Perrigo Company (PRGO) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales declined 10.7% year-over-year to $1.07 billion, mainly due to lower infant formula and seasonal categories, but margin expansion and cost savings initiatives partially offset topline impacts.

• Adjusted diluted EPS was $0.53, down from $0.63 in Q2 2023, primarily due to prior year tax benefits and infant formula impact.

• Project Energize and Supply Chain Reinvention programs are underway, delivering $53 million in gross savings year-to-date and targeting $140–$170 million annualized pre-tax savings by 2026.

• Completed divestment of HRA Pharma Rare Diseases business in July 2024, with $205 million in proceeds and a $34.1 million impairment charge recognized in Q2.

• Leadership strengthened in quality, brand building, and key areas, enhancing consumer focus.

Financial highlights

• Q2 2024 organic net sales declined 9.1% year-over-year, with -6.8 to -7 percentage points from infant formula and -4 points from lower Upper Respiratory and Pain & Sleep Aids, partially offset by +1.7 points growth elsewhere.

• Adjusted gross margin was 40.6% (+190bps YoY); GAAP gross margin was 37.0% (+120bps YoY).

• Adjusted operating income was $139 million, up 1.5% year-over-year; GAAP operating loss was $26.5–$27 million due to impairment and restructuring charges.

• Adjusted net income was $74 million, or $0.53 per share; reported net loss was $106–$108.4 million, or $(0.77)–$(0.79) per share.

• Cash and cash equivalents at quarter-end were $543 million, excluding $205 million from HRA Pharma divestment.

Outlook and guidance

• Fiscal 2024 organic net sales growth outlook revised to -3% to -1%; total net sales growth now -5% to -3%.

• Adjusted diluted EPS guidance reaffirmed at $2.50–$2.65 for fiscal 2024, with second half EPS expected to more than double first half.

• Project Energize expected to deliver $140–$170 million in annualized pre-tax savings by 2026; Supply Chain Reinvention Program targets $200–$300 million annual run-rate savings by 2028.

• Operating cash flow conversion for full year expected at 90–100% of adjusted net income.

• Net leverage ratio targeted to reduce to 3.8x–4.0x by year-end 2024.