Hain Celestial Group Q2 2026 Hain Celestial Group Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 Hain Celestial Group Inc Earnings Call
Speaker #3: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. We do ask that for today's call, you limit yourself to one question and one follow-up.
Speaker #3: If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.
Operator: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Alexis Tessier, Head of Investor Relations. You may begin.
Speaker #3: Thank you. I would now like to turn the call over to Alexis Tessier, Head of Investor Relations. You may begin.
Alexis Tessier: Good morning, and thank you for joining us for a review of our fiscal Q2 2026 results. I am joined this morning by Alison Lewis, our President and Chief Executive Officer, and Lee Boyce, our Chief Financial Officer. Slide two shows our forward-looking statements disclaimer. As you are aware, during the course of this call, we may make forward-looking statements within the meanings of federal securities.
Speaker #2: Thank you for joining us for a review of our fiscal second quarter 2026 results. I am joined this morning by Alison Lewis, our President and Chief Executive Officer, and Lee Boyce, our Chief Financial Officer.
Jeanie: I am joined this morning by Alison Lewis, our President and Chief Executive Officer, and Lee Boyce, our Chief Financial Officer. Slide 2 shows our forward-looking statements disclaimer. As you are aware, during the course of this call, we may make forward-looking statements within the meanings of federal securities. 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. Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed from time to time with the SEC, as well as the press release issued this morning for a detailed discussion of the risks.
Speaker #2: Slide 2 shows our forward-looking statements disclaimer. As you are aware, during the course of this call, we may make forward-looking statements, security. These include expectations within the meanings of federal operations and financial performance.
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. Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed from time to time with the SEC, as well as the press release issued this morning for a detailed discussion of the risks.
Speaker #2: These statements are based on our current assumptions regarding the company's future expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations.
Speaker #2: Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed from time to time with the SEC, as well as the press release issued this morning, for a detailed discussion of the risks.
Speaker #2: We have also prepared a presentation, inclusive of additional supplemental financial information, which is posted on our website at HAIN.com under the Investors heading. As we discuss our results today, unless noted as reported, our remarks will focus on non-GAAP or adjusted financial measures.
Jeanie: We have also prepared a presentation inclusive of additional supplemental financial information, which is posted on our website at hain.com under the Investors heading. As we discuss our results today, unless noted as reported, our remarks will focus on non-GAAP or adjusted financial measures. Reconciliations of non-GAAP financial measures to GAAP results are available in the earnings release and the slide presentation accompanying this call. This call is being webcast, and an archive will be made available on the website. And now I'd like to turn the call over to Alison. Good morning, everyone, and thank you for joining the call and for your continued support of HAIN. Today, we will discuss the actions we are taking to advance our turnaround strategy and the results for our second quarter. First, let me start with an update on our strategic review.
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 Investors heading. As we discuss our results today, unless noted as reported, our remarks will focus on non-GAAP or adjusted financial measures. Reconciliations of non-GAAP financial measures to GAAP results are available in the earnings release and the slide presentation accompanying this call. This call is being webcast, and an archive will be made available on the website. And now I'd like to turn the call over to Alison.
Speaker #2: Reconciliations of non-GAAP financial measures to GAAP results are available in the earnings release and the slide presentation accompanying this call. This call is being webcast, and an archive will be made available on the website.
Speaker #2: And now, I'd like Allison.
Speaker #3: Good morning, everyone, and thank you for joining the call and for the time we are taking to advance our turnaround strategy and the results for our—
Alison Lewis: Good morning, everyone, and thank you for joining the call and for your continued support of HAIN. Today, we will discuss the actions we are taking to advance our turnaround strategy and the results for our second quarter. First, let me start with an update on our strategic review.
Speaker #3: second quarter. First, let me your continued support of start with an update on our strategic HAIN. Today, we will discuss the actions review. As previously to turn the call over to communicated, we have been conducting a comprehensive strategic review with the goal of simplifying our portfolio and enhancing our financial flexibility, reducing our leverage profile, and maximizing shareholder value.
Jeanie: As previously communicated, we have been conducting a comprehensive strategic review with the goal of simplifying our portfolio, enhancing our financial flexibility, reducing our leverage profile, and maximizing shareholder value. The assessment phase involved a thorough review of our assets, operations, and market opportunities. As a result, we are executing our first decisive step to sharpen our focus on categories and brands in key markets where we can leverage our organizational strengths. On 2 February, we announced that we reached a definitive agreement to sell our North American snacks business to SnackRupters, a family-owned manufacturer of food and baked goods in Canada, for $115 million in cash. Proceeds from the transaction will be used to reduce debt, thereby strengthening our company's financial position and leverage profile. I am confident that in SnackRupters, we have found the right home for our beloved snack brands and the employees who support them.
Alison Lewis: As previously communicated, we have been conducting a comprehensive strategic review with the goal of simplifying our portfolio, enhancing our financial flexibility, reducing our leverage profile, and maximizing shareholder value. The assessment phase involved a thorough review of our assets, operations, and market opportunities. As a result, we are executing our first decisive step to sharpen our focus on categories and brands in key markets where we can leverage our organizational strengths.
Speaker #3: The assessment phase involved a thorough review of our assets, operations, and market opportunities. As a result, we are executing our first decisive step to sharpen our focus on categories and brands in key markets where we can leverage our organizational strengths.
Speaker #3: On February 2nd, we announced that we reached a definitive agreement to sell our North American snacks business to SnackRupters, a family-owned manufacturer of food and baked goods in Canada, for $115 million in cash.
Alison Lewis: On 2 February, we announced that we reached a definitive agreement to sell our North American snacks business to SnackRupters, a family-owned manufacturer of food and baked goods in Canada, for $115 million in cash. Proceeds from the transaction will be used to reduce debt, thereby strengthening our company's financial position and leverage profile. I am confident that in SnackRupters, we have found the right home for our beloved snack brands and the employees who support them.
Speaker #3: Proceeds from the transaction will be used to reduce debt, thereby strengthening our company's financial position and leverage profile. I am confident that in SnackRupters, we have found the brands and the employees who support them.
Speaker #3: I want to express my gratitude to the many talented employees who have built our North American snack brands over the years. Their commitment has been instrumental to reaching this milestone.
Jeanie: I want to express my gratitude to the many talented employees who have built our North American snack brands over the years. Their commitment has been instrumental to reaching this milestone. This divestiture marks a pivotal moment for Hain Celestial as we focus to grow. The simplified portfolio that emerges in North America following the divestiture is stronger financially, with a more robust margin and cash flow profile to drive growth. Hain Celestial's North America snacks represented 22% of the company's net sales in fiscal 2025 and 38% of the North America segment's net sales, with negligible EBITDA contribution over the last 12 months. The financial profile of the remaining portfolio in North America is meaningfully stronger and expected to deliver EBITDA margin in the low double digits underpinned by gross margin above 30%.
Alison Lewis: I want to express my gratitude to the many talented employees who have built our North American snack brands over the years. Their commitment has been instrumental to reaching this milestone. This divestiture marks a pivotal moment for Hain Celestial as we focus to grow. The simplified portfolio that emerges in North America following the divestiture is stronger financially, with a more robust margin and cash flow profile to drive growth.
Speaker #3: This investiture marks a pivotal moment for Hain as we focus to grow. The simplified portfolio that emerges in the right home for our beloved Snack North America following the investiture is stronger financially, with a more robust margin and cash flow profile to drive growth.
Alison Lewis: Hain Celestial's North America snacks represented 22% of the company's net sales in fiscal 2025 and 38% of the North America segment's net sales, with negligible EBITDA contribution over the last 12 months. The financial profile of the remaining portfolio in North America is meaningfully stronger and expected to deliver EBITDA margin in the low double digits underpinned by gross margin above 30%.
Speaker #3: HAIN CELESTIAL's North America snacks represented 22% of the company's net sales in fiscal 2025 and 38% of the North America segment's net sales, with negligible EBITDA contribution over the last 12 months.
Speaker #3: The financial profile of the remaining portfolio in North America is meaningfully stronger and expected to deliver EBITDA margin in the low double digits, underpinned by gross margin above 30%.
Speaker #3: Our North America business will be healthier financially and more focused as we concentrate on three flagship categories: tea, yogurt, and baby and kids, while we continue to develop our meal prep platform.
Jeanie: Our North America business will be healthier financially and more focused as we concentrate on three flagship categories: tea, yogurt, and baby and kids, while we continue to develop our meal prep platform. This portfolio remains diverse across life stages, is aligned with Better For You trends, and is quite GLP-1 resistant, meeting evolving consumer needs. This recently announced divestiture is the first visible step in the execution phase of the strategic review we initiated with Goldman Sachs. This transaction is a clear example of how we intend to use the value embedded in our portfolio to meaningfully reduce debt, strengthen our balance sheet, and sharpen our strategic focus. In parallel, we are actively advancing the next phase of this review to further simplify our portfolio with a clear priority on continued deleveraging.
Alison Lewis: Our North America business will be healthier financially and more focused as we concentrate on three flagship categories: tea, yogurt, and baby and kids, while we continue to develop our meal prep platform. This portfolio remains diverse across life stages, is aligned with Better For You trends, and is quite GLP-1 resistant, meeting evolving consumer needs. This recently announced divestiture is the first visible step in the execution phase of the strategic review we initiated with Goldman Sachs.
Speaker #3: This portfolio remains diverse across life stages, is aligned with better-for-you trends, and is quite GLP-1 resistant, meaning evolving consumer needs. This recently announced investiture is the first visible step in the execution phase of the strategic review we initiated with Goldman Sachs.
Speaker #3: This transaction is a clear example of how we intend to use the value embedded in reducing debt, strengthening our portfolio to meaningfully balance the sheet, and sharpening our strategic focus.
Alison Lewis: This transaction is a clear example of how we intend to use the value embedded in our portfolio to meaningfully reduce debt, strengthen our balance sheet, and sharpen our strategic focus. In parallel, we are actively advancing the next phase of this review to further simplify our portfolio with a clear priority on continued deleveraging.
Speaker #3: In parallel, we are actively advancing the next phase of this review to further simplify our portfolio, with a clear priority on continued deleveraging. We expect the resulting financial flexibility will allow increasing investment over time, enabling us to drive sustainable, profitable growth for shareholders and create long-term value.
Jeanie: We expect the resulting financial flexibility will allow increasing investment over time, enabling us to drive sustainable, profitable growth and create long-term shareholder value. I'd like to discuss the concrete operational progress we've made to advance our turnaround strategy and the positive changes we're driving across the organization. We are beginning to see measurable results from the steps we've taken to reshape our cost structure, enhance our operating model, and execute our five actions to win. As a reminder, our turnaround strategy is centered on five key actions to win: streamlining our portfolio, accelerating brand renovation and innovation, implementing strategic revenue growth management and pricing, driving productivity and working capital efficiency, and strengthening our digital capabilities. Underpinning our turnaround strategy is enhanced operating discipline.
Alison Lewis: We expect the resulting financial flexibility will allow increasing investment over time, enabling us to drive sustainable, profitable growth and create long-term shareholder value. I'd like to discuss the concrete operational progress we've made to advance our turnaround strategy and the positive changes we're driving across the organization. We are beginning to see measurable results from the steps we've taken to reshape our cost structure, enhance our operating model, and execute our five actions to win.
Speaker #3: I'd like to discuss the concrete operational progress we've made to advance our turnaround strategy and the positive changes we're driving across the organization. We are beginning to see measurable results from the steps we've taken to reshape our cost structure, enhance our operating model, and execute our five actions to win.
Alison Lewis: As a reminder, our turnaround strategy is centered on five key actions to win: streamlining our portfolio, accelerating brand renovation and innovation, implementing strategic revenue growth management and pricing, driving productivity and working capital efficiency, and strengthening our digital capabilities. Underpinning our turnaround strategy is enhanced operating discipline.
Speaker #3: As a reminder, our turnaround strategy is centered on five key actions to win: streamlining our portfolio, accelerating brand renovation and innovation, implementing strategic revenue growth management and pricing, driving productivity and working capital efficiency, and strengthening our digital capabilities.
Speaker #3: Underpinning our turnaround strategy is enhanced operating forecast accuracy, inventory management, service levels, and productivity. These reinforce operating discipline and tighten our confidence that we are enhancing production processes, improving cash efficiency, and establishing a strong foundation for long-term growth.
Speaker #3: Discipline. For example, forecast accuracy in Early Signals across the US rose by 4 points quarter over quarter, and in December reached the highest level in the last several years.
Jeanie: Early signals across forecast accuracy, inventory management, service levels, and productivity reinforce our confidence that we are enhancing operating discipline, tightening production processes, improving cash efficiency, and establishing a strong foundation for long-term growth. For example, forecast accuracy in the US rose by 4 points quarter-over-quarter and in December reached the highest level in the last several years. This contributed to a 4-day improvement in days inventory outstanding in North America, while international improved by 9 days, driving improved cash flow. In terms of service level increases, North America was over 96% in the quarter, our best service level in recent history, enhancing our ability to meet demand and support sustainable growth.
Alison Lewis: Early signals across forecast accuracy, inventory management, service levels, and productivity reinforce our confidence that we are enhancing operating discipline, tightening production processes, improving cash efficiency, and establishing a strong foundation for long-term growth. For example, forecast accuracy in the US rose by 4 points quarter-over-quarter and in December reached the highest level in the last several years.
Alison Lewis: This contributed to a 4-day improvement in days inventory outstanding in North America, while international improved by 9 days, driving improved cash flow. In terms of service level increases, North America was over 96% in the quarter, our best service level in recent history, enhancing our ability to meet demand and support sustainable growth.
Speaker #3: This contributed to a four-day improvement in days' inventory outstanding in North America, while international driving improved cash flow. In terms of service level, we improved by nine days.
Speaker #3: Increases: North America was over 96% in the quarter, our best service level in recent history. Enhancing our ability to meet demand and support sustainable growth.
Speaker #3: Further, we drove a 13% improvement in SG&A year over year, or 120 basis points as a percent of sales, and productivity remains on track to hit our target for the fiscal year.
Jeanie: Further, we drove 13% improvement in SG&A year-over-year, or 120 basis points as a percent of sales, and productivity remains on track to hit our target for the fiscal year, supporting our ability to reinvest in the business. On this improved operational foundation, we are driving HAIN forward with a focused portfolio, more brand renovation and innovation, rigorous pricing and promotion execution, and enhanced digital marketing and e-commerce capabilities that position us to accelerate growth and improve profitability. Turning now to quarterly results. Our Q2 results reflect both the meaningful progress we are driving and the near-term pressure we continue to navigate, particularly from volume-driven deleverage in select parts of the portfolio. Even with these headwinds, we delivered important wins: strong cash flow, a reduction in net debt, and a clear sequential improvement in both top- and bottom-line trends in our international business.
Alison Lewis: Further, we drove 13% improvement in SG&A year-over-year, or 120 basis points as a percent of sales, and productivity remains on track to hit our target for the fiscal year, supporting our ability to reinvest in the business. On this improved operational foundation, we are driving HAIN forward with a focused portfolio, more brand renovation and innovation, rigorous pricing and promotion execution, and enhanced digital marketing and e-commerce capabilities that position us to accelerate growth and improve profitability.
Speaker #3: Supporting our ability to reinvest in the business. On this improved operational foundation, we are driving Hain forward with a focused portfolio, more brand renovation and innovation, rigorous pricing and promotion execution, and enhanced digital marketing and e-commerce capabilities.
Speaker #3: The position is to accelerate growth and improve profitability. Turning now to quarterly results. Our second quarter results reflect both the meaningful progress we are driving and the near-term pressure we continue to navigate, particularly from volume-driven deleverage in select parts of the portfolio.
Alison Lewis: Turning now to quarterly results. Our Q2 results reflect both the meaningful progress we are driving and the near-term pressure we continue to navigate, particularly from volume-driven deleverage in select parts of the portfolio. Even with these headwinds, we delivered important wins: strong cash flow, a reduction in net debt, and a clear sequential improvement in both top- and bottom-line trends in our international business.
Speaker #3: Even with these headwinds, we delivered important wins: strong cash flow, a reduction in net debt, and a clear sequential improvement in both top- and bottom-line trends in our international business.
Speaker #3: The core of our business is stable, with continued growth in North America, kids, and finger foods across both tea, yogurt, and in baby regions. Organic net sales in Q2 were flat year over year when excluding the known hotspots of North America snacks and Ella's Kitchen wet baby food, as well as Earth's Best baby formula, which is impacted by lapping supply recovery last year.
Jeanie: The core of our business is stable, with continued growth in North America tea, yogurt, and in baby kids finger foods across both regions. Organic net sales in Q2 were flat year-over-year when excluding the known hotspots of North America snacks and Ella's Kitchen wet baby food, as well as Earth's Best Baby formula, which is impacted by lapping supply recovery last year. SG&A performance was a standout, with disciplined execution driving meaningful improvement. Adjusted EBITDA of $24 million reflected volume mix impact and cost inflation. Importantly, the actions we are taking across innovation, pricing, and brand investment should position us for a stronger second half. We remain fully committed to delivering improved top and bottom-line performance in the back half of the year as these initiatives take hold, executing with discipline to strengthen our cost structure and position the business for growth.
Alison Lewis: The core of our business is stable, with continued growth in North America tea, yogurt, and in baby kids finger foods across both regions. Organic net sales in Q2 were flat year-over-year when excluding the known hotspots of North America snacks and Ella's Kitchen wet baby food, as well as Earth's Best Baby formula, which is impacted by lapping supply recovery last year. SG&A performance was a standout, with disciplined execution driving meaningful improvement.
Speaker #3: SG&A performance was a standout, with disciplined execution driving meaningful improvement. Adjusted EBITDA of $24 million reflected volume-mix impact and cost inflation. Importantly, the actions we are taking across innovation, pricing, and brand investment should position us for a stronger second half.
Alison Lewis: Adjusted EBITDA of $24 million reflected volume mix impact and cost inflation. Importantly, the actions we are taking across innovation, pricing, and brand investment should position us for a stronger second half. We remain fully committed to delivering improved top and bottom-line performance in the back half of the year as these initiatives take hold, executing with discipline to strengthen our cost structure and position the business for growth.
Speaker #3: We remain fully committed to delivering improved top- and bottom-line performance in the back half of the year as these initiatives take hold, executing with discipline to strengthen our cost structure and position the business for growth.
Speaker #3: We are advancing our turnaround strategy with urgency, and this quarter demonstrated meaningful strategic and operational progress. We are sharpening our portfolio and strengthening our balance sheet through the divestiture, giving us greater financial flexibility alongside an improved margin and cash flow profile.
Jeanie: We are advancing our turnaround strategy with urgency, and this quarter demonstrated meaningful strategic and operational progress. We are sharpening our portfolio and strengthening our balance sheet through the divestiture, giving us greater financial flexibility alongside an improved margin and cash flow profile. Our core categories are stable. Our operational execution is improving, and the actions underway across simplification, pricing, innovation, productivity, and digital provide a clear path to sequential improvement in the back half of the year. I'll now turn the call over to Lee to review our second quarter results in more detail along with our outlook. Thank you, Alison, and good morning, everyone. For the second quarter, we saw an organic net sales decline of 7% year over year, driven by lower sales in both the North America and International segments.
Alison Lewis: We are advancing our turnaround strategy with urgency, and this quarter demonstrated meaningful strategic and operational progress. We are sharpening our portfolio and strengthening our balance sheet through the divestiture, giving us greater financial flexibility alongside an improved margin and cash flow profile. Our core categories are stable.
Speaker #3: Categories are stable. Our operational execution is improving, and the actions underway across simplification, pricing innovation, productivity, and digital provide a clear path to sequential improvement in the back half of the year.
Alison Lewis: Our operational execution is improving, and the actions underway across simplification, pricing, innovation, productivity, and digital provide a clear path to sequential improvement in the back half of the year. I'll now turn the call over to Lee to review our second quarter results in more detail along with our outlook.
Speaker #3: Lee, to review our second quarter, I'll now turn the call over to you for results in more detail, along with our outlook.
Lee Boyce: Thank you, Alison, and good morning, everyone. For the second quarter, we saw an organic net sales decline of 7% year over year, driven by lower sales in both the North America and International segments. The decline in organic net sales growth reflects a 9-point decrease in volume mix and a 2-point increase in price. As Alison mentioned, organic net sales trends in the second quarter were flat year-over-year and in line with Q1 when excluding North American snacks and Ella's Kitchen wet baby food, along with Earth's Best Baby formula, which was cycling a significant return-to-market pipeline.
Speaker #2: Thank you, Alison. And good morning, everyone. For the second quarter, we saw organic net sales down 7% year over year, driven by lower sales in both the North America and International segments.
Speaker #2: The decline in organic net sales growth reflects the 9-point decrease in volume-mix and a 2-point increase in price. As Alison mentioned, organic net sales trends in the second quarter were flat year over year, and in line with Q1.
Jeanie: The decline in organic net sales growth reflects a 9-point decrease in volume mix and a 2-point increase in price. As Alison mentioned, organic net sales trends in the second quarter were flat year-over-year and in line with Q1 when excluding North American snacks and Ella's Kitchen wet baby food, along with Earth's Best Baby formula, which was cycling a significant return-to-market pipeline. Adjusted gross margin was 19.5% in the second quarter, a decrease of approximately 340 basis points year-over-year. The decrease was driven by cost inflation, lower volume mix, and unfavorable fixed cost absorption, partially offset by productivity and pricing. Actions already underway, including SKU simplification, revenue growth management, targeted pricing, and productivity initiatives, along with efforts across key manufacturing sites to improve plant absorption and reduce discards, position us well for margin improvement in the back half.
Speaker #2: When excluding North American snacks and Ella's Kitchen food, along with Earth's Best Baby formula—which was cycling a significant return-to-market pipeline—adjusted gross margin was 19.5% in the second quarter.
Lee Boyce: Adjusted gross margin was 19.5% in the second quarter, a decrease of approximately 340 basis points year-over-year. The decrease was driven by cost inflation, lower volume mix, and unfavorable fixed cost absorption, partially offset by productivity and pricing. Actions already underway, including SKU simplification, revenue growth management, targeted pricing, and productivity initiatives, along with efforts across key manufacturing sites to improve plant absorption and reduce discards, position us well for margin improvement in the back half.
Speaker #2: A decrease of approximately 340 basis points year over year in Kitchen Wet Baby. The decrease was driven by cost inflation, lower volume-mix, and unfavorable fixed-cost absorption.
Speaker #2: Partially pricing, actions already underway including skew growth management, targeted offset by productivity and simplification, revenue initiatives along with efforts in pricing and productivity across key manufacturing sites to reduce discards.
Speaker #2: Position us well for margin improvement in the back half. SG&A year to $61 million in the second quarter, driven by a reduction in employee-related expenses, and non-people costs decreased 13% year over year as we implemented overhead reduction. SG&A represented 15.9% of net sales for the quarter.
Jeanie: SG&A decreased 13% year-over-year to $61 million in Q2, driven by a reduction in employee-related expenses and non-people cost discipline. As we implemented overhead reduction actions, SG&A represented 15.9% of net sales for the quarter, as compared to 17% in the year-ago period. We are nearly finished with our restructuring program, to date having taken $103 million in charges associated with the transformation program, excluding inventory write-downs. The total charges are now expected to be between $115 to $125 million, reflecting a $15 million increase related to actions anticipated in connection with the sale of the North American snacks business. We remain on track to deliver the targeted $130 to $150 million in benefits through fiscal 2027.
Lee Boyce: SG&A decreased 13% year-over-year to $61 million in Q2, driven by a reduction in employee-related expenses and non-people cost discipline. As we implemented overhead reduction actions, SG&A represented 15.9% of net sales for the quarter, as compared to 17% in the year-ago period. We are nearly finished with our restructuring program, to date having taken $103 million in charges associated with the transformation program, excluding inventory write-downs.
Speaker #2: As compared to 17% in the year-ago period. We are nearly finished with our actions and charges associated with the transformation program, excluding the $103 million taken in inventory write-downs.
Lee Boyce: The total charges are now expected to be between $115 to $125 million, reflecting a $15 million increase related to actions anticipated in connection with the sale of the North American snacks business. We remain on track to deliver the targeted $130 to $150 million in benefits through fiscal 2027.
Speaker #2: The total charges are now expected to improve plant absorption and be between $115 million to $125 million, reflecting a $15 million increase related to actions anticipated in connection with the sale of the North American snacks restructuring program.
Speaker #2: We remain on track to deliver the benefits through fiscal 2027. To date, having targeted 130 to date. Interest rose 22% year over year to $16 million in the quarter.
Jeanie: Interest rose 22% year-over-year to $16 million in the quarter, primarily driven by higher spread, as well as increased amortization of deferred financing fees as a result of the amendment of our credit agreement. We have hedged our rate exposure on more than 50% of our loan facility, with fixed rates at 7.1%. We continue to prioritize reducing debt over time. Adjusted net loss, which excludes the effects of restructuring charges, among other items, was $3 million in the quarter, or $0.03 per diluted share as compared to an adjusted net income of $8 million, or $0.08 per diluted share in the prior year period. We delivered adjusted EBITDA of $24 million in the second quarter, compared to $38 million a year ago. The decrease was driven primarily by lower gross margins, partially offset by a reduction in SG&A. Adjusted EBITDA margin was 6.3%.
Lee Boyce: Interest rose 22% year-over-year to $16 million in the quarter, primarily driven by higher spread, as well as increased amortization of deferred financing fees as a result of the amendment of our credit agreement. We have hedged our rate exposure on more than 50% of our loan facility, with fixed rates at 7.1%.
Speaker #2: Higher spread as well as primarily driven by financing fees as a result of the increased amortization of deferred $150 million in amendment of our credit agreement.
Speaker #2: We have hedged our rate exposure on more than 50% of our loan facility with fixed rates at 7.1%. We continue to prioritize reducing debt over Adjusted net loss, which excludes the timing.
Lee Boyce: We continue to prioritize reducing debt over time. Adjusted net loss, which excludes the effects of restructuring charges, among other items, was $3 million in the quarter, or $0.03 per diluted share as compared to an adjusted net income of $8 million, or $0.08 per diluted share in the prior year period. We delivered adjusted EBITDA of $24 million in the second quarter, compared to $38 million a year ago. The decrease was driven primarily by lower gross margins, partially offset by a reduction in SG&A. Adjusted EBITDA margin was 6.3%.
Speaker #2: Effects of restructuring charges—$3 million, among other items—were in the quarter, or 3 cents per diluted share, adjusted net income of $8 million, or 8 cents per share, as compared to diluted net income per share in the prior year period.
Speaker #2: We delivered adjusted EBITDA of $24 million in the second quarter, compared to $38 million a year ago. The decrease was driven primarily by lower gross margins, partially offset by a reduction in SG&A. Adjusted EBITDA margin was 6.3%.
Speaker #2: Turning now to our individual segments. In North America, organic net sales declined 10% year over year, driven by lower volume. The decrease was primarily in snacks and baby formula.
Jeanie: Turning now to our individual segments. In North America, organic net sales declined 10% year over year. The decrease was primarily driven by lower volume in snacks and by baby formula, partially offset by growth in beverages. Excluding snacks, organic net sales in the quarter would have declined by 3%. The core is relatively healthy, with growth in tea, yogurt, and Earth's Best finger food and cereal. Second quarter adjusted gross margin in North America was 20.8%, a 440 basis point decrease versus the prior year period. The decrease was driven primarily by lower volume mix, cost inflation, and unfavorable fixed cost absorption, partially offset by productivity savings and pricing. Excluding snacks and EVEs, which we previously announced we were exiting, gross margin would have been 28.6% in the quarter.
Lee Boyce: Turning now to our individual segments. In North America, organic net sales declined 10% year over year. The decrease was primarily driven by lower volume in snacks and by baby formula, partially offset by growth in beverages. Excluding snacks, organic net sales in the quarter would have declined by 3%.
Speaker #2: Partially offset by growth in beverages. Excluding snacks, organic net sales in the quarter would have been 3%, with growth in tea, yogurt, the core is relatively healthy, and Earth's Best Finger Food and Cereal.
Lee Boyce: The core is relatively healthy, with growth in tea, yogurt, and Earth's Best finger food and cereal. Second quarter adjusted gross margin in North America was 20.8%, a 440 basis point decrease versus the prior year period. The decrease was driven primarily by lower volume mix, cost inflation, and unfavorable fixed cost absorption, partially offset by productivity savings and pricing. Excluding snacks and EVEs, which we previously announced we were exiting, gross margin would have been 28.6% in the quarter.
Speaker #2: Second quarter adjusted gross margin in North America was 20.8%, a 440 basis point decrease versus the prior year period. The decrease was driven primarily by lower volume mix, cost inflation, and unfavorable fixed-cost absorption.
Speaker #2: Partially offset by productivity savings and pricing. Excluding snacks and EVES, which we previously announced, we would have been 28.6% in the quarter. Adjusted EBITDA in North America was, exiting, gross margin $11 million, or 5.5% of net sales.
Jeanie: Adjusted EBITDA in North America was $11 million, or 5.5% of net sales, reflecting a decrease of 57% from the year-ago period. The decrease resulted primarily from lower gross margins, partially offset by a reduction in SG&A expenses. Excluding snacks and EVEs, EBITDA margin on a comparable basis would have been 12.8% in the quarter. In our international business, organic net sales declined 3% in the quarter, primarily driven by lower sales in baby and kids. This represents an improvement from the 4% decline in organic net sales in the first quarter, driven primarily by a moderation in declines in baby and kids. International adjusted gross margin was 18.1%, a 200 basis point decrease versus the prior year period. The decrease was driven primarily by cost inflation, unfavorable fixed cost absorption, and lower volume mix, partially offset by productivity savings and pricing.
Lee Boyce: Adjusted EBITDA in North America was $11 million, or 5.5% of net sales, reflecting a decrease of 57% from the year-ago period. The decrease resulted primarily from lower gross margins, partially offset by a reduction in SG&A expenses. Excluding snacks and EVEs, EBITDA margin on a comparable basis would have been 12.8% in the quarter. In our international business, organic net sales declined 3% in the quarter, primarily driven by lower sales in baby and kids.
Speaker #2: Reflecting a decrease of 57% from the year-ago period. The decrease resulted primarily from lower gross margins, partially offset by a reduction in SG&A expenses.
Speaker #2: EBITDA margin on a comparable basis would have been 12.8% in the quarter. In our international business, organic net sales declined 3% in the quarter.
Speaker #2: Primarily driven by lower sales in Baby and Kids. This represents an improvement from the 4% decline in organic net sales in the first quarter.
Lee Boyce: This represents an improvement from the 4% decline in organic net sales in the first quarter, driven primarily by a moderation in declines in baby and kids. International adjusted gross margin was 18.1%, a 200 basis point decrease versus the prior year period. The decrease was driven primarily by cost inflation, unfavorable fixed cost absorption, and lower volume mix, partially offset by productivity savings and pricing.
Speaker #2: Primarily by a moderation in driven declines in Baby and Kids. International adjusted gross margin was 18.1%, a 200 basis point decrease versus the prior year period.
Speaker #2: The decrease was driven primarily by cost inflation, unfavorable fixed-cost absorption, and lower volume mix, partially offset by productivity savings and pricing. Adjusted, excluding Snacks and EVES, EBITDA was $19 million.
Jeanie: Adjusted EBITDA was $19 million, or 10.2% of net sales, reflecting a decrease of 16% compared to the prior year period. The decrease resulted primarily from lower gross margins. Now turning to category performance. Organic net sales in snacks was down 20% year-over-year, driven by club distribution losses and velocity challenges in North America. Importantly, we are seeing velocity improvements with our recent avocado innovation and multi-pack optimization, and our seasonal innovation performed particularly well with ghosts and bats for Halloween and, more recently, holiday trees. In baby and kids, organic net sales growth was down 14% year-over-year, driven primarily by industry-wide softness in wet baby food in the UK, as well as formula in North America, driven by lapping the return-to-market pipeline.
Lee Boyce: Adjusted EBITDA was $19 million, or 10.2% of net sales, reflecting a decrease of 16% compared to the prior year period. The decrease resulted primarily from lower gross margins. Now turning to category performance. Organic net sales in snacks was down 20% year-over-year, driven by club distribution losses and velocity challenges in North America.
Speaker #2: Or 10.2% of net sales, reflecting a decrease of 16% compared to the prior year period. The decrease resulted primarily from lower gross margins. Now turning to category performance.
Speaker #2: Organic net sales in snacks was down 20% year over year, driven by club distribution losses and velocity challenges in North America. Importantly, we are seeing velocity improvements with our recent Avocado innovation and multi-pack optimization.
Lee Boyce: Importantly, we are seeing velocity improvements with our recent avocado innovation and multi-pack optimization, and our seasonal innovation performed particularly well with ghosts and bats for Halloween and, more recently, holiday trees. In baby and kids, organic net sales growth was down 14% year-over-year, driven primarily by industry-wide softness in wet baby food in the UK, as well as formula in North America, driven by lapping the return-to-market pipeline.
Speaker #2: And our seasonal innovation performed particularly well, with ghosts and bats for Halloween and, more recently, holiday trees. In baby and kids, organic net sales growth was down 14% year over year, due to softness in wet baby food in the year.
Speaker #2: UK as well as formula in North America, driven primarily by industry-wide factors and by lapping the return-to-market pipeline. We have continued to see strength in Earth's Best Finger Foods and Cereal in North America.
Jeanie: We have continued to see strength in Earth's Best finger foods and cereal in North America, each showing dollar sales growth of low double digits % year-over-year. Ella's Kitchen finger food also saw organic net sales growth up high teens % year-over-year. While still in decline, we are seeing signs of stabilization in the wet baby food category in the UK. In the beverages category, organic net sales growth was 3% year-over-year, driven by tea in North America, and demonstrating an acceleration from the 2% growth year-over-year in Q1. Celestial Seasonings tea grew dollar sales in the quarter, in part due to the recent launch of Wellness Innovation. In meal prep, organic net sales growth was down 1% year-over-year, as softness in spreads and drizzles in the UK was partially offset by strength in yogurt in North America.
Lee Boyce: We have continued to see strength in Earth's Best finger foods and cereal in North America, each showing dollar sales growth of low double digits % year-over-year. Ella's Kitchen finger food also saw organic net sales growth up high teens % year-over-year. While still in decline, we are seeing signs of stabilization in the wet baby food category in the UK.
Speaker #2: Each showing dollar sales growth of low double digits percent year over year. Ella's Kitchen Finger Food also saw organic net sales growth year over year. And while still in up high teens year over year decline, we are seeing signs of stabilization in the wet baby food category in the UK.
Speaker #2: In the beverages category, organic net sales growth was 3% year over year, driven by tea in North America, and 2% growth year over year in Q1.
Lee Boyce: In the beverages category, organic net sales growth was 3% year-over-year, driven by tea in North America, and demonstrating an acceleration from the 2% growth year-over-year in Q1. Celestial Seasonings tea grew dollar sales in the quarter, in part due to the recent launch of Wellness Innovation. In meal prep, organic net sales growth was down 1% year-over-year, as softness in spreads and drizzles in the UK was partially offset by strength in yogurt in North America.
Speaker #2: Celestial Seasoning bag tea grew dollar sales in Q2, demonstrating an acceleration from the quarter. In part, this was due to the recent launch of Wellness Innovation.
Speaker #2: In meal prep, organic net sales growth was down 1% year over year, as softness in spreads and drizzles in the UK was partially offset by strength in yogurt in North America.
Speaker #2: Greek Gods grew dollar and unit sales in the quarter by high teens percent and gained share. Shifting to cash flow and the balance sheet.
Jeanie: Greek Gods grew dollar and unit sales in the quarter by high teens percent and gained share. Shifting to cash flow and the balance sheet. As Alison mentioned, we had strong cash delivery in the quarter. Free cash flow in the second quarter was $30 million, an increase of 22% compared to $25 million in the year-ago period. The improvement was primarily driven by inventory delivery, higher cash earnings, and improved payables, partially offset by lower recovery of accounts receivable. We are pleased with the progress we're making on inventory, driven by improved operating discipline. Inventory continues to be an area of focus for fiscal 2026. Day's inventory outstanding improved to 75 days in the quarter compared to 83 days in Q1 2026 and 77 days in the prior year period. Each day of inventory is worth approximately $3.5 million.
Lee Boyce: Greek Gods grew dollar and unit sales in the quarter by high teens percent and gained share. Shifting to cash flow and the balance sheet. As Alison mentioned, we had strong cash delivery in the quarter. Free cash flow in the second quarter was $30 million, an increase of 22% compared to $25 million in the year-ago period.
Speaker #2: As Allison mentioned, we had strong cash delivery in the quarter. Free cash flow in the second quarter was $30 million, an increase of 22% compared to $25 million in the year-ago period.
Lee Boyce: The improvement was primarily driven by inventory delivery, higher cash earnings, and improved payables, partially offset by lower recovery of accounts receivable. We are pleased with the progress we're making on inventory, driven by improved operating discipline. Inventory continues to be an area of focus for fiscal 2026. Day's inventory outstanding improved to 75 days in the quarter compared to 83 days in Q1 2026 and 77 days in the prior year period. Each day of inventory is worth approximately $3.5 million.
Speaker #2: The improvement was primarily driven by inventory delivery, higher cash earnings, and improved payables, partially offset by lower recovery of accounts receivable. We are pleased with the progress we're making on inventory.
Speaker #2: Driven by improved operating discipline, inventory continues to be an area of focus for fiscal 2026. Today's inventory outstanding improved to 75 days in the quarter compared to 83 days in Q1 2026.
Speaker #2: And 77 days in the prior year period. Each day of inventory is worth approximately three and a half million dollars. We also made progress in our day's payable outstanding.
Jeanie: We also made progress in our Day's Payable Outstanding, with Day's Payable Outstanding of 57 days in the quarter in line with Q1 and an improvement from 56 days in the year-ago period. CapEx of $7 million in the quarter was up slightly from $6 million in the prior year period. We now expect capital expenditures to be in the low $20 million for fiscal 2026. Strong cash flow generation in the quarter brought cash on hand to $68 million and net debt to $637 million, a reduction of $32 million. We also have $144 million of available liquidity under our revolver and remain in compliance with all credit agreement covenants. Our credit facility matures in December of 2026. Accordingly, we have classified all of the associated borrowings as a current liability in our 10-Q.
Lee Boyce: We also made progress in our Day's Payable Outstanding, with Day's Payable Outstanding of 57 days in the quarter in line with Q1 and an improvement from 56 days in the year-ago period. CapEx of $7 million in the quarter was up slightly from $6 million in the prior year period. We now expect capital expenditures to be in the low $20 million for fiscal 2026.
Speaker #2: Days payable outstanding stood at 57 days in the quarter, in line with Q1 and an improvement from 56 days in the year-ago period. CapEx of $7 million in the quarter was up slightly from $6 million in the prior-year period.
Speaker #2: We now expect capital expenditures to be in the low $20 million range for fiscal 2026. Strong cash flow generation in the quarter brought cash on hand to $68 million.
Lee Boyce: Strong cash flow generation in the quarter brought cash on hand to $68 million and net debt to $637 million, a reduction of $32 million. We also have $144 million of available liquidity under our revolver and remain in compliance with all credit agreement covenants. Our credit facility matures in December of 2026. Accordingly, we have classified all of the associated borrowings as a current liability in our 10-Q.
Speaker #2: And net debt to $637 million, a reduction of $32 million. We also have $144 million of available liquidity under our revolver, and we remain in compliance with all credit agreement covenants.
Speaker #2: Our credit facility matures in December 2026. Accordingly, we have classified all of the associated borrowings as a current liability in our 10-Q. We have a disciplined approach to capital management and continue to prioritize debt reduction as the primary use of cash, as we continue to act proactively to manage the upcoming maturity.
Jeanie: We have a disciplined approach to capital management and continue to prioritize debt reduction as the primary use of cash as we continue to act proactively to manage the upcoming maturity. Over the last 10 quarters, we have reduced net debt by $140 million. We expect to generate additional operating cash flow during the balance of fiscal 2026, including the collection in January of $26 million of insurance proceeds and ongoing working capital improvement, meaningfully reducing debt obligations in the ordinary course of business. Our strategic review yielded a multi-stage plan aimed at materially improving liquidity and leverage. The sale of the North American snacks business is an important first step, with net proceeds dedicated to debt repayment. Pro forma for the transaction, leverage would fall from 4.9x at quarter end to approximately 4x.
Lee Boyce: We have a disciplined approach to capital management and continue to prioritize debt reduction as the primary use of cash as we continue to act proactively to manage the upcoming maturity. Over the last 10 quarters, we have reduced net debt by $140 million. We expect to generate additional operating cash flow during the balance of fiscal 2026, including the collection in January of $26 million of insurance proceeds and ongoing working capital improvement, meaningfully reducing debt obligations in the ordinary course of business.
Speaker #2: Over the last 10 quarters, we have reduced net debt by $140 million. We expect to generate additional operating cash flow during the balance of fiscal 2026.
Speaker #2: Collection in January of $26 million of insurance, including the proceeds, and ongoing working capital improvement, meaningfully reducing debt obligations in the ordinary course of business.
Lee Boyce: Our strategic review yielded a multi-stage plan aimed at materially improving liquidity and leverage. The sale of the North American snacks business is an important first step, with net proceeds dedicated to debt repayment. Pro forma for the transaction, leverage would fall from 4.9x at quarter end to approximately 4x.
Speaker #2: Our strategic reviewers yielded a multi-stage plan aimed at materially improving liquidity and leverage. The sale of the North American snacks business is an important first step.
Speaker #2: With net proceeds dedicated to debt repayment, pro forma for the transaction, leverage would fall from 4.9 times at quarter end to approximately [X] times. As we execute the next phase of this plan, we are advancing four additional actions to enhance financial flexibility.
Jeanie: As we execute the next phase of this plan, we are advancing additional actions to enhance financial flexibility, improve performance, and address the upcoming credit agreement maturity, including further asset sales and operational improvements. We believe that aligning the maturity solution timing with the execution of the multi-stage plan will enable us to achieve the strongest long-term outcome for the company and shareholders. We remain actively engaged with our lenders and are assessing opportunities to refinance our debt or extend maturities while evaluating potential capital raising or strategic transactions. We believe that the successful execution of these plans will enable us to refinance, extend, or repay our debt prior to maturity from a position of strength. Turning now to our outlook.
Lee Boyce: As we execute the next phase of this plan, we are advancing additional actions to enhance financial flexibility, improve performance, and address the upcoming credit agreement maturity, including further asset sales and operational improvements. We believe that aligning the maturity solution timing with the execution of the multi-stage plan will enable us to achieve the strongest long-term outcome for the company and shareholders.
Speaker #2: Improved performance and address the upcoming credit agreement, sales, and operational maturity, including further asset improvements. We believe that aligning the maturity solution timing with plan will enable us to achieve the strongest long-term outcome for the company and shareholders.
Lee Boyce: We remain actively engaged with our lenders and are assessing opportunities to refinance our debt or extend maturities while evaluating potential capital raising or strategic transactions. We believe that the successful execution of these plans will enable us to refinance, extend, or repay our debt prior to maturity from a position of strength. Turning now to our outlook.
Speaker #2: We remain actively engaged with our lenders and are assessing opportunities to refinance our debt or extend maturities while evaluating potential capital raising or strategic transactions.
Speaker #2: We believe that the successful execution of the multi-stage plans will enable us to refinance, extend, or repay our debt prior to maturity from a position of strength.
Speaker #2: Turning now to our outlook. As previously communicated, we are not providing numeric guidance on fiscal 2026 operating results due to uncertainty around the outcome and timing of the review.
Jeanie: As previously communicated, we are not providing numeric guidance on fiscal 2026 operating results at this time, given the uncertainty around the outcome and timing of the completion of our strategic review. We intend to provide pro forma financials upon closure of the North American snacks divestiture, expected in February. Looking ahead, we expect the divestiture of North American snacks to be gross margin and EBITDA accretive, and the profile of the GoForward North American portfolio to have gross margin above 30% and EBITDA margin in the low double digits. As for fiscal 2026, we continue to expect strong cost management and productivity, along with execution against our five actions to win in the marketplace, to drive stronger top and bottom line performance in the second half of the year as compared to the first half. And for the full year, we continue to expect positive free cash flow.
Lee Boyce: As previously communicated, we are not providing numeric guidance on fiscal 2026 operating results at this time, given the uncertainty around the outcome and timing of the completion of our strategic review. We intend to provide pro forma financials upon closure of the North American snacks divestiture, expected in February. Looking ahead, we expect the divestiture of North American snacks to be gross margin and EBITDA accretive, and the profile of the GoForward North American portfolio to have gross margin above 30% and EBITDA margin in the low double digits.
Speaker #2: We do not intend to provide pro forma financials at this time given the snacks divestiture expected in February. Looking ahead, we expect the divestiture of North American snacks to be gross margin and EBITDA accretive upon closure of the North American transaction, and the profile of the go-forward North American portfolio to have gross margin above 30% and EBITDA margin in the low double digits.
Lee Boyce: As for fiscal 2026, we continue to expect strong cost management and productivity, along with execution against our five actions to win in the marketplace, to drive stronger top and bottom line performance in the second half of the year as compared to the first half. And for the full year, we continue to expect positive free cash flow.
Speaker #2: As for fiscal 2026, we continue to expect strong cost management and productivity, along with execution against our five actions to win in the marketplace to drive stronger top- and bottom-line performance in the second half of the year as compared to the first half.
Speaker #2: And for the full year, we continue to expect positive free cash flow. Before I turn back to Alison, I want to underscore the actions we are taking to strengthen our financial position.
Jeanie: Before I turn back to Alison, I want to underscore the actions we are taking to strengthen our financial position. We are enhancing our flexibility and improving performance through initiatives to stabilize sales, improve profitability, optimize cash, and reduce debt. The strategic review and agreement to sell our North American snacks business are important steps, and we continue to advance additional actions. With solid liquidity, strong cash delivery in the quarter, and positive free cash flow expected in fiscal 2026, we remain confident in our ability to drive improved performance in the second half and beyond. Now I turn the call back to Alison for some closing remarks.
Lee Boyce: Before I turn back to Alison, I want to underscore the actions we are taking to strengthen our financial position. We are enhancing our flexibility and improving performance through initiatives to stabilize sales, improve profitability, optimize cash, and reduce debt. The strategic review and agreement to sell our North American snacks business are important steps, and we continue to advance additional actions.
Speaker #2: Stabilize sales, improve profitability, optimize cash, and reduce debt. The strategic review and our agreement to sell our North American snacks business are important steps, and we continue to advance additional actions. With solid liquidity, strong cash delivery in the quarter, and positive free cash flow expected in fiscal 2026, we remain confident in our ability to drive improved performance in the second half and beyond.
Lee Boyce: With solid liquidity, strong cash delivery in the quarter, and positive free cash flow expected in fiscal 2026, we remain confident in our ability to drive improved performance in the second half and beyond. Now I turn the call back to Alison for some closing remarks.
Speaker #2: Now I turn the call back to Alison for actions and some closing remarks. Thanks, Lee. In summary, I want to reaffirm our confidence in the direction we have set for the company.
Alison Lewis: Thanks, Lee. In summary, I want to reaffirm our confidence in the direction we have set for the company. This quarter marks a pivotal moment in our journey. We have taken a significant first step to sharpen our focus and strengthen our financial position. We are engaging in ruthless focus, fewer categories, fewer brands, and fewer SKUs, enabling concentration on areas that better align with our strengths and core capabilities. We are making tangible progress in improving our operational health and enhancing cash delivery. The actions we have taken will drive a structural reset of our margins, and we continue to identify and remove costs from the business, freeing up fuel to invest. Q2 results demonstrate strong cash delivery, reduction in net debt, and a stable core business. We are attacking our challenges head-on and nurturing growth through our five actions to win.
Alison Lewis: Thanks, Lee. In summary, I want to reaffirm our confidence in the direction we have set for the company. This quarter marks a pivotal moment in our journey. We have taken a significant first step to sharpen our focus and strengthen our financial position. We are engaging in ruthless focus, fewer categories, fewer brands, and fewer SKUs, enabling concentration on areas that better align with our strengths and core capabilities.
Speaker #2: This quarter marks a pivotal moment in our journey. We have taken a significant first step to sharpen our focus and strengthen our financial position.
Speaker #2: We are engaging in ruthless focus—fewer categories, fewer brands, and fewer SKUs—enabling concentration on areas that better align with our strengths and core capabilities.
Alison Lewis: We are making tangible progress in improving our operational health and enhancing cash delivery. The actions we have taken will drive a structural reset of our margins, and we continue to identify and remove costs from the business, freeing up fuel to invest. Q2 results demonstrate strong cash delivery, reduction in net debt, and a stable core business. We are attacking our challenges head-on and nurturing growth through our five actions to win.
Speaker #2: We are making tangible progress in improving our operational health and enhancing cash delivery. The structural reset of our margins. And we continue to identify and remove costs from the business, freeing up fuel to invest.
Speaker #2: Q2 results demonstrate strong cash delivery, reduction in net debt, and a stable core business. We are attacking our challenges head-on and nurturing growth through our five actions to win.
Speaker #2: We are encouraged by the progress we are making as we focus on actions we have taken that will drive executing our strategy and building momentum quarter by quarter.
Alison Lewis: We are encouraged by the progress we are making as we focus on executing our strategy and building momentum quarter by quarter. While we continue to navigate pockets of pressure, we are executing with resolve, and we remain confident that the steps we are taking today position HAIN to deliver sustainable, profitable growth and long-term value for our shareholders. That concludes our prepared remarks, and we are now happy to take your questions. Operator, please open the line.
Alison Lewis: We are encouraged by the progress we are making as we focus on executing our strategy and building momentum quarter by quarter. While we continue to navigate pockets of pressure, we are executing with resolve, and we remain confident that the steps we are taking today position HAIN to deliver sustainable, profitable growth and long-term value for our shareholders. That concludes our prepared remarks, and we are now happy to take your questions. Operator, please open the line.
Speaker #2: While we continue to navigate pockets of pressure, we are executing with resolve, and we remain confident that the steps we are taking today position Hain to deliver sustainable, profitable growth and long-term value for shareholders.
Speaker #2: That concludes our prepared remarks, and we are now happy to take your questions. Operator, please open the line.
Speaker #2: line. At this
Jeanie: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of Jim Salera with Stephens Inc. Please go ahead.
Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of Jim Salera with Stephens Inc. Please go ahead.
Speaker #3: time, I would like to remind everyone in order to ask a question, press
Speaker #3: Telephone keypad. And your first question comes from the line of Jim Solero with Stephens Inc. Please go ahead.
Speaker #3: ahead. Hey, Allison.
Alexis Tessier: Hey, Alison. Hey, Lee. Good morning. Thanks for taking our question. I wanted to start off.
Jim Salera: Hey, Alison. Hey, Lee. Good morning. Thanks for taking our question. I wanted to start off.
Speaker #4: Hey, Lee. Good morning. Thanks for taking our question. I wanted to start off with
Speaker #5: Morning. Good morning.
Jim Salera: Good morning.
Alison Lewis: Good morning.
Speaker #4: Maybe good morning. I wanted to start off with maybe some more details around the decision to divest the snacks portfolio. If we go back to the investor day in 2023, you guys called out a couple of different categories to focus on as growth.
Alexis Tessier: Good morning. I wanted to start off with maybe some more details around the decision to divest the snacks portfolio. If we go back to the Investor Day in 2023, you guys called out a couple of different categories to focus on as grow. Snacks was one, the baby and kids, and then beverages. I think there were six brands, three of which were snacks. And then over the preceding years, there's been a lot of focus on innovation in the snacks portfolio, getting better placement and away from home, things like that. And so clearly, something's changed. You guys think that there's more value in focusing on other areas of the portfolio. So we'd just love if you could kind of help us bridge what changed in your thinking or what you've seen in the market from that 2023 until now to result in divesting the snacks.
Jim Salera: Good morning. I wanted to start off with maybe some more details around the decision to divest the snacks portfolio. If we go back to the Investor Day in 2023, you guys called out a couple of different categories to focus on as grow. Snacks was one, the baby and kids, and then beverages. I think there were six brands, three of which were snacks.
Speaker #4: Snacks was one, the baby and kids, and then beverages. I think there were six brands, three of which were snacks. And then over the preceding years, there's been a lot of focus on innovation in the snacks portfolio, getting better placement in away-from-home, things like that.
Jim Salera: And then over the preceding years, there's been a lot of focus on innovation in the snacks portfolio, getting better placement and away from home, things like that. And so clearly, something's changed. You guys think that there's more value in focusing on other areas of the portfolio. So we'd just love if you could kind of help us bridge what changed in your thinking or what you've seen in the market from that 2023 until now to result in divesting the snacks.
Speaker #4: And so, clearly, something's changed. You guys think that there's more value in focusing on other areas of the portfolio. So we'd just love if you could kind of help us bridge what changed in your thinking or what you've seen in the market from that 2023 until now to result in divesting the—
Speaker #5: Sure. I'll jump in. Morning. Look, you—
Alison Lewis: Sure. I'll jump in first. So good morning. Look, you know that our first action to win is all about simplifying our portfolio. We needed to take some action in North America that would allow us to really focus to grow. As we assess the various businesses, stepping back and looking at sort of rights to win and what it takes to win in a category like snacks, the reality is that there are a lot of capabilities, given that this is an impulse category, that I would argue are more difficult for us to develop. So if you think about impulse categories that are fundamentally demand creation categories, you need to have really heavy and intense innovation. You need to have strong marketing investment consistently. You need to have DSD-like merchandising to drive, again, kind of that impulse purchase.
Alison Lewis: Sure. I'll jump in first. So good morning. Look, you know that our first action to win is all about simplifying our portfolio. We needed to take some action in North America that would allow us to really focus to grow. As we assess the various businesses, stepping back and looking at sort of rights to win and what it takes to win in a category like snacks, the reality is that there are a lot of capabilities, given that this is an impulse category, that I would argue are more difficult for us to develop.
Speaker #5: In first, so good about simplifying our portfolio—snacks. We needed to take some action to allow us to really focus on North America, that would grow.
Speaker #5: As we assess the various businesses stepping back and looking at sort of rights to win and what it takes to win in a category like snacks, the reality is that there are a lot of capabilities given that this is an impulse category that I would argue are more difficult for us to develop.
Alison Lewis: So if you think about impulse categories that are fundamentally demand creation categories, you need to have really heavy and intense innovation. You need to have strong marketing investment consistently. You need to have DSD-like merchandising to drive, again, kind of that impulse purchase.
Speaker #5: So if you think about impulse categories that are fundamentally demand creation categories, you need to have really heavy and intense innovation. You need to have strong marketing investment. You need to have consistency.
Speaker #5: Again, kind of that impulse—sort of the rest of our portfolio, it tends to be more center of store. In DSD-like merchandising to drive... If you look at North America, center of store categories are fundamentally demand fulfillment.
Alison Lewis: If you look at sort of the rest of our portfolio, it tends to be more center of store in North America. And center of store categories are fundamentally demand fulfillment. So the demand's already there, and it's not quite as competitively intense. So that is one of the key reasons when we looked at our portfolio, where was sort of the biggest opportunity for simplification. I'll also add, and you saw that snacks over the years had become somewhat financially challenged for us as a business. We had become over-reliant on the club channel. That club channel is really great when you have that business, really challenging when you don't have that business. And so again, we had to look at how do we build a portfolio that financially is structured to grow.
Alison Lewis: If you look at sort of the rest of our portfolio, it tends to be more center of store in North America. And center of store categories are fundamentally demand fulfillment. So the demand's already there, and it's not quite as competitively intense. So that is one of the key reasons when we looked at our portfolio, where was sort of the biggest opportunity for simplification.
Speaker #5: So the demand's already there, and it's not quite as competitively intense. So that is one of the key reasons when we looked at our portfolio where was sort of the biggest opportunity for simplification.
Speaker #5: I'll also add—and you saw this—that snacks, over the years, had become somewhat financially challenged for us as a business. We had become over-reliant on the club channel. That club channel is really great when you have that business; really challenging when you don't have that business.
Alison Lewis: I'll also add, and you saw that snacks over the years had become somewhat financially challenged for us as a business. We had become over-reliant on the club channel. That club channel is really great when you have that business, really challenging when you don't have that business. And so again, we had to look at how do we build a portfolio that financially is structured to grow.
Speaker #5: And so again, we had to look at how do we build a portfolio that financially is structured to grow? And we firmly believe that as we divest the snacks business, having a portfolio in North America that has gross margins 30-plus percent and has EBITDA margins in the low single digits, it's going to put truly can invest and truly can focus to grow.
Alison Lewis: And we firmly believe that as we divest the snacks business, having a portfolio in North America that has gross margins 30+% and has EBITDA margins in the low single digits, it's going to put us in a position where we truly can invest and truly can focus to grow.
Alison Lewis: And we firmly believe that as we divest the snacks business, having a portfolio in North America that has gross margins 30+% and has EBITDA margins in the low single digits, it's going to put us in a position where we truly can invest and truly can focus to grow.
Speaker #4: Yeah, I would agree. And I guess just building on that to what Alison said—I mean, the operating model, talent profile, and capital allocation priorities are very different.
Alexis Tessier: Yeah, I would agree. And I guess just building on that to what Alison said, I mean, the operating model, talent profile, capital allocation priorities are very different. And what we called out is you kind of look forward is ex snacks, and we also said ex Yves as well because that's another piece of business we previously disclosed that we'd gotten out of. The gross margin profile of those businesses is 28.6%. The ongoing margin profile, the gross margin profile of the remainder of the North American business, we anticipate being greater than 30%. And again, we don't like to do kind of ex, but if you take out a couple of things specifically around snacks and then some category softness that we've had in kids, we're actually flat. So that speaks to kind of the rest of the portfolio.
Lee Boyce: Yeah, I would agree. And I guess just building on that to what Alison said, I mean, the operating model, talent profile, capital allocation priorities are very different. And what we called out is you kind of look forward is ex snacks, and we also said ex Yves as well because that's another piece of business we previously disclosed that we'd gotten out of.
Speaker #4: And what we called out is you kind of
Speaker #4: look forward us in a position where we is X snacks and we also said X Eves as well because that's another piece of business we previously disclosed that we'd gotten out of.
Lee Boyce: The gross margin profile of those businesses is 28.6%. The ongoing margin profile, the gross margin profile of the remainder of the North American business, we anticipate being greater than 30%. And again, we don't like to do kind of ex, but if you take out a couple of things specifically around snacks and then some category softness that we've had in kids, we're actually flat. So that speaks to kind of the rest of the portfolio. So we think we are better positioned as we move forward with a higher profitability portfolio.
Speaker #4: The gross margin profile of those businesses is 28.6%. The ongoing margin profile, the gross margin profile of the remainder of the North American business, we anticipate being greater than 30%.
Speaker #4: So, and again, we don't like to do kind of X, but if you take out a couple of things—specifically—then some actually flat.
Speaker #4: around snacks, and
Speaker #4: So that speaks to kind of the portfolio. So we think we are better head in kids, we were positioned as we move forward with a higher profitability portfolio.
Alexis Tessier: So we think we are better positioned as we move forward with a higher profitability portfolio.
Speaker #2: Can I ask about reallocating some of the innovations? I
Jim Salera: Can I ask about reallocating some of the innovation? Because I imagine if you're not having the snacks portfolio anymore, that frees up some internal capabilities to then pivot to innovation in the remaining categories. Can you just talk through maybe some of the stranded overhead, what those costs are, and if we could expect to see more innovation in the remaining categories, whether it's in the back half of this year or maybe that's a 2027 event?
Jim Salera: Can I ask about reallocating some of the innovation? Because I imagine if you're not having the snacks portfolio anymore, that frees up some internal capabilities to then pivot to innovation in the remaining categories. Can you just talk through maybe some of the stranded overhead, what those costs are, and if we could expect to see more innovation in the remaining categories, whether it's in the back half of this year or maybe that's a 2027 event?
Speaker #2: Imagine if you're not having the snacks portfolio anymore. The rest of that frees up some internal capabilities to then pivot to innovation in the remaining categories.
Speaker #2: Can you just talk through maybe some of the stranded overhead—what those costs are? And if we could expect to see more innovation in the remaining categories, whether it's in the back half of this year, or maybe that's a 2027 event.
Speaker #5: Yeah, we did call out the stranded costs. I don't think we probably verbally spoke to it, but it was on one of the slides.
Alexis Tessier: Yeah, we did call out the stranded costs. I don't think we probably didn't verbally speak to it, but it was on one of the slides. So the stranded cost impact is about $20 to 25 million. So those are costs that are allocated to snacks right now. We have really concrete plans to execute to mitigate the majority of those costs within a 6- to 12-month time frame. And again, it will free up resources. Some of that obviously would drop through, but also just free up resources as we support those innovations, as we make sure that we have kind of adequate marketing expenditure against the rest of the portfolio.
Lee Boyce: Yeah, we did call out the stranded costs. I don't think we probably didn't verbally speak to it, but it was on one of the slides. So the stranded cost impact is about $20 to 25 million. So those are costs that are allocated to snacks right now. We have really concrete plans to execute to mitigate the majority of those costs within a 6- to 12-month time frame. And again, it will free up resources. Some of that obviously would drop through, but also just free up resources as we support those innovations, as we make sure that we have kind of adequate marketing expenditure against the rest of the portfolio.
Speaker #5: About $20 to $25 million. So those are costs. So the stranded cost impact is that are allocated to Snacks right now. We have really concrete plans to execute to mitigate the majority of those costs within a 6 to 12-month timeframe.
Speaker #5: And again, it will free up resources—some of that, obviously, would drop through, but also just free up resources to make sure that we have kind of adequate marketing expenditure against the rest of the portfolio.
Speaker #3: Yeah. I'll just I do think
Alison Lewis: Yeah, I do think your point is right, that we will be able to put more investment and more time and energy against the innovation for the balance of portfolio. And we really are seeing. I think I've talked to you before about how we're doubling down on innovation, both in our North America and our international segments. We're seeing that those innovations that we're putting in the market, whether it's single serve yogurt with The Greek Gods or wellness tea or Earth's Best snacks, we're seeing that those innovations are driving incrementality. They're driving share growth. So innovation is absolutely critical in this segment or in these better-for-you categories to bring new consumers in and ultimately get to growth and driving volume-based growth. So yes, absolutely, we will continue to double down our focus on innovation.
Alison Lewis: Yeah, I do think your point is right, that we will be able to put more investment and more time and energy against the innovation for the balance of portfolio. And we really are seeing. I think I've talked to you before about how we're doubling down on innovation, both in our North America and our international segments.
Speaker #3: That we will be able to put more investment and more time and energy against the innovation for the balance of portfolio, and we support those innovations as we really are seeing. I think I've talked to you before about how we're doubling down on innovation both in our North America and our international segments.
Alison Lewis: We're seeing that those innovations that we're putting in the market, whether it's single serve yogurt with The Greek Gods or wellness tea or Earth's Best snacks, we're seeing that those innovations are driving incrementality. They're driving share growth. So innovation is absolutely critical in this segment or in these better-for-you categories to bring new consumers in and ultimately get to growth and driving volume-based growth. So yes, absolutely, we will continue to double down our focus on innovation.
Speaker #3: We're seeing that those innovations that we're putting in the market—whether it's single-serve yogurt with the Greek Gods, or wellness tea, or Earth's Best snacks—we're seeing that those innovations are driving incrementality.
Speaker #3: They're driving share growth, so innovation is absolutely critical in this segment, or in these better-for-you categories, to bring new consumers in and ultimately get to growth and drive volume-based growth.
Speaker #3: So yes, absolutely, we will continue to double down our focus on
Speaker #3: innovation. Great.
Alexis Tessier: Great. I appreciate the time. I'll pass it on.
Jim Salera: Great. I appreciate the time. I'll pass it on.
Speaker #2: I appreciate the time. I'll pass it on.
Jeanie: Your next question comes from the line of Kaumil Gajrawala with Jefferies. Please go ahead.
Operator: Your next question comes from the line of Kaumil Gajrawala with Jefferies. Please go ahead.
Speaker #1: The question comes from the line of Kamil Grajowala with Jefferies. Please go ahead.
Kaumil Gajrawala: Hey, everybody. Good morning. I guess a question on the divestiture in the context of cash. Obviously, you have some cash coming in, but were those businesses cash-burn businesses where, just from a sort of run-rate perspective or whatever capital that was required, how does that sort of bend the curve on your ability to generate cash?
Kaumil Gajrawala: Hey, everybody. Good morning. I guess a question on the divestiture in the context of cash. Obviously, you have some cash coming in, but were those businesses cash-burn businesses where, just from a sort of run-rate perspective or whatever capital that was required, how does that sort of bend the curve on your ability to generate cash?
Speaker #4: Guess the question on the divestiture in the context of cash. Obviously, you have some cash coming in, but were those— Good morning, everybody.
Speaker #4: Businesses' cash-burn—businesses where, just from a sort of run-rate perspective, or whatever capital that was required, the curve on your ability to generate—how does that sort of bend cash?
Speaker #5: Yeah, I mean, cash-generating business. I mean, we talked about the lower margin profile. Within it, so the snacks is not a significant—I'd say from an ongoing kind of cash generation perspective, we're in a position.
Alexis Tessier: Yeah, I mean, the snacks was not a significant cash-generating business. I mean, we talked about the lower margin profile within it. So I'd say from an ongoing kind of cash generation perspective, we're in a very, very good position. One thing we did emphasize is as you look at Q2, we did have a really strong cash delivery. We would continue to be very focused on inventory reductions, continue to make progress on payables. The second thing, especially as we go into the second half, I think we also mentioned we do have $26 million that we got on 2 January on insurance proceeds as well from a previous M&A activity. So I think we're in a good position moving forward. But to your question, I mean, the snacks business was not a significant cash generation business for us.
Alison Lewis: Yeah, I mean, the snacks was not a significant cash-generating business. I mean, we talked about the lower margin profile within it. So I'd say from an ongoing kind of cash generation perspective, we're in a very, very good position. One thing we did emphasize is as you look at Q2, we did have a really strong cash delivery.
Speaker #5: One thing we did emphasize is very, very good as you look at Q2, we did have a really strong cash very focused on inventory reductions, continued to make progress on delivery.
Speaker #5: We continued into the second half. I think we also mentioned we do have $26 million that we got in insurance proceeds as well, from a previous M&A activity.
Alison Lewis: We would continue to be very focused on inventory reductions, continue to make progress on payables. The second thing, especially as we go into the second half, I think we also mentioned we do have $26 million that we got on 2 January on insurance proceeds as well from a previous M&A activity. So I think we're in a good position moving forward. But to your question, I mean, the snacks business was not a significant cash generation business for us.
Speaker #5: So, I think we're in a good position moving forward. But to your question, I mean, the snacks business was not a significant cash generation business for—
Speaker #4: Okay. Got
Kaumil Gajrawala: Okay, got it. You provided some, I guess, thoughts on the upcoming maturity. How much flexibility do you have? Is it leaning one direction versus the other, refinance versus equity versus strategic? So it feels like there's many moving parts. Just curious, how should we be thinking about what your options are and how much flexibility there is as the date gets closer?
Kaumil Gajrawala: Okay, got it. You provided some, I guess, thoughts on the upcoming maturity. How much flexibility do you have? Is it leaning one direction versus the other, refinance versus equity versus strategic? So it feels like there's many moving parts. Just curious, how should we be thinking about what your options are and how much flexibility there is as the date gets closer?
Speaker #4: it. And you provided us. some I guess thoughts on the upcoming maturity. How much flexibility do you have? Is it leaning one direction versus the other?
Speaker #4: Refinance versus equity versus strategic—there feels like there are many moving parts. Just curious, how should we be thinking about what your options are and how much flexibility there is as the date gets closer?
Alexis Tessier: Yeah, so I'd say a few different things. I mean, we have a path. We're mindful of the upcoming maturities, and we're in frequent and constructive dialogue with our bank group. So what we did feel was that aligning the maturity solution with the execution and the strategic review will put us in a stronger long-term position. The key thing, obviously, with the execution of this divestiture, you did see on a pro forma basis, our leverage decreased significantly, so going from 4.9 to 4 times. So again, we are also continuing under that strategic review to look at other options. So again, we're mindful of it. We're working through good discussion with our bank group, and we're continuing to just do a thorough evaluation of our strategy and our portfolio.
Alexis Tessier: Yeah, so I'd say a few different things. I mean, we have a path. We're mindful of the upcoming maturities, and we're in frequent and constructive dialogue with our bank group. So what we did feel was that aligning the maturity solution with the execution and the strategic review will put us in a stronger long-term position.
Speaker #5: mean, we have a path. We're mindful of the upcoming maturities. And we're in Yeah. So I'd say a few different things. frequent and constructive I dialogue with our bank group.
Speaker #5: So what we did feel was that the execution and the strategic review will put us in a stronger long-term position. The key thing, obviously, with the execution of this divestiture, you did see on a pro forma So going from 4.9 to four aligning the maturity solution with times.
Alexis Tessier: The key thing, obviously, with the execution of this divestiture, you did see on a pro forma basis, our leverage decreased significantly, so going from 4.9 to 4 times. So again, we are also continuing under that strategic review to look at other options. So again, we're mindful of it. We're working through good discussion with our bank group, and we're continuing to just do a thorough evaluation of our strategy and our portfolio.
Speaker #5: So again, we are also continuing, under that strategic review, to look at other options. So again, we're mindful of it. We're working through good discussion with our bank group.
Speaker #5: And we continue to just do a thorough evaluation of our strategy and our portfolio. So again, the four times is versus the covenant we have that takes us all the way through to the 22nd of December, which is 5.5 times.
Alexis Tessier: So again, the 4 times is versus the covenant we have that takes us all the way through to 22 December, which is 5.5 times. So we have significant headroom under the current. But again, we're in ongoing dialogue to make sure that we come up with the right optimal long-term capital strategy.
Alexis Tessier: So again, the 4 times is versus the covenant we have that takes us all the way through to 22 December, which is 5.5 times. So we have significant headroom under the current. But again, we're in ongoing dialogue to make sure that we come up with the right optimal long-term capital strategy.
Speaker #5: current. But again, we're in with the right optimal long-term capital ongoing dialogue to make sure that we come up So we have significant headroom under the
Speaker #4: Okay. Got it. Thank
Kaumil Gajrawala: Okay, got it. Thank you.
Kaumil Gajrawala: Okay, got it. Thank you.
Speaker #1: Your
Jeanie: Your next question comes from the line of John Baumgartner with Mizuho. Please go ahead.
Operator: Your next question comes from the line of John Baumgartner with Mizuho. Please go ahead.
Speaker #1: Next question comes from the line of you.
Speaker #1: Mizuho. Please go
Speaker #6: Good morning. Thanks for the John Baumgartner-with-strategy question. I'd like to ask Alison, I'd like to ask a follow-up to Jim's question and the characteristics for categories that you like, and you want to clear.
Kaumil Gajrawala: Good morning. Thanks for the question. I'd like to ask, Alison, I'd like to ask a follow-up to Jim's question and the characteristics for categories that you like and you want to pursue. The profit improvement from the snack sale is clear. But as you progress in the second phase of review and presumably divest more assets, how do you envision HAIN as a true growth business in the end? I get the resource allocation. You have some bright spots with the finger foods and kids. But there's pockets in meals that haven't really grown over time. In babies and kids, the fertility rates are declining across your market. So how do you think about driving sustainable volume in that backdrop? Does it require larger price cuts to bring your products more within reach of sort of mainstream middle-income households and expand penetration that way?
John Baumgartner: Good morning. Thanks for the question. I'd like to ask, Alison, I'd like to ask a follow-up to Jim's question and the characteristics for categories that you like and you want to pursue. The profit improvement from the snack sale is clear. But as you progress in the second phase of review and presumably divest more assets, how do you envision HAIN as a true growth business in the end?
Speaker #6: Pursue. The profit improvement from the snack sale is—fertility rates are declining across your market. So, how do you think about driving sustainable volume in that backdrop?
Speaker #6: But as you progress in the second phase of review and presumably divest more assets, how do you envision Hain as a true growth business in the end?
Speaker #6: I get the resource allocation. You have some bright spots in finger foods and kids. But there are pockets in meals that haven't really grown over time.
John Baumgartner: I get the resource allocation. You have some bright spots with the finger foods and kids. But there's pockets in meals that haven't really grown over time. In babies and kids, the fertility rates are declining across your market. So how do you think about driving sustainable volume in that backdrop? Does it require larger price cuts to bring your products more within reach of sort of mainstream middle-income households and expand penetration that way?
Speaker #6: Does it, in babies and kids, require larger price cuts to bring your products more within reach, to sort of drive penetration that way?
Speaker #5: So, as I look at it again, I'll sort of focus it, I guess, on North America, given that we're focused there with the divestiture. As you look at the remaining portfolio in North America, as I mentioned, first of all, the demand fulfillment aspect of it is an area where I think we've had consistent delivery over time.
Alison Lewis: So as I look at again, I'll sort of focus it, I guess, on North America, given that we're focused there with the divestiture. As you look at the remaining portfolio in North America, as I mentioned, first of all, the demand fulfillment aspect of it is an area where I think we've had strength and we've demonstrated consistent delivery over time. As you think about growth in the remaining portfolio, where we talk about sort of our flagship categories being our tea business, our yogurt business, and our Earth's Best baby and kid business, what you see is in those businesses, we have strength. So if you look at tea, we're a top three player in tea. We've shown that we can drive growth when we innovate. So our wellness innovations that we launched in June of last year are a great example of that.
Alison Lewis: So as I look at again, I'll sort of focus it, I guess, on North America, given that we're focused there with the divestiture. As you look at the remaining portfolio in North America, as I mentioned, first of all, the demand fulfillment aspect of it is an area where I think we've had strength and we've demonstrated consistent delivery over time.
Speaker #5: As you think about growth in the remaining portfolio, we talk about sort of our flagship categories being had strength, and we've demonstrated our tea business, our yogurt business, and our Earth's Best baby and kid business.
Alison Lewis: As you think about growth in the remaining portfolio, where we talk about sort of our flagship categories being our tea business, our yogurt business, and our Earth's Best baby and kid business, what you see is in those businesses, we have strength. So if you look at tea, we're a top three player in tea. We've shown that we can drive growth when we innovate. So our wellness innovations that we launched in June of last year are a great example of that.
Speaker #5: What you see is in those businesses, we have strength. So if you look at tea, we're a top three player in tea. We drive growth when we innovate.
Speaker #5: So our wellness innovations that we launched in June of last year are a great example of that. They're driving share growth for us. And share growth in the overall wellness category.
Alison Lewis: They're driving share growth for us and share growth in the overall wellness category. When you look at our yogurt business, I mean, that's a standout business for us with double-digit growth, again, in a very specific area where we have strength. So whole milk, which is a growing area of interest in the overall dairy category, where whole fats are something that consumers are moving more and more towards. So again, a niche area within a broader player, but an area where we can build from a place of strength. And then the same with baby and kids. When I look at our snacks business and our cereal business, where again, we're number one in each of those categories. So we have strength. We're seeing innovations that we're launching there, are delivering results, double-digit growth, in fact.
Alison Lewis: They're driving share growth for us and share growth in the overall wellness category. When you look at our yogurt business, I mean, that's a standout business for us with double-digit growth, again, in a very specific area where we have strength. So whole milk, which is a growing area of interest in the overall dairy category, where whole fats are something that consumers are moving more and more towards. So again, a niche area within a broader player, but an area where we can build from a place of strength.
Speaker #5: When you look at our yogurt business, I mean, that's a standout business for us with double-digit growth. Again, in a very specific area where we have strength.
Speaker #5: So, whole milk, which is a growing category where whole fats are— we've shown that we can— something that consumers are moving more and more towards.
Speaker #5: So again, a niche area within a broader area, interest in player, but an area where we can build from the overall dairy—a place of strength.
Speaker #5: And then the same with baby and kids. When I look at our snacks business and our cereal business, where again, we're number one in each of those categories.
Alison Lewis: And then the same with baby and kids. When I look at our snacks business and our cereal business, where again, we're number one in each of those categories. So we have strength. We're seeing innovations that we're launching there, are delivering results, double-digit growth, in fact.
Speaker #5: So, we have strength. We're seeing innovations that we're launching there are delivering results—double-digit growth, in fact. So, again, the idea is play to your strengths.
Alison Lewis: So again, the idea is play to your strengths, find those sort of spots within those categories where you already are in a top three position, and keep driving that. When it comes to meal prep, there's also areas within meal prep that I would argue are under-penetrated. A great example, we're number one in coconut oil in Spectrum oils, right? An area where less competition, we're number one. We're launching into liquid coconut for the first time in the second half of the year. 25% of households only use coconut oil. So it's an untapped opportunity for continued growth. So when you talk about sort of where does that growth sit, it's really finding those growth pockets and being close to the consumer and unlocking that with innovation and renovation. When it comes to price cuts, here's what I'd say.
Alison Lewis: So again, the idea is play to your strengths, find those sort of spots within those categories where you already are in a top three position, and keep driving that. When it comes to meal prep, there's also areas within meal prep that I would argue are under-penetrated. A great example, we're number one in coconut oil in Spectrum oils, right?
Speaker #5: Find those sorts of spots within those categories where you already are in a top three position and keep driving that. When it comes to meal prep, there's also areas within meal prep that I would argue are underpenetrated.
Speaker #5: A great right? An area where there's less competition. We're number one. We're launching—into example—we're number one in liquid coconut for the first time.
Alison Lewis: An area where less competition, we're number one. We're launching into liquid coconut for the first time in the second half of the year. 25% of households only use coconut oil. So it's an untapped opportunity for continued growth. So when you talk about sort of where does that growth sit, it's really finding those growth pockets and being close to the consumer and unlocking that with innovation and renovation. When it comes to price cuts, here's what I'd say.
Speaker #5: In the second half of the year, use coconut oil. So it's continued growth. So when you talk about sort of where does that growth sit, it's really finding those growth pockets and being close to the consumer and unlocking that with innovation.
Speaker #5: In the second half of the year, use coconut oil. So it's continued growth. So when you talk about sort of where does that growth sit, it's really finding those growth pockets and being close to the consumer and unlocking that, an untapped opportunity for and renovation.
Speaker #5: When it comes to price cuts, here’s what I’d say. I mean, oil in Spectrum oils—25% of households only—price is relative to the value that you deliver.
Alison Lewis: I mean, price is relative to the value that you deliver. And what we've consistently seen, and I think you see this broadly across all categories, is that price is relative to value. So when we're bringing innovation or we're bringing renovation and we're seeing that added value come into the products, we're seeing an ability to sustain price or even price up. So again, the key is not so much about decreasing prices, increasing prices. It's really about what's the value that we're bringing and what's the consumer willing to pay for that value.
Alison Lewis: I mean, price is relative to the value that you deliver. And what we've consistently seen, and I think you see this broadly across all categories, is that price is relative to value. So when we're bringing innovation or we're bringing renovation and we're seeing that added value come into the products, we're seeing an ability to sustain price or even price up. So again, the key is not so much about decreasing prices, increasing prices. It's really about what's the value that we're bringing and what's the consumer willing to pay for that value.
Speaker #5: And what we've consistently seen, and I think you see this broadly across all categories, is that price relative to value. So when we're bringing innovation or we're bringing renovation and we're seeing that added value come into the products, we're seeing an ability to sustain price or even again, the key is not so much about decreasing prices, increasing prices.
Speaker #5: Price up. Improvement expectation in the fiscal second.
Speaker #5: It's really about what's the value that we're bringing
Speaker #6: Okay. Thanks for that. And then for Lee, in terms of the potential or
Kaumil Gajrawala: Okay, thanks for that. And then for Lee, in terms of the potential or, I guess, likelihood of additional asset sales from here, are there cost basis or tax considerations or any other factors that might limit your degree of flexibility in divesting certain businesses?
John Baumgartner: Okay, thanks for that. And then for Lee, in terms of the potential or, I guess, likelihood of additional asset sales from here, are there cost basis or tax considerations or any other factors that might limit your degree of flexibility in divesting certain businesses?
Speaker #6: I guess likelihood of additional asset sales from here, are there cost basis or tax considerations or any other value. factors that might limit your degree of flexibility in divesting certain
Speaker #6: businesses?
Speaker #5: There are no
Alexis Tessier: There are no concerning tax considerations at this point.
Alison Lewis: There are no concerning tax considerations at this point.
Speaker #5: Concerning tax considerations at this point, and what's the consumer willing to pay for that point.
Speaker #6: Okay. Thank
Kaumil Gajrawala: Okay, thank you.
John Baumgartner: Okay, thank you.
Speaker #7: Thank
Speaker #7: you.
Alison Lewis: Thank you.
Alison Lewis: Thank you.
Speaker #1: Your next question comes from the line of Andrew Lazar with Barclays. Please go ahead.
Jeanie: Your next question comes from the line of Andrew Lazar with Barclays. Please go ahead.
Operator: Your next question comes from the line of Andrew Lazar with Barclays. Please go ahead.
Speaker #1: ahead. morning.
Speaker #8: Great. Thanks so much. Good
Andrew Lazar: Great. Thanks so much. Good morning.
Andrew Lazar: Great. Thanks so much. Good morning.
Speaker #9: Hey,
Lee Boyce: Hey, Andrew.
Lee Boyce: Hey, Andrew.
Speaker #8: You mentioned sequential
Andrew Lazar: You mentioned sequential improvement expectation in the fiscal second half. And obviously, you also announced the divestiture of snacks, which is expected to close fairly soon. Much of the weakness in the fiscal first half was, of course, related to snacks. So I'm curious if you also expect sequential improvement in the fiscal second half, sort of on a pro forma basis. And then any thoughts or help on how we should think about the potential magnitude of such improvement?
Andrew Lazar: You mentioned sequential improvement expectation in the fiscal second half. And obviously, you also announced the divestiture of snacks, which is expected to close fairly soon. Much of the weakness in the fiscal first half was, of course, related to snacks. So I'm curious if you also expect sequential improvement in the fiscal second half, sort of on a pro forma basis. And then any thoughts or help on how we should think about the potential magnitude of such improvement?
Speaker #8: half. And obviously, you also announced the divestiture of snacks, which is expected to close fairly soon. Much of the weakness in the fiscal first half was, of
Speaker #8: Of course, related to snacks. So I'm curious, Andrew, about the improvement in the fiscal second half. And any thoughts or help on how we should think about the potential magnitude of such?
Speaker #8: improvement? Yeah.
Alison Lewis: Yeah. So I think we talked in the first part of the call a little bit about sequential improvement in our international segment. We saw that from Q1 to Q2, and we expect that to continue in the international segment, not only driven by the innovation that we're putting into the marketplace. It is significant. We also cycle the Ella's challenges with the broader sort of industry, and category in May 2026. So that's going to definitely help. In North America, we also expect sequential improvement as we look to from first half to second half. We saw that actually in our tea business. If you look at Q1 to Q2, we see that pick up with the rest of our businesses as we launch innovations.
Alison Lewis: Yeah. So I think we talked in the first part of the call a little bit about sequential improvement in our international segment. We saw that from Q1 to Q2, and we expect that to continue in the international segment, not only driven by the innovation that we're putting into the marketplace. It is significant. We also cycle the Ella's challenges with the broader sort of industry, and category in May 2026.
Speaker #7: So I think we talked in the first part of the call a little bit about sequential improvement in our international segment. We saw that from first quarter to second continue in the international quarter.
Speaker #7: putting into the marketplace, it And we expect that to the ELA's is significant. We also cycle challenges with the broader sort of industry and category only driven by the innovation that we're in May of segment.
Speaker #7: 2026. So that's going to definitely help. In Not sequential improvement as we look from first half to second
Alison Lewis: So that's going to definitely help. In North America, we also expect sequential improvement as we look to from first half to second half. We saw that actually in our tea business. If you look at Q1 to Q2, we see that pick up with the rest of our businesses as we launch innovations. So when you think about our yogurt business that's doing very well, we continue to expand our single-serve Greek Gods yogurt, which is driving a lot of incrementality, about 60% incremental to the business and almost 100% or the category and almost 100% incremental to our business.
Speaker #7: Half. We saw that actually in our tea business. North America, we also expect—if you look at Q1—two of our businesses, as if you also expect sequential, we launch innovations.
Speaker #7: Q2, we see that pick up with the rest So when you think about our yogurt business that's doing very well, we continue to expand our
Alison Lewis: So when you think about our yogurt business that's doing very well, we continue to expand our single-serve Greek Gods yogurt, which is driving a lot of incrementality, about 60% incremental to the business and almost 100% or the category and almost 100% incremental to our business. When you look at our Earth's Best business, we are launching seven SKUs in the big kids snacks area. That's an area we have not been in the past. So we're launching bites. We're launching ways. We're launching sticks. All of those things have added protein, have added fiber, and so they really play into where the market is moving. So again, the sequential improvement comes from that innovation. We also see the full realization of the pricing actions we've taken. As you know, pricing actions have been rolling in across baby, across tea, across meal prep.
Speaker #7: Single-serve, sort of on a pro forma basis. Greek Gods yogurt, which is driving a lot of incrementality—about 60% incremental to the business and almost 100% to the category, and almost 100% incremental to our business.
Alison Lewis: When you look at our Earth's Best business, we are launching seven SKUs in the big kids snacks area. That's an area we have not been in the past. So we're launching bites. We're launching ways. We're launching sticks. All of those things have added protein, have added fiber, and so they really play into where the market is moving. So again, the sequential improvement comes from that innovation. We also see the full realization of the pricing actions we've taken. As you know, pricing actions have been rolling in across baby, across tea, across meal prep.
Speaker #7: When you business, we are launching seven SKUs in the big kid snacks area. That's an area we have not look at our earth best been in the past.
Speaker #7: So we're ways. We're launching sticks. All of those things have added protein, have added fiber, and so they really play into where the market is moving.
Speaker #7: So again, the innovation. We also see the full realization of the pricing actions we've taken. As you know, pricing across baby, across tea—sequential improvement comes from that—across meal prep as we executed the first half.
Speaker #7: Actions have been rolling in, so definitely we are looking to drive sequential improvement from the first half to the second half overall. And we have a lot of activities against our five actions to win.
Speaker #7: Actions have been rolling in, so definitely, we are looking to drive sequential improvement from the first half to the second half overall. And we have a lot of activities against our five actions to win to help drive that.
Alison Lewis: As we executed the first half, in the second half, we see the full benefit of that, along with we'll continue to tighten up sort of our promo efficiency and effectiveness. So, definitely, we are looking to drive sequential improvement, first half to second half, overall. And we have a lot of activities, I guess, or five actions to win to help drive that.
Alison Lewis: As we executed the first half, in the second half, we see the full benefit of that, along with we'll continue to tighten up sort of our promo efficiency and effectiveness. So, definitely, we are looking to drive sequential improvement, first half to second half, overall. And we have a lot of activities, I guess, or five actions to win to help drive that.
Speaker #7: In the second half, we see the full benefit of that, and we'll continue to tighten up sort of our promo efficiency and effectiveness.
Speaker #8: Yeah, and just building on that a little bit, we expect our margins in the second half to improve for the reasons Alison mentioned. I mean, RTM—we did have some impact.
Alexis Tessier: Yeah, and just building on that a little bit, we expect our margins in the second half to improve for the reasons Alison mentioned. I mean, RGM, we did have some impact, and we talked about it in the second quarter on manufacturing on absorption. We expect to get improvements in our manufacturing footprint, continue to drive productivity. We're reducing some of our waste as well. So we expect to see that as we move through. So we expect to see an improving margin profile as well.
Lee Boyce: Yeah, and just building on that a little bit, we expect our margins in the second half to improve for the reasons Alison mentioned. I mean, RGM, we did have some impact, and we talked about it in the second quarter on manufacturing on absorption. We expect to get improvements in our manufacturing footprint, continue to drive productivity. We're reducing some of our waste as well. So we expect to see that as we move through. So we expect to see an improving margin profile as well.
Speaker #8: In the second quarter, and we talked about manufacturing on absorption, we expect to get improvements in our productivity, reducing some of our waste as well.
Speaker #8: So we expect to see that as well. Okay, great. Thank you for that. And then just regarding stranded, what you can do to mitigate that as soon as you can.
Andrew Lazar: Great. Thank you for that. And then just Lee, regarding stranded costs, you call out the $20 to 25 million on an annual basis. And obviously, you're going to do what you can to mitigate that as soon as you can. But I guess in the near term, I mean, should we think about EBITDA being impacted for a period of time when the deal closes because of the stranded costs? And does the 4 times pro forma leverage include or exclude the stranded costs? Thank you.
Andrew Lazar: Great. Thank you for that. And then just Lee, regarding stranded costs, you call out the $20 to 25 million on an annual basis. And obviously, you're going to do what you can to mitigate that as soon as you can. But I guess in the near term, I mean, should we think about EBITDA being impacted for a period of time when the deal closes because of the stranded costs? And does the 4 times pro forma leverage include or exclude the stranded costs? Thank you.
Speaker #8: On costs, you call out the $20 to $25 million on— and does the four pro forma leverage include or exclude the stranded costs? Thank you.
Speaker #8: But I guess in the near term, I mean, should we think about EBITDA improving margin profile as manufacturing footprint continues over time, when the deal closes, because of the stranded costs?
Speaker #5: Yeah. So, we do—I mean, the pro forma leverage did include some of the stranded costs, and then some of the other benefits, as there will be some short-term. We have a very detailed plan to get those out in a short period; we take them out.
Alexis Tessier: Yeah, so we do. I mean, the pro forma leverage did include some of the stranded costs and then some of the other benefits as we take them out moving forward. I mean, there will be some short-term pressure with the stranded costs, but we do have a very detailed plan to get those out in a short period of time. We said the 6 to 12-month period. So it is something, again, there's a number of elements. It's primarily in the SG&A side, a little bit in our distribution and warehousing network. But we have action plans to get those out. So I'd say you would see some pressure in Q1, but that will dissipate as we execute those actions very, very quickly.
Lee Boyce: Yeah, so we do. I mean, the pro forma leverage did include some of the stranded costs and then some of the other benefits as we take them out moving forward. I mean, there will be some short-term pressure with the stranded costs, but we do have a very detailed plan to get those out in a short period of time. We said the 6 to 12-month period.
Lee Boyce: So it is something, again, there's a number of elements. It's primarily in the SG&A side, a little bit in our distribution and warehousing network. But we have action plans to get those out. So I'd say you would see some pressure in Q1, but that will dissipate as we execute those actions very, very quickly.
Speaker #5: Again, there's a number of times we said the 6 to moving forward—I mean, our distribution and warehousing network—12-month period. But we have action plans to get those, so it is something out.
Speaker #5: So, I'd say you would see some pressure in the first quarter, but that will dissipate as we execute those actions very, very quickly.
Speaker #8: Thank
Andrew Lazar: Thank you.
Andrew Lazar: Thank you.
Speaker #1: Again, if you would like to ask a question,
Jeanie: Again, if you would like to ask a question, press star one on your telephone keypad. And your next question comes from the line of Anthony Vendetti with Maxim Group. Please go ahead.
Operator: Again, if you would like to ask a question, press star one on your telephone keypad. And your next question comes from the line of Anthony Vendetti with Maxim Group. Please go ahead.
Speaker #1: keypad. And your next question comes from the line of Anthony Vendetti with Maxim you.
Speaker #1: Group. Please go
Speaker #1: ahead.
Speaker #10: Thank you. Yeah.
Anthony Vendetti: Thank you. Yeah. So just to, I know you gave us the percentages of the snack business relative to overall and to North America. If we had a look at either the last 12 months or fiscal year 2025, what was the actual revenue contribution from the snack business?
Anthony Vendetti: Thank you. Yeah. So just to, I know you gave us the percentages of the snack business relative to overall and to North America. If we had a look at either the last 12 months or fiscal year 2025, what was the actual revenue contribution from the snack business?
Speaker #10: So just so I know, you gave us the percentages of the—
Speaker #10: snack
Speaker #10: business. Relative to overall and to North America, if we had a look at the last either the last 12 months pressure with the stranded costs, but we do or fiscal year '25, what was the actual revenue contribution from
Speaker #10: the snack of elements.
Speaker #5: So, it's primarily in the— we gave it as, was it 38%? 38% of the total North America number.
Alexis Tessier: We gave it as, was it, 38% of the total North American number?
Lee Boyce: We gave it as, was it, 38% of the total North American number?
Speaker #10: Okay. Did the was that 28.6. Not that far
Anthony Vendetti: Okay. Was that business? I know you said that there was, I think you said, the gross margin on that business was 28.6. Not that far off from what you're looking at.
Anthony Vendetti: Okay. Was that business? I know you said that there was, I think you said, the gross margin on that business was 28.6. Not that far off from what you're looking at.
Speaker #10: Was—I think you said the gross margin on that business was—sorry.
Speaker #10: Off from what you're looking at. Sorry.
Alexis Tessier: No, no, no. Sorry. Sorry. Just one correction there. That gross margin was ex the snacks business. So the snacks business was extremely dilutive to that. So that's why we wanted to give you ex the snacks business.
Lee Boyce: No, no, no. Sorry. Sorry. Just one correction there. That gross margin was ex the snacks business. So the snacks business was extremely dilutive to that. So that's why we wanted to give you ex the snacks business.
Speaker #5: Just one correction there. That gross margin was X, the snacks business. So the snacks business was extremely diluted to that. So that's why we wanted to give you X, the
Speaker #10: it. Okay. Good. That's helpful. then if in terms of I And Got you to this was this know the first question was what drove
Anthony Vendetti: Got it. Okay, good. That's helpful. And then, in terms of, I know the first question was what drove you to this. Was this sale pressured by your bank group? Did the bank group sign off on it? And if the bank group wasn't involved, do you think you would have spent more time trying to turn it around? Or maybe just give us a little bit of color on what drove the sale right now.
Anthony Vendetti: Got it. Okay, good. That's helpful. And then, in terms of, I know the first question was what drove you to this. Was this sale pressured by your bank group? Did the bank group sign off on it? And if the bank group wasn't involved, do you think you would have spent more time trying to turn it around? Or maybe just give us a little bit of color on what drove the sale right now.
Speaker #10: the bank group? Did the bank No, no, no. group sign off on sale pressured by it? And if the bank group wasn't involved, do you think you would have spent more
Speaker #10: Time trying to turn it snacks business around or maybe just give us a little bit of color on what drove the sale, right?
Speaker #10: now? Yeah.
Alexis Tessier: Yeah, it definitely wasn't pressured by the bank group. It was done. I mean, we talked about, I think it was May, we kicked it off. We had a strategic review process. And were we strategically in a position with a right to win within that category? And how did it fit within the rest of our portfolio? So that's really what drove the decision. It felt like with their acquirer, they've got a better position to drive that moving forward. So not pressured by the bank group, no.
Lee Boyce: Yeah, it definitely wasn't pressured by the bank group. It was done. I mean, we talked about, I think it was May, we kicked it off. We had a strategic review process. And were we strategically in a position with a right to win within that category? And how did it fit within the rest of our portfolio? So that's really what drove the decision. It felt like with their acquirer, they've got a better position to drive that moving forward. So not pressured by the bank group, no.
Speaker #5: It definitely wasn't pressured by the bank group. It was done. I mean, we talked about—I think it was, maybe we kicked it off.
Speaker #5: We had a strategic review process and where we've strategically in a position with a right to win within that category and how did it fit within the rest of our portfolio.
Speaker #5: really what drove the
Speaker #5: Decision. So that's what it felt like with the acquirer—they've got a better position to drive that moving forward. So, not pressured by the bank group, no.
Alison Lewis: Yeah. And I would say, Anthony, I mean, look, obviously, this is public now with the team. We couldn't talk to the team in North America much about what we were doing. As the team looks at sort of the potential of the business with the three flagship categories I noted, plus selective opportunities in meal prep, they're excited. They're excited because the financial profile is such that they can put a lot more focus against these businesses. They know there's growth in these businesses. They're going to be given an opportunity to unlock that growth. So again, simplification is our first action to win. We have to engage in ruthless complexity reduction across our business.
Alison Lewis: Yeah. And I would say, Anthony, I mean, look, obviously, this is public now with the team. We couldn't talk to the team in North America much about what we were doing. As the team looks at sort of the potential of the business with the three flagship categories I noted, plus selective opportunities in meal prep, they're excited.
Speaker #4: mean, look, obviously, this is public now with the team. We couldn't talk to the team in North America much about what we were doing.
Speaker #4: The team looks at, sort of, as the business with the three flagship categories. I noted, yeah. And I would say, meal prep—they're excited.
Speaker #4: the potential of the meal prep business, because that is one of
Alison Lewis: They're excited because the financial profile is such that they can put a lot more focus against these businesses. They know there's growth in these businesses. They're going to be given an opportunity to unlock that growth. So again, simplification is our first action to win. We have to engage in ruthless complexity reduction across our business.
Speaker #4: They're excited because the financial profile is, Anthony, such that they can put a lot more focus against these businesses. They know there's growth in these businesses.
Speaker #4: They're going to be given an opportunity to unlock that growth, plus selective opportunities in—so again, simplification is our first action to win. We have to engage in ruthless complexity business.
Speaker #4: And snacks was a very smart way to do that given the capabilities that are required to win in snacks, which I would argue are a reduction across our—of Hain Celestial's strengths given it's an impulse category.
Alison Lewis: Snacks was a very smart way to do that given the capabilities that are required to win in snacks, which I would argue are not capabilities that are at the heart of Hain Celestial's strengths given it's an impulse category and fundamentally a demand creation category.
Alison Lewis: Snacks was a very smart way to do that given the capabilities that are required to win in snacks, which I would argue are not capabilities that are at the heart of Hain Celestial's strengths given it's an impulse category and fundamentally a demand creation category.
Speaker #4: category.
Speaker #10: Okay.
Anthony Vendetti: Okay, great. And then one last follow-up on the meal prep business because that is one of the fastest-growing categories within grocery stores. Maybe give us a little bit more color on the plan there. Is it going to be more frozen refrigerated? And just an idea of how you're going to build that out. Thank you.
Anthony Vendetti: Okay, great. And then one last follow-up on the meal prep business because that is one of the fastest-growing categories within grocery stores. Maybe give us a little bit more color on the plan there. Is it going to be more frozen refrigerated? And just an idea of how you're going to build that out. Thank you.
Speaker #10: the fastest-growing Great. And then one last follow-up on
Speaker #10: More color on the plan—maybe give us a little bit there. Is it going to be more frozen? And just an idea of how you're going to build, not capabilities that are at the heart, that out.
Speaker #10: Thank you.
Alison Lewis: Yeah, you're right. Meal prep is actually an exciting area. As we're looking at how do we put some additional focus against that business without the snacks business in North America, we're looking at sort of doubling down on innovation. So we're already talking about and building out our pipeline related to MaraNatha. You heard me talk about liquid coconut oil on Spectrum, 25% of households only using coconut oil, and we're number one right now, but we don't have a liquid product. That's another great example. So we will absolutely look at ways we can unleash the opportunity within meal prep as we go forward because we know it's a growth category. And when 38% of your business is in snacks and it requires impulse category-like capabilities, you find that a disproportionate amount of human resources are spent there.
Alison Lewis: Yeah, you're right. Meal prep is actually an exciting area. As we're looking at how do we put some additional focus against that business without the snacks business in North America, we're looking at sort of doubling down on innovation. So we're already talking about and building out our pipeline related to MaraNatha.
Speaker #4: You're right. Meal prep is actually an exciting area. And as we've sort of we're looking at how do we
Speaker #4: put some additional focus against that business without the snacks business in North America? We're looking at sort of doubling down on refrigerated?
Speaker #4: innovation. So we're already talking Yeah. about and building out our categories within grocery stores. pipeline related to liquid coconut oil on Spectrum 25% of number one right now, but we don't have a liquid product.
Alison Lewis: You heard me talk about liquid coconut oil on Spectrum, 25% of households only using coconut oil, and we're number one right now, but we don't have a liquid product. That's another great example. So we will absolutely look at ways we can unleash the opportunity within meal prep as we go forward because we know it's a growth category. And when 38% of your business is in snacks and it requires impulse category-like capabilities, you find that a disproportionate amount of human resources are spent there. We now have time to spend it against some of the other great opportunities that exist in our portfolio.
Speaker #4: That's another great example. So we absolutely can unleash the households only using coconut oil. And we see opportunity within meal because we know it's a growth prep as we go forward in the category.
Speaker #4: And when 38% of your required impulse business is in snacks and it's category-like capabilities, you find resources are spent there. We now have time to spend it against some of the other great opportunities that exist in our—
Speaker #4: that a disproportionate amount of human
Alison Lewis: We now have time to spend it against some of the other great opportunities that exist in our portfolio.
Speaker #10: Okay. And I would just like to conclude with permanent appointment as CEO,
Anthony Vendetti: Okay. I would just like to conclude with congratulations on the permanent appointment as CEO, Alison. Thank you.
Anthony Vendetti: Okay. I would just like to conclude with congratulations on the permanent appointment as CEO, Alison. Thank you.
Speaker #10: Alison.
Alison Lewis: Thank you very much. Continue to be energized by it.
Alison Lewis: Thank you very much. Continue to be energized by it.
Speaker #4: very much. Thank you Good morning.
Speaker #4: Continue to be energized by
Speaker #4: Continue to be energized by—thanks for the question.
Speaker #4: it.
Speaker #1: Your next
Jeanie: Your next question comes from the line of Jon Andersen with William Blair. Please go ahead.
Operator: Your next question comes from the line of Jon Andersen with William Blair. Please go ahead.
Speaker #1: question comes from the line of John Anderson with William Blair. Please go ahead.
Jon Andersen: Good morning. Thanks for the question. I was wondering if you could help us just with kind of the cadence in the baby and kids business. There are, I guess, a couple of other transitory events that are affecting the organic growth in that business. You cited the first one as being pipeline associated with the Earth Balance relaunch last year, and then just kind of the industry-wide challenges in wet baby in the UK. Can you remind us of the timing of those? When will those be cycled or kind of out in the base, if you will? And do you kind of expect post that that the baby and kid business is in a position in aggregate to grow? Thanks.
Jon Andersen: Good morning. Thanks for the question. I was wondering if you could help us just with kind of the cadence in the baby and kids business. There are, I guess, a couple of other transitory events that are affecting the organic growth in that business. You cited the first one as being pipeline associated with the Earth Balance relaunch last year, and then just kind of the industry-wide challenges in wet baby in the UK.
Speaker #11: Kids business, there are, I guess, a couple of transitory events that are affecting the organic growth in that business. I was wondering if you could look at ways we—
Speaker #11: kids business, there are, I guess, a look at ways we I was wondering if you couple of transitory events that are affecting the
Speaker #11: You've cited the first one as being pipeline associated
Speaker #11: With the Earth Balance relaunch, last of the in the baby and portfolio. Year. And then just congratulations on the kind of the industry-wide challenges in wet baby in the UK.
Jon Andersen: Can you remind us of the timing of those? When will those be cycled or kind of out in the base, if you will? And do you kind of expect post that that the baby and kid business is in a position in aggregate to grow? Thanks.
Speaker #11: Can you remind us of the timing of those? When will those the base, if you will? And do you kind of expect post could help us just with kind be cycled or kind of out in that that the baby and kid business is in a position, in aggregate, to grow?
Speaker #11: Thanks.
Speaker #4: Yeah.
Alison Lewis: Yeah. So I'll talk about the UK first and Ella's. So the BBC Panorama documentary came out in early May of last year. And so we do start to cycle that drag that has hit the category come Q4 of this year. So you will see that business return to a much better position and return to growth. We are, as you know, on that business. We've been doubling down on marketing. I think I talked in our last call about sort of a new marketing campaign that's getting very good response. We are also doubling down on our innovation. So in the back half in Ella's, we have 10 new snack SKUs going in. We have new meals, stage four, so older kids sort of meals going in. And then we have the nutty blends, which is a combination of nuts and fruits and vegetables.
Alison Lewis: Yeah. So I'll talk about the UK first and Ella's. So the BBC Panorama documentary came out in early May of last year. And so we do start to cycle that drag that has hit the category come Q4 of this year. So you will see that business return to a much better position and return to growth. We are, as you know, on that business.
Speaker #4: So I'll talk about the UK first. And Ella's, so the BBC, May of last year. And so we do start that drag to cycle that has hit the category come Q4 of this year.
Speaker #4: So you will see that business return to a much better position and return to growth. We are, as you know, on that business. We've been doubling down on marketing.
Alison Lewis: We've been doubling down on marketing. I think I talked in our last call about sort of a new marketing campaign that's getting very good response. We are also doubling down on our innovation. So in the back half in Ella's, we have 10 new snack SKUs going in. We have new meals, stage four, so older kids sort of meals going in. And then we have the nutty blends, which is a combination of nuts and fruits and vegetables.
Speaker #4: I think I talked in our last call about sort of a new marketing campaign that's getting very good response, and that we are also doubling down on our innovation.
Speaker #4: So in the back half, in Ella's, we have meal stage four—so, older kids' sort of meals going in. And then we have the Nutty Blends, which is a combination of nuts and fruits and vegetables.
Speaker #4: So again, lots of innovation to continue to drive that category. And Ella's does remain the number one in the category overall, and is the pioneer and sets the standard for organic. Once we cycle that, we have confidence that, again, that business, you'll see a return to growth.
Alison Lewis: So again, lots of innovation to drive that category. And Ella's does remain the number one in the category overall and is the pioneer and sets the standard for organic baby in the category. So again, once we cycle that, we have confidence that, again, that business, you'll see a return to growth. As it relates to the North America business, I think we've talked quite a bit that we're in a tale of two cities where we've got good growth, double-digit growth, strong double-digit growth in our Earth's Best snacking business, and we'll continue to drive that with the innovation we have coming in in the back half of the year. On our cereal business, the same thing, mid-single-digit growth, strong business, again, looking at innovation to continue to drive that. When it comes to our formula business, this is the last big cycle.
Alison Lewis: So again, lots of innovation to drive that category. And Ella's does remain the number one in the category overall and is the pioneer and sets the standard for organic baby in the category. So again, once we cycle that, we have confidence that, again, that business, you'll see a return to growth. As it relates to the North America business, I think we've talked quite a bit that we're in a tale of two cities where we've got good growth, double-digit growth, strong double-digit growth in our Earth's Best snacking business, and we'll continue to drive that with the innovation we have coming in in the back half of the year.
Speaker #4: As it relates to the North America business, I think we've talked quite a bit that we're in a tale of two cities, where we've got good growth, double-digit growth, strong double-digit growth in our Earth's Best snacking business.
Speaker #4: And we'll continue to drive that with the innovation we have coming in in the back half of the year. On our cereal business, the same thing.
Speaker #4: And we'll continue to drive that with the innovation we have coming in in the back half of the year. On our cereal business, the same 10 new snack SKUs coming, mid single-digit growth, strong business.
Alison Lewis: On our cereal business, the same thing, mid-single-digit growth, strong business, again, looking at innovation to continue to drive that. When it comes to our formula business, this is the last big cycle. This quarter was the last big cycle that we see. So we should get to a more normalized place, although I will tell you that formula is an incredibly competitive category. You have a lot of new players in, and Earth's Best has been working hard to really rebuild sort of the trust credentials that it always had, as well as engage in very targeted recruitment-based marketing through things like Earth's Besties, as well as some of the registry programs with our retailers.
Speaker #4: Again, looking at innovation to in. We have new continue to drive that. When it comes to our formula business, this is the last big cycle this quarter was the last big cycle that we see.
Alison Lewis: This quarter was the last big cycle that we see. So we should get to a more normalized place, although I will tell you that formula is an incredibly competitive category. You have a lot of new players in, and Earth's Best has been working hard to really rebuild sort of the trust credentials that it always had, as well as engage in very targeted recruitment-based marketing through things like Earth's Besties, as well as some of the registry programs with our retailers. So again, we have more work to do on our formula business, but the cycles we get over. As it relates to our pouch business, sort of our other challenged area, I mean, that's another example where it's hyper-competitive in the pouch business, a lot of the pouch business moving to refrigerated. And so you're seeing sort of a sea change and a shift in that category overall.
Speaker #4: So we normalized place. Should get to a more—although I will tell you, incredibly competitive new players in. And Earth's category, you have a lot to really rebuild, sort of the trust credentials that it always had. Very targeted, recruitment-based marketing through things like Earth's Besties as well as some of the registry programs with our retailers.
Speaker #4: So Best has been working hard again. We have more work to do on our formula business, but the cycles, we get over. As it relates to our pouch business, sort of our other challenged area, I mean, that's another example where it's hyper-competitive in the pouch business.
Alison Lewis: So again, we have more work to do on our formula business, but the cycles we get over. As it relates to our pouch business, sort of our other challenged area, I mean, that's another example where it's hyper-competitive in the pouch business, a lot of the pouch business moving to refrigerated. And so you're seeing sort of a sea change and a shift in that category overall.
Speaker #4: A lot of the pouch business moving to of a sea change and a shift in that category overall. refrigerated. And so you're seeing sort cycling some exits of that business as we look to we talked to you, I think, our last earnings call about the 30% SKU reduction in North America.
Alison Lewis: We will still be cycling some exits of that business as we talked to you, I think, our last earnings call about the 30% SKU reduction in North America. We continue to drive that. A chunk of that SKU reduction does actually hit our pouch business as we look to really, again, build a focused power core of sort of hero SKUs in our wet baby food business. So again, we've got great strength in a couple of segments, and we'll continue to drive those hard. We're working to stabilize the other two segments with some cycles that we get through as we move through the remainder of the year.
Alison Lewis: We will still be cycling some exits of that business as we talked to you, I think, our last earnings call about the 30% SKU reduction in North America. We continue to drive that. A chunk of that SKU reduction does actually hit our pouch business as we look to really, again, build a focused power core of sort of hero SKUs in our wet baby food business. So again, we've got great strength in a couple of segments, and we'll continue to drive those hard. We're working to stabilize the other two segments with some cycles that we get through as we move through the remainder of the year.
Speaker #4: We continue to drive that. A chunk of that SKU reduction does actually hit our pouch business as we look to really, again, build a focused power core of sort of hero SKUs in our wet baby food business.
Speaker #4: So again, we've got great strength in a couple of segments. And we'll continue to drive those hard. And we're working to baby in the category.
Speaker #4: Stabilize the other two segments with, so again, some cycles that we get.
Speaker #11: Thanks for the color. That's helpful.
Jon Andersen: Thanks for the color. That's helpful. Makes sense to focus on the area where you have the strongest differentiation. One follow-up to Andrew's question just on stranded overhead. I just want to make sure when you talk about North America gross margins being in the 30s post on a pro forma basis and EBITDA margin double-digit, low double-digit, is that after the workdown of the stranded overhead costs, or is it kind of right out of the gates?
Jon Andersen: Thanks for the color. That's helpful. Makes sense to focus on the area where you have the strongest differentiation. One follow-up to Andrew's question just on stranded overhead. I just want to make sure when you talk about North America gross margins being in the 30s post on a pro forma basis and EBITDA margin double-digit, low double-digit, is that after the workdown of the stranded overhead costs, or is it kind of right out of the gates?
Speaker #11: on the
Speaker #11: Area where you have the strongest, as we move through the remainder of the question, just on stranded overhead. I just want to make sure when you talk about North year.
Speaker #11: America gross margins being in the differentiation 30s, post a pro forma. One follow-up to Andrew's basis and EBITDA margin after the workdown of the stranded overhead costs?
Speaker #11: Or is it kind of right out of the gates?
Speaker #12: No, no. That's a good question. It is
Alexis Tessier: No, no. That's a good question. It is after the workout of the stranded overhead impacts. So again, that's why we've emphasized we have action plans to take those out on kind of a short-term basis, moving very aggressively, but it is after that workout.
Lee Boyce: No, no. That's a good question. It is after the workout of the stranded overhead impacts. So again, that's why we've emphasized we have action plans to take those out on kind of a short-term basis, moving very aggressively, but it is after that workout.
Speaker #12: Off to the workdown of the stranded overhead impacts. So again, that's why we've to take those out on a kind of short-term basis.
Speaker #12: emphasized we have action plans to
Speaker #12: Moving very aggressively. But it is off to that work down. Double-digit, low double-digit, is that—
Speaker #4: That's right.
Alison Lewis: That's right.
Alison Lewis: That's right.
Jon Andersen: So just again, for modeling purposes, it would be, I guess, prudent might be the word to assume there's going to be kind of a $5 to 6 million overhead, stranded overhead headwind per quarter until those are worked down.
Jon Andersen: So just again, for modeling purposes, it would be, I guess, prudent might be the word to assume there's going to be kind of a $5 to 6 million overhead, stranded overhead headwind per quarter until those are worked down.
Speaker #11: purposes, it would be I guess prudent might be the word to assume there's going to be kind of a 5 to So just again, for modeling overhead stranded overhead 6 million dollar headwind per quarter until those are worked
Speaker #12: That's the way the math would work. Yes. It would be about, yeah, 5 million dollars a quarter,
Alexis Tessier: That's the way the math would work. Yes, it would be about, yeah, $5 million a quarter, 5 to 6. But again, we would be taking actions to quickly kind of work that down as fast as possible.
Lee Boyce: That's the way the math would work. Yes, it would be about, yeah, $5 million a quarter, 5 to 6. But again, we would be taking actions to quickly kind of work that down as fast as possible.
Speaker #12: But again, we would Understood.
Speaker #12: Be taking actions down to quickly kind of work that down to 5 to 6.
Jon Andersen: Understood. Okay. Thank you so much.
Jon Andersen: Understood. Okay. Thank you so much.
Speaker #11: Okay. Thank you so
Speaker #11: much.
Speaker #1: That concludes our question and answer session. I will now turn the call back over
Jeanie: That concludes our question and answer session. I will now turn the call back over to Alison Lewis, CEO, for closing remarks.
Operator: That concludes our question and answer session. I will now turn the call back over to Alison Lewis, CEO, for closing remarks.
Speaker #1: to Alison Lewis, CEO for Closing
Speaker #1: Remarks. Great.
Alison Lewis: Great. Well, thank you, everyone, for joining today. I'll just reaffirm our confidence in the direction that we're taking. This quarter represented a really pivotal step for us as we began to execute our strategic review with the divestiture of snacks. We're focusing our portfolio for growth. We're improving sort of our overall financial profile as we go forward and also strengthening our operational health while we continue to drive out costs and enhance our overall cash delivery. And I would say we're attacking the challenges head-on. Certainly, this business is in transformation and turnaround, but we see bright spots, and we'll continue to drive those bright spots as we action our five actions to win. So thanks for joining us today.
Alison Lewis: Great. Well, thank you, everyone, for joining today. I'll just reaffirm our confidence in the direction that we're taking. This quarter represented a really pivotal step for us as we began to execute our strategic review with the divestiture of snacks. We're focusing our portfolio for growth. We're improving sort of our overall financial profile as we go forward and also strengthening our operational health while we continue to drive out costs and enhance our overall cash delivery.
Speaker #4: Well, thank you, everyone, for joining today. As fast as possible, I'll just reaffirm our confidence in the direction that we're
Speaker #4: The quarter represented a real opportunity to execute our strategic review with the Director of Snacks. We're focusing on a pivotal step for us as we began improving our overall financial profile as we go forward.
Speaker #4: And also, strengthening our operational health while we continue to drive our portfolio for growth. We're out costs and we're attacking the challenges head-on. Certainly, this business is in transformation.
Alison Lewis: And I would say we're attacking the challenges head-on. Certainly, this business is in transformation and turnaround, but we see bright spots, and we'll continue to drive those bright spots as we action our five actions to win. So thanks for joining us today.
Speaker #4: And turnaround. But we see bright spots. And we'll continue delivery. to drive those bright spots as we And I would say action our five actions to win.
Speaker #4: So thanks for joining us today.
Speaker #1: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may
Jeanie: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
