FREE - Earnings call 3 2020 | Whole Earth Brands Inc

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Operator

Good morning, and welcome to the Whole Earth Brands Third Quarter 2020 Conference Call. [Operator Instructions]. Please note, today's event is also being recorded. At this time, I'd like to turn the conference over to Jeff Sonnek, Investor Relations at ICR. Sir, please go ahead.

Jeff Sonnek

morning. good and you, Thank Today's presentation Officer; Manzone, Executive by be Andy Rusie, hosted and Albert Chief Chief will Financial Officer. Simon available Executive and Irwin is on participating Chairman, the will be for Q&A. also call

within on Securities are today's than call based statements statements statements current harbor accompanying forward-looking the The comments considered Act and These beliefs the the of are and events. of Private during meaning of other facts forward-looking Reform expectations presentation statements. of the well of management's contain historical statements Litigation a as provisions assumptions All safe XXXX. future concerning as number

forward-looking Such are statements to risks actual and unknown results and the uncertainties differ materially forward-looking results statements. to could the cause subject that from known in discussed

risks and company's identified these of discussed are uncertainties with filings and the SEC. the in Some

website, We'll Please today. our earnings which financial measures. can also be in directly non-GAAP comparable their refer GAAP most to Relations for non-GAAP to on the refer tables included financial measures release investor.wholeearthbrands.com, measures found to reconciliations of certain the Investor

now the With like to Manzone, turn that, Albert call over CEO. I'd to

Albert Manzone

November will as Thank public to present Swerve which segments, and quarter am strategic of you, company the morning, merits excited XX. the Tuesday, and first closed some our full acquisition, today. our Jeff, I our color providing X business good everyone. start this I around of by a performance then past discuss

the reiterate innovation growth to building, M&A you're for to to organic our marketplace addition In driving want that execution. and unfold, to starting see strategy commitment I brand

branded within CPG record track demonstrated of had We success innovation our segment. a

our new launches baking, This product apparent extensions. areas is XXXX of for innovation. sugar In as fact, sales driven and consumption globally. were by approximately accounts XX% such product in approximately especially To which our of XX%

our America significant Additionally, our of geographic our opportunity for business. will which within organic be growth a by portfolio, sweetener North driven penetration future represents

markets drive continue international awareness new such our sweetener support will growth all geographies China. to across category positioned and also as to enter India expansion in key markets We're Increasing emerging stuff. and into within

third quarter. product versus Whole we continued the markets. branded category the year, comparable EBITDA during Within quarter of sweetener During momentum Brands by within all grew segment, channels while key our e-commerce the revenues our growing quarter X.X% experienced across CPG retail the X.X% Earth adjusted last in consolidated and

Additionally, share natural innovate we gains to all over markets, realized year top underscoring our execute. our in X ability year and

retailer Starbucks, the momentum quarter foodservice some reduction offset stable COVID for retail of inventories resulting This in geographies in this for certain Euro-Asian due which [ and was positive and by uncertainty, sales to the revenue softness, growth lower channel market distributor from within segment. includes ]

forward, excited we're secular about strives business. natural Looking our in the growing continued

quarter. segment, sweetener performance. Within the XX% Earth derivatives drove domestic Whole business tobacco during our Flavors grew Ingredients and brand in Our our our strong

by grew versus segment year. quarter comparable last X.X% This

Our focused our organic growth business. strategy primarily within derivatives is

new segment's growth-oriented global hit and R&D drive Sales the the a running Head establishing is performance. has ground focus future Our and of to

that's underway. projects to progress optimization on the continue solid We footprint make

on associated the has working this financial execute This advantages forward team and we and significant is XXXX. Our on to benefits diligently platform, time our XXXX to in project delivering for operational look and budget.

across reinforce Swerve generating Swerve and XXX% of to growth shelf-stable and which through replacements baking in conventional among sugar XXXX. some direction is ultimate where of manufacturer moments growing sugar, marketer sweetener a revenue fastest-growing of and is Swerve to compound various others grocery, including calorie natural, retail mixes, and few brand gluten-free a a are the specializing online mass, channels, with e-commerce. headed. since in conventional, provide merits transaction zero natural take sold and sugar I'll the include replacement annual the Now the on strategic zero rapidly portfolio financial we're

The XXXX. a and million and several million transaction adjusted brand of EBITDA opportunity. creation compelling approximately offers generate approximately significant in to value $X brands $XX all of This represents our is sales strategic expected net attributes for

the segment First, with sweeteners with baking, on our its its in market Swerve category market. billion attractive, which we the addressable is of natural approximate especially $X focus position strengthened find that a

share Second, $XXX by forma sweeteners. pro of of Swerve key this million, the XX% our scale market equating revenues With geography enhances American to and CPG approximately representing growth North in branded a XX%. key market all

provide from XXXX segment Swerve estimated North sweetener CPG We the category diversification. revenues. enhanced natural products Branded our penetration American XX% to portfolio our Third, XX% of of approximately

products And of of segment approximately segment revenue XX% to compared XX% branded now CPG our within natural portfolio our represents approximately previously.

us leverages And transaction, driven range by the affords in fiscal the $X to business opportunity million the following the established second this Swerve savings closing expected our chain $X.XX full which of by model, overhead of year savings. to and extract fourth, supply

adjusted branded producing margins our what EBITDA within When we're segments. Swerve fully similar generate CPG expect to today we integrated, to

EBITDA. represents of we The purchase net asset-light synergized price to business an this integration that believe run acquisition sales million estimated multiple of important synergies is that rate risk. XXXX note X.XXx It adjusted X.Xx model, attractive achievement represents and Swerve's estimated minimal or $XX given

to health such due business Western the global the declining secular is burdens wellness, diabetes. Our necessity diets, by with which and and aligned around obesity is the powerful toward created as trend forces increasingly

As of to marketplace. within free-from time, the categories to intend into broader expand to the intend penetration we we our sweetener we the adjacent Over look future, category. continue

category clean GMO an gluten-free among with market carbon, dairy others. such plant-based, addressable The enormous low free, $XX and organic, billion revenue free-from nearly free, as in categories represents label, includes

and transaction. Swerve within engage of additional market within summary, In and strong Ingredients the the to and with are our execution by seeing energized brands strategy growth targets our the business the CPG segment with great our market. we are Flavors of derivatives prospective M&A opportunities performance our continue of segment, We continued in our M&A the

we the create to larger categories, a in right foundation form assets right in would the the from grow to geographies significantly have we enterprise. that believe right I which the

I am value. a corresponding experienced team leadership shareholder can confident growth that our drive in

months thank colleagues. to growth, our higher In business, a future the Andy, and my the I necessary in worked highly to Before went place operate grow hard like has call I'd key the X.X public since team leaders the put turn complete geographies and functions drive infrastructure over we to public, and to acquisition. strategic company in

oriented beyond. team, this and excited quarter execution fourth and XXXX With I for the am for

and With our the for that, XXXX. Andy financial take you details will outlook through

Andrew Rusie

Thank good you, to everyone. Albert, morning and

a indicative XX, June of those for our successor company, periods, As predecessor XXXX, our and to reminder, the combination new date. both financials reflect consolidated business

compare results to quarter successors ended results third third I'll predecessor's quarter XXXX XXXX September XXXX, quarter XX, third the discuss The the that results.

for result, be may of you that As GAAP our period. reported impact in comparability. not predecessor my the to the some remarks, a items I'll financials highlight comparable

will to This detail. you our for the your of also end enhance understanding additional reconciliations point our at press the of progress, and non-GAAP financial I release

the September Flavors million, For XX, quarter increase $XX representing the last revenues X.X% $XX.X and quarter third for driven year. ended million comparable product Ingredients Growth a XXXX, from by our consolidated segment. primarily were was

same to quarter million for the to $XX.X year. increased in for of compared XXXX third period X.X% revenues $XX million prior the the Segment

in by over-the-counter driven used primarily care increase food and our is and skin business, The pharma performance beauty strong end derivatives beverage which was and of markets.

flat, On $XX revenues revenues $XX.X X.X%. essentially compared a million constant to year. million the Branded prior currency basis, CPG were to in increasing X.X% grew

emerging Segment results inventories North the by partially due Europe, continued and strong a reductions driven Western offset to softness markets were in the was channel foodservice uncertainty. performance distributor which and in few of COVID by retailer American of

and year, quarter Reported the down the gross XX.X% profit of from the was from profit $XX.X was million prior in gross down XX.X% million, in in margin XXXX, year period. $XX.X prior third

accounting related accounting significantly to purposes. inventory million noncash an purchase were results revaluations for adjustment by These $X.X influenced required

basis gross Excluding X.X% $XX.X increased gross driven of supply points versus impact margin this branded chain and year, segment prior the profit adjustment, by the noncash favorable to mix XX.X% and to productivity. and profit million, product CPG XX increased

XXXX, the costs adjustment the $X.X prior again, company by purchase and was the income $X.X million million consolidated by noncash accounting third million quarter partially versus following offset combination, growth. of year, public $X.X revenue driven decreasing business primarily Operating in

$X.X the prior was basis. adjustment noncash the by Net net million of in impacted and year-over-year period million to loss $X.X year compared a on similarly was income

readiness million contingency primarily compared $XX.X purchase Excluding nonrecurring other and prior adjustment, in increase to EBITDA improved to profit driven noncash the expense margins. company miscellaneous gross was year public expenses $XX.X the revenue This nonrecurring accounting growth, and actions X.X% million expenses, increased adjusted period. by

X.X% a driven for in CPG review currency product X.X% brief year-to-date $XXX.X a ended year September product Flavors to was of million offset prior nearly X.X% revenues revenues. performance revenues Ingredients XXXX. by versus decreased that in Consolidated increase X the a product XX, our the Shifting by to decrease and branded period, months constant

X.X% partially offset business Consolidated international branded versus costs, prior adjusted driven by growth improvements. in productivity declines decreased EBITDA the segment of and revenue by year, $XX.X company and CPG million public tobacco

of the that X MacAndrews to XXXX, first moving months in is flow of $X.X from Forbes. Now We of and sheet. balance million cash cash expenses million the by generated consolidated transaction-related $XX.X and operations of that were flow net funded

$XX.X of issuance we XXXX, had equivalents cash costs. and As debt, September million $XXX.X of million of cash XX, net in and

approximately on under company's company cash financed revolving $XX on a full facility, XX-month for approximately which $XX assuming capital forma our million combined the EBITDA with the adjusted September EBITDA million to the structure of as -- based on XX-month contribution given the for acquisition, loan net was leverage forma hand basis company's and million change XX, price, Pro of the the $XX the X.Xx ratio XXXX. adjusted pro was available and Swerve effect trailing purchase

a X, repurchase previously XXXX. September disclosed, authorized As on share we've $XX authorization million Board our

third returns was aimed quarter, the at our continue during buyback delivering alternatives to evaluate While not the various the highest to prioritize utilized shareholders' and we capital.

year COVID-XX within our Ingredients well to as to company public and full costs. segment operating outlook tightening we our respect Flavors due higher our as outlook, With are headwinds

approximately updated outlook, nominal the to our amount our of million Swerve in million and associated quarter the in with revenue XXXX $X $X EBITDA. of Included fourth acquisition adjusted contributions

product as full $XXX consolidated are updating range to million year We follows: million. XXXX the $XXX our of in revenues outlook

Consolidated footprint combining synergies this and branded the related $X forma million. CPG supply adjustments to range million the benefits manufacturing the million to future Flavors of to Please adjusted and EBITDA companies in relating segment. $XX of within chain of transformation segment that $XX the project, optimization X Ingredients excludes the note pro

look XXXX, will future reflect do benefits we anticipate XXXX periods as in these and not these benefits We but realizing ahead to fiscal in beyond.

Total will million, to optimization is $X.X $X the in million. be project. of our $X reduction with approximately is The capital a which footprint million associated range expenditures of reduction

The execution of the project remains on track.

capital a the been to of delayed of has portion spending the However, XXXX.

sales to that and future expect our years to continue XXXX We asset approximate expenditure of base maintain strategies. capital in growth budget our X.X% our beyond will support annual

prepared open concludes you, now Operator, to to remarks. That Q&A. our over please the call

Operator

with first comes [Operator of the Scott Instructions] Our Mushkin RX from question Capital. line

Scott Mushkin

is what's the revenue the a of expectations I question the of biggest kind little mean, over of think range months. the EBITDA just little tapped down the changed to when you I there. a X My of, too, last bit around we've kind guess, and kind X obviously bit business

So wondering changed? I was what's

Albert Manzone

this to Irwin on happy little feel of And to we say on has changed. would I'm start I as have the morning, the that and to also opening at we call jump happy as the said -- needed. Scott, this I'm Irwin, free question.

foodservices balance fact which, of do the States, you assume you is United impact going uncertainty the COVID-XX to is the now remain a have, depressed, know, as from the mostly. that What for that obviously, year, we

what that's we So have.

the starting see same to consumption. much the we drive At some lockdowns say, we're regard are are time, a and so of are second starting being -- higher I with would same -- lockdowns time Europe in COVID. At positive cautious, starting, to

but also going happen which a are U.S., know with conditions, severe proceeding very course, don't the We more what in impact. positive to could of have is states some

is reiterate would that our strong. I share very

markets, a share. is some markets. in saw strongly, gaining our you a what the of performing international But with the phasing in double-digit QX category we're and top growth was So category, for standpoint in most extremely from some X one-off

well bodes say. would very QX, for that So I

are And number of the where in well we that we shelves on buffer as and an special XXX% have Whole have initiatives gain that growth as have put as a Earth. seen that for products in a we our QX Equal the well place speak. as are distributions seasonal from of And we confirmed our e-commerce, displays as hitting

Andrew Rusie

And Scott, to just that. I'll add

in I coming This together think what public I has the has quarter changed? lot a as full our nothing company, there's changed. mean, meantime. a first

X%. Our sales, overall sales up were up

Equal a the stuff in in share of lots acquisition gain out had and and to Whole out to regards other good continue Earth EBITDA. great ingredients done We the Swerve there We business. positive category We've there. and interesting

at public I think public this compare. company being you And a look consolidate. costs we company go really company this comparisons, together in as company private a look as as and also coming back coming together, public and we at you company as a can't now being what

of So of something today high this is still and the it's I'm a single guidance more mid- digits proud of tightening team. to that growing

The other thing foodservice is mean, the of sweetener good the I a is, was business. transformation. part

the and pick more business up opportunity more more as at to home, for more But us stay consumers at home. and

in growing Coke and is Diet Zero is growing both products these coke. Coke X% Zero over Diet and that Coke nicely, and are are

you, on and I tell great and have with it will realize not is is because go the Swerve. points you said attached if pointed nutritional's excited. tried or I'm great that buy So some Albert as with product pretty bake to how X a the to out And it. X you got And product, not also, that

Scott Mushkin

And because Swerve. around a great question follow-up on to so my follow-up lead question it's in my

the about to at this how they drive even as opportunities seems space there's probably product. of like Because talk us it the adoption further you there? significant shelf consolidate really opportunities Can you much to retail end have,

have I then And one more...

Irwin Simon

natural you if Albert foods stores. was look day the in will the sold percentage mostly you give the business as it's small, So and within and product whole at MULO, food

us to know we how the and roll MULO don't into for roll food that's So and out out products natural e-commerce. into for have -- thing MULO, I it into it to know roll out big you

of week, call this internationally, The was other of big levels of it's Canada, levels Mexico, the last on high there's sold thing is, issues. as and diabetes high I said where none sugar whether

with good the have East thing. in infrastructure same We now a the Middle

business is to for there distribution. for So a we outside look of the us major U.S. that

want got I And just it's international them? from you product the amazing just about this looking, talk not to we to product calls can when on I'm sure. do this ship ACV, Albert,

Albert Manzone

No, all. you think I it said

U.S. Scale going XX% complementary. sweeteners, now excited. old We're products the million very and market X are The for share be is to at the of us. good the We Whole Swerve Equal $XXX and in very Earth, are

very when pouches into into anchored Swerve, you and at stevia really complementary fruit. it's sachet, products. Whole monk Earth look And anchored is and baking,

one, a already see channel historical is natural sitting, #X more club Earth. And customers, Whole of very in brands traditional the in very do where the in a squarely the price can time, [indiscernible] lot in really better world lot are place top got because which also and natural. in from those And the exciting, do from at said this brands the We country. and is the we grocery our with exciting as earlier learn in I opportunities a to: Swerve, about we number mass, and same

U.S., are it's and so where our well excited where us, hear are very going, healthier are XX% we for we're as the consumers bodes that and are where the in consumers and -- going, discussions is the retailers now from speak. starting going, We're [indiscernible] those natural portfolio to

Scott Mushkin

the if said restructuring the So color. the one acquisition, if could question, final that's for at you Flavors guys plant Swerve mean what if regarding great I and at My you last look sneak I you Ingredients. consolidation one in. look

base giving does I we're next on up is know Am given not well I year, X And factors. but pretty next those that? setting guidance like year look it for off

Albert Manzone

you the to pleasure answer let I Irwin, question. that

Irwin Simon

a about think great you the under and the I'm I know, leadership on and in we Listen, organization Albert's Scott, hot place think as team. me people, I #X, seat. have Put

on #X is got free-from ingredient business. regards what consumers and want our and strategy We to our equity in is brands brand today.

acquisition Swerve Whole and infrastructure the with Canderel with putting both the of and the Earth Equal So around expansion world. and

after whitespace MacAndrew business to just part was the run space Forbes, this And and We're the think big for we now is growth. white year, took business and with this I a out for going going of run distribution business really there. not thing getting growth. that is, taking

and you standpoint, scale sugar you, $XXX ACVs today for what scale Albert category. are in market, And good From us in million business the opportunity. a say, the heard our gives the North a it sugar low American

is this also cash. And I CapEx-intensive a was free business with there with cash our flow. up tremendous business there just not business. mean, of It's a the amount

we're acquisitions there, the at. additional have also we which So do out ability to looking

Albert Manzone

Yes. agree why because completely, really to execute. ability when doing talk strong see well category the share see excited And share that, even I I'm would Scott. very about I I and say gains so gains I that's

that, committed With our be the that during we acquisitive. [indiscernible] street would to we

that deal since is XXX acquisitive will days our happy and And you expect what in in can base first significant our remain I'm short, we we [indiscernible]. And is what business. midterm, growing our only while announced closed to that the continue

Operator

[Operator of comes with from Burke Burke Burke Capital. Instructions]Our the line next question

Unknown Analyst

guys. questions, A couple of

First I on about may little the EBITDA. on at, I concerned to last bridge bit as of the was how get to a all, the looking recall you was quarter, adjusted

very $XX.X between is to $XX.X you guys XX% happy from see million, the which run X to growth But quarters. a that million

that, million generation, the million. the you at the ops, free flow guys in same and haven't said from generating -- looking my question $X.X cash Having $XX.X seen X predecessor at are and is, months company,

payables, adjusted Is and to there that operations, fourth able from to flow component quarter on cash has may up anything and catch your EBITDA cetera, on that beyond? at the be in timing et some least receivables or there with you closer get

Andrew Rusie

Andy. Yes. Berke, this is question. Good

one, impacted paid we the couple overall our transaction-related cash & in of flow. my flow prepared this things on reported perspective bonuses that were from I a that MacAndrews Number think by technically But a mentioned by paid is I Forbes. And so remarks. cash the

$XX.X a kind basis. reported you on add to back to of So of year-to-date worth have our million about numbers cash

while million, in need to add report operational $XX.X of million $X.X -- perspective. a we reality, you real that So from there's actually

we is, perspective, what third the some so quarter -- of working within see when came positive ship see the that quarter. Number -- say working on in and the a capital we I fact at be there though, to yes, should simply is we've some you'll on quarter, -- fourth in capital would working capital the the forth, timing two, some will you where received when sales positive from is end there of relative

Unknown Analyst

very enjoyed lighter Then a make was was This a is daughter my Okay. with phenomenal. product I yesterday on really helpful. it, and it And product. brownies actually just some Irwin, great note, it I this with Swerve

So I...

Irwin Simon

believe it I did the where I couldn't same, it and question it? I and people first was buy do served like

Unknown Analyst

yes. Amazon, could some I I I'll everything pictures, including pancakes great. bought that but else, everything on share were and but

the educate cadence well on hear is back acquisition, going almost a that particularly sales. really not a and was Could imagine. international I no or baking is no I very product me of So strong having what to there like that is trending the international niche unique excited phenomenon, is you U.S.

to countries. guys So XXX-plus operate you it's gone world all And around grow. the in

And other they're something somewhat in comments that revenues start -- States, domestically how that from your you doors generating do with so limited? successful which internationally? what So and United take is the also, understand I along some

Irwin Simon

one and Berke, the for on question. start I'm you happy this thank to

few said in important question. a So your things you

that phenomenon. global into is XX% baking. the consumption sugar is one of a baking The first goes

off in the the Europe, And off in you very seeing, baking seeing to big really New is similar Zealand East, what are taking a off Middle taking Australia, taking in way. you Western in are U.S.,

one in a Swerve. a would should the we're essentially, of We and have to after the in go. fact, So week be as matter presentation Asia next, actually, up customer where coming going those markets present

what which essentially avenue, mentioned we're you from is other are you and very successfully, The doing e-commerce. prime a example just

know, very the same in e-tailers with with Amazon and in We Asia. Western in do in Europe, Australia our as with have relationship, you the a and U.K. Alibaba strong

to be And the this where product very be insert will going rapidly. able we're platform to a second

to I baking -- So a It's phenomena. taking really everywhere. off that would going is say we're

We see and and Western big Zealand, Middle we're Australia, New opportunities now. East, Europe, Asia getting in the started

Unknown Analyst

one analyst Investor -- the right of then there that. side Great Relations a have on talk final to question. of potential guys coverage the or is question, I after could coverage, have of a believe But lack Obviously, analyst I company I comment you things? about in the terms of there's hear awareness that now.

progress any there? So I'm curious about

Andrew Rusie

Yes. Berke, that take one. this is I'll Andy.

an with and question. So team. the area keenly Albert and ICR and on a where whole everyone focused support I'm great of It's

who things. Number one, of we've issued couple one have you'll us, -- number our question a earlier, who few X, see being our So on Scott, reports analysts a of on in a got website, them. asked

up more reporting. few lined a have do We for

should've very You maybe with of X more one the with the see out X end by shortly or reports year. more coming

So at least that's anticipate. what we

Unknown Analyst

have. hear to is stock final fully call, and your and it your strategy because And after global incredible with nothing offers a supportive comment strong quality better sheet shareholders Great merger, to my platform, company a eliminating basically public not to shareholder do that. this synergies of of X return as thing you forget shares a your share same have Great. repurchases your own you But team. bigger there you your some integrating out when operations the I flexible believe that from of earnings the are last for piece day great encourage on also balance that the given and I by about the of management on really said your the our I acquisition and

Operator

to back I'm and remarks. this for at session I'd time, gentlemen, turn question-and-answer the no end the showing and closing further management any like Ladies questions. conference to

Albert Manzone

would again. support you the provide. to everybody, thank I that Thank to Well, for you, continue like just you

for questions you, you, any thank Thank much. Andy, follow-up and We very, and very will Erwin, discussion. be available

Operator

teleconference. today's concludes This

have and your disconnect may time. You at day. your lines a this for wonderful you participation, Thank

Whole Earth Brands Inc - Ordinary Shares (FREE) 16 Nov 202020 Q3 Earnings call transcript