Hain Celestial(HAIN) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Organic net sales declined by 7% in Q2 2025, with free cash flow of $25 million and a reduction in net debt by$ 12 million [10][44][56] - Adjusted EBITDA was $38 million, with an adjusted EBITDA margin of 9.2%, reflecting a 350 basis point increase from the first quarter [10][44] - Adjusted gross margin was 22.9%, a decrease of approximately 60 basis points year over year due to cost inflation and higher trade spend [44] Business Line Data and Key Metrics Changes - Snacks experienced poor in-store performance, leading to a decline in sales, while baby and kids' products saw a recovery in infant formula supply, with a 29% year-over-year increase in consumption [9][22] - Meal prep showed sequential improvement in year-over-year organic net sales growth trends, with branded soup in the UK achieving double-digit dollar sales growth [30][31] - Personal care, the smallest category, is undergoing a strategic review to focus on better-for-you food and beverage [34][56] Market Data and Key Metrics Changes - North American organic net sales declined by 9%, primarily due to lower sales in snacks and personal care [49] - International organic net sales declined by 4%, driven by lower sales in meal prep and short-term service challenges [52] - Away from home net sales grew by 38% in North America and 52% internationally [40] Company Strategy and Development Direction - The company is focused on its Hain Reimagine strategy, aiming to simplify its portfolio and concentrate on better-for-you food and beverage [34][64] - A new North America commercial structure has been implemented to improve customer focus and consumer engagement [36] - The company expects to pivot to growth in the back half of fiscal 2025, driven by improved marketing effectiveness and distribution gains [11][58] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the full-year outlook due to a softer than expected first half and a volatile macro environment, adjusting organic net sales expectations to a decline of 2% to 4% for fiscal 2025 [11][58] - The management remains confident in the building blocks for growth, including improved supply chain reliability and marketing strategies [11][64] - The company anticipates a material step-up in gross margin and adjusted EBITDA in Q4 2025 [60] Other Important Information - The company has taken$ 7 million in charges associated with restructuring and transformation-related expenses during the quarter [46] - The long-term goal remains to reduce balance sheet leverage to three times adjusted EBITDA or less by 2027 [57] - The company is exploring strategic options for its personal care business to focus on food and beverage [34] Q&A Session Summary Question: Can you provide more detail on the poor in-store performance in snacks? - Management indicated that the main challenge was driving distribution and that a shift in promotional activity impacted overall velocities [70][72] Question: Are you building in flexibility in your back half guidance for unforeseen challenges? - Management acknowledged the caution in guidance due to past execution challenges and the dynamic packaged food environment [82] Question: What is the expected cadence for organic sales growth in the second half? - Management expects organic sales growth to pivot starting in Q3, driven by distribution gains and promotional activity [88][89] Question: How are you managing the P&L and margins with the shift in promotional activity? - Management stated that they are reallocating marketing spend to focus on conversion-driven activities while maintaining overall budget [94] Question: What indications are there that the pivot in promotional spending is working? - Management reported improved consumption trends in the market, indicating positive early results from the new marketing approach [139] Question: How will the new distribution center impact productivity and cost savings? - Management confirmed that the new distribution center will improve speed to shelf and service levels, contributing to overall productivity improvements [141][142] Question: How did category captain issues impact North American snacks sales? - Management confirmed that category captain issues had a material impact on sales due to shelf placement and assortment, which will be resolved in upcoming resets [148]