Hain Celestial (HAIN)

Katie Turner IR, ICR
Mark Schiller President and CEO
James Langrock EVP and CFO
Ken Goldman JP Morgan
Evan Greenblatt Wolfe Research
Amit Sharma BMO Capital Markets
Rob Dickerson Deutsche Bank
Alexia Howard Bernstein
Anthony Vendetti Maxim Group
Eric Larson Buckingham Research Group
Bill Chappell SunTrust
Steve Strycula UBS
Call transcript
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Thank you for standing by. This is the conference operator. Welcome to The Hain Celestial Group Third Quarter Fiscal Year 2019 Earnings Conference Call.

As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. now for turn opening would to conference I Turner Katie remarks. Instructions] like the to over [Operator Please go ahead.

Katie Turner

year call. Thank you. Hain fiscal on for joining earnings Good morning. And Celestial's thank third you us XXXX conference quarter

Executive On the Mark Financial Langrock, are call Chief Vice and Officer, and President Schiller, Executive Officer. James President today Chief

of also statements is of the to Hain available And to at those www.hain.com is cause under uncertainties meaning for Hain those based course annual other implied from forward-looking securities and will described could financial which being laws. federal to non-GAAP Exchange the issued or in of statements. may a webcast could these in available results today. on from morning materially During differ involve the its measures current that the call, filed on Please the in and made time earnings make actual Investor to and on on forward-looking risks from detailed and Mark statements results refer are XX-K discussion turn like and to that materially the of release, any an Celestial's management and call now of Schiller. to it Securities This I'd call website. and this release Commission, Celestial's archive statements Form management's expectations Relations. website within with time report actual the differ posted These press is A risks forward-looking reports be expressed over GAAP events this reconciliation

Mark Schiller

are third To progress future to quarter made consistent update results look transformational at pleased results forward pleased in there our many we still to results. key plan committed We're stakeholders our to results, our track expected, remain be significant against and on operational late fiscal growth as that, we year our and quarter Day and during it's report financial our everyone. on sequential our a understand business improvements view Thank you, the all in remain achieve to with and our today outlook. demonstrate I third At to financial Katie, Hain Celestial, that providing in to and business our the levels Investor while our to outlined with we -- areas business of strategic and fiscal encouraged important to morning, with of an early is we've direction early to done early clear return our we incredible providing end, profitability. that of February. delivering acceptable work good performance

year. shareholders. but QX Our our historical highs key gross in believe current and summarize to the and the of sequential to EBITDA this in US, strategy and growth performance QX improvements areas compared adjusted adjusted have improvement the and right executed profitable EBITDA results, operational in fiscal below deliver our the margin, value adjusted team consolidated we QX US our team significant margin of improvement executional to we internationally. in right in generating drove our consistent generate QX remains business, that This our well and To

in improved from the XXX QX XXX QX. second These international points QX solid businesses. basis basis both margin quarter results points and points EBITDA and XXX Adjusted QX improvement. and example, basis gross XXX adjusted represent US QX of increased For points from margin from with from consecutive improvements sequential basis

in cash flow. QX, core a we set expand following our report that core in anchored profitable of US the provide progress in financial objectives. of margins we growth pleased business. out a start strategies; capabilities; brands, portfolio a performance I'll strategy and Investor At with good simplify reinvigorate US, in these to the and little key color, made line clear on bit and the all Now organization; to to the strengthen Day, laid more strategic transform the top I'm

pursue In maximization completed are to minimal that the consider Tofu Hain Pure we and our portfolio. These margin, businesses to reached terms in of of aggressively we potential the we considerable were definitive more and our Both be selling our enhancement clear to a first the benefit a that WestSoy P&L. add Protein one, believe simplifying the last low week margin someone would brands. stated with the that you are told them. we the business organization, or profit have low this divestiture have non-strategic the may to to also minimal to profitability going value brand. we brands else, don't complexity When week To end, that path these accretive low-margin remaining of agreement with sell we growth to brands

losses. improve divestitures In and also from simplifying we should addition cash to balance portfolio, our these transactions the these sheet operating generate reduce as

effort profit. Overall, in in the more and SKUs, XX, optimization don't XXX over US points eliminating. profile is that and by expected address plan Canada. to the margin reduce also and of basis improve the we the by formalizing process of meaningful of pricing both in than co-manufacturers XX that time by XX% XXX to number our eliminate approximately US make SKUs our is team Canada SKUs low-margin Our the SKU cost-reducing over and to

finalizing Next, restructuring of excellence, capabilities, spans we strengthening refocus of reduce layers, North centers North resources. to a our business of our create are control, and second core increase America the strategy, America in --

and While will we be are forward, modest savings expect the of driver some there primary efficiency changes going these effectiveness.

sustainable we entail ability it will will guidance. ‘XX ‘XX Instead, charge, achieve future our fiscal our to of F help actions set to support growth up the this restructuring these to While don't impact business. a expect

working to on of hired that I've team R&D adding consultant inventory process talent for our a innovation, already executives and in as You recently, a had may Both senior also with distribution core worked several Most capabilities. and we've Officer added SVP an and of I organization service. Hain management, have started with in months. leadership noticed expertise have functional significant We've leaders previously bolster who we've warehousing, busy improvements bring executive Chief to Supply six who these brought the been Chain our and since been meaningful November.

We and sets world-class also are of a starting in who a transformation would creating President America overseeing with North synergies new aligned our with well of be couple a have journey. we're the core US for summary, weeks and US in In between skill marketing that our building Canadian team businesses. responsible

to strategy progress. an third of I Our wanted reinvigorating provide top update with one, line growth, our on recent you this profitable on

better year-over-year declines in to -- 'XX see distribution due You'll to fiscal uneconomic of said, we investment which future visibility of losses we lapping elimination into the XXXX, That as brands, partly and a partly into the performance to performance. fiscal get investments, dub recall expected leading improvements our velocity SKU revenue rationalization. to with indicator bigger that pricing of due we promised and brands

down X% this in year's elimination brands to While reduction distribution on year's activities, compared velocities quarter. uneconomic third were up the due and to last points our X% of total quarter still in the second the SKU are get bigger

the creating begun bigger on the delivered get with these this innovation bigger of We've growth and brands resources journey get reallocating margin expanding while the also we've goal marketing Importantly, category-growing program. brands. velocity to of equity-driving

to are consistent and are processes, build the experts, we partnering stages, early the tightening for foundation growth. in starting While with

years primarily brands, get two velocity lowest shelf of to is up where in and turning focused store in profit, space last the X% are This eliminating in improvement the their quarter. better collection and and our that simplification velocities versus time. quarter brands from represents The our ago doing For on more the of likely SKUs that the were velocity suggests on good of we're the over assortment. expansion year also the first we remaining are programs faster job SKUs the hold a result and this

we sales, significant in QX. EBITDA Day. When cash US, and performance was reductions points from margins from our the the gross trade year. basis basis adjusted EBITDA profitability as sequential QX. expand expectation margin margin flow, from did of gross QX margin expanded XXX quarter earlier, on and was from while to that In each objective uneconomic XXX impact US, in set did made fiscal -- points fourth margins expected basis We adjusted XXX I adjusted adjusted and in and up in our up the we mentioned at and basis QX looking Investor points we it and points our net and it this XXX Our

delivering the Our the middle team P&L. has progress been significant in of

million costs dropped levels in first compared warehousing has XX% dropped points first XXX two half period. have almost versus improved distribution and example, prior-year service fiscal the time basis inventory the $XX for year to and of the to while have years, For the

guidance, XXX with points of expansion XXX better is Our adjusted QX our and brands get XX.X%, line take points margin investment. basis QX long-term to in aggressively which generated adjusted brands' EBITDA bigger EBITDA we out expanded uneconomic basis as from get from our

and let consistent international our the We and also our growth Tilda, a plant-based in our brand was constant represented delivered of of the XX% sales Kitchen, where brands shift From we've the and results Yves Ella's currency net perspective, our company quarter, European operating EBITDA Linda to total strong. Now, third adjusted sales performance. achieved and XX% margin In business international business sequential me McCartney profit. quite improvement. modest fueled business net

and the same we year, but strong period growth was in was EBITDA versus As expect expected, this timing-driven down QX. last slightly

discuss transformation confident starting uneconomic channel activity in we said, Investor last James some our see demonstrating in some While personal Despite EBITDA margins areas guidance also US In we our we increase, and for our in and aggressively to on continued promotion. that gross discussed Day, are business lap program. outlook parts as improvements in and cost-reduce in into That eliminate of detail, We'll the line stabilize heading reaffirming that this, of club softening EBITDA signs sequential as international generate care of in we remain low-margin business and summary, ability expect and better continue showing buy-in expect trade margin, are price cut overall improvement performance as the the the results the chain, QX. year. our for we profitability adjusted we softness work. top gross some We're is we uneconomic the our year's will to resulting for supply and to top reduce adjusted and in we the line our more margins. QX, margin

profitability in the cash will capabilities this to business have some through deliver addressed and that top lots and a , in and growth year, are next of to forecasted There this of take still but still time. strategy. turn issues clear year of more it's Many the will line our with complex getting softness much There's to be like around running done with understand levels As that's with significant greater and discipline line ROIC. a to like be said, and pricing to work our important be acceptable flow balance of developed and very we're this to That need we come of that much left to improvement is still culture commitment change consistency. Many forecasting. areas enhanced embedded. need business

with said, very it. QX So declare to we long trajectory, we our achieving ahead That can remain pleased victory. path and and our about while optimistic road our a our have future before we we performance are

over provide stronger gets QX it will company. to With brief overview, and ‘XX to driving look we Our and throughout our me continued James? on confidence James our financials fiscal who guide. detail let improvement more that forward every turn day

James Langrock

good Thank you, morning, Mark, and everyone.

for a are Hain prior segment periods. Protein current as the results the the of a presented financial operation, and position, related As flows to cash operation Pure reminder, discontinued and

brands are May the have into Hain and definitive We fiscal the subject transaction pleased Kosher to agreement the for expected year. is of million Protein a of to adjustments. Pure Empire businesses, The to close before FreeBird the $XX yesterday, end with sale our entered remaining Xth, including

near sustainable I we Tofu of results bigger In our unless will eliminate long-term better SKUs. on addition, investments term, we discussed operations noted. take as pricing Investor and for growth. week as discussion brand get my focus strategy to as brands get sales we continuing on our financial Mark WestSoy and mentioned, down At also our the will sale year-over-year long-term completed aggressively otherwise to continue low-margin Today, last reiterated we and and on in have are the from uneconomic our net pleased be Day, that focus strategies

on $XXX.X profitability basis. flat decline offset by As currency higher, trade Adjusted improving year-over-year. with by adjusted were chain X% changes Project and partially savings. expectations line call. or our million million these XXX commodity the sales expect basis every we absolute QX year. driven for last as last items, and $XXX.X costs and with this flat inflation, performance In we a from Compared percentage constant prior-year decrease the basis in net profit QX third or the a gross gross points, are XX.X%, constant of XXX quarter US year, X% quarter to margins but improve to of made, When our earnings was in but in Declines improved SG&A supply would with divestitures, and margin a sales on been certain a set net in decreased XX.X%, line this up consolidated was XX.X% sequentially year. period, dollars. the Terra net other sales expectations, currency, have point with acquisitions,

results Investor and align Adjusted our quarter Day, $XX.X we key effective from adjusted reported strategic margin represents margin on for business. now business compared our the tax EPS XXX $XX.X EBITDA both rate year of sustainable our XX.X% driven international EBITDA QX. last $X.XX EPS with on an based We of with I'll team sequential prior with tax basis QX, long-term sequential optimize segments. to period. of from improvement. $X.XX structure of continue rate effective you based million of points our QX was on Adjusted second each on million in improvement by year consecutive US and to profit our of in $X.XX organizational the an provide improved This financial the growth. and in a As objectives in an compared XX% stated basis

objectives our sustainable our mentioned, improvements As drive Mark business. on strategic QX in progress we made good in to US

the rationalization. adjusted or X% For net SKU for US, sales the increased when X%

the we customer take still mass planned in as better through we distribution product and on eliminate are working and trade manage we've uneconomic While gained low SKUs distribution incremental losses investments, pricing channel, margin mix.

a by with However, for margin costs operational mixing of improvement center planned. our reduction gross the and our factory XX.X% primarily in year-over-year and as Terra cost XX.X% in from now brands. pleased are and adjusted was The a QX. efficiencies. sequential related benefited to was of net procurement the QX percentage US and Project sales savings marketing XX.X%, we for we elimination SG&A uneconomic such to co-manufacturing a was XXX savings distribution as compared XX.X% sequential improvement as year, is both QX increased as last continued XXX to QX XXXX points Margins improvements warehousing activities expenses. growth we and better as EBITDA Adjusted bigger our deliver an get velocity from driven also generating of trade key net of in of sales profitability. significant of on the increase X.X%, from to get improved a metric points increased basis percentage basis U.S.

XX% XX% get better of of represented sales of represented and sales and XX% For in of the and US profit. XX% brands profit get QX brands bigger our business, roughly the

business improving our for in quarter. the this Adjusted improved perform third with expectations basis to of points continued second for international XX from flat consecutive versus prior sequentially and fiscal line margins year the the EBITDA year. quarter, QX Our

million over We to sales In year the the the international and continue net its decreased stability business UK, period. quality $XXX.X with to be potential. the and future X% of profitability prior pleased

and as consolidation. or million soup and an was of This prior over X% with savings by Tilda Rest to said, This points XX as a XXX XX%. team However, Cultivate, world from X%, and Kitchen supply basis manufacturing sales adjusted our commodity on offset shifting operating with an increasing increasing Daniels this has basis rest on driven which activities primarily a down for the basis gross identified XXX points compared job Hain net expenses net and sales by sales percentage of of basis points X% as gross XX related EBITDA adjusted the uneconomic inefficiencies the UK improved have points the done points of SG&A. we flat UK have Ventures an a Canada basis of and was was Hain basis good we primarily net year-over-year sales QX margin are decreased XXX at of period in and XX within to Terra QX. partially QX basis expenses, by to as basis, offset points from $XXX.X Rest EBITDA generated and that basis controlling Ella's Hain world margin was in result primarily That being business down was in formerly we X% our increase decreased known Canada. Adjusted basis expectations. trade inflation percentage an Daniels. Net period, prior-year year. increased of world reduce the points from down Europe to from adjusted the adjusted of compared year result Hain in Project strong our QX, XX adjusted QX. and XX and at points XX.X%, also year-over-year the decreased Ventures, increased chain addressing X% eliminate and line improvement growth to

cash sheet. and Now, balance flow to turning our

were related months $XX.X $XX.X March cash in payments XXXX, of forward timing the three to any million Brexit potential the and XX, expected supply operating flow mitigate due Cash than we ended and was to million. from UK operations buys the capital For was inventory disruptions. flow expenditures less

provide continued profitable cash improvement sheet, M&A. flow use continue cash time, a conversion to to operating our plan further our in our our delever returns particularly we increased balance and pursue free improve Over we shareholders, to as our QX, cycle profitability. expect in improvement we forward, sequential expect flow in generation, Going cash and to

balance As net million. UK. in the to $XX.X partially March XXst, and of service sequentially our reflecting debt forecasting forward offset our an better and inventory was $X the in decreased from $XXX buys million improvement cash million US, in Inventory was by QX, strategic customers

year-ago dropped our in peak less beginning the has January, our to levels levels Importantly, August. inventory US $XX inventory in in million is and than

Similar bank XXst Xth, in whereby times On consolidated than amended X.XX fiscal was company no of the credit agreement its compared as was allowable the to to leverage leverage March May March as part of XXXX. Hain ratio as Our more XXXX. for X.XX increased times three our continuing X and times XXst, December purposes are discontinued operations are reporting through Protein's XXst results noted the Pure quarters, from to earnings of last not operations.

I we Protein the Pure pleased are sale FreeBird of signed agreement mentioned, As business to and the Hain a have Empire including remaining definitive for brands.

provide significant $XX I'll on Terra year-to-date, in expectations. We of our made an Project which update million on quarter in progress the $XX Now, costs with saved Project and million Terra. and line is

billion savings being of reported total be million. to X.X% decrease lower year at compared expect guidance For XXXX, approximately XXXX range, from said, down basis. to X% on we $XX approximately net to continue billion expect XXXX, X% for we or of $X.XX approximately the fiscal sales X% a fiscal to our to as fiscal to constant operations That end $X.XX a continuing currency

velocity long Mark distribution SKUs have the As US, in unprofitable, mentioned, in tail resulting a losses. considerable we low of

the will result, a quarters. trade optimization for are sales impact our net pricing As removing efforts, actions, next several and which including aggressively finalizing we uneconomic our SKU

fiscal and sales be an end $XXX for to any to share to per EBITDA all another EBITDA depreciation, approximately other million. profitability sequential are anticipated to expectations, in our expense $X.XX capital us also to XXXX be of flow expected expense to forward of range the we And of $XXX Adjusted and working adjusted effective tax improvement our year, delivering potential rate of with Based million expect compensation timing operations reaffirming of the UK and range million to guidance our $XX million. for and are result guidance XX%. low approximately be from $XX stock-based the of to XXXX the buys at we lower cash to $X.XX expenditures fiscal of anticipate anticipate XX% these on million related We $XX toward Interest the expect amortization, quarter. to payments million due but fourth we earnings million $XX of actions disruptions. capital between be range in to quarter with inventory in supply diluted is $XX the end Brexit $XX to million mitigate in

manufacturing We are investments investments to growth and margins. demand meet our in in making higher productivity businesses to improve

million initiatives CEO $XX Terra and includes related costs of guidance certain other and of to we agreement to flow items. succession to million expect implement related cash $XX incur Project charges associated Our the

our reminder, a or provided operations. a guidance from continuing As is non-GAAP on basis adjusted

items, results. of with Mark. will I’ll call any future With So to future other and which that, non-recurring acquisitions, this identify continue impact divestitures, back excludes the we turn financial the to our

Mark Schiller

the Thank In transformation for developing summary, and business our you, a life. compelling bringing of we're James. days early in plan are it to

that strategy margin and going confidence simplification, have significant time. value on capability top-line We building, over deliver focusing growth, our expansion to reinvigorating shareholder of is

goals of evidence and progress much This we see third our to line performance. expectations will starting capabilities. in culture, are February. as significant to outlined time, transformations, much it quarter Day At are ahead in pleased same in all on with our a and guidance and long-term we changes have toward our we very Investor take build know Like with we meaningful processes, and achieve algorithm. require the initial work the We is our time improvement

committed to strong stakeholders. consistent delivering to excited said, all remains for to is your journey that and happy continue questions. results we're team our this take Our With

Let back operator. it turn to me the


you. from with Morgan. question Please Ken The first JP comes Thank Goldman go ahead. [Operator Instructions]

Ken Goldman

lower your wanted help bit I be end for driver not you in the I bit comments some useful, on little think. the about just guiding EBITDA, the but little Thanks. us give little just major a maybe rat. color bit what the a I a up there there follow pricing, affecting Can of more investments it's is? up And picked in would more the understand I year. the to about range SKU made sales at end on to

Mark Schiller

and Day, out we're do the said be some at pricing, SKU changes activity. said how we going our of is those in going pace rationalization, uneconomic activity, to are aggressively to as can to related directly take aggressively and at So, to Investor sales which we quickly the to going we going make uneconomic that we pull changes we're

I you QX think we a making what saw in are that pace. rapid very is at progress

the so being out, did that's lower in we And what more is at driver really have as the pull revenue we the to I be. coming bit the sales short-term what think look we QX, the we softer. And going of QX a and look at little in

talked As velocities we before with that that of pull activity, in the quartile. we are some of out some was distribution quartile I've this SKUs number we had disproportionate a in where our lowest of bottom that losing the about

of on. as So what made, we were is a margin along that, we part that expansion with of which result counting some have been see going the distribution very losing we've decisions but you rapid

of you're As sales we the see will QX. what out, shrink higher, I that's we're the be and tail, costs will pull in profits size think going to going to the the lower, be

the of driver the have you line said acceleration either Ken, So, on we and in are be things the to that's that losses to retailer really price one could item, are a that they didn't significant SKUs accept that could really money, pulling we going for they any retailers, discontinue erosion. investments, know it's make increase long we short, SKUs or be customized uneconomic so to back related distribution story top it's the in

to short-term nature that be we pull out. these expect in We as very activities

they're only them You out and gone. pull once

the we on And so mean faster well. might ‘XX get line F Day stabilization than Investor as in would that we thought that top on to

Ken Goldman

Day, that. shifted metric. for It you Thank highlighted -- that has Investor obviously seems for over they that you as I really is XX%. think managers returns compensation your the key the at shareholder up stock then And toward

you at wide So little includes guidance range, expense have be that higher expected it I'm is extent modeling this what early a but compensation bit your of to I Investor a than Day maybe just just EPS internally? curious realize too you to range or

Mark Schiller

change is to the expense. compensation No, Yes. related not

an fiscal off got You when had back that of plan way are that we we far remember, this to started initial year plan.

there it's robust as performance originally earnings what F not in going but So guidance. to expense impacting is we've at our overall do our this not rewards for ‘XX been the some said P&L compensation our to all. have year relative be that accrued we We delivering, given


The with next Wolfe Research. Mushkin Scott from question comes

Evan Greenblatt

Yes. This Thanks for my actually Evan. is I'm for on now. Scott question. right taking

Any in just now. Have tailwinds fourth general the US a you you move one up a noticeable So from headwinds quarter industry coming any or for into as seen perspective? changes competition?

Mark Schiller

but I material. Nothing interest mean, competition, wouldn't our of retailers There say in dramatically lot the always we I definitely wellness impacting seen is both competitive. a it is that's and intense, always and that it's health performance. from have anything externally

victories are anticipate point the this our change and more near term. and at we our both don't internally woes driven significant our -- think in I

Evan Greenblatt

to on quartile helpful. question. with thanks. SKUs in progressing? expectations? On of been How your mentioned velocity has Okay, and next second were wanted That's get And XX%. XX% Is track it down your that on that bottom then quarter call, you my you of to terms your the

Mark Schiller

Yes, great question.

get quarter will better bottom That's cases, done broken almost economic and may suggest forward. not would we have that than SKUs we're are is bucket. brands the retailer that that taking won't justify in SKUs end expand the that of don't going in generate brands that have to really in return bigger our we've to that come that that good, trying bigger get we now will So is into turning portfolio majority what better, and never out, us The which about. us get SKUs quartile, In bottom less the and it talked when because relatively them They're high XX% margin. have get as of that distribution rationalization not we're get for be well. some higher the better they get they're one SKU of stable discussion of turn in percentage going the vast quartile. are have the to them why before all that The we the the ones have base a

our brands of of velocity is on is So but expectation vast as number, those the the in SKU low get better low-margin through rationalization go the that amount items the the still the XX% get shrink brands. we back better down majority issue toward will


Amit comes question BMO with next The Sharma Markets. from Capital

Amit Sharma

still of perspective, and we can was right? brand guidance good have, the light bucket is, reduce. faster, the and from year, what to the move SKU than the You not those sales all bigger, on the perspective, are are brands for in what, and Mark, just of even in your are that next you XX, but other a reasons, trying granted, a in commentary get from actively them question five XX

So to the divestitures, from pace is interested that is driven it is brand of due that interest or lack maybe parties internally really there? the question of real

Mark Schiller


So great it's question. a

As your waiting when as to considering said buy not right with we're in these control, you and people around we you But Investor have and valuations. for know, businesses. Day, totally something it's the on to not you're divesting have buyers come

margins. are We going to improve their

of in saw very the things the the in to going that businesses. adjusted quarter third margin do those dramatic we've you and EBITDA are all improvement said We

I XXX basis was think it points. about

though we a as if there be WestSoy our the move to long open and are we we the economic businesses That want them aggressively they buyer they as algorithm. for and business. company to keep quickly, said, So are running an as for for-profit within is those going possibly business, interested can are are public we like and make them haul

doing side on we'll have nothing both are up come as from holding as approach We're going But any going and the in us as I will to not said, So time continue like people us, businesses. able. around. conversations the There's swiftly make and move terms we're they improvements our wait and of we of transactions. parties take to to those right profitability

Amit Sharma

one just then And Great. more.

in at A, quarterly And basis look least that's improvement, SKU perspective? long of you a to run pretty from of XXX tails as right, right points. at you available Two continuing margin well? seasonality which as this you're you dramatic US, almost if helping XXXX then the if we think not, profit rate sequential are If is you there there. or the this because operating things opportunities a to to is this rationalize, about these opportunities the look magnitude type any

Mark Schiller

the at businesses. part of we and Tea is we're by impacted brands some do seasonality for higher winter are margin have soup not all months. to really of our with but the regard So Easter, seasonality over question, and tea the one stronger that

So tea impact will which our smaller we summer months, a bit. a our the percentage little into as will be margins overall get mix, of

be may we're seasonality, that made. slightly the improvements run runway rate of -- be still of because So and to proud we've but there made. inflated very there significant the is And

supply With to started that making of just chain, of getting and we're happen. need P&L the on the middle changes the some

I is do going that also we as get which going the we into SKU You significant money year center us mentioned, in some F to restructuring year, as remember, to mixing next we're overlap rationalization, going that money free We're debacle cost to the had and P&L. ‘XX. up in the in early

hard but lot runway is ahead work, to more of is definitely a There's come over there there of So time. us.

So move but made, we're F progress into sequentially as with that see to ‘XX the pleased we continue think . you'll we've we


The comes next with Deutsche Bank. Rob from Dickerson question

Rob Dickerson

Day, right, -- get ACV Coast to your the hey, example, pointed of expansion on right? you? the how about are all maybe, as West distribution bigger from your number a something Mark, Mark Coast. It's an and potential, like Gods taking increasing brands, to at Investor you Greek East the

kind bigger speak you through distribution can year today, color a I curious you have able so call you months negatively Thanks. provide you. past so you the some of expand probability be piece, -- should especially of rationalizing 'XX, give that a fair given but get those on up what conversations bigger the maybe really to sure be those like far being get it'd this couple but around said speak the So lower just that to in just as such on and of and also, the brands regarding taken well, you're we SKUs to come about potential that the just guide in get or you over I'm let's brands the distribution little, you've year, opportunity improving profitability make had because just feel actually so maybe at end next helpful

Mark Schiller

I the increase appreciate Yes. of drivers brands. and going expansion velocity bigger were question One There to we're to get opportunity. of the margin, high sales primary three Great how distribution the around is core items. those high

F But little to have and take in commercialize started the wins on because customers their the when were start The are to very we the wait innovation. with a And marketing resets. we'll and had of question retailers pipeline you coming obviously reset. and distribution, are number got marketing, two to more the then pretty they We've that for receptive. time bit ‘XX. build and the taking new items those in other place regard around The a some conversations big have categories category see with to would innovation

willing to those a tell So would those because I been to to we're get slotting other materialize short didn't on dollars the thing want expense have see standpoint. fiscal not we in the take you I do make year run. is, in expect we're And start going distribution from the spend distribution to momentum points bigger and to the brands we date late to

the And as take will just some conversation. F to for ‘XX check plan, write we dollars and our the having a the it space. won't we're the So build in into slotting to then of you're retailers willing get who needed we get unless build

conversations the are high, is interest positive. the So

in but stores, very I them we making talking top see in our or as to F kind at retail items ACV, have and turn some into they'll move they're about, good get yeah, have all that have we to they're authorized, said, momentum them of start in. the we have We're ‘XX. only not you're We progress you cut what that see these will force of we don't progress absolutely signs XX% customers non-slotted or in who of

Rob Dickerson

to seen the hiring of we've quarter, Chain. the so, just And so R&D, executive Head the you over new bench with of past month Supply kind respect announce then in to or speak, we've seen

do built you point bench additional you How out this forward? going there you North feel hires feel with think called fill? American expect holes Do this to just well. at I the that marketing still or at you as to like today the point fairly respect is are out

Mark Schiller

several very in the different I'm good hires pleased So previously. six them, To major and on feel about. with direct skills the my news all team months is with worked bring backgrounds six I've I built. different and staff, that They great of that we've make

go organizational can running we out. take capabilities So the we versus hit the are restructuring. time other to ground That to new as we through this fill said, each building

areas. gaps we were over-staffed areas other significant capability had in and in we some So in

we complex So this as of that some cross-functionally. good the the this a hiring Pricing through functional projects silos in in restructuring, of we are on would a on be expertise example; -- than and project go plan not stronger functions about. We're between areas I just do complex company. linkage management, is strength talked we

in leadership us leaders outcome are difference won't will of they those a will an on lead the company all the who people They necessarily the to example, somebody but efforts, as senior going be my terms team, make in be be will big of changing important. be having that So organization.

So in months we won't and seen other bring that my skills you've news but people necessarily you joining as who don't last as much you six have. on see the currently team, hear will capabilities

Rob Dickerson

very OK great. anything be price HPP considered, on on just the but all selling seemed then HPP, factor obviously guidance didn't side. just go-forward Okay, things And to quickly,

cash. $XX CFO least guidance pre-tax. financial should it I'm sit ' bit fair will XX, deleverage? in, get with accelerated cash given curious a for You that of we to like flexibility probably million and inflow coming expect it just now that there CapEx extra cash cash for increased to there prior say see and or Is kind little is some just of at actually a sounds tremendous amount

James Langrock

That The plan cash. with balance plan to to that the delever down debt would be sheet. use pay the the to $XX was million


comes next with from Alexia Bernstein. The question Howard

Alexia Howard


two ones me. from So quick

the really freight the second impact you on easy price get costs had negotiate the of I the Firstly, with in problem retailers? increase will was or been my be year-on-year the to to has it were have year, to the pricing is really when the in then -- point obviously you incremental mixed earlier succeeded to taking for first actually obviously around That's Because the one was passed does one you've to incentive issues really that complete? How easy year that felt on rationalization that the And basis, it retailers needed the getting you that. beyond on. another SKU and a question. think cover

on. have finished. process So I'm you stop for be when a Thank just wondering pass you hard whether and that will I'll it

Mark Schiller

significant pricing. on is question, going I fairly would there around So, -- the say on first there is activity

With models. rationalization, to were for explain the out, we're so going previous enterprise were pricing, the is things we one and structure said, next et around it has work It's I've structure our done more SKU kind tenets But there it allowances that priorities on able leaving some second have all we speak. be we operates, in focused I need table continued calls, we were evaluation. and growth. the point of we would on some years, pricing cetera basic through Just a and working quarter of are miles of than to robust in we've on retailers our industry the for the which to pickup a we were as of on that pricing driving and that number more That back money of retailers driving have robust being for key the that they that. is to Bracket are miles analyzed how were to of one -- with just don't some pass we and will our to and regard year of around those costs, that and have more the less today many to of done likely said rethinking we that. time across needs conversations pricing go

was It profit was SKUs. SKU about low about exercise low not really growth addressing last addressing the rationalization so SKUs. And

bunch SKUs drag of a were profitable. eliminated but growth, we've that of were so those And a on some

businesses out SKUs. of we but and so businesses, margin the SKU margins, focused were So that earnings business SKU we actually rationalization the drag part profitable It rationalization. year fact the profit on of is improved exclusively profitable The last took eliminated were some on this the they new they lower is profit.

options a the are in either make be We pricing, either we're because, and to rationalization of to addressed that of so don't I'm going lose out be XX% giving some will them retailers may and through give taking option because money important take both or that the and If SKU money increase, SKUs SKUs these the XX% item or to cases, -- increase XX% we price significant choose very to decide. now a a discontinue and price price a we make something are SKU. going a discontinue profitable want them may to up increase, it have to take not it's they let

and there throes final figuring restructuring So be that what all that work come and the is back is cost the is that like, way. looks this a that P&L. to our issue, going this different accretive with of hope the We're with rationalization. an in announcement redesign the that some because of under end be We'll but that comes to SKU much out org the of before will quarter more addressing we're exactly on both

after vast SKUs our upcoming we rationalization, do but replace a year, of problem rationalization. innovation our SKU that of in so forward, forward every going can -- my be through rationalization the that the we're that don't we would low-margin to next this be care the would and Going taking SKU get majority hope expectation have


The Vendetti comes next from Maxim with Anthony Group. question

Anthony Vendetti


restatement fiscal what results XQ, was revenue. -- like in was ‘XX? for prior driving What question quick the XQ that, Just on the a of

James Langrock

would be wasn't and HPP the just That restatement. a operations. That continuing of going discontinued operations out into coming

Anthony Vendetti

a relationships, make to as relationship, Amazon then if And changes talk bit great. Foods? how can Foods, bit Whole the a Mark, about little you they're about, that's separate could at proceeding Great, continues Okay. talk Whole two little but I know Amazon you

Mark Schiller

absolutely. Yes,

is portfolio Whole And in bringing good than dynamics we are and both business. terms are those have management, the our So assortment really partners we the important interesting of believe Amazon they we supplier to is are differently looking to news terms of Foods. meaningful their of of -- historically. at parts in Foods biggest Whole

we're or we to to high partnering all put strong let's the as about different them. high-margin is relationship looking discussion very where looking very on rationalization terrific. it thinking stores we a a with lockstep at to say, have not those need pretty into sit they they this at are and SKUs. And subject. they opportunity need to do as our they SKU And be. the It for opportunity may SKUs do we are March very much is -- and what us with same them we in together assortment we both in optimization, SKUs perfect in We robust and what think are So a their compare terms actually velocity, do, also lists, us which think of gives the had

very relationship our is them So strong. with

parties. of of manage we how I win-win for we table at think such prominent because a are both they their in and they inventories how in we seat make their them, all terms terms they're we're an in collaborating to important supplier becoming very are a the and of assortment, both have and sophisticated decisions making more it these

Anthony Vendetti

on the than lower guidance. rapid little a a if just SKU that's end sales that why thought, then at like at originally rationalization. And accelerates you'll pace great. of It be you sounds Okay, more more color the

this Day, process. is Investor XX-month the at a XX, about talked You've

innings. the early down you could progress based to it's a the you've thinking made on Are to see that than XX-month up process, still said you so or moving -- less months? XX far, You

Mark Schiller

a largely or is I through closures of or through progress got what day tail. do driven the work fast to rate like. divestitures And both lot is or the be SKU rationalize said to rat of we rationalize So, tail the earnings on left through the going how to by we've

a but a earnings good some very there earlier S&OP said do; that's there we would I on -- we early whether control, of in innovation on commercializing. tell SKU making So forecasting, pricing; lot couple is assortment, don't today, robust still progress what we pipeline whether of optimization, you are very that rebuilding call areas got the pricing, innovation, have that's work where mentions as I to the I've are we stages of of pricing, and made the our a we're process; things

things lot are as to do. making a going want is are we faster. good some this regard from very fast the HPP. don't mislead time, HPP great, the is to can. anticipated, journey sell And to I important heavy I lifting building going would left to that to than things So is don't outside people progress but we example. possibly good to to need sell organization go want timetable. with progress we've take some some which on to of We probably we wanted but help took on started, it are of We're comment that as the the of a to We're brands. on a have these going anybody. faster It us more blocks There year

these our control. in but on of things control, aren't some that do making things we we're good So totally the progress


from Eric comes Research with question next Buckingham The Larson Group.

Eric Larson

everyone. you, Thank really quick couple A of questions.

as into of able costs ops? are any -- put you that you, kind Now take care was that or with of here, behind HPP the divestiture you that discontinued operation of there stranded were to

James Langrock

There was was very -- the HPP stand-alone.

it. no really we stranded when was costs there So divested

Eric Larson

the that figured was I Okay. case.

was question you you as about complex little et a at can bit second can think you complexity an cetera. your manufacturing Q&A here the Investor your this, of eliminate significantly talked the I question co-packing reduce as but we your is, you you a -- idea, give -- operation, talk So Day, us SKUs, there

impact SKUs, SKUs those? co-packers? elimination accrue lag? how take one does is you you Is with two a contracts a of they immediate on does there quarter the a cost I as on Does benefits, depend the so out? it it So relatively rationalize or as how mean, these

Mark Schiller

cut about the out to SKU take not rationalization we half in we to contractually to will we number time XXX to else, something your objective question, anyway Investor at call stop do obligated just manufacturing Day, will -- them. said for or back to coming that our co-mans from XX. and over This XX immediately XX, to those with goal it are our of XX is So, that we

raw the Now to so customer we that may have till have and may timing we're we category be reset to to of of we not on, materials March, cognizant bit reset have little be next cognizant produce because sitting a more.

nothing have going really it's there out by of depend us contract time. So over they getting what these co-mans keeping and but to XX with is make what them, from we

thing mention, the of the which The journey, would that I also to SKU is benefit important rationalization. other is this

see the of the category again, next benefit only You'll part throughout happen resets because, year. year

customers eight, reset the for from to are the we because category. So that now, discontinue months XX not going not we just are may SKU, may selling again, a we announcing when -- it stop it depending, on seven, nine,

impact. later impact full that the will be full in the of impact. SKU -- rationalization will ‘XX. the So much Things categories the felt get will the the reset We'll quarter in things that impact, full of a where of F reset less first get partial get

gradual not about just where see some our the of of benefit. decrease sales So that's keep gradual as light as we or why gradual example switch a low-margin SKUs. in But money-losing see change a exit instantaneously this and and you'll over you see margins we good make will That's a all those the and course -- a talking why of increase you year, it's some performance. are in gradually happens in things and a the those improvements


Bill from comes question with next The Chappell SunTrust.

Bill Chappell

to back SKUs, when the competitive, but the say, those also with of go trying other why Just rationalization SKU the I'd XX% take kind just sometimes understand retail retailer to of say and don't and XX% maybe the you remove they going you like to to response a you. to

rationalization or before of over Do right going kind you're greater few share in up? both result now seeing just understand near-term coming losses share that into enough is I'm the to the of is so maybe back than kind now, of back to SKU then pick kind you innovation kind how just of losses what trying fill have to cadence or of play? it and quarters. builds it spot right the that of And next things

Mark Schiller

we SKU still only have So the finalizing list. rationalization -- we're

so the conversation So what's with the we've biggest really had only retailers coming beforehand. know that they

fully can't the everyone. what we be with it of have the impact I So answer will conversations when

and out higher-velocity, our intent list then We to have But SKUs. to SKUs higher-margin finalize those we with the replace that will is those with go list.

So XXX ones we brand that talked a SKUs. any we but pick low-velocity high-velocity There even SKUs. and low-margin have there about, high-margin core SKUs you SKUs and within are brand, want, is

sit get our So be that brands, a our would SKUs better replace before have the the said a to bottom on better as and SKUs I SKUs said, say, disproportionate has amount intent of That still we portfolio. retailer in the the in with quartile.

are we in don't have. some the space in -- sitting we brands we our that of bottom quartile, space space we a than be of will less on loser the the justify have. net When we do we where So justify cases, because XX% SKUs

we of replace able aren't in ought if to our higher-margin SKUs SKUs portfolio are that in SKUs the with have as performing that we three them couple top enough a we productive, have quartiles. the So -- to be

innovation. Where look how replace a Investor will we plan to innovation have that have. So, have them. some of Day innovation, at put to certainly on the we talked about in We do we we in,

SKUs. is will innovation SKUs because these amount at day, the quartile. definitely remember some brands, particularly of the the are will the the bottom And reduction end on be where my of there in again, in appropriate. of to better We expectation look put our distribution money-losing But get in

by in of terms a our addition P&L it's subtraction lot and eliminates So of it complexity.

better can good but benefit SKUs. financial as as be the that much turning of possible hopefully So replace regardless, we with should

Bill Chappell

pricing. do I on And with changes that's still just of like you stand feel kind more moving for in the most with moving U.S. it's and categories where your stable the that mean, everybody there's in and space particularly of competition category in, a it. coming your know probably spring of some does Got where organic the reset, the buying that -- out? place an then baby, -- or in, is product with I all post shelf

where So stands. just trying that understand to

Mark Schiller


baby a pretty you'll low-margin very So business for but our that is is we stable, at remember Day us. business Investor it that said

to margin and baby but It's to financial be skews. the to our what because do that. of of because in. bigger shrink the get is that that is what of and we've going we're pricing able rationalization and try that baby to performance on doing doing, be to of the competition get already are are I we that not do to got the out just, and our -- brands In took size move change significant bucket third will so smaller, part into that to business our to SKU of dramatically expect business starting had of of So margins X% get we quarter, some get expansion with portfolio, we business, we the uneconomic improve invest we want

a not intent issue. really of transform our It's the part strategic the economics it's that business. competitive not -- to So it's on


Thank you. The next Strycula question come Steve UBS. will from with

Steve Strycula

clarification, your two of and two-part Brexit, call. question, on times So, sequential one on mentioned improvement. you think point congratulations the profit One I or

QX, Just be that question. what sold my how the are anything product and companies Is they QX about mindful do March so QX XXth of even? between That's of a in think there first in pretty happened QX ahead CPG we clear, deadline. or in of I I'm lot should

Mark Schiller

to at one, we've just I it of we make a no going sec, if over you would we and weren't there was end in Brexit turn I'll So, disruption. supply the say, inventory the sure James. want built hard be that was quarter sure to because there to

we cash of flow inventory part the on retailers. is into increase inventory, push intentionally impact but and the cycle not we conversion did So cash did

as to at not do the they're this Brexit, is as point way retailers anything finding fact, go getting transformational -- struggling we going to they're in because they're sure reluctant of we're are more conservative are with uncertainties what So things go. which

that the down inventory for a news is good got while. also road So have Brexit the you is good set kicked news there, we're The away.

one So we it of of don't kind term, and significant sales flow between will any in be short business as the usual but expect other. the quarter

see down we actually You'll we've come in out that of built inventory probably starting worked up to for. some the inventory second quarter as that

Steve Strycula

for follow-up are determined how closely? as would the we you. that think that's Day. And Okay. which the the good of US to retailers. monitor moving be next the quarters, more since of large dollars as some than before forward a one. necessarily what out there at of about should And question happening pretty SKU next Thank that some directionally said lot we're think is at think on cycle year? people total significant focus, be, EBITDA focusing all few That'd you investors then over were Nielsen, up be came just Mark, grow supposed Analyst shape gross shift I kind pieces appreciate think wrap least do EBITDA still I and trends you the How does planograms a through I now sales. to or things, this then planogram rationalization we should but you go that profitability

Mark Schiller

next first the year. answer EBITDA question is grow to the will So, dollars second

regard our on wellness, with other. I've the Hain and in pricing, health we in of discussions to that on The and is, rationalization, SKU retailers, confident or because we about we disadvantaged. each them resets are are many one advantaged important portfolio gotten player times We robust is that fact. good cetera, news asked to very and having questions big et are and innovation such a category on are With

because advantaged are offerings the of I we think of that have. breadth well we

we're If believe. guys different we're be player XX wellness, you're in because a a in call and retailer to and you I want you're health the to going first categories,

We're conversations you winner very with together how senior not that a portfolio have about do want that. together. really work do there a management how more above winner, and a we're around, we win-lose of managing in which conversations so, is health We've portfolio do other want senior It's we and buyer a is of to And to to differently. thing taking be conversations. had to wellness, a the level doing as tops, win the lot be lot we the strategic to top

they've are uneconomic and ever we've our that get of this at So relationships been, business a that are going that to activity through see of the robust see I'm the strong end the interests as optimistic as time talked aligned, you're very that our that things and that we value portfolio retailers all and the about day. our over


to like conference closing question-and-answer to would the for remarks. concludes session. turn management over I This the back any

Mark Schiller

your Great. Thank we're questions over couple available as you time. to I And all. days of have you the appreciate them. answer next

Thank appreciate So, you. I it.


This concludes call. today's conference

You may Thank a day. pleasant participating. you disconnect for have And your lines.