FREE - Earnings call transcript Q3 2021 | Whole Earth Brands Inc

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Operator

Good morning, and welcome to the Whole Earth Brands Third Quarter 2021 Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Jeff Sonnek, Investor Relations at ICR. ahead. go please Sir,

Jeff Sonnek

of on Litigation good statements. and Chief based presentation statements the beliefs, Safe that Litman, Securities differ Executive Chairman, in could statements results considered comments current meaning unknown also Officer. Act and available the forward-looking number will by statements Q&A. historical within accompanying of for results Such Chief are materially be actual provisions than from presentation forward-looking cause and Albert the Harbor Private Executive events. a statements XXXX. other The and These participating is Simon Manzone, risks All Officer; today's subject of Irwin the call morning. you, and facts are of future known the discussed to assumptions and will be statements. Reform call as expectations Today's on uncertainties forward-looking during well hosted Accounting the the as Thank are concerning of and forward-looking Brian statements management's contain to

GAAP and the are the release Some non-GAAP financial risks Investor the refer for which of measures to be investor.wholeearthbrands.com certain reconciliations the refer SEC. We'll uncertainties with non-GAAP in measures these identified also to in and most financial Please found on today. company's tables measures. of comparable included filings to discussed the can directly earnings Relations website their

Albert of may like company's a now Manzone, useful provided performance. presentation Additionally, we've to analysis call website the supplemental earnings the CEO. over to be Relations on in your Investor that I'd

Albert Manzone

on both our to our the of In We everyone periods. top reported organic stacked of a our for million. to portfolio, segment versus currency strength and and XXXX acquisitions including generate pro XXXX growth third QX, thanks constant EBITDA XX.X% consolidated and and a growth we record quarter the to revenue joining Jeff, Branded for of line to growth, call or bottom X.X% organic you, line adjusted revenue ability basis business. due strong constant versus and volume momentum growth currency of CPG today. two demonstrate continue X.X% in strong forma $XX.X year Thank

strategy and of visibility and the top customers momentum is Earth and to next and presence sales we've ecommerce, been drive across Wholesome, and service, well. entire the One for into is of seeing continuing Inflation gains food all fourth retail, our greater ours industry, of Swerve, this year. mind and channels Power CPG across with the are as that enhance shelf equal see management retail chain and working. towards quarter focus We're it building we Our including through distribution supply Whole a

and sourcing, reinvention to our includes logistics over create manufacturing the pricing chain a start. optimization, announced operations, and projects, that mitigate volatility, previously long-term. and focus spend opportunities margin, had drive our However, other, we better in bit positions than We a believe given working relatively protect already several of on we efficiencies a were head trade on supply distributions. are we greater initiatives This to

However forces. Swerve this against business drive is [ph], tool are and protect our another to with which continuing yet macroeconomic synergies we to Wholesome,

comfortable full guidance. fiscal reiterating remain year we such, our As XXXX

with of stage most retailers We year. in have price increases start Go-live the next to

and and supply built world-class growth building, confidence model operating our chain, in our basis opportunities. confident innovation, in ahead, we lies look ability five take strategic The deliver market advantage we're for our of team. distribution, to pillars; As strong on sustainable brand proven

continued branded emerging driven Let share ingredient and remained both, to across in for CPG provide and year-to-date. we our within segments me On growth volume, highlights. our across been by and categories some have has innovation; those recent developed our now QX Demand and strong building years. gain primarily our flavors categories markets, brand and

packaging to come. product a year flavors number CPG including years our We key year industry We're with recognizable two one innovation campaigns, where from XX our ingredients, in to meeting we'll sharing new strong with is markets very most launches goal over and this an segment messaging revenues projected XX be XX% derived of brands consumers basis. our rolling and product of number three campaigns demand branded and in wholesome for attractive influencers and design, CPG or have in have on purpose-led marketing branded

year-on-year. in we're branded I'm lap market-based pleased Well, Our such take sugar baking a well into trade the up categories sales than bake current as positioned of acquired mix of innovation with over of fair we benefits, more consumption substitutes, XX% as categories. plant-based very consumption Half disproportionate sugar and is performance zero-sugar, execution. categories the baking, on baking, focused and expanding growth and CPG laden distribution, high in and in as mixes, of to XXXX organic digits, up sugar on keto-friendly dollar growth, now ideally is our functional brands, share. with double portfolio as

sachet no-sugar our and all believe shopability, fair getting with organic Organic and of food organic Whole sweeteners, mixology, or coffee across growing for and solutions, are gain retail, across muffins, work Equal growth, mobility ingredients. as and all together to baking Wholesome of category the our this shelf particular, of because sugar Power One Agave of category to brands disproportionate Our natural raise One for a is strategy share tea, distribution cookies young for innovative consumers sugar optimize help working both, or fast for Wholesome partner become of Swerve our sweeteners, our ecommerce, food to provides billion and to is where sweetening and our One alternatives no-carb Earth service increased channel's for trade and non-GMO brownies. Earth Power the Brands sweetener set refined growth. Power Whole business retailers $XXX we profile total a The addressable leveraging and market. improve brands strategic better-for-you business, they thereto offerings. strategy we're service as their consumer benefiting our via retailer's can key We look is in we

more natural expect Both, which customers. will food operators food opportunity. had and benefit and Swerve our consumers Power presence We service to Wholesome, sweetener pre-acquisition, from options, represents One with now in an incremental limited demand and approach of service

is our shown measures presentation As a morning, impact XXXX. measured report distribution and which of a overall, channels made a this XX% an some in a the supplemental year-to-date happy direct Swerve X-point increase QX that on basis; ACV XX%, as strategy. Earth key XX-point on sweetener, XX%, is company U.S. distribution our in distribution Whole to our the is increase website Earth of available Brands One or performance Whole similar to increase. I'm QX the Power versus XX-point highlight brand grew

number XXXX. selling year-to-date of Brands category have ahead Our distribution our XXXX. Earth we the X% perspective, by Whole momentum is is QX sweetener markets we our door look natural us U.S. outpacing grown within September. for a growth year-to-date still From continuing gains at versus significantly sugars of stores key all we in as portfolio; have the QX developed and count [indiscernible] in

versus X.X% For our the is for the change U.S. in category. sales example, XX.X% value

markets. Our is all household key developed across penetration increasing

engage On for CPG additional supply undoubtedly and Brands to penetration XX% segments. household opportunity penetration markets XXXX. and competitive U.S. across versus chain For opportunity key XX%. sugar, flavors versus example, is ingredient QX processed and an developed Whole to grew XX% the our Still, across huge X-points in Earth advantage branded the sweeteners manufacturing household chain; XXX implies an remains and with million year-to-date with a supply for households. our

our large, Jersey it, daily our and of results best-in-class world-class prove the and vision noted include in have New previously, on growth, commodity All are Specific our will allow On reinvention, deliver of leadership food the company. and our pre-buys a organic, completed sale to CPG acceleration to mitigate to natural ingredients footprint recognize including drive and passion, team; optimization inflation teams. plans. on/or continue engagement to expansion cash want flow free Camden, North employees us line build and ahead of revenue and initiatives QX. branded chain supply I plant-based in demonstrate they with They chain proceeding our ahead As America to of competency improvements supply generation. those initiatives top facility to our XXXX, margin flavors

I Our and with CFO we are search search is quality progressing candidates of executive am well supported firm, pleased a leading by national the attracting.

and segment, North flavors products. The in delivered expansion strong portfolio such our respect He play the North we're growth, [ph] quarter decades will with brand to role market. experience As to Tata with our and and and the despite we continue adjacent team. of in due of XXXX. in at to comparison business QX Rishi growth a leadership ingredients performance accelerate Rishi companies strategic Deng sweetener American quarter very America to performance. categories, our year-to-date the With a driving as to of leadership demonstrated over two has leading track-record pleased significant growth the the our pleased tough in addition consumer in also PepsiCo innovation also third I'm of efforts revenue and a building announce

good customers anticipated sales XXXX. and QX are off pay for to Our significant in momentum the investments business with continuing R&D new and and in

the end-markets. Brands the flow our produce our the is by Earth sweetener and better-for-you expect and in global global licorice, continue to leadership We to strong driven reduced cash in free categories. [ph] sugar leader business position diverse Whole

continues as to three billion team grow company our into priorities. to plus execute we Our $X pursue revenue on vision

fast $XXX First, market total being sugar by displaced sweeteners. disrupt the massive that addressable refined billion is growing

brand our drive global distribution, leadership our through continue and leverage M&A. strategic capabilities, innovation and strong for chain accelerate further Second, to building, our category expand best-in-class growth supply

plant-based further will a evolve to With review our that, take deck our encourage through and XXXX. our towards for portfolio continue financials our I QX and highlights food and organic QX earnings. brands Brian, company. supplemental for large product natural outlook to details you becoming you on now Third,

Brian Litman

and Thank everyone. you, Albert, morning to good

Swerve reported acquired on we reminder, X, for XXXX, February results to XX, speak full Swerve quarter of will and on Wholesome I a includes period As which and XXXX. third the November Wholesome 'XX.

on results select forma own you XXXX and combined pro to the additional the of Investor your of if supplemental in to earnings the refer release as at detail, XXXX, growth reconciliations portfolio. organic the Swerve presentation the some assist we non-GAAP XXXX, end provide Also, our our website. analysis encourage view Wholesome press please we'll and Relations in I to and both, Additionally, of for

year XXXX, million the revenue well margin third prior $X.X primarily organic the prior The $XX.X a increased Consolidated the accounting year growth third by quarter. by the to prior basis. income Reported the XXXX. net September from was label legacy contributions non-cash the consolidated and million Wholesome, accounting from prior the the quarter X.X% third favorable million Swerve and XX.X% to private compared compared versus down For third businesses full consolidated quarter in gross including was basis, current XX.X% period. in the Adjusted net XXXX and $X.X both, gross segments. in million currency positively product the $XXX.X of profit negatively constant prior in of purchase increased inventory to a XX.X% Reported to contributions as higher year loss $XX.X periods; by grew related prior to income On influenced of revaluations, Wholesome quarter and margin the impacted $XX as was and operating from X.X% on year, year XX, was product million or Swerve to to bonus revenues prior change Swerve for the adjusted growth prior year Results in compared quarter. $X.X purchase by forma year in XX.X% quarter million, Wholesome's in acquisitions, by driven EBITDA legacy million driven revenue $XX.X million Wholesome inclusion for compared business profit was Consolidated profit a was ended pro were business. million year adjustments. and prior compared acquisitions, adjustments gross compared revenue increased in margin XX.X% in our year, to the to offset period. partially and XX.X%, $XX.X expense

million year The to operating an accounting and On for CPG segment shifting costs. XXXX. segment and increase pro offset addition year Operating prior including by QX. increased and lower 'XX third of Now, product primarily prior 'XX the segment addition pure ingredients $X.X associated to XXXX, XXXX; of both period; million quarter X% $XX.X due related product quarter segment constant basis, when prior derivatives. stock-based third a products $X.X by extracts to operating CPG driven revenue results was XXXX. million, organic quarter compared in our third branded the and revenue to suite and in constant million to and third XXXX revenues Swerve income was national CPG adjustments; of stock-based XX.X%. the the compared primarily expenses our were ingredients year by in product of acquisitions lines, or a of due magnus of quarter to project, XXXX in for million revaluations, $XXX.X Wholesome. for offset million increases higher impact period, the X.X% growth, supply flavors and basis, contributions income adjustments in expense increase the expense 'XX. revenue in quarter third by reinvention for to the million largely two-year the the expenses driven change $X.X million expense, Branded for comparing in compensation prior forma in of to volume $XX.X strong increase Operating organic currency increased segment the Flavors bonus growth branded stack increased particularly revenues inventory from $X growth current On purchase was third quarter's, million of the year loss our in revenue in with and $X.X corporate in for the Wholesome, the costs currency Swerve accounting to the declines quarter purchase segment favorable quarter, quarter Operating operating acquisitions the of primarily chain product to of inclusion our were to business increased from an partially XXX.X% compensation third portfolio. million compared due growth $XX.X to lower $X driven by the and of third licorice these to for forma pro of was increased the legacy

Now, results. I year-to-date September will briefly cover

which XXXX As our indicative a September XX, XXXX, to reflect nine both, I XX, discuss through XX, September includes combined the through XXXX. months and periods combination The September compare of consolidated results for nine June successor and from XX, date. business months XXXX ended XXXX XXXX the year-to-date XX, the XX, successor predecessor the period June January ended results reminder, June results predecessor year-to-date the from XXXX, XXXX will period the X,

X.X% product of XX.X% consolidated of of financial Swerve acquisitions reflect results revenues comparison. forma Consolidated comparisons our the period. increased million, $XXX.X year increased $XXX.X the reported completed Wholesome, of stack on product and a revenues product constant to to constant Branded a acquisitions and On currency nine of XX.X% organic period, revenues two-year product to of prior $XXX the to grew nine prior segment of gross the first year driven and Flavors basis, the XX.X% $XX.X from forma margin an months increased million, million from in Adjusted XXXX. in increased the compared year as million, profit prior was months as compared million was forma Additionally, $XX.X of X.X% CPG year Wholesome year-to-date prior $XX.X of the XXXX XX.X% include company driven bonus the and pro increased organic public the impairment gains primarily $XX.X XX.X%, was loss September XXXX net revenues margin XXXX in were basis million was was prior due income in On million prior loss the Revenue year. $XX.X to million currency Gross compared an as both September ended of the impact XX.X% profit to compared pro charges periods period. net basis, in prior the ingredients positive offset compared productivity Reported period. XXXX revenues Swerve. year operating product a pro Swerve acquired as of to to reflecting period. period. to the acquisitions largely $XX.X compared by X.X% $XX.X and to The XXX.X% a recorded period. million and increase compared the $X.X XX, partially XXXX impact by for year profit to the income our increases year in ended costs Wholesome's in growth nine months results. in $XX.X million consolidated from adjusted Consolidated XX.X% period, in and prior Wholesome million private in expense. non-cash operating Consolidated contributions and was And to the by gross XX, acquisitions improvement million EBITDA an the businesses. down compared label business. the increase

by sheet. or the net operating related $XX.X transaction to September activities balance million; million costs. $X.X provided M&A year-to-date Now, of i.e. as moving unusual flow non-recurring Cash such flow and cash of costs restructuring for was and items

$X.X Our or cash September were excluding the million. Free was capital items unusual year-to-date non-recurring flow, million. expenditures $XX.X

XXXX September at XX, X.X reiterating which we we net outlook; includes the Wholesome. $XXX.X long-term sheet our Shifting of full Reducing acquisitions continues net our leverage year of of of equivalents remain year a costs. times. adjusted debt approximately unamortized Using cash debt, debt and $XX.X September midpoint EBITDA of corporate to our Swerve XXXX to of EBITDA XX, discounts our issuance As million ratio guidance had and million adjusted was and our and are cash to full XXXX balance priority. guidance,

the forma be growth to Swerve. both, margin for be a We growth and as basis. range expected expect As for To on approximately Adjusted revenues pro to to consolidated representing million greater guidance, of and XXXX. continue consolidated to to XX% Wholesome, and of reported which outlook our influence gross to the the reiterate be our in organic reflects EBITDA of are if we years Swerve product organic and define XX% company X%. the forma of than is XX% expectations to of to of Adjusted Wholesome margins owned pro of X% XXXX a reminder, full represents $XXX million, pro organic growth be our the acquired revenues, revenues. XX% growth again forma $XXX expected assets, product profit product

range consolidated $X of X%. in XX%, expenditures $XX will prepared greater growth million. the to million, X% range million taxes expect expect $XX be Operator. lastly, capital be to representing $XX remarks. and of We of forma we the range pro That in reported adjusted than million $XX to the million concludes will of of Total organic And EBITDA $X in cash our growth million. to

call Now, the back Please to open you. for Q&A.

Operator

you. Thank

We will The [Operator go first from is Scott ahead. RX Capital. now Instructions] begin the question-and-answer session. Please Mushkin question from

Scott Mushkin

Irwin, Hey Hey guys, on questions. think with thanks ending, as taking Haine for is year so [ph]. non-compete congratulations I my that

there; exciting that guess I the is, I as M&A the about -- talked already? guess are end what probably you the you question the first guys had there? when And looking refresh more Are at the The market? you in at back that So, can get -- comfortable that's can you you're targets the us debt I concluding. comfortable

Albert Manzone

Scott morning, for Irwin. addressing, and you Good Sure. thank

start maybe, to guess depth that you and and if can Irwin, I with piece. So, then, napping the want address your the anniversary [ph], Brian

Irwin Simon

organic I morning, acquisitions future yes, regards and three with Albert you whole non-compete And team the and in growing [ph], Good gone since to natural Haine working -- category. natural three in Sure. I've organic categories. certain in I years that it's years from fast Scott. And have look forward a to did know,

who that, today. done companies again, focused right things. in the good [ph]; I our press debt our in And the not do to likes release, growth are but levels, going X, guy But EBITDA. levels, debt and would said, be that a growth, has of Scott, focused where on and going years. where Pepsi I'm lot with we going now, But be there to focused As his to I in with come buying is we're guess push lots acquisitions the be [ph] the lots X.X we're niche a to we're plant-based, X good of Albert, would companies is of it's we natural, organic. debt back seeing past we're on in on with I

year, do -- Earth company, the a and public So is just And our over we over of and working, we've size integrated, the you Whole year lot and to we're a just a get that to we're and lots get to of acquisition. a do Wholesome, in of now what company and more in on-track. and stuff the really able only the the get remember, what out Swerve go growth been ability for there's company then, accomplish with got there to want integrated,

a back we're acquisitions your multiple answer; question a few looking to over them at So, now. next about and excited out and at years long-winded there on going the of looking bunch

Scott Mushkin

just probably time Haine I the could addressed thinking you to one And thing, as like [ph], sometimes just of -- Irwin; debt, to -- more Maybe issue. at allergic it I seemed debt that can I you know, your I debt. back lot ask know, almost didn't think like a were you

as I know, maybe that. from and equity possibility more type questions Is the other we've that that And with you route that you time, layering on of a yield that to here would I'll than So about on company? talked -- rather that to go debt time like debt have then, thing. did earnouts

Irwin Simon

And, share an Really good And Earth. at the and giving Yes, I growing And in of There's time great today chain accretion look when is have for -- and big to Equal a accretion to and think big is and there Earth question. upside and out lot part be equity stepped earnout the of to of a the we're even like here. do a and know, earnings those back I here. that it, Whole way I that, upside our what and bigger. of been And tremendous listen, companies acquisitions is equity someone of Swerve share is able and we've use them in Wholesome, disrupted. have. where taking think sure. feel and with have the and a thing be with a being the and we some there thing; supply equity And we demonstrated we the those today that is buying did is, doing Whole you smaller there they part in brands we've equity,

business, strong businesses The around have good with international the other a international is, an offices world. thing we Scott, we have

So yes, we amount I heard -- it. cash. today, use we as the part would to as go was equity as and with money why of a that's free a more of before tremendous out throw cost cash, there And not I'm of Brian little reluctant talk off our ultimately, you free borrow. And about

thing The capital so is other ton is in we're really Whole a like not Earth investing our asset-like, CapEx. of it's

Scott Mushkin

the jump to Perfect. other chance. you. But I thank let have people questions. actually other going Anyway, do I'm some have back in queue,

Irwin Simon

Great, thank you.

Albert Manzone

Scott. Thanks,

Operator

question Canaccord. Please next from ahead. The Bobby is go from Burleson

Bobby Burleson

Hey, morning. good

underrepresented So regions Where ones right those just you're Are U.S. just on I'm now? particularly of there know, in your random couple you just gaining areas quick a the retail. help any and mainly thinking CPG growth? will -- regional to -- where really traction U.S. the color

Albert Manzone

talking the I And meant the when U.S.? you Bobby. morning, Good were Yes. pieces geographic region, you piece in missed about

Bobby Burleson

U.S. branded CPG with Yes. regions Other where penetrated, you're under retail? in particularly geographic in the

Albert Manzone

have about regional across is is, growing this a way footprint. Listen, alleviated footprint -- strong that and/or retailers Understood. very the we national it distribution think with a this

Power the away so this about One categories, of and One also the this that those continue sugar move is lot of of education of There Power know, therefore, because getting we One, this opportunities as you talk Bobby you opportunity, the those that have not a also and by see really growing not national regions. gaps. as on, indicates, optimizing young very but need. need, there working then, we is is a why as gain is is stability, increasing from processed and is retail of of retailers about at you are -- know, only this this opportunities is in those International to tackling we the As Power the of is footprint, is with important. retailers side there that for going it's and category, lot need a and ton with regional to that only, the distribution, And of a of a the as is always we're is, education, growth with -- why bounds. there gaining we're penetration those need, beginning a partners natural opportunities specific just and What sure, a the on especially distribution so close an we're with results a we mentioned; global There leaps is national in excited is

Bobby Burleson

might Are out Great. in And of just yourself young that sweetener sure the the someone issues making a of has like the have be and towards natural of with retail I supply in -- on curve kind would scale you you terms you're the know, little of that there. these of gravitating they lot bit supply of ample being ahead guys, more category this topic -- tough mentioned, category chain reduce a of as brand we're imagine obviously, the but a seeing you like align of sweeteners strategy end that consolidation want to you disruptions? any may kind disruptions. risk reduced can partners where you

Albert Manzone

working And XXXX Earth; XXXX Swerve I XXXX, what and right. you of think disruption, XX%, Whole if way it -- in remarks are retailers. curve we you securing back never hard, previous laurels. And and But The as bit you terms about think talked you inability in can fact about in Bobby. addition, think of there boding prepared And the color and very we XXXX, of my like that on I started at said of I about, we little that the emerging this this had space. global we to in with terms combined to said your to well leader Wholesome with talked to those stock rest XX% back terms as in the as all important things is, shelves, always a have of building One, you Power a of significant being talk the combined on players. of with very we tools calls from talked significant would And in manufacturers, brands only cost inflation. back ahead look the you managing XXXX maintaining partnership are also shown about about the it growth the about and talked was and it I I continue said, Right, we not in and the strategic on supply for that that, service are to partner about inability like in was if we the take with rate. retailer Irwin just with And really -- some we're which significant just supply, new of I bringing

at answer the hard retail partners. the it to is, So we're working that deserve confidence from

Irwin Simon

on Bobby, that…. And, just

Albert Manzone

Yes, Irwin. go ahead,

Irwin Simon

on again, that, that's I Just think, great a question. and

tried in big is, to do our in in or regards take is to direction that's there. service myself building will we sweetener And to I do tell just this than be that's point, from must And whether it's that's come out before; footprint important the sweetener, and going distribution, the better-for-you, great the in there we category, asked out regards And this. a to what team we how As pull getting look as with. Wholesome. plant-based, there think diversify to it that's what's do sweetener do great to sweetener share, job supply; to we to great team that says your that and challenges see leader and it's come Swerve, And consumers I the future on company? a what we whole how Yes, build being And holder the that's want But the onus what [ph], the think moving in we've diversified and be build at right to back, doing the new thing that from we want it's food out portfolio and in over and not sweetener I tried again, back But now. it's out see Albert you done acquisitions. has products name. developing And to that new again, out our we either Scott to to that footprint supply always regards category, it's category; benefits our be of whether that of some all it innovation what together; whether company. organic. out

Bobby Burleson

Great.

much. very you thank Okay,

Irwin Simon

Thank you.

Albert Manzone

Bobby. you, Thank

Operator

question-and-answer to closing This to remarks. any the conference for like the session. Mr. concludes over back I Manzone turn would

Albert Manzone

Sure.

all thank of we And very the you please listen take look time So, deck and to posted supplemental calls elements taking us. have listen, It Happy this thank for the you. with the us. a which to analysis. that useful has the for at a information to can you joining follow-up hope much Thanksgiving morning. Thank Goodbye. said, additional Again, and big much. for products our you find as you baking you them. season, in find Christmas, may so we your And Irwin you and enjoy

Operator

call. conference today's concludes This

have and a Thank lines. you your disconnect participating pleasant for may day. You

Whole Earth Brands Inc - Ordinary Shares (FREE) 9 Nov 212021 Q3 Earnings call transcript