HAIN CELESTIAL GROUP INC (HAIN)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY25 net sales were $411M (organic -7%) with adjusted EPS $0.08 and adjusted EBITDA $38M; GAAP EPS was $(1.15) driven by $107M non-cash goodwill/intangible impairments, and free cash flow was $25M .
• Revenue softness was concentrated in Snacks (organic -13%) due to in‑store activation/promotional effectiveness and shelf resets; International also faced short‑term service challenges, while Baby & Kids benefited from a full recovery in Earth’s Best infant formula .
• Guidance was lowered: FY25 organic net sales now down 2–4% (prior “flat or better”), adjusted EBITDA flat (prior mid‑single‑digit growth), and gross margin +≥90 bps (prior +≥125 bps); free cash flow ≥$60M maintained .
• Management reiterated a pivot to growth beginning in Q3, supported by promotional timing shifts, distribution gains, formula recovery, and a new Savannah, GA distribution center that doubles U.S. network capacity and cuts delivery mileage ~66% .

What Went Well and What Went Wrong

• What Went Well

  • Strong cash generation and deleveraging: Operating cash flow $31M; free cash flow $25M; net debt reduced by $12M QoQ to $672M; net secured leverage 4.1x .
  • Baby & Kids recovery: Earth’s Best infant formula consumption +29% YoY post full supply recovery; Earth’s Best snacks/cereal up double digits; improved household penetration .
  • Distribution/channel progress: Confirmed snack distribution gains (e.g., +5% at the largest retail partner) and expansion into value and C‑stores; away‑from‑home net sales grew 38% in NA and 52% International in Q2 .
  • Management quote: “We are confident that the actions taken…will drive organic net sales growth in the second half of the year.” — Wendy Davidson .

• What Went Wrong

  • Organic net sales declined 7% YoY (volume/mix −5 pts, price −2 pts); adjusted EBITDA fell to $38M from $47M YoY; adjusted EPS $0.08 vs $0.12 prior year .
  • Snacks headwinds (organic −13%) from promotional timing shift and weaker in‑store activation; shelf placement issues at a large customer impacted velocities until resets later in Q3 .
  • International service challenges and ingredient shortfall in Celestial Seasonings hot tea season pressured sales and margins; management admitted the tea issue was an internal execution miss, now resolved .
  • Adjusted gross margin compressed 60 bps YoY to 22.9% (trade spend and pricing pressures); International adjusted EBITDA margin fell ~160 bps YoY to 12.4% .

Financial Results

Segment Net Sales and EBITDA

Category Net Sales

Key KPIs and Balance Sheet

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Organic net sales declined 7%…we did generate free cash flow of $25 million and continued to make progress on net debt reducing it by $12 million in the quarter.” — Wendy Davidson .
• “Adjusted EBITDA in the second quarter was $38 million…Adjusted gross margin was 22.9%…decrease driven by cost inflation and pricing due to higher trade spend…partially offset by productivity.” — Lee Boyce .
• “We now expect organic net sales to be down 2% to 4%…adjusted EBITDA to be flat year‑over‑year…gross margin to expand by at least 90 basis points…free cash flow of at least $60 million.” — Lee Boyce .
• “We plan to begin marketing certain items within our portfolio to GLP‑1 users in the near future.” — Wendy Davidson .
• “It [Celestial Seasonings ingredient shortage] was actually an internal execution mistake…as of the end of December, we were back in supply.” — Wendy Davidson .

Q&A Highlights

• Snacks execution and marketing mix: Management is shifting from broad awareness to lower‑funnel, conversion‑focused social activation; expects distribution and promo cadence to drive improvement in Q3/Q4 .
• Cadence/pivot timing: Company expects organic net sales to pivot to growth starting in Q3, with a material margin/EBITDA step‑up in Q4 .
• Shelf resets and customer issues: Shelf placement/assortment headwinds at a large customer materially impacted velocities; resets to occur later in Q3 .
• Distribution center economics: DC expansion primarily improves service and speed‑to‑shelf; savings fall within overall margin expansion targets (not quantified) .
• Macro caution and bifurcation: Management highlighted premium/value bifurcation and maintained a cautious outlook in guidance .

Estimates Context

• Wall Street consensus (S&P Global) for Q2 FY25 EPS and revenue was not retrievable due to an SPGI request limit error during this analysis; as a result, we cannot formally assess beats/misses versus consensus for this quarter [SPGI data unavailable].

Key Takeaways for Investors

• Execution is the near‑term swing factor: Snacks underperformance from activation/promo effectiveness and shelf placement should ease as resets complete and conversion‑focused marketing ramps in Q3/Q4 .
• Baby & Kids inflecting: Full formula supply and +29% consumption underpin a positive trajectory for Earth’s Best, with distribution/marketing tailwinds into H2 .
• Structural supply chain gains: The new Savannah DC doubles capacity and cuts delivery mileage (~66%), supporting service levels and margin efficiency over time .
• Margin/FCF discipline intact: Despite revenue pressure, the company delivered FCF $25M and expects ≥$60M for FY25; productivity continues to offset some inflation/trade spend .
• Guidance reset lowers near‑term expectations: FY25 organic net sales down 2–4% and adjusted EBITDA flat point to a more cautious H2 ramp; watch Q3 inflection proof points .
• International recovery watch: Short‑term service challenges weighed on Q2; management expects H2 growth as spreads contract loss is lapped and beverage/snacks initiatives take hold .
• Long‑term algorithm intact but pushed to exit‑rate: Management targets sustainable 3%+ organic growth exit rate by FY2027, 26%+ gross margin, and 12%+ adjusted EBITDA margin; revenue growth management is a priority area to close the loop .