The Hain Celestial Group Q2 2025 Earnings Report

The Hain Celestial Group EPS Results

• Actual EPS: $0.08
• Consensus EPS: $0.12
• Beat/Miss: Missed by -$0.04
• One Year Ago EPS: N/A

The Hain Celestial Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $431.01 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

The Hain Celestial Group Announcement Details

• Quarter: Q2 2025
• Date: 2/10/2025
• Time: Before Market Opens
• Conference Call Date: Monday, February 10, 2025
• Conference Call Time: 8:00AM ET

The Hain Celestial Group (NASDAQ:HAIN) manufactures, markets, and sells organic and natural products in United States, United Kingdom, Europe, and internationally. It operates through two segments: North America and International. The company offers infant formula; infant, toddler, and kids' food; plant-based beverages and frozen desserts, such as soy, rice, oat, and spelt; and condiments. It also provides cooking and culinary oils; cereal bars; fresh and aseptic soups; yogurts; and nut butters. In addition, the company offers hot-eating desserts, refrigerated and frozen plant-based meat-alternative products, jams, fruit spreads, jellies, honey, natural sweeteners, syrups, dessert sauces, and marmalade products, as well as other food products. Further, it provides snack products comprising potato, root vegetable and other exotic vegetable chips, straws, tortilla chips; and personal care products that include hand, skin, hair, and oral care products, as well as deodorants, baby food, sunscreens, and other products under the Alba Botanica, Avalon Organics, Earth's Best, JASON, Live Clean, and Queen Helene brands name. Additionally, the company offers herbal, green, black, wellness, rooibos, and chai tea under the Celestial Seasonings brand. It sells pantry products under the Spectrum, Spectrum Essentials, MaraNatha, Imagine broths, Hain Pure Foods, Health Valley, and Hollywood brands. It sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and clubs, and drug and convenience stores. The company was incorporated in 1993 and is headquartered in Hoboken, New Jersey.

The Hain Celestial Group Q2 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, everyone, and welcome to the Hain Celestial Group Incorporated Fiscal Second Quarter twenty twenty five Earnings Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you.

[Operator]

At this time, I will now turn the call over to Alexis Tessier. Please proceed.

[Alexis Tessier, VP, Investor Relations at The Hain Celestial Group]

Good morning, and thank you for joining us for a review of our second quarter results. I am joined this morning by Wendy Davidson, our President and Chief Executive Officer and Lee Boyce, our Chief Financial Officer. Slide two shows our forward looking statements disclaimer. As you are aware, 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.

[Alexis Tessier, VP, Investor Relations at The Hain Celestial Group]

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 ks, 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. We have also prepared a presentation inclusive of additional supplemental financial information, which is posted on our website at hayne.com under the Investors heading. As we discuss our results today, unless noted as reported, our remarks 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.

[Alexis Tessier, VP, Investor Relations at The Hain Celestial Group]

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.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Thank you, Alexis, and good morning, everyone. I'll start the call by walking through today's key messages. I'll then review our second quarter results, category performance, progress on our Hain reimagine strategy and the building blocks to support our pivot to growth in the back half of fiscal twenty twenty five. Lee will then provide more detail on our financial results along with our updated outlook. Despite a disappointing revenue quarter, we generated strong operating cash flow and continued our progress to further reduce net debt.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We drove sequential improvement in baby and kids, driven by the recovery in infant formula supply and in meal prep led by the continued momentum in our soup brands across both regions and growth in Greek Oz Yogurt. However, sales growth in the quarter was hindered by poor in store performance in snacks, driven by marketing and promotion effectiveness as well as short term supply challenges, particularly in our international segment, where demand outpaced our supply in several of our core categories and brands. To address these issues, we have improved in store marketing activation, added production capacity to rebuild inventory and support growth, and reorganize our customer service supply chain. We are confident that these actions, combined with the previously communicated promotional shifts, fully recovered infant formula supply in North America, brand campaign momentum and confirmed distribution gains in both regions will drive organic net sales growth in the second half. Organic net sales declined 7% in the second quarter.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

While not satisfied with this result, we did generate free cash flow of $25,000,000 and continue to make progress on net debt, reducing it by $12,000,000 in the quarter. Adjusted EBITDA in the quarter was $38,000,000 and adjusted EBITDA margin increased three fifty basis points from the first quarter. We remain confident in the building blocks we have in place to deliver top line growth in the back half. However, due to the softer than expected front half and a more volatile macro environment, we feel it is prudent to approach our guidance with a more cautious outlook for the full year. Lee will provide details shortly.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Before I get into the detailed category performance, I want to touch on our positioning, which is particularly relevant in today's environment. Better for you trends continue to outpace traditional categories with consumers increasingly looking for healthier options without sacrificing taste, convenience, or affordability. We also acknowledge the evolving trend of individuals opting for better for you products to align with their diverse dietary goals. Our purpose is to inspire healthier living through better for you brands. It's part of our ethos and something we've been focused on for more than thirty years.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We view the consumer demand shift and evolving regulatory space as a tailwind for Haines. Our positioning and free from artificial portfolio is a true differentiator, particularly in The U. S. Today, 100% of Haines' global portfolio is free from artificial colors. Historically, we've not used red dye number three in our portfolio.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And in The U. S, we only use colors from natural sources such as fruits and vegetables, and we do not use artificial flavors. Internationally, more than 95% of our portfolio is free from artificial flavors and we don't use any artificial colors. We have partnered with experts to understand the unique nutritional needs of consumers on GLP-one treatments and assess our portfolio against those needs. We are currently developing our criteria to define what is GLP-one friendly based on available science.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And we have already identified a number of products in The U. S. That are a good fit for these consumers across our beverage, soups and yogurt brands. We plan to begin marketing certain items within our portfolio to GLP-one users in the near future. These authentic, better for you credentials position us well to meet increasing consumer demand for Better4U products.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Let's now review each of our categories and early signals in our pivot to growth in the back half of fiscal twenty twenty five. Sales growth in Snacks was hindered by in store marketing activation and promotion effectiveness. As we mentioned at the start of this fiscal year, Snacks were affected by a shift in our promotional activity on the Garden Veggie brand and by key retailer shelving changes for Garden Veggie and Terra as we discussed last quarter. Garden Veggie remains a strong brand with high brand awareness and one of the highest levels of household penetration among better for you snacks. The shift of our promotional activity from the first half of the year to the second half impacted absolute sales volumes in both time periods and had a carry on effect in overall velocity.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

As a result, we have adjusted our in store activation and shopper marketing We

[Wendy Davidson, President & CEO at The Hain Celestial Group]

continue

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We continue to expand in this important channel and have confirmed distribution expansion up 17% year on year in the back half of the year. Para saw strong base unit velocities up 9% and in The U. K, our leading snack brand, Hartley's, also delivered mid single digit distribution growth in the quarter. We expect to see accelerated Snacks performance in the second half of the year driven by expanded distribution of our brands, including a 5% increase in distribution for snacks at our largest retail partner. We will also have new innovation, including exciting flavors in Garden Veggie Flavor Burst, which was recently named the top new product in the Tortilla category by Newsweek.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Beginning in this quarter, we have better placement in aisle with key customer resets as well as increased merchandising and promotional activity across top customers. To support consumers sticking to their healthier living resolutions, we have robust New Year, New You campaigns in place for this quarter, and we have actively shifted our marketing spend to social. This shift enables us to expand reach across a broader set of usage occasions and audiences and leverage influencers with user generated content to drive engagement. In Baby and Kids, we continue to see sequential improvement in year over year organic net sales trends. Earth's best infant formula supply has fully recovered, with a return of all formulations and sizes at the December as planned.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

As expected, consumption of infant formula pivoted to growth in the quarter, increasing 29% year on year, further demonstrating the strength of the Earthbest brand. Outside of formula, consumption of EarthFest snacks and cereal were each up double digits in the quarter and household penetration for EarthFest has increased. We believe in the return to leadership in infant formula led by the strong brand awareness and loyalty in EarthFest. In fact, 83% of Earth's Best dairy formula shoppers won't substitute for another brand, but will instead seek their preferred formula at another retailer if what they're looking for isn't on shelf. We expect baby and kids trends to continue to improve in the second half of the year, driven by the full recovery of infant formula supply, additional distribution gains, increased marketing, especially in e commerce and exciting new innovation with our EarthFest self feeding platform, which reinforces our leadership from birth to backpack.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We are excited to continue our progress towards regaining leadership in organic infant formula. Our Earth's Best brand has been a pioneer in organic formula and a trusted leader in the growing powdered formula market for more than thirty five years. And Earth's Best was recently recognized by BabyCenter as best organic baby formula of 2024. In Ella's Kitchen, the leading baby food brand in The UK, we grew distribution by low single digits and outpaced the category on volumes in the quarter. Fiscal year to date, Ella's has gained share in its core wet baby food category, and we are strengthening our storytelling and partnership with a large retailer with branded in aisle activation in more than 200 top stores.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Early results are promising with sales up high single digits in the quarter. In the beverage category, non dairy beverage sales moderated in the quarter with industry shift to discount channels where we are under indexed. Despite these category headwinds, Natoomi continued to grow share in the natural channel. Celestial Seasoning sales in the quarter were impacted by short term service issues driven by a shortage of a long lead time raw material used in our blends, which resulted in fill rate issues at the beginning of the hot tea season. This issue has since been resolved and consumption improved throughout the quarter as we moved past these service challenges and our K Star World brand campaign gained momentum.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Celestial Seasonings has high brand awareness and our recently launched innovation, Celestial Seasonings Lemon Honey Drop and the Sleepytime Biotin Beautyrest are both performing well. We've seen continued strength in Sleepytime with Melatonin launched last year, which remains a top 100 item in the category. Our efforts to reduce plastic waste led to recognition by beverage industry and we were named best beverage packages of 2024. We are leaning into our marketing on taste and wellness through our new master brand campaign, Taste Our World, building strong TCs and programs and expanding our away from home presence to drive greater trial and awareness. Additionally, we will be expanding offerings in the second half with innovations focusing on all day wellness, women's health and GLP-one support.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

In meal prep, our largest global category, we saw sequential improvement in year over year organic net sales growth trends. Greek God's Yogurt is showing healthy velocities at key mass customers and has lacked the impact faced last year from customer shifts. The Greek God's brand remains strong with increased household penetration fiscal year to date. We continue to see strong growth in branded soup in The UK with double digit dollar sales growth and share gains in each of our three leading brands. We grew distribution by 25% outpacing the overall category and our recent launch of Destination Lunch has delivered strong early results in market, up 22% in the quarter compared to 9% in the category at the same retailer.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Demand was so strong in fact that we had to pull back on certain promotions in the quarter to ensure we could service our customers. As we look to the balance of the year, we expect trends to improve in the back half as we fully lap the private label contract loss in our U. K. Spreads and drizzles business. We have increased soup capacity and are expanding our rollout of destination lunch merchandising based on the early success in quarter two.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And Greek God's growth in the back half will be supported by a new brand campaign in the third quarter to support gains in incremental distribution in key channels. And finally, personal care, our smallest category. The progress we have made towards stabilizing our personal care business is driving improvement in gross margins sequentially and in sales trends in our core channels of natural and e commerce. With the goal of further advancing the focus pillar of our Hang Reimagined strategy and simplifying our portfolio to concentrate on better for you food and beverage, we are exploring strategic options for this business. We believe this is the best path to focus the organization, simplify our business and create long term value for shareholders.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We continue to make progress in the transformation we outlined in our Haen reimagine strategy to position the company for growth. While our shift to growth has taken longer than initially anticipated, we remain confident in the pivot to growth in the back half and in our ability to execute on our transformation strategy. The progress made to date under our focus pillar has simplified our operations and our portfolio. This includes today's announcement on personal care and last year's portfolio divestitures, footprint consolidations and SKU simplification initiatives, some of which impacted year on year organic net sales in the first half of twenty twenty five as expected. We estimate these actions account for an approximately 1% impact on organic net sales growth year to date.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

In addition, our new North America commercial structure designed to better align our go to market model for improved customer focus and consumer engagement was implemented in the first half of this fiscal year. We are seeing notable improvement in our customer engagement with increased distribution at major customers on our largest brands in the second half of the year. Quantitative and qualitative feedback from customers has been positive and we have innovation and collaboration sessions with top retailers scheduled over the next few months, including in our Innovation Experience Center recently opened in our Hoboken, New Jersey headquarters. We expect this new commercial structure to be a key enabler of our future growth. Underpinning our fuel pillar, we started fiscal twenty twenty five strong, delivering above target savings in the first half.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And for the full year, we expect to outpace the record delivery and savings we achieved in fiscal twenty twenty four. We expect to continue to enhance our revenue growth management capabilities, including trade optimization for improved price, volume and mix, as well as gross margin expansion. Within working capital management, you'll recall we unlocked approximately one third of the total Hain Reimagined target of $165,000,000 from working capital improvement in our first year. And we continue to make progress in fiscal twenty twenty five. From our starting point in fiscal twenty twenty three, we have extended payables by nineteen days and reduced inventory levels by five days.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

In fiscal twenty twenty five, we continue to expect FUEL to deliver gross margin expansion with further reduction in debt, improvement in leverage and investments in our brands and our capabilities. We are seeing continued progress under the build pillar in our channel expansion strategy, especially away from home. We have recent distribution wins with strategic convenience store customers and will have at least two snack items in 11 of the top 15 c store retail chains by year end, up from five in fiscal twenty twenty four. In the fiscal second quarter, away from home net sales grew 38% in North America and 52% in international. Garden Veggie remains strong in convenience stores with dollar volume up over 40% in the quarter, gaining over 200 basis points of better for you salty snack share.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We have a clear line of sight to growth in the back half of fiscal twenty twenty five. We have a number of second half initiatives in place, including the previously communicated promotional activity shifts, adjustment of our marketing actions, increased promotional activity on brand campaigns, known distribution gains, and a return to full supply of our infant formula business. We remain focused on execution to deliver growth and drive operational improvements across the business, in particular through our enhanced commercial go to market model in North America. Our supply chain team over delivered on our fuel pillar in fiscal twenty twenty four and we are confident in the work being done to address the short term supply challenges in international. And now I'll turn it over to Lee to discuss our second quarter financial results and updated fiscal twenty twenty five outlook in more detail.

[Lee Boyce, CFO at The Hain Celestial Group]

Thank you, Wendy, and good morning, everyone. For the second quarter, we saw organic net sales decline 7% year over year. The decline was driven primarily by lower sales in the North American segment. The decline in organic net sales growth reflects a five point decrease in volume mix and a two point decrease in price. We delivered adjusted EBITDA of $38,000,000 in the second quarter compared with $47,000,000 a year ago.

[Lee Boyce, CFO at The Hain Celestial Group]

Adjusted EBITDA margin was 9.2%, a three fifty basis point increase from the first quarter. Adjusted gross margin was 22.9% in the second quarter, a decrease of approximately 60 basis points year over year. The decrease was driven by cost inflation and pricing due to higher trade spend on promotional activities and efforts to execute winning portfolio actions, partially offset by productivity. SG and A decreased 5% year over year to $70,000,000 representing 17% of net sales for the quarter as compared to 16.3 in the year ago period. The decrease was primarily driven by lower employee related expenses on efficiencies from our integrated operating model.

[Lee Boyce, CFO at The Hain Celestial Group]

During the quarter, we took charges totaling $7,000,000 associated with actions under the restructuring program, including contract termination costs, asset write downs, employee related costs and other transformation related expenses. To date, we have taken $75,000,000 in charges associated with the transformation program, which is comprised of $72,000,000 of restructuring charges and $3,000,000 of expenses associated with inventory write downs. Of these charges, 29,000,000 were noncash. As previously discussed, the total transformation program charges are expected to be $115,000,000 to $125,000,000 by fiscal twenty twenty seven, inclusive of potential inventory write downs of approximately $25,000,000 related to brand and category access. Restructuring charges excluding inventory write downs are expected to be $90,000,000 to $100,000,000 by fiscal twenty twenty seven and are excluded from adjusted operating results.

[Lee Boyce, CFO at The Hain Celestial Group]

Interest costs fell 21% year over year to $13,000,000 in the quarter, driven by lower outstanding borrowings and a reduction in interest rates. As a reminder, we have hedged our rate exposure on more than 50% of our loan facilities with fixed rates at 5.6%. We continue to prioritize reducing net debt over time. Adjusted net income, which excludes the effect of restructuring charges, amongst other items, was $8,000,000 in the quarter or $0.08 per diluted share as compared to $11,000,000 or $0.12 per diluted share in the prior year period. Turning now to our individual reporting segments.

[Lee Boyce, CFO at The Hain Celestial Group]

In North America, organic net sales declined 9% year over year. The decrease was primarily driven by lower sales in Stacks due to in store activation and promotional timing shifts as well as by lower sales in Personal Care in part due to SKU simplification initiatives. We expect North America to return to growth in the back half of the year, driven by Snacks on the promotion timing shift, improved shelf placement and distribution and execution of marketing. Infant formula on recovered supply and T on recovery from supply chain issues, innovation and the new brand building campaign. Second quarter adjusted gross margin in North America was 25.2%, a 40 basis point increase versus the prior year, driven by productivity, partially offset by pricing due to trade spend as discussed.

[Lee Boyce, CFO at The Hain Celestial Group]

Adjusted EBITDA in North America was $25,000,000 as compared to $31,000,000 in the year ago period. The year over year decline resulted primarily from pricing and deleverage on lower volume, partially offset by productivity. Adjusted EBITDA margin was 11%, a 60 basis point increase year over year. In our international business, organic net sales declined 4% in the quarter, driven primarily by lower sales in meal prep and short term service challenges. We expect the international segment to return to growth in the back half of the year as we lap the loss of the private label spreads contract, accelerate growth in Hartley Snacks, Ella's Kitchen accelerates on increased TDPs and brand building and we realized the benefits of innovation and new contracts in nondairy beverage.

[Lee Boyce, CFO at The Hain Celestial Group]

International adjusted gross margin was 20%, approximately 160 basis points below the prior year period, driven by inflation and deleverage on lower volume and mix, partially offset by productivity. International adjusted EBITDA was $23,000,000 a decrease of 13% compared to the prior year period as deleverage on lower volume and product mix more than offset productivity. Adjusted EBITDA margin was 12.4%, down approximately 160 basis points year over year. Shifting to cash flow and the balance sheet. Free cash flow in the second quarter was $25,000,000 compared to $15,000,000 in the year ago period and an outflow of $17,000,000 in the first quarter.

[Lee Boyce, CFO at The Hain Celestial Group]

The increase was primarily due to improved cash flow from accounts receivable and accounts payable, partially offset by a reduced benefit from the inventory related to short term supply challenges. We continue to see the benefit of our days payable outstanding as well as an improvement in our days inventory outstanding in the second quarter. Days payable outstanding improved to fifty six days from thirty seven days in fiscal twenty twenty three. Days inventory outstanding improved to seventy seven days from eighty two days in fiscal twenty twenty three. We continue to make progress against our Haymria Imagine targets of seventy plus days payable outstanding and fifty five days inventory outstanding by fiscal year twenty twenty seven.

[Lee Boyce, CFO at The Hain Celestial Group]

CapEx of $6,000,000 in the quarter was in line with the prior year period. We now expect expenditures to be less than $40,000,000 for fiscal twenty twenty five. Finally, we closed the quarter with cash on hand of $56,000,000 and net debt of $672,000,000 Our net leverage ratio, as calculated under our credit agreement, ticked up modestly to 4.1x. We expect our net leverage to end the year in the high 3s. We remain comfortable that we have sufficient headroom under our existing covenants.

[Lee Boyce, CFO at The Hain Celestial Group]

Paying down debt and strategically investing in the business continue to be our priorities for cash, and we reduced net debt by $12,000,000 in the quarter. Our long term goal remains to reduce balance sheet leverage to 3x adjusted EBITDA or less as calculated under our credit agreement. Turning now to our outlook. While we continue to expect to pivot to growth in the back half of the year, given performance year to date and the challenging macroeconomic backdrop, we are adjusting our full year outlook. For fiscal twenty twenty five, we now expect organic net sales to be down 2% to 4%, adjusted EBITDA to be flat year over year, gross margin to expand by at least 90 basis points year over year and free cash flow of at least $60,000,000 Please note that while changes in exchange rates do not impact organic net sales growth, it does impact adjusted EBITDA.

[Lee Boyce, CFO at The Hain Celestial Group]

The impact on adjusted EBITDA of exchange rate movements since we gave our initial guidance is approximately $2,000,000 unfavorable. In terms of cadence for the balance of the fiscal year, we expect gross margin and adjusted EBITDA to improve sequentially with a material step up in Q4. While we have made significant progress in executing our Hain reimagine strategy, growth has taken longer to realize as we have discussed. As such, we want to provide an update to our Hain reimagine growth algorithm. We expect that organic net sales growth will improve throughout the Hemian Imagine high horizon with a sustainable exit rate of 3% plus by fiscal twenty twenty seven.

[Lee Boyce, CFO at The Hain Celestial Group]

We continue to expect gross margin of at least 26% by fiscal twenty twenty seven. We continue to expect 12 plus adjusted EBITDA margins by fiscal twenty twenty seven. And we also continue to expect to unlock $165,000,000 in working capital improvement by fiscal twenty twenty seven. And we continue to expect to achieve leverage between two and three times by 2027. And now I'll hand it back over to Wendy for closing remarks.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Thank you, Lee. With leading brands in Better4U, Payne is well positioned to meet increasing consumer demand for Better4U products. We have made progress against our Hang Reimagined strategy, particularly in the focus and fuel pillars of our transformation. We have simplified our portfolio of brands and SKUs, our geographic footprint and our operating model. We launched our fuel program delivering strong cash flow, which we have used to reduce net debt while investing in our brands and capabilities to drive future growth.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We are confident in our portfolio of brands in categories that are positioned for growth with ample white space to drive distribution. We have strengthened our relationships with top customers and are partnering to enable them to support consumer trends and better for you. We are focused on driving improved commercial execution and supply chain reliability to enable our pivot to growth in the back half of fiscal twenty twenty five. Before I close, I want to acknowledge our team members, our supply partners, and our customers. We believe that better for you doesn't have to mean sacrificing taste, convenience, and availability.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Together, we can deliver on the promise to inspire healthier living. Operator, please open the line for questions.

[Operator]

Thank you. The floor is now open for questions. And your first question comes from Jim Solera with Stephens. Please go ahead.

[Jim Salera, Research Analyst at Stephens Inc]

Hi. Good morning. Thanks for taking our question. Wendy, you had mentioned on the STACK side, just some in store performance driven by marketing and promotion effectiveness. Can you just give us a little more detail on what you saw specifically?

[Jim Salera, Research Analyst at Stephens Inc]

And then maybe what gives you confidence that some of the promo you have shifted into the back half of the year will be more effective as we progress through the year?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Absolutely. Good morning, Jim. When we look at the three brands in the portfolio, you would have heard us talking about the strength of those brands in their awareness and that our biggest challenge was actually driving distribution while they were beloved brands, we made it very hard for you to find them. The shift in promotional activity from quarter one into the back half of the year didn't just have an absolute dollar impact of just those activities from front half to back half, but it also impacted the awareness just broadly with consumers identified that we had strong awareness and what we needed was to actually have conversion driven marketing activation in store rather than awareness building. So what does that look like?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

It looks like in quarter one, we did a master brand campaign on Garden Veggie. What we really needed to be doing was driving specific conversion and reaching consumers where they were in driving occasion based marketing. So we've done a pretty dramatic shift in the overall snack portfolio. We have the known distribution gains and the known promotional activity that move from front half into back half. We have incremental distribution that comes in the back half.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

In C stores alone, we will go from five chain C stores with two of our SKUs to 11 of the 15 largest chain C stores. We also picked up 5% distribution in our largest retail partner and we've added the value channel with 20,000 stores beginning in March. So we have some really good incremental distribution and incremental availability. What we've done to shift our marketing is to actually drive it in lower funnel activity. So much more on social, which you should start seeing actually be seen in the last couple of weeks to really drive awareness and reach to a broader consumer cohort in driving conversion.

[Jim Salera, Research Analyst at Stephens Inc]

Okay, great. And then maybe a follow-up on that. I know in December in particular there was a little bit of softness in salty snacks. Is that something that also impacted this or is it really just what you guys saw from the in store effectiveness? You're trying to parse out your category impact relative to kind of pain specific impact.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes. There is overall in the snacking category, there was softness in the December time period. What's interesting though is Better4Usnacking continues to perform. And we think actually those are tailwinds overall for Better4Us, but also for Haines. So we don't see a lot of transfer between conventional snacking and our brands.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

So for us, it really was about availability in all the right places, promotion, display and promotional effectiveness. I think I've told you before, our brands don't respond to deeper discounts. They do respond to feature and display. So more frequency available more often and that's what you'll see us driving in the back half.

[Jim Salera, Research Analyst at Stephens Inc]

Great.

[Jim Salera, Research Analyst at Stephens Inc]

I appreciate the color. I'll hop back in the queue.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

You bet. Thanks, Jim.

[Operator]

Your next question comes from the line of Andrew Lazar with Barclays. Please go ahead.

[Andrew Lazar, Managing Director at Barclays]

Great. Thanks so much. Wendy, in the last several quarters, you've talked a lot about the executional issues in various segments. And certainly, I can appreciate some of the wins you have in distribution coming up and having put some of the supply issues in the rearview. I guess, I'm curious if you're building in some flexibility in your back half guidance for any other potential unforeseen challenges that may arise, particularly in light of what is, as you've noted, is still very dynamic sort of packaged food environment.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes. To be quite honest and as we said in the prepared remarks, we've built in some caution in the back half, both given the history we have on some of the execution challenges, but also in the broader marketplace. And I think we've appropriately guided for that in the back half. What I would also say though is that each one of the challenges we faced really since we launched Pain Reimagined, the team have addressed those with pace. And we were ahead in our commercial execution turnaround in international.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

You saw that reflected in the international numbers up until this last quarter. The impact in international in quarter two were all about service challenges, and those have since been addressed. North America was about a year later in some of the commercial go to market shift. But given the results that we've seen in international go to market changes gives me a lot of confidence that the in a very different commercial execution.

[Andrew Lazar, Managing Director at Barclays]

Got it. And then Lee, you talked about the cadence in the back half of the year on gross margin and adjusted EBITDA. I was hoping you could put some perspective around the cadence when it comes to organic sales growth. Thanks so much.

[Lee Boyce, CFO at The Hain Celestial Group]

Yes. So I mean, as we look through the second half versus the first half, I mean, we did say we'd actually pivot to growth. From an EBITDA perspective, I think that was the first part of the question, EBITDA perspective, I mean, we expect to see that sequentially improve as we go through the balance of the year. We see that also just from a margin perspective. I think it's consistent with prior calls.

[Lee Boyce, CFO at The Hain Celestial Group]

We said that we'd have a step up our productivity steps up as we go through the balance of the year. So what you'll see is sequential improvement, a step up in particularly as we get into the fourth quarter.

[Andrew Lazar, Managing Director at Barclays]

Got it. So it

[Andrew Lazar, Managing Director at Barclays]

sounds like organic though should pivot to growth. It sounds like your expectation there would be even starting in the third quarter, if I'm hearing you

[Andrew Lazar, Managing Director at Barclays]

right?

[Lee Boyce, CFO at The Hain Celestial Group]

Yes. Yes, we should be pivoting to growth.

[Andrew Lazar, Managing Director at Barclays]

Okay. Thank you so much.

[Operator]

Your next question comes from the line of Kamil Gajrawala with Jefferies. Please go ahead.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Hey guys, good morning. I guess a couple of things on Snacks and I guess this pivot to more on the conversion side. How much flexibility do you have in managing the P and L and the margins with the shift in promo activity? Looks like when you go top of funnel, bottom of funnel, we can certainly understand how you would get an increase in volume. But at the same time, you're managing a balance sheet and margin.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

So can you just talk about the calculus there?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes. We said before that we felt good about the amount of money that we have allocated for marketing spend that we needed to shift to more effectiveness. So working versus non working and to spend it better with better effectiveness before we simply increase that spend. So what you're seeing us do is actually shift from what I would say were more awareness driving activities to more conversion type activities, but inside the envelope of our normal spend within marketing. So just driving effectiveness first and foremost.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Okay. Understood. And is this, when we think about some of the, I guess, some of that slowdown or some of that visit, sort of what was maybe the logic on, having sort of the pendulum more on the awareness side and now moving it to the conversion side, maybe the logic for the awareness piece initially?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes. I would say that a year ago, the belief was that we needed to drive greater brand awareness around our three primary snack brands. So that was the biggest challenge that we had driving both distribution and awareness. We've had a really good run on picking up distribution. In quarter two, we picked up distribution mid single digits.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And as I mentioned earlier, we have substantial distribution gains coming in the back half that were either known distribution gains, shifts in promotional activity, known innovation launches or incremental distribution gains, especially in the value channel and in convenient stores. What we learned though last summer when we did remember that was the first multi brand promotion that we did, the Savor Your Summer promotion. What we found from that was that we were driving awareness where we already had high brand awareness. And in Garden Veggie, we actually have, the top household penetration of better for you snack brands. So our issue isn't that consumers know the brand.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

It isn't that consumers are regularly buying the brand. It's the frequency they're buying it and are they buying it for whole family or are they buying it just for their kids. So we needed to drive more occasion based marketing and more conversion marketing and really lean into social. Especially in better for you brands and in more nimble social activation is much more effective than

[Operator]

Your next question comes from the line of Matt Smith with Stifel. Please go ahead.

[Matthew Smith, Director at Stifel Financial]

Hi, good morning, Wendy and Lee. Thank you for taking my question.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Good morning.

[Lee Boyce, CFO at The Hain Celestial Group]

Good morning.

[Matthew Smith, Director at Stifel Financial]

When it comes to the second half organic sales pivot, you called out initiatives across the major product categories. If we look at just The U. S. Business, would you expect growth organic top line growth in the second half to be broad based as you benefit from formula distribution, snacks distribution and the promotion shift and you have the recovery in the beverage supply chain. Are there categories or some of those categories where you call out more confidence in that pivot to growth or more risk around them?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

I think there is I'll start and I'll let Lee add a little bit of color behind it. But we've talked before about full recovery in infant formula as of December. And we've actually had a really nice pickup in distribution. And we said before that our velocities are back where they were prior to the supply disruption. So you have a very meaningful pivot in Earth's best in the back half from the front half.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

In Snacks, we've talked before about the distribution or the promotional activity that shifted from quarter one into quarter three and quarter four. So that is also a very meaningful shift in just the optics of the year. I think with beverage in both international and in The U. S. Business, there's incremental activity, promotional activity, innovation and then the branding work that you'll see drive some growth.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And then we have the continued success in our soups category across all three brands in international and then our U. S. Brands that continue to grow. So I would say those are probably the biggest drivers. And then the last I would say is Greek Yogurt.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We had a shift in customer distribution earlier last year and we've lapped that now. So now the increased distribution we've seen in other customers, you now start to see that play out and the velocities are very strong in that brand.

[Lee Boyce, CFO at The Hain Celestial Group]

Yes. And I guess just supporting that. So despite the challenges in Garden Veggie and Tera Brands, we did see mid single digit distribution growth. So as we look forward, we've got accelerated performance driven by the expand distribution, innovation launches and then increased promotional activity. In Baby and Kids and we talked about Baby and Kids repeatedly on prior calls though, we have seen the supply fully recovered and we expect to see the second half continued distribution gains and an increased marketing environment.

[Lee Boyce, CFO at The Hain Celestial Group]

On Beverages, we did actually have some short term challenges there. We resolved them. Companies leaning into the marketing on taste and wellness through the new Master Brand campaign. And then as Wendy mentioned on meal prep, I mean, we're seeing really good trends, increased household penetration on Greek gods, good momentum on the international side as well.

[Matthew Smith, Director at Stifel Financial]

Thank you. And as a follow-up, the initiatives you've taken on the Personal Care business have gotten that to that business to a place where you're now able to undergo a strategic review there. I'm curious if the learnings through that process, if you're at a point where you can look across your portfolio and see opportunities for similar actions across other product categories or geographies? And if that's part of the shift in the Hayne Reimagine organic sales target where you're now moving to more of an exit rate rather than a sales growth rate across the period?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

I would say from day one of Hayne Reimagined, we in the focus pillar had identified that we needed to appropriately drive an intense focus on stabilization of particular parts of the portfolio. And once those businesses are stabilized, we would then determine where in the portfolio they fit or if they fit somewhere else outside of the company would be a better place for that. And you've seen us do that. Over the last year and a half, we moved non dairy beverage from stabilization into our maintained categories. Instant formula up until this quarter, we had in stabilized because we needed to get the supply and the overall recovery of that.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We've moved that back into grow in IRFs best. We have some of our snack brands and some of our personal care brands that we divested. They were in stabilized and then we divested of those. And now the personal care portfolio margin expansion is actually ahead of where we expected to be and significant work as you would see in the earnings slide that the team have done to tighten up the footprint, tighten up the SKU mix and portfolio and really improve the overall shape of that business. The divestiture of that will allow us to be a pure play food and beverage company in Better4U.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And so I think we will always evaluate parts of the portfolio that are below our algorithm either in top line or in margin and decide what is the best way for us to improve the overall shape of those businesses, whether that's in our portfolio or somewhere else.

[Lee Boyce, CFO at The Hain Celestial Group]

And I guess just both just as a tiny piece. I mean, and we said this before. I mean we believe we're in the right geographies and in the right category platform. So I guess to Wendy's point we will continue just to look just to continue to optimize. And then in terms of stabilized right now I mean it's about 10 of our portfolio still sitting in stabilized.

[Lee Boyce, CFO at The Hain Celestial Group]

So we continue to assess it.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Thank you. I'll pass it on.

[Operator]

Thanks. Your next question comes from the line of Michael Lavery with Piper Sandler. Please go ahead.

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

Thank you. Good morning.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Good morning.

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

You've touched a lot on

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

distribution gains and how important that is. But then in Snacks in the second quarter, you already had mid single digit gains. And so maybe can you just help us understand a little more clearly what's different about the expected gains versus what you already had in hand? Because obviously the sales declines accelerated despite that in the quarter?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes. The issues we had in Snacks in quarter two were less about distribution, absolute points of distribution because we continue to grow those. It was the velocity on shelf where the real driver was. And that's where marketing activation and effectiveness and promotional activity play such a key role. So that's why in the back half, the continued growth in distribution is a good thing.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

But even more important is the promotion, display, shift in marketing activation and driving purchase activity will be that much more important in driving the turnaround in Snacks.

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

And then just to maybe unpack that a tiny bit further. Obviously, the promotional activity usually has a pretty quick consumer response where some of the marketing execution can build more over time. How should we think about, as you mentioned, some of the ways you want to kind of pivot the marketing approach, how quickly do you expect to get to see results there? Does social media have a quicker response time than kind of historically other marketing approaches? Or is that really kind of a little bit of a longer term build too so that we shouldn't expect anything too quickly?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

You will see some improvement in absolute growth of Snacks in quarter three. The distribution gains will be a benefit and the promotional activity will be a benefit. To your point around social, we will see that continue to build, especially as we have an always on social activation rather than always on traditional media. But you'll see that build over time. But I think the absolute distribution gains and the absolute promotional activity will be a bigger driver for us in quarter three and quarter four.

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

And maybe just lastly, a quick follow-up on the distribution center you had the press release on I think a week or so ago. Any sense of the magnitude of savings that might generate for you?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

I don't think we've quantified it. I would say it falls within the overall margin expansion goals that we outlined in Henry Imagine. Remember we said we had about an 800 basis points disadvantage to industry peer benchmark. We established a 400 to 500 basis points around cost reduction through the Hayne Reimagined plan. And that's part of what will be included in that sort of overall.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

I would tell you, I think the bigger benefit is the fact that it allows us to be a better partner to our customers by putting our products closer to the market, so we can have feed to shelf. So as volumes peak, as we have peak promotional period, we were in some cases three or four days from resupply to some of our key markets. So now having distribution nodes in all the various parts of the country allows us to be a better partner to our customers.

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

Okay. Thanks so much.

[Operator]

You bet. Your next question comes from the line of Alexia Howard with Bernstein. Please go ahead.

[Alexia Howard, Analyst at Bernstein]

Good morning, everyone. Good morning. So the first question is really about what indications you're perhaps already seeing in the marketplace to show that this pivot in promotional and marketing spending in Snacks is working. We're already about five or six weeks into the third quarter. Are you seeing evidence that the new pivot is actually working on the top line?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We are seeing improved consumption trends in market.

[Alexia Howard, Analyst at Bernstein]

Okay. And then secondly, on the distribution announcement that you put out a few days ago, that sounds like a fairly significant reduction in delivery route mileage of 66% and it seems as though it's opening fairly quickly. Is that going to have a material impact on productivity improvement, cost savings in the back half? And are there other benefits in terms of service levels and so on that, that new distribution center could bring? Thank you and I'll pass it on.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Thanks. It absolutely has a twofold impact. It is a part of our productivity outlook. And as we said before, the back half margin expansion is largely driven by both the pivot to growth, but also by our productivity pipeline. The team have a very good track record in delivering the productivity pipeline and we are in good we're in a good place as we go into the back half of this year.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

This distribution expansion is a key part of that as well. So it ties in to that pipeline. More importantly, it will improve our speed to shelf and our fill rate on shelf with our customers. And as we lean into really trying to be our customers' preferred partner in better for you brands, This is a great opportunity for us to be better positioned by having product resupply within one or two days of our customers rather than three or four days.

[Alexia Howard, Analyst at Bernstein]

Great. Thank you. I'll pass it on.

[Operator]

Your next question comes from the line of Andrew Wolf with CLK. Please go ahead.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

Thanks. Good morning.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Good morning.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

Just to

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

continue on, hi, the North American Snacks weakness in the quarter. Could you discuss, like to what extent, if any, the category captain issues that you discussed that occurred last quarter, I'm not sure if they're resolved yet, impacted the sales there. I think that was at your largest, your customer. Has the category been reset? And, or when would that be reset?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

It absolutely had a material impact on that particular account because of shelf placement but also assortment. It impacted the velocities, in that large retail partner. Those will be resolved in the resets that happened inside this quarter. But we did have some incremental promotional activity with them, for New Year, New You, as a potential ramp up into those store resets. But you should see those resets as we hit the latter part of this quarter that give us confidence as we go into quarter four.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

Okay. Now the vendor who ran the camp, who was responsible for the category, captaincy, has that vendor or anyone else kind of done a copycat type of product to the Flavor First? Just out of curiosity.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We have not actually seen anyone try to replicate Flavor First. We actually have two new flavors. One is an exclusive with one customer that launches this quarter. We have another variant that actually launches in this quarter as well. So stay tuned for now four flavor varieties of Flavorbirds.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And I think I mentioned in the prepared remarks that it was named the top new product in the Tortilla category by Newsweek.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

Okay. And just last thing is on Celestial, the ingredient shortage. Could you give a little more background on that and why it's fixing? Was that in the market? Or could you maybe go to single source there?

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

And just sort of what occurred and why that's is there any prophylactic issue with it? Do you have to go to double source or something? Or is it more just something happened in the market with a certain ingredient?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

It actually wasn't in market. I would tell you that it was actually an internal execution mistake. It's a long lead time ingredient that enough wasn't purchased to have on hand. And as demand picked up at the start of tea season, we were unable to source the ingredients fast enough to be able to resupply. I would say that as of the December, we were back in supply of that ingredient, and we're able to then re pipe into the marketplace on Celestial Seasoning and Tea.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

So it was a short term blip, it impacted quarter two, but it isn't an ongoing concern.

[Lee Boyce, CFO at The Hain Celestial Group]

Yes, we have put additional steps in to mitigate the risk in the future.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

Okay. Thank you. Appreciate it.

[Operator]

Your next question comes from the line of John Anderson with William Blair. Please go ahead.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

Yes. Good morning, everybody.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Good morning.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

Wendy, you talked during your at the top of your prepared comments about better for you as a tailwind overall in food and referenced the kind of ingredient profile of your products.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

And I think for the first time really call out also GLP-one. So I'm just wondering if you could tell us a little bit more about how you view how you're defining kind of better for you within the context of your portfolio And what that's doing or not doing perhaps to shape your perspectives on innovation and messaging importantly to the consumer, also throwing the GLP-one angle in there as well? Thanks.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes, absolutely. This is one that I think we've mentioned before that we started a piece of work about a year ago with consumer research to really understand what consumers are looking for and better for you. Because we continue to say that we're a leader and better for you, we believe in healthier living, but we wanted to make sure that we had real science and real consumer insight to back that up. We learned from that very clear attributes the consumer was looking for. They don't want to sacrifice taste.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

They don't want to sacrifice convenience. They don't want to sacrifice availability and affordability. They don't want pure health, but they do want healthy nudges. So it is a presence of positive and a little bit of a nudge down of the negative. And so we will be really relooking at our portfolio through that lens to ensure that our products are providing a better than what option to items that consumers would want in their pantry and regular part of their diet routine.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

So we think that we have products that actually taste as good, they are as convenient, they are available for consumers without having them have to sacrifice good health and good ingredient profile. We, 100% of our North American portfolio has an absence of any artificial flavors or colors. And our international portfolio is 95%. We have a few, artificial sweeteners in some products, which will actually be removed over a period of time. So we really are going to lean in to better for you, and positives for the consumer without sacrifice.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

As it relates to GLP-one, it's almost like every other diet. Keto, high protein, gluten free, dairy free, etcetera. Consumers have particular needs and we want to make sure that it is easier to shop our portfolio to make it easier for them to eat without sacrifice for whatever diets they're on. As we've worked with our experts to look at our portfolio through the lens of a GLP-one diet, What products do we have that are ideal for that first three months of GLP-one? What are the products we have that are really good for in the middle?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And then what are those products that are ideal for maintaining? And we will message openly to the marketplace to make it again easier for consumers to be able to be on whatever diet they're on, and Hain will be there to help support their healthier living.

[Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies]

Great. Thanks.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

I guess, I think you've done a good job of explaining a lot of the execution related matters, both external, internal that are leading you to kind of revise your outlook on the top line for the current fiscal. But what are we to make of the revision to kind of the long term algo on the top line? What are you maybe trying baking in there? And what are you trying to kind of maybe communicate from an expectation standpoint that we may not get that kind of 3% plus run rate until we're exiting fiscal twenty twenty seven.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes. I would say and you've been really good as well as investors and asking me the question of, so as you go along and Henry imagine, what have you learned? What's working? What's not working? How is that adapting as you go?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And as we've looked at both the changes we've made in the portfolio, but also execution challenges and then importantly the macro environment. We have tweaked some expectations around parts of the portfolio based on that. We still believe very strongly in our fuel delivery. We feel very strongly in the focus initiatives we've announced to date and the focus initiatives that we are exploring. We also feel very good about the margin expansion in the future.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

I would say we are ahead in productivity pipeline in supply chain, particularly in procurement and in our operations. We are behind where I would have expected us to be in revenue growth management and you'll see us aggressively leaning into that around price tag architecture, pricing, trade effectiveness and trade promotion. We're doing well in overall marketing awareness of our what we call our hero brands. I would say we're doing improvements based on learning to drive real execution of marketing into conversion and purchase. And we are doing a fantastic job on the commercial side and building an improved relationship with our top customers that I feel confident will lead to better outcomes as we go forward.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

But I think we've tried to then build an outlook that is acknowledging the areas that are taking longer to turn, while at the same time the areas that are continuing to deliver. While as Lee said, our exit rate at three plus doesn't mean that we won't get there before then. It's just us trying to set an expectation at a rate basis on an annualized number rather than a CAGR over the life of Hain imagined. So I would view it through that lens.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

Okay. That's helpful. I know you asked for two questions. I'm going to try and squeeze in a third if I could. I'm, just back of the envelope, Matt, it looks like again, we may be off on this, but the guidance for fiscal twenty twenty five on the top line almost calls for flattish kind of organic in the second half of the fiscal, I guess, depending on where you come out in the range.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

So I guess my just question is on the pivot to growth in the second half, what that really means? Does that mean on a full second half basis? Does it mean you pivot somewhere in the quarter or in the second half meaning maybe the third quarter is flatter down and the fourth quarter is up? Just some more help with the cadence of this, I think from a modeling perspective is really important at this point.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes. I'll let Lee answer the specifics, but I would say we're looking at it and the range is pretty wide as you can tell, because we're acknowledging the challenges in the front half and the macro environment. We're not assuming that we will cover all of the challenges in the front half, but we will pivot to growth in the back half on a full back half basis. And I'll let Lee talk to

[Wendy Davidson, President & CEO at The Hain Celestial Group]

the share.

[Lee Boyce, CFO at The Hain Celestial Group]

Yes. And I mean, we're looking to pivot as I said earlier in Q3. So you can kind of wanted to give guidance again on the overall back half, but we are looking to pivot to the growth in the Q3 timeframe.

[Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C]

Great. Okay. Thanks.

[Operator]

Thanks, John. Your next question comes from the line of John Baumgartner with Mizuho Securities. Please go ahead.

[John Baumgartner, Managing Director, Equity Research at Mizuho Securities]

Good morning. Thanks for the question.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Good morning.

[John Baumgartner, Managing Director, Equity Research at Mizuho Securities]

I wanted to come back, Wendy, to the macro environment and some clarification there. It sounds as though Better for You continues to outperform. And one of Haines' merits is to skew towards higher income households. So are you seeing some incremental headwinds for this higher income group at the shopper level? Or is the macro commentary directed more at sort of like the retail category competition at the shelf?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

I think it's more acknowledging that in general there's a lot of volatility right now, in consumer sentiment in general, and in the marketplace. And so we're trying to be fairly cautious related to that. What we are seeing and probably the same thing you are is this real bifurcation at the and discounters as well as value products continue to grow. And discounters as well as value products continue to grow. It's that middle that's really gotten squeezed in general and that's more of a general comment, not just specific to the Hain portfolio.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

And so as we look at our portfolio, we tend to play at that entry price point to premium, which we think is an ideal position. We think the consumer tailwinds as it relates to Better4U and health concerns are a real tailwind for Hain. And we as we've leaned into making our products more accessible and available to more people, you'll see our distribution gains in the discount channel and in the value channel as well as driving distribution and growth online will continue to help us meet the needs of both consumers at all value price points.

[John Baumgartner, Managing Director, Equity Research at Mizuho Securities]

Okay. And for my follow-up, I wanted to come back to the comments on ingredients. And I understand Hayne's point of differentiation for Clean Ingredients, the Red Number three and so on. But in an environment with a regulatory backdrop, let's say, tightens and you have larger companies required to eliminate more of these artificials either by government directly or by consumers indirectly, I think that would sort of narrow the playing field a bit and dilute Haines' differentiation on the shelf for quality. How do you think about the playing field potentially changing on the ingredient side?

[John Baumgartner, Managing Director, Equity Research at Mizuho Securities]

And how would it maybe require Haines to pivot or adjust in terms of how to differentiate in the future?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Well, I would hope that more companies are leaning into those ingredient claims. So I'm not viewing Free From as a moat that we want to maintain. I'd like everybody to move in that direction, especially as a company that believes in inspiring healthier living. But we are ahead, and we think that we have brands that deliver on great taste and convenience. And our goal is to drive greater availability of those as the consumers are leaning in.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

But I think a focus against, an improved ingredient profile for all makes it easier for all.

[John Baumgartner, Managing Director, Equity Research at Mizuho Securities]

Okay. Thanks, Wendy.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

You bet.

[Operator]

Your last question comes from the line of Anthony Vendetti with Maxim Group. Please go ahead.

[Anthony Vendetti, Executive Managing Director at Maxim Group]

Thank you. I know it's been like a little over an hour. So just a very high level question, I guess related to an earlier question, Wendy. I guess as you move into the second half and I know we've talked about that a little bit, but if you had to talk about and there's lots of variables, your level of confidence, are you highly confident that with these reduced expectations you can hit sort of the guidance you have out there for the second half? And if you are highly confident, what are the I guess if you could foresee or sort of look at the second half challenges, what would be the one thing or couple of things that could make the second half not as strong as you think it could be?

[Wendy Davidson, President & CEO at The Hain Celestial Group]

I believe that we have set the right guidance for, the things that could go well and the things that could be a risk in the back half. So I think we've given the appropriate range. I feel very confident about our Erstez and Ella's Kitchen. So the baby category, I feel very confident in the beverage category as we go into back half. And I feel good about the momentum that we have in Greek God's Yogurt and the meal prep category in particular soups in the international business.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

I would say where I am cautious is in snacks. We have very good distribution gains and assortment gains in the back half, but we definitely need to see the improvement in productivity of our marketing actions play out. And I think we've built that into our outlook for the back half to appropriately account for that.

[Anthony Vendetti, Executive Managing Director at Maxim Group]

And then just a quick question on Personal Care. Obviously, that was very weak this quarter. When did you decide or make decisions looking for strategic alternatives? And how far along is that? Is that process just starting?

[Anthony Vendetti, Executive Managing Director at Maxim Group]

And do you think that will take six months, a year? Or are you aggressively trying to figure out what to do with that segment? Thank you.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes. The well, first, I would want to say, remember in quarter two, some of the impacts in personal care relate to the SKU simplification, but for SKUs that don't get organic treatment. So there is a disproportionate impact on the personal care portfolio optics because of some of that SKU cleanup that doesn't get reversed out for organic treatment. That said, we feel really good that we've stabilized the top line that we've done a nice job in expanding the margins and that business is in a better shape for us to be able to explore optionality. We began the process actually in quarter two.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

We have engaged the bank to begin moving forward with that. We would hope to be able to execute inside this fiscal year, but you know how those things go. So we'll see how that plays out. In the meantime, we are 100% focused on continuing to run that business well, to execute well with our customers and take care of those brands.

[Anthony Vendetti, Executive Managing Director at Maxim Group]

Okay. Thanks very much. I appreciate it.

[Operator]

You bet. We have no further questions at this time. I will now turn the conference back over to Wendy Davidson, CEO, for closing remarks.

[Wendy Davidson, President & CEO at The Hain Celestial Group]

Yes. I really want to reiterate my thanks and appreciation to our Hain team, to our supply partners and to our customers. As we said, we don't believe that better for you means you have to sacrifice labor, convenience, availability or affordability and we look forward to working together to inspire healthier living. Thanks for this morning.

[Operator]

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation and you may now disconnect.

Participants

Executives

• Alexis Tessier, VP, Investor Relations
• Wendy Davidson, President & CEO
• Lee Boyce, CFO

Analysts

• Jim Salera, Research Analyst at Stephens Inc
• Andrew Lazar, Managing Director at Barclays
• Kaumil Gajrawala, Managing Director at Jefferies Financial Group
• Matthew Smith, Director at Stifel Financial
• Michael Lavery, Senior Equity Research Analyst at Piper Sandler Companies
• Alexia Howard, Analyst at Bernstein
• Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates
• Jon Andersen, Partner - Equity Research at William Blair & Company, L.L.C
• John Baumgartner, Managing Director, Equity Research at Mizuho Securities
• Anthony Vendetti, Executive Managing Director at Maxim Group