The Hain Celestial Group, Inc. Q3 FY2026 earnings call

Turnaround Strategy Progress

• Core priorities: Optimize cash flow, strengthen the balance sheet, improve profitability, and stabilize sales to position the firm for long-term sustainable growth.
• Completed the divestiture of the North America Snacks business, enabling portfolio streamlining, eliminating $155 million in total debt, and creating a more focused, higher-margin core North American portfolio.
• Restructuring program is nearly complete: $108 million in transformation charges recorded to date, out of a total expected $115-$125 million, on track to deliver $130-$150 million in total benefits by fiscal 2027.

Operational Execution

• Stranded cost elimination is progressing well: 70% of expected 20-$25 million in stranded costs have already been removed, with full elimination targeted by the end of fiscal 2027 Q4.
• Working capital improvements: Days inventory outstanding improved to 73 days (the lowest level in two years), down from 79 days year-over-year; free cash flow reached $35 million in Q3, up from a $2 million outflow year-over-year.
• Innovation and renovation acceleration: 12% of net sales now come from SKUs launched or relaunched in the last three years, up 2.5 percentage points year-over-year, with a robust pipeline of new products planned for coming quarters.

Balance Sheet Strength

• Net debt reduced by $145 million since the start of fiscal 2026 to $505 million, with a leverage ratio of 4.3x, well below the 5.5x credit covenant.
• Total available liquidity of $238 million ($44 million cash on hand + $196 million available under the revolving credit facility), with full compliance with all credit agreement covenants.

Regional and Brand Highlights

• North America: Core categories (yogurt, tea, baby finger foods, cereal) are stable and growing, with early share gains from recent innovation including wellness tea, Greek Gods yogurt, and Earth's Best finger foods.
• International: 50% of brands are holding or gaining share despite macroeconomic headwinds; planned full brand relaunches for Hartley's (spreads/drizzles) and Yorkshire Provender (soup) to reverse softness and drive category engagement.

North America Segment

• Organic net sales: Declined 3% year-over-year. Excluding portfolio simplification pantry brands (oil, nut butter, soup), organic net sales grew 3% year-over-year, with growth in tea, yogurt, Earth's Best finger foods, and cereal.
• Adjusted gross margin: 23.4% (up 100 basis points year-over-year); excluding divested snacks, adjusted gross margin reached 30%.
• Adjusted EBITDA: $17 million, equal to 10% of net sales (down 1% year-over-year); excluding divested snacks, adjusted EBITDA margin reached 16.4%.

International Segment

• Organic net sales: Declined 8% year-over-year, driven by softness in wet baby food, spreads/drizzles, and branded soup due to consumer confidence weakness and private label competition.
• Adjusted gross margin: 18.5% (down 270 basis points year-over-year).
• Adjusted EBITDA: $20 million, equal to 11.7% of net sales (down 12% year-over-year).

Category Performance

• Baby and Kids: Organic net sales down 14% year-over-year, driven by industry-wide UK puree volume softness and North American puree/formula declines, partially offset by finger food growth in both regions and North American cereal growth.
• Beverages: Organic net sales flat year-over-year, with North American tea growth offsetting branded non-dairy beverage declines.
• Meal Prep: Organic net sales down 5% year-over-year, driven by North American pantry brand declines and UK spreads/drizzles weakness, partially offset by strong high-teens dollar growth for Greek Gods yogurt.
• Snacks (post-divestiture, only international jellies): Organic net sales down 7% year-over-year.

• The firm is not providing full fiscal 2026 operating result numeric guidance due to uncertainty around the timing and outcome of the ongoing strategic review.
• The divestiture of North American snacks is expected to be accretive to both gross margin and adjusted EBITDA, with the go-forward North American portfolio expected to sustain gross margins above 30% and low double-digit adjusted EBITDA margins.
• Full fiscal 2026 free cash flow is expected to remain positive, with full-year capital expenditures projected to be approximately $20 million.
• No formal fiscal 2027 guidance is provided at this time. Core priorities for fiscal 2027 are stabilizing sales, improving gross and EBITDA margins versus fiscal 2026, generating positive free cash flow, and fully eliminating remaining stranded costs. Formal fiscal 2027 guidance will be provided after the strategic review is completed.

• Heightened geopolitical uncertainty and persistent elevated inflation (including rising fuel prices) have reduced consumer confidence in the UK and Europe, leading to industry-wide volume softness across multiple key categories.
• Aggressive private label competition is pressuring top-line performance and margins for mature international categories including branded soup and spreads/drizzles.
• The firm faces a $505 million net debt position with a debt maturity coming in December 2026, requiring refinancing, extension, or repayment before the maturity date.
• Isolated underperformance in non-core portfolio segments (North American pantry brands, UK wet baby food) continues to pressure overall top-line results.
• Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from management expectations, as detailed in SEC filings.

Q: How will the company fund marketing and innovation support for new product launches amid ongoing deleveraging priorities, and will all incremental margin savings go toward debt maturity preparations? / A: Management confirmed innovation requires sustained marketing support to drive awareness, trial, and long-term product stickiness, with investment planned over a 3-year horizon for new launches. Marketing investment has already been increased for North American innovation, with plans to accelerate international marketing spending as well. Incremental savings from portfolio simplification and divestment will be balanced between reinvestment in core growth initiatives and debt reduction priorities, with a focus on shifting more spending to higher-return digital and social channels. (217 characters)

Q: Have you seen an increase in competitive discounting and trade spend amid broader economic uncertainty, and do you have flexibility to respond to more aggressive competition? / A: Management reported no significant uptick in promotional activity across core North American segments, with core growth categories (yogurt, tea, baby food) expected to remain stable through the back half of the year. On the international side, major branded competitors have increased promotional and media investment. The company will maintain a surgical, targeted approach to spending adjustments to remain competitive if competition intensifies, in both regions. (224 characters)

Q: How is the company approaching private label competition across regions, and when will the new high-protein Greek Gods offering launch with marketing support? / A: In North America, private label penetration is low (below 5%) in core categories like tea and baby food. Higher penetration in yogurt is offset by innovation advantage for branded players, so management is not overly concerned. In international, private label growth has accelerated due to weaker consumer sentiment, but the company has a balanced portfolio with significant private label share to capture this shift. The new high-protein Greek Gods SKU launched in April at select retail and is supported by marketing investment, with broader rollout planned. (332 characters)

Q: What is the strategy to return the U.S. meal prep segment to growth? / A: The largest segment of U.S. meal prep is the growing, share-gaining Greek Gods yogurt business, which is already delivering strong results with new innovation (single-serve formats, high-protein SKUs) supported by marketing. The remaining portion of the segment consists of small-share pantry brands (nut butters, oils, broth) that face high private label competition and make up less than 20% of the total portfolio. The current strategy focuses on stabilizing these smaller brands with targeted trade and marketing investment rather than aggressive expansion. (298 characters)