PERRIGO COMPANY PLC 2026 Q2 Earnings Call

Please go ahead, sir. Good morning, and good afternoon, everyone.

Welcome to Perrigo's second quarter 2026 earnings conference call. A copy of the release we issued today and the accompanying presentation are available within the investors section of the perrigo.com website. Joining today's call are Perrigo's Interim President and CEO, Albert Manzone, and CFO, Eduardo Bezerra. 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. Now to the agenda. First, Albert will discuss the leadership transition and his priorities. He will review our progress against the Three-S plan, provide a market overview, and discuss our second quarter performance.

Albert will close with an update on the key priorities expected to support improved execution and long-term value creation. Eduardo will provide a financial review and discuss our 2026 outlook. With that, I'll turn it over to Albert.

Thanks, Eric. Good morning, good afternoon, and thank you for joining today's call. I'd like to start by stating that it is an honor and an enormous responsibility to serve as Perrigo's Interim President and CEO. I want to assure our customers, our investors, and my fellow Perrigo colleagues that I am 100% committed to our mission of being a world leader in affordable consumer self-care. We have important work ahead of us, and I am moving quickly to advance our key priorities. I have served on Perrigo's board since 2022, and I have spent more than three decades leading and transforming consumer businesses at critical inflection points, including in OTC health care. I know this company, and I have a clear view of what it takes to create value here. I spent my first months on the road listening. Three things stand out. First, our customers.

They value what Perrigo brings to the market, and they want to do more business with us. We have a great deal to offer and a clear right to win. Second, our investors. I have heard from them directly. The confidence of the investment community must be re-earned, and I take this personally. Third, our team. This is an experienced team with the capabilities needed to achieve our goals. During the quarter, we also strengthened the board with two accomplished new directors, Salman Amin and Omer Gajial, whose consumer, operational, and strategic experience will help guide our value creation agenda. My message today is simple. The board, the management team, and I are confident in Perrigo's future. Let me start with who we are. We are the leader in store brand OTC in the U.S., and our portfolio of OTC brands in Europe includes several that lead their respective categories.

Our sales are roughly half store brands and half branded, although that mix is geographically concentrated. In the U.S., we're almost entirely store brand, and in Europe, we're almost entirely branded. This combination is unique within our industry. Through our category-led operating model and One Perrigo approach, we serve consumers across brands, store brands, categories, and price points, which is increasingly important as consumers focus more on value. In the second quarter, those capabilities translated into market share gains across our portfolio, even as the categories we compete in remain challenged. Results in the U.S. were particularly strong as we grew dollar, unit, and volume consumption. Category trends improved as the quarter progressed, and that momentum is carrying into the third quarter. We're also reaffirming our full-year 2026 outlook, weighted toward the second half and supported by clear tangible drivers.

We remain mindful of an uncertain consumer and economic environment, but we are executing on what we control, gaining share, streamlining the portfolio, and reducing debt. Our progress runs through the Three-S plan: stabilize, streamline, and strengthen. On stabilize, we have improved the consistency of our operations, our service levels, and our execution across key categories. Since 2023, U.S. service levels are up 1,600 basis points to 91%, and international service levels are up 1,000 basis points to 95%. Better service has strengthened customer relationship and directly supported our share gains. On streamline, we have simplified the portfolio, strengthened the balance sheet, and taken cost out. Since 2024, divestitures have generated approximately $600 million on upfront proceeds, mainly applied to debt reduction, including this quarter's sale of Dermacosmetics for $359 million. Our operational enhancement program is on track to deliver $80 million-$100 million of savings by 2027.

We are also advancing the strategic reviews of infant formula and oral care, examining whether to optimize, partner, or divest each. Our approach is discipline. Any outcome must enhance shareholder value and sharpen the focus of the portfolio. In the meantime, we have improved the infant formula business through capacity rationalization, greater efficiency, and innovation. Those actions have improved stability, increased visibility, and strengthened the business regardless of the outcome of those reviews. On strengthen, we have built the capabilities that drive future growth. A new category-led operating model, a substantially larger innovation pipeline, deeper retailer partnerships, and stronger demand generation. The value of our innovation pipeline has more than tripled since 2024, with over 55% of projects now leveraging shared platforms. That makes our investment more efficient and more scalable, driving share gains across U.S. store brands, OTC, and key European brands.

Taken together, the Three-S plan has created a more focused company and a foundation for growth. While we have more work ahead of us, the momentum in the business is encouraging and the path is clear. A quick word on the market. Consumption is still below historical averages, but it is improving. U.S. value and volume trends improved sequentially through the quarter, and Europe improved as well. The improvement has continued into the third quarter. U.S. OTC volumes in the categories where we compete turned positive in the four weeks ended July 19th. Softness has been concentrated in seasonal categories within the self-care segment, including cough, cold, pain, and allergy, reflecting lower seasonal incidents and tough year-over-year comparisons. We view this softness as temporary, and it does not change our view of long-term demand. We expect category trends to keep improving as comparison ease through the year.

Our purpose is to expand access to quality, affordable self-care, and that purpose has never been more relevant than it is today with consumer focused on value. That alignment, plus better execution and a differentiated model, is producing measurable share gains. In the U.S., the categories we compete in declined 1.1% in volume. Yet, we grew our store brand OTC volumes across self-care and specialty care by a combined 1.5%, taking 50 basis points of market share. In Europe, category value declined 0.6%, while our key brands grew 3.3%, again, taking 50 basis points of market share. Those share gains are the outputs of our growth building blocks, and a few examples show the model in action. Opill continues to build in its second year with rising velocities across major retailers, strong repeat rates, and consumers trading up to larger packs.

It is proof that focused innovation paired with targeted demand generation can grow a category. Compeed accelerated through the quarter on earlier seasonal activation and better in-store execution across Europe, delivering share gains and record recent sales. It shows what brand investment plus commercial execution can do. Our store brand allergy business kept gaining share on the back of innovation, distribution wins, and demand generation that is lifting household penetration. The common thread is a more integrated, more scalable engine. One category-led model, one innovation pipeline deployed across categories, markets, and price points. Turning briefly to the numbers before Eduardo takes you through the detail. Core net sales declined 3.1% year-over-year, and all-in net sales declined 3.2%. Driven by continued category softness against a strong prior year, a slow start to summer categories, and retailer destocking.

Within all-in, infant formula grew 23%, more than offset by the Dermacosmetics divestiture. Core adjusted EPS was $0.46, and all-in adjusted EPS was $0.50. Earnings came ahead of our expectation, driven largely by one-time cost benefits, which is why we're maintaining, not raising our outlook. The indicators we care most about, market share, execution, cost savings, debt reduction, and portfolio actions all moved in the right direction. We called 2026 a transition year, with softer reported results in the first half masking real operational progress. That is how it has played out. We continue to gain share, which is the clearest sign our strategy is working, and that we will benefit when demand normalizes. Our growth building blocks, innovation, demand generation, and distribution are building toward a sequentially stronger second half. Let me close with where we're going, because that is what will define Perrigo.

First, we will sustain market share growth by expanding access to quality, affordable self-care products. In the U.S., our goal is not only to gain share within store brand OTC, but to grow the category. Store brands are under-penetrated, and we're uniquely positioned to expand the category by partnering with our retail customers to bring more consumers quality self-care at a better value. In Europe, we have strong brands like Compeed and Jungle Formula that lead their categories. We're investing behind those winners and focusing our resources where we have the strongest opportunities to win. This approach allows us to be nimble and competitive in the areas where we choose to play. Second, we will continue to simplify and strengthen our portfolio to sharpen focus, discipline, and consistency.