Welcome to Perrigo's 2025 Investor Day. [Operator Instructions].

Good morning, good afternoon and good evening. On behalf of Perrigo's executive leadership team, I'd like to welcome you to Perrigo's 2025 Virtual Investor Day. My name is Brad Joseph, Head of Investor Relations and Communications here at Perrigo. Perrigo's journey over the last few years has been one of transformation into a Consumer Self-Care Company. And today, you're going to hear about how we plan to win in Self-Care by focusing on operational execution, our unique assets and our Three S plan: Stabilize, Streamline and Strengthen, to deliver value to you, our shareholders. But before we do that, 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 and we'll provide a reconciliation of GAAP to non-GAAP financial measures on the Perrigo Investor Relations website. Please see the audited financial statements included in our SEC filings as well. A few quick 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 product lines and currency in both comparable periods. Third, some of the potential changes discussed today may be subject to certain information and consultation processes required by law. And fourth, our 2025 financial guidance and 3-year projections are based on constant currency to fiscal year 2024. Now on to the agenda. Opening today's discussion is Patrick Lockwood-Taylor, President and CEO of Perrigo, who will walk you through a focused and clear plan to deliver stable and dependable results. Following Patrick, Perrigo's CFO, Eduardo Bezerra, will discuss how this plan translates into shareholder value. After which, other members of…

Thank you, Brad, and good morning, good afternoon, everyone, and thank you for attending Perrigo's 2025 Virtual Investor Day. Today, we're going to lay out a clear plan to get back to stability and reliability, and lay out a bold, transformative path forward. After 21 months on the job, I'm going to share where we've had challenges, how we've pivoted, what's different and special about this company, our core strengths and the specific sequence steps we are taking to drive this business forward. Stepping back, Self-Care is a $400 billion fast-growing global market. Perrigo holds a unique and broad position in Self-Care. We compete in the most molecules and the most price points with the potential to meet the needs of more consumers. We play across all value tiers in the U.S. and the EU with both national brands and with store brands across 9 categories. We're a branded top 10 player in Europe with #1 or #2 brands across key subcategories such as blister, insect repellent, emergency contraception, cough/cold and nicotine reduction. We are the leading player in U.S. store brands with a 50 share. We also have the #1 brand in scar healing and daily contraception. We're #3 in the infant formula business in North America across both brands and store brand tiers with greater than a 20 share. We're a large player in a large growing category with a unique and highly defendable position. Our key challenges when I first arrived were one in the U.S. store brand business, which was losing volume share. We had lost our way on value, service and innovation, ceding share to competitors. Secondly, our international brands were fragmented and undersupported due to insufficient priority investment decisions. And thirdly, infant formula industry dynamics and regulatory changes created a need for a significant…

Thanks, Patrick. Good morning and good afternoon, everyone. I'm Eduardo Bezerra, and I'm very excited to provide a 3-year financial view on growth prospects, share our 2024 results and provide financial guidance for our 2025 fiscal year. As a reminder, all numbers and figures presented in our 3-year projection as well as 2025 financial guidance at constant currency to fiscal year 2024. As Patrick has laid out our plans to Stabilize, Streamline and Strengthen Perrigo, I'll provide a financial perspective on how all these components translate into attractive and sustainable total shareholder return over the next 3 years. First, it's important to remember what makes Perrigo a unique and balanced company. As we operate in both brands and store brands, we're better positioned to grow our sales in line with market and delivered solid cash returns through our balanced portfolio of offerings. This is unique as we leverage significant synergies across our platforms through the breadth of our molecules, low-cost production and consumer-led innovation. Also there is a complementary approach where it drives significant cash flow from our store brand business, enabling us to reinvest in our highest return brand opportunities. Our focus on stabilize, streamline and strengthen can provide significant benefits to our investors as follows. First, our efforts on stabilizing CSCA OTC store brand market share and recovering Nutrition store brand share should translate into a higher financial reliability and consistency in delivering on our expectations, reducing volatility and risk associated with our equity. Second, as we streamline our portfolio and organization to drive focused and scalable growth prioritize targeted brands and innovation and optimize our manufacturing network to enable reach and scale, we should drive further operating margin expansion and cash flow. And third, as we strengthen and prioritize R&D and A&P investments towards our highest potential…

Thank you, Eduardo. Hi, everyone. My name is Triona Schmelter, and I lead the Consumer Self-Care Americas business here at Perrigo. I'm excited to share with you today our progress and ongoing plans to stabilize our CSCA businesses, specifically our over-the-counter or OTC store brand business and our infant formula business. As Patrick outlined, the U.S. OTC store brand business was losing volume share and we had lost our way on value, service and innovation. In the infant formula industry, dynamics and regulatory changes created a need for a significant intervention. We needed to get back to winning. With over 100 years of experience, Perrigo had a proven formula for success and our customers have reinforced the strength of this formula in my many conversations with them over the last year. Here it is. First, be a trusted partner. This includes consistently delivering the quality our customers and their consumers can trust along with excellent customer service and deep category and technical expertise. Second, be an efficient and reliable supplier. We have to offer our customers a great value, high utilization of our world-class manufacturing facilities that reliably produce and supply product for our customers is a critical component of how we offer that value. But those are table stakes in this store brand business. What sets Perrigo apart are these next two: be a volume and profit driver and deliver category growth. We use consumer and shopper insights to help our customers drive volume and profit. Customers also rely on Perrigo to help drive category growth with new insights, new claims and new products. It is these capabilities that make us the store brand partner of choice in the U.S. Let's look now at store brand OTC specifically. Stepping back, Perrigo is a sizable and critical provider of core…

Thank you, Triona. Good morning and good afternoon, everyone. I'm Roberto Khoury, and I'm excited to outline the steps we are taking across the enterprise to streamline our portfolio and drive scalable growth and sustainable TSR, as highlighted by Eduardo. Over the last year, we made significant progress in 3 key areas across Perrigo. First, we streamlined our enterprise portfolio and prioritize our assets based on their strategic role, focusing on ready-to-scale brands in fewer high-growth categories while positioning other parts of the business to focus on cash, allowing us to reinvest to drive further growth while expanding margin. Second, we're in the late stages of streamlining the organization to one operating model, simplifying our structure for efficiency, agility and scale, unlocking reinvestment into growth. Third, we have made substantial progress optimizing our manufacturing network and addressing underutilized assets. However, there is more improvement to be done going forward, which Ron will cover shortly. I will now walk you through more details on our portfolio strategy and operating model. We recently undertook an extensive enterprise exercise on categories in markets in which we compete. This provides us with a clear perspective on where to narrow our focus and align resources. As a result, we've implemented a balanced enterprise portfolio strategy aimed at driving growth and margin expansion, leveraging the unique complementarity of our business. Specifically, we segmented our global portfolio into high-growth categories based on their potential and the readiness to win of our assets while focusing another set of categories to yield high cash return but lower growth prospects to allow for reinvestment into high-growth brands while expanding margin. Our high-growth categories include skin healing powered by brands such as Mederma, Compeed, the #1 blister care brand outside the U.S. Women's health with brands like Opill and ellaOne, the…

Thanks, Roberto. Good morning, good afternoon, everyone. Thank you again for joining us today. My name is Ron Janish, and I am excited to provide an update on the significant progress we've made on key initiatives to streamline our supply chain as well as our vision for a strategic investment we are looking to make in our infant formula operations network. As you would have already heard from Eduardo, this investment provides a tremendous opportunity to transform our free cash flow performance and as a result, comes with a very attractive payback period. It also helps ensure the long-term sustainability of a key component of our North American business. As Patrick and others have already discussed, we've anchored our strategy around Three S: Stabilize, Streamline and Strengthen. Triona just talked about some of the tremendous progress we've made on stabilizing our supply chain, in particular, our infant formula operations. As we think about streamline in the context of product supply, our goal is to ensure a supply network capable of delivering our vision, both in terms of global reach as well as scale and cost. Most supply chains are at their best when delivering world-class quality, service and cost. At our last Investor Day in 2023, we introduced our global supply chain reinvention program aimed at delivering margin accretion by focusing on improvements across 4 key areas: winning portfolio, planning, sourcing and manufacturing optimization. Since its initiation, we have made tremendous strides in reducing complexity and driving efficiencies across our network. As you heard from both Roberto and Triona, we have optimized our global portfolio, eliminating over 1,300 SKUs, reducing complexity in our supply chain and enabling us to focus on those SKUs that drive the most value for the business. As Triona previously showed, we've improved forecast accuracy in…

Good day, everyone. My name is Abbie Lennox. In our Three S strategy, looking at Strengthen, we are focusing on prioritizing our brand portfolio to create growth through impactful consumer-led innovation by scaling our technology chassis across brand, store brand and geography. Patrick earlier explained the complementary nature of our business model. Perrigo is the company who can scale consumer-led innovation across store brands, brands and geographies giving us the highest return on investment potential for our innovation. Now we know there are 5 key attributes that it takes for a Perrigo innovation to win. First, we fuel the funnel with concepts that both understand and address the functional, social and emotional needs of our consumers wherever they shop. Then we prioritize benefits and technologies that are ownable and can be scaled for improved return on investment. Now Perrigo has an unparalleled retail partnership and we use and leverage this early and often, driving further insights and minimizing late-stage project attrition. By understanding our internal technical strengths of more than 100 molecules across 100% of price point coverage and building on these with our external customer partnerships, we have an ability to innovate and still give room for new capability builds as or when the landscape changes. We also do this through our new approach to balancing both resource and innovation across claims, packaging and formula upgrades as well as full new product development. Now previously, R&D investments were spread across a large fragmented portfolio of small brands with limited ability to scale. And by utilizing similar products, formulation, packs or product claims, we have to look at how we can improve the return on our R&D investment. So focusing and strategically building scale using technology chassis across multiple brands, geographies and price points will ensure that we meet consumers…

Thanks, Abbie. Hello, everyone. My name is David Ball. And today, it gives me great pleasure to talk about our Three S strategy for strengthening our business and demonstrate our ability to grow brands by scaling innovation with world-class brand building whilst prioritizing our advertising and promotional spend to our high-margin, High-Grow brands. We'll do this by prioritizing our highest growth potential margin-accretive brands, which have the potential to drive significant value. I'll give some examples of how we are already driving this value through, firstly, leveraging the Perrigo chassis across portfolios, identifying compelling new claims and scaling innovation, all wrapped in world-class brand building. All this will be built on a foundation of bolstering and scaling our capabilities across the company to win more households. As you've previously heard from Roberto, prioritizing our High-Grow, high-margin brands is a key strategy for strengthening our business. Here at Perrigo, we have strong brands, both in Europe and the U.S. including Compeed, ellaOne, Jungle Formula, Mederma and Bronchostop. We are often the #1 share brand in fast-growing categories. And in 2024, we launched the game-changing Rx-to-OTC switch of Opill into the U.S., which created a whole new category, OTC contraception. We are now disproportionately funding our High-Grow brands with A&P and R&D, sourcing funds from the remainder of our portfolio that generate cash. Let's look at a video highlighting some of the current end market creative driving these top growth brands and their key results.

Over the next few slides, I'll dig a little deeper into some of our brands to showcase several successful examples where we are already scaling innovation and how we plan to continue driving growth through world-class brand building. Broncho, our European cough umbrella brand, grew consumption nearly 8% in 2024, outpacing the broader category by 3 percentage points. A big part of this excellent growth was driven by our most recent cough innovation, [ Broncho Max in 1 ] which delivers on the promise of soothing any cough behind new, unique claims. This single innovation has already gained a 2% market share where launched, becoming the #1 innovation in cough across both Spain and the U.K. under the Broncho umbrella brand. Following this success, I'm excited that we will further drive geo-expansion of these assets behind our tested and repeatable launch model. In fact, we've already started scaling our cough and cold OTC innovations across multiple local carrier brands in Europe with 7 brands, including Broncho, Coldrex and [ Tussirex ] across 18 countries, making us the #3 player in the cough and cold categories in the countries where we play. Furthermore, we project to expand our Broncho footprint into 5 new markets in the near future. Essentially, we are leveraging our global innovation engine and utilizing our strong local brand assets in countries and regions allowing us to scale innovation across multiple executions. Another great example of brand building is in the highly attractive nicotine replacement therapy category where we hold the #1 market share in the U.S. with Perrigo store brands, which Triona touched on in her section, and the #3 share in the U.K. and Europe in the nicotine brand. As Abbie mentioned, we are in the process of developing and scaling innovation pipelines agnostic to brand,…

Thanks, David, and to the entire management team for outlining our Three S plan that has the potential to generate significant shareholder value. Self-care is a $400 billion business. It's global and it's growing with demographic and health care costs as tailwinds where we have an unparalleled opportunity for driving cash flow and TSR growth because of our differentiating asset base of 100-plus molecules completing a 100% price point coverage, giving us the opportunity to serve more consumers given what they can afford. Also, our unique portfolio combining store brand and infant formula with key growth-ready differentiated brands. Our core relative strengths with the breadth and scale of our innovation, the scale of our customer relationships, the scale of our global regulatory interface and the scale of our manufacturing. What makes Perrigo unique is a complementary nature of our businesses. Store brand and infant formula generate the cash to enable the investment in key growth brands. Branding and innovation capabilities enable brand and store brand demand generation. Consumer-led innovation can be scaled across brands, store brand and different geographies. And we have a scalable supply chain that enables differentiation that we need to compete in store brands and in national brands. And now we're well underway with our Three S plan to take full advantage of our unique opportunity. Stabilizing key aspects of our business, including store brand and infant formula, ensuring consistency and reliability and ultimately, lower volatility of earnings. We're going to streamline, simplifying our portfolio, prioritizing targeted brands and innovation and are aligning our structure, all of which results in higher margins and cash flow. We're strengthening. We're prioritizing high-growth brands. We're amplifying R&D in A&P. And we're directing resources to the highest return projects, which drives ROI and future growth rates. We're reigniting our business by leveraging our strengths by executing with precision and focusing on quality, service, innovation and cost efficiencies. We will continue to drive meaningful customer partnerships, always putting the consumer first. We're building a future that's bigger, stronger, more predictable and more profitable than ever. With that, we will now take a break for 10 minutes. After which, the team and I will join you for Q&A. Thank you very much.

Welcome to the Q&A portion of Perrigo's 2025 Investor Day. [Operator Instructions] Lastly, in addition to the aforementioned company speakers, Charles Atkinson, Perrigo General Counsel, will also be available during the Q&A session. Thank you. To start, we would like to take our first question from Keith Devas at Jefferies.

Operator, we are not hearing Keith if he is on.

Keith, I can see that you've dialed in. [Operator Instructions]

I was unable to unmute myself. Maybe just starting with the North America OTC. It'd be great to just hear a little more context on the categories and products where you're trimming your exposure, what common characteristics they have, where you are in the process of your exits? Maybe said in another way, how much more could that business contractor get smaller? And then specifically, how you're redeploying some of that manufacturing capacity and where it's going? And then I have a follow-up.

Yes. Keith, thank you for joining us today. This has been a business that we've had to get fairly surgical. We exited a large number of very dilutive SKUs. We even exited a couple of businesses with customers that were also highly diluted. However, I think that mask that we had some competitive issues that we had to address in terms of our service, cost competitiveness whilst expanding and then maintaining margin. We think we're just in a much better place to win whole build and drive the free cash flow yield from that business. But to get to a couple of the specifics you've touched on, what I'll do is invite Triona to make the comment.

Yes. No, that sounds good. And then maybe I'll ask Ron to kind of finish up there with regard to supply chain reinvention. So we have, as Patrick said, over the last year, couple of years, trimmed back on SKUs that were unprofitable or allowed us to improve capacity within our manufacturing facilities. Much of that work is done. And we really -- it has allowed us to improve things like service and customer reliability and others, which, as I mentioned, are key tenets to our strategy. So we're quite focused on demand generation as we move forward. I'm sure there will always be some nips and tucks available here. But Ron, I'll let you comment as you think about supply chain reinvention.

Thanks, Triona. Thanks for the question, Keith. So as we are -- we embarked on supply chain reinvention going back a couple of years ago and we have contributed significant financial benefit to the gross margin line over the last couple of years. But what it's also done is it's enabled us to operate our assets much more efficiently because of the focus on continuous improvement, and that's enabled us to manage the capacity that's been freed up much more efficiently while we wait for the volume that's going to come back now with all of the recent wins that the CSCA OTC business has seen in the recent months.

Great. And then just quickly on the infant formula and the incremental investment announced today. I'd love to just hear a little bit more about what gave you confidence to make that decision, what the retailers are telling you, how you feel about the level of investment that's needed to get the share gains and velocity that you're talking about for the next couple of years? Just really an update on, I guess, the category and your position within it and kind of what's driving you to double down here and invest a little bit more ahead of the projections you've laid out for the next couple of years.

Yes, Keith. I mean you're familiar with our journey on infant formula. So I'm going to give just a setup as I see it, probably invite Eduardo and Triona and possibly even Ron because this is a corporate imperative for us. But firstly, standing back, it's a very attractive business. We supply hundreds of millions of beading occasions. We play a unique role saving the consumer almost $1,000 a year versus the brand equivalent. So we play an important role. As the significant barriers to entry, you know that this is a very capital-intensive business, okay? And there's only a small number of domestic providers. We like that position. We have been very effective in remediating that business, and a lot of credit to the team on addressing a significant remediation extremely quickly. And we are highly quality assured and we're achieving, I think it was about 98% service levels there. So outstanding work over the last few months, okay? I say it because I'm very proud of it. A lot was achieved quickly. Next thing I'd say is we're building back that business fully in line with the commitments we gave last year on the store brand in terms of share, in terms of service, filling out the shelves. We see significant innovation opportunity to increase velocities and distribution going forward and the share of store brand of the total category. And we have, I think it's about a 98% share of that business. So that is a strong win. To your point around capital expenditure. This is a high-margin business but of a capital-intensive business, okay? We have 3 plants. We can consolidate that plant configuration, which will allow us to get to even better margins, but it will step change our free cash flow generation from that business by between about 800 and 1,000 basis points. I mean it's very, very significant, and we moved from it being a dilutive free cash flow business to actually becoming accretive. We do that relatively quickly. And because of that step change in free cash, we pay out that initiative figures within a couple of years. So this is the right thing to fortify our network. It's absolutely the right thing to do in order to step change the economics and financials of that business, which is very good for shareholders on a go-forward basis. But just to add a bit more color, I'll invite Eduardo.

Yes. Thank you, Patrick. So Keith, a couple of comments. We've gone through an extensive evaluation of multiple alternatives of what is the best for the infant formula business, right? So you're aware that we have some aging assets. And also we did most recently the acquisition of the former Nestl� site. So as you look into the overall network and evaluated these multiple options, the one that we're proposing and that we have approved -- got approval from the Board is to pursue forward that we believe is not only going to give us the reliability that we need but also will help us to reduce the cost of on a per unit basis that we need once the full investment is completed, right? And as Ron mentioned, given some of the cash flow that we're going to see the benefit over the next couple of years, we expect that the full return of that investment 2 years post completion, around mid-2029. And so that way, we're going to generate starting '28, $100 million of free cash flow there. But I don't know, Ron, any other color that you want to give there?

Yes, Eduardo. The only thing I would add to that, Keith, is that not only does this investment allow us to significantly improve our cost position. But as you would have seen today, we actually rely on some external third parties for some of our packaging and quality testing needs. And this investment is not only going to optimize our cost, but it's going to allow us to be 100% reliant on our internal packaging and quality capabilities, which will significantly derisk the supply chain for this key business unit for us as well.

Our next question comes from Susan Anderson at Canaccord.

I had a question on the EBIT margin goal by fiscal '27. I think it looks like you're expecting it to leverage 150 to 200 bps. I guess, first, it looks like maybe it's all coming from gross margin. So I'm assuming some of these investments are weighing on the OpEx side of it. If you can maybe expand on that. And then second, I think that would get you about to the upper 15% range. How confident do you feel in achieving this? And do you think it could end up being conservative? I think some of your peers are in the low 20% range? Or is that really just more opportunity over time?

Thank you, Susan. Nice to see you. Thank you for this question. Unsurprisingly, I'm going to put this one to the CFO.

Thank you, Susan. Again, so let me address the first piece of your question, right? So as you saw, we are considering an improvement on our gross profit margin between 200 and 400 basis points over the next years, right? And so we expect to reinvest a portion of that to make sure that we're going to secure the growth required on A&P and R&D to support our High-Grow brands that David Ball alluded to that. So I think those are important investments that we need to do that. And of course, we're leveraging some of the benefits of the accretive initiatives, both the supply chain reinvention as well as the Project Energize that will help fund some of these investments there. To your second question regarding 15% operating margin in 2025. So a couple of comments there. You saw that I mentioned, 100 basis points on gross profit margin. The key driver for that is really the recovery on our infant nutrition business this year, right? And also, as I made a comment that we expect the wins that we're gaining on the store brand business will have a more impactful, a more positive impact to our results in the second half of the year. So at this stage, we're very confident that we can deliver that 15% operating margin by the end of the year.

Okay. Great. That's really helpful. And if I could maybe just add one more. Just looking at those 100-plus molecules that you have, I guess, are being used right now. I'm curious, does this give you opportunity to roll out new products or some of these not being used? And then -- or is it really more just leveraging these molecules, which are already in certain brands, maybe into a private label brand or another brand in another geography? And then also, will you be rolling out more branded products in the Americas?

Thank you, Susan. There's quite a lot to that question. So yes, we have 100 molecules, all of which are utilized today. We have 230 actives and molecules, and we have something like 2,500 different formulation. So we have a big tool kit. Most of that tool kit can be applied to any price tier and any execution in any geography. We can use the same molecule and brand and a store brand in different markets. Our opportunity is to sequence those scale plays across as many different carriers, okay, in order to maximize the revenue potential of the molecule and innovation, et cetera. We're agnostic about how we execute, brand, store brand, et cetera. It is about fully utilizing that to meet consumer needs and maximizing revenue potential of that. That's the big unlock for this company. It's that asset base monetized through as many potential carriers in as many geographies as possible. And that's what sort of step change the innovation potential we're now talking about, the opportunity to move it from about 1.5% of our revenue per year to about 3%, and that's what we're working on. So this is a huge unlock in terms of the future performance of the company. But what I'll do, just to add a bit more color to that, I'll probably invite Abbie on the role of innovation and scaling these assets across brand, store brand, geography over time. Abbie, over to you.

Thank you, Patrick, and thank you for the question as well. So as Patrick said, when we talk about the Perrigo chassis, what we're talking about is our ability to take our base technology and formula across those multiple brand carriers. Historically, Perrigo innovation is actually only ever launched in around about 2 countries if you go back over the years. By using the chassis effectively, whether we're talking store brand, brand or across geography, we've already shown that we do have the capability to be able to take this to multiple markets. You saw some great examples actually earlier in the presentation with cold sore that we took into 23 countries, taking the same technology and positioning it to the consumer where we're meeting them and where they shop. So hopefully, you'll start to see this even more as we bring the innovation to life when we talk and brand agnostic as part of our innovation strategy going forward.

The next question comes from Korinne Wolfmeyer at Piper Sandler.

I'd like to maybe touch a little bit more on the near-term results and the -- what you reported for Q4 gross margin and also the selling expense. I mean the gross margin stepped down pretty meaningfully, but then the selling expense that also stepped down pretty easily. Can you give us a little bit of context on what was going on with those two line items? And then any color on the proper run rate you should be thinking about for those lines heading into 2025 and then the cadence of improvement over the course of the year to get to your longer-term target?

Korinne, nice to see you. Thank you for joining for the question and the specificity of the question, as always. And I'll ask Eduardo to address that.

Korinne, so a couple of topics. So first thing on gross margin in the fourth quarter, right? So we had a 260 basis point impact there. First, we had lower over-the-counter volumes, right? So that -- remember, the cough and cold season this year has been more in line with 2019, 2020 season, that's been more, let's say, aligned with historical trends, but much the latest compared to what happened last year. So inventories in the channel haven't been moved too much at that time. So that was one impact. The second is we talked in the press release, we had some disruption in our infant formula equipment that did impact service and delivery, but impacted our margins in terms of obsolescence impact there. But then we had some very positive impact. So accretive actions, both the supply chain reinvention, that also contributed positively there. And then also pricing. We have almost 100 basis points benefit from pricing coming on in Q4. And then remember, we had important divestitures that took place in 2024. So the HRA rare disease business that had a very high margin that we exited, divested that in the beginning of the third quarter as well as some brands that we had in CSCI. So both things impacted us about 60 basis points. So that's, in a nutshell, the 260 basis points negative impact we saw on gross margin. When you look into specifically our operating margin, we had the opposite, right? So we had 260 basis points positive. So almost more than 500 basis points delta there coming from lower expenses. A couple of comments there. Project Energize, remember, we launched that in the first quarter. And as the year went by, we saw benefits going through. And remember, we ended up the year with…

That's super helpful. Thank you so much for all the detail. And then more strategically speaking. So I think you guys had called out a few of your businesses, maybe trying -- using for shareholder value activities with such as the oral business and the derma cosmetics business. Can you expand on what you mean there? Is that something where you might start looking at your portfolio and figuring out what makes sense within the portfolio, what may make sense to divest or sell at some point? Just any clarity on plans for those businesses?

Yes. I'll start there strategically. And then for a bit more detail and color, probably to Eduardo. So we've been through a very extensive portfolio review. And we're fairly clear on those businesses that are very attractive, scalable. We see good growth, good financial return. They're synergistic to the examples that Abbie just talked about. And we're also increasingly clear on those brands that don't sit within that and possibly those categories where it is less obvious. Now those brands and those categories are still very attractive, but not as synergistic in the Perrigo model that we've just been describing over the last hour. So this is just part of a portfolio review. Any healthy company is doing that. The businesses it wants to be in, should be in, possibly the businesses that don't fit with overall company model. So we are still assessing those businesses, all right? We're not making a declaration today. We're just describing that we need to better understand how they can play a meaningful role in strategy and in shareholder return going forward. So anything to add to that?

Not much Korinne. So as Patrick mentioned, so we're going through that assessment. And as soon as we get any conclusion of that, we'll keep you updated, okay?

Our next question comes from Chris Schott with JPMorgan.

Thanks so much for the questions and hosting us today. I guess my first question is on 2025 Nutrition growth. It seems like there's some encouraging progress here. But I'm just interested in why not a growth rate above 3% to 5% given the lower 2024 starting point, especially some of these first half results from last year? And maybe as part of that, can you quantify how much of an infant formula contract manufacturing headwind is reflected in that target? And I'll follow up from there.

Chris, nice to see you. Thanks for joining us today. Yes. I mean this is an industry and a business that's in flux. We're trying to get our hands around all the dynamics that are going on. We are trying to appropriately react to some of those dynamics, but not overreact to some of those dynamics because we're a secure supply chain for infant formula. You understand the amount of discussion around tariff, reliance upon onshoring, critical industry manufacturing. So there's a lot of variables at play and what we're trying to give is the best sort of presentation of our outlook based on what we understand today, but there is significant effort to restrengthen U.S.-based contract business. It's just we only understand what we understand today. I think to give a bit more color on the specifics, I'll hand over to Triona.

Yes. Thanks, Patrick, and thanks for the question. Maybe I'll start with the piece around kind of what we're seeing right now and the timing. So as I talked about in the presentation, we are seeing a really return to that trusted partner level of service and quality that our customers absolutely and their consumers expect from us. So we're highly encouraged with that. In order to rebuild the volume, though, there's kind of more to it, right? So there's the reintroduction of those paused SKUs that I talked about. And consumers are looking for matches in a store brand world. So until those SKUs kind of get on shelf, it takes some time to get all of the consumers back. The same is true with just the category dynamics in general, right? So it's people who have a small infant at home. And so we call it a parade category where consumers are consistently coming in and then aging out as their baby just get older. And so we have to kind of get through those cycles, that's where our velocity increases are going to be focused, in driving those consumers back in through some of the activation that I showed you as part of the presentation. So I do feel like we are on the path back and you saw the time frame that we expect that to roll out on. I'm going to pass it over to Eduardo maybe to kind of talk specifically more.

Chris, just to clarify one thing, right? So we're talking about our CAGR of 3% to 5% between '25 and '27. But 2025, we expect much higher recovery is going to be on the double-digit level, right? But as Triona mentioned, mainly based on store brand recovery and lower on the contract business, but it's going to be, in '25, double-digit recovery on the top line.

Great. And just a quick follow-up I just had in the guidance. I know it was constant currency. Can you just give us a framework of with where FX is sitting today? What type of top and bottom line impact should we kind of think about as we look at '25?

Yes. So great question, Chris. So for every $0.01 on euro, the difference is about $0.02 on our EPS or about between $15 million and $20 million of potential impact on our top line for every $0.01 on the euro, okay? And we decided to go that way because there is so much volatility and speculation right now that's going to be very hard for, I guess, anyone to try to really put a mark there. So that's why we decided to do it in constant currency to last year and then be able to explain what specifically are the variances because probably, we're going to see a lot of volatility within 2025.

The final question from Daniel Biolsi at Hedgeye.

I, too, wanted to echo the appreciation for the level of detail today. Previously, management expected the OTC industry to have like an annual price headwind of like 1% to 2% and innovation contribution to the top line of 2% to 4% and similar amount for innovation to contribute to that. Do you still see a similar rate for the industry? And following on that, have the 2020 changes to the U.S. monograph had the intended effect of increasing the innovation in the industry? Has that played out?

Yes. Nice to see you again. Thank you for those sort of 3 or 4 elements there. I'm going to have Abbie comment on monograph. I think our general thrust there, we would like to see that accelerated more. I'll let Abbie speak to that. I'm going to talk a little bit about deflation, how that compares to other CPG companies and how we're managing that. And then maybe Triona, a little bit more about how important it is for us to get to volume growth ahead of revenue growth as we consider absorbency and throughput margin and driving cash flow. I think 1% to 2% deflation, if I look at store brand over the last 20 years, is a reasonable working assumption. If I look at the branded side, typically for brands as they're moving through their product life cycle as the technology becomes more commoditized, what you also tend to see there is 1% to 2% deflation as well, normally offset the trade spend, increased promotions, et cetera. It's no different on the store brand side. It's just natural product life cycle management, okay? What we would be better at is just recognizing that and building that into our planning through a combination of things, and you touched on a couple of them. Number one, cost-saving projects. We have a master plan of those spreading over the years and there is cost and productivity that we need to achieve. The second one is mix. And all molecules are created equal and some of them are still very margin accretive, and we need to build our share of those. And we're getting more intentional about that. I think the next one for me, and you touched on it, is innovation. Innovation tends to be more premium priced at a better margin. And so basically, it's a combination of activities and deliberate business planning such that you're growing volume, you're increasing absorbency, a point of absorbency for us is circa $20 million, $30 million. It's a significant opportunity for us. And I think we're just getting much more precise in how we strategically manage this business across those sort of fundamentals, as I call it. So we feel better about this business in terms of the yields we're going to see driven by growing our volume share of it, and that's kind of the big pivot over the last 12 months that I referenced. Triona, maybe a bit more depth?

Yes. Thanks, Patrick. Just a couple of things I'd point to. Patrick is absolutely right as it relates to really managing the mix in a couple of different ways and whether that's the mix of volume and revenue or the mix within more commoditized products versus innovation, all of those things are factored into how we think about managing the business. I would also add, though, and something I talked about a little earlier today, which is our customers are really looking for a full value equation from us, so not purely price. So as it relates, the product is one thing, the kind of the suite of the partnership that we provide with our customers is a bit different than that. Price is a component, but not the only component. They're looking for reliable, consistent service, efficiency, strong production, quality and those demand-generating capabilities. And so I think that's another kind of value that we differentially bring to our customers differently than our competition and it helps us manage some of that pricing environment as well. With that, I'll turn it over to Abbie to answer that final question you have with regard to monograph.

So thank you for the question. And yes, so just to confirm, basically, Perrigo is very much involved in the industry conversations taking place with the FDA and through the trade associations around the changes in the monograph system. I think all of us would be happier if it was moving faster and we would all be much happier if we could get to the simplification and specificity that we -- I think the FDA aim to get to. So we're focusing, but I think there's a lot more work to go with respect to both the agency and the industry working together to actually bring this to life and something that we can see having a fundamental impact on the innovation pipeline as we move forward.

[Operator Instructions] I'll now hand the call back over to Brad to take questions from the online audience. Thank you, Brad.

Great. Thank you, operator. So the first question that came in is, so you've had very strong growth in your CSCI International business. How do you expect to continue that growth? And does M&A fit into that strategy?

Very good. I think it's probably been underappreciated, the kind of consistent growth that we've seen in international, both in revenue but in particular margin expansion. We have a large number of very fast-growing brands enjoying very strong positions in fast-growing categories, okay? And that sets us up well for the future. The international business has been growing well, expanding margin while executing well. And Roberto in a minute will talk about how we maintain that. I think the M&A, I want to be very clear. M&A is not a capital allocation priority for us. We have been through a period of multiple transactions. Those transactions involve a significant effort of integration and then getting back to base reliability. And we don't want to take on that complexity. We feel those assets that we acquired have significant runway for years to come. So we are not looking at large M&A. We are always looking at strategic bolt-on, be it capability, be it entry brand carrier for which we feel we can scale our chassis with. And we will always look at those. They tend to be opportunistic. They're difficult to control and -- when they become available. But I just want to be clear, we are not looking at large-scale M&A, just strategic financially attractive bolt-on should it become available. But I think to give a bit more color on how we will continue to drive and over perform in international, I'll hand over to Roberto.

Thank you, Patrick, and thank you for the question. So let me give you a couple of reasons as to why and where we see opportunities for us in the future. So one, we're really starting from a focused portfolio that is really building growth on brands that are already delivering really well. So you heard the case of Compeed growing at 30% as of 2024. And our cough and cold way, Broncho growing at 8% ahead of the category. But as we look forward, we see 4 growth areas, 4 key growth areas still ahead of us. One, from a market share perspective, we still have opportunity to grow market share in existing markets through innovation. You're seeing great performance in 2025 already end of 2024, our Broncho 5-in-1 and -- but also category expansion, we see in some categories in big markets like emergency contraception in the U.K., an addressable market of 70%, but only 30% of usage. And then scaling really our brands and our chassis across multiple brands across our geography. So really much ahead of us to be able to drive revenue. But as well as you heard between Project Energize and the sequence exits to generate cash allows us to also not just drive revenue, but also drive operating profit.

Great. Thank you, Roberto. Next question that's come in. Can you please share some more details about why you broke out the High-Grow brands and what may be included in those?

Yes. I think by break out why we're focusing on them. So that's where I'm going to orientate the answer. So I think the first thing for all stakeholders to probably better appreciate, 40% of our business is branded today. It plays a disproportionate role in the long term in terms of driving more margin accretive revenue, really from '27 onwards plays a disproportion of role in sustaining our long-term growth algorithm. We have to get those brands strengthened and ready for scaling. What gives us encouragement is they are highly meaningful brands enjoying highly meaningful positions with consumers today, that's financially attractive, strategic, we can scale them. And so we see those but as playing that disproportionate role, we have to focus on them and enable them now. So I think, David, maybe you can give some more specifics of what we're doing, why we're focused on those and maybe just elucidate a little bit on how we're going to scale?

Absolutely. Thank you, Patrick. I'm really excited about the potential and opportunity of the High-Grow brands that we have. And there's still the 3 key points of why I'm excited. Firstly, they all play in high-growth categories. Secondly, they're all margin accretive to the broader Perrigo business. And then thirdly, they're often the brands that are #1 in the category or in the region that they play. So it gives us tremendous ability to scale and create value creation for broader Perrigo. We've focused on skin healing where we are #1, both for Compeed in Europe and the U.K. and then derma and scar care in the U.S. We've got women's health where we're already #1 in emergency contraception with ellaOne and obviously, we're launching Opill into the U.S. And then we're also focused on select OTC brands where, again, we're #1 and growing incredibly fast. So a wonderful opportunity to drive incremental revenue for Perrigo as a whole.

Thank you, David. And then there's a final question that's come through, which is more about the phasing of earnings through the FY '25 through FY '27 arc, and can we highlight maybe a little bit of some of the weighting that may -- that investors should expect over that time frame.

Eduardo?

Yes. Great. Thank you for the question. So as we mentioned, given the guidance we've giving to 2025, so '25, it's a huge recovery year for us, basically on infant nutrition, but also winning back a lot of the lost business that we had in OTC store brand. So we expect that to give us, as we mentioned, significant growth, both in OI and EPS. EPS also benefits from the reduction in our debt with the $400 million that we paid down at the end of last year. As you look into 2026, '26 is going to be a transition year, right, because we start accelerating the investments on our High-Grow brands. Perrigo have already achieved stability or stabilization on our store brand and infant nutrition. And so we expect still to deliver significant growth there and beyond our 3/5/7 previous algorithm. But then when we get to 2027, we expect to outpace that on the top line as we accelerate our high-growth initiatives with the investments that we did and the further expansion in the markets that we are today that both David Ball and Roberto mentioned today. And so that also will bring us higher benefits into EPS because we plan to repay $400 million of debt that are due in April 2027. And that also will give us a booster in EPS for that year. So all in all, '25 is going to be a very strong recovery year, '26 is going to be a transition, and then we expect to accelerate top line and going through the bottom line in 2027.

Thank you, Eduardo. And with that, operator, should I just turn it back over to Patrick for some closing remarks?

Let's be proactive...

I will pass the ball back to Patrick.

Okay. Thank you, Brad, and thank you, everyone, for joining today. I want to just give sort of 4 or 5 key points here. Firstly, I think what you've heard today is we are now clear on what our strategy is. I hope you're convinced that strategy is built upon our unique capabilities and our unrivaled scale across a number of very important factors. We have a very clear plan to get back to stability and to reliability. We see significant value creation potential for this company driven by growth and our ever-increasing focus on free cash flow. Some of you would have picked up on, but for the next 3 years, this plan actually outperforms our current growth algorithm of 3/5/7 fairly significantly on those last 2 metrics. And it will not go unnoticed that with our current valuation and our commitment to our dividend policy, we represent a significant TSR opportunity in the mid-teens, which is very competitive versus our peer set and represents a fantastic return for our shareholders. I sincerely want to thank you for joining us today. I know it was a lot of material. We'll see a number of you face to face over the next couple of weeks, and thank you for that opportunity as well. And thank you for your belief in Perrigo. All the best. Thank you.