The Hain Celestial Group, Inc.

Greetings and welcome to the Hames Celestial third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief 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 your host, Anna Kate Heller. Thank you, Anna Kate. You may begin.

Thank you. Good morning, and thank you for joining us on Hayne Celestial's third quarter fiscal year 2021 earnings conference call. On the call today are Mark Schiller, President and Chief Executive Officer, and Javier Adrobo, 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 Law. 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 in those described in these four looking statements. Please refer to Hayne 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 and 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 Hain Celestial's website under the investor relations heading. Please note, management 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 archived event will also be available on the website. I'd also like to note that we are conducting our call today from our respective remote locations. As such, there may be brief delays, cross-thoughts, 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 doing well. On today's call, I'll give you some color on our third quarter results and explain how we continue to position ourselves for sustainable, profitable growth. Let me start with our Q3 results, which marks another great quarter for Haines. As we guided on the last quarter, we expected first top line to be down around 10%, which is where we came in. Second, we said we would deliver at least 100 basis points of margin improvement. We delivered a 317 basis point improvement in adjusted gross margin and a 400 basis point improvement in our adjusted EBITDA margin, far ahead of our guidance. This marks the fifth straight quarter of adjusted gross margin and EBITDA margin improvement of more than 200 basis points. Third, we told you we would deliver around 10% adjusted EBITDA growth. In fact, deliver 22% year-over-year growth, making this the seventh straight quarter of double-digit adjusted EBITDA growth. Both North America and international delivered terrific results with continued profit and margin expansions, further demonstrating that our strategy is working across the globe, and importantly, we have considerable momentum going into Q4 and beyond. I'd like to take a few minutes to dissect the results further, starting with our top line. You'll recall that the guidance we provided took into account several factors. First, international volume that retailers pulled into Q2 in anticipation of Brexit disruptions impacted Q3 revenue by about 4%. Second, the lapping of a sizable fiscal 20 customer hair care merchandising program that was moved from this year to next year due to COVID. This generated a 3% revenue headwind in the quarter. In addition to those items, after adjusting our sales for divestitures and currency, our sales would have actually been up slightly in the quarter versus last year. I should also mention that we were able to deliver our sales projection this quarter despite an unplanned slowdown in our Earth's Best brand, driven by a congressional report on the baby food industry that temporarily impacted revenues. I say temporarily because volumes have rebounded significantly in Q4, with Earth's best consumption up more than 30% in the most recent four weeks, and share growing and sales also up significantly. When we look by division, we see signs of strong underlying revenue growth. In North America, we grew share and measured channels again this quarter, on our big brands like Celestial Seasoning, Sensible Portions, and Greek God, and we're seeing good Moolo growth on personal care segments like Live Clean Body Lotion and Body Wash and Alba Body Lotions. Our Alba Sun Care program, which largely sells in unmeasured channels, was also up 8% in the quarter and has started Q4 even stronger. In fact, several customers have sold through their initial inventory and are already reordering much earlier than usual. In the e-commerce channel, where Hayne has a very strong presence, we had a 33% growth in consumption this past quarter, with the Get Bigger brands up 54%. Compared to 2019, which factors out the hair care program entirely, the Get Bigger brand shipments were up 8% in Q3, even with our shipments lagging consumption this past quarter. In international, where our Q3 revenue was impacted by the Brexit volume pulled into Q2, Consumption was up 12% in the quarter compared to 2019, far outpacing shipments. Our seven biggest brands and our private label non-dairy business, which represent more than 60% of our international sales, collectively delivered 8% growth in the quarter. We held or gained share in Linda McCartney plant-based meats, Hartley's jelly pots and spreads, all three of our soup brands, and Joya non-dairy beverage. So in conclusion, There was great underlying revenue performance in the business this past quarter, clouded by some non-recurring events. I remain pleased with our progress and continue to be optimistic about the future. Switching to margins in EBITDA was an exceptional quarter. We were able to deliver industry-leading margin growth despite significant headwinds like additional Brexit costs, transportation challenges, snowstorms, and additional COVID-related costs, among other things. You'll recall that two years ago on Investor Day, We told you we expected to improve our adjusted EBITDA margins from about 8% to somewhere between 13% to 16% by the second half of next fiscal year. Some people were skeptical as to whether or not this was achievable. Hopefully, the 15% EBITDA margin we just delivered a year ahead of projections puts any doubts to rest. We have a great productivity and revenue management capability, and importantly, we expect continued progress on margins moving forward. In short, we're doing exactly what we said we would do during our investor day in 2019 and continue to execute our playbook in North America and now in international as well. Turning to the future, I continue to be very optimistic. We exited Q3 with strong momentum, which bodes well for Q4, as well as F22 and beyond. There are four key reasons I believe that our best days are still in front of us. One, macro trends are in our favor. Two, the get bigger brands continue to strengthen. Three, our international business has significant momentum. And four, our productivity opportunities are significant. Let me quickly take them one at a time, starting with the macro trends. When the pandemic hit, it caused a number of changes in consumer sentiment and behavior. Specifically, consumers are far more concerned about their health, they're shopping more online, they're cooking more from home. We've discussed these items before, but as the pandemic wanes, we see evidence these trends will remain elevated and that Hain will benefit. The second reason I'm bullish about the future is that our get-bigger brands, which represent more than two-thirds of our North America sales, continue to strengthen. Compared with 2019, our consumption in Q3 was up double digits, and our categories grew almost 8%. So in short, we are gaining share in high-growth categories. Customers are just now resetting shelves, and we have great innovation that's earning new distribution and bringing new consumers to our brands. Pre-pandemic launches are finally getting slotted by many more of our customers. And on top of that, we have great additional innovation, like Sensible Portions Veggie Puffs, Celestial Seasonings K-Cups and Cold Brew Tea, more mainstream flavors on Terra, and product improvements on several snack brands also hitting these resets. As a result, total distribution points grew 8% versus prior year this past quarter, with the biggest gains coming on the brands that are innovating. Importantly, we're also seeing our strongest household penetration and loyalty gains in affluent households, which are less price sensitive, and with younger consumers who are more health and e-commerce focused. Both of these factors set us up well for the future. The third reason I'm optimistic about the future is that we have a tremendous international portfolio, and our performance is accelerating. We have the number one or number two share brands in 10 categories, and are well positioned in some of the highest growth categories like plant-based meat alternatives and non-dairy beverages. As I stated earlier, despite the Brexit volume pull forward, our six biggest brands and non-dairy private label business collectively grew this quarter over 8% versus a year ago, and more than 12% versus 2019. These businesses also deliver more than 70% of the international EBITDA. Their collective profits this quarter were up double digits versus last year, and more than 25% versus 2019. So clearly, we have many strong businesses demonstrating excellent growth on both the top and bottom line. And lastly, I remain excited about the future potential because we continue to have significant margin opportunities. In North America, after generating significant productivity and revenue management over the last eight quarters, we're now pursuing sizable initiatives like plant consolidations, simplified pricing to fill up trucks, price size architecture, and product redesign, among others. In international, building off of the very successful North America playbook and processes, we've also identified and are just starting to execute a robust productivity and margin management agenda. In the most recent quarter, those initiatives helped deliver almost 500 basis points of margin improvement, and there is a long list of projects that will ensure continued margin expansion momentum. Things like automation, lean manufacturing, organization redesign will all yield significant benefits starting now and continuing into the future. And like North America, as the savings materialize, we will begin reinvesting some of that money into increased marketing to reinvigorate the top one. So in conclusion, in the face of significant challenges, we've had another great quarter. We entered Q4 with a lot of momentum, and we're well positioned to accelerate performance from here. With that said, Let me turn it over to Javier, who will provide more color about our Q3 performance and financial expectations for Q4.