Jon Andersen

Jon Andersen asked about the key drivers behind the significant 800 basis point increase in brand awareness over the past year. He also inquired about the brand's equity, loyalty, and repeat purchase rates, and whether any adjustments to the value proposition are planned. Additionally, he questioned the rationale and utilization criteria for the newly authorized $100 million share repurchase program.

Answer

Russell Diez-Canseco, Executive Chairperson, President, and CEO, attributed increased awareness to a consistent marketing approach focused on long-term brand building, even during supply constraints, with no plans to change the value proposition. Thilo Wrede, CFO, explained the share repurchase program as a response to shareholder feedback on balance sheet utilization, leveraging unused debt capacity, and an opportunity to buy back stock at attractive levels, signaling company maturity.

Jon Andersen asked about the key drivers behind the significant 800 basis point increase in brand awareness over the past year, inquiring about the brand's equity, loyalty, and repeat purchase rates, and if any adjustments to the value proposition are planned. He also asked for the rationale behind the new $100 million share repurchase program and the criteria for its utilization.

Answer

Russell Diez-Canseco, Executive Chairperson, President, and CEO, attributed the brand awareness increase to a consistent, long-term marketing approach, maintaining investment even during supply constraints. He emphasized converting awareness into trial and repeat purchases. Thilo Wrede, CFO, explained the share repurchase program is the first since the IPO, driven by shareholder feedback on balance sheet use, existing debt capacity, and a strategic move to create shareholder value by buying back stock at attractive levels.

Jon Andersen asked for a breakdown of the expected revenue growth acceleration in the second half, questioning the contribution from pricing versus volume. He also sought details on the decision to pull forward capital spending for the Seymour facility.

Answer

CFO Thilo Wrede stated that the back-half acceleration is primarily driven by a step-up in volume as supply improves, with pricing acting as a 'cherry on the top.' CEO Russell Diez-Canseco added that accelerating the Seymour investment is a strategic move to catch up with strong brand growth and satisfy unmet demand. Both executives confirmed the project will be self-funded using the balance sheet and operating cash flow.

Jon Andersen inquired if the Q1 volume growth was in line with expectations and asked for more detail on the expected cadence of volume acceleration throughout the year. He also sought to confirm the magnitude of the recently announced price increase for shell eggs.

Answer

President and CEO Russell Diez-Canseco clarified that underlying branded volume growth was a stronger 5.6% when excluding lower-margin breaker egg sales, which decreased due to higher processing efficiency. CFO Thilo Wrede confirmed a 'low double-digit' price increase and stated that volume growth will accelerate through the year, with Q2 being a transition point before a more significant ramp-up in the second half as new farms come online.

Jon Andersen asked if Q1 volume growth was in line with expectations and sought clarity on the cadence of volume acceleration for the rest of the year, questioning if it would be uniform or have a specific unlock point. He also sought to confirm the magnitude of the price increase on shell eggs.

Answer

CEO Russell Diez-Canseco clarified that underlying branded volume growth was a stronger 5.6% when excluding lower sales of breaker eggs, reflecting improved processing yields. CFO Thilo Wrede corrected the price increase to 'low double-digit' and stated that volume growth will accelerate in the second half of the year as new farms ramp up, with Q2 serving as a transition period.

Jon Andersen asked why Vital Farms' network appears less affected by avian influenza and inquired about the sustainability of current marketing spend levels and expectations for 2025 maintenance costs.

Answer

President and CEO Russell Diez-Canseco suggested their network's resilience may be due to greater vigilance in maintaining farm infrastructure and biosecurity. CFO Thilo Wrede indicated the current marketing spend of 5-6% of sales is a comfortable level for measured brand building. He also stated that 2025 maintenance costs will be similar to 2024 overall but spread more evenly throughout the year to ensure consistent operations.

Jon Andersen of William Blair asked about the dynamic between household penetration and buy rate in relation to the company's long-term plan, consumer brand loyalty versus switching behavior, and the expected evolution of advertising spending as a percentage of sales.

Answer

CFO Thilo Wrede noted that household penetration is on track, but recent growth has been driven more by increased buy rate and consumer loyalty than initially planned. CEO Russell Diez-Canseco added that while many consumers use multiple egg brands, Vital Farms sees a growing pool of heavy users. On spending, Thilo Wrede confirmed that marketing as a percent of sales was at its highest level since the IPO in Q3, with elevated spending expected to continue in Q4 to build long-term brand awareness.

Jon Andersen from William Blair asked Freshpet about the extent to which the new production technology is included in the 2027 EBITDA margin targets (20% for high single-digit growth, 22% for mid-teens growth). He also inquired if the 7%-10% sales growth guidance for 2026 should align with consumption trends, and for clarification on the expected cadence of growth, particularly potential over-delivery in Q1 and under-delivery in Q3 due to comps.

Answer

CEO Billy Cyr clarified that unless manufacturing investment in new technology is accelerated, its impact on 2027 margins would be relatively modest, as the installed line and planned conversion represent a small share of total volume. He stated that current targets are based on OEE improvements, yield improvements, G&A efficiency, and higher net sales growth. Regarding 2026 sales and consumption, Cyr noted they should trend closely, with consumption measuring most of the business outside of Freshpet's internal DTC. He confirmed Q1 is a softer comp due to prior year disruption, and Q3 is tougher, with the pace of the year dependent on advertising effectiveness and the consumer environment.

Jon Andersen asked about the 2027 EBITDA margin targets (20% for upper single-digit growth, 22% for mid-teen growth), inquiring whether the benefit of the new production technology is included and to what degree. He also asked about the 7%-10% sales growth for 2026, whether consumption should be similar, any puts and takes, and the cadence of growth (over-delivery in Q1, under-delivery in Q3).

Answer

CEO Billy Cyr stated that unless manufacturing investment in new technology is accelerated, its impact on 2027 will be relatively modest due to the small scale of the initial lines. The current building blocks for the 2027 targets primarily assume good old-fashioned OEE improvements, yield improvements, G&A efficiency, and higher net sales growth, with accelerated technology serving as an additional lever rather than a necessity. Regarding 2026 sales, Billy Cyr clarified that consumption data now measures almost all of the business, so consumption and net sales should trend closely. He confirmed the cadence of a softer Q1 comp (due to prior year disruption) and a tougher Q3 comp (due to significant club expansion), with the rest of the year depending on advertising effectiveness and the consumer environment. He expressed confidence in current trends and building blocks.

Jon Andersen asked about full-year expectations for distribution growth, the dynamic of TDPs growing faster than store count, and whether the growth in high-value MVP households comes from new or existing customers.

Answer

President & Co-Founder Scott Morris confirmed they are on track to add 100,000 cubic feet of fridge space this year from new stores and second/third fridges. CEO William Cyr noted the large TDP increase was driven by Walmart adding second fridges. Morris then explained that most MVP growth comes from new customers entering the franchise, who often start with affordable items before increasing their spend and becoming high-value, loyal consumers.

Jon Andersen asked for clarification on distribution metrics, specifically the difference between cubic feet and TDP growth, and for an outlook on the expansion of second and third fridges.

Answer

Co-Founder and President Scott Morris clarified that the focus is on growing cubic footage through second and third fridges, which drives higher growth than store count alone. He noted that Walmart is now allocating more space to Freshpet in its company-owned fridges. He sees consistent growth from fridge expansion as retailers recognize fresh is the key growth driver in the pet food category.

Jon Andersen asked for clarification on the difference between cubic feet growth and TDP growth, the role of retailer-owned fridges, and the future outlook for adding second and third fridges in stores.

Answer

Executive Scott Morris explained that adding second and third fridges is a key growth driver. He noted that Walmart is the primary retailer with its own fridges, and Freshpet is now successfully gaining space within them. For other retailers, Freshpet's company-managed fridge program is preferred due to its high efficiency and low maintenance, with less than 1% of fridges down at any time.

Jon Andersen asked about the cadence of the baby and kids business, specifically the timing for cycling the Earth's Best formula pipeline and the industry-wide challenges in UK wet baby food, and if the business is expected to grow in aggregate thereafter. He also followed up on stranded overhead, asking if the pro forma 30%+ gross margin and low double-digit EBITDA margin are *after* the workdown of these costs and what the quarterly impact would be.

Answer

CEO Alison Lewis explained that the drag from the BBC Panorama documentary on UK Ella's Kitchen will be cycled in Q4 (May 2026), with new marketing and 10 new snack SKUs, new meals, and Nutty Blends expected to drive growth. In North America, Earth's Best snacking and cereal show strong double-digit/mid-single-digit growth with innovation. The formula business is cycling its last big quarter, but remains competitive, while the pouch business is hyper-competitive and shifting to refrigerated, with planned SKU reductions. CFO Lee Boyce confirmed that the pro forma margins (30%+ gross, low double-digit EBITDA) are *after* the workdown of stranded overhead impacts, reiterating a $5 million-$6 million quarterly headwind until mitigated.

Jon Andersen asked about the cadence in the Baby & Kids business, specifically the timing for cycling transitory events like the Earth's Best formula pipeline and U.K. wet baby food challenges, and the expectation for growth post-cycling. He also sought clarification on the impact of stranded overhead on North America's pro forma gross and EBITDA margins.

Answer

President and CEO Alison Lewis explained that the U.K. Ella's Kitchen drag would cycle in Q4 2026, with new marketing and innovation expected to drive a return to growth. For North America, Earth's Best snacking and cereal show strong growth, and the formula business's last big cycle was this quarter. The pouch business is undergoing SKU reductions. CFO Lee Boyce clarified that the projected North America gross margins (30%+) and EBITDA margins (low double-digit) are *after* the workdown of the $20 million-$25 million stranded overhead costs, which will cause short-term pressure of about $5 million-$6 million per quarter initially.

Jon Andersen questioned whether the shift to a regional operating structure is the primary basis for the 12% people-related SG&A cost reductions, if these savings are incremental to the $60 million productivity target for fiscal 2026, and the expected timeline for sales stabilization.

Answer

CFO Lee Boyce confirmed that the 12% SG&A reduction is incremental to the $60 million productivity target and will build sequentially through fiscal 2026, reaching a full run rate by the fourth quarter. Interim President and CEO Alison Lewis explained that sales stabilization is a key priority, driven by renovation, innovation, revenue growth management, and digital capabilities. She noted that SKU reductions target small, complex SKUs, aiming for stabilization by year-end and ultimate growth in future models.

Jon Andersen from William Blair & Company, L.L.C. asked if the 12% people-related SG&A cost reductions are primarily driven by the shift from a global to a more regional operating structure, and if these savings are included in the $60 million productivity target for fiscal 2026, or if they will build into fiscal 2027. He also inquired about a loose timeframe for when Hain Celestial expects sales to stabilize, considering the impact of innovation, marketing, SKU rationalization, and current headwinds.

Answer

Lee Boyce, CFO, clarified that the 12% SG&A reduction is incremental to the $60 million productivity number and is people-related SG&A, with the full run rate expected by the end of the fiscal year, building sequentially. Alison Lewis, Interim President, CEO & Director, confirmed that many 'actions to win' are designed to accelerate sales, and SKU reduction targets small sales items that add complexity rather than significantly impacting the top line. She stated the goal is sales stabilization through the year, followed by growth in future models, acknowledging the company is 'coming from behind.'

Jon Andersen asked if the shift to a regional operating structure is the primary driver for the 12% people cost reductions in SG&A, whether these savings are included in the $60 million productivity target for fiscal 2026, and the anticipated timeframe for sales stabilization.

Answer

CFO Lee Boyce clarified that the 12% SG&A reduction is incremental to the $60 million productivity target, focused on people-related SG&A, and will reach full run rate by Q4 2026, building sequentially. Interim President and CEO Alison Lewis confirmed that many 'actions to win' are designed to accelerate sales, and SKU reduction targets small, complex SKUs with minimal top-line impact. She stated the goal is sales stabilization through the year, followed by ultimate growth, acknowledging the need to recover from past performance.

Jon Andersen asked for any preliminary thoughts on the outlook for fiscal 2026, how Interim CEO Alison Lewis's past experience at larger CPGs applies to Hain's situation, and the expected timing for an update on the strategic review.

Answer

CFO Lee Boyce and Chair Dawn Zier stated it was too early to provide a 2026 outlook. Interim CEO Alison Lewis explained that within her large-company background, she has extensive experience leading smaller, agile brands and business turnarounds. Chair Dawn Zier reiterated that it is too early to commit to a timeline for the strategic review update.

Jon Andersen requested more detail on the company's 'Better-for-You' and GLP-1 positioning and its impact on innovation. He also asked about the rationale for revising the long-term top-line growth algorithm and sought clarity on the cadence of the pivot to growth in the second half.

Answer

CEO Wendy Davidson explained that 'Better-for-You' means providing 'healthy nudges' without sacrificing taste or convenience. For GLP-1, the strategy is to identify and market suitable products to consumers on that diet. She stated the revised long-term growth algorithm reflects learnings and execution timelines, noting they are behind on revenue management but ahead on productivity. CFO Lee Boyce reiterated the expectation to pivot to growth in Q3.

Jon Andersen with William Blair inquired about J&J Snack Foods' full-year sales outlook, considering the 3% headwind from SKU rationalization, and how the company plans to achieve its long-term mid-single-digit organic growth target amidst commercial innovation and new business wins. He also asked for an update on Project Apollo's $20 million cost savings run rate timeline and the impact of commodity costs and portfolio mix on gross margin improvement.

Answer

CEO Dan Fachner indicated that Q1 sales were slightly softer due to plant consolidation ramp-up but anticipates low single-digit growth for the full year, excluding the SKU rationalization impact. CFO Shawn Munsell clarified this growth applies to the remaining portfolio. Regarding Project Apollo, CEO Dan Fachner expects the $20 million annual run rate for plant consolidation savings to be fully realized in Q2, with CFO Shawn Munsell detailing that the remaining $5 million from distribution and G&A savings will ramp up in Q3 and hit full run rate by Q4. CEO Dan Fachner also noted that commodity pricing is expected to be favorable this year, contributing to gross margin improvement alongside plant consolidation and portfolio optimization. CFO Shawn Munsell clarified that a $1 million one-time product disposal cost impacted Q1 gross margin but is not expected to recur.

Jon Andersen with William Blair inquired about J&J Snack Foods' full-year sales outlook, considering the 3% headwind from SKU rationalization, and how the company plans to achieve its long-term mid-single-digit organic growth target amidst commercial innovation and new business wins. He also asked for an update on Project Apollo's $20 million cost savings run rate timeline and the impact of commodity costs and portfolio mix on gross margin improvement.

Answer

CEO Dan Fachner indicated that Q1 sales were slightly softer due to plant consolidation ramp-up but anticipates low single-digit growth for the full year, excluding the SKU rationalization impact. CFO Shawn Munsell clarified this growth applies to the remaining portfolio. Regarding Project Apollo, CEO Dan Fachner expects the $20 million annual run rate for plant consolidation savings to be fully realized in Q2, with CFO Shawn Munsell detailing that the remaining $5 million from distribution and G&A savings will ramp up in Q3 and hit full run rate by Q4. CEO Dan Fachner also noted that commodity pricing is expected to be favorable this year, contributing to gross margin improvement alongside plant consolidation and portfolio optimization. CFO Shawn Munsell clarified that a $1 million one-time product disposal cost impacted Q1 gross margin but is not expected to recur.

Jon Andersen asked about the outlook for the marketing expense line in 2025, the expected normalized top-line growth rate, the role of pricing in the 2025 plan, and the forecast for capital expenditures.

Answer

CEO Daniel Fachner projected marketing expenses to remain flat around 7.4% of sales and guided for low-to-mid single-digit normalized top-line growth in fiscal 2025. He confirmed that price increases are planned for January across all three business units. CFO Ken Plunk added that capital expenditures are expected to normalize to a run rate of 4.5% to 5% of sales, equating to approximately $75 million to $85 million.

Jon Andersen inquired about the expected duration of the 'shakeout' process for insurgent brands and whether the current competitive dynamic will remain difficult until it plays out more broadly.

Answer

Darcy Davenport, President and CEO, BellRing Brands, acknowledged that a shakeout is ongoing, with some brands failing to meet thresholds. She emphasized that insurgent/crossover brands represent only 10% of the category, while leading brands (like Premier) are growing by bringing in new households and sourcing volume from declining legacy brands (30% market share). She expects continued churn among insurgent brands but believes leading brands with established household penetration, repeat rates, national supply chains, and retailer partnerships will continue to win and consolidate the category.

Jon Andersen asked about the expected timeline for a shakeout among insurgent brands in the category, and how long this competitive dynamic might persist before a broader market consolidation plays out.

Answer

President and CEO Darcy Davenport noted that insurgent brands represent 10% of the category and will experience ongoing churn. She emphasized that growth primarily comes from leading brands like Premier gaining households and sourcing volume from declining legacy brands (30% market share). She expects a consolidation where successful brands propel forward, while the churn of insurgent brands will be a continuous dynamic.

Jon Andersen from William Blair & Company asked about the incrementality of the Indulgence line, the Premier brand's performance in the almond milk segment, and any shifts in capital allocation priorities.

Answer

CEO Darcy Horn Davenport reported strong performance and high incrementality for the Indulgence line, with about half of its sales from category expansion. She noted it was too early to assess the new almond milk line. CFO Paul Rode stated there has been no change to capital allocation priorities, which remain focused on balancing debt paydown with opportunistic share buybacks, while M&A is a longer-term consideration.

Jon Andersen requested more insight into the initial performance of the Indulgence line and asked for details about the next major innovation planned for later in the fiscal year.

Answer

President and CEO Darcy Davenport shared that the Indulgence line is seeing early success, driving incrementality by targeting new occasions like treats and desserts. She noted it is also surprisingly bringing in new-to-category consumers. She revealed the next major innovation, planned for Q4, is strategically focused on attracting new consumers to the brand.

Jon Andersen questioned the distribution ramp for Alani Nu, its potential to reach Celsius's current ACV and TDP levels, and how Celsius Holdings plans to collaborate with PepsiCo to avoid the inventory optimization issues experienced with Celsius in 2024.

Answer

CFO Jarrod Langhans stated that management has learned from the Celsius transition, with tighter team connections and captaincy providing more control to ensure an efficient and smooth flow for Alani Nu. Chairman and CEO John Fieldly added that Alani Nu has strong appeal, performing well in convenience, and that the captaincy allows control over planograms. He anticipates a more gradual, quarterly transition over the next three to six months, with the same ACV and TDP opportunities for Alani Nu as for the entire portfolio, leveraging a larger key accounts team and PepsiCo's food service opportunities.

Jon Andersen asked a two-part question regarding Alani Nu: its distribution ramp (ACV/TDPs) and potential to reach Celsius's market levels, and how Celsius Holdings is collaborating with PepsiCo to avoid inventory optimization issues previously seen with Celsius in 2024.

Answer

CFO Jarrod Langhans addressed inventory, stating they've learned from the Celsius transition, have tighter team connections, and captaincy provides more control, making them confident in an efficient flow for Alani Nu. CEO John Fieldly discussed distribution, noting Alani Nu's strong appeal and performance in convenience, with significant ACV/TDP opportunities through PepsiCo's network, though it will be a more gradual, quarterly transition over the next 3-6 months.

Jon Andersen asked for more detail on the expected shelf space expansion for both the core Celsius brand and the newly acquired Alani Nu, and how the company plans to activate consumers around these gains.

Answer

CEO John Fieldly highlighted that new innovations like Playa Vibe and Retro Vibe are expected to gain placements. He emphasized significant wins in secondary placements, such as checkout coolers in large national retailers, which will improve velocity. For Alani Nu, he expressed strong optimism for distribution gains, particularly as the team prepares for 2026 buyer meetings, leveraging the brand's momentum and strong connection with female consumers.

Jon Andersen of William Blair & Company, L.L.C. asked about the extent of future brand rationalization and its potential top-line impact, and also inquired about the sell-through and growth opportunities for the super-premium brands, particularly at Walmart.

Answer

CEO Robbert Rietbroek stated that the largest part of brand rationalization is complete, with the current focus on simplifying regional brand offerings to improve operational efficiency. On the premium business, he highlighted its 44.2% volume-driven growth, fueled by expanded retail distribution like the PET launch at Walmart, direct delivery availability, and a strong focus on the food service channel. He noted that new production facilities are underway to unlock future growth.

Jon Andersen inquired about the performance drivers for Primo's premium brands, Saratoga and Mountain Valley, and sought details on the factors contributing to the first-quarter EBITDA beat versus expectations.

Answer

CEO Robbert Rietbroek attributed the 49% sales growth in premium brands to strong volume, new distribution in Walmart, and significant marketing exposure, including a viral social media moment for Saratoga. CFO David Hass explained the EBITDA beat was driven by strong base business performance and operational efficiencies, in addition to the on-plan $20 million in synergy capture.

Jon Andersen of William Blair & Company, L.L.C. requested more detail on the gross margin progression, specifically the tariff headwind in Q3 and recovery in Q4. He also asked for color on the new business pipeline, how aseptic capacity is balanced across products like broth and milk, the fruit snack line investment details, and capital allocation priorities for 2026.

Answer

CFO Greg Gaba quantified the Q3 tariff impact at roughly $2 million, expecting it to be fully passed through by Q4. CEO Brian Kocher added that the strong pipeline, particularly in fruit snacks and plant-based beverages, gives confidence in hitting the high end of their long-term growth targets. He explained that broth production is used strategically to manage production seasonality. Gaba confirmed the $25M fruit snack line investment will occur mostly in 2026 and that hitting the 2.5x leverage target remains the top priority.

Jon Andersen from William Blair & Company, L.L.C. requested more detail on the gross margin progression, specifically the expected Q3 tariff headwind and its recovery in Q4. He also asked for an update on the new business pipeline, how aseptic capacity is balanced across products, the investment details for the new fruit snacks line, and 2026 capital allocation priorities.

Answer

CFO Greg Gaba quantified the Q3 tariff timing impact at approximately $2 million, expecting a full pass-through by Q4. CEO Brian Kocher added that the strong pipeline supports growth near 10% and explained that seasonal broth production helps balance aseptic capacity. Gaba confirmed the new line is a ~$25 million investment for 2026 to support 2027 growth and that deleveraging remains the top capital priority.

Jon Andersen requested more detail on the gross margin progression, the strength of the new business pipeline, and how the company balances its aseptic capacity across various products like broth and plant-based milk. He also asked for specifics on the fruit snack line investment and capital allocation priorities for 2026.

Answer

CFO Greg Gaba clarified that a new ~$2 million tariff impact will affect Q3 margins but should be fully passed through by Q4. CEO Brian Kocher added that the business pipeline's strength gives them confidence in achieving the high end of their long-term growth algorithm. Kocher explained that broth is a strategic product that helps optimize production schedules due to its seasonality. Gaba confirmed the fruit snack line is a ~$25 million investment primarily in 2026, and after hitting leverage targets, the priority remains high-ROIC growth projects.

Jon Andersen sought clarification on the composition and sales potential of the expanded business pipeline, the company's visibility on the Midlothian wastewater project, and whether the outlined gross margin path incorporates the impact of tariffs.

Answer

Executive Brian Kocher detailed that the pipeline is now approximately 25% of annual revenue, double its size 15 months ago, and is heavily weighted toward plant-based beverages, broth, and existing customers. He affirmed that volume limitations from the Midlothian issue are factored into 2025 and 2026 guidance. He also clarified that the current gross margin guidance does not bake in the fluid tariff situation, as the goal is to protect gross profit dollars, which could affect the margin rate.

Jon Andersen sought clarification on the gross margin cadence, the drivers behind the second-half revenue growth acceleration, and whether the long-term 20% gross margin target is still achievable. He also asked about the impact of the Midlothian electrical upgrade downtime.

Answer

CFO Greg Gaba confirmed the 44%/56% split refers to gross profit dollars, driven by new roles and unlocking trapped capacity in the second half. He affirmed the 20% long-term gross margin target remains. CEO Brian Kocher attributed the revenue cadence to the timing of known distribution wins and innovation. He also stated the Midlothian downtime cost about 50 basis points of margin in Q4.

Jon Andersen from William Blair & Company inquired about the specific drivers behind the strong Q2 revenue beat, the resilience of the foodservice segment amid market softness, and the reasons for gross margin pressure despite high volumes, seeking clarity on short-term investments and the expected Q4 margin recovery.

Answer

Executive Brian Kocher explained that the revenue strength was broad-based, stemming from new product launches, TAM expansion in protein shakes, and strong performance of the brands they support. He attributed foodservice resilience to deep customer integration, participation in limited-time offers, and new product innovations. Kocher detailed that while strong volume growth tested the supply chain, the company is making targeted short-term investments in areas like downline efficiencies and equipment uptime, which caused temporary margin pressure but provides confidence in a sustainable margin expansion starting in Q4.

Jon Andersen of William Blair asked for an update on digital sales growth and its mix of the total business, the long-term target for international sales contribution, and whether pulling forward fall innovation created any gaps in the product pipeline.

Answer

Senior VP & CFO Mandy Fields reported that e-commerce channels grew nearly 20% in the quarter and now represent about 20% of the total business. CEO & Chairman Tarang Amin expressed high aspirations for international growth but did not provide a specific long-term mix target. He also confirmed that pulling forward the melting lip balms did not create a hole in the innovation pipeline, stating that the overall fall innovation slate remains strong.

Jon Andersen of William Blair & Company, L.L.C. asked for clarification on the gross margin outlook and how management became confident in Rhode's long-term sustainability versus being a more fleeting celebrity brand.

Answer

SVP & CFO Mandy Fields reiterated that no specific gross margin guidance was being provided. Chairman and CEO Tarang Amin detailed his confidence in Rhode's longevity, citing founder Hailey Bieber's vision, the brand's proven ability to scale, its high-quality innovation, and strong consumer repeat purchase rates as key factors.

Jon Andersen from William Blair & Company, L.L.C. asked how the outperformance of retailers who participated in promotional strategies is influencing 2026 line reviews. He also requested details on the company's visibility and timeline for reaching its mid-30s gross margin target.

Answer

CEO James Hagedorn stated that activation funds will be directed towards retail partners who actively collaborate on driving POS, a strategy that has proven successful. President & COO Nate Baxter added that discussions for 2026 are ongoing. On margins, EVP & CFO Mark Scheiwer outlined a path from 30% to 35%, driven by approximately 100 basis points annually from supply chain savings and another 100 basis points from net pricing. Nate Baxter also noted that future product innovation will be margin accretive.

Jon Andersen of William Blair & Company inquired about the significant delta between the 12% point-of-sale (POS) unit growth and the low single-digit dollar growth, and also sought confirmation on the company's confidence in achieving its medium-term gross margin target of over 35%.

Answer

CEO James Hagedorn and CFO Mark Scheiwer addressed the questions. Hagedorn explained that the unit/dollar growth gap is primarily driven by aggressive, retailer-funded promotions designed to increase store traffic, which he views as a positive indicator of consumer engagement. Scheiwer quantified the drivers as 60% product mix (higher volume of lower-priced soils and mulch) and 40% promotional activity. Regarding margins, Hagedorn affirmed the 35% goal is a board mandate, with the planned Hawthorne divestiture expected to provide a tailwind of at least 100 basis points. Scheiwer added that ongoing supply chain savings are on track to deliver over 200 basis points of improvement by fiscal 2027.

Jon Andersen of William Blair & Company inquired about the expected cadence of gross margin improvement through fiscal 2025 and sought updated thoughts on the path to achieving the mid-30s percentage goal by fiscal 2027, particularly the more challenging final steps.

Answer

Executive Mark Scheiwer detailed that for fiscal 2025, about two-thirds of the gross margin improvement will occur in the first half, driven by lower commodity costs, with the remainder in the back half. Executives James Hagedorn and Nate Baxter expressed high confidence in reaching the mid-30s target by 2027, citing a clear line of sight through supply chain savings, SKU simplification, innovation, pricing, and the margin uplift from separating the Hawthorne business.

Jon Andersen asked for clarification on the company's three-year financial targets, specifically questioning the $700 million EBITDA goal and the path to achieving a mid-30s gross margin rate by fiscal 2027.

Answer

CEO James Hagedorn confirmed the $700 million EBITDA target by fiscal 2027 is firm and aligns with the goal of reducing leverage to approximately 3x. He stated the mid-30s gross margin target is also intact, explaining that while significant pricing is difficult now due to consumer sentiment, the goal will be reached through a combination of targeted price increases, incremental volume growth, cost-saving initiatives, and potential M&A.

Jon Andersen asked for more details on pricing actions and capital allocation priorities. He also followed up on whether the company could still achieve its long-term top-line growth algorithm in fiscal 2026 despite the drag from Atkins.

Answer

CEO Geoff Tanner confirmed pricing was taken on Atkins shakes and more is being evaluated to offset costs. CFO Chris Beeler outlined capital allocation priorities as M&A, followed by debt paydown and share buybacks. Regarding FY26 growth, Tanner reiterated that it's early in the planning cycle and acknowledged the drag from Atkins, but noted its impact will lessen as its portfolio mix declines.

Jon Andersen asked for the reasons behind raising the full-year outlook for Quest's point-of-sale growth and inquired if brand extensions like salty snacks create a halo effect for the core business. For Atkins, he asked what specific signals investors should look for to gauge the success of the brand's stabilization over the next 12-18 months.

Answer

CEO Geoff Tanner attributed the stronger Quest outlook primarily to the salty snacks platform, which is growing rapidly now that supply constraints are resolved. He confirmed a significant halo effect, with platforms like salty snacks and bakeshop bringing new consumers to the entire Quest franchise. For Atkins, Tanner advised investors to monitor the underlying base velocity of the business, adjusted for the planned reduction in shelf space, as the key metric for stabilization.

Jon Andersen of William Blair & Company, L.L.C. requested more context on the optimization of low-ROI spending for Atkins and asked about the competitive landscape for the OWYN brand.

Answer

CFO Shaun Mara explained the goal is to create a more sustainable Atkins business and reinvest savings into Quest and OWYN. CEO Geoff Tanner gave an example of cutting unprofitable trade promotions. Regarding OWYN, he stated it is the clear plant-based leader due to its superior taste, which attracts mainstream dairy consumers, and noted a lack of significant emerging competitors.

Jon Andersen questioned the fiscal 2025 point-of-sale growth assumption for OWYN (20-30%), which is much lower than its recent performance. He also asked about the ROI and appropriateness of marketing spend for Quest and Atkins.

Answer

CEO Geoff Tanner explained the OWYN forecast reflects lapping a year of significant distribution gains, with FY25 growth driven more by velocity and filling voids. CFO Shaun Mara added that this growth rate would still double the business in three years. On marketing, Tanner praised the high ROI of Quest's campaign, which will see increased spending, while noting Atkins' spend is being reduced, primarily in non-working areas. Mara quantified the total marketing spend will decrease from low-9% to mid-to-low 8% of sales.

Jon Andersen inquired about the impact of macroeconomic uncertainty on private label demand and the company's consumption trend assumptions for its full-year outlook. He also asked for clarification on the expected impact of margin management activities for the remainder of the year.

Answer

CEO Steven Oakland explained that TreeHouse's guidance conservatively assumes no benefit from consumers shifting to private label, positioning any such trend as potential upside. He noted that private label's value proposition is strong. CFO Patrick O'Donnell and CEO Steven Oakland added that margin management actions were intentionally front-loaded in Q1, and the full-year organic volume and mix forecast remains a decline of approximately 1%.

Jon Andersen asked about the expected cadence for the remainder of the supply chain savings program and for more detail on the multiyear glide path for capital expenditures, questioning how low the CapEx-to-sales ratio might go over the next few years.

Answer

EVP and CFO Patrick O'Donnell stated that 2025 savings will include carryover from 2024 procurement initiatives, plus manufacturing and logistics savings. Regarding CapEx, he noted that as multiyear projects conclude, the rate should move toward the low end of the historical 3-3.5% of sales range, especially in a lower-growth environment.

Jon Andersen from William Blair sought to reconcile TreeHouse's volume declines with broader private label share gains and asked for an update on the $250 million cost savings program, including its progress, 2025 outlook, and any volume dependency.

Answer

CEO Steve Oakland explained the volume pressure is linked to weakness in large traditional grocery channels, impacting all center-store private label categories. CFO Patrick O'Donnell highlighted the $20 million positive supply chain benefit in Q3, driven by procurement initiatives, and confirmed the company is on track with its savings plan, with future contributions expected from TMOS and distribution network efficiencies.

Jon Andersen of William Blair & Company sought clarification on the FDM distribution timeline, details on business with the largest customer, the potential incrementality of the new energy drink line, and the outlook for the DTC subscriber base.

Answer

Executive Chris Mondzelewski clarified the full distribution target of 70-75% ACV is now expected by the end of 2026 due to customer timing shifts. He described business with their largest customer as strong, with high velocities and innovation plans. He also asserted the energy drink line will be highly incremental, targeting different occasions and demographics. Regarding DTC, he confirmed the subscriber base has stabilized but the primary focus remains on retail expansion.

Jon Andersen asked about the key drivers of the international business, the reason for plateauing ACV levels, and for a reminder of the long-term growth algorithm for the branded business and the scale of planned capacity additions.

Answer

CEO Martin Roper highlighted strong growth in the U.K. and Germany, with plans to replicate the German market entry model across Western Europe. CFO Corey Baker explained that flat ACV was a result of inventory constraints impacting on-shelf availability (TDPs), not a loss of shelf space. He reiterated the long-term goal for mid-teens branded growth and stated that capacity is being added to return to a more flexible 80-85% utilization rate to support future growth.

Inquired about the cadence and application of the incremental marketing spend, whether product demand was driven by trade-down behavior or overall category health, and the conviction behind raising guidance early in the year.

Answer

The company confirmed the incremental $12 million marketing spend is heavily front-loaded in the first half of the year. The growth in manufactured brands is not at the expense of distributed brands; rather, the overall category pie is growing with new and lapsed customers returning. The decision to raise guidance was driven by strong momentum in non-seasonal brands and a better-than-expected start to the flea and tick season.

Requested a comprehensive update on the Services segment, including community clinics, remaining wellness centers, and a key retail partner pilot. Also asked for a segment-level breakdown of the 2024 sales growth guidance.

Answer

The community clinic business is performing well and expanding. The remaining wellness centers are stable, with future plans dependent on a new hygiene model test. The retail partner pilot is successful and nearing an expansion announcement. For 2024 growth, manufactured brands are expected in the low-double-digits, distributed brands in mid-single-digits, and Services to be flat, with the overall adjusted growth being the key focus.

Inquired about 2024 retailer shelf resets and innovation, manufacturing capacity, and details about the new Walmart pilot program, including its structure and potential rollout.

Answer

Retailer discussions for 2024 are positive, with moderate distribution gains expected and strong momentum in treats. A key innovation is a new premium supplement launch. Manufacturing capacity is sufficient to support growth. The new Walmart pilot is a Walmart-branded program with PetIQ as the operator, currently in a single location with no further rollout details shared.