The Hain Celestial Group, Inc.

Greetings and welcome to the Haynes Celestial second quarter 2021 earnings conference 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 Anna Kate Heller of Investor Relations. Thank you. You may begin.

Thank you. Good morning, and thank you for joining us on Hanes Celestial's second quarter fiscal year 2021 earnings conference call. On the call today are Mark Schiller, President and Chief Executive Officer, and Javier Drogo, 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 include expectations and assumptions regarding the company's future operations and financial performance, including expectations and assumptions related to the impact of the COVID-19 pandemic. These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in these forward-looking statements. These refer to Hanes Celestial's annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed from time to time with the Securities and Exchange Commission. in its press release issued this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. The company has also prepared a few presentation slides and additional supplemental financial information, which are posted on Hanes Celestial's website under the investor relations heading. Please note, management's remarks today will focus on non-GAAP or adjusted financial measures. Reconciliations of GAAP results to non-GAAP financial measures are available in the earnings release and the slide presentation accompanying this call. As a reminder, beginning in Q1 of fiscal year 2020, the company changed its segment reporting to focus on North America, international and corporate, which had previously been reported as the U.S., U.K., and rest of world segments. This call is being webcast and an archive of it will also be available on the website. I'd also like to note that we are conducting our call today from our respective remote location. As such, there may be brief delays, crosstalks, or other minor technical issues during this call. We thank you in advance for your patience and understanding. And now I'd like to turn the call over to Mark Schiller.

Thank you, Anna Kate, and good morning. I hope everyone is safe and doing well in these turbulent times. On today's call, I'll give some color on our strong second quarter results and explain how we continue to position ourselves for sustainable, profitable, long-term growth. Let me start with the Q2 results. On our last earnings call, I stated for the second quarter, we expected continued mid-single-digit top-line growth after adjusting for divestitures and discontinued brands, several hundred basis points of margin improvement, and adjusted EBITDA growth comparable to the 25% we delivered in the second half of fiscal 2020. I'm pleased to report that we have met or exceeded all of these projections and, again, delivered another very strong quarter. For the fourth straight quarter, sales growth was up over 5% in constant currency, excluding divestitures and discontinued brands. For the sixth straight quarter, gross margin was up more than 200 basis points. And for the fourth straight quarter, adjusted EBITDA margin was also up more than 200 basis points. Adjusted EBITDA dollars was up 38% in the quarter versus last year, while investing 15% more dollars in marketing. That's the fifth straight quarter of double-digit adjusted EBITDA dollar growth. Both North America and international delivered strong sales, profit, and margin expansion, further demonstrating that our strategy is working across the globe and we have considerable momentum. If we reflect back on the financial targets we laid out on Investor Day two years ago, we are already delivering at or near the three-year growth and margin targets one year ahead of schedule. and we are doing it while increasing our marketing investment. When we started our transformation two years ago, we said that we would begin by showing immediate progress on margins with lower sales as we eliminated unprofitable brands, SKUs, and low ROI investments. The result would be a smaller, more profitable company that was ready to grow again. As you know, we have delivered and exceeded on those expectations. We also said that in order to restore sustainable profit growth, there was four things that we needed to focus on. First, we needed to be a more reliable supplier to our customers. This meant making it easier to do business with Hain, which we've done by simplifying our sales force and supply chain to deliver improved service. I'm pleased to report that our service levels have been strong for some time now, and we've distinguished ourselves in this area throughout the pandemic. Second, we needed to provide the right sizes and price points to make our products more affordable and competitive by channel. We achieved this by doing things like downsizing and lowering the price on many offerings to be more competitive in the grocery channel, creating the right multi-packs for e-commerce and the club consumer, and creating trial sizes to get our snacks on the front end of the store near the cash register. Third, we needed to improve our marketing and focus our dollars on the get-bigger brands which have the most growth potential. To accomplish this, we've consolidated marketing partners, revamped all our campaigns, refocus our spending on the channels that show the most potential like e-commerce, and reallocate the dollars from the get better brands to the get bigger brands. And lastly, we need to provide breakthrough innovation that would be margin accretive and attract incremental consumers and drive eating occasions for our brands and categories. We've done that with products like sensible portion scream and hot veggie straws that brought young males into healthier snacking. Celestial seasonings tea with new category benefits like energy, probiotics, melatonin, and gut health, and new formats like K-cups and trial packs. While this work is ongoing, the results so far have been terrific. Starting before the pandemic and continuing for the last year, we've seen strong sales growth across the Get Bigger portfolio, and there are clear indications that those trends are accelerating. In the most recent quarter, the Get Bigger brands, which represent two-thirds of the sales in North America, grew more than 10% for the fourth straight quarter. We gained market share again in snack behind the continued strength of sensible portions, restored growth on Garden of Eden, and stabilized performance on Terra. Greek gods yogurt again grew double digits and gained significant market share. Key health share in measured channels while growing almost 20% overall. And personal care continued its double digit top line growth with particular strength in unmeasured channels. In the most recent four weeks, the Get Bigger brands have shown strong momentum with volume growth and share gains accelerating. Household penetration and buying rate grew close to 10% in the second quarter. That's the third straight quarter of growth as we continue to see new households trying our Get Bigger brands and repeating at a high rate. ACV distribution on the core Get Bigger brands grew last quarter, and average items per store grew by more than 10%. In fact, 11 of our 13 biggest brands in the U.S. game distribution last quarter demonstrating the breadth of strength across our portfolio. Shelf space gains are largely being driven by our innovation, which has delivered strong velocities and high incrementality to our categories. As customers begin resetting their shelves again, starting with snacks and baby later this quarter, we expect to see our space continue to grow materially. Importantly, we also have more innovation coming. We just launched sensible portions of veggie puffs, which are so far turning fast as our veggie straws, and again, highly incremental. We also have more tea, yogurt, and personal care launches happening next quarter. So, we expect to see TDP growth be a significant driver of growth as the pandemic wanes. From the investments needed to profitably drive the sustainable growth, we also needed to continue eliminating complexity and cost from the organization. That journey continues, and there are quite a few sizable initiatives underway. First, as you know, we've been optimizing our portfolio by exiting businesses and SKUs that have limited potential within Hain and add unnecessary complexity. Last quarter, I told you we were in the process of selling our fruit business, and in early January, we were able to successfully complete that transaction. This $140 million food service-oriented business, which had been declining 25% to 35% during the pandemic, was very complex and delivered no profit. By selling it, We not only continue to simplify and focus our company, we also will see our go-forward company-wide gross margins expand by about 150 basis points, and our EBITDA margins expand by roughly 100 basis points. In the last 20 months, we have now sold or shut down 17 non-strategic businesses which had collective sales in excess of $900 million, but less than $15 million of EBITDA. In doing so, we've generated $430 million in proceeds, which equates to about 30 times the EBITDA. We've used that money to reduce our debt to under two times and buy back some stock. Second, as we've discussed previously, we are currently executing our simplified pricing model, which encourages retailers to order in bigger quantities and fill up trucks. This will increase our capacity by freeing up dock doors in our DCs, reducing administrative work for Hayne and our customers, and reducing costs. In addition, this will also improve our carbon footprint as consolidating orders means less trucks on the road. In Q2, we began implementation of this simplified pricing model and have seen some terrific results. The average order size increased by almost 50% and costs have come down materially. As we roll this out to the rest of the customers in the current quarter, we expect to see continued material savings for both Hain and our customers. Third, in both North American and international, we've built a robust productivity capability and process and have identified almost $150 million of additional cost savings initiatives that will bear fruit starting this year and continuing over the next several years. One of the biggest focus areas on the productivity list is optimizing our manufacturing footprint. In Q2, we made the decision to consolidate our Terra and Sensible Portion snack plants in North America and expect that project to be completed before year end. In doing so, we will be investing in significant automation, further simplifying our operation and reducing costs. In the UK, we're also simplifying our manufacturing operations and have taken steps to consolidate our soup manufacturing locations, right-sizing our remaining facilities and repatriating some of our co-manufactured volumes to drive absorption and efficiency. While there are many more initiatives underway, hopefully these few examples give you confidence in our ability to drive continued margin expansion. We've built an accountable productivity capability and culture. We have the right team and tools, and importantly, we have a robust pipeline of projects to drive further improvement over the next several years. In summary, Q2 is another strong quarter for Hain, and I'm very proud of the strong results the team has delivered in the quarter and the profitable growth momentum on the business. Our transformation plan is clearly working. And we continue to believe there is significant upside both in North America and our international business. With that, let me now turn it over to Javier, who will give you more color on our recent results.