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Hain Celestial: Reports Q2-2020 Financial Results

Lake Success / NY. (hc) The Hain Celestial Group Inc., a leading organic and natural products company with operations in North America, Europe and India providing consumers with A Healthier Way of Life, reported financial results for the second quarter ended December 31, 2019. The results contained herein are presented with the Hain Pure Protein and Tilda operating segments being treated as discontinued operations.

Mark L. Schiller, Hain Celestial’s President and Chief Executive Officer, commented, «Our team continues to execute on our transformational strategic plan, as we demonstrate another quarter of operational and financial improvement on a year-over-year basis. We have made significant progress in a very short period of time. We are delivering on the commitments we communicated to further simplify the portfolio and organization, strengthen our core capabilities, expand our margins and cash flow as well as reinvigorate profitable sales growth in a core set of high potential brands. We remain committed to delivering strong, consistent results for all our stakeholders.»

Financial highlights1

Summary of Second Quarter Results from Continuing Operations2

  • Net sales of USD 506.8 million decreased 5 percent on an as reported and constant currency basis compared to the prior year period.
  • When adjusted for Foreign Exchange, Divestitures and Stock Keeping Unit («SKU«) rationalization3, net sales decreased 1 percent compared to the prior year period.
  • Gross margin of 20.8 percent, a 180 basis point increase from the prior year period.
  • Adjusted gross margin of 22.0 percent, a 220 basis point increase from the prior year period.
  • Operating income of USD 9.2 million compared to an operating loss of USD 20.9 million in the prior year period.
  • Adjusted operating income of USD 29.5 million compared to USD 24.4 million in the prior year period.
  • Net income of USD 1.9 million compared to a net loss of USD 31.8 million in the prior year period.
  • Adjusted net income of USD 17.6 million compared to USD 13.0 million in prior year period.
  • Ebitda of USD 24.9 million compared to USD 12.2 million in the prior year period.
  • Ebitda margin of 4.9 percent, a 260 basis point improvement from the prior year period.
  • Adjusted Ebitda of USD 45.0 million compared to USD 37.9 million in the prior year period.
  • Adjusted Ebitda margin of 8.9 percent, a 180 basis point increase compared to the prior year period.
  • Earnings per diluted share («EPS«) of USD 0.02 compared to a loss of USD 0.31 per share in the prior year period.
  • Adjusted EPS of USD 0.17 compared to USD 0.12 in the prior year period.

1 This press release includes certain non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP financial measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided herein in the tables «Reconciliation of GAAP Results to Non-GAAP Measures.»
2 Unless otherwise noted all results included in this press release are from continuing operations.
3 Refer to «Net Sales Growth at Constant Currency« and «Adjusted for Divestitures and SKU Rationalization« provided herein.

Segment highlights from continuing operations

Historically, the Company had three reportable segments: United States, United Kingdom and Rest of World. Effective July 1, 2019, the Company reassessed its segment reporting structure, pursuant to which the Company’s Canada and Hain Ventures operating segments, which were included within the Rest of World reportable segment, were moved to the United States reportable segment and renamed the North America segment. Additionally, the Europe operating segment, which was included in the Rest of World reportable segment, was combined with the United Kingdom reportable segment and renamed the International reportable segment. Accordingly, the Company now operates under two reportable segments: North America and International. Prior period segment information included herein has been adjusted to reflect the Company’s new reporting structure.

North America

North America net sales in the second quarter were USD 280.7 million, a decrease of 8 percent compared to the prior year period. When adjusted for Divestitures and SKU rationalization3, net sales decreased 2 percent from the prior year period.

Segment gross profit in the second quarter was USD 65.0 million, a 13 percent increase from the prior year period. Adjusted gross profit was USD 69.4 million, an increase of 14 percent from the prior year period. Gross margin was 23.1 percent, a 430 basis point increase from the prior year period and adjusted gross margin was 24.7 percent, a 480 basis point increase from the prior year.

Segment operating income in the second quarter was USD 20.1 million, a 110 percent increase from the prior year period. Adjusted operating income was USD 25.0 million, a 51 percent increase from the prior year period.

Segment Ebitda in the second quarter was USD 23.4 million, a 47 percent increase from the prior year period. Adjusted Ebitda was USD 30.1 million, a 41 percent increase from the prior year period. As a percent of sales on a constant currency basis, North America adjusted Ebitda margin was 10.7 percent, a 370 basis point increase from the prior year period.

International

International net sales in the second quarter were USD 226.1 million, a decrease of 1 percent from the prior year period. When adjusted for Foreign Exchange, Divestitures and SKU rationalization3, net sales increased 1 percent compared to the prior year period.

Segment gross profit in the second quarter was USD 40.6 million, an 8 percent decrease from the prior year period. Adjusted gross profit was USD 42.2 million, a decrease of 6 percent from the prior year period. Gross margin was 18.0 percent, a 130 basis point decrease from the prior year period and adjusted gross margin was 18.7 percent, a 90 basis point decrease from the prior year period.

Segment operating income in the second quarter was USD 12.9 million, a 15 percent decrease from the prior year period. Adjusted operating income was USD 16.5 million, a decrease of 12 percent from the prior year period.

Segment Ebitda in the second quarter was USD 21.6 million, a 5 percent decrease from the prior year period. Adjusted Ebitda was USD 25.1 million, a 5 percent decrease from the prior year period. As a percent of sales on a constant currency basis, International adjusted Ebitda margin was 11.1 percent, a 50 basis point decrease from the prior year period.

Fiscal year 2020 guidance

The Company narrows and reaffirms its annual guidance for continuing operations for fiscal year 2020:

Fiscal Year 2020 Reported Constant Currency
Adjusted Ebitda USD 177 to 192 Million USD 179 to 194 Million
Growth +7% to +16% +8% to +18%
Adjusted EPS USD 0.62 to USD 0.72 USD 0.64 to USD 0.74
Growth +3% to +20% +7% to +23%

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Guidance, where adjusted, is provided on a non-GAAP basis and excludes: acquisition and divestiture related expenses; integration charges; restructuring charges, start-up costs, consulting fees and other costs associated with the Company’s productivity and transformation initiatives; unrealized net foreign currency gains or losses; and other non-recurring items that may be incurred during the Company’s fiscal year 2020, which the Company will continue to identify as it reports its future financial results. Guidance also excludes the impact of any future acquisitions, divestitures, or share repurchases.

The Company cannot reconcile its expected Adjusted Ebitda to net income or adjusted earnings per diluted share to earnings per diluted share under «Fiscal Year 2020 Guidance» without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time.