• Organic Net Sales: Declined 7% in the second quarter.
• Free Cash Flow: $25 million generated in the quarter.
• Net Debt Reduction: Reduced by $12 million in the quarter.
• Adjusted EBITDA: $38 million for the quarter.
• Adjusted EBITDA Margin: Increased by 350 basis points from the first quarter.
• Adjusted Gross Margin: 22.9%, a decrease of approximately 60 basis points year-over-year.
• SG&A Expenses: Decreased 5% year-over-year to $70 million.
• Interest Costs: Fell 21% year-over-year to $13 million.
• Adjusted Net Income: $8 million or $0.08 per diluted share.
• North America Organic Net Sales: Declined 9% year-over-year.
• International Organic Net Sales: Declined 4% in the quarter.
• Free Cash Flow Improvement: $25 million compared to $15 million in the prior year period.
• Cash on Hand: $56 million at the end of the quarter.
• Net Debt: $672 million.
• Net Leverage Ratio: 4.1 times.
• Fiscal 2025 Outlook: Organic net sales expected to be down 2% to 4%; adjusted EBITDA to be flat year-over-year.

• Warning! GuruFocus has detected 3 Warning Sign with HAIN.

Release Date: February 10, 2025

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) reported strong operating cash flow and reduced net debt by $12 million in the quarter.
• The company saw sequential improvement in the Baby & Kids segment, driven by the recovery in infant formula supply and growth in Earth's Best brand.
• Hain Celestial's Greek Gods Yogurt showed healthy velocities and increased household penetration, contributing positively to the Meal Prep category.
• The company is expanding its distribution, particularly in the snacks category, with a 5% increase at its largest retail partner and significant gains in convenience stores.
• Hain Celestial's focus on better-for-you products, free from artificial colors and flavors, positions it well to meet increasing consumer demand for healthier options.

Negative Points

• The Hain Celestial Group Inc (NASDAQ:HAIN) experienced a 7% decline in organic net sales in the second quarter, primarily due to poor in-store performance in snacks and short-term supply challenges.
• Adjusted EBITDA decreased to $38 million from $47 million a year ago, reflecting lower sales and pricing challenges.
• The company faced short-term service issues in the beverage category, impacting Celestial Seasonings sales due to a shortage of a key raw material.
• Despite distribution gains, the snacks category struggled with velocity on shelves, affecting overall sales performance.
• The macroeconomic environment remains volatile, prompting a more cautious outlook for the full fiscal year, with expected organic net sales down 2% to 4%.

Q & A Highlights

Q: Wendy, you mentioned in-store performance issues in the snacks segment. Can you elaborate on what you observed and why you believe the promotional shifts to the back half of the year will be more effective? A: Wendy Davidson, CEO: The main issue was driving distribution for our well-known brands. The shift in promotional activity from the first half to the second half impacted consumer awareness and velocities. We've learned that we need to focus on conversion-driven marketing rather than just awareness. We have planned distribution gains and promotional activities for the second half, including increased presence in convenience stores and value channels, which should drive better results.

Q: Are you building flexibility into your back half guidance to account for potential unforeseen challenges, given the dynamic packaged food environment? A: Wendy Davidson, CEO: Yes, we've built in some caution due to past execution challenges and the broader market environment. However, we've addressed previous issues with pace, and our international segment has shown positive results from commercial execution changes, giving us confidence in our North American improvements.

Q: How do you manage the P&L and margins with the shift in promotional activity in snacks? A: Wendy Davidson, CEO: We are focusing on spending our existing marketing budget more effectively rather than increasing it. This involves shifting from awareness-driven activities to conversion-focused marketing within our current spend envelope.

Q: Regarding the Personal Care business, what are the learnings from stabilizing it, and are there similar opportunities across other product categories? A: Wendy Davidson, CEO: We've stabilized the Personal Care business and are exploring strategic options. We continuously evaluate parts of our portfolio that underperform and decide whether to improve them internally or consider divestiture. Currently, about 10% of our portfolio is in the stabilization phase.

Q: Can you provide more details on the expected distribution gains in snacks and how they differ from what you already achieved? A: Wendy Davidson, CEO: The second quarter issues were more about velocity on shelves rather than distribution points. The back half will benefit from continued distribution growth, promotional activities, and marketing shifts to drive purchase activity.

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