Q1 2027 The Hain Celestial Group Earnings Conference Call - HAIN CELESTIAL GROUP INC

Financial Performance:

• First quarter organic net sales declined 6.7% year-over-year, driven by a 7% drop in volume/mix partially offset by pricing.
• Adjusted gross margin improved 320 basis points year-over-year to 22.8%, primarily due to the North American snacks divestiture.
• Adjusted EBITDA was $18 million (6.8% margin), a decrease from $20 million (6.0% margin) in the prior year, impacted by lower volume and cost inflation.
• SG&A decreased 6% to $62 million, reflecting employee cost reductions; the company incurred $1.5 million in one-time restructuring charges for $8 million in run-rate SG&A savings.
• Adjusted net loss was $7 million ($0.07 per diluted share), compared to $7 million ($0.08 per share) in the prior year period.
• Cash on hand stood at $63 million; net debt increased 5% to $523 million due to seasonal working capital needs.
• Net leverage ratio was 5.3x at quarter end, maintaining compliance with all credit agreement covenants.
• International business saw organic sales decline 7%, while North American sales declined 6%.

Guidance and Future Outlook:

• No formal forward financial guidance was provided due to ongoing debt restructuring and international sale negotiations.
• Management expects the majority of $16 million SG&A cost improvements to be completed in fiscal 2027, with full realization by H1 2028.
• Pro forma outlook suggests a gross margin of >30% and low double-digit adjusted EBITDA margin for the North American business post-realignment.
• Key priorities include addressing December credit facility maturities, finalizing the sale of the international business to Aurelius, and advancing cost realignment.
• The transaction with Aurelius is pending a credit agreement amendment deadline of October 12, 2026; discussions continue if the condition is not met.

Business Segments and Product Lines:

• North America: Organic sales down 6%; Adjusted gross margin up 1080 bps to 33.5% following the snacks divestiture; Adjusted EBITDA margin expanded to 15.6%.
• International: Organic sales down 7%; Adjusted gross margin down 80 bps to 14.9% due to high energy costs and volume decline; Adjusted EBITDA down 29% to $9 million (6% margin).
• Key Growth Areas: Ella's Kitchen returned to high-single-digit growth; Greek Gods grew mid-single digits and gained market share; E-commerce sales for core brands grew >30% year-over-year.
• Product Innovation: International innovation renewal rate reached 14% (9th consecutive quarter improvement) with 27 new SKUs, including Hartley's high-protein jellies and New Covent Garden lunch pots.
• Strategic Moves: Decision made to wind down the subscale personal care business; completion of $25 million stranded overhead removal from the North American snacks sale.

Market and Competitive Landscape:

• Headwinds: Unseasonably warm weather negatively impacted hot tea; elevated energy, freight, and packaging costs continue to pressure margins.
• Competition: Highly competitive baby and kids category; Earth's Best faces share and distribution losses in specific segments.
• Market Share: Despite sales declines, core brands in international maintained or grew market share; Earth's Best gained share in wellness (18% category share).
• Digital: Pure-play e-commerce growth outpacing categories, indicating strong digital capability traction.

Risks and Challenges:

• Debt Maturity: Upcoming December credit facility maturity poses a critical liquidity and capital structure risk.
• Transaction Uncertainty: The international sale to Aurelius remains conditional on a credit agreement amendment; failure to close could impact strategic focus.
• Cost Inflation: Elevated energy costs, particularly in international operations, remain a persistent margin pressure.
• Market Volatility: Weather patterns and inventory builds/cycles create unpredictability in category performance (e.g., tea, spreads).

Management Commentary and Tone:

• Management adopted a cautious yet determined tone, emphasizing "progress against strategy" and "tangible evidence" of execution despite revenue declines.
• CEO Allison Lewis highlighted the strategic shift to a focused North American business with stronger underlying economics.
• CFO Lee Boyce focused heavily on balance sheet integrity, debt maturity management, and the completion of cost realignment actions.
• The tone reflected urgency regarding the financial position but confidence in the long-term commercial priorities (renovation, innovation, digital).

Analyst Questions and Answers:

• No Q&A Session: Management explicitly stated that due to ongoing discussions with lenders and the pending international sale, no Q&A session would be held to avoid disclosing material information prematurely.
• Information Limitation: Updates were limited to public SEC filings and the earnings release; further detail will be shared only when material information becomes available.

Other Key Points:

• Regulatory approval for the sale of the international business to Aurelius was fully received; the deal remains pending a financial amendment.
• The company completed all actions to remove $25 million in stranded overhead from the snacks divestiture ahead of schedule.
• Marketing investments are being prioritized for comprehensive restages of Celestial Seasonings and Earth's Best to modernize packaging and communications.
• International pricing strategies will remain selective while prioritizing volume recovery in the second quarter.