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The Hain Celestial Group Inc (HAIN) Q3 2024 Earnings Call Transcript Highlights: Mixed Results ...

GuruFocus Research
·5-min read

  • Consolidated Net Sales: Decreased 3.7% year-over-year to $438 million.

  • Organic Net Sales: Also decreased 3.7%, adjusted for divestitures and discontinued brands.

  • Adjusted EBITDA: $44 million, up 17.5% year-over-year.

  • Adjusted EBITDA Margin: 10%, a 180-basis point increase versus the prior year.

  • Adjusted Gross Margin: 22.3%, up approximately 90 basis points year-over-year.

  • SG&A Expenses: Decreased 11.1% year-over-year to $67 million.

  • Net Loss: $48 million or $0.54 per diluted share.

  • Adjusted Net Income: $11 million or $0.13 per diluted share.

  • Free Cash Flow: Increased, with $42 million generated from operating activities.

  • Net Debt: $728 million, with a net leverage ratio of 3.9 times.

  • Guidance Revision: Organic net sales expected to decline 3-4% year-over-year, with adjusted EBITDA between $150 million and $155 million.

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • The Hain Celestial Group Inc (NASDAQ:HAIN) has made significant progress in its 'focus and fuel' pillars, achieving cost savings and operational efficiencies.

  • The company successfully streamlined its operating footprint, reducing the number of facilities and co-manufacturers, which is expected to lower costs and increase capacity utilization.

  • The Hain Celestial Group Inc (NASDAQ:HAIN) reported improved in-stock rates and service levels, with a notable increase from the previous quarter, positioning the company better for customer partnerships and distribution expansion.

  • The company's revenue growth management initiatives have successfully unlocked trade spend efficiencies, contributing to better net price realization and promotional effectiveness.

  • The Hain Celestial Group Inc (NASDAQ:HAIN) has seen growth in key categories like beverages, driven by strong performance in the Celestial Seasonings brand and non-dairy beverages, indicating effective brand and innovation strategies.

Negative Points

  • The Hain Celestial Group Inc (NASDAQ:HAIN) experienced disappointing top-line results for the quarter, with some areas of the business underperforming and requiring more time and effort to pivot to growth.

  • Significant challenges in the infant formula supply, primarily due to operational shutdowns by the supplier Perrigo, have materially impacted the business and its ability to meet consumer demand.

  • The personal care category continues to struggle, with a significant reduction in SKUs and a need for a stabilization plan to address underperformance and complexity in the portfolio.

  • The Hain Celestial Group Inc (NASDAQ:HAIN) faces ongoing challenges in the plant-based meat-free category, with market contraction impacting the performance despite the company gaining market share.

  • The company's pivot to growth is taking longer than anticipated, leading to a revision of the full-year guidance and indicating potential ongoing challenges in achieving growth targets.

Q & A Highlights

Q: Can you provide an update on the execution in snack distribution, particularly in light of the current consumer backdrop and retailer sensitivity to pricing? A: Wendy Davidson, President and CEO of Hain Celestial, explained that the snack category is performing well, particularly the Garden Veggie brand, which has seen strong execution and performance. Despite previous supply chain challenges, the company has improved its position and expanded distribution. However, the Terra brand faced challenges due to its concentration in the club channel and past supply chain issues, which are now being addressed to expand distribution. Retailers have not shown sensitivity to price gaps between snacking SKUs and private labels, as the snack category is less penetrated by private labels compared to other food categories.

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Q: What are the main factors contributing to the revised guidance for fiscal 2024, and how do these factors impact the company's performance? A: Lee Boyce, CFO of Hain Celestial, noted that the revised guidance is primarily due to three factors: slower stabilization in personal care, unmet commitments from the infant formula supplier, and shortfalls in snack distribution execution. These issues have led to adjustments in the company's financial expectations for the year.

Q: How is the company addressing the challenges in the personal care category, and what are the long-term plans for this segment? A: Wendy Davidson stated that personal care is currently the smallest part of Hain Celestial's portfolio and has suffered from an over-proliferation of SKUs. The company is actively working to stabilize this segment by rationalizing the SKU assortment and focusing on core categories where they have a competitive advantage. This includes reducing the number of facilities and co-manufacturers, which will help improve margins and simplify operations.

Q: Can you discuss the performance and outlook for the meal prep category, particularly in light of recent declines? A: Wendy Davidson acknowledged a decline in the meal prep category, primarily due to challenges in the plant-based meat-free segment. Despite the category's overall contraction, Hain Celestial's brands like Yves in Canada are gaining market share. The company is also seeing strong performance in the soup category, which continues to grow and perform well.

Q: What steps is Hain Celestial taking to improve supply chain issues that have impacted the availability of key products like Terra chips and infant formula? A: Wendy Davidson explained that supply chain issues are largely resolved except for ongoing challenges with infant formula supply. The company has made significant investments to stabilize and improve supply chain operations, ensuring better product availability and reliability moving forward.

Q: How is Hain Celestial addressing its portfolio management, particularly in terms of SKU rationalization and focus on core brands? A: Wendy Davidson highlighted that the company is undertaking significant SKU rationalization, particularly in personal care, where 62% of SKUs are being removed. This is part of a broader strategy to focus on profitable and core categories, improving overall business efficiency and effectiveness.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.