The Hain Celestial Group, Inc.

Greetings and welcome to the Haynes Celestial third quarter 2023 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, Alex Tessier, Head of Investor Relations. Thank you. You may begin.

Good morning, and thank you for joining us on Haynes Celestial's third quarter fiscal year 2023 earnings conference call. On the call today are Wendy Davidson, President and Chief Executive Officer, and Chris Belair, Executive Vice President and Chief Financial Officer. During the course of the 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. These statements are based on management's current expectations and involve risks and uncertainties that could cause actual events to differ materially from those described in these four looking statements. Please refer to Haines 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, as well as 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 presentation inclusive of additional supplemental financial information, which is 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 will be made available on the website. And now I'd like to turn it over to Wendy.

Thank you, Alexis, and welcome. We're excited to have you on board as our new head of investor relations for Haines Celestial. Good morning, everyone, and thank you for joining the call today. This is my first full quarter with Hain Celestial. In the past four months, I've had the opportunity to visit many of our locations across North America and the U.K. to explore our operations and connect with our local teams. I've learned about the market potential of our brands and the growth potential in our categories. I've conducted a robust review of our current performance and outlook with the teams, and while the third quarter and end-of-year results will fall below our initial expectations. We understand the key drivers and are taking the necessary actions to address them. Importantly, despite these results, I remain confident that we have a strong portfolio, and as I look ahead, I expect to see continued growth opportunities within our key categories and stabilization in some of our more challenged categories. Looking back at our Q3 performance, top line came in weaker than expected, down nearly 6% year-on-year on an adjusted basis. However, we did see several category and brand bright spots across both North America and international. In North America, two of our largest brands, Greek Gods and Earth's Best, both grew with double digits. Unfortunately, these highlights were eclipsed by softness in the snacks, tea, and personal care categories. Within snacks, the primary driver of our weaker than expected top line results in the quarter was sensible portions. The Sensible Portions brand has been trending up double digits fiscal year to date, but trends slowed within the quarter due to competitive spending in brand building and promotion. As you will recall, in 2022, we pulled back on brand building given supply chain impacts on service levels. With the supply chain challenges largely behind us, we are now just beginning to reinvest in brand building and innovation and in-store promotions and are confident in the long-term growth outlook for this brand. The recovery in service levels supported a strong quarter for the TerraChips brand, growing dollar consumption 17% and gaining share. The ParmCris brand performance was down year over year as expected, as it was impacted by a significant loss of distribution, resulting in an impairment, which Chris will discuss in detail later. Recent dollar consumption data indicates we have seen an inflection point and return to growth in many of our categories. In particular, in tea, Celestial Seasonings is growing dollar consumption 8% and gaining share. Greek God's Yogurt continues to perform very well. In the latest 12 weeks, the brand's dollar consumption grew 21%, gaining share, reflecting double-digit growth in velocities. Earth's Best dollar consumption grew 4%, despite cycling the year-ago formula surge and industry-wide supply issues. Excluding formula... The brand grew dollar consumption 13% with velocities up double digits. First Best Snacks dollar consumption was up nearly 50%, driven by growth in total distribution and strong velocity. Overall, Hain's Snacks dollar consumption grew 2.5% in the quarter, driven by TerraChips and sensible portions. Total distribution for the overall Snacks portfolio was up 8%, reflecting continued distribution gains in new margin-accretive channels such as convenience and drugstores. This is an important part of our future growth strategy. Our personal care brand portfolio has been challenged, and we have taken significant steps to stabilize and return the business to profitable growth. In the most recent quarter, we brought in new leadership to turn around the strategy for the business and look forward to sharing more on this in the future. More recent data shows Alba Botanica dollar consumption is improving, and we have a strong sun season planned with robust merchandising, advertising, and earned media to support the promotion of the Alba mineral line. While North America performance was challenged, international continues to stabilize and improve, primarily in the better-for-you snacking business in the U.K., led by Hartley's, and in the non-dairy business in Europe. In the UK, our dollar consumption growth accelerated and we gained share in several categories, with fresh soup consumption, dollar consumption, up 18%, gaining two share points in the quarter and four points in the latest four weeks, and our better-for-you ingredients, such as jams and marmalades, delivering double-digit dollar consumption growth in the quarter. Now, I'd like to spend a few minutes talking about our fiscal 23 year-over-year projections, as it sets the stage for the more strategic conversation as to where our longer-term growth will come from. I'll start with North America. Our overall SNACS portfolio for fiscal year 23 is projected to grow high single digits year over year, with the exception of palm crisps and fensters. While we have seen a slowdown in the second half, it has been driven by the pullback in marketing and brand-building spend in the prior year, as well as customer programs that were not repeated this year. We are addressing this with reinvestment support within the quarter, as mentioned on the last call, and we anticipate seeing the benefits begin to materialize in the back half of this calendar year. I'm pleased to report that we have programs in place for a significant increase in distribution on some of our key brands with some of our major customers for the next year. The Earth's Best business, despite lapping the demand surge last year and ongoing supply challenges and formula, is projected to be up high single digits. We are very excited about our Earth's Best business, which continues to resonate with consumers and is demonstrating strong growth in total distribution and velocity. The recently launched Good Food Made Fun brand campaign is delivering above expectations and driving brand awareness and preference. Our Greek Gods brand is projected to finish with mid-teens year-over-year growth, and we are excited going forward because of the service-level recovery from a year ago. and a strong unit growth in response to the reinvestment in media and promotions. Our tea business is projected to finish down high single digits due in part to the pullback in marketing and brand building support and the overall category weakness as it lapped a pandemic-related demand surge in the prior year. As a leading brand in the category, Celestial Seasonings was impacted as well. To counter this impact and return the brand to growth, We activated media with our Magic in Your Mug campaign in quarter three and continue to engage with our retail partners on optimizing the assortment and shelf sets. We are beginning to see recovery in the brand, returning to growth in the most recent weeks, and the outlook includes new innovation launches and improved distribution at some of our largest customers as we head into fiscal 24. Turning now to international. The international segment performed broadly in line with our expectations while also improving sequentially across all key metrics. Our business continues to strengthen due to the stabilizing macro environment, our participation in both branded and private label as consumers seek out value, execution of our planned pricing, distribution gains, and improving service. We're encouraged by the stabilization and improvement in the better-for-you snacking business in the U.K., led by pricing and velocities and in the non-dairy beverage business in Europe. The meat-free category is beginning to reset from the accelerated category growth in the past two years and the entrance of new players. We're beginning to see stabilization with private label in meat-free returning to growth. In addition, we continue to see improvements in the efficiency initiatives underway across our business. Despite significant inflationary headwinds, The combination of price actions, operational cost management, and robust productivity programs prevented significant margin erosion while protecting core distribution. I will now turn the call over to Chris to share greater detail around the quarter and to discuss our full-year guidance, after which I will share some of the actions we are already taking to drive towards successful outcomes, and as promised, I'll share some of our thinking about our future direction and our focus.