Hain Celestial(HAIN)2024-08-27 15:55Financial Data and Key Metrics - Organic net sales growth for fiscal 2024 was ahead of guidance at down 2%, driven by 4% growth in International offset by a 6% decline in North America [28] - Adjusted EBITDA for fiscal 2024 was 167 million in the prior year [28] - Adjusted gross margin increased 30 basis points year-over-year to 22.4% for fiscal 2024 [29] - Free cash flow generation improved significantly to 39 million in the prior year, driven by working capital initiatives [33] - Net leverage ratio improved to 3.7x at the end of fiscal 2024, down from 4.1x at the beginning of the year [34] Business Segment Performance North America - Organic net sales declined 5% in Q4 2024, primarily due to lower sales in infant formula (260 bps drag) and Personal Care (170 bps drag) [32] - Adjusted EBITDA margin in North America decreased 150 bps year-over-year to 8% in Q4 2024 [32] - Snacks category showed positive momentum, with Garden Veggie Flavor Burst driving mid-single digit consumption growth [16] International - Organic net sales declined 4% in Q4 2024, with strong growth in beverages offset by softness in plant-based meat free and snacks [33] - Adjusted EBITDA margin improved 40 bps year-over-year to 17% in Q4 2024 [33] - European non-dairy beverage business drove mid-single digit organic net sales growth in the Beverage category [21] Market and Channel Performance - Away-from-home revenues grew low double-digits in both North America and International, with C-store count increasing 42% in the U.S. [12] - E-commerce saw growth in North America, with Garden Veggie up low-single digits and Celestial up mid-single digits [13] - Hartley's in the UK is positioned for a strong back-to-school season with plans to double feature space [18] Strategic Initiatives and Industry Competition - The company made significant progress on its Hain Reimagined strategy, achieving 61 million target [8] - Portfolio simplification included exiting non-strategic categories and brands, such as Queen Helene and Thinsters, and reducing SKUs in Personal Care by over 60% [6][51] - Innovation pipeline showed strong performance, with Sleepytime with Melatonin breaking into the top 100 SKUs in the tea category and Garden Veggie Flavor Burst being the 1 new product in the better-for-you snack category [14] Management Commentary on Operating Environment and Outlook - Management expects to pivot to growth in fiscal 2025, with organic net sales growth flat or better, adjusted EBITDA growth in the mid-single digits, and gross margin expansion of at least 125 bps [35] - The company remains committed to its long-term algorithm of 3%+ organic net sales CAGR, 400-500 bps of adjusted gross margin expansion, and adjusted EBITDA margin of 12%+ by fiscal 2027 [37] - Significant opportunities remain in working capital management, with a target of $165 million in savings outlined on Investor Day [10] Q&A Session Highlights Question: Drivers of potential outperformance in fiscal 2025 - Incremental outperformance could come from formula sales recovery in the back half, promotional shifts in snacks, and broader geographic distribution expansion for Greek Gods [41][42] - The company has regained distribution in 48,000 C-stores, with potential for additional overdrivers as these distribution points realize their velocity [44] Question: Impact of SKU rationalization and business exits - The flat organic sales outlook for fiscal 2025 includes headwinds from normal SKU rationalization within the current portfolio, not just whole category exits [54] - Business exits and divestitures, such as Thinsters and Queen Helene, have impacted reported sales, with the company providing an adjusted baseline for 2024 organic sales [55] Question: Outlook for the snacks portfolio - The company feels confident in its snacks portfolio, with Garden Veggie, Terra, and Garden of Eatin' gaining incremental ACV with large retail partners, moving from mid-20s to mid-70s ACV in some cases [71] - A new master brand campaign for Garden Veggie, "YUMbelievably Delicious," was launched to support the portfolio [72] Question: Tea business performance and outlook - Softness in Celestial Seasonings volumes was attributed to packaging changes (removing overwrap) and reduced promotional spend in Q4 in anticipation of a master brand campaign launch in early October [84] - New innovations, including a beauty wellness tea with Biotin and a lemon tea, are expected to contribute to growth in fiscal 2025 [85]