Whole Earth Brands, Inc.

Good morning and welcome to the Whole Earth Brands fourth quarter and full year 2021 results conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note that today's event is being recorded. At this time, I'd like to turn the conference over to Jeff Sonick, Investor Relations at ICR. Please go ahead, sir.

Thank you and good morning. Today's presentation will be hosted by Albert Manzoni, Chief Executive Officer, and Dwayne Portwood, 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 today. Please refer to the tables included in the earnings release, which can be found on our investor relations website, investor.wholeearthbrands.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. Additionally, we've provided a supplemental earnings presentation on the investor relations website that may be useful in your analysis of the company's performance. With that, I now turn the call over to Albert Manzoni, CEO.

Thank you, Jeff, and thanks to everyone for joining the call today. I'd like to begin by welcoming Dwayne Portwood to his first earnings call for Whole Earth. As you know, Dwayne joined Whole Earth as CFO in January, bringing with him a wealth of experience and wisdom and has hit the ground running. I'm excited he's part of the Whole Earth team. 2021 was a transformational year for Whole Earth. and I am pleased to deliver on our financial commitments amid a complex and challenging operational environment. In response to supply chain disruption and labor shortages, we took actions to position the company for success, and I am proud of our achievements and particularly grateful for the efforts of our team, including those on our front lines for their resiliency and persistence, which is critical in maintaining our operations and service levels with customers. For full year 2021, which is our first full year as a public company, we drove 2% consolidated organic constant currency revenue growth, which included acquisitions in buff periods. Branded CPG segments perform organic constant currency revenue growth grew 0.7% versus 2020 and 11.9% on a two-year stacked basis versus 2019, due mostly to volume growth. And flavors and ingredients segment product revenues grew 7.1% versus 2020. We generated over 82 million in adjusted EBITDA within our guidance range through the power of our portfolio and strong cost discipline. It has been an exciting journey since our business combination in June 2020, and I would like to take a moment to reflect on all our friends' accomplishments in this short time and the opportunities that lie ahead. At the time we went public, we saw an immense opportunity to bring global leadership to an unorganized yet extremely attractive category that not only had a large total addressable market, but was also supported by powerful secular tailwinds geared toward better-for-you alternatives. To accomplish this goal, we needed capital to unlock this opportunity to compound value for shareholders over time. This capital provided us the ability to significantly improve our capital structure and reduce leverage. We also needed to generate scale, particularly in North America. We successfully acquired two amazing businesses in Wholesome and Swerve, which nearly doubled our revenue base and provided the foundation which has become our power of one strategy to drive growth across our diverse portfolio of brands. And finally, we were able to invest in our team and strengthen our bench which is a critical point for a growing business with great aspirations. We have assembled the talent, capabilities, and leadership to deliver on the potential of our global business through brand expansions, new product innovations, distribution increases, and supply chain optimization. We have fundamentally strengthened and transformed our business. And to that end, I'd like to recognize our team once again for all of our accomplishments to date. Our Power of One strategy to enhance our shelf presence and drive greater visibility with retail customers across our portfolio of natural and traditional sweeteners is working. We are seeing the retail distribution gains that we have been building towards. We have momentum in e-commerce and food services recovering nicely. This is a wonderful combination of forces that puts us in a formidable position as we look ahead to 2022 and beyond. I view 2022 as a year of building upon the foundation we put in place in 2021. Fundamentally, we are an organization focused on profitability and cash flow generation. and we believe we have a durable foundation to build from that will provide us the flexibility to advance our growth initiatives. Our opportunity to create value lies with a healthy global category, our world-class brands, and our ability to leverage our commercial teams in key global regions to drive penetration. In North America, our Power of One strategy continues to provide us with a framework to drive long-term growth. With our Whole Earth sweeteners brands, we continue to execute on opportunities to expand distribution and build out adjacencies. For Swerve and Whole Earth, innovation and expansions in the baking portfolio are critical factors that will support growth and distribution gains. In Wholesale, We have an amazing brand that has defined the word organic in the sweetener category for many years. We see an opportunity to build upon Wholesome's brand equity and expand its portfolio into other areas such as baking mixes. And finally, beyond the retail shelves, we continue to pursue opportunities within our other sales channels such as e-commerce and food service, with a thoughtful approach to meet the shifting consumer needs and appetites for better-for-you products. Within our international markets, we are in an advantageous position with very recognizable brands that have number one or number two share in most key markets. Our aim is to continue to drive greater penetration with brands such as Candorail, Equal, and Pure Via through portfolio expansion to baking and over-adjacencies. At the same time, we're excited by our expansion momentum into new geographies such as India and China. From an operational standpoint, inflation and supply chain management continue to be top of mind for the entire CPG industry, and it is a focus of ours as well. In fact, Our North America Supply Chain Reinvention project is focused on identifying opportunities to de-risk our supply chain while enhancing service and ultimately creating efficiency. We are fortunate in many regards that our focus began prior to the extreme disruption to global supply chains. And the project is all the more important today as we work to mitigate incremental costs and disruptions. The key thrust of this project was to bring select production activities in-house to improve our cost structure while improving service levels. In fact, in response to the rapid shift in the environment, we made a strategic decision to accelerate the project timeline to minimize the impact on customers. While these efforts are ongoing, I am confident that our exposure would be significantly greater had we not invested the time and resources to optimize our network. While we were immune to the supply chain disruptions, we continue to believe we are in an advantage position relative to others in the space. Nonetheless, we are actively working to accept inflationary pressures with price, SKU rationalization and heightened attention on maintaining profitable relationships with our customers. We are also making every attempt to mitigate the timing mismatch that erodes margins. With respect to our recent results, our fourth quarter was negatively impacted and we expect this to continue through first quarter of 2022 as well until our pricing actions are implemented. We believe the effects are temporary and we anticipate returning to more normalized margin rates beginning in second quarter with a pricing structure that will offset forecasted cost pressure through the balance of 22. We will continue our initiatives to mitigate volatility, protect margins, and create opportunities to drive greater efficiencies over the long term. This includes trade spend optimization, an ongoing focus on sourcing, manufacturing operations, logistics and distributions, and synergy extractions from our integration of Swerve and Wholesome to help protect our business against macroeconomic forces. With respect to our flavors and ingredients segment, we're very pleased with our performance. We added some new leadership and critical investments in R&D and sales that have been instrumental in shifting our commercial approach to the diverse end market that we serve. This is visible in our innovation and product development strategy, which now clearly maps to the various applications across our suite of Magna branded products to drive use and sales growth. We continue to view this business as a strong free cash flow generator with a defensible mode and global leadership position that will support our broader growth initiatives as we further diversify and grow our business. Polar Friends is the global leader in the better for you sweetener and reduced sugar categories. Our team continues to pursue three priorities. First, disrupt the massive 100 billion total addressable refined sugar market, which is being displaced by fast-growing sweeteners. Second, drive category leadership through best-in-class innovation and brand building, expand our global distribution, leverage our strong supply chain capabilities, and continue to further accelerate our growth through strategic M&A. Third, continue to evolve our brands and product portfolio towards becoming a large, organic, natural, plant-based food company. We remain focused on both organic and inorganic opportunities for growth. We have demonstrated that we can be simultaneously strategic and opportunistic in our transaction and would continue to do so. We believe 2022 will be another productive and profitable year for all Earth and our portfolio of products. With competitive advantages that include market positions, global scale, industry-leading R&D, and best-in-class supply chain, we are well positioned to execute our growth strategy and achieve our goals. Finally, before turning the call over to Duane, I want to mention our progress in ESG initiatives. We were excited to recently announce the launch of our ESG framework and strategic goal areas. Strong ESG performance is fundamental to our business strategy. It is reflected in everything we do, from product development to ingredient sourcing and manufacturing and beyond. Our commitment to enabling wellness by offering natural alternatives and clean label products supports our ability to deliver on our ESG vision over the next decade and beyond. We're excited to launch this framework after our first full year operating as a public company and share this journey with customers, consumers, and investors. In the coming months, all our friends plan to further develop measurable targets and a baseline to strategically address the key ESG issues.