Hain Celestial (HAIN)

Katie Turner ICR
Mark Schiller President, CEO & Director
James Langrock EVP & CFO
Andrew Lazar Barclays Bank
Alexia Howard Sanford C. Bernstein & Co.
Kenneth Goldman JPMorgan Chase & Co.
William Chappell SunTrust Robinson Humphrey
Michael Lavery Piper Jaffray Companies
John Baumgartner Wells Fargo Securities
David Palmer Evercore ISI
Call transcript
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Greetings. Welcome to Hain Celestial's Fourth Quarter Fiscal Year 2019 Earnings Conference Call. [Operator Instructions]. Please note, this conference is being recorded.

I will now turn the conference over to Katie Turner. you. Thank

begin. may You

Katie Turner

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

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

meaning actual are annual risks that course the report Exchange from statements to based Commission differ and other cause differ to current and could this discussion today those filed involve and on uncertainties in time statements. statements press its of from detailed release securities that these materially federal the issued Hain Please management actual or forward-looking results on may management's time any the During Form from implied XX-K, forward-looking those in described refer laws. and could and for made make materially Celestial's events call, Securities within of risks These with statements forward-looking expressed expectations the the today. a reports to of

on to release. remark measures. GAAP of Please note, is reconciliation A will results financial adjusted non-GAAP financial in today the or available measures earnings non-GAAP management's focus

also presentation the XXXX information, is also available being slide and archive it The a an fiscal of websites financial company on on will which be additional Relations. outlining supplemental Hain posted This call prepared outlook are the Celestial's has Investor few under webcast website. and

to call Schiller. the I'd over Mark now turn to like

Mark Schiller

Thank you, Katie, good and morning, everyone.

immediate to capabilities; steady term, a simplifying as expansion our international and and U.S. transformation performance that would core we top built optimize and strengthening strategy program. key recall, on the set was growth financial that innovation continuing on later strategy third start two, the and assortment top one, margins U.S. three marketing first driving we in the the short in plan. cash founded on and we growth pillars: you'll the quarter, laid in-store .we out As progress core the four, and velocity organization; brands and business. margin three, see our flow; line in profitable revised line beginning strategic at was the materialize reinvigorating of profit portfolio of explained transforming build would four the expanding and and That

With erosion with continued expect improved expected 'XX half margin to following regard the fiscal trends versus with we and volatility. some earnings, continued expansion sequential dollars; you second three, quarter; margin each EBITDA gross U.S.: improvement the line two, and first told in top margin half one, -- the to in the EBITDA

that brands we the and taking would SKUs We also on shrink fast depend strategic communicated amount and the to able money-losing activity, noneconomic rationalizing decline eliminating of by the SKUs pricing. were how

EBITDA gross and and Internationally, QX. margin that you progress both steady dollars, continued the should that we quarter we in said associated adjusted pleased uncertainty against performance commitment. I'm margin despite showed strong report fourth in results that a with With solid to our mind, Brexit, our and strategy and expect expected

of our areas in Day As our and XXXX track achieve fiscal key during sequential to business, laid February. objectives in we financial our financial Investor expected, and demonstrate remain performance results improvements we that and these out many on operational

XXX This was QX other finished up at margin, gross quarters this in sequential in from EBITDA basis increased quarter compared the QX, margin improvement with our fiscal XXX XXX generated straight points significant the points from QX XX.X%. points adjusted from third our adjusted consolidated and dollars EBITDA summarize for improvements and and year. QX. This drove in progress team operational adjusted execution To results, both QX gross and QX on margin U.S. internationally. adjusted

and XXX from international. EBITDA at and XX.X%. in XX points was QX from This and solid from finished QX, basis quarter third straight points up QX with margin U.S. increased also Adjusted both XXX for improvements the the points

in EBITDA on XXXX, pleased and those very since increased you the gross second improved two of our QX metrics adjusted year since is that increase tell I'm quarter our performance margin that Importantly, to versus reaffirming our also fiscal first quarterly implementing This financial a new the strategy. dramatically margins year-on-year ago. has

to Now more provide little with color, let business. start me U.S. a the

quarter, versus Our XX.X%, XXX adjusted XXX QX for versus third points finishing and basis improved the margin XXX from points gross at up QX, straight points up QX.

year, versus is of versus up quarter result of 'XX. such too, increase first last also increase last its since QX, point at was versus points third improvement year, also Importantly, Adjusted had year-over-year increase fiscal since point it the improvement XXX improvement year-over-year margin U.S. the ending That QX QX XXX EBITDA consecutive XX versus versus XX.X%. such first was the an improvement basis and This, XXX point XXXX. in QX.

multiple to there We were U.S. improve profitability opportunities told you in the

areas with improved the has on progress Now people every our our on tool, focused that the team we is materially, have right right on right confidence our the transformation financial growing the and day.

to I to on our some our and to Before demonstrate the making I progress you validate business, progress. confidence we sustained that we're continued up international setting against give turn ourselves and wanted are detail for strategies four

we to company our organization, with the that superior WestSoy complexity of be performance. a ability deliver Starting To and potential strategy, accretive low brands size execute first minimum end, quarter, low in we and that our that many with our our Protein were remaining completed to margin simplifying we Hain indicated for brand, too brand portfolio. which to growth, and inhibiting the was the the and divestiture Pure the had

In balance debt X.Xx. also reduced our down addition sheet improved and divestitures portfolio, leverage paid simplifying our we to these as the to

simplifying took optimization SKUs team It in eliminates effort. need meaningful we're which cost further XX% SKUs XX reducing is Canada also approximately also America. over and/or our for don't and total the actions of This business. about by North Overall, profit. further SKU the our about U.S. aggressive have pricing our eliminating expected SKUs, address XXX co-manufacturers, the again, in to to XX% is Our that low-margin SKUs of eliminating,

restructuring QX, to brands strengthening customers. resources better strategy, business visibility the second forces us its build five of promotions core system and consolidated American allowing management like sales cross-functional new create in better bands into Our layers, and and of our implemented trade North to and a innovation We've reduce centers our capabilities. give created business one, spending excellence, started areas resources. increase We've control focus increased of us teams optimize effectiveness, insight. we consumer with to a also to our to In

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

team in the and added in the to the that well more the in QX. also we've skill changes on to six. senior addition structure, hires brings journey. to In year leaders transformation We of with my are have sets our leadership That two new first capabilities a line now team our since total with world-class organization

On middle strategy, third the our come been our more of P&L, expand has significant margins and to in flow, cash the team on with delivering progress beyond. XXXX and fiscal

half improved basis dropped ended dropped year Just performance and XXX basis the Service XXX cost half, over first distribution to the points points. XX%. XX%. at Inventory comparing our second

to related Pricing poor Fines work more more and here, by XX%. dropped to good service do penalties by have than we we're increased While making progress. X%.

Day We've top our strategy a the Investor growth identified core tea these Bigger in and brands. line of Our high-potential brands at Personal fourth categories. in February profitable residing Get set as Care, reinvigorating is snack, yogurt brands

unit rationalizations. distribution and recall, is You'll in revenue losses on partly first our from fiscal to uneconomic half. from increased said, due quarter up see SKU in year-over-year quarter. XXX from fiscal the XXX partly last 'XX. we basis and XX.X% lapping the points expected of to up This to the -- Bigger velocities That declines That's elimination brand 'XX and Get and points basis investments due the

items down the expansion total growth a to faster on businesses. shelf while due turning category health are the are than the distribution the That's placed the key So of these indicator rate. margin of points program,

Get innovation We marketing creating and for we brands remain because with equity-driving to reallocating the program. are strong expect resources also of velocities growing category, these goal these Bigger

about in Conference next the we're the build Barclays consistent at stages, we'll early present and While foundation changes we talk to week. Investor these the for more starting growth, when

to at I pricing. short reduce last top the unproductive the a grow from resulting XX% the questions underlying total investment, the end, quarter about a line health remind you at look uneconomic and we faster reassess smaller and the business foundation which stronger future. let also earnings me line the the out U.S. SKUs first in those line in issues, pull U.S. we and explained of we the in that noticed you and that that profitable To decline would erode, attack term top our of articulated have would faster that I Day of the top in some more in business. the as Investor the but choppy be call

we performance, As several important we top signs weaker. line getting not evaluate is stronger, our our that see

just mentioned I in improvement the Get First, the Bigger velocity brand.

in of measured in investment slightly brands Bigger channel. consumption QX grew MULO as the Second, mainstream Get

SKUs of SKUs likely year, space of that to sitting are X% the hold since the still forward. beginning velocity in Third, their fiscal the shelf bottom the of quartile with the percent meaning categories going more dropped the has on their shelf

the our And ago prior In quarter build increase. price overstated. addition, year this where X% result, in the somewhat a consumption we're in quarter, decline again, shipment sales suggesting QX year, customers by inventory outpaced a lapping to a as is

a is able metric. business were, our a QX while out short, be top line unprofitable simplify in should not pull to It we our to positive investment So in more concern. the that even fact, as viewed delivering profit

our In deliver promised, very for adjusted adjusted U.S. to gross stronger foundation margin the creating our much with a EBITDA as future. our and expansion, and margin in summary, progress the while I'm on ability pleased

to Now the international let business. me shift

promotion improved a potential year That same work very XX.X% last we the in we continued Brexit as the line some communicated March. strong with adjusted we softness X% see to disruptions were customer Adjusted expansion and inventory eliminated a last up hedge the as was EBITDA in against currency. up versus built results low-margin and As quarter, down and international margin top very EBITDA said, the solid. constant quarter in expected period

up Adjusted basis basis gross points which also points XXX ago, points and EBITDA delivered XX.X% QX highest since up from QX, XXX is up XXX better QX, points than also corporate points. from margin Adjusted QX. impressive from international an has year business This the points excluding from XXX quarter, was XXX margin from was the basis the at margin was basis QX. XXX overhead, it ago. to points QX year from XXX It is points EBITDA XXXX. improved XX.X%, And versus XXX and in

brands. potential we them number of U.K. surrounding U.S., investments growth uneconomic strong meat plant-based reductions, management we brands. our brands and in have the Brexit, segmented given XX the team inventory Between the in and number we challenges a did was more all, aggressive substitutes and an the navigating reducing All difficult particularly brands. one encouraged the strength international Europe margin to two that job the exceptional lower customer are line strong. delivering growth and aggressively than uncertainty across business in so a exhibiting Similar We're top growth, share the have are environment by performance. the Many down and these and of saw margin beverages in number portfolio and where our in of are quarter, and solid lower

cost million, the This in most U.K. Tilda $XXX also By for regulations. government we but EBITDA. our cost a pasta to the the pressures risk. accelerate, strong XX.Xx past transactions and due industry one premium had result, of was is to a several stagnant divesting a done further significant Tilda, growth and EBITDA food And the announced increased rice reduce rates that over Yesterday, several we'd years. or been the in our which input years. was brand brand, represents for other sale as will significant input Tilda facing

to significantly it As ForEx. you our know, Brexit exposure Tilda also sales so selling U.K., in reduces are and the primarily based

another for our is not to of value strategy. talked in example and while about may It selling places we this where reduces our allows simplifies resources organization, So significant risk we us business, focus have our this sale shareholders. executing better can explicitly us create

briefly Now F to to give me a few 'XX let turn headlines. you

Along margin you deliver growth EBITDA U.S. continue our Day, As we adjusted from productivity. expected margin focus would with 'XX to we further line Investor top the we on and again. told continue that recall gross growing would expansion that, as economic shrink F in and before you'll the

important we're we and said, better promises. that are few report business. where are focusing operating You commitment will the changes we energy make see our our guide more guidance a That in and terms our how going to we how reflect to reconfirms to those of

for top guidance going the The not throughout to not the plan. XXXX the first We're give we're of line margin are going visibility we fiscal line year growing because will giving into improvement deliver visibility to we is That said, change also to are -- margin. top Bigger continue that fiscal give relying health on Hain. which and EBITDA which the you and the adjusted to growth-generating brands, Get of be the to gross future businesses going you are

the strength EBITDA our share of business per our dollars show since our adjusted quality these Our earnings measures strategy, of guidance will and the focus of and execution. on health

baseline two, top headlines, which will, the Get and top stable four, a and grow 'XX in and 'XX; intentionally effectively one, and we of grow; Bigger fiscal up and to fiscal brands line price, acceleration volume, set three, line; of lower dollars profit adjusted the from profitable terms EBITDA manage net with mix even reestablish impact for In margin.

we together America on teams the maximize ability purchasing, as closer North to deliver of America, teams Instead the we're change reporting of for North together We are corporate. terms changing tremendous manufacturing, U.S. to marketing and fiscal reporting will synergies well international operate. of be Canadian will entities. and in reporting how our and innovation U.K. rest see our XXXX U.S., closer and in work international to world, Second opportunity our the synergies. the Similarly, linking segments to and guidance

change fiscal for how business. 'XX third we our international report is The

more As dropped you due XX% year since than know, and of the the challenges British pound the related uncertainty has the Brexit. first to to

will dollar performance our true Focusing understanding Europe our more even international equivalent business on U.S. financial reporting make challenging. in

control. to a focus and visibility to is job with the provide that business Our our areas are continue of great you to build under

exchange currency assess our in ensure performance versus performance you will as as fluctuations, by provide we as provide local the the so management. financial rate. we'll the can Given and items possible, constant performance planned significant well as you both currency transparency much real controlled That and

this around in our business strategy, a We're focused productivity show summary, transformation on and very the that signs clear running business is early strategy growth. working. discipline much results culture stages, the In and a with while greater profitable

our our deliver future but ahead, commitment ability team remains We from have our a our optimistic long road Day. about to and against Investor

provide it overview, brief more to on that and me With over who QX details financials will let XXXX our turn James, fiscal guidance.

James Langrock

focus Good Fourth operations, on Mark. results continuing you, discussion Thank my year-over-year morning, X% decreased acquisitions, expectations. a everyone. Today, sales I otherwise noted. was period. or $XXX million line quarter divestitures net items, will adjusting decrease certain our our XX% on This and prior with the basis. to unless from currency, versus consolidated financial When decreased sales currency constant net in generally for X% constant other a year

both sequential by U.S. trade improvement. Project Adjusted the and basis point and $XXX by profit supply gross partially With chain in year-over-year QX inflation. improvement basis sale, commodity result, consolidated were on this XXX incentive we sales of our XXXX SG&A was in primarily delivered This XX.X%, driven net net the EBITDA EPS. on prior up from a in sales. increased lower year annual by as was adjusted period. on XX.X% compensation Improvements efficiencies or XXX profit and reductions XX%; cost was Terra point offset million guidance driven and percentage

face international quarter $XX EBITDA the and was XX margin prior $XX an U.S. driven tax EBITDA tax of the effective points in XX.X% $X.XX of on unfavorable of year a of both million EPS in to of even represents $X.XX the reported we effective year basis third basis Adjusted improved by compared QX improvement, with on an We million FX. QX rate from Adjusted based with businesses. adjusted compared sequential sequential This $X.X consecutive last margin million as our period. XX.X%. rate

cash million and was a balance of Since flow expenditures in now year. $XX.X QX million $XX the me and reporting cash improvement were much $XX.X fiscal for million, $XX was for quarter focus sheet. significant highlight, Mark million covered our Operating our from which segment QX. the Capital on let in flow

Going continue conversion continue discuss our cycle an free further flow improve in expect forward, as cash with and more fiscal our to profitability, improve detail generation we improvement cash in XXXX I'll which operating we to our outlook.

our of XX, reflects This $XX.X SKU from balance improvement and customers the Inventory June net an in constant million $XX was U.S. excluding currency of to cash forecasting was better and our As million. basis $XXX impact on by a the sequentially QX, our service debt in rationalization. decreased million

in million XXXX. $XX is than levels our August peak less inventory our Importantly, inventory

X.XXx as business end Protein XXXX. Our bank We June used sale the from of down ratio pay Pure X.XXx to was Hain fiscal leverage debt. the the the of proceeds compared XX at to of

transformational progress and redesign Terra, with in savings out of $XX.X capability have and with redeployed million an We complexity our better XXXX, been eliminate million as Project productivity, to terms strategic Much our than transformation. the plan. previously to align has which and made and of implemented associated to $XX.X cost organizational resources strategic In we referred redesign expected. slightly the deliver build to we was saved better capabilities significant of in the fiscal on quarter the

process profit basis annual gross rationalization low SKU that by XXX Over North in points. and year representing time, net primarily America the eliminating in fiscal XXX in of velocity improve our SKUs expect approximately margin America, are sales We $XX will we the XXXX. for approximately North million

million other related charges we facilities, savings will These the million lease annual asset of the to of resulted QX. severance, $X $XX well. inventory as drive restructuring in write-down, cost, manufacturing write-offs obligation, in U.K., in and efforts approximately anticipated fixed Part the we expect charge consolidated which in

to Tilda. share of perspective would financial on sale I get the like into Before our guidance, I

to $X.XX about transaction a of decision we the to expect some merit $X.XX good ,depending capital for premium are strategic about from we this on this price, believe shareholders the allocation given how our into said, That I'd But insight use be you proceeds to the is We give dilutive deploying and like shareholders. proceeds. philosophy transaction. to and the thinking our

Board capital management the allocating long-term committed to value. to First create foremost, shareholder our and and the most are

range, is the excess management is business. first Our run have allocation ratio ensure capital We intend or invest target share from capital within evaluate just do Board we to the proceeds to the and capital to dividends. evaluate optimal to distribute with sale, opportunities opportunities. structure repurchases excess the Tilda our the either capital debt After ensuring to our distribution or the priority and leverage via other the that the current reduce

on contributed excluding fiscal adjusted million approximately focusing which are in for outlook Please our fiscal in million and net Now Tilda, keep XXXX. $XX in XXXX. sales we for EBITDA mind, $XXX

to XXXX fiscal from So need of to take comparing it out perspective, finalized modeling a your when guidance. going used our to results of guidance, Though will assumed have of Tilda, utilize of we financial fiscal purposes the that proceeds XXXX the all we down not be all our sale you'll debt. to are we pay for proceeds the of from how have

to compared improvement our algorithm. of in approximately reinstating to On results XX% reported as this $XXX EBITDA million, compared million XXXX, a basis, headwind fiscal an represents This currency EBITDA of of million of adjusted adjusted expect $XXX $XXX significant the given we in $XXX to million $XXX create fiscal to $XXX EBITDA adjusted that ForEx of $XX performance expect in of bonuses X% to XXXX. million excluding EBITDA million adjusted fiscal in million an EBITDA constant For we adjusted Tilda, XXXX. increase and

year to we items, by improvement plan. continued of improve major million, our from million our momentum reflective in EBITDA expect will last and our these a confidence $XX and Excluding adjusted $XX

to earnings On reported is constant range an $X.XX fiscal of to Adjusted to expected $X.XX, a $X.XX the a $X.XX diluted $X.XX to XX% XX%. to currency per adjusted rate with effective of basis of on EPS EPS expected XXXX X% are compared to an XX%. in increase share the be be tax adjusted of to basis, for

reinstating It's on addition note stock-based adjusted headwind to that $X long-term EPS important and impact a the our from also of a $X.XX $X.XX bonuses, of year full in creates compensation per headwind the the for to which share. approximately incentive has ForEx EPS, million

adjusted will our progress Excluding XX% this nonoperational fiscal demonstrate which headwind, increase to XX%, EPS from XXXX. significant

foreign to our exchange in that fluctuations particularly rate British an annual in Brexit, with compared rate pound XXXX. $X.XX the the and fiscal uncertainty the have to I $X.XX of mentioned, Due exchange guidance around assumes as

will translation the and going earlier, $XXX,XXX British mentioned in each EBITDA Mark movement on in adjusted mind, basis. basis Keep approximately British reported we results, $X.XX in pound on forward. the a constant both As currency provide a equals of

$X So the has movement in fiscal going currency a $X.XX million into headwind XXXX.

profit organization, America. fiscal efforts continued international including operating and to with significant portfolio investment we've XXXX, similar business, slightly optimization and inflation. be in growth further in results In savings to expect what solid the We our generated substantial North from lower improvement with along our productivity in across fiscal XXXX, expect we

expected million are $XXX be noted our by prior a to XX conversion with as to excluding million. year, that Tilda. a approximately be other This cash the to compensation range XXXX. to million days. improvement of cash-intensive flow business very expense $XX million to expense million be a and, million sale, depreciation, Tilda significant amortization, stock-based the is result approximately will $XX improvement of from operations from $XXX of the cash million should anticipate approximately improve a also in was in fiscal in and It cycle $XXX $XX compared $XX We Interest

lower significantly recur guidance the plan expect fiscal strategic that Our succession not related CEO associated and included we in and payment to $XX the items, year, SKU XXXX. of than other $XX started related transformational and charges which restructuring the which in cash do to flow QX includes to rationalization that prior million million plan is

$XX expenditures million to capital spending. million, capital XXXX with $XX expect We in of line fiscal our

the cadence to From be half investment of perspective, sales second to the will to top manufacturing businesses meet our demand in margin. investments and year. rate the decline a shrink of in fiscal making expected are improve productivity the higher-growth line We net and

$X in expect a From based of and compensation expense slight we growth long-term headwind a the our have year These to fiscal 'XX incentive a lapping currency also similar constant profit to that period. demonstrate QX perspective, EBITDA to compensation lowest QX are QX adjusted compared items higher will part prior will million in basis, approximate profit the two quarter reversal. an we be expectation represented year-over-year prior to contribution the on on we continue dollar incentive year.

Given the seasonality in our of the representing quarters business, in total, profitability ,with will improve dollar as and QX contribution year. the largest fiscal year QX progresses the

operational our of second XXXX look strategy forward Our in and us continued the and XXXX. to gives results through our we financial half reporting fiscal that working confidence fiscal is progress transformational

With that, will to back call turn Mark. the I

Mark Schiller

Thank committed confidence strategy consistent to James. our for remain In all and our strong, summary, stakeholders. in you, we delivering results have

With to your we questions. happy that take said, we're Operator?


[Operator Instructions].

Our from Barclays. first question Andrew is Lazar with

Andrew Lazar

phase. might a bit wide. key reach early about still two guess, I in or to push fairly end understanding I the fiscal to us range start to that go right you range So tell lower higher you the of the with turnaround as the what is that either some the end well. of maybe needs in range EBITDA could the you're factors off yes, of we'll on And my The hoping 'XX questions, for was

Mark Schiller

a at So let me that, take Andrew. shot

optimization the line, right. that that this on goes algorithm not into upside, the productivity, we on top many things to underway everything pricing there's with that So baked assortment have have we regard

and excellence, progress. on to continued be P&L. execute the But on in counting the always middle line that upside going we're to the there's on of top So with the both extent we productivity

there's mitigate And taken there's else, significant not note: go this of say could that and for done we disadvantaged Brexit, is us wrong, difficult terms to that risks is know very while that in plan potential analysis an are two we're we've of the which risk always have that I'd competitively forecast. uncertainty. because uncertainty becomes things any versus extensive steps In there impact one to to anyone

rely operate risk the around as second I I work think is the environment plan and an say changes, partners is these And that all on retail we that always in competitive. we're distribution. us, to our we of with executing because in

to upside. have that And distribution grow significant we deliver set so the I good on optimistic the extent balance, we set that planned, confident the we lose we I'm will and strikes downside. and very can a think more To But a and that extent have than we expectations plan stabilize distribution, that we we've would today.

Andrew Lazar

productive that have be with Get to been of your know as up? are that my into on managing replace question, SKU less gets you the in the shelf I the then shelf. space pulling freed is -- some And sort product leads to as more SKUs less much shelf, that profitable next and you the guess you'd like which of moving productive rationalization, off sort the along of able of now testing, Bigger brands are ones how I that how

And gone has been retailers distribution that as I gone customers how shelf to for just may sort on to of of But has some this of Some you've conversation guess, period relative losses and how lead of space that the process? expectations? time. with the through is going conversion your

Mark Schiller

question. Yes. Good

So I would expected. say what line we it's gone with in

when recall, last had in reset quartile you'll As we about we we amount in sitting velocity. bottom guidance year, terms the of a talked of disproportionate SKUs

loser certainly first So loser half as net of will to space the were through to uneconomic net a space. to And we fiscal of continue knew a expect pull going we be be I that of would out 'XX. continue we investment, that we

categories about and That's velocity As higher-margin replace and things to replacing have that assortment of about a higher optimizing things at have Investor we right out. fairly is the challenging -- and TeaWell well. SKUs. proactively we so nonperforming In then, our little which we our SKUs program some well. have SKUs don't talked making that bit hold Day, with aren't We're bottom is coming called are max very now, secondly, mix, to with much much resetting tea, to that small fast But have percentage key to of the turning there put onto very the shelf minimizing so big quartile, becomes doing looking innovation a a some the -- the have we category are space categories, ultimately when to it In SKUs be more honestly, retailer that's in going that our progress other that proposition at again as it, innovation, the us in .and we a is like and we to growing there. number that space. going as


from Alexia is Howard Bernstein. Our next question with

Alexia Howard

normalization channel? 'XX, natural it I your from losses So the the I first segments guess, see then just on. early of now? half growing how my dynamics And in the Am expected regular through to I'm fiscal able it get sense you for is or followup, comments big pay of just e-commerce be of the the timing as reductions from of start the we question. food 'XX lap a thinking sales in in then those trying on of Andy's parse between exit U.S.? that each of start roughly the U.S. are sort we'll sales process distribution those channel and versus to right out you that the second SKU following of should up half pass sort to if channels And I'll that. growth fiscal are to should to on of

Mark Schiller


year. put in So distribution strategy question, on we of QX remember in place this the that last

uneconomic until out through investment second this we get quarter year. are And so still the we of taking

the is I'm you, expect So already more don't would Part have would second those through the we've lapped And go understand when with the second retailers of give sorry, you the the get be an in losses. in conversation. significant to total distribution guys we we that losses half. then some that partner control the first half distribution. we And some -- example half, to as what investment, would I uneconomic we need that of over on of I

going close at million. is increase, either XX% answer I the what If to increase, said, not about take obviously, that a be. they SKU can But "You price We're out. $X retailer Day at and the example, the take SKU." loses the take distribution talked question retailer to discontinue So holds. if for price goes increase you went that one Investor we'll to one they sure the the to I or believe distribution to We don't that price

bit than those is to in -- some be to is of a that better it money that of outcomes with one but to customer. outcome for hard continue Hain little in that and nothing lose either SKU So going do predict, we a if

a So program. having we're a In cases, some able In those we investment, holding to we're of some program last retailers. with discontinuing uneconomic some conversations we're year's at some able cases, we're we're as items. in cases, lot replace -- to better look In cases, items. with

of we've is little predict, it's there because on the why some choppiness But we to which terms part that reason line top certainly, the more guide we is in start bit decisions. some half will harder half, the half, pulled So in a given first of more to of better been -- we reluctant to of there the -- that investment the more expect trends year. get the would uneconomic second will pulled distribution and out in second pull out we the I that in the will lap things economic those

in likely half Although the on brands, they profit much still second will than we Get brand. down we're Bigger more maximization because a be taking aggressive stance again, are the the

to regard we retailers are to on and at cases, visibility were vary we by And to hand-packing be more replace it have to the us your automated many these going investments, example customer with package uneconomic looking A that channels. to them. size to do improve our channels, the able and and our pack as they we partnering channel. channels we're the with for were by specific have configuration all allows forward obviously, customers that would question things a selling change been and margins With or we hold good In distribution.

So there channel-specific impact are customer-specific and results there's definitely the that will -- in conversations each.

it things grow things that But the being customer which of we're channels out. a say strong looking now, being seeing because across we terms trying things would channel right investments pulled so are are and in and and core replaced by staying to I it which are in and from. by varies of varies which at so foundation, And we're really most to every optimize the channel have decline


Our JPMorgan. is Goldman with next question from Ken

Kenneth Goldman

is had To Andrew Lazar's a guidance, mentioned Brexit question your on risk. that the downside of you

obviously you're looking to and I and about what's And you baked is everyone hard forecasting think that. numbers. your more of give results bit I are wanted that's predict, Brexit worst guess that. aware what color, I little of just color bit in actually could, get the your numbers, so it's your wanted the guidance more of terms little from I I to I just but Brexit a a I that. if into for scenario But in to know for in assume a case analyze hard from

Mark Schiller

you country, goods so the border. more is truckloads been over less putting that backlog moving going it's you less the to are likely moving are we doing shipments be with and from any the is Brexit; Yes, inventory come; change. busy locations; we which time that the we're changes less so have so Brexit, taking through different even a the actually what extra what impact around hard tell country, as becomes we that going there clogged due to the from we to into what whatever But that to container we ports ports impact steps like? have and look hard that in exactly of would tell loads, to enter is doing have what to moving mitigate I react does to the Sourcing be. What

how manufacturing to bottleneck we becomes, labor impact What businesses, we plants is what tariffs things what in put that So of get to can can't doing a our on of control. regard what the control border the long at immigration. happens we there's are we to kind lot with

that They risks The into forecast. control to to What tell don't we're the that would plan. you things algorithm guidance. well So I are that are of you, and would tell we we we very But some is prepared. I can I very built are this is controlling. things be this think really control, hard going to

currency, if fourth There end despite there constant environment. you something very be our that delivered most. in might happened certainly this you double-digit it As we QX than QX. weathered material were in Brexit saw and the results, growth look of QX that at earnings we the And better think expectations I at quarter, well and

So optimistic. I'm

I in built amount we've of and prepared think to the I think well risk, handle it. we're appropriate

Kenneth Goldman

of get there's coming way in on hoping a Okay. trade bit maybe want the I public in on -- on. some on again, a where more you're meaningful today, plan a of categories a that the I Can little you the any innovation of you of secrets focused maybe flowing the benefits terms help so we question on assume sort focus have, some Mark, And to about my of to know through I we second it's some can some get broad maybe. to give more don't a expect the little idea market how investment can just of is later. some was a give But color too you brands of question. obviously start sort that's timing of and talked in then of us more innovation. And call, bit but you

Mark Schiller


the reallocated to investment resources the have We brands.

You than we because see marketing year last stopped innovation in all this Personal to year. well. more the We Care basically we year innovation in will because supply put adequately last couldn't service significantly business and

the much of to have have we is we We is robust that California have our Care. pipeline a that's going much up Personal plant in to and plant of better, the services be and going years' innovation two better that supply -- almost really new coming Now be out. our innovation in worth going

launched more tea. before, be pretty market that's tea. pipeline talked And I broadly which which a going TeaWell, was into distribution on on going ideas on have to have limited also in about We robust

a but brands second the get a we try ideas innovation the hit snacks, have we snacks yogurt, of of have half market in within multiple we as robust half will And of portfolio, the which into We couple of some on year. very pipeline hope ideas and in the the second well. we the fast-tracking have and market the are big some to

So you'll see first half. little in innovation the

And You'll I 'XX, robust F categories. see when then and think all see the more innovation across the innovation brands second hit in half. we you'll


next with question from Robinson SunTrust is Chappell Humphrey. Our Bill

William Chappell

it the bit it was highly I to to understand. business a want a valuable and decision that Just guess and back Tilda obviously just was little else, was growing. to go to valuable -- trying someone

along? other to part look total just would sell a Was And urgency make you really so sense of Tilda I'm to sell as just real business? growth not understand, -- -- the right businesses or the if came of there price did to trying being sense and

Mark Schiller


So a couple points.

close to would the time that would was cash tell Tilda a But we'll And the forced decision it. the at and with "It's time to unsolicited to sell Day, very felt when the to what all any and First, at now One did on Tilda the when us premium told working capital were what this $X.XX. in an a it sell. pretty take I several million we and say, which the sell was offer get were at business." we there obviously now valuation, at our to to like, were it going close was look And $X.XX paid transaction, we this you, which XX.Xx. is business not in it, fit for paid Investor brands that which $XXX honestly, by factors valuation, we settles at you that we not for But was for bucket. we to net accretive it's is what we be it. did currency,

this time valuation good over gone on the that and was some premium a created to market. have we've So felt that other deals very value in

has and significant specs regulations India, around you The second government source we controls makes headwinds the supply. which in of far country the was rice importing has which some it increase to been There a rice, fewer factor like difficult around its for that have that very business. of some on that the from need

in erosion doubled significant margin so while margin happened line, top the the several gross and on input robust have on And is that seen you've actually brand. you've And years, what business. over seen that last costs EBITDA almost

of was headwinds. the from see it while any these business, our becoming And dilutive it margin future. in we to didn't relief headwinds So anytime a was near because those premium algorithm

and risks given the of currency a that our obviously, I was in U.K. fluctuation mitigate is think the some time the to Brexit, feeling the third, this good

And those to so led decide to make sale. is us what of the combination factors that

is regard focus that your businesses I to tell you -- are which the With is we of uneconomic part other on our growing. are question, your preference was would to sell What second around that would brands each come their to and algorithm. the offers with a time accretive merits. we But people company, them be our that all as businesses, buy evaluate of on to and us one potential have to to public don't

exiting focused for right wasn't Tilda But while the on that at receive so short proactively, or specifically it the them. on other in we business. gave time low-margin should fixing And was And businesses, deal businesses offers other we for the really sale and reasons the on we right are time. a them would entertain period you, certainly I of those

William Chappell

it. And on clarification. then Got one followup just

most of in falls XXXX, that XXX is of over time, XXXX Or Should million fall we So to represent from revenue. out? you're out will that assume Just that modeling and in XXXX? SKUs just, trying $XX a reducing this understand that standpoint.

Mark Schiller

yes. Yes,

the category to is take until out. have wait So again, those in to reset SKUs we order

just holes. stuff go pull off and and leave to shelf can't a You retailer their

they for wait we throughout the and category the year. reset reset, So

that that the volume that in out have more almost F reset ones drop reset quarter, the you'll the out volume So ones have fourth in 'XX. The in first you'll drop of quarter, F all 'XX. in of that

in of would SKUs. out and all million, to $XX other But drop XX% so, you will assume I for that of money-losing drops That's 'XX XX% XX% these 'XX. out or to in SKUs the about XX% are F So understand. important

better. improvement out, they that algorithm comes us about entire basis XXX There's XXX of every points come gets So portfolio SKUs our with those one of when out. single them, across the pulling margin


question next with Jaffray. Lavery is Michael Piper from Our

Michael Lavery

that status on you believe, think of the the had to today versus Tilda more to touch to necessarily some portfolio? one much anticipated. just mentioned work ways you you we might see obviously, remaining be even go? how of Can I should of And you deal the there where the wasn't come? But how

Mark Schiller


you talked Investor sales about remember zero billion of generated profit. Day, that from $X.X we So worth

to them. said, to billion. $X.X we we've them a -- And of the our that that them doing always can remain rationalization, them stabilize and of fixed we have brands. fourth the on get everything of while we working attractive over maximize much the within fruition selling those of if in double-digit like value, explore improve them. in we and and et that them profitability quarter. pricing, of some potential cetera, we're WestSoy, get are expect more their that year. businesses, become can't to we SKU to EBITDA said There businesses to tail. we're We will I conversations design sold will have some margin, some would But are on we will those portfolio come And also course the other I expect

we're And feverishly to have a the on them So time. actively to billion and is "fix." with conversations there at really working of same $X.X how that that, we're to do trying fix external partners internally we active business

Michael Lavery

And a that. little bit related to

specific you're You what's maybe X-or-so still to up for not that potentially slower? 'XX. the said trending at of it fiscal generally about know little that down Investor or fiscal top a Day way ahead fiscal Is bucket? Investor that guidance, Would like 'XX you sort line between anything expected just 'XX, and be yellow 'XX? past of line sideways looking Day, somewhere there it's in think trending, top same fiscal about months but in arrows I in giving right

Mark Schiller

it's fast Investor Get We linked -- Get which directly brands, if The the So stable. what said the we on holds, consumption brands up turns tail. still I've at around Bigger which look you algorithm is like at the the X.X%. rate how Bigger our is actually Day entire at to are shrink

a has you able growth extent significant to that stable large the rate. bit and entire a is to fiscal way which there over. very the to it that just of make right now I are happening. a and businesses their brands to to Where year That much right the Remember, to we'll more we that a every money, exit pace growth little fairly fiscal on at the need the the down. we're continue program. price. control going that those decline 'XX, those growth But growth So tail more 'XX businesses. But you our a going they're of starting likely. to at don't the Obviously, interest yet pace to control have the To directly tail. becoming drag it marketing becomes buyer some been have in is ability the But a flat shifts the innovation brands at loses very little to related confidence at shrinking business with is look going shutting no in algorithm be have grow. and and I are no optimization assortment investment of

of see with in the again, when not marketing they're resources, start will put to what stable be and little matter the the to a we focus brand. those that confidence great to that our that come happens So fact market relatively innovation to come the growing. totally control. that profit that's It's that articulated, maximization we market just me gives we've And

of those we 'XX brands algorithm been a forever. brands the the relative the those shift in those F growth. shrinks, will because guidance total number those size brands assuming have sale conservative to -- bit little and So toward as for of the brands that the we're But we've


from question John with Wells is Baumgartner Our next Fargo.

John Baumgartner

you could for savings touch through Terra the James, The program. more wondering XXXX. came on if $XX million

Then phasing aggregate $XXX million it think year. line so, sound to of savings 'XX? the actually how from the expected if this we the dropping You Is bottom the lot through savings confirmed still fiscal I about are cumulative $XXX a doesn't here? the do million. guess But of

helpful. So on the any comments phasing would be

James Langrock

had capital budgeting we architecture, inflation our to from Terra for gross we productivity offsetting our productivity to savings, this doing XXXX. in price Board improve some zero-based SG&A. And in our lot in the network the that be it -- where for and value, and the a to We're Project cost come similar And have savings. will we our savings and So of to be invest optimization will then cost. obviously, believe that productivity. these what we have on is We'll continue Board focus supply continue going design year

roughly gross to to up inflationary it million. going that the get be against but we'll it's headwinds There's some $XXX the same. we're So obviously against,

John Baumgartner

organic And revenue sustaining then to on high just Okay. Mark, Europe, to I the U.K., collectively, the follow mid- they're F end up international businesses. of 'XX. mean to Canada, the all single-digit

think you in this morning going saw mean, X% as is QX, now down year, fairly you long-term at I this algo X% But the I past sounded again the forward. to upbeat. broke comments

the some with maybe year, slowdown the you just comments? positive how happening sharp can forward So what's bridge going reconciles last and algo lower the that with of more

Mark Schiller

has at all. The problem bad was would ForEx. not the is been say I the What constant currency, Yes. fourth in quarter

we've you how local devaluation you and absolute, if declining. which in So XX% been in currency, U.K. the is look at growing. are the the way in performing the Europe a they business when pound But it's are reporting, have in

both that's in the given are very with Markets because at to how very it going you So fluctuate. very going look onion and local into the currency in F just the to we margin line, very if what's versus one currency 'XX, is we're bottom and performing to well said like uncertainty prime on terms pound the currency, in well, currency, guidance from of horizon. peel know minister and potential on currency top a don't here hard they're constant Brexit absolute to expansion, back going in don't and new But look constant you the the businesses I of happen doing provide well the absolute going on and well the currency at reasons line.

relative XX one expect what Brexit in analysis brands If They something well we number that environment. our control. percent advantaged. have And Brexit. competitive very our competitors positioned slightly can't or very we the of are momentum I two extensive got are shares. against we're positioned number come We from third-party that I and relative would really barring We've versus did But an They in feel that to to good. continue, think U.K. the ingredients anything, of to other the outside category. well

to everyone with So should increased thoughts, as our pressures on are ability be there. pricing pass on

weather to of storm there. should some better than ability Our the competitors our be

strong leadership I So there performance that performance team they've have the optimistic about our am been delivering. place the in and and we

John Baumgartner

with some Because algo, So along I still X% past? maybe guess, I the rates basis we if in the the future X%, what pretty plus in drives sales tie versus that the the mean smaller. to stuff are deceleration the

the just think to algo. SKU you do there's Is So trying conservative Just grow to long-term as there well? opportunity a rationalization more this of more stance, bridge the off base?

Mark Schiller


the So looking at investments U.S., similar we short and there, uneconomic term, have brands too. internationally the are segmented to

short there there U.S. are line just So on term, as some will top the be in headwinds

it aside, investment got strip than time, plant-based McCartney. great managed growth is We've so the been better there substitute in U.S. you business over robust when of a obviously, smaller the meat amount uneconomic there potential. Although But is that they've Linda is here in

beverages are plant-based nicely. growing have very that We

high-margin We businesses Daniels in positioned competitively. have very Hain well that some are

currency, growth that in I are these businesses. So constant expect

year-over-year, negative currency, the going $XX currency, fine. local In again, top $X.XX versus pound million given 'XX to that currency, lost just absolute We the difference it's show just $X.XX and the in fluctuation. line. going currency absolute F it's 'XX on in due between to a be In F $X.XX to

of top currency. out million $XX to line So comes just due

look you robust and take local a more out it you it's you much that in if business. So at currency,


question Our with ISI. is Evercore next from Palmer David

David Palmer

and even of big a you're margin people on rationalization. moving gross And in ahead, thinking has better then in parts terms down fiscal decompose if specifically Obviously, because of margins. terms gross you But your follow-up. think stuff There margin break the Question you break in of impact. to thinking were -- of that SKU for do mix I have going gross down gross would margins quarter how terms I When 'XX. on for a best that had expected. must how than that could pretty be the lot and of ton impact a about that you

Mark Schiller


are but of those combination don't SKU chain we've supply in they have improvement. So -- combination tactic our of that rationalization, huge the uneconomic specific the investment, of improvements then margin overlap, specific a are somewhat I it the numbers the all things P&L, by mix all is because driving made pricing, and middle the

get As much a sequential necessarily QX you F lower-margin as 'XX, than not we so to year-over-year QX expect is because every an improvement margin example. quarter, quarter

will be ago. be lower it than but So QX be higher year will than will QX, -- it

expansion quarter So margin versus year ago. would that I expect throughout every year the progression continued and

David Palmer

-- that another 'XX, that gear were even what as as ahead, get some co-packing might things are of out cycle you we that some What that to perhaps, can point? you would imagine, further we are things about 'XX along at fiscal the be network, you that innovation network beyond? If think internally. might into give on I you be the of point as see 'XX and hitting as your some will fiscal think at far

Mark Schiller

three top things. it's Yes. From line, primary the

which a Investor there's Day, distribution opportunity those about optimization, XX% at significant of highest-velocity Assortment ACV, in again, we only are talked highest-margin, our so SKUs on the SKUs.

to the be is third to call. about going little talked a on earlier the marketing. which And innovation, be bit is Second I've going

some haven't we've in that Conference the at formula new made evaluating show there. previously. we of that a that Investor marketing are you of and process the next ROI progress creating having Barclays some robust campaign week, We of I'll had for

it's chain. we of of important supply working co-manufacturers SKUs we that to our allow but the SKU manage, and It's number every full as to going very middle center, the distribution we we Less have simplify can In the truckloads. centers, number cost so each metric. get a ship savings us of to to into to the manage distribution have simplify P&L, be going to that

miles. miles both whether pricing in the basically the Today, whether of one at other ordering very amount, you're We P&L on help or ordering that truck. the is don't robust a or a X,XXX pricing. charge two then we're top middle we XXX and will We same well shipping And the have us line full pallets differentiate just don't matrix.

cases, CPG opportunity we've as terms more on the than of for lot at sure find, there's just shelf, the a we everyone some analysis, we X, X we're company in as size robust and price are pricing, like architecture offering else. ounces So charging shelf else, products miles of price of having the same of done everyone X, every a right making that in other amount bracket the we driving, that have you're

of So pricing. there's the that to work you a 'XX, marketplace will back of towards hopeful will significant F half on, trajectory amount get see I'm the going improve in again, the our middle as the which, hit on we And the year. start of


I and the for remarks. conference Ladies to of gentlemen, management end closing session. back we turn have like our to would over question-and-answer reached the

Mark Schiller

thank guys, all and and support. your time I'd to for you, understanding like

very excited making. progress the are we're We about

at you than look things we you that if and, to go faster the a committed and Day on delivering frankly, Investor think, I of to. much what all them we're pretty we rate at promised, back

this we excited and we to continue forward you of I'm where on path look forward as I'm on I our all future, dialogue So confident move about are. with transformation.

to that, back turn with And you. thank operator. the So I'll it


conference. This today's concludes

thank your lines you and participation. your for You disconnect at may this time,