Perrigo Company plc

Ladies and gentlemen, and welcome to Perigo Q3 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 the star zero for the operator. This call is being recorded on Wednesday, November 5, 2025. I would now like to turn the conference over to Brad B. Joseph, Vice President, Global Investor Relations. Please go ahead, sir.

Good morning and good afternoon, everyone. Welcome to Parago's third quarter 2025 earnings conference call. I hope you all had a chance to review our two press releases issued today. Copy of both releases and presentation for today's discussion are available within the investor section of the Parago.com website. Joining today's call, our 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 will 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 items before we start. First, unless stated, all financial results discussed and presented are on a continuing operations basis. Second, organic growth excludes acquisitions, divestitures, exited products, and foreign currency fluctuations in both comparable periods. Third, regarding the strategy reviews discussed today, we will not provide further updates unless and until the company determines further disclosure is appropriate or required. And finally, Patrick's discussion will focus solely on non-GAAP results, except as otherwise noted. And with that, I'm pleased to turn the call to Patrick. Thank you, Brad.

Good morning, good afternoon, and thank you for joining today's call. I'd like to begin by addressing recent category consumption trends across consumer health, which remains soft, reflecting broad, short-term market pressures. Against this backdrop, Perigo has delivered sustained share gains and advanced key initiatives under our 3S plan to stabilize, streamline, and to strengthen. These efforts are enabling us to navigate the challenging landscape while making steady progress on our strategic priorities and reinforcing our long-term value proposition. With that context, let's turn to how these trends influenced our year-to-date performance and our outlook going forward. Let's start with US OTC. Perigo continued to outperform despite a challenging market. While total OTC volume consumption has recently declined versus the prior year, Perigo store brand has delivered six consecutive months of share gains. These gains were driven by strong execution, consumer trade across from national brands, new distribution of business wins, against key store brand competitors. Diving in a bit deeper, you can see on the right-hand side of the slide that over the last 13 weeks, Perigo gained volume share of 90 basis points and across nearly every OTC category we compete, most notably smoking cessation, allergy, and women's health. The same volume share gains in this environment underscores our winning OTC strategy and validates the strength of our value proposition to retailers and consumers. In the EU, total OTC euro consumption has also recently declined. Despite this, Perigo's key brands are gaining dollar share for five consecutive months, driven by our strong brands with unique value propositions, our highly focused AMP investments and innovation, and targeted activation strategies. These durable gains highlight the strength of our category-led approach and the resilience of our key brands, including Ella One, Jungle Formula, and our cold products, Vidium Air and Coldrex. Though our remaining brands in the EU have been impacted by similar trends to the broader market, our key brands illustrate the strength of our portfolio, where we have concentrated our resources. In total, Perigo share gains across the US and Europe, particularly in the current challenging environment, underscores the strength of our execution and the relevance of our unique multi-price point OTC portfolio. Building on our share gains in both the U.S. and Europe, let's turn to the progress we've made against our 3S plan, stabilizing, streamlining, and strengthening, which continues to guide our actions and priorities. We've stabilized our U.S. OTC store brand business and are outperforming the market in the categories we compete. As I just mentioned, we have gained volume share for six consecutive months. This success in consistently growing share in a challenging market results directly from disciplined execution and is clear evidence that this business is winning in the market. In infant formula, store branders also gain share, and operationally, we are consistently delivering safe, affordable formula to parents and caregivers. We also continue to streamline our organization, Delivering is one paragraph. Initiated in 2022, our supply chain reinvention remains on track to deliver between $150 and $200 million in benefits by the end of this year. Project Energize, which has generated $163 million in gross annual savings, above the midpoint of our $140 to $170 million range. Also, as part of our streamlining, we have been positioning our portfolio to become a more strategically scalable TSR attractive portfolio. These efforts are leading Perigo back to our core strength, which is consumer health. The sale of our derma cosmetics business remains on track to close in the first quarter of 2026. As announced this morning, we are now actively reviewing the infant formula business, and I'll get more on this in a moment. We also continue to strategically review our all-care business, which we announced as our February investor day. We have made meaningful strides to strengthen the organization. Our new leadership team is in place. We are scaling new brand building capabilities, and we have an improved and highly focused innovation process. Implementation of our commercial growth model is expected to unlock the full potential of our portfolio, enabling teams to scale more molecules more efficiently to more consumers across more markets. Finally, we are leveraging consumer insights and deepening our retail partnerships in ways that differentiate Perigo versus competition. This is a new way of operating, and the team is energized about the possibilities ahead. Now to our quarter three and year-to-date results. where our diversified portfolio continued to demonstrate resiliency in a challenging environment. For the third quarter, organic net sales declined 4.4%, impacted by 1.6% from our global OTC business, due primarily to soft OTC category consumption, and 2.8% from businesses under review, both oral care and infant formula. Gross profit and margin were down year over year, reflecting next sales performance. Operating profit and margin were partially offset by proven cost management. And as projected, the in-performance scrap expense experienced in quarter two did not repeat, which drove meaningful sequential growth and operating margin expansion of 180 and 380 basis points, respectively. Collectively, these factors led to a third quarter EPS of 80 cents, off one penny versus the prior year. Year-to-date organic net sales declined 1.7%, primarily driven by 0.8% from the businesses under review that I just mentioned, in addition to 0.5% from the absence of last year's Oakville launch stocking benefits. Our remaining OTC business accounted for the balance. Despite marketplace challenges, Year-to-date growth and operating margins expanded, and organic operating income grew 13%, driven by continued execution of our accretive initiatives, recovery and infant formula, and prudent cost management. Year-to-date EPS grew 21% or 27% organically, $1.97. Year-to-date consumption across consumer health has been dynamic and unpredictable. Order one saw year-over-year growth. Order two moved from growth to decline in June, and this decline significantly accelerated in the third order. Drivers appear transitory and do not look structural in nature. Combined with updated assumptions for our own conformer business, these factors have led us to revise our 2025 outlook. This is the right decision for the long-term stewardship of Perigo and our shareholders. In U.S. store brand OTC, Perigo increased dollar, unit, and volume share in five of the seven categories where we compete. In Europe, our key brands, including LO1, Jungle Formula, Compi, and our Coffin Coff franchise also outperformed expectations. To capitalize on this momentum, we reallocated additional AMP investments in both regions, generating approximately $30 million in sales over and above our initial forecast. delivering a solid return on investment. At the same time, market consumption trends have been softer than anticipated. Over the latest 13-week period, U.S. OTC volume as a total category declined 3.2%, while Europe grew just 0.6%, falling short of our original assumption by roughly 700 and 500 basis points respectively. This represents an estimated $150 to $170 million impact to our 2025 net sales outlook. Lastly, whilst Income Formula has stabilized operationally, store brand share recovery will take longer than expected, which in addition to lost good stock brand distribution is contributing an additional $100 million impact. Continuing with Income Formula, today we announced a strategic review of this business as we assess its long-term role within the Perigo portfolio. While we have stabilized this business, the external environment has quickly shifted, which will require sustained investment and disproportionate management focus, making its long-term fit alongside our faster-growing, higher cash yielding, consumer health OTC portfolio less strategic. As a result, the team will consider a full range of options, in addition to pausing our previously announced investment of $240 million. No matter the outcome of this review, our corporate priorities are unchanged. Reduce leverage, sustain our dividend, deliver for customers and shareholders, and focus on our high potential OTC portfolio to expand consumer access and household penetration. During this review, the business will continue to operate as normal, ensuring consistent, and reliable supply of high-quality formula to customers and consumers. In summary, we are executing our 3S plan with discipline, growing share in US store brands and gaining share in our key European brands. These results show the resilience of our unique business model and validate our value proposition, even in a stock consumption environment. At the same time, we are delivering benefits from the supply chain reinvention and from Project Energize. We're also sharpening our focus on consumer health with the announced sale of Dermacosmetics and are actively reviewing both infant formula and oral care. While soft OTC consumption and infant formula are prompting a revision to our 2025 outlook, the momentum from our 3S plan and our share gains reinforce our confidence in Perigo's ability to capture the durable demand trusted consumer health solutions. With that, I'll now turn the call over to Eduardo to walk through the financials.