Executive Summary

Q1 2024 showed resilient profitability progress despite softer revenue: revenue fell 2.2% to $129.5M while reported gross margin expanded 440 bps YoY to 28.8% and adjusted gross margin rose to 32.5% (+260 bps YoY), driven by lower raw materials/freight and mix .
Adjusted EBITDA grew 15.2% YoY to $19.1M on lower costs even as Branded CPG volumes declined; Flavors & Ingredients grew modestly on price and volume .
No FY24 guidance was issued; the company focused management commentary on execution and closing its go‑private transaction with Ozark Holdings (announced at $4.875/share), expected to close later in Q2 2024 (subject to approvals) .
Key stock narrative catalysts: continued gross margin expansion and free cash flow focus, plus the definitive merger agreement which sets a deal floor and narrows the near‑term trading debate to deal timing/probability and any interim performance surprises .

What Went Well and What Went Wrong

What Went Well
- Sustained margin improvement: reported gross margin 28.8% (+440 bps YoY) and adjusted gross margin 32.5% (+260 bps YoY) on lower input/freight and favorable mix .
- Operating discipline and cost actions: Adjusted EBITDA rose 15.2% YoY to $19.1M despite lower revenue, reflecting supply chain reinvention savings and lower freight/raw material costs .
- Flavors & Ingredients growth continued: segment revenue +2.1% (+1.9% cc), with operating income of $8.6M (vs. $9.5M prior year) as higher price/volume offset mix headwinds .
- Management tone: “third consecutive quarter of meaningful gross margin expansion,” with focus on efficiencies, FCF, and deleveraging (Irwin D. Simon, Executive Chairman) .
What Went Wrong
- Top-line softness: consolidated revenue down 2.2% as Branded CPG fell 3.5% on lower volumes (only partially offset by price) .
- Higher corporate expense: corporate expenses $10.4M vs. $5.7M prior year, primarily due to merger-related costs and higher bonus expense, pressuring reported profitability .
- Net loss widened sequentially: net loss of $9.4M (vs. $7.4M in Q4), with interest expense ($10.9M) and merger costs offsetting operating improvements; cash used in operations was $9.6M due to timing of bonuses/inventory .

Financial Results

Overall financials (oldest → newest)

Metric	Q3 2023	Q4 2023	Q1 2024
Revenue ($M)	$134.43	$151.16	$129.50
Net Income (Loss) ($M)	$(5.43)	$(7.35)	$(9.40)
Diluted EPS ($)	$(0.13)	$(0.17)	$(0.22)
Gross Profit ($M)	$37.53	$40.43	$37.31
Gross Margin (%)	27.9%	26.7%	28.8%
Operating Income ($M)	$6.66	$2.68	$3.13
Adjusted Gross Profit ($M)	$42.54	$44.88	$42.09
Adjusted Gross Margin (%)	31.6%	29.7%	32.5%
Adjusted EBITDA ($M)	$21.03	$22.53	$19.10

Segment revenue and operating income (oldest → newest)

Segment	Q3 2023 Revenue ($M)	Q4 2023 Revenue ($M)	Q1 2024 Revenue ($M)	Q3 2023 Op Inc ($M)	Q4 2023 Op Inc ($M)	Q1 2024 Op Inc ($M)
Branded CPG	$103.27	$118.71	$98.45	$7.2	$0.3	$5.0
Flavors & Ingredients	$31.16	$32.46	$31.05	$8.4	$8.7	$8.6

Additional KPIs and balance sheet highlights

Cash and cash equivalents: $23.8M; long-term debt: $422.4M; revolver drawn: $69M (as of 3/31/24) .
Cash from operations: $(9.6)M (Q1), driven by bonus payments and inventory timing .

Non-GAAP adjustments (Q1 2024 notable items)

Add-backs included M&A/strategic review ($3.589M), supply chain reinvention (non-cash $0.166M, cash $1.678M), long-term incentive ($2.024M), and “Other items” ($2.204M) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
All company metrics	FY 2024	N/A	No guidance disclosed in Q1 2024 8‑K press release	—

Note: Q3 2023 updated FY2023 guidance to $540–$550M revenue and $77–$79M Adjusted EBITDA for that year (historical reference) .

Earnings Call Themes & Trends

(Company did not publish a Q1 2024 earnings call transcript in our corpus; themes based on company releases for trend continuity.)

Topic	Previous Mentions (Q3 2023)	Previous Mentions (Q4 2023)	Current Period (Q1 2024)	Trend
Gross margin expansion/efficiency	270 bps YTD adj. GM improvement; cost and mix benefits	Reported GM 26.7%, adj. 29.7%; benefits from lower freight and supply chain reinvention costs	Reported GM 28.8%, adj. 32.5%; third consecutive quarter of meaningful expansion	Improving
Supply chain reinvention savings	Lower costs, reduced tariffs, reinvention costs declining	Lower reinvention costs supported profitability	Reinvention costs continue but smaller; savings aid margins	Tailwind with tapering costs
Branded CPG volumes vs pricing	Volumes down, pricing up; sugar bulk reductions	Growth in Q4 aided by one‑time bulk sugar sale; lower tariffs	Volumes lower; price partially offsets; segment revenue −3.5%	Mixed; volume pressure persists
Flavors & Ingredients performance	Record sales; price and volume growth	Record $32.5M revenue	+2.1% revenue; op income slightly lower on mix	Stable to modest growth
M&A/go‑private	Strategic review active	Pending go‑private expected later Q2’24	Definitive merger at $4.875/share; closing expected later Q2’24 (subject to approvals)	Closing focus

Management Commentary

“We’re pleased with our first quarter performance, which marked our third consecutive quarter of meaningful gross margin expansion… [focused on] driving efficiencies… improved free cash flow and reducing our balance sheet leverage. We are progressing toward the completion of our pending go‑private transaction…” – Irwin D. Simon, Executive Chairman .
Q3 2023 color (context for trajectory): “We are pleased to deliver a year‑over‑year increase in adjusted gross profit margin… stabilizing, streamlining, and evolving our operations to drive enhanced productivity and sustainable margin improvement.” – Irwin D. Simon .

Q&A Highlights

Not available; no Q1 2024 earnings call transcript located in our document set.

Estimates Context

S&P Global consensus: unavailable via our data connection for FREE (no CIQ mapping).
Third‑party indications suggest a miss vs. street: revenue $129.5M vs. ~$138.0M consensus and EPS $(0.22) vs. $(0.02) consensus (InvestorPlace/TradeSmith aggregation) .
Given S&P Global data unavailability, investors should treat third‑party consensus snapshots with caution; reported results per company filings are definitive .

Key Takeaways for Investors

Margin trajectory remains positive: Q1 adjusted gross margin 32.5% vs. 29.7% in Q4 and 31.6% in Q3, reflecting sustained cost tailwinds and mix benefits .
Profitability resilience despite revenue softness: Adjusted EBITDA +15.2% YoY to $19.1M as efficiency gains offset Branded CPG volume declines .
Branded CPG is the swing factor: volumes remain pressured (−3.5%), partially offset by price; further stabilization in volumes would aid leverage on fixed costs .
Flavors & Ingredients continues to provide steady contribution and pricing power, though mix modestly weighed on operating income this quarter .
Corporate costs elevated on M&A: merger/strategic review expense ($3.6M) and higher bonuses lifted SG&A; normalization post‑transaction could be a post‑deal earnings lever .
Balance sheet watch: $422.4M long‑term debt and negative operating cash flow in Q1 (timing‑related) underscore the importance of execution on FCF and inventory .
Deal lens dominates near term: definitive $4.875/share cash merger consideration and expected close in Q2’24 frame risk/reward around approvals/timing versus standalone valuation .

Appendix: Additional Detail

Non-GAAP and adjustments (Q1 2024)

Adjusted EBITDA reconciles from net loss with add‑backs including interest, taxes, D&A, LTI, M&A/strategic review, supply chain reinvention, and other items; see full reconciliation for line‑item magnitudes .

Merger details

Per Share Merger Consideration: $4.875 cash per share; closing conditions include majority approval and a 66 2/3% vote of non‑affiliated shares, HSR/other approvals; outside date Aug 12, 2024; financing includes a committed $375M incremental term loan and up to $300M equity commitment .

Other Q1 2024 metrics (for reference)

Interest expense: $10.86M; net loss per share: $(0.22); operating cash flow: $(9.56)M .
Segment revenue: Branded CPG $98.45M; Flavors & Ingredients $31.05M .

Sources: Whole Earth Brands Q1 2024 8‑K and Exhibit 99.1 press release ; Q4 2023 8‑K/press release ; Q3 2023 8‑K/press release ; Merger 8‑K (Feb 13, 2024) ; Third‑party consensus snapshot .

Whole Earth Brands, Inc. (FREE)·Q1 2024 Earnings Summary