] Q&A Session Summary Question: Follow-up on infant formula share and expectations - Management acknowledged that while store brand share is growing, it is at a slower pace than anticipated due to competitive pressures and market dynamics [28][29] Question: Insights on OTC and infant formula consumption changes - Management noted that OTC consumption has been volatile, with a significant decline observed in Q3 compared to previous quarters [33][34] Question: Plans for reinvestment given current market conditions - Management indicated that while priorities remain on deleveraging and maintaining dividends, there may be opportunities to increase spending in high-performing areas [38][39] Question: Current share of infant formula and future growth expectations - Management reported an approximate 16% share in infant formula, with expectations to grow to 18-20% over the next 12 months [40][41] Question: Clarification on gross margin pressure - Management confirmed that the gross margin pressure was primarily due to sales deleverage and product mix, not input costs [42][43]

Financial Data and Key Metrics Changes - Perrigo's organic net sales growth in Q2 2025 was flat compared to the prior year, with OTC brand growth of 3.6% [8][10] - Gross margin declined by 250 basis points, impacted by divested businesses and isolated production variability in infant formula [11][30] - EPS in the quarter grew by 7.5% or 12.5% organically, with year-to-date EPS growth exceeding 50% organically [12][34] Business Line Data and Key Metrics Changes - The infant formula business net sales grew by 9%, driven by store brand formula, while the Good Start brand experienced a significant decline due to lost distribution [6][16] - Pain and sleep aids grew by 8%, contributing positively to overall growth, while the digestive health category faced challenges due to lower consumption of proton pump inhibitors [12][14] - OTC brands delivered organic net sales growth of 3.6%, with Jungle Formula and Compie achieving significant market share gains [13][14] Market Data and Key Metrics Changes - Store brands are gaining share in volume and unit share as consumers seek value amidst economic uncertainty [10][12] - The U.S. market is experiencing declining total category consumption, while the EU is seeing decelerating consumption trends [10][11] - Perrigo's allergy product sales at a key retailer increased by almost 19% year-to-date, contrasting with a category decline of over 2% [19] Company Strategy and Development Direction - The company is focused on its 3S plan: Stabilize, Streamline, and Strengthen, with significant progress made in stabilizing the infant formula business and streamlining operations [5][26] - An agreement to sell the derma cosmetics business for up to EUR 327 million is expected to sharpen strategic focus on core high-growth brands [6][21] - The company aims to enhance its category-led market activation growth model to unlock portfolio potential and improve execution [22][23] Management's Comments on Operating Environment and Future Outlook - Management described the market as fluid and volatile, with heavy promotional activity from competitors impacting share growth expectations [44][45] - Despite challenges, the company remains confident in achieving its EPS target range of $2.9 to $3.1 per share, equating to strong double-digit growth [38][88] - Management acknowledged the slower-than-expected recovery in the infant formula business but emphasized ongoing demand generation efforts [46][84] Other Important Information - Year-to-date organic gross profit increased by 3.8%, primarily due to recovery in the infant formula business [31] - The company is on track to deliver a full-year gross margin of approximately 40% [30] - Operating cash flow for the year to date was $11 million, with cash on the balance sheet at $454 million [35][36] Q&A Session Summary Question: Insights on the infant formula market and competitor responses - Management noted that the market is fluid, with brands heavily promoting to gain share, and acknowledged that their shelf placement is not optimal at certain retailers [44][45] Question: Building blocks for achieving guidance in the second half - Management confirmed that the EPS requirement for the second half aligns with guidance, emphasizing confidence in OTC store brand growth and infant formula recovery [49][52] Question: Strategic pricing actions and retailer conversations - Management indicated that discussions with retailers regarding pricing are positive, with expectations to offset tariff impacts through pricing actions and supply chain adjustments [61][62] Question: Changes in expectations for Opill and marketing plans - Management expressed satisfaction with Opill's performance, noting double consumption growth and plans to continue investing in brand awareness [72][74] Question: Increased product scrap in infant formula and future confidence - Management clarified that the increased product scrap was an isolated issue caught by quality systems, and they are confident it will not continue to impact margins [80][82]

Core Insights - The company has advanced its 'Three-S' strategic plan (Stabilize, Streamline, and Strengthen) through the sale of its Dermacosmetics business, scaling its global operating growth model, and enhancing brand building capabilities, which are yielding positive results [1][6][8] - The company reaffirms its full-year 2025 adjusted EPS target range of $2.90 to $3.10 despite challenging market consumption trends [1][39] Financial Performance - Second Quarter 2025 net sales were $1.06 billion, a decrease of 0.9% year-over-year, impacted by divestitures and exited products [7][13] - Reported operating income was $45 million, compared to a loss of $27 million in the prior year, while adjusted operating income decreased by 2.9% to $135 million [7][17] - Diluted EPS improved to $0.00 from $(0.77) in the prior year, with adjusted EPS at $0.57, reflecting a 7.5% increase [19][12] Segment Performance - Consumer Self-Care Americas (CSCA) net sales were $622 million, down 1.9%, with growth in Nutrition and Upper Respiratory categories offset by declines in Digestive Health and Oral Care [21][22] - Consumer Self-Care International (CSCI) net sales increased by 0.7% to $434 million, driven by Pain & Sleep Aids and Upper Respiratory categories, despite a negative impact from divestitures [27][28] Strategic Initiatives - Project Energize, launched in Q1 2024, aims to enhance organizational agility and is expected to deliver annualized pre-tax savings of $140 million to $170 million by the end of 2026 [9][10] - The company anticipates that the sale of the Dermacosmetics business will strengthen its balance sheet and accelerate net leverage goals [8][39] Cash Flow and Balance Sheet - Year-to-date operating cash flow was $11 million, with cash inflow of $76 million in Q2 2025, and cash and cash equivalents on the balance sheet were $454 million as of June 28, 2025 [33][34] - Total debt on the balance sheet was $3.65 billion [34] Market Outlook - The company expects reported and organic net sales growth to be towards the lower end of their respective ranges for 2025, primarily due to infant formula industry dynamics and challenging market consumption trends [39][44] - The company believes its unique business model and extensive product offerings position it well to adapt to changing consumer behaviors and market conditions [37][39]

Summary of Perrigo Company (PRGO) FY Conference - June 10, 2025 Company Overview - Perrigo is a global leader in the self-care market, holding over 50% of the US store brand share and ranking among the top 10 branded companies in Europe [4][5] - The company offers a diverse range of products across various price points, catering to different economic cycles and consumer habits [5][6] Core Business Strategy - Perrigo's strategy is anchored on three imperatives: stabilize, streamline, and strengthen [6][7] - The focus is on returning the US store brand to growth, ensuring reliable quality in infant formula supply, and driving innovation in high-growth brands [7][8] - The company aims for incremental revenue growth of $100 to $200 million by 2027, with a target of reducing net leverage below three times by the end of the year [8][12] Market Position and Performance - Perrigo's portfolio is diversified, with 40% of sales from branded products and 60% from store brand contributions [8][9] - The company is the largest OTC manufacturer by volume in the US and UK, with products present in nearly two-thirds of US households and over 80% of UK households [9][10] - Recent store brand volume share in the US increased by 110 basis points in May, indicating strong market performance [14] Financial Outlook - The company is trading at a significant discount compared to consumer health peers, presenting a value opportunity [11] - Expected double-digit adjusted EPS growth in 2025, with a high single-digit PE multiple [15] - Plans to improve free cash flow to net sales ratio by 200 basis points over three years, focusing on inventory optimization and operational efficiency [55][56] Challenges and Opportunities - The macro environment remains fluid, with pressures on consumer spending affecting OTC categories [13][29] - Trade-down behavior is observed in various categories, but Perrigo's position as a store brand provider offers a defensive advantage [13][29] - The infant formula business is recovering, with plans to launch 60 new SKUs to enhance market share [40][41] Regulatory and Tariff Considerations - The company anticipates a 1% increase in COGS due to tariffs, amounting to approximately $35 million in 2025 [48] - Ongoing strategic reviews of the oral care and derma cosmetic businesses to optimize portfolio focus [51][53] Conclusion - Perrigo is well-positioned to leverage its unique market position and diversified portfolio to drive growth and shareholder value, while navigating challenges in the consumer landscape and regulatory environment [22][54]

Financial Data and Key Metrics Changes - Organic net sales declined by 0.4%, but excluding lost distribution and prior year effects, organic net sales grew by 1.8% year over year [16][25] - Gross margin expanded by 440 basis points year over year to 41%, driven by business recovery in infant formula [16][25] - First quarter EPS increased by 107% year over year to $0.60 per share [16][28] Business Line Data and Key Metrics Changes - Infant formula net sales increased by 19% compared to the same quarter last year, contributing to overall recovery [7][19] - OTC brands achieved solid organic growth of 5.9% year over year, driven by strong sales of key products [10] - Operating income in the CSCI segment grew by 10% organically, while CSEA operating income grew by 90% due to infant formula recovery [27] Market Data and Key Metrics Changes - Dollar sales across self-care categories turned negative compared to the prior year, reflecting cautious consumer behavior due to inflation and reduced consumer confidence [11][12] - Total US OTC store brand volume gained 50 basis points over the last four weeks, indicating a shift in consumer buying patterns towards value-oriented products [15] Company Strategy and Development Direction - The company is focused on its 3S plan: stabilize, streamline, and strengthen, with positive results from stabilizing key parts of the business [6][21] - The synergistic relationship between store brand and OTC brands is being leveraged to drive growth, with substantial cash flow generated from store brands [10] - The company is enhancing its new product development process to create a more efficient pipeline [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain macroeconomic environment but expressed confidence in the company's positioning to navigate these challenges [12][22] - The company is widening its 2025 net sales projections due to macroeconomic uncertainties while reaffirming its adjusted EPS range [12][30] - Management expects a significant ramp-up in infant formula sales in the second half of the year due to new product introductions [39] Other Important Information - The company plans to offset tariff-related cost increases through strategic pricing actions and sourcing more manufacturing to US facilities [14][30] - The gross increase in global cost of goods sold from tariffs is expected to be approximately 5.5% for the full year [32] Q&A Session Summary Question: Impact of tariffs on EPS for 2026 - Management expects that actions taken to mitigate tariff impacts will offset any major changes in EPS projections for 2025 and beyond [36][37] Question: Sales ramp for infant formula - Management anticipates a similar sales trajectory in Q2, with significant growth expected in the second half due to new SKU introductions [38][39] Question: Contract manufacturing activity - There is an increase in activity for contract manufacturing as competitors seek domestic supply routes [44] Question: Organic sales performance - Organic sales were broadly in line with expectations, with upper respiratory products performing well despite some regional variances [48][49] Question: Gross margin expectations - Management maintains a full-year gross margin expectation of around 40%, despite better-than-expected Q1 performance [52][53] Question: Widening net sales range - The widening range reflects dynamic shifts in consumer behavior and ongoing opportunities in the market [60][62] Question: Pharma-specific tariffs impact - Management anticipates a potential $100 million impact from pharma-specific tariffs, with plans to mitigate through pricing and sourcing strategies [84][85]