Summary of Perrigo (PRGO) Q4 2025 Earnings Call

1Key Financial Results and Metrics

Full Year 2025 Results:

All-In Operating Income: Grew by 2%

All-In EPS: Increased by 7% to $2.75, aligning with revised guidance.

CORE Perrigo Operating Income: Up 7%, with CORE EPS up 14%.

Q4 2025 Results:

CORE Organic Net Sales: Declined by 2%, despite strong market share gains.

CORE Operating Income: Decreased by $4 million (2%), resulting in CORE EPS of $0.76, down $0.02 from the prior year.

Cash Position: Ended 2025 with $532 million in cash; Q4 operating cash flow was $175 million.

2Strategic Updates and Business Highlights

Three-S Plan: Continued progress in simplifying, streamlining, and strengthening the business, with a focus on stabilizing the store brand business and improving supply chain efficiency.

Market Share Gains: Significant share gains in the U.S. OTC market and Europe, reversing years of decline.

New Reporting Segments: Transitioning to new reporting segments (Self-care, Specialty Care, Infant Formula) starting Q1 2026 for enhanced transparency.

Operational Enhancements: Implementing a two-year operational enhancement program expected to yield $80-$100 million in annualized savings.

3Forward Guidance and Outlook

2026 Expectations:

CORE Perrigo Organic Net Sales Growth: Projected between -3.5% to +0.5%.

CORE EPS Guidance: Expected range of $2.25 to $2.55.

All-In EPS Guidance: Projected between $2.00 to $2.30, reflecting headwinds from the Infant Formula business.

Market Conditions: Anticipated improvement in the second half of 2026 as temporary market headwinds are expected to normalize.

4Bad News, Challenges, or Points of Concern

Infant Formula Business: Continued structural challenges impacting financials; expected to remain dilutive to earnings.

Market Weakness: U.S. OTC market consumption down 5.1% over the last 13 weeks; retailers adjusting inventory levels due to soft demand.

Goodwill Impairment: A noncash charge of $1.3 billion recorded, with potential additional impairment charges of up to $350 million expected in Q1 2026.

Leverage Concerns: Net leverage ratio at 4x, slightly above projections; expected to remain flat year-over-year in 2026, impacting flexibility for reinvestment.

5Notable Q&A Insights

Market Recovery: Management expressed confidence in a second-half recovery driven by share growth, innovation, and improved demand generation.

Operational Challenges: Under-absorption of plant capacity due to lower sales volumes is expected to impact margins in 2026 but is viewed as transitory.

Infant Formula Strategy: Ongoing strategic review to assess options for the Infant Formula business, including potential partnerships or divestitures.

Capital Allocation: Commitment to maintaining dividends while focusing on debt reduction and investing in innovation; proceeds from the Dermacosmetics sale will be used to reduce debt. Overall, Perrigo is navigating a challenging market environment while making strides in operational efficiency and market share growth, with cautious optimism for recovery in the latter half of 2026.