The Hain Celestial Group, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Leadership Transition: Board announced leadership transition, with Alison Lewis stepping in as Interim President and CEO. Also, launch of formal process to review the company's portfolio.
• Key Focus Areas:
  • Simplifying business: Reduced lease expense, co-manufacturers, and vendors; aim to generate over $25 million in run rate cost savings by H2 2026.
  • Renovation and innovation: Authorizing step change in renovation and innovation of portfolio, leveraging Better-for-You credentials.
  • Revenue growth management: Embedded initiatives, implementing pricing actions to mitigate inflation, driving trade effectiveness.
  • Supply chain productivity: Expect to unlock nearly 2/3 of $165 million working capital goal by year-end; solid pipeline for fiscal 2026.
  • Digital capabilities: Enhancing digital analytics, e-commerce performance, and procurement efficiency.

Segment Performance

• North America: Organic net sales declined 10% year-over-year. Adjusted gross margin was 22.4% (20 basis point increase vs prior year), adjusted EBITDA was $17 million (down from $28 million prior year).
• International: Organic net sales grew 0.5% in the quarter. Adjusted gross margin was 21.1% (130 basis points below prior year), adjusted EBITDA was $22 million (down 10% vs prior year).
• Category Performance: Snacks organic net sales down 13% y/y; Baby and Kids down 6% y/y (excluding lost customer, Earth's Best formula showed double-digit growth); Beverage down 7% y/y; Meal Prep returned to growth (+1% y/y).

Guidance

• Full year fiscal 2025 organic net sales expected down 5%-6%, adjusted EBITDA ~$125 million, gross margin ~21.5%, free cash flow ~$40 million.
• North America organic net sales trends expected to improve sequentially in Q4, driven by Baby and Kids.
• International segments expected to improve sequentially in Q4 with benefits from pricing actions, innovation, and new contracts.

Risks

• Macro environment uncertainties, including regulatory developments and tariff impacts.
• Execution challenges in marketing and promotions, particularly in Snacks category.
• Competitive pressures in certain categories affecting velocity and distribution.

Question and Answer

• Q: David Palmer on execution issues in Snacks A: Lee Boyce noted promotional underperformance across club and mass, in-store execution issues at mass retailers, and need to strengthen overall execution.
• Q: Jim Salera on visibility A: Lee Boyce mentioned investing in commercial team and digital capabilities for better visibility.
• Q: Kaumil Gajrawala on strategic review A: Dawn Zier stated Board is early in evaluating broad strategic options to maximize shareholder value.
• Q: Ken Goldman on balance sheet actions A: Lee Boyce mentioned continuing to drive working capital reduction and portfolio optimization to support deleveraging.
• Q: Jon Andersen on strategic portfolio review timeline A: Dawn Zier stated it's too early to comment on timeline, will update when appropriate