EPS of $-0.54 increased by 58.1% from previous year
Gross margin of 22.1%
Net income of -48.19M
""While we are disappointed in top line results in the quarter, we are pleased to deliver continued margin expansion and momentum in adjusted EBITDA delivery, free cash flow and net debt reduction."" - Wendy Davidson
The Hain Celestial Group Inc (HAIN) QQ3 2024 Results Analysis: Margin Expansion, Stabilization Progress, and Strategic pivot under Hain Reimagined
Executive Summary
The Hain Celestial Group reported Q3 FY2024 (calendar Q3) revenue of $438.36 million, down 3.7% YoY, with organic net sales also down 3.7% as FX provided a modest 1.3 percentage point tailwind. The quarter featured meaningful margin expansion and cash flow generation despite topline weakness, underscoring progress on the company’s Hain Reimagined program—specifically the Focus and Fuel pillars aimed at portfolio simplification, footprint consolidation, and end-to-end operating model improvements. Adjusted EBITDA rose 17.5% YoY to $44.0 million (margin 10.0%), while GAAP net income declined to a net loss of $48.2 million (EPS -0.54) due to restructuring charges and ongoing deleverage from lower volumes. Management characterized the pivot to growth as taking longer than anticipated, citing Perrigo’s infant formula supply disruption and challenges in snacks distribution as primary near-term headwinds. The company reaffirmed a multi-year growth algorithm with an emphasis on margin expansion, working capital optimization, and selective brand/channel investments, while guiding for FY2024 organic net sales to decline ~3% to 4%, adjusted EBITDA of $150–$155 million, gross margin expansion up to 50 bps, and free cash flow of $40–$45 million. The narrative centers on converting stabilized performance into durable growth through portfolio rationalization (including a 6% SKU reduction, with a heavier emphasis in Personal Care), footprint consolidation (one remaining personal care manufacturing facility, India JV exit), and the development of a true integrated operating model. Investors should monitor stabilization progress in formula, continued margin/mix improvements in snacks and beverages, capital structure evolution toward the target leverage of 3x Adjusted EBITDA, and the pace of channel expansion in margin-accretive outlets and e-commerce.
Key Performance Indicators
Revenue
438.36M
QoQ: -3.47% | YoY:-3.71%
Gross Profit
96.67M
22.05% margin
QoQ: -5.42% | YoY:-0.83%
Operating Income
-27.90M
QoQ: -3 472.47% | YoY:80.20%
Net Income
-48.19M
QoQ: -256.07% | YoY:58.36%
EPS
-0.54
QoQ: -260.00% | YoY:58.14%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $438.36m, down 3.71% YoY; organic revenue down 3.7% (FX-lift +1.3ppt). North America weakness (Personal Care and Baby Formula) offset by International growth (+1% organic).
Gross margin: 22.30%, up ~90 bps YoY due to productivity gains and pricing from Fuel/RGM initiatives, partially offset by deleverage from lower volumes and cost inflation.
Net income: -$48.2m; diluted EPS: -$0.54; YoY result reflects restructuring charges (total $10.0m in the quarter, $2.0m noncash) and ongoing mix/volume headwinds.
SG&A: $67.0m, 15.2% of net sales, down 11.1% YoY (driven by incentive accrual normalization).
Financial Highlights
- Revenue: $438.36m, down 3.71% YoY; organic revenue down 3.7% (FX-lift +1.3ppt). North America weakness (Personal Care and Baby Formula) offset by International growth (+1% organic).
- Gross margin: 22.30%, up ~90 bps YoY due to productivity gains and pricing from Fuel/RGM initiatives, partially offset by deleverage from lower volumes and cost inflation.
- Adjusted EBITDA: $44.0m, +17.5% YoY; adjusted EBITDA margin: 10.0%, up ~180 bps YoY.
- Net income: -$48.2m; diluted EPS: -$0.54; YoY result reflects restructuring charges (total $10.0m in the quarter, $2.0m noncash) and ongoing mix/volume headwinds.
- SG&A: $67.0m, 15.2% of net sales, down 11.1% YoY (driven by incentive accrual normalization).
- Free cash flow: $30.24m; operating cash flow: $42.27m; capex: $12.03m; cash at end of period: ~$49.5m; net debt: $728m; net leverage: ~3.9x.
- Working capital: days payable outstanding ≈ 46; days inventory outstanding ≈ 77; cash flow improvements driven by working capital optimization.
- Guidance (FY2024): Organic net sales down 3%–4%; Adjusted EBITDA $150–$155m; Gross margin expansion up to 50 bps; Free cash flow $40–$45m.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
438.36M
-3.71%
-3.47%
Gross Profit
96.67M
-0.83%
-5.42%
Operating Income
-27.90M
80.20%
-3 472.47%
Net Income
-48.19M
58.36%
-256.07%
EPS
-0.54
58.14%
-260.00%
Key Financial Ratios
currentRatio
2.1
grossProfitMargin
22.1%
operatingProfitMargin
-6.36%
netProfitMargin
-11%
returnOnAssets
-2.24%
returnOnEquity
-5.1%
debtEquityRatio
0.91
operatingCashFlowPerShare
$0.47
freeCashFlowPerShare
$0.34
priceToBookRatio
0.71
priceEarningsRatio
-3.49
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Theme: Hain Reimagined progress and near-term stabilization
- Quote on focus/fuel: Wendy Davidson emphasized focus on three initiatives to simplify the business and the fuel pillar to unlock cost savings and margin expansion.
- In-stock improvement: Management noted stock/availability improvements, with in-stock rates >94% (+130bp vs Q2; +400bp vs peers), underscoring reliability for retailers and potential distribution gains.
- Margin and cash flow: Chad/Lee highlighted adjusted EBITDA growth (44.0m) and gross margin expansion (22.3%) as evidence of productivity gains and pricing discipline; the company also pointed to free cash flow and net debt reduction as proof points of financial discipline.
- Formula supply disruption: Wendy cited Perrigo’s manufacturing shutdowns as a material, though temporary, headwind to Earth’s Best formula supply, prompting the move to stabilize/contain exposure and re-build shelf presence with a leaner distribution.
- Snacks execution: The discussion acknowledged mixed snacks performance, with Garden Veggie strong but Terra distribution constrained; the company plans a multi-brand Summer promotion to accelerate distribution and velocity.
- SKU rationalization and portfolio management: Executives described a larger-than-typical SKU reduction (6% total, with 62% of items in Personal Care) as part of a broader category pruning to focus on core, productive SKUs and brands.
- Growth vs stability: Management stressed that 85% of the portfolio has grown >3% YTD, while the stabilized 15% (including formula) remains a near-term drag; the plan is to stabilize, then reallocate investments to high-return growth opportunities in snacks, Baby & Kids, and beverages.
- Channel strategy and marketing: The team indicated a targeted, efficiency-driven marketing approach, with modest overall marketing spend growth and greater emphasis on high-ROI channels and promotions; ongoing investments aim to convert channel expansion into margin-accretive growth.
- Outlook context: Management acknowledged the pivot to growth is taking longer than expected due to supply and distribution headwinds but remains confident in Hain Reimagined and seeks to complete stabilization in the near term to enable a stronger mid-/long-term growth trajectory.
"While we are disappointed in top line results in the quarter, we are pleased to deliver continued margin expansion and momentum in adjusted EBITDA delivery, free cash flow and net debt reduction."
— Wendy Davidson
"85% of our business has grown over 3% year-to-date, in line with our Hain Reimagined growth algorithm."
— Wendy Davidson
Forward Guidance
Outlook and achievability assessment:
- FY2024 guidance updated to: Organic net sales down ~3% to 4%; Adjusted EBITDA $150–$155 million; gross margin expansion up to 50 bps; free cash flow $40–$45 million. The company also signaled leverage stabilization towards the low- to mid-3x range by FY25, with net leverage expected to tick up modestly into Q4 FY24 and Q1 FY25, then finishing FY25 in the high 3s.
- Key drivers and risks:
- Growth/Turnaround: 85% of the portfolio has grown >3% YTD, but the remaining 15% (notably Personal Care and formula) remains a drag; stabilization of formula and a more productive Personal Care portfolio are prerequisites for stronger top-line growth and margin expansion.
- Formula supply: Perrigo’s plant shutdowns caused a material adverse impact; management expects a full recovery beginning in H2 FY2024 and considers the issues short-term, but the timeline to normalize channel reach remains uncertain.
- Snacks and channel expansion: Execution in snacks distribution improved sequentially but fell short of expectations; a multi-brand promotional program (Savor Your Summer) aims to unlock distribution and velocity, which could be a near-term catalyst if supply and merchandising execution keep pace.
- Cost/talent/supply chain: Productivity initiatives ($61m annual savings) and fuel improvements support margin expansion; ongoing end-to-end supply chain enhancements and a lean operating model are intended to provide resilience with potential margin upside.
- Balance sheet: The company targets debt reduction and a longer-term leverage target of ~3x Adjusted EBITDA; headroom under covenants remains, but the near-term leverage trajectory will depend on working capital outcomes and cash flow generation.
- Investment thesis and monitoring points for investors:
- Near-term stabilizers: Successful stabilization of Earth’s Best infant formula supply and continued SKU rationalization in Personal Care; progress in Terra distribution and Garden Veggie momentum could accelerate revenue growth and gross margins.
- Margin expansion levers: Realization of the 11-point gross-margin uplift linked to stabilization and rationalization; productivity savings (guided at $61m for the year) and better net price utilization will be watched for sustainability.
- Growth acceleration: The planned ramp in marketing efficiency and channel-expansion initiatives (e-commerce, food-service, and margin-friendly channels) should drive household penetration and distribution breadth in HAIN’s core categories (snacks, beverages, and Baby & Kids).
- Structural leverage: Watch net debt trajectory and covenant headroom; the company’s stated objective is to reach or approach a 3x net debt/Adjusted EBITDA, which would be a meaningful credit-strengthening signal.
- Bottom line: The combination of focus/fuel execution, portfolio optimization, and operating-model improvements, if stabilized in FY25, could re-accelerate revenue growth and transform cash flow quality. Investors should monitor formula recovery timing, Personal Care stabilization progress, Terra’s distribution ramp, and the cost/outcome of SKU portfolio rationalization as key pathways to unlocking Hain Reimagined upside.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
HAIN Focus
22.05%
-6.36%
-5.10%
-3.49%
BRBR
36.80%
21.70%
-30.30%
25.56%
FLO
48.50%
-4.95%
-3.40%
-24.27%
INGR
20.70%
10.50%
4.63%
10.28%
JJSF
33.60%
11.40%
3.87%
21.69%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The investment thesis rests on completing Hain Reimagined stabilization and then leveraging the improved cost structure and brand-building capacity to accelerate growth in core categories (snacks, baby & kids, beverages). Near-term catalysts include improving formula supply stability, stronger distribution in Terra and Garden Veggie, and a successful multi-brand promotion (Savor Your Summer). The company’s FY2024 guidance reflects ongoing headwinds; however, the anticipated productivity savings ($61m) and targeted margin expansion provide a viable path to mid-teens adjusted EBITDA margins in a stabilized year. Critical monitoring points include: stabilization progress for infant formula, SKU rationalization outcomes in Personal Care and other tail brands, Terra’s distribution ramp, the efficacy of marketing spend in driving household penetration, and the debt reduction trajectory toward a 3x target. Overall, the stock trades with a modest price-to-sales multiple (HAIN P/S ~1.54) and a negative P/E, reflecting the turnaround risk; a successful stabilization and a clear path to growth could re-rate HAIN higher as operating leverage improves and growth momentum returns against a lower cost base. Investors should remain cautious about execution risk in the short term but optimistic about the potential for durable margin expansion and cash flow accretion as stabilization completes and growth axes begin to turn positive.
Key Investment Factors
Growth Potential
- Growth from stabilized non-dairy beverages and Earth’s Best/Baby & Kids growth areas; expansion of Terra distribution and the Garden Veggie/Flavor Burst innovation pipeline; anticipated channel expansion in margin-accretive outlets including e-commerce and food-service; Savor Your Summer program to drive cross-brand distribution and velocity.
- Potential 11-point gross margin uplift from Personal Care stabilization and SKU rationalization; ongoing productivity (61m) and RGM-driven pricing to improve profitability despite a top-line headwind in formula and personal care.
Profitability Risk
- Infants formula supply risk from Perrigo; stabilization execution risk for formula and associated on-shelf re-acquisition with retailers.
- Personal Care remains a high-uncertainty category given aggressive SKU reduction and potential disruption to top-line if stabilized slower than expected.
- Dependence on external macro factors (inflation, consumer spend shifts toward value, and private label penetration) which could delay category-by-category recoveries.
- Execution risk in snacks distribution expansion and channel mix shift; if promotional/revenue growth management initiatives do not translate into near-term top-line gains, margin trajectory could stall.
Financial Position
- Leverage cadence targeted to ~3x Adjusted EBITDA by FY25; current net debt around $728m and net debt to EBITDA at ~3.9x as of Q3 FY2024; cash flow generation improving with CFO of $42m and FCF of $30.2m in the quarter.
- Solid liquidity with capped capex (Q3 capex ~$12m; FY24 guidance mid-40s), indicating ongoing capital discipline; asset-light transformation improves operating leverage potential; in-stock rates above 94% bolster distribution opportunities.
SWOT Analysis
Strengths
Strong margin expansion and cash flow generation despite top-line softness (adjusted EBITDA +17.5% YoY; gross margin up ~90 bps)
Rigid end-to-end supply chain improvements and in-stock rates >94%, enabling better retailer partnerships and distribution
Active portfolio simplification reducing SKUs, especially in Personal Care, to improve velocity and reduce complexity
Debt reduction trajectory and improving leverage (net debt $728m, net leverage 3.9x) with a plan to reach ~3x Adjusted EBITDA
Brand momentum in Celestial Seasonings, Garden Veggie, and Earth’s Best, supported by targeted marketing and channel expansion
Weaknesses
Revenue headwinds driven by infant formula supply disruption and Personal Care portfolio stabilization
Significant operating losses in Q3 (net income -$48.2m; EBIT negative) due to restructuring costs and deleverage from lower volumes
Heavy reliance on external formula suppliers (Perrigo) with timing risk for supply normalization
Stabilization timeline for the Personal Care category longer-than-expected, delaying growth acceleration
Opportunities
Non-dairy beverage growth and non-core stabilized brands moving into Maintain/ growth trajectory
Terra distribution expansion and new marketing campaigns to capture brand love
Savor Your Summer multi-brand program to lift distribution and velocity across snacks
End-to-end RGM and working capital improvements to further reduce cash conversion cycle
Potential to achieve 11-point gross margin uplift from stabilization program
Threats
Perrigo supply disruptions delaying formula recovery and dwell-time in stabilized category
Private label competition and value-oriented consumer trends in snacks/food categories
Execution risk in channel expansion and promotional effectiveness translating into topline gains
Inflation and input cost volatility that could pressure margins if pricing power erodes
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