Whole Earth Brands, Inc.

Greetings and welcome to the Whole Earth Brands Incorporated second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jeff Sonick of Investor Relations. Thank you. You may begin.

Thank you and good morning. Today's presentation will be hosted by Albert Manzoni, Chief Executive Officer, and Andy Rusi, Chief Financial Officer. Executive Chairman Erwin Simon is also participating on the call and will be available for Q&A. The comments during today's call and the accompanying presentation contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We'll also refer to certain non-GAAP financial measures. Please refer to the tables included in the earnings release, which can be found on the investor relations website, investor.wholeearthbrands.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. With that, I'd now like to turn the call over to Albert Manzoni, CEO.

Thank you, Jeff, and thanks to everyone for joining the call today. Whole Earth Brands is the global leader in the better for you sweetener and reduced sugar categories. Our vision is to grow Whole Earth Brands to a 1 billion plus revenue global food and beverage company by doing three things. One, disrupt the massive 100 billion total addressable markets dominated by refined sugar and penetrate large adjacent categories on a mission to make sweet healthy. Our diet is leading to a global health problem. Refined sugar is a concern for all generations. Hall of Friends is part of the solution by providing consumers with delicious sugar substitutes, baking solutions, and over-ready-to-eat, no-sugar added products. We believe that we are perfectly aligned with the powerful consumer macro trends toward health and wellness that are here to stay and are only accelerating with the shifting demographics and emergence of millennials and Gen Z. Two, drive category leadership through best-in-class innovation and brand building, expanding our global distribution, leveraging our exceptional supply chain capabilities, continuing to accelerate our growth through strategic F&A, as well as taking full advantage of the expertise of our world-class team with long experience at large global food companies. And three, evolve Whole Earth Brands from a mostly sweetener business to a holistic, better-for-you food company. In Q2, our business performed above expectations. consistent with our past three quarter performances since becoming a public company. Our branded CPG segment faced some headwinds in Q2 due to a tough prior year comparison due to the COVID led pantry loading last year. This resulted in a year over year decrease of 8% on an organic constant currency basis. That said, We believe a more appropriate measure of performance is looking through the lenses of our two-year stack growth. We're very pleased by our plus 15% increase in revenue on a constant currency basis versus the second quarter of 2019. This demonstrates the strength and momentum of our portfolio and our ability to generate long-term sustainable revenue growth. We delivered a company record adjusted EBITDA of 22 million, an increase of 9% versus Q2 2020, driven by revenue growth, contributions from the swerve and wholesome acquisitions, improved the margins, and productivity gains. I am also pleased to report that swerve and wholesome acquisitions, which almost doubled our revenue in our first year as a public company, had been fully integrated And we're now operating as one business. We are delivering on our synergies as planned. Our power of one with our retail partners has also been launched with very positive results to date. We are fortunate to have already been working on various optimization initiatives in what is now a decidedly inflationary environment. and we believe that we have several tools to help offset inflation with the implementation in the coming quarters and years. This includes the driving supply chain productivity, pricing, trade spend optimization, and overall productivity initiatives. As such, we remain comfortable reiterating our fiscal 2021 full-year guidance, Whether COVID goes away or remain, we fast a little longer. We have demonstrated over the past four quarters the strength and resilience of our business. As we look ahead, we're confident in our ability to deliver strong, sustainable growth and take advantage of the tremendous market opportunities I mentioned earlier. The basis of our confidence lies in our proven operating model built on five strategic pillars, brand building, innovation, distribution, supply chain, and our world-class team. Let me provide some Q2 highlights. On brand building, you can now discover new packaging design and campaigns consistent with each brand's distinct promise for equal, wholesome, and whole hearth. with each brand also showing a proudly part of Whole Earth brand's logo. We have already gotten a highly positive response to the changes we have made from consumers and our retail partners. Swerve connects with consumers seeking to reduce or eliminate sugar in their diets with a robust consumer digital marketing campaign, as well as partnership with Joy Bauer and the registered dietetician community. Whole Earth is rooted in plant-based sweeteners for beverages, baking, and more that open a world of goodness among the wellness community. And our wholesome portfolio of organic, fair trade sweeteners encourages consumers across the country to bake things better. On innovation, we are on track to meet our goal of 30 product launches this year in branded CPGs. and 15 in flavors and ingredients, as we focus on delivering on our commitment to having over 15% of our Branded CPG segment revenues derived from product innovation on a three-year rolling basis. Our innovation in Branded CPG is focused on high growth territories, baking, plant-based, keto-friendly zero sugar, functional benefits, organic and fair trade in current categories of sugar substitutes and base mixes, as well as expanding into adjacencies. Whole Earth's recent innovation is anchored in high-growth ingredients such as monk fruit, allulose, and collagen peptides, and incremental usage occasions with success across key retailers. Swerve and Wholesome new base mixes are being rolled out in North America and ready to disrupt the massive 1.8 billion base mix category with innovation in both card-conscious keto and premium scratch baking, capturing multiple locations with offerings ranging from scratch to ready-to-eat. Swerve's portfolio of base mixes in cake, cookie, brownie, and pancake, waffle are keto-friendly, no added sugar, gluten and grain-free, low glycemic, natural, and are suitable for individuals with diabetes. Wholesome is launching a new line of organic, fair trade, scratch-quality premium baked mixes, capturing the growth terrain of consumer convenience with scratch-quality premium ingredients. These baked mixes are sweetened with organic fair trade sweeteners, such as honey, agave, coconut sugar, brown sugar, and cane sugar that supports farmer communities. And we have introduced innovation in better-for-you chocolate, cake mixes, jams across our international markets. On growing distribution, as I said in our last earning call, Our expanded portfolio of brands significantly improves our shelf presence and visibility with retail customers. In North America, we have integrated our sales organization to expand our partnership with retailers and lead the category in sweeteners and baking. We call it the power of one. It is now underway with retailers and based on early results, we believe it will yield enormous benefits for the category and our business, similar to the success it has yielded across most other CPG categories. We are very pleased with our confirmed gains in distribution in North America and our expanding distribution breadth and depth across brands. As products get on the shelf of retailers in Q3 and Q4, we will share growth in ACV and number of stores in Nielsen and Mulow. Our e-commerce platform, which already contributes over 10% of our global sales, is well-positioned to benefit from the consumers' buying pattern shifts toward e-commerce purchasing. And we're very pleased with the resurgence of food service. We're leveraging the national distribution footprint of Equal, to drive placement of our expanded front-of-the-house sweetener portfolio and create culinary solutions and programs to capitalize on incremental back-of-the-house opportunities with beverage mixology and bakery ingredients. On manufacturing and supply chain, supply chain is undoubtedly a competitive advantage for whole-earth brands and continued supply chain improvements will allow us to mitigate inflation and drive top-line revenue growth, margin expansion, and free cash flow generation. We are progressing as planned on our branded CPG supply chain reinvention project to provide added scale and leverage our overhead costs beginning in the second half of 2021 through 2023 by optimizing the combined assets of Holder Friends, Swerve, and Wholesome. You can find more details about this initiative in our supplemental earnings presentation. Additionally, within our flavors and ingredients segment, our manufacturing footprint optimization resulted in the closing of our Camden production facility. We expect to deliver approximately 2 to 3 million savings in 2021 and an additional 2 to 3 million in 2022 consistent with our plans. With respect to our flavors and ingredients segments, we are very pleased with Q2 performance. Aside from favorable comparisons versus the second quarter of 2020, when orders were pulled forward into Q1 to prepare for COVID, our investments in R&D and sales are paying off, with good momentum in the business and significant new customer wins thanks to 15 product innovations launched in 2021. We expect the business to continue to produce strong free cash flow, driven by our global leadership position in liquorice and our diverse end markets. While in the near term, we're focused on our organic growth efforts and generating strong free cash flow in order to reduce our balance sheet leverage, M&A remains an important part of our growth strategy. We intend to continue to increase penetration in the better for you sweetener and adjacent sweets category through organic initiatives and M&A based on a strong pipeline of opportunities. These categories include baking mixes, chocolates, bars, jams, and spreads to name a few and represent over 30 billion in addressable market opportunity with a projected 8% CAGR in the coming years. Our ability to complete the integration of Swerve and Wholesome at a fast pace is evidence of M&A being a core competency based on the deep expertise and experience we have in our leadership team. With that, Andy will now take you through our financials and outlook for 2021.