The Hain Celestial Group, Inc.

Greetings, welcome to the Haines-Celestial second quarter 2024 earnings conference call. At this time, all participants are on 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. I'll now turn the conference over to your host, Alexis Tessier, Vice President of Investor Relations. You may begin.

Good morning, and thank you for joining us on Hanes Celestial's second quarter fiscal year 2024 earnings conference call. On the call today are Wendy Davidson, President and Chief Executive Officer, and Lee Boyce, Executive Vice President and Chief Financial Officer. During the course of this call, we may make forward-looking statements within the meaning of federal securities laws. These include expectations and assumptions regarding the company's future operations and financial performance. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations. Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed from time to time with the SEC, as well as the press release issued this morning for a detailed discussion of the risks that could cause our results to differ from those expressed or implied in any forward-looking statements made today. We have also prepared a presentation inclusive of additional supplemental financial information, which is posted on our website at haine.com under the Investor Settings. Please note that remarks made today will focus on non-GAAP or adjusted financial measures. Reconciliations of non-GAAP financial measures to GAAP results 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 the call over to Wendy.

Thank you, Alexis, and good morning. And thank you all for joining us today. I will begin today's call by first reviewing our second quarter results and then provide an update on the progress with our Hain Reimagine strategy to return the business to profitable growth. Lee will then review our financial results in more detail along with our outlook for the year. We are pleased that our second quarter delivered sequential improvement from our first quarter as anticipated in revenue, growth margin, and adjusted EBITDA. Our international business segment continued its strong growth led by pricing, distribution, and currency benefits, and our North America's business segment improved revenue trends compared to our first quarter. Adjusted EBITDA for the first half came in ahead of our plan, but was down versus prior year due to lower volume and increased investments in marketing and SG&A, offset by both pricing and productivity. Lee will provide greater detail in his remarks. We are making continued progress on the four pillars of our Hain Reimagined strategy, focusing our business in our five core categories and our five core geographies. Progress in building our organizational capabilities to scale our brands and gain share, driving growth through innovation and channel expansion, and progress in generating fuel through working capital management and productivity savings to expand our margins and transform our business for sustained performance. This momentum contributed to the sequential improvement in both our top and bottom line trends and is expected to drive growth in our second half. As we outlined on Investor Day, fiscal 24 is the foundational year of our multi-year transformation strategy. In the first half of the year, we prioritize execution against the focus and fuel pillars of our strategy, which will enable us to fund incremental investments in capabilities for the build pillar in the back half of the year to support accelerated growth. Let's look now at some highlights across the business for the second quarter. Our snack category dollar growth trends have improved since the start of the fiscal year, and I'm pleased with the momentum we are building. This improvement in trend occurred despite the first half strategic changes we made in our promotional strategy and channel mix, which resulted in short-term impacts on our overall snacks category trends. Our largest snack brand, Garden Veggie Snacks, grew dollar sales more than 3% in the second quarter across all customers, measured and non-measured, and TerraChips grew dollar sales 8% in the quarter and grew units 5% and gained share. With channel expansion a key growth lever for our snack brands, we are pleased to see our non-measured trends outpacing measured channels, and both non-measured and C-store sales continuing to grow double digits. We are excited for our flavor burst innovation launch in the garden veggie brand that should further drive our revenue growth in the second half, which I'll elaborate on more shortly. In the baby and kids category, industry-wide organic formula supply shortages persisted from quarter one into quarter two. We continue to work with industry supplier partners, and I'm happy to report we have secured supply commitments that we expect to support double-digit year-over-year growth during the second half. and improved in-market consumption by the fourth quarter. Excluding formula, our overall global baby and kids category continues to perform well. Earth's best snacks and baby food are outperforming the total category driven by pricing and distribution gains with expansion into Canada this year. And our UK-based Ella's Kitchen brand grew net sales year on year, gaining share in e-commerce by optimizing online visibility and enhancing customer planning. In our beverage category, we grew net sales year over year. Celestial Seasonings, the number one bagged herbal tea brand in North America, grew dollar sales in the most recent quarter and gained share, driven by success in both brand building with our Magic in Your Mug campaign and with innovation with the continued performance of both Sleepy Time Melatonin and Throat Cooler. In the international segment, we grew non-dairy beverage net sales for the second consecutive quarter, driven by both private label and brand growth across our Lima and Natumi brands. Our meal prep category grew net sales year over year, led by Spectrum Oils, Maranatha Nut Butters, and Imagine Soup in North America, and branded soups, Hartley's Jams and Jellies, as well as our private label grocery business in International. Spectrum Oils grew dollar sales by mid-single digits, driven by strong velocities. And our branded suit portfolio continued its strong momentum with mid-single digit year-over-year growth, ahead of the category and gaining share. Our three international brands, New Covent Garden, Yorkshire Provender, and Cully & Sully, are the number one, two, and three leading fresh suit brands in the UK. Private label spread showed continued strength, growing dollars by double digits and gaining share. In the plant-based category, the overall category continues to be challenged. However, it returned to growth in the UK in the latest quarter in frozen, where the majority of our plant-based meat-free sales come from. We have two leading meat-free brands, Eve's, the number one brand in Canada, and Linda McCartney Foods, the number two brand in the UK. Eve's is performing better than category, resulting in both distribution and share gains, and we are seeing recovery in both branded and private label in the UK. Lastly, we continue to concentrate on stabilizing our personal care business. While we acknowledge we still have progress needed, we delivered year-over-year net sales growth overall, led by Alba Suncare, Avalon Organics, and in Live Clean, a leading personal care brand in Canada. We're seeing growth in e-commerce and other non-measured channels, leading to non-measured growth for our overall portfolio, and we've made progress optimizing our manufacturing capacity utilization for improved efficiency. As Lee will outline, we will be pulling forward some of the Hain reimagined initiatives originally planned in fiscal year 25 that will result in a top line drag to the personal care portfolio in the back half of this fiscal year, but enable us to accelerate key business mix improvements. Overall, we continue to be encouraged by the bright spots we're seeing across our five categories and our five geographies. Turning to our Hain Reimagined Progress, as we've said, fiscal 24 is the foundational year of our strategy. We're making great strides towards focusing our business, resetting our global operating model, enhancing critical capabilities across brand building, channel expansion, and innovation, and in implementing our fuel program. Our second quarter results demonstrate a marked improvement sequentially in year-over-year trends. This improvement is even more pronounced if you include the short-term impact of baby formula. This reinforces confidence that our Hain Reimagined strategy is on track as we begin to deliver on our promise of returning our company to profitable growth. As a reminder, Hain Reimagined is built upon four strategic pillars, focus, grow, build, and fuel. Starting with the focus pillar, We've made great progress in simplifying our business and aligning our global teams and functions to support a high performance culture. We recently welcomed a new chief people officer, Amber Jefferson, to our global executive leadership team. Amber will be instrumental in building out our people strategy to enable our high performance culture and a strong pipeline of talent to help us deliver on our full potential. During the quarter, we also made strong progress on streamlining our footprint as well. opening our right-sized headquarter in Hoboken, New Jersey, consolidating our sales offices in Europe, and continuing to optimize capacity utilization in our manufacturing facilities across both meat-free and personal care. The rollout of our agile working model to leverage our hub-and-spoke footprint is delivering on our high-performance culture objectives. In the past 12 months, our applications are up 300% on fewer job openings, and applications are up 500% with women. Our turnover remains below industry average, and our engagement score is improved by 8%. Looking ahead to the balance of the year, we will be pulling forward several focus pillar initiatives designed to establish a winning portfolio of SKUs, streamline our operations, and simplify our geographic footprint. These initiatives are an important step towards eliminating complexity in our business, allowing us to concentrate our resources more effectively on the areas where we have the greatest right to win. Under our growth pillar, our goal is to drive share gains across our core snack, baby and kids, and beverage platforms. These platforms have gained incremental distribution across mass and grocery channels, reinforcing our confidence that this momentum will continue to build throughout the year and support our pivot to growth in the back half. Our build pillar is centered on brand building, channel expansion, and innovation. As we mentioned previously, we're driving improved marketing efficiency through a reshaping of working and non-working media and leveraging both paid and earned media to drive brand awareness and reach. We launched our Hain, Agile, and Amped brand building model globally and began to ramp up brand campaigns in the first half of the year for Celestial Seasonings with Magic in Your Mug and the beloved Sleepytime Bear. and targeted marketing on Greek gods yogurt. We've begun to leverage global platform insights and campaigns for our leading baby and kids brands, Earth's Best with Good Food Made Fun in North America and Eat Play Fun for Ella's Kitchen in the UK. Our improved effectiveness and our brand building spend will drive more from our core products and brands and also support new innovation launch success. For innovation, we continue to enhance our capabilities and pipeline. working to leverage key insights to develop breakthrough, scalable innovations. Our recent launch of Garden Veggie Flavor Burst Tortilla Chips is a prime example. Created from consumer research highlighting a gap in the better-for-you snacking segment, Flavor Burst fills the better-for-you tortilla chip void by combining the craveable flavors of nacho cheese and zesty ranch with wholesome ingredients, including non-GMO corn and colorful veggies, with no artificial flavors and no artificial preservatives. Consumer testing results have been outstanding, and we've received nearly 100% retailer acceptance in both the U.S. and Canada. Flavor Burst will hit the market with strong initial ACV, and we expect distribution to build based upon retailer commitment, setting Flavor Burst up to be the strongest innovation launch in recent company history. We are supporting the launch through a robust omnichannel activation leveraging our Agile and AMP brand building model to drive awareness, trial, and repeat purchase, both on shelf and online. Flavor Burst Tortilla will be a strong driver of our year-on-year second half growth in this next category. To support the strong launch, you will see a sequential increase in marketing investment in quarter three. In addition to innovation, we are strengthening our channel expansion capabilities in both away from home and e-commerce. As our new teams scale up, We are pleased to see our C-Store sales up 15% in the quarter, driven by our snacks business, which was up 18%. Further, in January, we expanded snacks distribution to more than 10,000 C-Stores, increasing our store count in this margin of creative channel by double digits. And Garden of Eaton has had several significant wins in commercial restaurants, helping drive both revenue and reach. On the e-commerce side, we are pleased to see digital sales penetration at our unified commerce retailers growing and outpacing grocery category averages. Brand building, innovation, and channel expansion are key drivers of our pivot to growth in the back half of the year. Our last pillar is fuel, which is designed to unlock efficiencies across our business to fund our growth and drive margin expansion. Our productivity pipeline, as measured by cost savings initiatives and our manufacturing operations, is robust and on track to deliver our targeted savings to offset inflation within the year. Our revenue growth management initiatives are on track for fiscal 24 expected savings, largely in trade and non-trade efficiencies, net price realization, and price tech architecture. Our working capital initiatives are also on plan to reach fiscal 24 targets. We have approximately 80% of our payable targets committed to date, and our raw and pack inventory is over 20% lower than a year ago, and our finished goods remain below the expected seasonal build for the first half, better than we projected on the last earnings call. We are continuing to unlock value through our fuel program, which will facilitate reinvestment in the business and the return to growth in the back half of the fiscal year. I'm excited that we've made strong progress in our fuel initiatives and for our plan to deliver continued sequential improvement in our business and year-on-year growth in quarter three and quarter four. With formula supply recovery, distribution gains and innovation, and channel expansion, and continued momentum in our international region, we have many reasons to believe in our outlook for a pivot to growth in the back half in spite of the challenging macroeconomic environment. Before I hand the call over to Lee, I want to thank the entire Hain team for their dedication, their passion, and their hard work. As we've reimagined Hain Celestial and redefined the future of better-for-you, purpose-driven brands, our global team has played a pivotal role in putting new plans into action, coming together to grow our brands, our business, our impact, and our people. I want to thank them for their continued commitment to lead with purpose, to live our Hain values, and to demonstrate possibility thinking. With that, I'll turn the call over to Lee.