The Hain Celestial Group, Inc.

And welcome to Hein Celestial Third Quarter 2022 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. I would now like to turn the conference over to your host, Anna-Kate Heller, investor relations. Thank you, and over to you. Thank you.

Good morning, and thanks for joining us on Haynes Celestial's third quarter fiscal year 2022 earnings conference call. On the call today are Mark Schiller, President and Chief Executive Officer, and Chris Villers, Executive Vice President and Chief Financial Officer. During the course of this call, management may make forward-looking statements within the meetings of federal securities laws. These include expectations and assumptions regarding the company's future operations and financial performance. 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. 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 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. This call is being webcast and an archive of it will also be available on the website. And now I'd like to turn the call over to Mark Schiller.

Thank you, Anna Kate, and good morning. On today's call, Chris and I will give you some color on the Q3 performance, our Q4 outlook, and what we're doing to enable the Hain 3.0 strategy that we discussed on Investor Day last September. Q3 was a very challenging quarter as additional unexpected inflation, supply disruptions, ingredient and package shortages and eroding European consumer confidence, primarily caused by the Russia-Ukraine conflict, had a significant impact on our business and financial performance. While these disruptions led to softer than anticipated results in the quarter, strong consumption and market share gains leave us confident in the underlying business health and long-term trajectory. Let me explain why we feel this way. First, consumption and sales in North America are exceptionally strong, and we expect that momentum to continue into Q4. In fact, while I don't have a complete archive of the company's reported earnings history, we do know that this quarter was the highest net sales growth quarter in North America in the last seven years. In a moment, I'll share with you some impressive details behind these sales and what that means for our future growth. Second, while our top line was soft and international, most of the revenue issues within the quarter were driven by short-term factors that we believe will improve in Q4. Although we expect short-term inflation and consumer confidence challenges to continue internationally, it's worth noting that we have nine number one and two-share brands that are well-positioned for growth as conditions normalize. Third, since we don't know when the inflationary pressures we are all facing will ameliorate, we do expect it to continue and are taking actions to reduce our ongoing cost basis while passing on significant additional pricing. To date, we've taken two rounds of pricing, both here and in Europe, and thus far, we've seen only a marginal impact on our unit growth. Our primary priority has been and will be to continue servicing our customers, even if this impacts short-term profit, to allow us to further build consumer trial and loyalty, as well as strengthen customer relationships. Despite industry-wide supply challenges, we're maintaining service levels in the 90% range, which is exceeding most of our competitors' and allowing us to take share. This was and is a conscious decision and one that we are confident strengthens Hain for sustainable long-term profitable growth. Digging into the reporting segments, in North America, we saw strong momentum on the top line with consumption in the U.S. up 11% in the quarter, well above the industry average of less than 5% for branded food. Sales in the quarter grew 13% overall. Excluding acquisitions and divestitures, our sales were up a very strong 9%. So recall that on Investor Day, we identified six categories we're focusing on for growth, plant-based, snacks, tea, baby, yogurt, and personal care. Our growth brands in these categories, which make up about 80% of our volume and profit, delivered dollar consumption growth of almost 16% versus a year ago, more than double the rate of their respective categories. Compared to pre-pandemic, consumption on these growth brands is up 23%, with velocities up 20%, underscoring the strength of the brands and its relevance. In aggregate, our growth brands led by snacks, baby, and tea gained share again this quarter. And in fact, we've grown aggregate market share of these growth brands every single four-week period for more than a year. Household penetration on these brands also grew 10% in the quarter, a very important metric given the size of our brands. The growth brands also delivered strong unit velocity growth of 6% compared to a 4% decline in unit velocity for all food companies. More impressive, unit growth was up 4% while average food companies declined 4%, and that strong Hain unit growth was delivered with double-digit pricing versus a year ago, indicating that we're gaining users and loyalty. In fact, we increased our buyers 11% compared to less than 1% increase in our categories. And our heaviest buyers who purchased more than three times a year grew 14% in the past quarter. Category and brand level, snacks and baby were particularly strong this past quarter. Our snacks portfolio share grew 1.3 points with consumption up over 25% on a one-year basis and almost 40% versus pre-pandemic levels. Household penetration was up 17% versus last year and 40% compared to pre-pandemic levels. Sensible Portions, which is the company's biggest brand, has grown household penetration 23% versus a year ago and 70% since the beginning of the pandemic. Our Earth's Best Baby Food brand was also particularly strong with consumption up 35% and household penetration up 17% versus the same quarter last year. Dollar market share grew 1.9 points and unit consumption was up double digits, while pricing was also up double digits. For personal care, total channel consumption inclusive of club and e-commerce was up 25% in the quarter, and total PC net sales in the quarter were up double digits, driven by strong programs in club on ALBA, hair, and sun products. Both these club initiatives will continue into Q4. Garden of Eden and Terra, which struggled with supply challenges in the first half of the fiscal year, both returned to growth in the quarter, a great example of how well we're addressing some of the macro challenges and a very positive indicator of the underlying strength of these businesses. So bottom line, our growth brands are performing exceptionally well in North America and showing the growth potential that we outlined in Hain 3.0. In the middle of the P&L, gross margins compressed materially as we continue to face unexpected challenges with ingredient shortages, rising fuel costs, and increased labor expense, adding additional disruption costs. To offset these costs, we took more pricing in the quarter. The pricing, however, lagged inflation, thereby contributing to the margin erosion in the quarter. The expected impact of these price increases will be fully reflected in Q4 and is part of our go-forward guidance. Shifting to international, our issues were predominantly driven by top-line softness. Sales in constant currency, excluding divestitures, were down 8%, well below what was expected. There were three primary drivers of the revenue decline, which we anticipate will improve in Q4. First, consumer sentiment in Europe has dropped significantly since the start of the Russia-Ukraine conflict. Wages aren't keeping up with inflation. People are concerned about their future and therefore are making tradeoffs in their consumption. In the quarter, total grocery sales across the entire store were down almost 7%, with units down 9%. This affected all food brands and categories, including our own. Looking forward, the overlap versus a year ago gets significantly easier and we expect total store declines to mitigate going forward. Second, we had a major customer cancel plant-based beverage orders in Europe a year earlier than planned. As a result, we lost close to $8 million of sales in the quarter versus last year. The good news here is that the category is still growing nicely and we've already started selling the excess capacity to new and existing customers and expect to have replaced 50% of the lost volume by the end of the fourth quarter. Third, we took a hard line and chose to stop shipping products to those retailers who initially resisted our price increases. The good news is we eventually prevailed and got the increases accepted, but the longer-term benefit came at a short-term cost. We lost four to five weeks of sales on several brands at multiple retailers during the negotiations hurting both our short-term sales growth and share performance within the quarter. We're now shipping fully to all customers, and therefore this is not going to be a headwind in Q4. In the middle of the international P&L, margins were eroding versus last year, driven almost entirely by price increases, lagging inflation, increased energy costs, which we discussed on our last earnings call, and stranded overhead costs driven by the lower volumes. With pricing now in place and volume expected to improve in Q4, We anticipate that margins will increase sequentially. As we look to Q4, for the entire company, while we are lowering our guidance to reflect the impact of the issues that hit us in Q3, we expect sequential improvement and continued strong top-line growth in North America. Chris will give you more details on the forecast in a few minutes. Pivoting to our HANE 3.0 strategy, we remain excited and optimistic about our direction. You'll recall that our strategic pivot to growth is predicated on driving distribution, creating category-expanding innovation and increasing marketing in a core set of growth categories and brands. While we expect to invest our robust productivity improvements into more marketing over time, in the short term, we've been using those dollars to help offset unprecedented inflation and drive brand growth through strong service and high in-stock levels at shelf. This strong service has both enabled us to pick up significant trial and gain incremental merchandising and distribution opportunities. As a result, despite the many macro headwinds, we're seeing clear signs of sales momentum and brand strength in North America across our growth brands, and we expect that momentum to continue. While international growth was certainly more challenging in Q3, as I mentioned earlier, I'd remind you that we have nine number one and two share brands in our portfolio and are well positioned for future growth. Brands like Ellis Kitchen, which has grown share for 15 straight years and increased sales more than 30% in the recent quarter, show the strength of our portfolio and how well we are positioned for the future. Short-term, we have to navigate the consumer angst over the Russia-Ukraine conflict and some of the lost plant-based command volume, but we remain confident that our brands are strong and our future is bright. As part of the Hain 3.0 growth strategy, we also made the acquisition of That's How We Roll to bulk up our presence in the high-growth snacks category. I'm pleased to report that the business grew 20% in the quarter, and the integration is going very well. We've identified more synergies than originally assumed and fully expect these brands to deliver consistent double-digit EBITDA margins over time. Just this week, we started commingling its products at our DCs, allowing customers to order everything on one Hain invoice and receive all ambient Hain products on one truck. This takes trucks off the road, which is great for the environment, and allows the That's How We Roll products to basically ride for free on our trucks. I mentioned earlier that we're intensely focused on reducing our ongoing costs. As we look forward and deal with short-term cost pressures and long-term growth opportunities, we're embarking on a restructuring to set us up for the future. As part of that restructuring, we're reassessing our org design and resource allocation with the goal of accelerating growth, increasing efficiency and effectiveness, and reducing costs. Among the changes already underway, We are, one, increasing resources within supply chain and our purchasing, co-manufacturing, and productivity teams to deliver additional cost reductions. Two, adding additional resources on capacity planning to support peak growth categories. Three, eliminating the chief commercial officer role, elevating other sales leaders to report directly to me. Four, integrating the That's How We Roll brand into Hain, eliminating many redundant roles and redeploying many of their teammates to fill critical open positions at Hain. And five, right-sizing our infrastructure in Europe to reflect some of the short-term headwinds there. While we'll provide more detail about the complete restructuring on the next call, we're confident that these changes will make us leaner and more agile to address the short and medium-term inflation we are seeing and more effective in driving our Hain 3.0 strategy. With that, let me now turn it over to Chris to provide more details on our performance and go-forward guidance.