Q3 2025 The Hain Celestial Group Inc Earnings Call
Thanks for watching.
Eric: Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hain Celestial Group Incorporated Physical Third Quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise.
Eric: After the speakers are marks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.
Speaker Change: I would now like to turn the call over to Alexis Tessier, VP of Investor Relations. Please go ahead.
Alexis Tessier: Good morning, and thank you for joining us for a review of our third quarter results. I am joined this morning by Don Veer, Chair of the Hain Board of Directors, Alison Lewis, our Interim President and Chief Executive Officer, and Lee Boyce, our Chief Financial Officer.
Alexis Tessier: Slide 2 shows our four-looking statements disclaimer. As you are aware during the course of this call, we may make four-looking statements within the meaning of federal security's laws.
Alexis Tessier: These include expectations and assumptions regarding the company's future operations and financial performance. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations.
Alexis Tessier: Please refer to our annual report on Form 10K, quarterly reports on Form 10Q, and other reports filed from time to time with the SEC, as well as the press release issues this morning for a detailed discussion of the risks.
Alexis Tessier: We have also prepared a presentation, inclusive of additional supplemental financial information which is posted on our website at Hain.com under the investor's heading.
Alexis Tessier: As you discuss our results today, unless notice is reported, our remarks will focus on non-GAAP or adjusted financial measures.
Alexis Tessier: Reconciliation of non-cap financial measures to gap results are available in the earnings release and the slide presentation accompanying the call. The call is being broadcast and an archive will be made available on the website. And now I'd like to turn it over to Don.
Alexis Tessier: Thank you, Alexis. Good morning, everyone. I'm Don Zier, Chair of the Hain Board of Directors, and I'd like to thank everyone who's dialed in this morning. Before we get into the results for the quarter, I want to share a couple of updates from the Board of Directors. [inaudible]
Alexis Tessier: The Board of Directors has been evaluating the company's performance and leadership to ensure that Hain is positioned to maximize long term value.
Alexis Tessier: As part of this effort, as you may have seen in the press release we issued this morning, we have announced two important actions. One, a leadership transition and two, the launch of a formal process to review the company's portfolio. [inaudible]
Alexis Tessier: Let me begin with the Leadership Transition. In September 2023, we launched our new strategy, Hain Reimagined.
Alexis Tessier: Aint that streamlining our operations, simplifying our product portfolio and reinvesting in our core better-for-you category initiatives.
Alexis Tessier: As a result of these efforts, the company has improved its financial health through discipline cash management and strategic debt reduction. Today, we have a stronger balance sheet and significantly more financial flexibility.
Alexis Tessier: Now with standing these accomplishments, we are disappointed with the overall performance of our business.
Speaker Change: Accordingly, Wendy Davidson will no longer serve in that role effective this morning
Speaker Change: On behalf of the company, I want to thank Wendy for her leadership and the contribution she has made to help to enhance transformation and position the company for long-term success.
We wish her the best in her future endeavors. [inaudible]
Speaker Change: The board has a leadership succession plan in place. We're executing that plan, which aims to seamlessly identify the company's next CEO . In the meantime, one of our board directors, Alice and Lewis, will step into the role of interim president and CEO .
Speaker Change: We are fortunate to be able to benefit from Allison's vast industry and leadership experience.
Speaker Change: Alton has a track record of driving superior in market execution, delivering disciplined and profitable revenue growth, and enlarging innovation to create value.
Speaker Change: She joined the Hain Board in September , 2024, and it spent the last 30 years working with some of the world's most respected consumer product companies including Kimberly Clark, Johnson and Johnson consumer health, Coca-Cola, and Kraft Times.
Speaker Change: In addition to the leadership transition, we also announced that the board has formally initiated a strategic review of the company's portfolio aimed at maximizing shareholder value.
Speaker Change: The borders are tingled Goldman Sachs as its financial advisor and we will consider a broad range of potential options to enhance value.
Speaker Change: There is no set time table for the completion of this evaluation. The company does not intend to provide further updates on this effort, unless and until the board has approved a specific course of action or determines that additional disclosure is appropriate or necessary. Thank you very much.
Speaker Change: With that, I'll turn the call over to Allison to say a few remarks and then to Lee to walk through the highlights from the quarter.
Allison Lewis: Good morning, everyone, and thank you for joining us today. I also want to thank our employees across the globe for their continued hard work and dedication during what has been a challenging period for the business.
Speaker Change: Over the past eight months, I've had the opportunity to serve on Haines Board and get to know the business well. When the board asked me to step in as interim CEO , I didn't hesitate because I believe in this company. It's purpose, it's people and it's long term potential. .
Speaker Change: As Don mentioned, I spent my career building and scaling consumer brands, and I believe Hain has many of the right ingredients to succeed, distinctive products, a strong portfolio and a passionate team.
Speaker Change: That said, we also need to be realistic about where we are today. Our third quarter results were disappointing and fell short of our expectations. We are not where we need to be and we cannot afford to stand still. [inaudible]
Speaker Change: To that end, we are taking a hard look at our strategic plan to leverage what is working and address the areas in which we need to make changes.
We must face our challenges directly and we will.
Speaker Change: This is a moment that calls for clarity, focus and action and that's exactly how we intend to move forward. I look forward to discussing more with you on our next earnings call. Now I will turn the call over to Lee to walk through our performance for the quarter and outlook. Thank you very much.
Thank you, Alison. Good morning, everyone.
Speaker Change: Our third quarter results for far shorter expectations and our full-year results will not be where we expected to finish.
Speaker Change: As you saw in the morning's release, we reported a 5% decline in organic net fails and adjusted EBITDA of $34 million, over 20% below last year's performance.
Speaker Change: I'll cover the financials in more detail in a few minutes, but would first like to provide some color on the key drivers of the performance shortfall as well as aspects of the business we are working on to course correct.
Speaker Change: The shortfall in both third quarter sales and earnings was driven primarily by four factors, principally in our North American business.
Speaker Change: Under performance and snacks, delayed timing in expected recovery in Earth's best formula, a challenging start to the hot key season for celestial seasonings and trade investment and inflation impacts ahead of pricing.
Speaker Change: In snacks, the promotional activity on Garden Veggie that shifted from the first half of the year into the back half, performed below expectations, and our trade investment was less efficient than anticipated.
Speaker Change: Velocities in Earth's best formula were slower than we anticipated. However, we had double-digit velocity growth in many key retailers.
Speaker Change: In celestial seasonings, the temporary service issues we encountered at the start of the hot T-season in Q2 affected volume in the early weeks of the winter T season.
Speaker Change: Well, those issues have since been resolved. It did impact the call to finally pricing actions did not keep pace with trade investment and cost inflation across the portfolio.
Speaker Change: While all results in the quarter were below our expectations, we may progress in certain important areas.
Speaker Change: Including International, which is returned to year-over-year organic net sales growth, having resolved the first half service level challenges that affected that business.
Speaker Change: Dequential Improvement in year over year organic net sales trends overall. A return to consumption growth in celestial tea, productivity and efficiency savings that continue to enable us to partially offset other headwinds in the business.
Speaker Change: An ongoing reduction of working capital to improve cash generation and reduce net debt. To shift our performance, we are focused on 5 key drivers.
Speaker Change: Driving operational productivity and working capital reduction and finally strengthening our digital capabilities.
Let me review each inquiry to detail.
First, simplifying her business.
Speaker Change: We recently announced the shift of our distribution network to move closer to our customers for improved speed to shelf and the consolidation of our office footprint in both Canada and the UK.
Speaker Change: Since fiscal year 2023, we've reduced our lease expense by over $5 million a year.
We have reduced our number of co-manufacturers by 23%.
and our raw materials and packaging vendors by 13 percent.
Speaker Change: Annabeling us to have fewer, more strategic partners to support our growth. We are also unlocking savings by optimizing our cost structure with significant work around our organizational structure to balance our corporate overhead with our company needs.
Speaker Change: Actions taken in this fiscal year are expected to generate over $25 million in run rate cost savings by the second half of fiscal 2026.
Speaker Change: Second, we are driving a step change in the renovation and innovation of our portfolio.
Speaker Change: including new news and snacks, category expansion in T, and end-to-end birth-to-back pack solutions for baby and kids.
Owa Laverging, Our Better For You Credentials. [inaudible]
Speaker Change: Third, we have embedded revenue growth management initiatives across the company and are implementing early fiscal year 2026 pricing actions to mitigate inflation impacts.
Speaker Change: We will accelerate our work to drive pricing, improve mix and trade effectiveness across multiple brands and are rolling out new packaging to support multi format and margin expansion across our portfolio.
Speaker Change: Both, Delivery of Our Supply Chain Productivity is expected to be in line with prior year, which was a record year of delivery for Hain.
Speaker Change: We expect to have unlocked nearly two-thirds of the total working capital goal of $165 million by year end. And we have a solid productivity pipeline for fiscal 2026.
Speaker Change: And fifth, we are enhancing our digital capabilities to save time and money while improving our business execution.
Speaker Change: Among the areas where we are having early success in customer and product level analytics to support brand strategy and revenue growth management.
Speaker Change: We have also been able to unlock opportunities to eliminate procurement tail spans, consolidate our vendor population, and leverage scale contributing to the productivity I mentioned earlier. And improving our capabilities to drive our e-commerce performance will be a key focus moving forward.
Speaker Change: Now I will cover our financial results and outlook in greater detail before we wrap up the call.
Speaker Change: The third quarter, year over year, organic net sales declined by 5%, I talked about earlier, reflects a three point decrease in volume mix.
Speaker Change: and a two point decrease in that pricing, mainly in the North America segment. Please note that we excluded from organic net sales growth trends in our personal care business.
Speaker Change: As we are exploring strategic alternatives for this business has previously announced.
Speaker Change: We only partially offset the impacts of the reduction in net sales and ongoing input cost inflation with productivity and S-GNA savings.
140 basis point decrease from the prior year. Yeah.
FGNA decreased 6% year-over-year to $63 million.
Speaker Change: Supported by the partial benefit from the overhead reduction actions I referenced earlier, and a reduction in selling expenses.
Speaker Change: SGNA represented 16.1% of net sales for the quarter, as compared to 15.2% in the year-a-go period.
Speaker Change: During the quarter, we took charges totaling $8 million associated with actions under the Restruction Program.
Speaker Change: Including employee related costs, contract termination costs, asset write downs, and other transformation related expenses.
Speaker Change: To date, we have taken $83 million in charges associated with the transformation program.
Speaker Change: which is comprised of $80 million of restructuring charges and $3 million of expenses associated with inventory write downs.
Of these charges, $31 million were non-cash. [inaudible]
Speaker Change: That's previously discussed, the total transformation program charges are expected to be between $150 million and $125 million, by fiscal 2027, inclusive of potential inventory write down of approximately $25 million related to brand and category assets.
Speaker Change: Restructuring charges excluding inventory write downs are expected to be 90 to a hundred million dollars by fiscal 2027 and are excluded from adjusted operating results.
Speaker Change: Interest costs fell 16% year-over-year to $12 million in the quarter, driven by lower outstanding borrowings and a reduction in interest rates.
Speaker Change: We have hedged our rate exposure on more than 50% of our loan facility with fixed rates at 6.1% based on the new credit agreement.
We continue to prioritize reducing net debt over time.
Speaker Change: Adjusted net income, which excludes the effect of restructuring charges amongst other items for $6 million in the quarter, or $0.7 per diluted share.
Speaker Change: As compared to $11 million or 13 cents per diluted share in the prior year period.
Turning now to the individual reporting segments.
In North America, organic net sales declined 10% year-over-year .
Speaker Change: The decrease was primarily driven by lower cells in snacks and baby and kids.
Speaker Change: We expect North America organic net sales trends to improve sequentially in the fourth quarter, primarily driven by baby and kids on improvement in formula velocity and distribution, innovation and the lap of skew rationalization initiatives.
Speaker Change: Third-culture adjusted gross margin in North America was 22.4%, a 20 basis point increase versus the prior year period, driven by productivity partially offset by higher trade spend and inflation.
Speaker Change: Adjusted EBITDA in North America was $17 million, as compared to $28 million in the year ago period.
Speaker Change: The year-over-year decline resulted primarily from lower volume mix and higher trade spend.
Parsley Offset by Productivity.
Speaker Change: Adjusted EBITDA margin was 7.8%, as compared to 10.4% in the prior year period.
Speaker Change: In our international business, organic net sales grew up 0.5% in the quarter, led by growth in meal prep and baby and kids and supply chain recovery from the service issues we discussed last quarter.
This was partially offset by declines in beverages and snacks.
Speaker Change: We expect the international segments to improve sequentially in the fourth quarter as we realise the benefits surprising actions already taken, new innovation and new contracts in non-dairy beverage.
Speaker Change: International Adjusted Gross Margin was 21.1%, approximately 130 basis points below the prior year period driven by inflation partially offset by productivity.
Speaker Change: International Adjusted EBITDA was $22 million, a decrease of 10% compared to the prior year period, primarily driven by inflation and net pricing,
Speaker Change: Adjusting EBITDA margin was 13.2% down approximately 120 basis points year-over-year
Now, turning to Cascorder Performance. [inaudible]
Speaker Change: Organic net sales growth in snacks was down 13% year over year, driven primarily by Garden Vendetti, as well as continued category softness.
Speaker Change: So we did see improvement in distribution in the quarter, up mid-single digits across Max.
Speaker Change: In Badian Kids, organic net sales broke was down 6% year over year, driven by Latin formula sales last year at a key retailer that was lost in the spring of 2024, softness in pouches and a skew simplification effort.
Speaker Change: However, excluding the lost customer, a specialist formula is showing double digit consumption growth and Ella's kitchen gained from share in both value and volume in its core wet baby food casserole.
Speaker Change: and we saw continued strong growth in Earth's best snacks and cereal, with high single digit and high $18 sales growth respectively.
Speaker Change: In the Burbridge category, organic net sales growth was down 7% year over year, driven by non-dairy
Speaker Change: Despite the category headlands, our non-dairy beverage brand, Joya, is growing consumption in high single digits and gaining share.
Speaker Change: To let your seasonings organic net sales stroke in the porter was impacted by a challenging start to the hot tea season.
Speaker Change: But consumption return to growth in the quarter with bag T up low single digits.
Alexis
Speaker Change: Global Category, Milk Prep, Return to Growth in the Quarter, up 1% year over year. We continue to see strong growth in branded soup in the UK, with Hain Brands growing pound sales by over 20% and gaining 450 basis points of share.
Speaker Change: and Greed God's yogurt, these dollar sales high single digits in the quarter, supported by a brand new campaign that drove increased household penetration. Thank you for your attention.
shifting to cash flow and the balance sheet.
Speaker Change: Three cash flow in the third quarter was an outflow of two million dollars.
Speaker Change: Compared to free cash flow of $30 million in the prior year, a gold period.
Speaker Change: The decrease was primarily due to lower EBITDA and an increase in inventory to support service level recovery, as well as to some extent they pulled forward a certain excuse to mitigate tariff exposure.
Speaker Change: We continue to see the benefit of our day's pair of both standing as well as the improvement in our day's inventory of standing in the third quarter.
Speaker Change: Dave Parable outstanding, improved to 61 days from 37 days in fiscal year 23 and from 46 days in Q3 fiscal year 24.
Speaker Change: Dave's inventory outstanding improved to 79 days from 82 in fiscal year 23 and up from 77 days in Q3 fiscal year 24.
Speaker Change: We continue to make progress towards our targets of 70 plus days payable outstanding and 55 days inventory outstanding by fiscal year 20 27.
Speaker Change: CapEx for $7 million in the quarter, with down from $12 million in the prior year period.
Speaker Change: We have ample capital spending planned to enable both our productivity delivery and capacity-building projects and expect total spending to be less than $40 million for fiscal year 2025.
Speaker Change: Finally, we closed the quarter with cash on hand of $44 million and net debt of $665 million.
Speaker Change: Our Nat Lavery's ratio as Calculated under our credit agreement kicked up slightly to 4.2 times.
Speaker Change: We have proactive amended our credit agreement to afford ourselves more flexibility as we navigate the next several quarters.
Speaker Change: The amended agreement provides for a maximum net secured leverage ratio of 4.75 times for the end of June 30th, 2025, through and including the call for ending March 31st, 2026.
Speaker Change: Paying down debt and strategically investing in the business continues to be our priorities for cash and we reduced net debt by 8 million dollars in the quarter.
Speaker Change: Our long-term goal remains to reduce balance sheet leverage to three times adjusted EBITDA or less, as calculated under our credit agreement.
Speaker Change: Looking ahead, I'd like to touch briefly upon the macro environment.
Specifically, regulatory development. [inaudible]
Speaker Change: While there is material uncertainty related to timing, level, and potential impact apparatus proposals.
Speaker Change: What we do know is that most of our products are produced and sold in the same region.
Speaker Change: Making us less subject to tariff impact on finished goods and cross-border shipping.
Speaker Change: We have some exposure in raw materials that cannot be grown or sourced in the US.
Speaker Change: However, based on what we know today, we do not expect any material cost impact in fiscal 2025 and we are actively working to mitigate any impact going forward.
This includes pre-building inventory head of tariffs.
Speaker Change: and reallocating resources within supply chain and R&D to accelerate work to reformulate and shift manufacturing.
Speaker Change: We will continue to monitor these developments as well as the customer landscape and consumer behaviours as we refine our execution strategy for fiscal 2026 and beyond.
Speaker Change: Regarding near-term performance expectations, we are adjusting our financial outlook for the year based on slower than previously anticipated volume recovery.
Speaker Change: For the four year fiscal 2025, we now expect organic net sales growth to be down approximately five to six percent.
Adjusted EBITDA of approximately $125 million for $125 million for $125 million.
Speaker Change: Gross margin to be approximately 21.5% and free cash flow of approximately $40 million.
Allison Lewis: With that, let me turn the call back to Allison to wrap up.
Speaker Change: Thank you, Lee. Looking beyond this fiscal year, we remain optimistic about the future and potential for Hain's
Speaker Change: We are a pure play better for your company at a time when the marketplace desire for better for you products continues to grow.
Speaker Change: Our business foundations are solid with a culture of driving strong operational productivity, a positive free cash flow profile, and a proven ability to reduce debt.
Speaker Change: We are committed to evolving our strategy with an eye on continuous improvement in margins, innovation and top line growth.
Speaker Change: We believe the external environment presents a unique opportunity for Hain and that the challenges we face are largely within our control. We are prioritizing simplifying the business. Thank you very much.
Speaker Change: We believe this focus will enable us to drive improved financial performance and deliver value for our shareholders.
Speaker Change: We appreciate your time today and look forward to answering your questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question please press star followed by the number one on your telephone keypad
Participants will be allowed one question and one follow-up question [inaudible]
Speaker Change: Your first question comes from the line of David Palmer with Evercore ISI.
Please go ahead.
Great, thank you. I wanted to ask about, you know, the tube.
Speaker Change: Big category snacks and infant nutrition and, you know, obviously, urspass and guard veggie.
I know those are... [inaudible]
Yeah, probably key [inaudible]
Speaker Change: Gross Areas in the minds of the board, and I'm wondering, you know, in the, in the, in the,
Speaker Change: You know, in some of the rhetoric from the management that, you know, Hain could be the best of both worlds. It could be how it could have the better functionality versus smaller brands, smaller companies out there, but be more nimble than large companies. You know, you mentioned some things about. You know what?
Speaker Change: Pricing, Not Keeping Up With Trade Investments, and it looks like we're having some surprising results here in the second half with Garden Veggie. I'm just wondering what is it about the execution and the insides of Hain that you think need to be fixed. [inaudible]
Speaker Change: To get to that ideal world that you want to be in. And then maybe complementing that is, you know, in what ways has the category competitive environment or the consumer kind of changed in ways they're impairing the growth of your
Speaker Change: of these two key growth areas of the company. Thank you.
Speaker Change: David, maybe I'll kick off here in terms of snacks. As you look at kind of the underperformance overall, you're right, that was that was one of the key areas. I mean, from a top line perspective, versus, you know, what we were anticipating 80% of our top line shortfall came in North American two thirds of it being in snacks.
Speaker Change: I would say a couple of things. I mean, and it ties into kind of our execution, our promotional event did under perform expectations across club and mass.
Speaker Change: and then we are seeing, and you're probably seeing this, we are seeing category softness with only a few better few brands driving growth during the quarter.
Speaker Change: You know, we still feel really good overall around kind of the brand health, specifically with guard and veggie. Just looking more recently, you know, we've had resets happening across major customers, but for those that we have executed, we did see improvement, but not for the level that we expect. So I think we have a lot more work to do to rebuild velocities. You know, part of this is continuing to drive marketing. It's
It's driving the things that we outlined, really. Really?
Accelerating Brand Renovation and Innovation. So,
Speaker Change: From a garden that you perspective, you know, our marketing efforts should should start to show benefits in Q4 we do have new flavor innovations. The second one you mentioned was was round baby and kids you know if we kind of. [inaudible]
Speaker Change: Bill that back a little bit. Market trends remain strong on on snacks and cereal within baby and kids and I'd say formula is performing well, but we're lapping a large year ago volume that we had that muted the performance so, you know, we feel good about that overall. We did have some headwind from our exit from us best jars. But again, I've tied back to the five key drivers we talked about the Allison Davidson.
Talked About Which Is Really Accelerating Brand Innovation and Renovation
and that ingested with her. [inaudible]
Speaker Change: I don't think we need to talk to you specifically about what one retailer or another has done, but where you are having issues with reshelving is it really come down to as simple as velocities, maybe not keeping up with key competitors, or maybe give us a sense of the competitive environment on shelf for your key snack brands, and I'll pass it on. Thank you. Thank you.
Speaker Change: Yeah, I mean, I think part of it is we talked about placement when we did the reset. So again, I think some of that gets down to execution on our side. We have had some execution challenges. I think it's done. It's that we talked a little bit about, you know, we have rebuilt the North American commercial team. That will be a focus moving forward that we have to drive that execution. Thank you.
Thank you.
Jim Salera: The next question comes from the line of Jim Salera with Stephen's Inc.
Please go ahead.
Good morning, Alison Lee, thanks for taking our question.
Baum
Speaker Change: Maybe starting off with with a high level question about kind of visibility. It just for both the remainder of this year then as we on a kind of a go forward basis, it sounds like. [inaudible]
Speaker Change: The underperformance in the quarter were all events that popped up as the quarter progressed and if I can characterize it, you correct me if you're wrong but
Speaker Change: You want really on your radar at the end of the second quarter, and so is there anything whether it's an investment in corporate assets or talent internally that you guys can invest in that you'll have maybe better forecasting or better visibility to address some of these Edwin's as they pop up in real time.
Speaker Change: Yeah, I think it's a great question and I think we took before we have some mates and investments but we're falling.
Speaker Change: Marshall in terms of kind of some of our forecasting. I think the other thing and the thing I would just tie back to is our investment in our commercial team will drive much more. I think we said now eight of our top nine we've got. All right.
Speaker Change: Top to top, linkage with our key customers. That would drive much more visibility. The other thing is, you know, investing, continuing to invest in some of our digital capabilities. Getting this information, you know, far more real time. So I think those things, you know, will help us move forward, but we do have to make it kind of a step change there.
Speaker Change: Okay, and then following up on David's questions on the snack side of the business.
Speaker Change: If you could maybe just give us, if you have any detail on.
Speaker Change: You know, particularly the underperformance on the promo because I know it's something that you guys were excited about and I believe you had some distribution games in the quarter as well so if my numbers are right I think.
Speaker Change: Sequentially, snacks were basically flat from 2Q to 3Q in terms of the rate of decline, but obviously in 3Q, you had a lot more support in market and I think distribution gains alongside that. So just any incremental color there about why those might have not had the same uplift as you anticipated earlier in the year.
Speaker Change: Yeah, so a couple of things. And you kind of hit it on the head. We did have an underperformance.
Speaker Change: Um, in terms of the list that we thought we were getting with the, with the promo. I mean, we're about 80% of expectations.
Speaker Change: You know, I would say also, you know, it was more challenging if we look at club, there was more competition from both
Speaker Change: And you've seen this. I mean, the overall snacks category itself. I mean, it's both better for you. And then the broader snacks category, you know, has really softened. So, you know, again, we're driving and the key thing is focusing in then on driving continues to drive that kind of innovation. [inaudible]
Got it. Thank you. I'll hop back in the queue.
Speaker Change: In next question comes from the line of Kaumil Gajrawala, Howard Jeffries,
Please go ahead.
Komil Gajrawala: Hey everybody, good morning. We may just talk a bit more about the strategic review. What specifically is the mandate?
Speaker Change: Is it, you know, is it portfolio related? Is it something bigger? Um, maybe if you just-
Komil Gajrawala: Dig into, provide us some more details other than what we see obviously in the press release.
Komil Gajrawala: Hi, thank you for your question. This is Dawn. As we said in the press release in light of the recent performance, the board decided that a thorough evaluation of the strategy and portfolio was warranted to determine the best approach to maximize our shareholder value. We are early on in that process. The review will consider a broad range of strategic options to enhance value, but it really is too early to comment on any specifics as we're early in the valuation. Thank you very much.
Speaker Change: Okay, got it. And then when you, as it relates to some of the decisions I guess made today, is, you know, obviously we're, we've got into sort of a
Speaker Change: The difficult macro environment and the particularly difficult macro environment for Max. And so, you know, to what degree is it sort of company specific versus the fact that it's just it's just a harder sort of environment than it was before. [inaudible]
Speaker Change: Yeah, I think it's a mix. I mean, you know, the categories of not I kind of found a bit like a broken record, but the categories are definitely softer. You know, there are challenges.
Speaker Change: You know, but then that piece of this is kind of the execution and why we're focused on the kind of the five key drivers to shift our performance. So it is a mix. But as I said, you know, our biggest top line shortfall was in snacks. That's the category that seems to be most pressure right now. [inaudible]
Okay, got it. Thank you.
Ken Goldman: The next question comes from the line of Ken Goldman with JP Morgan, please go ahead.
Hi, thanks.
Ken Goldman: You talked about the key drivers to shift performance, simplification, innovation, productivity, and so forth. I think one of the questions we're getting this morning is sort of what's different this time, right? These are a lot of areas that we've heard from the past.
Speaker Change: from a variety of Hain Management teams that the company will lean into. So, I guess...
Speaker Change: You know, the question I would ask is what can you discuss today in terms of, you know, what actually is being done differently and what can be implemented in the next year in a way that really can make a difference in near term shareholder value because I think, you know, what we're hearing some feedback on is.
Speaker Change: Yeah, this sounds great, but we've heard all of it before a few times.
Allison Lewis: Hi, it's Allison. Let me jump in here and I'll give you a little bit more of a philosophical point of view, given that I'm brand new in the role and I need some time to assess exactly what's going on. But on a broad base basis, what I would say is, you know, throughout my career, I've seen in consumer packaged goods that, you know, great marketing today, the digital first. . . . .
Great Innovation, Superior Execution, both in bricks and clicks.
Allison Lewis: As well as strong revenue growth management, inclusive of pricing are really the levers that drive growth on the business.
Allison Lewis: That combined with strength in terms of how you manage your P&L and all the activities against margin accretion both at the gross margin level and obviously at the EBITDA level are the things that make the machine tick so to speak.
Speaker Change: that we haven't executed all of those things as well as we need to. I can't give any specifics today, but what I can tell you is my plan is to go in to quickly assess. Let's go ahead and ask.
Speaker Change: and to really create focus against the things that are going to drive the greatest return most quickly.
Speaker Change: And, again, my experience would say when you do that, you can make a difference. And, you know, again, I look forward to talking to you in the next earnings call about some of the areas of focus and what we're doing there.
Speaker Change: Thank you. Thank you.
Speaker Change: Hi, this is John . I just like to jump in again from the board perspective. We believe that Allison has a track record of really driving superior. Here.
Actions over the last six months that will . . .
Will
Speaker Change: The Hain Reset Actions that we've taken in terms of those overheads. We believe there's significant opportunity on RGM and pricing actions that we still can take and strengthening our digital capabilities and growing e-commerce. So there are things that can be done differently and will be done differently as we move forward.
Speaker Change: Okay, thank you for all of that. I'd like to ask a quick follow-up if I can.
Speaker Change: You know, other actions you can take to clean up the balance sheet, right? The leverage ratio keeps rising and you just amended your credit agreement to remain compliant, but you know, what can you do or are there other creative ways that you're thinking about now to kind of [inaudible]
Speaker Change: You know make the stock a little more investible from that perspective as well .
Speaker Change: It's just one thing, we didn't amend it to be compliant, we were compliant as we closed the quarter. What we did amend it to do was just to give us flexibility moving forward. So I think what we have to continue to do and we've had a really good track record of this. We have to continue to drive the working capital reduction, we still see some opportunity there specifically kind of in the inventory.
Speaker Change: Lee area. You know, we actually inventories were higher bid in Q3 and I think we'd mention that. But so continuing to drive that, continuing just to look at our portfolio overall, and this is the whole thing with focus. So we are going to be kind of doing all of those things the end of day. We have to then just drive overall business results. [inaudible]
Speaker Change: Obviously, de-leveraging is us delivering on EBITDA. So it's all of those factors. I guess the last thing I would say is we talked a bit about it before is we have some tail assets out there. We are continuing to clean up the portfolio on those as well.
Speaker Change: The next question comes from the line of Michael Lavery with Paper Sandler. Please go ahead.
Thank you, good morning.
Speaker Change: It would look to get your perspective on the brands and I guess
Speaker Change: In the past, Hain has characterized some of the positioning as...
sort of a gateway premium or approachable premium, but-
Speaker Change: It can suggest neither the best value or lowest price for the consumer and also neither the pricing power of a real super premium or
Speaker Change: Truly Premium Brand. In that middle ground, it's proven tough for a lot of companies in the last few years. Is that the right place to be? How do you think about the brand attributes that are the most appealing as you go into this portfolio review? You know,
Speaker Change: Thank you. Let me jump in here. Um, it's Allison. I think that the way we have to think about brands is our role is [inaudible]
Speaker Change: Create value in the brands. Value in the brands to the innovation. Value in the brands to the marketing. Value in the brands through the packaging mix. [inaudible]
Speaker Change: in the channels that we distribute in. And when you do create that value in the brand, you can actually charge an appropriate price that the consumer is willing to pay.
Speaker Change: and then pricing for those value creation levers. So I wouldn't put us in a place where we say this is the price space we live in. Our role is going to be to continue to trade consumers up and really drive them again. .
Paying for our brand, what our brands are worth.
Speaker Change: And you know, if you look today to I think the point that you raise some of our brands are not as premium as maybe they should be in the marketplace.
Speaker Change: That's some of the data that we're seeing and so that's our opportunity to bring more value to the brand so we can charge more and drive that that margin accretion and that value overall for our business.
The social colors, maybe a related follow-up.
Speaker Change: Kind of similarly, a little bit higher level. As you look across the portfolio, obviously a fair number of brands and categories and being felt a little bit further, but is there a right to win that you would say you have as a company and how do you think about what that might be? [inaudible]
Speaker Change: Yeah, I mean, we obviously definitely have a right to win as a company. You know, again, I think, you know, for us
Speaker Change: What we have to do, and again, I advertise back to the five drivers that we say to me, we have to accelerate our brand renovation and innovation. I think that really supports kind of our right to win. We've talked about some things from a commercial execution standpoint, but we've invested it in right now that will also support our right to win.
Speaker Change: So I think both of those things, you know, driving the productivity so that we can continue to invest back into our brands as well.
Speaker Change: And I would just add that, you know, when you think about right to win, I mean, first of all, we are in very attractive categories. The better for you categories continue to out.
Speaker Change: Some of the baby segments, if you actually break down total baby and kids are growing double digits, that's extremely positive. So we've got to build on our strengths and where we have the bright spots, and then what we have to do is clearly double down our focus on snacks. [inaudible]
Speaker Change: And so that's part of, as Don spoke about the strategic review and how do we maximize the value overall for our business?
Dawn Zier: We have an opportunity, though, to elevate our messaging with consumers around the benefits and the claims, you know, and we are focused. We do have a strong pipeline of new coming from the snacks portfolio in 2026.
Dawn Zier: that will bring some of that renovation innovation. So again, the continued focus and execution of that.
Thanks for all the color. Thank you.
Speaker Change: As a reminder, if you'd like to ask a question, please press star followed by the number one on your telephone keypad.
Please go ahead.
Speaker Change: Yes, thank you. So, you know, just getting back to the higher level question, you know, in terms of, you know, strategy, I guess we go back to when engaged capital was involved. And the transition from. [inaudible]
Speaker Change: You know, the business was being reviewed and the focus was being narrowed onto businesses and categories that made sense and the feeling was at least time stock responded was that that was happening.
Speaker Change: and engaged with on the board, and marked at called number of products.
Speaker Change: You know, got a little rid of a lot of excess capacity businesses that were not possible so far. And the stock went up into the 30s and then engaged, ex-exited, but then Mark exited, Wendy came in, and again there was this, you know, Hain re-imagined, there was a new strategy, and it just
You know imploded and the stock has created now to to to and change
Speaker Change: I guess what was Mark doing wrong that needed to be changed, and then...
What exactly did Wendy do? That was-
Speaker Change: I'll take that question. I'm sure you can appreciate that the
Speaker Change: Dynamics, the business is very dynamic and certainly as we look over the past five or six years, there's been [inaudible]
Speaker Change: A dramatic change in the macro situation and in the dynamics of the business. So the board and the management team are constantly reassessing and looking at different options to move forward. I'm not going to go back and comment on on what, what Mark did, what Wendy did they both did a lot of things, right? It's just we are in a very dynamic environment. We are responding to that environment. [inaudible]
Speaker Change: And we are moving forward in a way that makes the best sense for the company and our shareholders. And as we do our strategic review, we will report back at the appropriate time if and when we take any action.
Speaker Change: So, one of the things just to follow up on the pricing, right? In this environment, consumers are probably price sensitive. It is taking pricing, working in this environment. Is that also under review? Is everything under review? I'm just trying to figure out.
Speaker Change: And then how long do you think this review will take in terms of the business to get back on track with your best estimate?
Speaker Change: Yeah, so just on the pricing, that is definitely under review. We have
Speaker Change: Probably, you know, Mr. Baller, a little bit on the pricing execution.
Speaker Change: So, you know, and investing, and I think we mentioned this, you know, as one of the key focus areas is, you know, strategic revenue growth management. We talked about that before, but we've really kind of turbocharged that and kind of standing up the capabilities on that.
Speaker Change: So, yes, pricing is under review. I mean, we are taking pricing in both North America and international. And again, we're going to be really focused heavily on revenue growth management. Thank you very much.
Speaker Change: The other thing that I'll just add in here, I think it's very important that we focus in on where the challenges lie. If you look at the results for the third quarter, what you see is 80% of that shortfall is North America, and within North America, the majority of that shortfall is snacks.
Speaker Change: So, again, as I come in and look at where do we need to double down, it's actually, you know, some pretty clear areas.
Speaker Change: and in other parts of the business, we are seeing some bright spots and I think that's important to keep elevating those bright spots and focus in on isolated challenge areas and really make a difference against those and that will make a difference on the business.
Speaker Change: Okay, thank you so much for the call. I appreciate it.
Speaker Change: The next question comes from the line of Andrew Wolf with CL King. Please go ahead.
Andrew Wolf: Thank you. I also want to ask about pricing, and I know you've answered it a couple of ways, but
Speaker Change: I just wanted to ask you know one of it I think Alison mentioned is more structural getting the value equation right for you know either premiumizing brands of that's the case or what have you I wanted to ask more of a process question
Andrew Wolf: and I think, you know, you kind of touched on it, but...
Andrew Wolf: Is it a lack of a centralized approach or standardization? You know, other companies did, you know, in the space also had a tough quarter on pricing, because I think, you know, commodity is kind of.
Andrew Wolf: Zoom pretty rapidly and just, you know, talk about a dynamic market, you know, is what's going on. But what first, Hain specifically, is this a process thing or more structural to get, you know, to get the pricing to where it should be versus, you know, cost inflation?
Andrew Wolf: No, I mean, a couple of things. I think we have. [inaudible]
Andrew Wolf: Centralized the approach a lot more. I mean, obviously it's driven by kind of analytics are really stepping up that piece of it, but it's centralized more, more accountability. So, you know within RGM, we have, we've, you know, stood up revenue growth management accountability into both regions that's linked across. So, let's take a look at that.
Andrew Wolf: and really being pushed then by the financial organization to make sure that we're getting you exactly out of it and it's reflected and coming through in the PNL. So that's something that we really stood up. We had before, but we needed to put a lot more discipline around it.
Andrew Wolf: Yeah, and I'll just build on pricing and revenue growth management, which is really one of the levers with...
Andrew Wolf: Pricing one of the levers within revenue growth management. I was at Coca-Cola 20 years ago when we started rolling out revenue growth management in North America. What I will tell you is it is a capability that is very, very important.
Andrew Wolf: But at the same time, it does take some time. We have clearly missed the opportunity there in totality.
Andrew Wolf: but we are putting the capability in place.
Andrew Wolf: And now we just need to double down with focus on some of the key levers, pricing being one of the biggest one and then mix probably the second biggest one.
Speaker Change: So again, you should be seeing more on that, but that is a key area of focus as Lee has highlighted a number of times in terms of the five areas that we are going to be putting our attention against.
Great. And the structural question is, um,
Speaker Change: I don't know how much you can answer this given you're under a board review, but when I look at the categories that are [inaudible]
Speaker Change: We're meal prep turning off and snacks being at the other end.
Speaker Change: You know, the knock on Hain as an entity was, you know, was too diverse, you know, too much stuff and, you know, and to manage.
Speaker Change: Yet Meal Prep probably is the most fragmented management.
Speaker Change: Kenan Drumman, and it's doing the best and maybe, and you know, Stax is doing, you know, not as well, even though you seemingly are well positioned. So, you know, I kind of think maybe there's a competitive intensity issue within the brands and maybe that's, you know, where the company might want to, you know.
Speaker Change: You know, I know you got a review coming in but it's just kind of interesting thing where you know. [inaudible]
Speaker Change: It does seem we're in meal prep, we're perhaps things are a little less intense on the competitive side and yet the company is very fragmented has a lot of different brands. It's interesting that that's where things are doing well. I don't know if you have any. The board has already thought about this or management internally. [inaudible]
that you might want to comment on.
Speaker Change: Yeah, you get this is done. You can be assured that we're looking at a broad range of strategic options to enhance value. We're looking across the entire portfolio as we warranted. It's time to do a thorough evaluation of both the strategy and the portfolio and we'll report back as appropriate when we have more information. [inaudible]
Speaker Change: The next question comes from the line of John Baumgartner with Mizzouho.
Please go ahead.
Good morning. Thanks for the question.
Speaker Change: I wanted to come back to the vision of the portfolio, you know, we've seen multiple teams speak to the perceived brand strengths and, you know, growth through distribution has been the strategy for 25-30 years.
But the stickiness of distribution and the velocities have been...
Speaker Change: Recurring Challenges. And I'm curious as part of this review process, assessing the external variables, whether it's private label making larger inroads in health and wellness, regulatory changes that might result mainstream brands improving their health credentials. Is it possible that Hain can add more value through the supply chain, you know, producing for private label, becoming a co-manufacturer in some cases? I'm curious, you know, what specific guardrails or actions are you sort of ruling out at this point?
in terms of the vision for the business going forward.
Thank you.
Speaker Change: The next question comes from the line of John Andersen with William Blair. Please go ahead.
Good morning, thanks.
John Anderson: You know, this may not be a fair question, Lee at this point, but I'll always get anyways, um,
Speaker Change: You know, as you look ahead and kind of given what you know now about the five, you know, focus areas that you're really looking to, to lean into, to try and drive some improved performance, and then you see, you know, diagnosed. Thank you.
Speaker Change: Where the majority of the current challenges are, how would you have us think about fiscal
Speaker Change: All of us asking questions here are going to have to establish a view on fiscal 2026. Are there some some boundaries or guardrails you could put around.
Speaker Change: How are you thinking about the possible performance of the business as you exit fiscal 25 in a month and a half? Thanks.
Speaker Change: So John , thanks for the question. I think right now we're not giving guidance or perspective on 2026. We're kind of working through that, you know, working through the kind of the five drivers, but also kind of as we've talked around kind of strategic portfolio review. So it's too early for us to have a perspective on 2026 at this point.
Speaker Change: That would be done during our normal cadence cycle, which as you know, would not be on this call for 2026.
Speaker Change: Okay, and I guess a question for Alison, you know, given.
Speaker Change: Giving your background to, you know, a number of large kind of CKG businesses, whether it be, you know, KMBA or Johnson and Johnson and Consumer.
Speaker Change: Coca-Cola. I mean, this is a, you know, a different kind of thought.
Speaker Change: Situation, I suspect, then the nodes larger, you know, more stable businesses are there experiences that you've had in the past that those.
Company's or another situation that you think you know bring with them.
Speaker Change: You know, they'll allow you to kind of add some value as you step in as interim here during this process. Thanks
Absolutely, so you're right, my experience reads large company.
Speaker Change: But within those large companies, I've had many experiences working and leading much more smaller agile brands, you know, I was a general manager and president of Odualla at Coca-Cola, which was the, you know, natural food and beverage brand at Coke in my other companies, like Johnson & Johnson, I was there and we acquired a number of different companies, which were small agile, fast moving, organized [inaudible]
Speaker Change: So I read big, but I have equal experience on small. I've worked on businesses that are, you know, declining that we've needed to turn around that are more steady state that are also fast growing. And, you know, there's not a lot of experiences I haven't had in my career, which I think brings a breadth and an insight that I believe will be a value in my role as interim president and CEO . [inaudible]
Speaker Change: And the board is asked Alice and to step in because she is a roll up her please operator with an extra
Speaker Change: Henry Traff record, and she will get into the details of the business as we go forward and make sure that we're executed against the five key levers that Lee and her have both talked about.
Speaker Change: Okay, one more follow-up. Again, I don't know what to think, I'll be able to answer this, but
Speaker Change: You know, when we roll around to the fourth quarter or the fiscal 25 call, you know, at that point, would you expect to have?
You know, a material update on the Strategic Portfolio Review.
Dawn Zier: As I said earlier, this is Dawn. It's too early to comment on that. We will update at the appropriate time when we have information to share. Can't commit to any timeline at this point, but appreciate your question.
Okay, thanks [inaudible]
Speaker Change: I will now turn the call back over to Alice and Melissa for closing remarks. Please go ahead.
Speaker Change: Well, thank you everyone for joining today and your continued support.
Speaker Change: I think we'll look forward to speaking with you next quarter where I'll have a little more insight on the business and be able to better answer some of your questions, but look forward to that next call and most importantly, I very much look forward to digging in.
Speaker Change: Ladies and gentlemen, this concludes the call. Thank you for joining and you may now disconnect.