Hain Celestial Reports Second Quarter Fiscal Year 2022 Financial Results

Second Quarter Adjusted Net Sales Growth at the High End of Original Guidance

Second Quarter Adjusted EBITDA Consistent with Mid-January Pre-Announcement

Second Quarter GAAP EPS of $0.33; Adjusted EPS of $0.36

Reaffirms Full Year Adjusted Net Sales Growth Guidance; Updates Full Year Adjusted EBITDA Guidance

LAKE SUCCESS, N.Y., Feb. 03, 2022 (GLOBE NEWSWIRE) -- The Hain Celestial Group, Inc. HAIN ("Hain Celestial", "Hain" or the "Company"), a leading organic and natural products company with operations in North America, Europe, Asia and the Middle East providing consumers with A Healthier Way of Life^®, today reported financial results for the second quarter ended December 31, 2021.

Mark L. Schiller, Hain Celestial's President and Chief Executive Officer, commented, "Our second quarter results delivered adjusted net sales growth consistent with initial guidance, behind strong U.S. consumption growth, despite industry-wide labor and supply chain challenges. We have utilized aggressive pricing and productivity to offset most of the cost headwinds and have revised guidance to reflect the expectation of accelerating topline growth in the second half of the year and continued elevated supply chain costs and disruptions. We believe that many of these costs will abate over time and remain very focused on our Hain 3.0 strategy as we pivot toward becoming a high growth and highly profitable global health and wellness company."

FINANCIAL HIGHLIGHTS¹

Summary of Second Quarter Results from Continuing Operations

• Net sales decreased 10% to $476.9 million compared to the prior year period.
• When adjusted for foreign exchange, acquisitions, divestitures and discontinued brands, net sales decreased 2% compared to the prior year period.
• Gross margin of 24.6% was flat compared to the prior year period.
• Adjusted gross margin of 24.6%, a 74 basis point decrease from the prior year period.
• Operating income of $32.0 million compared to $13.0 million in the prior year period.
• Adjusted operating income of $45.7 million compared to $48.1 million in the prior year period.
• Net income of $30.9 million compared to $2.2 million in the prior year period.
• Adjusted net income of $34.3 million compared to $34.7 million in prior year period.
• Adjusted EBITDA of $59.3 million compared to $62.2 million in the prior year period.
• Adjusted EBITDA margin of 12.4%, a 66 basis point increase compared to the prior year period.
• Earnings per diluted share ("EPS") of $0.33 compared to $0.02 in the prior year period.
• Adjusted EPS of $0.36 compared to $0.34 in the prior year period.
• Repurchased 2.0 million shares, or 2.1% of the outstanding common stock, at an average price of $44.31 per share.
  

SEGMENT HIGHLIGHTS FROM CONTINUING OPERATIONS

The Company operates under two reportable segments: North America and International.

North America
North America net sales in the second quarter were $275.0 million, a decrease of 3% compared to the prior year period. When adjusted for foreign exchange, acquisitions, divestitures and discontinued brands, net sales increased 1% from the prior year period mainly due to stronger sales in the snacks category.

Segment gross profit in the second quarter was $67.7 million, a 13% decrease from the prior year period. Adjusted gross profit was $67.9 million, a decrease of 16% from the prior year period. Gross margin was 24.6%, a 310 basis point decrease from the prior year period, and adjusted gross margin was 24.7%, a 380 basis point decrease from the prior year period. The decrease was mainly driven by higher cost of sales, including delivery and warehouse expenses in the United States operating segment.

Segment operating income in the second quarter was $27.2 million, a 16% decrease from the prior year period. Adjusted operating income was $29.0 million, an 18% decrease from the prior year period.

Adjusted EBITDA in the second quarter was $33.3 million, a 16% decrease from the prior year period. As a percentage of sales, North America adjusted EBITDA margin was 12.1%, a 190 basis point decrease from the prior year period.

International
International net sales in the second quarter were $201.9 million, a decrease of 18% compared to the prior year period. When adjusted for foreign exchange, divestitures and discontinued brands, net sales decreased 6% compared to the prior year period mainly due to a decline in the Europe operating segment, partially offset by an increase in sales in the Ella's Kitchen UK operating segment.

Segment gross profit in the second quarter was $49.6 million, a 4% decrease from the prior year period. Adjusted gross profit was $49.4 million, a decrease of 7% from the prior year period. Gross margin was 24.6%, a 350 basis point increase from the prior year period, and adjusted gross margin was 24.5%, a 280 basis point increase from the prior year period. The decrease in gross profit was mainly due to the aforementioned decrease in sales compared to the prior year period. The improvement in gross margin was driven by the divestiture of the fruit business in the third quarter of fiscal year 2021 and the implementation of productivity initiatives, partially offset by inflationary pressures.

Segment operating income in the second quarter was $27.4 million, compared to a loss of $2.7 million in the prior year period. Adjusted operating income was $27.8 million, an increase of 11% from the prior year period. The increase in operating income reflects non-recurring impairment charges associated with the fruit business that were recognized in the prior year period. Additionally, there were lower selling, general and administrative expenses mainly driven by lower labor-related expenses compared to the prior year period.

Adjusted EBITDA in the second quarter was $34.3 million, a 7% increase from the prior year period. As a percentage of sales, International adjusted EBITDA margin was 17.0%, a 390 basis point increase from the prior year period.

CAPITAL MANAGEMENT

The Company is announcing today that its Board of Directors has approved an additional $200 million share repurchase authorization. Share repurchases under this authorization will commence after the Company's existing $300 million authorization is fully utilized. The extent to which the Company repurchases its shares and the timing of such repurchases will be at the Company's discretion and will depend upon market conditions and other corporate considerations. Repurchases may be made from time to time in the open market, pursuant to pre-set trading plans, in private transactions or otherwise.

During the second quarter of fiscal year 2022, the Company repurchased 2.0 million shares, or 2.1% of the outstanding common stock, at an average price of $44.31 per share for a total of $89.8 million, excluding commissions. As of December 31, 2021, the Company had $117.0 million remaining under its $300 million authorization, prior to the approval of the additional $200 million authorization.

AMENDED AND RESTATED CREDIT AGREEMENT

In the second quarter, the Company refinanced its revolving credit facility by entering into a Fourth Amended and Restated Credit Agreement, which provides for senior secured financing of $1.1 billion in the aggregate, consisting of (1) $300 million in aggregate principal amount of term loans maturing in five years and (2) an $800 million senior secured revolving credit facility which is comprised of a $440 million U.S. revolving credit facility and $360 million global revolving credit facility. Both the term loans and revolving credit facility mature on December 22, 2026.

ACQUISITION OF PARMCRISPS^® AND THINSTERS^®

On December 28, 2021, the Company completed its acquisition of That's How We Roll from Clearlake Capital Group. That's How We Roll is the producer and marketer of ParmCrisps^® and Thinsters^®, two fast-growing brands offering simple and delicious, better-for-you snacks. Consideration for the transaction consisted of cash, net of cash acquired, totaling $261 million, subject to an adjustment for working capital. Of the total consideration, $255 million was paid at closing, with the remaining $6 million payable during the third quarter of fiscal year 2022.

FISCAL YEAR 2022 GUIDANCE

The Company updates its guidance for full fiscal year 2022 compared to fiscal year 2021 and now expects:

• Low single digit adjusted net sales growth consistent with prior guidance,
• Modest adjusted gross margin reduction, and
• Adjusted EBITDA approximately flat versus prior year.
  

Notes: Adjusted net sales is defined as adjusted for the impact of foreign currency changes, acquisitions, divestitures and discontinued brands. All references in this "Fiscal Year 2022 Guidance" section to growth or declines in adjusted net sales or adjusted EBITDA compared to a prior period represent percentage growth or percentage decline.

Contacts:
Investor Relations:
Chris Mandeville and Anna Kate Heller
ICR
hain@icrinc.com

Media:
Robin Shallow
robin@robincomm.com

Conference Call and Webcast Information
Hain Celestial will host a conference call and webcast today at 8:30 AM Eastern Time to discuss its results and business outlook. Investors interested in participating in the live call can dial 877-407-9716 from the U.S. and 201-493-6779 internationally. The call will be webcast and the accompanying presentation will be available under the Investor Relations section of the Company's website at www.hain.com.

About The Hain Celestial Group, Inc.
The Hain Celestial Group HAIN, headquartered in Lake Success, NY, is a leading organic and natural products company with operations in North America, Europe, Asia and the Middle East. Hain Celestial participates in many natural categories with well-known brands that include Celestial Seasonings^®, Clarks™, Cully & Sully^®, Earth's Best^®, Ella's Kitchen^®, Frank Cooper's^®, Gale's^®, Garden of Eatin'^®, Hain Pure Foods^®, Hartley's^®, Health Valley^®, Imagine^®, Joya^®, Lima^®, Linda McCartney's^® (under license), MaraNatha^®, Natumi^®, New Covent Garden Soup Co.^®, ParmCrisps^®, Robertson's^®, Rose's^® (under license), Sensible Portions^®, Spectrum^®, Sun-Pat^®, Terra^®, The Greek Gods^®, Thinsters^®, Yorkshire Provender^® and Yves Veggie Cuisine^®. The Company's personal care products are marketed under the Alba Botanica^®, Avalon Organics^®, JASON^®, Live Clean^® and Queen Helene^® brands.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. The words "believe," "expect," "anticipate," "may," "should," "plan," "intend," "potential," "will" and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include, among other things, our beliefs or expectations relating to our future performance, results of operations and financial condition; our strategic initiatives, business strategy, supply chain, brand portfolio and product performance; the COVID-19 pandemic; the success of our pricing negotiations; current or future macroeconomic trends; and future corporate acquisitions or dispositions.

Risks and uncertainties that may cause actual results to differ materially from forward-looking statements include: challenges and uncertainty resulting from the impact of competition; challenges and uncertainty resulting from the COVID-19 pandemic; our ability to manage our supply chain effectively; disruption of operations at our manufacturing facilities; reliance on independent contract manufacturers; changes to consumer preferences; customer concentration; reliance on independent distributors; the availability of organic ingredients; risks associated with our international sales and operations; risks associated with outsourcing arrangements; our ability to execute our cost reduction initiatives and related strategic initiatives; our ability to identify and complete acquisitions or divestitures and our level of success in integrating acquisitions; our reliance on independent certification for a number of our products; the reputation of our Company and our brands; our ability to use and protect trademarks; general economic conditions; input cost inflation; the United Kingdom's exit from the European Union; cybersecurity incidents; disruptions to information technology systems; the impact of climate change; liabilities, claims or regulatory change with respect to environmental matters; potential liability if our products cause illness or physical harm; the highly regulated environment in which we operate; pending and future litigation; compliance with data privacy laws; compliance with our credit agreement; the discontinuation of LIBOR; concentration in the ownership of our common stock; our ability to issue preferred stock; the adequacy of our insurance coverage; impairments in the carrying value of goodwill or other intangible assets; and other risks and matters described in our most recent Annual Report on Form 10-K and our other filings from time to time with the U.S. Securities and Exchange Commission.

We undertake no obligation to update forward-looking statements to reflect actual results or changes in assumptions or circumstances, except as required by applicable law.

Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP financial measures, including, among others, adjusted operating income and its related margin, adjusted gross profit and its related margin, adjusted net income, adjusted earnings per diluted share, net sales adjusted for the impact of foreign exchange, acquisitions, divestitures and discontinued brands, adjusted EBITDA and its related margin and operating free cash flow. The reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are provided herein in the tables. Management believes that the non-GAAP financial measures presented provide useful additional information to investors about current trends in the Company's operations and are useful for period-over-period comparisons of operations. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP measures may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded. They should be read only in connection with the Company's Consolidated Statements of Operations and Cash Flows presented in accordance with GAAP.

Certain forward-looking non-GAAP financial measures included in this press release are not reconciled to the comparable forward-looking GAAP financial measures. The Company is not able to reconcile these forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures without unreasonable efforts because the Company is unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact GAAP measures but would not impact the non-GAAP measures. Such items may include litigation and related expenses, transaction costs associated with acquisitions and divestitures, productivity and transformation costs, impairments, gains or losses on sales of assets and businesses, foreign exchange movements and other items. The unavailable information could have a significant impact on the Company's GAAP financial results.

The Company believes presenting net sales at constant currency provides useful information to investors because it provides transparency to underlying performance in the Company's consolidated net sales by excluding the effect that foreign currency exchange rate fluctuations have on period-to-period comparability given the volatility in foreign currency exchange markets. To present this information for historical periods, current period net sales for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average monthly exchange rates in effect during the corresponding period of the prior fiscal year, rather than at the actual average monthly exchange rate in effect during the current period of the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

The Company provides net sales adjusted for the impact of foreign currency, acquisitions, divestitures and discontinued brands to understand the growth rate of net sales excluding the impact of such items. The Company's management believes net sales adjusted for such items is useful to investors because it enables them to better understand the growth of our business from period-to-period.

The Company defines adjusted EBITDA as net income (loss) before net interest expense, income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, unrealized currency gains and losses, litigation and related costs, plant closure related costs, net, productivity and transformation costs, warehouse and manufacturing consolidation and other costs, costs associated with acquisitions, divestitures and other transactions, gains or losses on sales of assets and businesses, inventory write-downs, impairment of long-lived assets and other adjustments. The Company's management believes that these presentations provide useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the Company as well as a component of performance-based executive compensation.

The Company defines operating free cash flow as cash provided by or used in operating activities from continuing operations (a GAAP measure) less purchases of property, plant and equipment. The Company views operating free cash flow as an important measure because it is one factor in evaluating the amount of cash available for discretionary investments.
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