Hain Celestial reports Q4 results, sells international business

Hain Celestial Group (NASDAQ: HAIN ) released fourth-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below. This content is powered APIs. For comprehensive financial data and transcripts, visit Access the full call at Summary Hain Celestial Group announced the sale of its international business to Aurelius for $323 million, using proceeds to reduce debt and streamline its portfolio.

North America returned to organic sales growth, with a 55% increase in adjusted EBITDA, reflecting improved execution, productivity, and cost management. Key strategic priorities for fiscal 2027 include cost structure alignment, increased marketing investment, and debt management, supported by detailed plans for cost savings and operational improvements. The company reduced net debt by $151 million in fiscal 2026, driven by strong free cash flow generation and improved working capital management. International segment saw a 4% decline in organic net sales for Q4, but sequential improvement was noted, positioning it well for new ownership under Aurelius.

North America's key brands like Greek Gods Yogurt and Celestial Seasonings Tea showed strong growth, contributing to confidence in the North America-focused portfolio. Hain Celestial Group aims to achieve a pro forma gross margin of 30%+ and low double-digit adjusted EBITDA margins by implementing cost-saving measures identified through a zero-based budgeting review. Full Transcript OPERATOR Hello everyone. Thank you for joining us and welcome to the Hain Celestial fiscal fourth quarter earnings call.

I will now hand the conference over to Alexis Tessier, Vice President of Investor Relations. Alexis, please go ahead. Alexis Tessier, Vice President of Investor Relations Good morning and thank you for joining us for a review of our fiscal fourth quarter and full year 2026 results. I am joined this morning by Allison Lewis, our President and Chief Executive Officer, and Lee Boyce, our Chief Financial Officer.

Slide 2 shows our forward-looking statements disclaimer. As you are aware, during the course of this call we may make forward-looking statements within the meaning of federal securities law. These include expectations and assumptions regarding the company's future operations and financial performance and condition. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations.

Please refer to our most recent annual report on Form 10-K, our annual report on Form 10-K expected to be filed today, our quarterly reports on Form 10-Q, and our other reports filed from time to time with the SEC, as well as the press release issued this morning, for a detailed discussion of the risks. com under the Investors heading. As we discuss our results today, unless noted as reported, our remarks will focus on non-GAAP or adjusted financial measures. Reconciliations of non-GAAP financial measures to GAAP results are available in the earnings release and the slide presentation accompanying this call.

This call is being webcast and an archive will be made available on the website. And now I'd like to turn the call over to Allison. Wendy Davidson, President and CEO Thank you, Alexis. Good morning, everyone, and thank you all for joining the call today.

Fiscal 2026 was a pivotal year for Hain Celestial Group. Over the past 12 months, we took decisive actions to simplify our portfolio, pay down debt, improve execution, drive greater cost discipline, and sharpen our strategic focus. While there is more work ahead, we are exiting the year with improving momentum, stronger cash generation, and a clear plan to drive growth and profitability in the go-forward business. Earlier today, we announced that we reached a definitive agreement to sell our international business to a private equity firm, Aurelius, for 323 million in cash.

This transaction would represent an important step in the evolution of Hain Celestial Group and, when coupled with the fiscal Q3 divestiture of our North American snacks business, would mark a significant milestone in the simplification and strengthening of our portfolio. We believe we found a strong home for our international business in Aurelius, and I want to thank our international employees for their dedication, passion, and contributions to Hain Celestial Group. Over many years, they have built remarkable brands which we are confident will thrive under the new ownership.

The sale is expected to be completed in our fiscal second quarter, and proceeds from the transaction would be used to further reduce debt. As noted in our announcement, the transaction is conditioned upon securing an amendment for our credit agreement to extend the maturity, and we remain in active discussions with our lenders regarding that amendment. Once the transaction is closed, the resulting portfolio would be a North America business comprised of leading brands in attractive categories with a more streamlined operating model and a greater focus on core growth opportunities. Importantly, the strength of this portfolio was demonstrated in our fourth quarter results.

North America returned to organic sales growth, expanded gross margin by nearly 1,200 basis points, and increased adjusted EBITDA by 55% year over year. These results reflect the benefits of a streamlined portfolio, stronger execution, productivity initiatives, and disciplined cost management. Looking forward, the simplified portfolio will allow us to concentrate our resources and management attention on the areas where we see the greatest potential to create value. Fiscal 2026 also marked a year of substantial balance sheet improvement.

We reduced net debt by 151 million through a combination of actions resulting from our strategic review and strong free cash flow generation of 58 million. This free cash flow improvement was driven by a number of factors including higher working capital management, meaningful inventory reduction, productivity initiatives, and disciplined cost control. These factors not only drove cash generation in the year but strengthened our operational foundation. The international transaction would further reduce debt significantly and position us to continue the ongoing transformation of our portfolio and capital structure.

Our focus will now shift to simplifying the organization and aligning our cost structure with the scale of the future North America business to drive growth and profitability. Turning now to our performance, as I mentioned earlier, we exited fiscal 2026 with improved momentum across many areas of the business. Additionally, we made significant progress against our strategic priorities, including portfolio simplification and debt reduction, cash generation, and operational improvement. During the quarter, we delivered sequential improvement in organic net sales growth across the business as our five actions to win continued to gain traction across the organization.

These actions include simplifying our portfolio, accelerating renovation/innovation, implementing strategic revenue growth management, driving productivity and working capital efficiency, and strengthening our digital capabilities. Importantly, we see measurable results from these initiatives. Our Innovation Renewal Rate, or IRR, expanded year over year in both North America and International to a high single-digit and low-teen percentage, respectively, for fiscal 2026. IRR is a measure of the percent of net sales coming from new or relaunched SKUs in the last three years and a strong validation that our innovation is delivering results.

E-commerce sales delivered strong double-digit growth in Q4 year over year with our largest pure-play and omnichannel customers in North America, reflecting the progress of our digital transformation initiatives, and productivity efforts in supply chain continue to deliver substantial COGS reduction. While the environment remains dynamic and challenges persist in certain categories, these results reinforce our confidence that the actions we are taking are beginning to strengthen the business and build the foundation for future growth in North America. Organic net sales returned to growth in Q4, increasing 2% year over year.

For the full fiscal year, North America organic net sales were effectively flat, representing a meaningful improvement from prior years. Our yogurt business remains a standout performer. Greek Gods delivered strong double-digit growth along with share gains and remains an excellent example of how innovation, brand investment, and disciplined commercial execution can drive sustained results.

We are seeing emerging strength across the rest of our core business, including Celestial Seasonings Tea, which delivered growth in both the quarter and the year, driven in part by the success of our Wellness Tea innovation, and Earth's Best Finger Foods, the largest piece of our Earth's Best business, with strong double-digit growth supported by the continued success of our self-feeding platform. More broadly, the quarter reinforced our confidence in the potential of our go-forward North America portfolio.

Within our International segment, while organic net sales for Q4 declined 4% year over year, the decline moderated sequentially by roughly 400 basis points relative to the third quarter. Trends we saw improved performance sequentially across meal prep, beverages, and baby and kids. While spreads and drizzles remains a challenging category, we are encouraged by the early response to our Hartley's renovation and innovation launched in the fourth quarter. Combined with the improvements we are seeing across the broader portfolio, the International business is positioned well for its new ownership.

We were also pleased with the improvement in profit margins delivered during the quarter. Gross margin and adjusted EBITDA margin both expanded year over year, driven by improvement in North America. As expected following the snacks divestiture, North America delivered significant improvement in profitability, reinforcing our confidence in the earnings power of the underlying portfolio and the benefits of a more focused business model.

Consistent with trends throughout fiscal 2026, the vast majority of the year's gross margin and adjusted EBITDA pressure remained concentrated within International, where inflation, productivity shortfalls, and unfavorable mix continued to weigh on profitability. More broadly, fiscal 2026 demonstrated that the actions we have taken are producing early, tangible results. Exiting 2026, we see indications that the business is stabilizing, profit margins are improving, and we have a stronger operating foundation.

As we enter fiscal 2027, our focus is on building on the progress made over the past year while completing the work required to establish a focused, appropriately scaled North American Hain Celestial Group. Following the completion of the International transaction, our portfolio would be concentrated on leading better-for-you brands in attractive categories, including Greek Gods Yogurt, Celestial Seasonings Tea, and Earth's Best finger foods and cereal. Completion of the International transaction would be an important milestone, but it would not be the end of our work. Our priorities for fiscal 2027 are clear and supported by detailed plans already underway.

First, we will aggressively align our organization and cost structure with the scale and needs of the future North American business. This summer we completed a rigorous bottoms-up, zero-based budgeting review across the organization. That work identified specific actions to align cost structure with the size of our go-forward North American business. These actions are expected to simplify our operating model and deliver more than 16 million of annual run-rate cost improvement.

In addition, this exercise identified opportunities to optimize our marketing budget, driving greater impact for our key growth brands. Importantly, we expect to increase marketing investment year over year on both an absolute basis as well as percentage of net sales. These actions, the majority of which are expected to be implemented in fiscal 2027, support a pro forma gross margin of approximately 30-plus percent and adjusted EBITDA margin of low double-digit percentage. We have clear ownership, timing, and implementation plans and are moving with urgency to deliver these savings.

Second, we will remain disciplined in managing our financial position in light of the upcoming maturity date on the company's credit facilities in December. Proceeds from the International transaction will be used to reduce debt while maintaining rigorous oversight of working capital, capital spending, and transformation investments. Fiscal 2027 will include investments required to execute our cost reduction program and establish the appropriate operating model for the future business.

We will balance these near-term requirements with disciplined capital allocation and our continued focus on exploring any and all opportunities to further reduce debt and address the upcoming maturity. Third, we will shift investment behind our strongest brands and growth platforms. As I just outlined, we have identified opportunities to optimize our marketing spend, and we plan to increase marketing investment year over year by approximately 100 basis points of net sales to support brand building and innovation across Celestial Seasonings, Greek Gods, and Earth's Best. This investment will build on the progress we are already seeing across the core portfolio.

The work ahead is about establishing the right cost structure, the right portfolio, and the right level of investment to support a stronger North American Hain Celestial Group while continuing to explore all opportunities to maximize the value of the enterprise for the benefit of stakeholders. The actions taken throughout fiscal 2026, together with the detailed plans underway for fiscal 2027, would position us to become a more focused, profitable, and operationally stronger company. With that, I will turn the call over to Lee to review our financial results and cost structure initiatives in even greater detail.

Lee Boyce — Chief Financial Officer Thank you, Alison, and good morning, everyone. Before discussing our fourth quarter results, I'd like to begin with the improvement in free cash flow and the significant reduction in debt, which were among the most important accomplishments of fiscal 2026. As Alison mentioned, we had strong cash flow delivery in the quarter. Free cash flow for the fourth quarter was $7 million, an increase compared to the outflow of $9 million in the year-ago period.

The improvement was primarily driven by favorable working capital performance, including benefits from accounts payable, inventory reduction, and a lower net loss, partially offset by lower accounts receivable inflow. Free cash flow for the full year was $58 million as compared to an outflow of $3 million in the prior year. We are pleased with the progress we made on inventory driven by improved operating discipline. Days inventory outstanding improved year over year to 80 days in the quarter from 88 days in the prior year period.

It was up compared to 73 days in Q3 2026. Note that every day of inventory is worth approximately $3 million. We made sequential progress on our days payable outstanding, with days payable outstanding of 62 days in the quarter, an improvement from 59 days in Q3 2026 but slightly below 65 days in the prior year. Capex of $5 million in the quarter was down from $6 million in the prior year period.

Looking ahead, we would expect capital expenditures to decrease year over year as our North American business is significantly less capital intensive than our international business. Strong cash flow generation this quarter brought cash on hand to $58 million and net debt to $500 million, a reduction of $151 million or approximately 25% since the beginning of the fiscal year. 5 times in the quarter. 5 times.

We have a disciplined and prudent approach to capital management and continue to prioritize debt reduction. We have reduced net debt by $277 million over the past 12 quarters. We remain in active discussions with our lenders regarding an amendment of our credit agreement to extend the current maturity date. If reached, extension would be a near-term solution and an important step that provides additional flexibility as we continue to work on reducing our leverage.

We are working closely with all parties and will provide an update when we are able. We have made significant progress in the elimination of stranded costs resulting from the sale of the North American snacks business. In fiscal 2026, we initiated actions to remove the entirety of the $25 million in stranded costs, which was ahead of our initial timeline. Additionally, our Transition Services Agreement, or TSA, is generating proceeds from providing ongoing support to the divested snacks business.

Together with the actions taken to date, this has essentially eliminated any near-term stranded cost impact. As Alison mentioned, this summer we completed a robust, bottom-up, zero-based budgeting review across the organization that identified specific actions to align cost structure with the size of our go-forward North America business. We have concrete action plans in place to enact $16 million of annual run-rate cost improvement.