The Hain Celestial Group, Inc.

Good day and welcome to the Hain Celestial first quarter fiscal year 2020 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Ms. Katie Turner, ICR Investor Relations. Please go ahead.

Thank you. Good morning, and thank you for joining us on Hain Celestial's first quarter fiscal year 2020 earnings conference call. On the call today are Mark Schiller, President and Chief Executive Officer of and James Langrock, Executive Vice President and Chief Financial Officer. During the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to Hain Celestial's annual report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission and its press release issued today for a detailed discussion on the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note management's formal remarks today will focus on non-GAAP or adjusted financial measures. A reconciliation of GAAP results to non-GAAP financial measures is available in the earnings release. The company has also prepared a presentation outlining the fiscal 2020 outlook and additional supplemental information, which is available on its website under Investor Relations. This call is being webcast, and an archive of it will be available on the website as well. And now I'd like to turn the call over to Mark Schiller.

Thank you, Katie, and good morning, everyone. Earlier this week, I passed my one-year anniversary with Hain, and not surprisingly, I've been reflecting on the journey we've been on. To say the least, it's been an incredible year. Shortly after I was hired to be the CEO, I met with some of you early on and I promised you clarity, credibility, and consistency to help strengthen your confidence in Hain. After about 90 days, I then laid out a strategy for a complete transformation which consisted of four key pillars. One, simplifying the portfolio and organization. Two, strengthening our core capabilities. Three, expanding margins and cash flow. And four, reinvigorating profitable top-line growth in a core set of high-potential brands. Since articulating that strategy, we've undertaken numerous and significant changes to our portfolio, our business model, our culture, and our team. Examples of our progress thus far include simplifying the company by divesting non-strategic brands with sales of almost $750 million, consolidating from five sales forces in the U.S. to one and from over 30 brokers to just a handful, consolidating from over 30 distribution points in North America to less than five, and eliminating almost 10% of our SKUs worldwide. On building capability, we've hired a new senior team and brought on several new board members. We standardized key processes like forecasting, innovation and project management. We've reorganized into cross-functional business teams and we've created clear accountabilities and tied rewards to it. On improving margins and cash flow, we've eliminated over $50 million of uneconomic investments since last January. We built a new personal care plant in California. We significantly improved customer service, thereby reducing fines, penalties, and discards. And we've reduced inventory by over $60 million since our peak in August of 2018. Lastly, on driving growth in a core set of high-potential brands, we're optimizing assortment through our Max to Mix program, creating a multi-year, margin-accretive, consumer-validated innovation pipeline creating annual customer business plans and strategic partnerships and reassessing our pricing model. In short, we're going through a significant transformation and have accomplished a great deal with much more ahead as we build the operating model for continuous growth. Our progress is already showing in our results. We've started executing our strategy. Gross margins and EBITDA margins have expanded several hundred basis points. And in North America, where issues and opportunities were most evident, I'm very proud to report that EBITDA grew 55% this quarter, the first year-over-year growth in the last two years. More on the results in a minute, but I wanted to pause and thank our team for their hard work and resilience, our customers for continuing to support us as we work to become not just better, but their preferred business partner, and our investors for their continued confidence and trust in Hain Celestial. I go back to Q4 earnings call and the subsequent presentation at Barclays We gave some guidance and direction on our F-20 plan, and I'm pleased to report that we delivered on all our key metrics in Q1. With regard to first quarter financials, we told you to expect one net sales would be down in the first quarter and the first half of F-20, similar to what we experienced in the second half of fiscal 19, as we continue to pull out uneconomic spending and rationalized SKUs. In the first quarter, we delivered top line down 7%, which was down 4% in constant currency, in line with our expectations and second half year ago. Second, despite the decline in top line, we also gave guidance that each quarter we would deliver expanded adjusted gross margin and adjusted gross margin dollars versus F-19. In Q1, we delivered an adjusted gross margin increase of 240 basis points versus year ago, finishing at 20.9%. Adjusted gross dollars were also up 5.1%, which was 7.2% in constant currency. and more. Third, we gave guidance that adjusted EBITDA margin and adjusted EBITDA dollars would grow each quarter as compared to fiscal 19. In first quarter, I'm pleased to report that adjusted EBITDA margin increased 110 basis points versus Q1 last year to 6.7% with solid improvements across global operations. EBITDA dollars were up 15.6% in constant currency. This is only the second year-on-year quarterly increase in EBITDA margin in the last two reaffirming that our financial performance is improving and our new strategy is yielding strong results. Fourth, and lastly, we also told you that on the earnings call that cash flow would improve materially versus fiscal 19. I'm pleased to report that we accomplished that objective as well, and James will provide more detail in a few minutes. In summary, our first quarter results showed continuing progress against our strategy and commitment, and we remain on track to achieve our fiscal 20 Operational and Financial Objections that we laid out during Investor Day back in February. Now to provide a little more color on the individual reporting segment, let me start with our North America business. Our net sales declined 6.7% in line with previous quarters and as we projected. This includes the conscious decision to not overlap a $10 million customer program from a year ago that was unprofitable. Excluding that one program, net sales would have been down 3.2%, demonstrating some top-line trend improvement in the ongoing business, even with the skew rationalization and reduction in uneconomic spending. Adjusted gross margin improved 470 basis points to 23.6%, and adjusted gross profit dollars improved 16.6%. Adjusted EBITDA margin for North America also had its second consecutive quarter of year-over-year improvements Thank you for joining us today. and our confidence in our transformation is growing every day. Breaking the North America portfolio down further, we delivered improved trends on the Get Bigger brands as the sales decline narrowed from down 5.6% in Q4 to down 2.6% in Q1. And that includes not overlapping an unprofitable $10 million customer program on personal care. Excluding that one proactive decision, sales on the Get Bigger brands would have been up for the quarter. Similar to what we reported last quarter, consumption on the get-bigger brands was flat in measured channels. Non-promoted dollars grew, and incremental dollars declined double digits as we reduced uneconomic spending. As we eliminated underperforming SKUs and improved assortment, velocities in ACV continued to grow this quarter. Importantly, the average items carried, which was down almost 10% last quarter, was down only 5% this quarter, so that's a good indication that our distribution is stabilizing. On the Get Better brands, which are being managed for profit, our gross margins improved 480 basis points from a year ago, and our EBITDA margin improved 540 basis points, and EBITDA dollars were up 170%. So again, our strategy of segmenting the portfolio is working. The Get Bigger brands are strengthening on the top line while continuing to deliver strong margins, and the Get Better brands are fueling profitable growths. In summary, I'm very pleased with our progress in North America and our ability to deliver on an increase in adjusted gross margin and EBITDA expansion from Q1 last year while creating a much stronger foundation for future growth. Now let me shift to our international business. As we communicated last quarter, we knew currency fluctuations, primarily in the British pound, would add a level of complexity to our Q1 results. We expected top line to be down due to planned elimination of unprofitable SKUs and an increased trade investment, and EBITDA to be flat up on a constant currency basis. With that in mind, the international business results in the quarter were also very consistent with our expectations. Net sales were down 7.4% in the quarter, which equates to down 2.5% in constant currency. Forex represented an $11 million headwind. Similar to the U.S., we have segmented the international brands and are aggressively reducing uneconomic spending. This is particularly evident in our U.K. fruit and soup businesses and will continue for a few more quarters. Between that aggressive margin management and customer inventory reductions, top line was down in the quarter, but we saw solid growth across a number of brands. We are encouraged by the strength of our portfolio, where we have more than 10 number one and number two share brands, Many of them are exhibiting growth, with both our plant-based protein and plant-based beverages showing very strong double-digit growth. Adjusted gross margin was 17.4% in the quarter, down 16 basis points from Q1 last year, driven primarily by increased trade investment and product mix. Adjusted EBITDA dollars were down 1.3%, but grew 3.8% in constant currency. EBITDA margin was up 60 basis points. This was slightly ahead of our plans. All in all, given the difficult business environment in Europe and the uncertainty in the UK surrounding Brexit, the team did an exceptional job navigating these challenges and delivering solid performance. It's a testament to the strength of our brands and our leaders, and I can assure you that regardless of what happens on December 12th in the UK, our team is prepared and ready to drive continued success. I also want to give you some details on progress we are making against our first strategy, simplifying the organization. We indicated on investor day that we had too many brands for a company our size, and the complexity was impeding our ability to execute and deliver superior performance. To that end, in the quarter, we completed the previously communicated divestiture of Tilda, as well as two other brands, Sunspire and Arrowhead Mills, in October. Given these two brands had declining revenue and negative EBITDA margins, we're pleased that we sold these two for $15 million today. That's a great example of improving our P&L while getting smaller and simplifying the organization at the same time. In total, since we communicated our strategy in February to simplify the portfolio, we've completed seven divestitures. This includes Hain Pure Protein businesses consisting of Plainville, Empire Kosher, and Freebird brands, along with Westoy, Tilda, Sunspire, and Arrowhead Mills. Our team's done a tremendous job in this area, We continue to pursue market opportunities, and you should expect to see more divestitures in the future on brands that are less profitable or are otherwise less of a strategic fit within our core portfolio. Now let me briefly turn to Fiscal 20 outlook, which James will provide more detail on. As you'll recall from Investor Day, we told you North America would deliver further adjusted gross margin and EBITDA margin expansion as we continue to focus on economic growth and productivity. Along with that, we expect that Top line would continue to shrink in fiscal 20 before growing again. Today we're reiterating our expectations for these results. Specifically, we expect to grow adjusted gross profit dollars in margin and adjusted EBITDA dollars in margin versus a year ago in each of the remaining quarters of the fiscal year. Reestablish a profitable and stable baseline from which to grow. Decline on the top line throughout fiscal 20 with second half trends better than first half. and build momentum on the get bigger brands for top line acceleration next fiscal year and effectively and intentionally manage the net impact of volume, price, mix and margin. In summary, our results continue to demonstrate signs that our business transformation strategy, while still in the early stages, is on track and progressing nicely. Our entire team is working together to achieve our long-term financial commitments with much greater discipline around a very clear strategy, and a culture focused on productivity and profitable growth. Before I turn the call over to James to add more color on our Q1 performance and balance of your outlook, I wanted to share that we will be making a CFO transition in the coming weeks. James will be leaving Hain after leading our finance team for the past several years. After a long search process, including many qualified candidates, I'm excited to announce our new CFO, Javier Idrovo, will be joining us shortly from the Hershey Company. Javier has a long and successful history in consumer foods industry at Hershey, Dole, and with the Boston Consulting Group before that, and his financial and strategic acumen will be key ingredients to further support our transformation. I want to thank James for his many contributions over the past several years. He's been instrumental in my onboarding and the building of the foundation for our successful turnaround in the United States. I appreciate his hard work and tenacity, and I speak for all of Hain when I say he will be missed. With that, let me turn it over to James, who will provide more detail on our T1 financials and fiscal 20 guidance.