Perrigo Company Conference Summary Company Overview - **Company**: Perrigo Company (NYSE: PRGO) - **Industry**: Over-the-counter health and wellness solutions - **Headquarters**: Dublin, Ireland - **Founded**: 1887 - **Market Position**: Ranked number 1 in volume in the U.S. and a top 10 player by dollar sales in the E.U. [4][5] Core Business Insights - **Diversification**: Perrigo's portfolio is diversified across 9 categories, with no single product contributing more than 5% of total net sales [4] - **Consumer Savings**: The company delivers approximately $30 billion annually in savings to the U.S. and E.U. healthcare systems through its OTC solutions [5] - **Household Penetration**: Two out of three U.S. households purchase a Perrigo product, with 80% penetration in the U.K. [5] Market Performance - **Challenging Market**: The company is operating in a challenging market but has made progress in building a foundation for long-term value [6] - **Share Gains**: Perrigo gained share in most U.S. categories in 2025, with a 100 basis point increase in store brand growth and 300 basis points growth in the latest read [9][11] - **Retail Partnerships**: Strengthened retailer partnerships led to $100 million in new distribution and competitive takeaways in 2025 [11] Strategic Initiatives - **Three-S Plan**: Focuses on stabilizing, streamlining, and strengthening the business, with a goal of restoring consistency and building capabilities for long-term growth [10] - **Cost Savings**: Achieved $320 million in cost savings from Project Energize and supply chain reinvention [13] - **Workforce Reduction**: Announced a global workforce reduction of about 7%, targeting annualized savings of $80 to $100 million [13] Financial Outlook - **2026 Guidance**: Core EPS expected to be down 30% in the first half and up 70% in the second half, driven by seasonal categories and cost savings [18] - **Core Performance**: The 2025 core baseline EPS was $2.52, with expectations of offsetting headwinds through cost actions and share gains [17] Innovation and Growth Drivers - **Innovation Pipeline**: The value of the innovation pipeline has tripled compared to the previous year, with a focus on consumer meaningful innovation [13][30] - **Geographic Expansion**: Currently operating in 30 countries with a goal to increase household penetration beyond the current 5% globally [47] - **Store Brand Strategy**: Approximately 90-95% of consumers who switch to store brands remain loyal, presenting a significant market expansion opportunity [55] Market Challenges - **Economic Environment**: The company anticipates continued market softness in early 2026, influenced by economic conditions and geopolitical factors [14][34] - **Consumer Behavior**: Consumers are trading down to store brands due to economic pressures, which is expected to continue [55] M&A Strategy - **Cautious Approach**: The company is wary of large-scale M&A, focusing instead on organic growth and partnerships that align with its strategic goals [67] Conclusion - **Long-term Value**: Perrigo is positioned for long-term growth through strategic initiatives, innovation, and a focus on core business areas, despite current market challenges [19][45]

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][17] - Gross margin expanded by 440 basis points year over year to 41%, driven by business recovery in infant formula [16][26] - Operating margin expanded by 550 basis points, supported by gross margin flow through and benefits from Project Energize [17][26] - First quarter EPS increased by 107% year over year to $0.60 per share [17][29] Business Line Data and Key Metrics Changes - In the Americas business, store brand OTC saw new business awards that largely offset previous losses, with infant formula net sales increasing by 19% year over year [5][20] - OTC brands achieved solid organic growth of 5.9% year over year, driven by strong sales of key products [8] - CSCI segment reported organic net sales growth of 4.5%, while CSCA segment net sales declined by 3.6% due to lost distribution [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 [10][14] - 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 to stabilize, streamline, and strengthen operations, with significant progress reported in the Americas business [5][22] - The synergistic relationship between store brand and OTC brands is being leveraged to drive growth, with investments in high-growth brands expected to yield benefits in the second half of the year [8][9] - The company is navigating macroeconomic uncertainties while reaffirming its adjusted EPS range and net leverage targets [11][33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain macroeconomic environment but expressed confidence in the company's unique business model to capitalize on growth opportunities [14][23] - The company expects to mitigate tariff-related cost increases through strategic pricing actions and sourcing adjustments [13][31] - Future sales growth projections have been widened to account for macroeconomic risks, with expectations of 3% to 4.5% organic growth [31][32] Other Important Information - The company reported a cash balance of $410 million at the end of the first quarter, with typical cash outflow patterns observed [29] - The international business showed strong performance, with mid-single-digit sales growth and double-digit profit growth [88][90] Q&A Session Summary Question: Impact of tariffs on EPS for 2026 - Management expects actions taken to mitigate tariff impacts will offset any significant changes in EPS projections for 2025 and 2026 [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, with competitors seeking domestic supply routes [42][43] Question: Organic sales performance - Organic sales were broadly in line with expectations, with upper respiratory products performing well despite some regional variances [46][48] Question: Gross margin expectations - Management maintains a full-year gross margin expectation of around 40%, despite better-than-expected Q1 performance [51][52] Question: Widening net sales range - The widening range reflects dynamic consumer patterns and ongoing work to capture market opportunities [56][62] Question: Pricing actions and brand divestitures - Pricing adjustments are being discussed with retailers, and progress on brand divestitures is ongoing, with a focus on international opportunities [70][73] Question: Impact of pharma-specific tariffs - Management anticipates potential impacts from pharma tariffs but has a mitigation plan in place [84][85]