Executive Summary

Q1 2025 delivered strong margin expansion and EPS despite softer top-line: adjusted gross margin rose 440 bps to 41.0% and adjusted EPS more than doubled to $0.60; organic sales declined 0.4% on lost distribution, lack of Opill® launch-stocking benefit, and Digestive Health softness .
Versus consensus, PRGO posted a mixed print: Primary EPS beat ($0.60 vs. $0.566*) while revenue missed ($1.04B vs. $1.09B*) and EBITDA slightly beat ($164.6M vs. $160.4M*) .
Guidance was prudently widened on topline given macro/tariff uncertainty (reported net sales 0–3% from 1–3%; organic 1.5–4.5% from 2.5–4.5%); all other FY25 targets were reaffirmed (adj. EPS $2.90–$3.10, adj. gross margin ~40%, adj. op margin ~15%, cash conversion ~100%, FCF ~6%, net leverage ~3.5x) .
Stock-relevant narrative: infant formula recovery (+19% YoY) and Project Energize savings drove margins/EPS, while tariff mitigation plans and store-brand share gains could underpin estimate stability even as topline ranges widen .

What Went Well and What Went Wrong

What Went Well
- Infant formula recovery accelerated: “first quarter… infant formula net sales increased by 19%” and nutrition category grew 16%, supporting gross margin and EPS .
- Margin expansion and efficiencies: adjusted gross margin to 41.0% (+440 bps) and adjusted operating margin to 14.0% (+550 bps), with Supply Chain Reinvention and Project Energize benefits; Energize run-rate savings reached ~$159M .
- CEO tone on brand strategy: “our global brands delivered organic growth of +5.9%… actions to Streamline… Strengthen investments on key brands” .
What Went Wrong
- Top-line softness: reported net sales fell 3.5% (organic -0.4%) on previously disclosed lost lower-margin distribution (~0.8–1.3%), lack of Opill® prior-year launch-stocking (~1.4–2.3%), and Digestive Health consumption declines .
- CSCA margin pressure QoQ in Q2 (context): later quarter showed isolated production variability and lower overhead absorption weighing margins; Q1 commentary noted higher A&P around Opill® and infant formula activation .
- Macro/tariffs uncertainty widened top-line range; expected COGS increase tied largely to Oral Care sourcing (80% of impact in CSCA Oral Care) .

Financial Results

Consolidated results vs prior quarters

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$1,087.5	$1,138.3	$1,043.9
Adjusted Diluted EPS ($USD)	$0.81	$0.93	$0.60
Reported Diluted EPS ($USD)	($0.13)	($0.30)	($0.05)
GAAP Gross Margin %	37.2%	33.9%	37.6%
Adjusted Gross Margin %	41.0%	37.2%	41.0%
Adjusted Operating Margin %	16.8%	17.0%	14.0%

Actual vs Wall Street consensus (S&P Global)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue Actual ($USD Millions)	$1,087.5	$1,138.3	$1,043.9
Revenue Consensus ($USD Millions)*	1,129.9*	1,195.7*	1,086.5*
Primary EPS Actual ($USD)	$0.81	$0.93	$0.60
Primary EPS Consensus ($USD)*	0.8120*	0.9215*	0.5658*
EBITDA Actual ($USD Millions)*	195.8*	349.1*	164.6*
EBITDA Consensus ($USD Millions)*	207.3*	216.9*	160.4*

Values retrieved from S&P Global.*

Segment breakdown

Segment Metric	Q3 2024	Q4 2024	Q1 2025
CSCA Net Sales ($USD Millions)	$671.3	$744.1	$620.7
CSCI Net Sales ($USD Millions)	$416.3	$394.1	$423.1
CSCA Adjusted Operating Income ($USD Millions)	$131.9	$146.0	$100.1
CSCI Adjusted Operating Income ($USD Millions)	$91.9	$83.0	$86.3

KPIs and balance sheet

KPI	Q4 2024	Q1 2025
Cash from Operations ($USD Millions)	$313	($64.5)
Capital Expenditures ($USD Millions)	$38	$26
Dividends Paid ($USD Millions)	$40	$41
Cash & Equivalents ($USD Millions)	$559	$410
Total Debt ($USD Billions)	$3.62	$3.63

Performance vs estimates (interpretation)
- Q1 2025: Primary EPS beat; Revenue miss; EBITDA beat. Q4 2024: broadly in line to slight EPS beat; Q3 2024: EPS in line; revenue light. Bold signals: EPS beat and revenue miss are material for Q1.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Reported Net Sales Growth	FY 2025	1%–3%	0%–3%	Lowered range midpoint
Organic Net Sales Growth	FY 2025	2.5%–4.5%	1.5%–4.5%	Lowered range floor
Adjusted Gross Margin	FY 2025	~40% (Investor Day)	~40%	Maintained
Adjusted Operating Margin	FY 2025	~15% (Investor Day)	~15%	Maintained
Adjusted Diluted EPS	FY 2025	$2.90–$3.10 (Investor Day)	$2.90–$3.10	Maintained
Operating Cash Flow Conversion	FY 2025	~100%	~100%	Maintained
Free Cash Flow / Sales	FY 2025	~6%	~6%	Maintained
Net Leverage	FY 2025	~3.5x adj. EBITDA	~3.5x	Maintained
Dividend Declared	Q2 2025 payable	—	$0.290 per share (declared)	Ongoing shareholder return

Known macro impacts (not guidance): tariffs expected to add ~$30–$40M to 2025 COGS starting in Q4 and ~$145–$155M on a full-year basis; majority tied to CSCA Oral Care; management plans price actions, insourcing, and supply chain moves to offset .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 2025)	Trend
Infant formula recovery	Q3: +3% YoY, +58% sequential; share gains . Q4: +17% YoY, FDA WI facility “No Action Indicated” .	Q1: +19% YoY; shelf resets, ~60 SKUs reintroduced; expect stronger H2 ramp; pricing gap vs national brands being addressed .	Improving, tempered by pricing dynamics; stronger H2 expected.
Tariffs/macro	Limited mention in Q3/Q4.	Detailed tariff impact and mitigation (pricing, insourcing, alt sourcing); widened topline ranges prudently .	New headwind; mitigation plans in place.
Supply chain & operations	Q3/Q4: Supply Chain Reinvention aiding margins .	Service levels at 94; continued margin support; Energize annual run-rate ~$159M .	Positive operational trajectory.
Store brand distribution	Q3/Q4: lost lower-margin distribution weighed on volumes .	Lapsing headwind; new awards expected to offset starting Q2; unit/volume share gains .	Turning from headwind to tailwind.
Women’s Health (Opill®)	Q3: launch tailwinds; Q4: strong growth .	Q1: lack of prior-year launch-stocking depressed YoY; continued A&P support .	Normalizing post-launch.
Regulatory/legal	Q4: FDA WI facility status improved .	Q1: $43M securities litigation settlement impacted cash flow .	De-risking on regulatory; legal cash outflow absorbed.

Management Commentary

CEO on brand/portfolio strategy: “our global brands delivered organic growth of +5.9% driven by actions to Streamline the portfolio and Strengthen investments on key brands…” .
CEO on mitigation and confidence: “Tariffs are expected to increase our global cost of goods sold… We plan to offset this impact through… price actions, insourcing… Though we are widening our 2025 topline growth ranges… we reaffirm all other 2025 financial targets” .
CFO on cash and operations: “Q1 operating cash was an outflow of $65M… rebuild infant formula inventories… $43M securities litigation settlement… restructuring costs of $17M” .
CEO on infant formula trajectory: “similar trajectory in Q2 and then ramping up significantly in the second half… reintroducing nearly 60 national brand equivalent SKUs” .

Q&A Highlights

Tariffs and EPS: Management expects to “mitigate 100% of the impact… not only this year, but… 2026… do not anticipate any major change in projections” .
Infant formula ramp: Q1 ~$105M; similar in Q2; ~50% growth expected in H2 with SKU reintroductions and shelf resets .
Pricing actions timeline (Oral Care): working with major retailers; price adjustments and insourcing expected “in the next three months” .
Gross margin outlook: despite Q1 upside, management still expects ~40% for FY25; Q1 reflected unusually high manufacturing efficiencies .
Guidance range drivers: consumer uncertainty vs store-brand tailwinds; infant formula promotions by national brands temporarily compress price gaps, prompting PRGO response .

Estimates Context

Q1 2025 vs consensus (S&P Global):
- Primary EPS: $0.60 actual vs. $0.5658* consensus → beat .
- Revenue: $1.0439B actual vs. $1.0865B* consensus → miss .
- EBITDA: $164.6M* actual vs. $160.4M* consensus → beat.
Drivers: margin expansion from infant formula recovery and efficiency programs offset revenue headwinds (lost lower-margin distribution, Opill® launch-stocking comp, Digestive Health) . Values retrieved from S&P Global.*

Key Takeaways for Investors

Margin-led thesis intact: Supply Chain Reinvention and Project Energize are delivering, with gross margin at 41% and EPS beats despite top-line softness .
Infant formula recovery is a core catalyst; H2 ramp expected with ~60 SKUs and shelf resets, but watch price-gap dynamics vs national brands .
Topline ranges widened prudently on tariffs/consumption; EPS/FCF/leverage guides reaffirmed—estimate risk skews more to revenue than profit metrics .
Near-term trading: EPS resilience + tariff mitigation may support multiples; revenue misses on Digestive Health/Opill® comps may cap rallies until H2 volume evidence emerges .
Medium-term: Store brand share gains and insourcing could structurally benefit CSCA and de-risk tariffs; monitor Oral Care price actions and unit elasticity .
Liquidity and deleveraging path intact (cash $410M; net leverage target 3.5x); one-off legal/tariff cash headwinds are being actively managed .
Watch themes: tariff policy evolution, consumer down-trading (potential value brand tailwinds), Opill® consumption normalization, and CSCI pricing/mix sustain .

Bolded beats/misses reflect potential estimate revisions; all company figures cited from PRGO’s Q1 2025 8‑K/press and prior quarter releases; consensus values from S&P Global.*

PERRIGO Co plc (PRGO)·Q1 2025 Earnings Summary