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 like Project Energize and Supply Chain Reinvention 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 delivered $53 million in gross savings year-to-date, 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 related impairment charges recognized in Q2.

• Investments in brand building, leadership talent, and innovation are strengthening consumer focus and future growth prospects.

Financial highlights

• Q2 2024 organic net sales declined 9.1% year-over-year, with -6.8ppts from infant formula and -4.0ppts from lower Upper Respiratory and Pain & Sleep Aids, partially offset by +1.7ppts growth elsewhere.

• Adjusted gross margin rose 190 bps to 40.6%; adjusted operating margin up 160 bps to 13.1% year-over-year.

• Adjusted operating income was $139 million, up 1.5% year-over-year; adjusted net income was $74 million.

• GAAP operating loss was $27 million, with reported net loss of $106 million, or $(0.77) per diluted share, due to impairment and restructuring charges.

• 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; second half EPS expected to more than double first half.

• Margin expansion and lower variable expenses are expected to offset net sales headwinds, supporting confidence in EPS guidance.

• Projected operating cash flow conversion of 90–100% and plans to pay down $400 million in debt by year-end, reducing net leverage to 3.8x–4.0x.

• Estimated year-end cash balance $500M–$550M; interest expense expected at ~$180 million; adjusted tax rate ~20.5%.