Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to The Hain Celestial Group, Inc. Fiscal Second Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. We do ask for today's call, you limit yourself to one question and one follow-up. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, Thank you. I would now like to turn the call over to Alexis Tessier, Head of Investor Relations. You may begin.

Good morning, and thank you for joining us for a review of our fiscal second quarter 2026 results. I am joined this morning by Alison Lewis, 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 meanings of federal security. These include expectations and assumptions regarding the company's future operations and financial performance. 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-K, 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 hain.com under the Investors heading. 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. 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 Alison.

Good morning, everyone, and thank you for joining the call and for your continued support of The Hain Celestial Group, Inc. Today, we will discuss the actions we are taking to advance our turnaround strategy and the results for our second quarter. First, let me start with an update on our strategic review. As previously communicated, we have been conducting a comprehensive strategic review with the goal of simplifying our portfolio, enhancing our financial flexibility, reducing our leverage profile, and maximizing shareholder value. The assessment phase involves a thorough review of our assets, operations, and market opportunities. As a result, we are executing our first decisive step to sharpen our focus on categories and brands in key markets where we can leverage our organizational strength. On February 2, we announced that we reached a definitive agreement to sell our North American snacks business to Snackrupters, a family-owned manufacturer of food and baked goods in Canada, for $115 million in cash. Proceeds from the transaction will be used to reduce debt, thereby strengthening our company's financial position and leverage profile. I am confident that in Snackrupters, we have found the right home for our beloved snack brands and the employees who support them. I want to express my gratitude to the many talented employees who have built our North American snack brands over the years. Their commitment has been instrumental to reaching this milestone. This divestiture marks a pivotal moment for Hain as we focus to grow. The simplified portfolio that emerges in North America following the divestiture is stronger financially with a more robust margin and cash flow profile to drive growth. The Hain Celestial Group, Inc.'s North America snacks represented 22% of the company's net sales in fiscal 2025 and 38% of the North America segment's net sales, with…

Thank you, Alison, and good morning, everyone. For the second quarter, we saw an organic net sales decline of 7% year over year, driven by lower sales in both the North America and international segments. The decline in organic net sales growth reflects a nine-point decrease in volume mix and a two-point increase in price. As Alison mentioned, organic net sales trends in the second quarter were flat year over year and in line with Q1 when excluding North American snacks, and Ella's Kitchen wet baby food, along with Earth's Best baby formula, which was cycling a significant return to market pipeline. Adjusted gross margin was 19.5% in the second quarter, a decrease of approximately 340 basis points year over year. The decrease was driven by cost inflation, lower volume mix, and unfavorable fixed cost absorption, partially offset by productivity and pricing. Actions already underway, including SKU simplification, revenue growth management, targeted pricing, and productivity initiatives along with efforts across key manufacturing sites to improve plant absorption, and reduce discards, position us well for margin improvement in the back half. SG&A decreased 13% year over year to $61 million in the second quarter, driven by a reduction in employee-related expenses and non-people cost discipline. As we implemented overhead reduction actions, SG&A represented 15.9% of net sales for the quarter, as compared to 17% in the year-ago period. We are nearly finished with our restructuring program to date having taken a $103 million in charges associated with the transformation program. Excluding inventory write-downs, the total charges are now expected to be $115 to $125 million reflecting a $15 million increase related to actions anticipated in connection with the sale of the North American snacks business. We remain on track to deliver the targeted $130 million to $150 million in benefits through…

Organic net sales in snacks was down 20% year over year, driven by club distribution losses and velocity challenges in North America. Importantly, we are seeing velocity improvements with our recent avocado innovation and multipack optimization. And our seasonal innovation performed particularly well, with ghosts and bats for Halloween, and more recently, holiday trees. In baby and kids, organic net sales growth was down 14% year over year, driven primarily by industry-wide softness in wet baby food in The UK, as well as formula in North America, driven by lapping the return to market pipeline. We have continued to see strength in best finger foods and cereal in North America, each showing dollar sales growth of low double digits percent year over year. Ella's Kitchen Finger Food also saw organic net sales growth up high teens year over year. And while still in decline, are seeing signs of stabilization in the wet baby food category in The UK. In the beverages category, organic net sales growth was 3% year over year, driven by tea in North America, and demonstrating an acceleration from the 2% growth year over year Q1, Celestial Seasoning Bad Tea grew dollar sales in the quarter, in part due to the recent launch of wellness innovation. In meal prep, organic net sales growth was down 1% year over year. A softness in spreads and drizzles in The UK was partially offset by strength in yogurt in North America. Greek gods grew dollar and unit sales in the quarter, by high teens percent and gain share. Shifting to cash flow and the balance sheet. As Alison mentioned, we had strong cash delivery in the quarter, Free cash flow in the second quarter was $30 million, an increase of 22% compared to $25 million in the year-ago period. The…

Thanks, Lee. In summary, I want to reaffirm our confidence in the direction we have set for the company. This quarter marks a pivotal moment in our journey. We have taken a significant first step to sharpen our focus and strengthen our financial position. We are engaging in ruthless focus, fewer categories, fewer brands, and fewer SKUs, enabling concentration on areas that better align with our strengths and core capabilities. We are making tangible progress in improving our operational health and enhancing cash delivery. The actions we have taken will drive a structural reset of our margins. And we continue to identify and remove costs from the business, freeing up fuel to invest. Q2 results demonstrate strong cash delivery, reduction in net debt, and a stable core business. We are attacking our challenges head-on and nurturing growth through our five actions to win. We are encouraged by the progress we are making as we focus on executing our strategy and building momentum quarter by quarter. While we continue to navigate pockets of pressure, we are executing with resolve, and we remain confident that the steps we are taking today position Hain to deliver sustainable, profitable growth and long-term value for our shareholders. That concludes our prepared remarks, and we are now happy to take your questions. Operator, please open the line.

At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. And your first question comes from the line of Jim Salera with Stephens Inc. Please go ahead.

Hey, Alison and Lee. Good morning. Thanks for taking our question. Wanted to start off with maybe some more details around the decision to divest the Snacks portfolio. If we go back to the Investor Day in 2023, you guys called out a couple of different categories, you know, to focus on as you grow. Snacks was one. The baby and kids, and then beverages. I think there's six brands, three of which were snacks. And then over the preceding years, there's been a lot of focus on innovation in the Snacks portfolio, you know, getting better placement and away from home, things like that. And so clearly, something's changed. You guys think that there's more value in focusing on other areas of the portfolio. So we just love you could kind of help us bridge, you know, what changed in your thinking or what you've seen in the market from, you know, that 2023 until now to result in divesting the snacks.

Sure. I'll jump in first. So good morning. Look. You know that our first action to win is all about simplifying our portfolio. We needed to take some action in North America that would allow us to really focus to grow. As we assess the various businesses, stepping back and looking at sort of rights to win and what it takes to win in a category like snacks, the reality is that there are a lot of capabilities given that this is an impulse category that I would argue are more difficult for us to develop. So if you think about impulse categories that are fundamentally demand creation categories, you need to have, you know, really heavy and intense innovation. You need to have strong marketing investment consistently. You need to have DSD-like merchandising to drive again, kind of that impulse purchase. If you look at sort of the rest of our portfolio, it tends to be more center of store in North America and center of store categories are fundamentally demand fulfillment. Demand's already there, and it's not quite as competitively intense. So that is, you know, one of the key reasons when we looked at, you know, our portfolio where was sort of the biggest opportunity for simplification. I'll also add, and you saw that, you know, snacks over the years had become somewhat financially challenged for us as a company. We had become over-reliant on the club channel. That club channel is really great when you have that business, really challenging when you don't have that business. And so again, we had to look at how do we build a portfolio that financially is structured to grow. And we firmly believe that as we divest the Snacks business, having a portfolio in North America that has gross margins 30 plus percent and has EBITDA margins in the low single digits, it's going to put us in a position where we truly can invest and truly can focus to grow.

Yeah. I would agree. I guess just building on that to what Alison said, I mean, the operating model, talent profile, capital allocation priorities are very different. You know? And what we called out is you kind of look forward is, Snacks, and we also said Eaves as well because that's another piece of business we previously disclosed that we've gotten out of. The gross margin profile of those businesses is 28.6. You know, the ongoing margin profile, the gross margin profile of the remainder of the North American business, we anticipate being greater than 30%. So, you know, and again, we don't like to do kind of x but if you take out a couple of things specifically around snacks, and then some, you know, some category softness that we've had in kids. You know, we were actually flat. So that speaks to kind of the rest of the portfolio. So we think we are better positioned as we move forward with a higher profitability portfolio.

The estimate reallocating some of the innovations? I imagine if you're not having the Snacks portfolio anymore, that frees up some internal capabilities. To then pivot to innovation in the remaining categories. Can you talk through maybe some of the stranded overhead, what those costs are? And if we could expect to see more innovation in, you know, the remaining categories whether it's in the back half of this year or maybe that's a 2027 event?

Yeah. We did call out the stranded cost. I don't think, you know, we can probably didn't verbally speak to it, but it was on one of the slides. So the stranded cost impact is about $20 million to $25 million. So those are costs that are allocated to Snacks right now. We have really concrete plans to execute to mitigate the majority of those costs within the six to twelve month, time frame. And, again, you know, it will free up, you know, resources some of that would obviously would drop through, but also just free up resources as we support those innovations, as we make sure that we have kind of adequate market expenditure against the rest of the portfolio.

Yeah. I'll just I do think your point is right that we will be able to put more investment and more time and energy against the innovation for the balance of the portfolio and we really are seeing, I think I've talked to you before about how we're doubling down on innovation both in our North America and our international segments. We're seeing that those innovations that we're putting in the market, whether it's single-serve yogurt and with the Greek gods, you know, or wellness tea or Earth's Best snacks, we're seeing that those innovations are driving incrementality. They're driving share growth. So innovation is absolutely critical in this segment or in the Better for You categories to bring new consumers in and ultimately get to growth and driving volume-based growth. So, yes, absolutely, we will continue to double down on innovation.

Great. I appreciate the time. I'll pass it on.

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

I guess a question on the divestiture in the context of cash. Obviously, you have some sort of cash coming in, but, were those businesses cash burn businesses where run rate perspective or whatever capital that was required? Like, how does that sort of bend the curve on your ability to generate cash?

Yeah. I mean, the Snacks is not a significant cash-generating business. I mean, we talked about the lower margin profile within it. You know, so it's a it I'd say from an ongoing kind of cash generation perspective, we're in a very, very good position. You know, one thing we did emphasize is, you know, as you look at Q2, we did have a really strong cash delivery. We will continue to be very focused on inventory reductions, continue to make progress on payables. The second thing, especially as we go into the second half, I think we also mentioned we do have $26 million that we got on January 2. On insurance proceeds as well from a previous M&A activity. So I think we're in a good position moving forward. But to your question, I mean, the Snacks business was not a significant cash generation business for us.

Okay. Got it. And you provided some, I guess, thoughts on the upcoming maturity. You know, how much flexibility do you have? Is it leaning one direction versus the other? You know, refinance versus equity versus strategic? So there's feels like there's many moving parts. Just curious how should we be thinking about what you what your options are and how much flexibility there is as the date gets closer.

Yeah. So I'd say a few different things. I mean, we have a path. We're mindful of the upcoming maturities, and, you know, we're in frequent and constructive dialogue with our bank group. So, you know, what we did feel was that aligning the maturity solution with the execution of the strategic review will put us in a stronger long-term position. The key thing, obviously, with the execution of this divestiture, you did see on a pro forma basis our leverage decreased significantly, so going from 4.9 to four times. So again, we are also continuing under that strategic review to look at other options. So again, we're mindful of it. We're working through good discussion with our bank group. And we're continuing to just do a, you know, thorough evaluation of our strategy in our portfolio. So again, the four times is versus the covenant we have. That takes us all the way through to the twenty-second December, which is 5.5 times. So have significant headroom under the current. But again, we're in ongoing dialogue to make sure that we come up with the right optimal long-term capital strategy.

Okay. Got it. Thank you.

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

Good morning. Thanks for the question. Like to ask, Alison, I'd like to ask a follow-up to Jim's question and the characteristics for categories that you like and you wanna pursue. The profit improvement from the snack sale is clear. You know, as you progress in the second phase of review and presumably divest more assets, how do you envision Hain as a true growth business in the end? You know, I get the resource allocation. You have some bright spots with the Finger Foods and Kids. You know, there's pockets in meals that haven't really grown over time. In babies and kids, the fertility rates are declining across your market. So how do you think about driving sustainable volume in that backdrop? Does it require larger price cuts to bring your products more within reach of, you know, sort of mainstream middle-income households and expand penetration that way?

You know, as I look at again, I'll sort of focus it, I guess, on North America given that we're focused there with the divestiture. As you look at the remaining portfolio in North America, as I mentioned, first of all, the demand fulfillment aspect of it is an area where I think we had strength and we've demonstrated, you know, consistent delivery over time. As you think about growth in the remaining portfolio, we talk about some of our flagship categories being our tea business, our yogurt business, and our Earth's Best baby and kid business. What you see is in those businesses, we have strength. So if you look at, you know, we're a top three player in tea. We've shown that we can drive growth when we innovate. So our wellness innovations that we launched in June are a great example of that. They're driving share growth for us, share growth in the overall wellness category. When you look at our yogurt business, I mean that's a standout business for us with double-digit growth. Again, in a very specific area where we have strength. So whole milk, which is a growing area of, you know, interest in the overall dairy category where whole fat are something that consumers are moving more and more towards. So again, a niche area within a broader player, but an area where we can build from a place of strength. And then the same with baby and kids. When I look at our snacks business and our cereal business, where, again, you know, we're number one in each of those categories. So we have strengths. We're seeing innovations that we're launching there are delivering results, double-digit growth in fact. So, again, the idea is play to your strengths. Find those sort of…

Okay. Thanks for that. And then, for Lee, in terms of the potential or, I guess, likelihood of additional asset sales from here, are there a cost basis or tax considerations or any other factors that might limit your degree of flexibility in divesting certain businesses?

There are no concerning tax considerations at this point.

Okay. Thank you.

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

Great. Thanks so much. Good morning.

Hey, Andrew.

You mentioned sequential improvement. Expectation in the fiscal second half. And obviously, you also announced the divestiture of Snacks, which is expected to close fairly soon. Much of the weakness in fiscal first half was, of course, related to Snacks, so I'm curious if you also expect sequential improvement in the fiscal second half sort of on a pro forma basis. And then any thoughts or help on how we should think about the potential magnitude of such improvement?

Yeah. So I think we talked in the first part of the call a little bit about sequential improvement in our international segment. We saw that from first quarter to second quarter and we expect that to continue in the international segment not only driven by the innovation that we're putting into the market it is significant. We also cycle the Ella's challenges with the broader sort of industry and category in May of 2026. So that's going to definitely, definitely help. In North America, we also expect sequential improvement as we look to from first half to second half. We saw that actually in our tea business. If you look at Q1 to Q2, we see that pick up with the rest of our businesses as we launch innovation. So when you think about our yogurt business, the doing very well. We continue to expand our single-serve Greek gods yogurt, which is driving a lot of incrementality, about percent incremental to the business and almost 100% or the category and almost 100% incremental to our business. When you look at our Earth's Best business, we are launching seven SKUs in the big kids snacks area. That's an area we have not been in the past. So we're launching bites, we're launching Waze, we're launching Sticks. All of those things have added protein, have added fiber, and so they really play into where the market is moving. So again, the sequential improvement comes from that innovation, we also see the full realization of the pricing actions we've taken. As you know, pricing actions have been rolling in across baby, across tea, across meal prep. As we executed the first half, in the second half, we see the full benefit of that, along with we'll continue to tighten up sort of our promo efficiency and effectiveness. So definitely, we are looking to drive sequential improvement first half to second half overall, and we have a lot of activities. I guess our five actions to win help drive that.

Yeah. And I just building on that a little bit, you know, we expect our margins in the second half to improve. The reasons Alison mentioned. I mean, RGM, you know, we did have some impact and we talked about it in the second quarter on manufacturing on absorption. We expect to get improvements in our manufacturing footprint continue to drive productivity reducing some of our waste as well. So we expect to see that as we move through. So we expect to see an improving margin profile as well.

Okay. Great. And then just regarding stranded costs, call out the $20 to $25 million on an annual basis. Obviously, you're gonna do what you can to mitigate that as soon as you can. But, I guess, in the near term, I mean, should we think about EBITDA being impacted for a period of time when the deal closes because of the stranded costs? And does the four times pro forma leverage include or exclude the stranded costs?

Thank you. Yes. So we do I mean, the pro forma leverage did include some of the stranded cost and then some of the other benefits as we've taken out. Moving forward, I mean, will be some short-term pressure with the stranded cost, but we do have a very detailed plan to get those out in a short period of time. We said the six to twelve month period. So, it is something again, there's a number of elements. It's primarily in the SG&A side, a little bit in our distribution and warehousing network. But we have action plans to get those out. So you got I'd say you would see some pressure in the first quarter, but that would dissipate as we execute those actions. Very, very quickly. Thank you.

Again, if you would like to ask a question, press 1. And your next question comes from the line of Anthony Vendetti with Maxim Group. Please go ahead.

Thank you. Yeah. So just to know you gave us the percentages of the snack business relative to overall into North America. If we had a look at the last either the last twelve months or fiscal year 2025, what was the actual revenue contribution from the Snack business?

We gave it as was it 38% of the total of the total North America number.

Okay. Did the is that was that business I know you said that there was I think the gross margin on that business was twenty-eight point six. Not that far off from what you're look No. No. No. Sorry.

Sorry. Just one correction there. That gross margin was ex the Snacks business. So the Snacks business was extremely dilutive to that. So that's why we wanted to give you x the snacks business.

Got it. Okay. Good. That's helpful. And then if you know, in terms of I know the first question was you know, what drove you to this. Was this was this sale you know, pressured by the debt by your bank group? Did the bank group sign off on it? You know? And if there if the bank group wasn't involved you think you would have spent more time trying to turn it around? Or maybe just give us a little bit color on what drove the sale right now.

Yeah. It definitely pressured by the bank, it was done. I mean, we talked about I think it was made. We kicked it off. We had a strategic review process, and where we've strategically in a position with the right to win within that category and how did it fit within the rest of our portfolio. So that's really what drove the decision. You know, it felt like with the acquirer, they've got a better position to drive that moving forward. So not pressured by the bank group, no.

Yeah. And I would say, Anthony, I mean, you know, look, obviously, this is public now with the team. We couldn't talk to, you know, the team in North America much about what we were doing. As the team looks at sort of the potential of the business with the three flagship categories I noted plus, you know, selective opportunities in meal prep, they're excited. They're excited because the financial profile is such that they can put a lot more focus against these. They know there's growth in these businesses. They're gonna be given an opportunity to unlock that growth. So, again, simplification is our first action to win. We have to engage in ruthless complexity reduction across our business and that was a very smart way to do that given the capabilities that are required to win in Snacks, which I would argue are not capabilities that are at the heart of The Hain Celestial Group, Inc.'s strength. Given it's an impulse category and fundamentally a demand creation category.

Okay. Great. And then one last follow-up on the meal prep business because that is one of the fastest growing categories within grocery stores. Maybe give us a little bit more color on the plan there. Is it gonna be more frozen, refrigerated? And just an idea of how you're gonna build that out? Thank you.

Yeah. You're right. Meal prep is actually an exciting area, and as we've sort of we're looking at how do we put some additional focus against that business without the snacks business in North America. We're looking at out our pipeline related to Maranatha. You heard me talk about liquid coconut oil on Spectrum. 25% of households only using coconut oil, and we're number one right now. But we don't have a liquid product. That's another great example. So we will absolutely look at ways we can unleash the opportunity within meal prep as we go forward because we know it's a growth category. And when 38% of your business is in snacks and it requires impulse category like capabilities. You find that a disproportionate amount of human resources are spent there. We now have time to spend it against some of the other great opportunities that exist in our portfolio.

Okay. And I would just like to conclude with congratulations on the permanent appointment as CEO, Alison.

Thank you very much. Continue to be energized by it.

Your next question comes from the line of Jon Andersen with William Blair. Please go ahead.

Morning. Thanks for the question. I was wondering if you could help us just with kind of the cadence in the baby and kids business, there are, I guess, a couple of other transitory events that are affecting organic growth in that business. You've cited the first one as being pipeline associated with the Earth Balance relaunch last year. And then just kind of the industry-wide challenges in Wet Baby in The UK, can you remind us UK. You know, the timing of those? When will those be cycled or kind of out in the base, if you will, and do you do you kind of expect post that that the baby and kid business is in a position in aggregate to grow? Thanks.

Yeah. So I'll talk about The UK first and Ella's. So the BBC Panorama documentary came out in early May of last year. And so we do start to cycle that drag that has hit the category come Q4 of this year. So you will see, you know, that business return to a much better position and return to growth. We are, as you know, on that business we've been doubling down on marketing. I think I talked in our last call about sort of a new marketing campaign that's getting very good response that we are also doubling down on our innovation. So in the back half, in Ella's, we have 10 new snacks SKUs going in. We have new meal stage four, so older kids sort of meals going in. And then we have the nutty blend, which is a combination of nuts and fruits and vegetables. So, again, lots of innovation to continue to drive that category, and Ella's does remain the number one in the category overall. And is the pioneer in sets the standard for organic baby in the category. So again, once we cycle that, we have confidence that again, that business, you'll see a return to growth. As it relates to the North America business, I think we've talked quite a bit that we're in a tale of two cities where we've got good growth double-digit growth, strong double-digit growth in our Earth's Best snack, in business, and we'll continue to drive that with the innovation we have coming in, in the back half of the year. On our cereal business, the same thing. Mid single-digit growth, strong business. Again, looking at innovation to continue to drive that. When it comes to our formula business, this is the last big cycle this quarter…

That's thanks for the color. That's helpful. Makes sense to focus on the area where you have the strongest differentiation. One follow-up to Andrew's question just on stranded overhead. I just want to make sure, when you talk about North America gross margins, being in the thirties post on a pro forma basis and EBITDA margin double digit or double digit. Is that after the work down of the stranded overhead costs, or is it, you know, kinda right out of the gates?

Oh, no. That's a good question. It is after the work down of the stranded overhead impact. So again, that's why we've emphasized and we have action plans to do take those out on the kind of a short-term basis, moving very aggressively. But it is up to that work down. That's right. So just again, for modeling purposes, it would be I guess, prudent might be the word to assume, you know, there's gonna be kind of a $5 to $6 million overhead stranded overhead headwind per quarter until those are worked down.

That's the way it would work. Yes. It would be about, yeah, $5.05 $5 million, you know, a quarter, 5 to 6. But, again, we would be taking actions, you know, to quickly kind of work that down as fast as possible.

Understood. Okay. Thank you so much.

That concludes our question and answer session. I will now turn the call back over to Alison Lewis, CEO, for closing remarks.

Great. Well, thank you, everyone, for joining today. I'll just reaffirm our confidence in the direction that we're taking. This quarter represented a really pivotal step for us as we began to execute our strategic review with the Director of Snacks. We're focusing our portfolio for growth. We're improving sort of our overall financial profile as we go forward. And strengthening our operational health while they continue to drive out costs and enhance our overall cash delivery. And I would say, you know, we're attacking the challenges head-on. Certainly, business is in transformation, and turnaround, but we see bright spots and, we'll continue to drive those bright spots as we action our five actions to win. So thanks for joining us today.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.