Perrigo Company (PRGO) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales declined 3.2% year-over-year to $1.09 billion, mainly due to lost distribution of lower margin products, divestitures, and exited product lines, but adjusted operating income rose 21.3% to $182 million, driven by Project Energize and supply chain improvements.

• Adjusted diluted EPS increased 26.6% to $0.81, while reported diluted EPS was a loss of $0.13 due to non-recurring items; infant formula business showed strong recovery, with net sales up 3% year-over-year and 58% sequentially, gaining market share.

• Project Energize and Supply Chain Reinvention delivered $95 million and $32 million in year-to-date gross savings, respectively, supporting margin expansion and operational efficiencies.

• Major asset sales included the completed divestitures of the HRA Pharma Rare Diseases Business and Hospital & Specialty Business, generating significant proceeds and related impairment charges.

• Expanded executive leadership and innovation initiatives targeting emerging trends, such as GLP-1 medication side effects, are being activated to drive future growth.

Financial highlights

• Q3 2024 net sales: $1,088 million (down 3.2% year-over-year); nine months: $3,235 million (down 7.5%).

• Adjusted gross margin: 41.0% (up 160 bps year-over-year); GAAP gross margin: 37.2% (up 60 bps year-over-year).

• Adjusted operating income: $182 million (up 21.3% year-over-year); GAAP operating income: $80.4 million (up 29.5% year-over-year).

• Adjusted EPS: $0.81 (up 26.6% year-over-year); reported diluted EPS: $(0.13) to $(0.15) due to non-recurring items.

• Cash and cash equivalents at quarter-end: $1.5 billion; total debt: $4.8 billion.

Outlook and guidance

• Fiscal 2024 adjusted EPS guidance reaffirmed at $2.50–$2.65; gross and operating margin expansion anticipated.

• Organic and reported net sales expected at the lower end of prior guidance: organic net sales growth of -3% to -1%, reported net sales growth of -5% to -3%.

• Operating cash flow conversion expected at 90–100%, assuming insurance reimbursement; adjusted effective tax rate of 19%–20%.

• Year-end cash balance projected at $500–$550 million, assuming insurance recovery; commitment to repay $400 million in senior notes due December 2024.

• Focus remains on free cash flow generation and deleveraging, with net leverage targeted to fall to ~4x by year-end.