Q2 2025 Perrigo Co PLC Earnings Call

Patrick Lockwood-Taylor: Good morning, ladies and gentlemen. Welcome to PERRIGO Q2 2025 financial results conference call. At this time, online is in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 6, 2025. I would now like to turn the conference over to Bradley Joseph. Please go ahead.

Good morning, ladies and gentlemen, welcome to Perrigo Q2 2025 Financial results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this, call, you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 6th, 2025. I would now like to turn the conference over to Bradley Joseph. Please go ahead.

Bradley Joseph: Good morning and good afternoon, everyone. Welcome to PERRIGO's second quarter 2025 earnings conference call. I hope you all had a chance to review our press release issued today. A copy of the release and presentation for today's discussion are available within the investors section of the PERRIGO.com website. Joining today's call are President and CEO Patrick Lockwood Taylor and CFO Eduardo Bezerra. I'd like to remind everyone that during this presentation, participants will make certain forward-looking statements. Please refer to the slides for information regarding these statements, which are subject to important risks and uncertainties. We'll reference adjusted financial measures that are non-GAAP in nature. See the appendix to the earnings presentation for additional details and reconciliations of all non-GAAP to GAAP financial measures presented. A few quick items before we start. First, unless stated, all financial results discussed and presented are on a continuing operations basis.

Good morning and good afternoon everyone. Welcome to Perrigo second quarter 2025 earnings conference call.

I hope you all had a chance to review. Our press release issued today.

Measures that are non-gaap in nature.

See the appendix to the earnings presentation for additional details and reconciliations of all non-gaap to gaap financial measures presented.

Bradley Joseph: Second, organic growth excludes acquisitions, divestitures, exited products, and foreign currency fluctuations in both comparable periods. And third, Patrick's discussion will focus solely on non-GAAP results, except as otherwise noted. And with that, I'm pleased to turn the call over to Patrick.

2, quick items. Before we start first, unless stated all Financial results discussed and presented are on a continuing operations basis.

Second organic growth. Excludes Acquisitions, domestic Secours, exited products and foreign currency fluctuations in both comparable periods and third, Patrick's discussion will focus solely on non-gaap results. Except as otherwise noted

And with that, I'm pleased to turn the call over to Patrick.

Patrick Lockwood-Taylor: Thank you, Brad. Good morning. Good afternoon, everyone. And thank you very much for joining today's call. I'd like to start with a quick overview of the progress that we have made against our 3S plan to stabilize, streamline, and strengthen One PERRIGO. We've accomplished a tremendous amount of work over the past 18 months to evolve into a more focused, agile, and scalable self-care organization. We've aligned our strategy and added top talent where needed. This works as the foundation for our 3S plan, and we have taken significant steps in the second quarter to accelerate our progress. In stabilize, our infant formula business net sales grew 9%, led by store brand formula. In store brand OTC, we continue to see encouraging results as new business awards overtook previously disclosed lost businesses, and our offerings are gaining volume and unit share in the market, enabling us to outpace competition.

Thank you, Brian. Good morning. Good afternoon, everyone. And thank you very much for joining today's call.

I'd like to start with a quick overview of the progress that we have made against our 3s client to stabilize streamline and strengthen 1 paragraph.

We have accomplished a tremendous amount of work over the past 18 months to evolve into a more focused agile and scalable self-care organization.

we belonged our strategy, and added top talent where needed

This works since the foundation for our 3s plan and we have taken significant steps in the second quarter to accelerate our progress.

Stabilize. Our infant formula business. Net sales, grew 9%.

Patrick Lockwood-Taylor: In streamline, Project Energize and our supply chain reinvention program remain on track and continue to deliver significant benefits. These are creative initiatives that are enabling more investments into our innovation pipeline and our AMP for future growth. Additionally, we recently announced an agreement to sell our dermacosmetics business for up to €327 million, with €300 million in cash upfront. This transaction, which is expected to close in the first quarter of '26, sharpens our strategic focus on our core portfolio, including our high-growth brands, which are expected to deliver $100 to $200 million in incremental net sales in 2027. Expected proceeds will be prioritized towards strengthening the balance sheet and accelerating our net leverage goals. To strengthen, we are scaling our category-led market activation growth model designed to unlock the full potential of our portfolio, and our upgraded brand-building activities are beginning to deliver results.

Led by store. Brand formula, in store brand OTC. We continue to see encouraging results as new business Awards overtook, previously, disclosed lost businesses, and our offerings are gaining volume and unit, share in the market and enabling us to outpace competition.

In streamline product energized and our supply chain reinvention program, remain on track and continue to deliver significant benefits.

These are creative initiatives are enabling more investments into our Innovation Pipeline and our amp

future growth.

Additionally, we recently announced an agreement to sell our durmak Cosmetics business. We're up to 327 million euros with 300 million euros, in cash up front.

this transaction which is expected to close in the first quarter of 26, sharpened, our strategic focus on our core portfolio, including our high growth Brands which are expected to deliver 100 to 200 million dollars in incremental, net sales in 2027,

Expected proceeds will be prioritized towards strengthening the balance sheet and accelerating our net leverage goals.

The strength we are scaling our category lead market activation growth model designed to unlock the full potential of our portfolio.

Patrick Lockwood-Taylor: We are moving with speed and purpose. With focused execution and strategic sequencing, we are advancing our 3S plan. More on this in a moment. But first, let's discuss our second quarter financial highlights. Our diversified portfolio continued to provide resilience and stability in a challenging consumer environment. PERRIGO organic net sales growth in the second quarter was flat compared to the prior year, including OTC brand growth of 3.6%. Year-to-date, organic growth was also flat but up nearly 1%, excluding the prior year opioid launch stocking benefit and previously disclosed lost distribution of lower margin US store brand products. Declining total category consumption in the US and decelerating consumption in the EU, both partially impacted by soft seasonal trends in categories such as allergy, sun care, and blister care, limited our top-line growth.

And our upgraded brand building activities are beginning to deliver results.

We are moving with speed and purpose with focused, execution and strategic sequencing. We're advancing our 3s plan.

More on this in a moment but first let's discuss our second quarter of financial highlights.

Our Diversified portfolio continue to provide resilience and stability in a challenging consumer environment.

Perago organic net sales growth in the second quarter was flat compared to the prior year, including OTC brand growth for 3.6%.

Year to date organic growth was also flat butt up. Nearly 1%, excluding the prior year opal. Launch stocking benefits.

And previously disclosed loss distribution of lower margin Us store brand products.

Patrick Lockwood-Taylor: However, our store brands continue to gain share on volume and are now gaining unit share as consumers seek greater value amidst the current uncertain macro environment. Our key brands also gained share in the quarter, and we're winning at the shelf. All the execution improvements we have made over the past two years are delivering solid results. Gross margin, which Eduardo will detail shortly, declined in the quarter, driven in part by divested businesses. Organic operating income was flat in the quarter, reflecting isolated production variability in infant formula, leading to an increase in product scrap and two lower plant overhead absorption in OTC. These factors were partially offset by reduced AMP spend as we intentionally pulled back due to softer consumption and Project Energize benefits. Year-to-date, organic operating income growth was 28.3%.

Declining total category consumption in the US and decelerating consumption in the EU both partially impacted by Soft, seasonal Trends in categories. Such as allergy, sun, care, and Ballistic Care Limited our Topline growth.

However,

Our store brands continue to gain share on volume and are now gaining unit. Share as consumers seek greater value. Admits the current uncertain macro environment.

Our key brands also gain sharing the quarter and we're winning at the Shelf.

All the execution improvements. We have made over the past 2 years are delivering. Solid results, gross margin which had wardo will detail shortly declined in the quarter of driven in part, by devest businesses.

Organic operating income was flat in the quarter, reflecting isolated production variability, and infant formula leading to an increase in product scrapped.

And 2 lower plant overhead absorption and OTC.

And project. Energized benefits.

Patrick Lockwood-Taylor: EPS in the quarter grew 7.5%, or 12.5% organically, and is up more than 50% organically year to date. Taking a closer look at our organic net sales performance in the quarter. Firstly, pain and sleep aids grew 8%, adding one percentage point of growth to total PERRIGO, driven by performance and restored supplier Sopadeen, our leading pain brand in Ireland and the UK. Next, nutrition added nearly one point of growth, reflecting continued recovery in our infant formula business. More details on that in a few moments. And lastly, upper respiratory added 0.7 points, primarily from new distribution and share gains in the US store brand allergy amid softer seasonality, in addition to restored supply of our PhysioMare brand for cold and allergy-related symptoms. Our OTC brands delivered organic net sales growth of 3.6% year over year as we continue to invest in our highest ROI assets.

Year to date, organic operating income growth was 28.3%.

DPS in the quarter grew 7.5% or 12.5% organically and is up more than 50% organically year to date.

Taking a closer. Look at our organic, net sales performance in the quarter.

Firstly.

Pain and sleep aids, group 8% adding 1% percentage point of growth to Total, Perrigo driven by performance and restored. Supply of deem are leading pain brand in Ireland and the UK.

Next nutrition added, nearly 1 point of growth reflecting continued recovery and our infant formula business more details on that in a few moments. And lastly upper respiratory added 0.7 points primarily from new distribution and share gains in the US store. Brand allergy amidst, softer. Seasonality in addition to restore supply of our physio mayor brand for cold and allergy related symptoms.

Patrick Lockwood-Taylor: Jungle Formula, our leading insect repellent, grew 14% in the quarter and achieved record market share in the UK, behind full brand activation during the summer season. Additionally, CompEat, our blister and wound care franchise brand, grew 6% and achieved record share in France, Spain, and Italy. Both these examples reflect the significant progress we have made in upgrading our brand-building capabilities to deliver our 3S plan. In contrast, our digestive health category was impacted by continued lower consumption of proton pump inhibitors. While the total PPI market was down, national brands accounted for most of the decline. Encouragingly, store brand volume share has steadily increased. Oral care declined due to lost distribution of lower margin product as the team continued to balance tariff impact and a competitive landscape while focused on driving profitability.

Our OTC Brands delivered organic, net sales, growth of 3.6% year-over-year. As we continue to invest in our highest Roi assets.

Jungle formula are leading insect repellant, grew 14% in the quarter and achieved record market share in the UK behind full brand activation during the summer season.

Additionally, compi of blistering wound care. Franchise brand, grew 6% and achieved record share of France, Spain and Italy.

Both these examples reflect the significant progress. We have made in upgrading our brand building capabilities to deliver our 3s plan.

In contrast, our digestive health category was impacted by continued lower consumption of proton pump inhibitors.

While the total PPI Market was down National Brands, accounted for most of the decline.

Encouragingly store. Brand volume, share has steadily increased.

Patrick Lockwood-Taylor: As I mentioned, overall consumption trends continue to soften, partially due to slower seasonality and waning consumer confidence. As a result of lower consumption trends, our stock in trade ticked higher in certain European markets, which we are actively monitoring. Now turning to detailed progress on our 3S plan, starting with the stabilization of infant formula. As mentioned, net sales in the quarter grew 9% year over year, driven by performance in our store brand and contract business, which were collectively up more than 30%. However, this momentum was partially offset by a significant decline in the Goodstart brand, primarily due to lost distribution. This decline was not entirely unexpected as we actively reset the brand following its relaunch under the Goodstart Dr. Brown's label. This brand remains a unique offering in the market, and we have seen modest share gains in the early stages of this reset.

Oral Care, declined, due to Lost distribution of lower margin product. As a team continued to balance tariff impact and a competitive landscape while focused on driving profitability.

As I mentioned, overall consumption Trends. Continue to soften partially due to slower, seasonality and waning consumer confidence.

As a result of lower consumption, Trends are stocking trade ticked higher in certain European markets, which we are actively monitoring.

Now turning to detailed progress on our 3s plan, starting with the stabilization of infant formula as mentioned, net sales in the quarter, grew 9% year-over-year, driven pipe performance in our store brand and contract business, which were collectively up more than 30%.

Patrick Lockwood-Taylor: We are making good progress reintroducing store brand SKUs, with 80% of our planned 2025 assortment now back on shelves. While store brand volume shares have moderated, total market consumption has increased during the same timeframe, diluting our volume share. Importantly, store brand formula consumption continues to grow. Looking to the second half of the year, we are pulling on several levers to improve store brand formula growth, such as increasing targeted promotional activity at select retailers, both in-store and online, increasing demand generation activities, including refreshed compared-to labels and enhanced in-store marketing for high-volume SKUs, continued consumption ramp-up of recently introduced SKUs, and launching the remaining 20% of our planned 2025 assortment. While recovery in this business continues, it is slightly slower than anticipated, so we have more work to do. However, I remain very encouraged by our steady progression.

However, this momentum was partially offset by a significant decline in the good stock brand primarily due to Lost distribution. This decline was not entirely unexpected as we actively reset the brand following its relaunch under the Good Start. Dr. Brown's label. This brand remains a unique offering in the market and we have seen modest share gains in the early stages of this reset.

We are making good progress reintroducing store and brand SKUs, with 80% of our plan for 2025 assortment now back on shelves.

While store brand volume shares has moderated. Total Market consumption is increased during the same time frame.

Diluting, our volume share importantly store brand formula of consumption continues to grow.

Look into the second half of the year. We are pulling on several levers to improve store. Brand formula growth such as increasing, targeted promotional activity at select retailers, both in store and online.

Increasing demand generation activities, including refresh compared to labels and enhanced install marketing for high. Volume skus.

Continued consumption. Ramp up of recently, introduced skus and launching the remaining 20% of our plan 2025 assortment

Patrick Lockwood-Taylor: Now to US OTC store bread, where we are seeing very encouraging signs that our stabilization efforts are gaining traction. In the second quarter, we reached an important inflection point. New business awards outpaced lost distribution for the first time since the 2024 reset. While there's still work ahead, this progress gives us confidence in the trajectory we're building for the second half of the year. We're also continuing to apply our brand-building capabilities to enhance the store brand portfolio, bringing differentiated value to our retail partners. This approach is deepening relationships with retailers who are focused on growing category share and delivering more value to their consumers. A great example is the allergy category, where our team executed a tailored demand generation campaign at a top customer. The result was notable.

while recovering this business continues, it is slightly slower than anticipated. So we have more work to do. However, I remain very encouraged by our steady progression.

Now, to us OTC store brand where we are seeing very encouraging signs that are stabilization efforts are getting traction.

In the second quarter, we reached an important inflection point. New business awards outpaced loss distribution for the first time since the 2024 reset.

We also continuing to apply our brand building capabilities to enhance the store brand portfolio. Bringing differentiated value to our Retail Partners.

This approach is deepening relationships with retailers who are focused on growing category share and delivering more value to their consumers.

A great example was the allergy category where our team executed a tailored demand generation campaign at a top customer.

Patrick Lockwood-Taylor: PERRIGO allergy product sales at that retailer are up almost 19% year to date, while the category has declined by over 2%. I am increasingly encouraged by our improving competitiveness, our marketing to consumers, and our strengthening retail partnerships. In combination, these delivered a volume growth six times faster than the total OTC market and an impressive share gain of 70 basis points for PERRIGO over the last 13 weeks. Turning to streamline, we have made meaningful progress in simplifying and focusing our business. Our creative initiatives continue to deliver meaningful benefits. Project Energize is tracking well, with annual run rate gross savings now generating $159 million, an increase of $30 million during the first half of this year. And our supply chain reinvention program remains on track to deliver between $150 to $200 million in benefits by the end of this year.

The result was notable.

Perago allergy product sales at that retailer are up almost 19% year to date while the category has declined by over 2%.

I am increasingly encouraged by our improving competitiveness.

Our marketing to Consumers and our strengthening retail Partnerships.

In combination these delivered a volume growth 6 times faster than the total OTC market and an impressive. Share game of 70 basis points for perago over the last 13 weeks.

Turning to streamline, we have made meaningful progress, and simplifying and focusing our business.

Our accretive initiatives continue to deliver meaningful benefits. Product energies is tracking well with annual run rate. Growth savings. Now generating 159 million

An increase of 30 million dollars during the first half of this year.

Patrick Lockwood-Taylor: These actions reflect our commitment to building a stronger, more focused PERRIGO position for sustainable growth. As for simplifying our portfolio, we recently announced the sale of our dermacosmetics business, which sharpens our strategic focus. This move allows us to concentrate resources on the categories that best align with our One PERRIGO model and where we see the greatest opportunity for long-term value creation. It will also accelerate our net leverage goals. Finally, on strengthening, we continue to make steady progress in our scaling our category-led locally activated growth model across the organization. This model is designed to help us bring more molecules to more consumers with greater speed and precision. At its core, it reflects our commitment to operating as one global organization, bringing together and scaling the best of our capabilities to serve consumers and customers more effectively.

And our supply chain reinvention program remains on track to deliver between 150 to 200 million in benefits by the end of this year, these actions reflect our commitment to building a stronger more focused, perago positioned sustainable growth.

as for simplifying our portfolio, we recently announced the sale of our demo Cosmetics business, with sharpens, our strategic Focus,

This move allows us to concentrate resources on the categories that best align with our 1 paragraph model, and where we see the greatest opportunity for long-term value creation.

It will also accelerate our net leverage goals.

finally, on strengthening

We continue to make steady progress and our scaling, our category lead locally activated growth model across the organization.

Patrick Lockwood-Taylor: This structure not only will improve our execution, it will also create more opportunities for innovation, more impactful marketing, and a stronger foundation for sustainable growth. This isn't a new direction for us. It's a proven model that we've been building and is already delivering results. Just a few examples of this model in action include: one, the opioid repeat rate of 55% reflects the team's focused efforts on education, access, and retail execution to support trial and drive consumer loyalty. With Nicotin, our leading nicotine replacement brand, we're seeing strong early results from new claims and a refreshed marketing campaign. Nicotin is now the fastest growing smoking cessation brand over the last four weeks, expanding our reach and relevance with consumers. Next, the performance of EllaOne. This is our leading emergency contraceptive brand.

This model is designed to help us bring more molecules to more consumers with greater speed and precision at his core. It reflects our commitment to operating as 1 Global organization bringing together and scaling the best of our capabilities to serve consumers and customers more effectively.

The structure, not only will improve our execution. It will also create more opportunities for Innovation more impactful marketing and a stronger foundation for sustainable growth.

This isn't a new direction for us.

It's a proven model that we've been building and is already delivering results.

Just a few examples of this model in action include 1, the Opel repeat rate of 55% reflects the teams focused efforts on education access and Retail execution, to support trial and drive consumer loyalty.

With an equity. Our leading nicotine. Replacement brand, we're seeing strong early results from new claims and a refresh marketing campaign.

The question is now the fastest growing smoking sensation brand over the last 4 weeks expanding our reach and relevance with consumers.

Patrick Lockwood-Taylor: Driven by commercial prioritization and a new marketing campaign that launched earlier this year, it has resulted in EllaOne leading category growth and gaining share. In Spain, we launched Bronco 181, that relieves discomfort associated with a cold. This launch is outperforming the market by 30 share points, thanks to local market activations that are resonating well with local market consumers. Also, Jungle Formula has achieved market leadership in Italy for the first time, reaching a record high seasonal market share following local media activation. What's enabling the success is a clear cultural shift, one that embraces a growth mindset, is grounded in strong category strategies, and with a deep collaboration across markets to drive more meaningful execution with local consumers. These examples embody the strength of operating as one unified global organization, aligned, empowered, and focused on delivering meaningful results.

Next, the performance of L1 this is our leading emergency contraceptive brand.

Driven by commercial prioritization on a new marketing campaign. That launched earlier this year has resulted in L1 leading category growth and gaining share.

In Spain, we launched Bronco 181 that released discomfort associated with the cold. This launch is outperforming the market by 30 shares. Thanks to local market activations. That are resonating well with local market consumers.

also, jungle formula has achieved Market leadership in Italy for the first time, reaching a record, high, seasonal market, share, following local media, activation

What enabling this success is a clear cultural shift 1, that Embraces a growth mindset is grounded in strong category, strategies.

and with a deep collaboration across markets to drive more meaningful execution with local consumers,

Patrick Lockwood-Taylor: In summary, despite a challenging consumer environment marked by soft seasonal trends and slower consumption, we continue to execute with discipline and focus. The executional improvements we have made over the past two years are delivering strong benefits, and our year-to-date results reflect the resilience of our diversified portfolio and the early benefits of our 3S plan. We have stabilized US store brand and are on track to grow net sales in the second half of this year. We are stabilizing the infant formula business, but as I said, we have more work to do here. Efforts to streamline PERRIGO are moving at pace as we sharpen our focus on the portfolio and on our operating model. We are strengthening the organization through consumer-led innovation and key brand-building activities that are beginning to deliver very strong results. As a result, we remain confident in reaffirming our full-year EPS outlook.

These examples, embody the strength of operating as 1 un Global organization aligned empowered and focus on delivering meaningful results.

In summary.

Despite the challenging consumer environment marked by Soft seasonal Trends and slower consumption. We continue to execute with discipline and focus.

Played over the past 2 years are delivering strong benefits and a year-to-date results. Reflect the resilience of our Diversified portfolio and the early benefits of our 3s plan.

We have stabilized Us store brand and are on track to grow net sales in the second half of this year.

We are stabilizing the infant formula business, but as I said, we have more work to do here.

Efforts to streamline paragraph. Moving at PACE as we sharpen. Our focus on the portfolio and on our operating model.

Patrick Lockwood-Taylor: With that, I'll now turn the call over to Eduardo to walk through the final naturals. Eduardo.

We're striving the organization through consumer lead, Innovation, and key brand building activities that are beginning to deliver very strong results. As, as a result, we remain confident in. Reaffirming our full year, EPS Outlook

Eduardo Bezerra: Thank you, Patrick. Hello, everyone. Looking at the second quarter financials, starting with the GAAP to non-GAAP summary, primary adjustments to our non-GAAP financial results were: one, amortization expense of $57 million, two, unusual litigation of $50 million, and three, restructuring charges of $9 million, primarily related to Project Energize and supply chain reinvention. Full details can be found in the non-GAAP reconciliation tables attached to today's press release. From this point forward, all financial results discussed will be on an adjusted basis unless otherwise noted. Second quarter gross profit of $403 million declined $30 million year over year, primarily due to an $18 million impact from divestitures and exited businesses, partially offset by favorable currency translation. Organic gross profit declined $23 million, largely due to the previously mentioned isolated production variability in infant formula. This production issue led to a scrapping of approximately $11 million of inventory.

with that, I'll now turn the call over to Eduardo to walk through the file Naturals Eduardo

Thank you Patrick. Hello everyone.

Looking at the second quarter financials is starting with the gaap to non-gaap summary.

Primary adjustments to our non-gaap financial results were 1 amortization expense of 57 million 2 and usual litigation on fifty million dollars and 3 restructuring charges of 9 billion dollars primarily related to project energized and supply chain. Reventon

Full details can be found in the non-gaap reconciliation. Tables attached to today's press release.

from this point forward, all Financial results discussed will be on an adjusted basis unless otherwise noted

Second quarter gross, profit of 43 million declined, 30 million year-over-year primarily due to an eighty million dollar impact from the vestures and exited businesses partially offset by favorable currency translation.

Organic gross profit declined, 23 million largely due to the previously, mentioned isolated production variability in infant formula.

Eduardo Bezerra: Additionally, we experienced lower plant overhead absorption in OTC and oral care. These factors more than offset benefits from our acquisitive initiatives, Project Energize and supply chain reinvention, which continue to deliver meaningful efficiencies. Second quarter gross margin was down to 150 basis points, stemming from: one, 70 basis points from divested businesses and exited products; two, an unfavorable impact of 110 basis points from the isolated infant formula scrap I just mentioned; and three, a net unfavorable impact of 70 basis points from the rest of the business, mainly due to overhead absorption, which was partially offset by creative initiatives and favorable brand store brand mix. Looking at the gross margin on a sequential basis, we were expecting a decline of approximately 250 basis points related to lower plant overhead absorption.

This production issue led to a scrapping of approximately 11 billion dollars of inventory.

Additionally, we experienced lower plant overhead absorption in OTC, and Oral Care. These factors more than offset benefits from our crypto initiatives project energized and supply chain inventions which continue to deliver meaningful efficiencies.

Second quarter, growth margin was down to 250 basis, points, seeming from 1 70 basis points, from divested businesses and exited products to and unfavorable impact of 110. Basis points from the isolated infant formerly scrap. I just mentioned and 3, a net unfavorable impact of 700 basis points from the rest of the business.

Mainly due to overhead absorption, which was partially offset by a creative initiatives and favorable Brand store brand mix.

Eduardo Bezerra: Said differently, our first half gross margin of 39.5% is in line with our plan, and we remain on track to deliver a full-year gross margin of approximately 40% in line with our 2025 outlook. I'll speak to operating income and earnings per share in a few minutes. Moving to year to date, organic net sales were flat as we lapped the prior year opioid stocking benefits from its late first quarter 2024 launch, in addition to the impact from previously disclosed lost distribution in US store brands. These factors more than offset growth of plus 0.7% in the rest of the business. Year-to-date gross profits of $831 million increased $3 million year over year, including a $32 million impact from divestitures and exited products. Organic gross profit increased $30 million, or 3.8%, primarily due to business recovery of infant formula.

Looking at the gross margin on a sequential basis. We were expecting a decline of approximately 250 basis points related to lower plant overhead absorption.

So differently, our first half gross margin of 39.5% is in line with our plan and we remain on track to deliver full year growth marketing of approximately 40% in line with our 2025 Outlook.

I'll speak to operating income and earnings per share in a few minutes.

Moving to here today organic net sales were flat as we lap at the prior year. Op is talking benefits from its late. First quarter 2024, Lounge. In addition to the impact from previously, disclosed lost distribution in Us store brands, these factors more than offset growth of plus 7% in the rest of the business.

Eduardo Bezerra: Year to date, organic gross and operating margins meaningfully expanded up 150 and 300 basis points, respectively. The margin expansion was driven by infant formula, in addition to benefits from creative initiatives, which were partially offset by lower plant overhead absorption and OTC volumes. Turning to net sales performance by segment, starting with CSCI. Reported net sales were up plus 0.7%. Organic net sales growth of 2.7% was led by supply recovery of key products, growth in our highly profitable products, including Jungle Formula and CompEat, and share gains in EllaOne that Patrick just mentioned. In CSCI, net sales declined 1.9% as growth in the nutrition business, healthy lifestyle, and upper respiratory categories were more than offset by lower net sales in digestive health and oral care.

Year to date gross profits of 831 million increased 3 billion dollars year-over-year, including a 32 million impact from diverse and exited products. Organic growth profit, increased 30 million dollars or 3.8%, primarily due to business recovery of infant Florida,

Year to date organic growth and operating margins meaningfully expanded up, 150 and 300 basis points respectively.

Margin expansion was driven by infant formula, in addition to benefits from a creative initiatives, which were partially offset by lower plant overhead absorption and OTC volumes.

Turn it to net sales performance by segment. Is starting with CI.

Of Key Products growth in our highly profitable products including jungle formula and compete and share gains in L1 that Patrick just mentioned.

Eduardo Bezerra: As Patrick highlighted, we have now lapped the prior year distribution losses in store brand OTC and realized net new business growth in the quarter, which we expect to benefit growth in the second half of the year. Second quarter operating income of $135 million decreased $4 million, including a $9 million impact from divested businesses and exited products. Organic operating income was flat year over year as lower advertising and promotion spend in reaction to softer seasonal demands, combined with our creative initiatives offset the higher scrap in infant formula and lower plant overhead absorption I just discussed. Year to date, operating income of $282 million increased $50 million, including a $50 million impact from divested businesses and exited products. Organic operating income grew 28.3%, driven by infant formula and our creative initiatives.

Net sales declined, 1.9% as growth in the nutrition business, healthy lifestyle. And upper respiratory categories were more than upset by lower net sales in digestive health and Oral Care.

As Patrick highlighted we have now led the prior year distribution losses in store, brand OTC and realized net. New business growth in the quarter which we expect to benefit growth in the second half of the year.

Second quarter, operating income of 135 million decreased 4 million dollars, including a $9 million impact from divested businesses and exited problems.

Organic operating income was flat year-over-year, as lower advertising and promotion spend and seasonal demands combined with our accretive initiatives offset the higher scraping infant formula and lower plant overhead absorption. I just discussed.

Europe today, operating income of 282, million increased 50 million including a 15 million impact from divested businesses and exited products.

Organic operating income, grew 28.3% driven by infant formula and our creative initiatives.

Eduardo Bezerra: Second quarter earnings per share of 57 cents increased 7.5% or 12.5% organically versus the prior year, driven primarily by lower interest expense. Year to date, earnings per share of $1.17 grew 41% or 53.3% organically, driven by infant formula recovery, creative initiatives, and lower interest expense. Turning now to the balance sheet. Second quarter operating cash flow was $76 million, bringing year-to-date operating cash flow to $11 million. As a reminder, first quarter operating cash outflow included the rebuild of infant formula inventories and a securities litigation settlement. Year to date, we invested $45 million in capital expenditures and returned $80 million to shareholders through dividends. Cash on the balance sheet at the end of the second quarter was $454 million. We remain on track to deliver our 2025 operating cash flow conversion target of approximately 100% to adjusted net income.

Second quarter.

Share of 57 cents increased 7.5% or 12.5% of organically versus the prior year, driven primarily by lower interest expense.

Year to today earnings per share of 1.17 cents grew 41% or 53.3% organically driven by infant formula recovery a creative initiatives and lower interest expense.

turning now, to the balance sheet,

Second quarter, operating cash flow was 7.

Million dollars bringing here today to operating cash flow to 11 million dollars.

As a reminder first quarter operating cash, outflow include the rebuild of infant formula, inventories, and a Securities litigation settlement.

Here. Today, we invested 45 million in capital expenditures and returns 800 million to shareholders through these LS.

Quarter was 454 million.

Eduardo Bezerra: Net leverage to adjusted EBITDA is 3.9 times over the trailing 12 months, on our way to achieving our target of approximately 3.5 times by year-end. To build on Patrick's comments regarding the announced sale of our dermacosmetics business, the proposed sale multiple reflects a premium of approximately 20% to 30% to PERRIGO's currently enterprise value to adjusted EBITDA multiple. So while the transaction sharpens our strategic focus, it's also value-enhancing for shareholders. As noted, we anticipate the transaction closing in the first quarter of 2026, with the expected proceeds prioritized to strengthening our balance sheet and advancing our net leverage goals. While we are operating in markets with challenging short-term consumption trends, our business model of hundreds of OTC molecules across multiple price points has propelled share gains across our store brand and key brands. These gains have insulated our performance this year.

We remain on track to deliver our 2025 operating cash flow conversion Target of approximately 100% to adjust the net income.

Net leverage to adjust to the beta is 3.9 times over the trailing 12 months.

On our way to achieving our targets of approximately 3.5 Times by year end.

To build on Patrick's comments regarding the announced sale of our durmak Cosmetics business. The proposed sale multiple reflects a premium of approximately 20 to 30%, to Burgos, currently Enterprise Value. To adjust it a bit and multiple

So why are the transaction?

Sharpens. Our strategic Focus. It's also valuing enhancing

For shareholders.

Noted.

We anticipated the transaction closing in the first quarter of 2026 with the expected proceeds. Prioritize to strengthening our balance sheet and advancing our net leverage goals.

Eduardo Bezerra: Recovery in our infant formula business is progressive. However, it is lower than initially anticipated, with net sales now projected to be below prior year levels. Given this update and prudence from ongoing softenings in OTC market consumption trends, reported and organic net sales growth are expected towards the lower end of our previously communicated ranges. Despite the top-line adjustment, expectations for operating income growth remain largely unchanged as the infant formula scrap issue is not expected to repeat, plant absorption expected to cease as a headwind in the second half as our production volumes improve and operating expenses come down. As a result, we are also reaffirming our outlook for gross and operating margins for the full year.

Why we are operating markets with challenging short-term consumption Trends, our business model of hundreds of voltic molecules across multiple price points, has propelled share gains across our store brand and key Brands these gains have insulated our performance this year.

Recovery in our infant formula. Business is Progressive. However, it is lower than initial anticipated with net sales. Now, projected to be below prior year levels.

Given this update and Prudence from ongoing softness in OTC market, consumption, Trends, reported and organic net. Sales growth are expected towards the lower. End of our previously, communicated ranges.

Despite the stop line adjustment expectations for operating income growth remained largely unchanged as the infant formula. Scrap issue is not expected to repeat, plant absorption expected to seize as a headwind in this second half as our production volumes improve and operating expenses, come down

Eduardo Bezerra: These same second-half drivers give us the confidence to reaffirm the rest of our 2025 outlook, including our EPS target range of $2.90 to $3.10 per share, equating to strong double-digit growth. As for phasing, top-line is expected to be heavily weighted to the fourth quarter, due primarily to timing of benefits from already secured new business in US store brand OTC and later than prior year selling activities for the cough and cold season in the European Union. Operating expenses are expected to be higher in the third quarter versus fourth quarter as we amplify advertising and promotion investments to support our winter brands and work to gain share in infant formula. Before I wrap up, just a few quick comments on tariffs.

As a result, we're also reaffirming our outlook for growth and operating margins for the full year.

Give us the confidence to reaffirm the rest of our 2025 Outlook, including our EPS target range of 2.90 cents to 3.10 cents per share, equating to strong double digit growth.

As for phasing Top Line is expected to be heavily. Weighted to the fourth quarter, due primarily to timing of benefits from already secured the new business in Us store brand OTC, and later than prior years. Selling activities for the cough and cold season in the European Union.

Operating expenses.

Expected to be higher in the third quarter, versus 4 quarter.

As we amplify advertising and promotion Investments, to support our winter brands and work to gain share in infant formula.

Before right.

Eduardo Bezerra: Based on our latest assessments, excluding any potential impact from pharmaceutical tariffs that make over ingredients used in the manufacturing of OTC products, we estimate a gross increase to global cost of goods sold in the fourth quarter of approximately $10 to $20 million and approximately $50 to $60 million on a full-year basis, equating to approximately 2% of our global costs. These estimated impacts are much lower than our first quarter update. As previously highlighted, we plan to offset these impacts through a combination of strategic pricing actions, insourcing to our US-based manufacturing facilities, and other supply chain actions. In summary, we are executing well in a challenging consumer environment and believe we have an edge in the marketplace with our unique offerings across the value spectrum.

Just a few quick comments on Terrace.

Based on our latest assessments excluding any potential impact from pharmaceutical terrorists. That make over ingredients used in the manufacturing of OTC products. We estimate a gross increase to Global cost of goods sold in the fourth quarter of approximately 10 to 20 million dollars and approximately 50 to 60 million dollars on a full year basis, equating to approximately 2% of our Global costs.

This estimated impacts are much lower than our first quarter update.

As previously highlighted, we plan to offset these impacts through a combination of strategic pricing actions in sourcing to our us-based, manufacturing facilities, and other supply chain actions.

Eduardo Bezerra: We continue to gain share in many categories and brands, and we remain confident in our ability to deliver strong double-digit EPS growth for the full year. Thank you for your time today, and I now turn back the call to Brad.

in summary, we're executing well in a challenging consumer environment and believe we have an edge in the marketplace with our unique offerings, across the value Spectrum,

we continue to gain share in many categories and Brands and we remain confident in our ability to deliver strong, double digit EPS growth, for the full year,

Bradley Joseph: Thanks, Eduardo. Operator, can we please open the line for questions?

Thank you for your time today. And I now, turn back the call to Brandt

Thanks Eduardo. Operator, can we please open the line for questions?

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press a star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your headset before pressing any keys. To withdraw your question, please press a star followed by the number two. With that, our first question comes from the line of Keith Devas with Jefferies. Please go ahead.

Thank you, ladies and gentlemen, we will now begin the question and answer session to ask a question. You may press the star, followed by the number 1 on your telephone keypad. If you're using a speaker phone to speak up your handset before pressing any keys to withdraw your question, please press the star followed by the number 2 with that. Our first question comes from the line of Keith Devas with Jeffrey. Please go ahead.

Keith Devas: Great. Good morning. Thank you. Maybe just starting with what you're seeing on the infant formula side, any context you can add, maybe just from what you're hearing from retailers as well as how competitors are responding. I think on the last call, you mentioned competitors had also engaged in promo activity and some pricing. So how do your second half expectations change, and how should we expect kind of the recovery to play out for the balance of the year?

Great. Good morning, thank you. Um, maybe just starting with what you're seeing on the Infant Formula side any contacts you can add um maybe just from what you're hearing from retailers as well as. Um, how competitors are responding. I think on the last call you mentioned competitors. Had also engaging in in promo activity and and some pricing. Um, so how have 2, you know, your second half expectations changed and um how should we expect, kind of the recovery to play out uh, for the balance of the year?

Patrick Lockwood-Taylor: Good morning, Keith. I'll take the first part of that question, and then for the more detailed financials, hand over to Eduardo. The market is, I would describe, quite fluid, quite volatile. Brands are promoting quite heavily the gained share. We've seen a number of new products being launched, and I would say that our placement at the shelf is not optimal as certain retailers. There's also probably opportunity in some of our packaging claims as well. Store brand infant formula volume, it does continue to grow, but as I mentioned, new volume has entered the category, and that has dampened our share growth versus our expectations a few months ago. I'm confident that we're putting into place the right steps to grow value share above our historical norms, and we really expect to continue to ramp up in the second half.

Uh, good morning, Keith. I'll take the first part of that question, and then for the more detailed financials, I'll hand it over to Eduardo.

Um,

The market is, oh, described quite, quite fluid.

Uh, quite volatile, uh, brands are promoting quite heavily, the game share.

You see the number of new products being launched.

um, and I would say that our, our placement that the Shelf is is

Not optimal as certain retailers. Uh, there's also probably opportunity in some of our packaging claims as well.

Uh, stubborn infant formula volume, it does continue to grow.

Um but as I mentioned, new volume has entered the category and that has dampened our share growth versus our expectations, a few months ago. Um,

I'm confident we're putting into place the the right steps to to grow value shared, uh, above our historical Norms. Uh, and we

Patrick Lockwood-Taylor: We still have 20% of our SKUs that we were launching this year to be placed in the market, but we are stepping up our demand activation activities, our new mom targeting programs, et cetera. So slower than expected, but largely on track in a market that's really been more dynamic than we've seen probably previously. Eduardo?

really expect to continue to ramp up in the second half. We still have, uh, 20% of our skus that we were launching this year to be

Eduardo Bezerra: Yeah. Hey, Keith. Good morning. Eduardo here. So a couple of comments there. So first, starting with the second quarter, right? So we're seeing, you know, we saw an important increase in our revenue, you know, about 9%. That's mainly driven by store brands. We're seeing, you know, not unexpected Goodstart having a low pickup, you know, a slower pickup versus we originally expected because of the relaunch of the brand that we had at the beginning of the year, you know, under the Goodstart Dr. Brown, right? But, you know, the new SKUs, the 80% that we launched this second quarter are starting to pick up. They're all on shelf across the major retailers, and it's a net of pickup velocity. We're putting all the actions in terms of promotion to make sure, you know, we achieve our expectation in the second half.

Eduardo Bezerra: In light of some of the softness that we saw in the second quarter, we're more prudent, and instead of seeing a 25% growth versus last year, we're more expecting to see a 25% increase in the second half versus the first half of the year, and that's what we're positioning right now. I think, Keith, that just to make sure we don't lose the, you know, the large sight on the big picture, right? So as we look into our performance in the first half of the year, so we were able to grow earnings per share, you know, by 34 cents as compared to last year. And so when you look into our midpoint of the range between 290 and 310, you know, and as you compare to what we need to deliver in the second half, it's just a 3% increase in earnings per share, right?

Comments there. So first starting with the second quarter right? So we're seeing you know we saw an important increase in our Revenue. You know about 9% that's mainly driven by star Brands. Um, we're seeing, you know, not the unexpected, good start having a low pickup, you know, as lower pickup versus we originally expected because of the relaunch of the brand that we had in the beginning of the year, you know, under the Good Start Dr. Brown right. But uh, it it, you know, the the new SKU, the 80% that we launched. The second quarter starting to pick up, they're all on shelf across the major retailers and it's a matter of pick up velocity, we're putting all the actions in terms of promotion to make sure, you know, we achieve our expectation in the second half.

In light of some of these softness that we saw in the second quarter were more prudent. And instead of seeing a 25% growth versus last year, we're more expecting to see a 25% increase in the second half versus the half first half of the year, and that's what we're positioning right now.

I think key is that just to make sure we don't lose the the, you know, the large site on the big picture, right? So as we look into our performance in the first half of the year so we were able to grow earnings per share you know by 34 cents as compared to last year. And so when you look into

Eduardo Bezerra: I know that the gross margin and some of the infant formula, it's a big question on people's minds, but I want to make sure we put that in the right context that, you know, we just need to deliver 3% ahead of what we delivered last year. And there are some important points that I wanted to highlight today. First, you know, all the contracts that we won on OTC store brand give us a significant advantage versus the first half of the year. And second, the infant formula growth that I just mentioned, those two key points, you know, give us the confidence that we're going to be able to deliver our EPS target there.

Eduardo Bezerra: We're seeing consumer, you know, softening, you know, but given also the gains that we had in OTC store brand volume share, this puts us in a confident position that we're going to be able to deliver, you know, our range. The only adjustment there, it's mainly on the top line, given some of the softness that we talked about in the first half of the year and some, you know, prudent approach on how we expect consumer trend to happen in the second half of the year. So I want to make sure I know infant formula always causes some questions, but it's important that we put in the broad context that if we're able to deliver 3% higher, you know, EPS versus what we delivered last year in a much stronger context than we were last year, we can deliver our EPS for the year.

Our uh, midpoint of the range between 29 and 310, you know, as and as you compared to what we need to deliver in the second half is just a 3%, increase in earnings per share, right? I know that gross margin and some of the infant formula. It's a big question on people's mind, but I want to make sure we put that in the right context that, you know, we, we just need to deliver 3% ahead of what delivered last year. And there are some important points that I wanted to highlight today. First, you know, all the contracts that we want on notice C store brand, give us a significant Advantage versus the first half of the year. And second, the infant formula growth that I just mentioned those 2 key points. You know, give us the confidence that we're going to be able to deliver uh you know, our EPS Target there. We seen consumer, you know, softening you know, but uh given also

So the gains that we had in OTC store brand volume, share these buttons in a confident position that we're going to be able to deliver, you know, our range, the only adjustment there. It's mainly on the top line given some of the softness that we talked about in the first half of the year and some, you know, prudent approach on how is expect consumer Trend to happen in the second half of the year. So I want to make sure I know in some formula, I always call some questions but

It is important that we put in the broad context that if we're able to deliver, 3% higher, you know, APS versus what we delivered last year, in a much stronger context that we were last year, we can deliver our EPS for the year.

Keith Devas: Great. That's very helpful. I think you touched on a lot of points that I was going to get to in the follow-up, but maybe just confirming, you know, some of the building blocks you laid out in the second half to get to guidance. I think originally you called for 60% of the EPS to come in the second half. It looks like a little bit more now. Maybe just talk about the visibility that you have in some of the building blocks you called out earlier to get there, you know, despite the top line coming in a little, you know, at the low end of the range. Anything you can add in just terms of contextual?

Patrick Lockwood-Taylor: Yeah. Let me, yeah. Thank you, Keith. I just want to address the point you said that we don't agree with. The EPS requirement for the second half is exactly in line with our guidance. It is not an increased burden in the second half. It's being executed per our financial plan and our financial guidance. But to go into a bit more detail on the other part of your question, Eduardo?

Great. That's very helpful. Um, I think you uh, touched on a lot of points that I was going to get to in the follow-up, but maybe just confirming, you know, some of the building blocks you laid out in the second half to get the guidance. Um, I think originally you called for 60% of the EPS to come in the second half it looks like a little bit more now. Um, maybe just talk about the visibility that you have in some of the building blocks you call that earlier to get there. Um, you know, despite the top line coming in a little you know, at the low end of the range. Yeah. Anything you can add in just terms of. Yeah, let me. Uh, yeah. Thank you. I I just want to, uh, address the point. You said that we don't agree with the, the EPS requirement for the second half is exactly in line with our guidance.

Eduardo Bezerra: Yeah. So on organic sales, right? So second half versus first half, it's high single digits that we expect. You know, we don't expect significant contribution from CSCI because we know CSCI last year had a strong position and because also we have the divestments that are lapping, you know, significantly in the mid of this year. We do not expect significant change there. The majority of that growth comes from CSCA, and 75% of the growth is coming from OTC, right? It's all about the new contracts, the wins versus losses, you know, which, remember, it was a negative impact in the first half of this year, and it's going to be a positive in the second half. So you need to consider, in total, it's a significant amount of growth in the top line we expect to see in the second half.

Um, it is not an increase burden in the second half. It's it's being executed for our financial plan, and our financial guidance, but to go into a bit more detail, uh, on the other part of your question regarding. Yeah. So on organic sales, right? So second and a half versus first half, its high single digits that we expect, you know, we don't expect significant uh,

Contribution from csci because, you know, csci last year had a strong position and because also we have the divestments that are lapping, you know, significantly, uh, in the mid of this year, we do not expect significant change there.

Eduardo Bezerra: Second, you know, cough and cold season assumptions as well. You know, remember last year we had a very late start, so we are assuming that, you know, we should see a pickup there. And all the demand generation activities that Patrick highlighted and focused on the velocity and all the partnerships, like the example he gave on allergy, and we're looking to similar ones in other parts of the OTC business, give us the confidence we're going to be able to deliver on that. And the remaining 25% comes from nutrition. And again, it's basically those four points that Patrick mentioned: the 20% of the remaining SKU, the ramp-up of the 80% is all the demand generation activities that we're doing and making sure that we have the promotion of what they need. When we look into gross margin, you know, in the first half, we delivered 39.5%, right?

New contracts that wins versus losses. You know which remember it was a negative impact in the first half of this year and it's going to be a positive in the second half so you need to consider in total. It's a significant amount of growth in the Top Line we expect to see in the second half.

You know, coughing cold.

And assumptions as well.

Had a very late start, so we are assuming that uh, you know, we should see a pick up there and all the demand generation activities that Patrick highlighted and focus on the velocity and all the Partnerships. Like the example, he gave on allergy and are looking to similar ones in other parts of of the OTC business. Give us the confidence. We're going to be able to deliver on that.

And the remaining 25% comes from nutrition.

And again.

Uh it's basically those 4 Points that Patrick mentioned is the 20% of the remaining SKU is the ramp up of the 80% is all the, uh, the main generation activities that you're doing and making sure that we have the promotion of what they need.

Eduardo Bezerra: And one thing that I don't know if it was exactly clear in my comments, but we planned that we would see a second quarter impact because of lower volume absorption coming from the last quarter of last year because of, you know, the deferral of those variances. We knew that it was going to impact. So we're exactly on plan. To be honest, we believe we are a little bit ahead of our plan, so that gives us the more confidence, you know, to deliver on the second half of the year. And then in terms of operating profits, right? So the key driver of that is really the gross profit, and we expect some lower operating expenses to take place in the second half of the year.

Eduardo Bezerra: Remember when we highlighted during the investor day and the first quarter that we'll do significant investment in the first half of the year to make sure that we would, you know, support our brands, and we did a significant portion of that. We didn't go more aggressive there because of the softening that we saw in some markets and certain categories like allergy, the skincare season that was very late in the Northern Europe as well this year. And so all those components made us a little bit adjust that. So that's why you see a little bit more AMP investments in the third quarter. But at the end of the day, as Patrick highlighted, we're going to be 60% towards the second half versus 40% in the first half that we delivered. So against our plans, we are pretty in line to that.

When I look into gross margin, you know, in the first half we were, uh, we delivered 39.5%, right? And 1 thing that I, I don't know if it was exactly clear in my comments but we planned that we would see a second quarter impact because of volume lower volume absorption coming from the last quarter of last year because of, you know, the deferral of those currencies, we knew that was going to impact. So we're exactly on plan to be the others. We, we believe we are a little bit ahead of our plan, so that's give us the more confidence, you know, to deliver on the second half of the year and then, in terms of operating profits, right? So the key driver of that is really the gross profit and we expect some lower operating expenses to take place in the second half of the Year. Remember, when we highlighted during the investor day and the first quarter that we will do significant investment in the first half of the year to make sure that we would

You know, support Our Brands and we did a significant portion of that.

We didn't go more aggressive there because of the softening that we saw in some markets and certain categories like allergy the skincare season that was very late in the northern Europe as well this year and so all those components made us a little bit adjust that. So that's why you see a little bit more uh amp investments in the third quarter. But at the end of the day as Patrick

Highlighted, we're going to be 60% towards the second half versus 40% in the first half that we delivered. So, against our plans, we are pretty in line to that.

Keith Devas: Great. Thanks for all the color. Pass it on.

Great. Thanks for all the color. Pass it on.

Eduardo Bezerra: Thanks, Keith.

Operator: And your next question comes from the line of Suzette Anderson with Canaccord Genuity. Please go ahead.

Suzette Anderson: Hi. Good morning. Thanks for taking my questions. You talked about taking strategic pricing. I guess maybe if you could talk a little bit more about what that will look like, will it be across both the branded and private label OTC? And then I guess if private label, I'm just curious the conversations you're having with retailers around potential pricing, I guess are they open to kind of increased prices there? Thanks. That's me.

And your next question comes from the line of Suzanne Anderson. With canico genuity, please go ahead.

Hi, good morning, thanks for taking my question. Um, you talked about taking strategic pricing, I guess, maybe if you could talk a little bit more about what that will look like, will it be a cross? Both the Branded and private label OTC and then I guess it privately will. I'm just curious the conversations you're having with retailers around potential pricing, I guess, are they open to kind of increase prices there? Thanks.

Eduardo Bezerra: Hi, Suzette. Good morning. Eduardo, your question is mainly related to the impact on tariffs, right? So again, as we mentioned, for this year, we expect a small impact between $10 and $20 million, mainly in the fourth quarter of the year. But we're having very good discussions on both OTC and oral care, and the impact is evenly splitted amongst those two. You know, some categories are very clear and customers are accepting that. Sometimes they challenge on the volumes of the business, but so far, we're pretty well on track, you know, on our expectations to fully offset those impacts, not only this year, but also next year. And remember, about two-thirds of that is going to come from pricing actions, and the remaining are related to supply chain, either in sourcing or other actions that we're taking.

That's me. Hi Susan. Good morning Eduardo here. Your your question is mainly related to the impact on Paris, right?

So I again, as a as we mentioned for this year, we expect a small impact, this in 10, 10 and 20 million dollars, mainly in the fourth quarter of the year, but we having very good and discussions on both OTC and all care. And the impact is is evenly split that amongst those 2. Um, you know, some categories are very uh, clear and uh customers are are accepting that sometimes.

They Challenge on on the volumes that the business, but so far we're pretty well on track, you know, on our expectations to fully offset those impacts not only this year but also next year, and remember about 2/3 of that is going to come from pricing actions and the remaining are related to supply chain either in sourcing or other actions that we're taking.

Suzette Anderson: Okay. Great. And then I was just curious on the private label side, are you seeing any accelerated pace of kind of consumers trading down to private label at all, or is it kind of pretty consistent with what we have seen in the past?

Okay, great. And then I was just curious on the private label side. Are you seeing any accelerated pace of kind of consumer's trading down to private label at all? Or is it kind of pretty consistent? What what what we have seen in the past?

Patrick Lockwood-Taylor: I think it's fair to say we have seen an acceleration.Store

Patrick Lockwood-Taylor: brand OTC is gaining share. We're gaining share of store brand OTC. We're seeing volume and now units accelerating as well. And the important point here is typically 70% to 80% of consumers, once they do move into store brands, stay with store brands. They think of that as an annuity going forward. They get exactly the same, obviously, medical benefit for significantly better value. So we are seeing it. We are seeing a partnering of retailers to continue to invest and grow household penetration of store brand OTC. I think that allergy program that I referenced in my comments is a very good illustration. And we have multiple similar efforts now being developed for execution in Cough, Cold, and into 26. We talked at the last call about this demand generation effort. I committed to give some commentary on that.

Fair to say we have seen an acceleration. Um,

Store brand OTC is gaining share. We're gaining share of store brand OTC. Uh, we're seeing, uh, volume and and now units, uh, accelerating as well.

Uh and the important Point here is typically 70 to 80% of consumers, once they do move into store brand state with store brands, they think of that as an annuity going forward.

I get exactly the same obviously, uh, uh, medical benefit, um, for significantly better value. So, we are seeing it. We are seeing and partnering with retailers, to continue to invest, and grow household, penetration in the store brand OTC. I think that allergy program that I referenced in. Uh, my comments is a very good illustration.

um and we have multiple similar efforts, now being developed through execution and cough cold and into 26

we talked at the last call about this demand generation

Patrick Lockwood-Taylor: We will see about 20 million of revenue that we're seeking to target, which will help us maintain sales in light of some category contraction and a multiple of that going into 26. Now, that all needs to be part of our financial stewardship, of course, as we look to deliver margin and EPS expansion. But we've put a lot of effort into this incremental demand generation. I'm pleased with what I'm seeing. It's new work for PERRIGO. It's new work for a lot of our retailers, but it's having a meaningful consumer impact, and we will continue to expand that.

effort, um, I committed to give some commentary on that. Um, we will see, um,

about 20 million of Revenue, that was seeking to Target, which will help us maintain sales in light of some category contraction, um, and a multiple of that going into 26 now that all needs to be part of our financial stewardship, of course, as we look to do

Deliver um margin and EPS expansion, but we've put a lot of effort into this incremental demand generation pleased with what I'm seeing is new work for Perrigo. This new work for a lot of our retailers but it's having a meaningful consumer impact and we will continue to expand that.

Rachel Smith: Okay, great. And then maybe just to follow up on the previous question on just kind of like the back half, but more focused on the top line, I guess I'm just curious on this, I guess, the step change in growth to the back half. I don't know if you can kind of parcel out by order of magnitude kind of the change. You know, is the biggest change in growth coming from infant formula, the private label OTC gains, or you know, maybe if you could just kind of expand on that a little bit. Thanks.

Patrick Lockwood-Taylor: Well, let me give some real top line and then Eduardo with a bit more detail. It's a fair question. You'll see about 9% approximately increase in second half versus first half. The international business is relatively flat. So very encouragingly, we're starting to see a step change in performance in the US, which has taken a lot of work and planning. Order of magnitude, about 15% increase in the second half versus half one for the Americas business. And to answer your question, about 75% of that actually coming from OTC. We've talked about net wins and losses in store brand contracts. It's in excess of 75 million from there. The cough cold season was particularly weak last year, so you'll see tens of millions of improvement on that. I just talked about demand generation accelerating store brand OTC velocity. That's north of 30 million.

Okay, great. Um, and then, maybe just a follow-up on the previous previous question on. Just kind of like the back half but more focused on the top line. I guess, I'm just curious on this, I guess this step change and, and growth to the back half. I don't know if you can kind of parse It Out. By order of magnitude, kind of the change, you know, is the biggest change in growth coming from infant formula, the private label OKC games or, you know, maybe if you could just kind of expand on that a little bit, thanks.

Well let me let me give some real Topline and Ado with a bit more detail. Um it's a fair question. Uh you'll see

About 9%, approximately increase in whole uh, second half versus first half.

Um, the international business, relatively flat. So very encouragingly. We're starting to see a step change in performance in the US, which is taken a lot of work and planning.

Uh, order of magnitude about 15% increase in the second half versus half 1 for the America's business. And to answer your question about 75% of that actually coming from OCC, we've talked about net wins and losses in store brand contracts. Uh, you know, in excess of 75 million, from there, the cough cold season was was particularly weak last year. So, you'll see tens of millions of improvement on that.

Patrick Lockwood-Taylor: And then about 25% coming from the nutrition and infant formula business, as we see consumption ramp up and USK use and demand generation activity kicking in as well. So it's fairly broad. It's mainly centered in the US business, which has been a key focus for us in terms of improving performance, and that's starting to land in the P&L now.

Uh, I just talked about demand, generation accelerating store, brand OTC velocity. Um, that's north of 30 million. Uh, and then about 25%, coming from the nutritional infant formula business as we see consumption ramp up and usk, use and demand generation activity kicking in as well.

So it's fairly broad, it's mainly centered in the US business where, which has been a key Focus for us in terms of improving performance. And that's starting to starting to land in the p&l now.

Rachel Smith: Okay, great. That was very helpful. And then maybe just one last question on OPIL. I guess, any changes in your longer-term expectation? I think you had previously said 100 million over the long term. now that you, I think it's been kind of under your belt for about a year now. So I guess any change there, any learnings from the brand, just in terms of how to manage it going forward? And then also, do you plan to continue to increase the marketing there to increase awareness? Thanks.

Okay, great. That was very helpful and then, maybe just 1 last question on Opel, I guess. Um, any changes in your longer term expectation? I think you had previously said 100 million over the long term. Um, now that you I think it's been

Kind of under your belt for about a year now. So, I guess, any change there any learnings, from the brand. Um,

Patrick Lockwood-Taylor: Thank you. Increasingly pleased with the performance of OPIL. We'll double consumption this year. We're seeing repeat rates now of about 55%, which is exceptional. There is growing awareness, growing trial, repeat, as I say, extremely high. So we will continue to invest to build awareness. What we've learned is there are very particular cohorts that this brand appeals to. And so we're much more targeted now in our media and our communication and our trial programs against those four cohorts. And it's working well. I think the team is getting increasingly good at the brand building necessary with those cohorts. We're at a point where we believe we can now start to roll out an O brand architecture.

Just um, in terms of how to manage it going forward and then also do you plan to continue to increase the marketing there to increase awareness. Thanks.

Thank you. Um,

increasingly pleased with the performance of opal.

We'll double consumption this year. We're seeing repeat rates now.

And our communication and our trial programs against those 4 cohorts and it's working. Well um I think the team is

Patrick Lockwood-Taylor: We have two or three active projects now in our innovation master plan to continue to build out a comprehensive women's health brand under the O brand across critical life stages, lifestyles, and key need states. So encouraging, and we continue to grow the brand. It was slower than initially anticipated or forecasted in bases, but I'm pleased with how it's developing. What it does show is we can successfully manage a switch. We're able to launch a new category and create new brands.

Is is getting increasingly good, uh, at the brand building necessary with those cohorts. Um, we're at a point where we believe, uh, we can now start to roll out an O brand architecture, uh we have 2 or 3 active projects. Now in our Innovation, master plan to continue to build out, comprehensive Women's Health brand. Um under the oak brand across critical life stages Lifestyles and uh, chi chi, chi chi need States.

So, uh, encouraging and we continue to grow the brand. Um, it will slower than initially anticipated or forecasted in bases, but um, I'm I'm pleased with how it's developing.

What it does show is we can successfully manage a switch. We're able to launch a new category and create new brands.

Rachel Smith: Great. Thanks so much for all the details. Good luck the rest of the year.

Patrick Lockwood-Taylor: Thank you, Suz.

Great. Thanks so much for all the details, good luck. The rest of the year.

Thank you, Susan.

Operator: And our last question comes from the line of Chris Shot with JPMorgan. Please go ahead.

And our last question comes from the line of Chris shot with JP Morgan. Please go ahead.

Bradley Joseph: Hi. This is Ethan on for Chris Shot. Thanks for taking our questions. Just starting off on infant formula, I was curious if you could give any color on what led to the increased product scrap. And then from here, what's your level of confidence that this has been addressed and won't continue to weigh on margins going forward? And then one follow-up after. Thank you.

Hi. This is Ethan on for Chris shot. Thanks for taking our questions. Just starting off on infant formula was curious. If you could give any color on what led to the increased product scrap,

And then from here what's your level of confidence that this has been addressed and won't continue to weigh on margins going forward and then 1 follow up after, thank you.

Patrick Lockwood-Taylor: Thank you, Ethan. As you know, we implemented comprehensive quality assured manufacturing. This was an isolated production issue. A product was out of spec. Our quality systems instantly picked up on that. We made the prudent decision to scrap. Nothing was released into market. We have done a full CAPA on that, adjusted some of our processes, as you would expect, in a continuous improvement manufacturing environment. And we are very pleased with the continued levels of quality assurance that we're achieving. So to answer the question, it was one-off. It was caught. We took the prudent step to scrap, and I do see it as isolated. And most importantly, reaffirmation of the quality manufacturing we now have in place.

Thank you e. Um, as you know we implemented comprehensive quality assured manufacturing. This was an isolated production issue. Um

A product was out of out of spec.

Um, a Quality Systems, instantly picked up on that. We made The Prudent decision to scrap. Nothing was released into Market. Um, we have done a full Capper on that, uh, adjusted some of our processes as you would expect and a continuous improved Improvement. Manufacturing environment. Um, and we are

Bradley Joseph: Thank you. That's very helpful. And then with the updated expectations on the infant formula ramp for the second half of the year, what does that imply for the share you're targeting to exit the year at? And then how does that or does that cause you to rethink your long-term guidance at all? Thank you.

I am very pleased with the continued levels of quality assurance that we're achieving. To answer the question, it was one-off. It was caught, and we took the prudent step to scrap it. I do see it as isolated and, most importantly, it's a reaffirmation of the quality manufacturing we now have in place.

Thank you, that's very helpful. And then with the updated expectations on the Infant Formula ramp for the second half of the year.

What does that imply for the? Share your targeting to exit the year at and then how does that or does that cause you to um rethink your long-term guidance at all? Thank you.

Patrick Lockwood-Taylor: I'll take that and then Eduardo add any color. I think it's fair to say that it has been a slower ramp-up than we expected. We've stepped up some of our activity in terms of demand generation, looking at some of our packaging claims, as I mentioned. And there's no doubt we need to put more effort against rebuilding point of market entry. So we still have the same share ambition. It will take longer. So in terms of store brand volume, share, capacity requirements, etc., that's okay. The bigger question for us, frankly, is there's a lot of variability in terms of local branded share, what that is going to be on a going basis given the continued importation primarily of European organic products. What share of the market are they going to take on a long-term basis?

Um, I'll take that, and then it will auto-add any color. Um,

I think it's fair to say that it has been a slower ramp up and we're expected. Um, we've stepped up some of our activity in terms of demand generation, uh, looking at some of our packaging claims as I mentioned. Um, and there's no doubt we need to put more effort against rebuilding point of Market entry.

so we still have the same share ambition, it will take longer, um,

So I'm I'm in terms of store store brand volume share capacity requirements, Etc. That's okay. The the the bigger question for us frankly is there's a lot of variability in terms of local branded share. Um

What? That is going to be on a going basis, given the continued importation primarily of European organic products

Patrick Lockwood-Taylor: Will the US administration continue to allow importation of foreign product, given emphasis on made in America and the quality standards we already have in our formulations as local manufacturers? That has some variability to it. And we need to continue to try to triangulate that capacity assumption, and that has implications for capital, etc. But in terms of the primary part of our business, store branded from formula, no change to our long-term outlook. And we continue to work through the dynamism that we're seeing on this foreign importation as a matter of priority. Thank you, Ethan.

Um, what share of the market are they going to take on the long-term basis?

Will the US Administration continue to allow importation of foreign product, given emphasis on made in America and the quality standards we already have in our formulations as local manufacturers.

That that has some variability to it, um, and we, we need to continue to try to triangulate that capacity, assumption, and that has implications for Capital Etc. But it turns, with the primary part of our business store branded from formula, no change to a long term Outlook, and we continue to work through the uh, dynamism that we're seeing on this foreign importation um as a matter of priority.

Thank you, please.

Operator: And we have no further questions at this time. I would like to turn it back to Patrick Lockwood Taylor for closing remarks.

Patrick Lockwood-Taylor: Thank you very much. So as we continue to execute our three as planned, stabilize, streamline, and strengthen, we are seeing tangible progress across key areas of the business. New wins in our store brand business have overtaken prior year losses. We've upgraded our brand building capabilities, and those are delivering the results we want. We're scaling our commercial operating growth model, driven by strategic category and brand management with enhanced local commercial execution. This is accelerating and is proving its effectiveness, as I hope we've given you some proof points on today. Despite a dynamic and difficult consumer environment, PERRIGO's diversified portfolio of hundreds of molecules across all price points remains a source of resilience, enabling us to grow share in our most strategic categories and outperform the market very significantly.

And we have no further questions at this time. I would like to start it back to Patrick lack with Taylor for closing remarks.

Thank you very much. So, as we continue to execute our 3S plan—stabilize, streamline, and strengthen.

We are seeing tangible progress across the key areas of the business.

New wins and our store brand business have overtaken. Prior year losses, we've upgraded our brand building capabilities and those are delivering the results we want.

We're scaling our commercial operating. Growth model driven by strategic category and brand management within hands, local commercial execution.

This is accelerating and is proving its Effectiveness. As I hope, we've we've given you some proof points on today.

Despite a dynamic and difficult consumer environment. Peri goes Diversified portfolio. Of hundreds of molecules across all price points remains a source of resilience

Patrick Lockwood-Taylor: Looking ahead, we're reaffirming our fiscal year '25 outlook, with strong operating income growth expected in the high single-digit range and EPS growth expected in the mid-double-digit range, even as net sales are expected towards the lower end of our guidance. We remain very focused on driving growth, deleveraging our balance sheet, and improving free cash flow to net sales, all of which position PERRIGO for long-term value creation. Many thanks for joining us today.

We remain very focused on driving growth, deleveraging our balance sheet and improving free cash flow to net sales.

All of which position perago for long-term value creation.

Many thanks for joining us today.

Operator: Thank you, presenters. And this concludes today's conference call. Thank you all for joining. You may now disconnect.

Thank you for presenters and this concludes today's conference call. Thank you all for joining me now. Disconnect.