Perrigo (PRGO) Launches 3-Year Optimize and Accelerate Strategic Plan, Issues FY23 Guidance

Perrigo Company plc (NYSE: PRGO) announced that it will outline its plans to drive long-term profitable growth and build shareholder value at today's Virtual Investor Day. Several key members of the Perrigo leadership team, including President and Chief Executive Officer, Murray S. Kessler, will share the Company's 2023 to 2025 Optimize and Accelerate strategic plan and corresponding financial objectives.

Kessler commented, "As a newly transformed consumer self-care company, our team is intensely focused on the next phase of our plan aimed at Optimizing our commercial operations through our Supply Chain Reinvention Program and Accelerating profitable growth through organic growth and successful integration of recent acquisitions. Collectively, these initiatives are expected to deliver returns that exceed our stated long-term growth algorithm of '3/5/7'1 through 2025, well above the average of our CPG peers. Concurrently, we intend to strengthen our balance sheet by reducing net leverage to less than 3x adjusted EBITDA2 by end of 2025, through a strong focus on earnings growth, cash conversion3 and further portfolio refinement as appropriate. We believe these plans will build value for shareholders as we continue to Make Lives Better for those consumers who depend on Perrigo products."

In 2022, the Company completed its four-year transformation from a healthcare to a pure-play consumer self-care company through several major actions that can be summarized as:

1. Reconfiguring Perrigo's product portfolio: Completed twelve transactions over the past four years, culminating with the acquisition of Héra SAS ("HRA Pharma" or "HRA") in 2022. These actions transformed Perrigo into a pure-play consumer self-care company.

2. Investing to restore growth and upgrade the Perrigo infrastructure: As a result, Perrigo delivered constant currency net sales compound annual growth rate (CAGR) from 2018 to 2022 of 7%, excluding divestitures, and organic net sales CAGR of 3%. This was achieved through the Company's strong new product pipeline that launched more than $600 million in innovation over the past four years. The Company also invested more than $130 million in information technology and global infrastructure, and built a strong eCommerce platform that achieved constant currency net sales CAGR, excluding divestitures, of 55% from 2018 to 2022.

3. Reducing uncertainty: The Company successfully overcame and advanced several challenges, including a favorable settlement of the Irish Tax Notice of Assessment and by divesting the most volatile portions of its portfolio.

Today, Perrigo is unveiling the details of its 3-year Optimize and Accelerate strategy at its Virtual Investor Day. Highlights include:

1. Why the Company firmly believes its self-care strategy is correct: Perrigo is extremely well positioned within this emerging sector as 1) national brands will continue to invest and build their brands, providing a long runway for store brand innovation, 2) consumer demographics remain favorable; as the global population ages there will be a greater need for OTC products, 3) further opportunities for Rx-to-OTC switches, and 4) the greater likelihood for increased Wall Street industry coverage that has the potential to add new investor interest to Perrigo.

2. How the Company plans to continue to grow organic net sales by 3% or more over the long-term: Perrigo has proven that it can consistently grow organic net sales by 3% and will share opportunities it has to refine its strategic growth pillars to continue driving growth through 1) adjacent market and product category penetration, 2) global expansion of key brands, 3) a robust pipeline of new products, especially in the high growth Women's Health and Skin Care categories, both new focus areas for the Company, and 4) making further investments in its high growth eCommerce business.

3. How Perrigo intends to build its adjusted gross margin to at least 40% over the next 3 years: The Company is utilizing a broad set of tools aimed at rebuilding and expanding adjusted gross margin through 1) its Global Supply Chain Reinvention Program that has the potential to deliver an annualized run-rate savings of $200 million to $300 million, excluding depreciation, by the end of 2028. Corresponding cash investments to achieve this run rate are expected in the range of $350 million to $570 million by the end of 2028, including $110 million for the 2022 acquisition of the Gateway infant formula plant and U.S. & Canadian GoodStart® brand ("Gateway"), 2) successfully integrating the significantly margin accretive acquisition of HRA and achieving €50 million in synergies by the end of 2024 from, in part, shifting distribution of product from external third parties to Perrigo's in-house distribution and sales infrastructure, 3) successfully integrating the margin accretive acquisition of Gateway, and 4) benefits from the annualization of inflation-justified pricing actions taken in 2022 and partial normalization of the global supply chain, which is expected to reduce costs.

4. Perrigo's commitment to strong Diversity, Equity and Inclusion (DEI) & Environmental, Social and Governance (ESG) programs: The Company will continue to prioritize and set rigorous goals that the entire organization is committed to achieving, including 1) reducing the Company's impact on the environment, 2) increasing the use of inputs and packaging from recyclable and renewable sources, 3) ensuring all colleagues feel welcomed, valued, respected and heard, and 4) investing in health, education and the needs of the communities in which we work and live.

5. How the Company plans to reduce leverage while still growing its dividend and reinvesting in its business: The Company has a strong balance sheet, $601 million in cash as of December 31, 2022, and expects to generate $1.6 billion to $1.8 billion from operating cash flow and additional portfolio refinements through 2025. These proceeds are anticipated to fund dividend growth, reduce net leverage to less than 3.0x by the end of 2025, support investments to maintain asset reliability, and enable our Supply Chain Reinvention Program and business growth.

6. How the Optimize and Accelerate Strategic plan can translate into shareholder value creation: In addition to margin expansion, these collective actions should enable Perrigo to outperform its long-term 3/5/7 growth algorithm from 2023 to 2025, with:

• • Organic net sales growth in the low-mid single digit percentage range,
  • Adjusted operating income growth in the mid-teens percentage range, and
  • Adjusted diluted EPS growth in the mid-high teens percentage range.

7. Issuing the Company's financial guidance for fiscal year 2023:

• • Reported net sales growth of 7.0% to 11.0% compared to the prior year,
  • Organic net sales growth of 3.0% to 6.0% compared to the previous year,
  • Reported ("GAAP") diluted EPS range of between $0.50 to $0.70,
  • Non-GAAP ("adjusted") diluted EPS range of between $2.50 to $2.70,
  • Adjusted tax expense rate of approximately 21.5%,
  • Interest expense of approximately $180 million, and
  • Cash conversion (operating cash flow as a percentage of adjusted net income) of approximately 100%.

Virtual Investor Day Details

Perrigo's Virtual Investor Day 2023 will start today at 8:00 A.M. EST and can be available at https://investor.perrigo.com/events-webcasts. A replay will also be available.

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