FREE - Earnings call 3 2023 | Whole Earth Brands Inc

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Operator

Good morning, and welcome to Whole Earth Brands Third Quarter 2023 Results 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 of ICR. Sir, please go ahead.

Jeff Sonnek

morning. good and you, Thank Today's presentation Robinson, Fiaux, Ohri Jeffrey by Financial be company's co-Chief hosted the Bernardo Rajnish Executive Officer. and will Officers; Chief and of and branded Nigel of be will the the of presentation Q&A.The XXXX. call provisions North CEO contain President today's for the the of safe during Litigation the Willerton, America Executive harbor and available Reform region Private meaning and Irwin comments Chairman, forward-looking Simon, company's within Act CPG Securities accompanying statements than other facts considered statements historical All statements are forward-looking of statements. These and statements events. a assumptions current are based on future beliefs number management's expectations concerning as as well of forward-looking forward-looking statements uncertainties to and actual Such risks results subject the are differ materially and results statements. unknown could the cause known that from to in discussed

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

company's useful Additionally, Investor Relations be Please Ohri. on we've presentation analysis like in turn I'd that, the your over a of may that provided to Mr. now website supplemental the to performance.With call earnings the go ahead.

Rajnish Ohri

of will update business. million the and the and $XX progress a on I of then consolidated over situations very and took be despite revenue begin call. This the evolving macroeconomic shift million generated the the $XXX.X I CPG on is challenging on our co-CEO, providing by everybody, morning, to very world.For business on quarter for for an thank is EBITDA. and an and since second quarter time Good geopolitical produced quarter branded consolidated adjusted the way of and some third pleased to We numbers Jeff today's taking you the around I'm update call, as

profit entire points XXXX, gross basis of year The quarter improvement directly XX strength CPG our and of versus into Branded categories. product optimizing brand and in advanced focus structure an linked to margin to basis operations global quarter, core presentation, organization improvement. QX be the from initiatives million, during enhanced will support those The Bernardo, a adjacent the adjusted of supply our we CPG growth our revenues stabilizing, which adjusted of branded points, and evolving Our leveraging consecutive has details on or XXX our leverage, simplification, our sustainable streamlining our third of profit year segment it.As prior productivity reinvention to focus is about America continues the Since decrease to currency share third on basis. on performance chain within and our margin the drive improved his constant and of and previous efforts our driving key of both improvement. more versus a which were gross is makes also X% XX.X% a period. prior margin business, in flow cash X.X% decrease $XXX.X of calls, expanded the our and and complexity, our North expand reduce outcomes removing to representing are mentioned

due Excluding in X.X% essentially to was sugar sugar planned a sales at decline was currency bulk flat the in revenue by decrease constant segment non-bulk offset sales, wholesome volumes. pricing growth X.X%

negatively incremental profitability. the sales limit margins a reason which avoid to and would our sugar impact tariffs, to was As reminder, bulk paying

operating sugar streamline for improved the our prior well to manage reinvention going the additional across shown quarter considering income bulk for manufacturing These as our However, versus thoughtful has increase approximately and management significant selection sugar cash.Operating we segment our prices, and current structure, the some CPG to growing efficiency supply generate outcome improvement, in lower inventories income XX% mix plan and operations may decision branded lower of the the are forward selling reflects of consider product channel tariffs. chain and year. sugar and matrix. costs as operations part the in import of oblique improvements the an The

We productivity established drive have a of objective a now and efficiency. of that opportunities network with clear interconnected globally cross-functional teams identifying enhance

optimization, in we result North the to the certification further lead and sourcing project free closed, flow Alabama track audits our at service the and material excess The the co-packer Perry, all is and look in removing near up customers. of logistics and completion. necessary to product all its well supply into profile margin reinvention on is of formulations, and to is cash co-packer rationalization, these new Texas teams America quality areas dedicated including performance.The strategic our running facility our improved of refinement this chain We with As systematically needed continue raw speak, and business, levels costs will of consolidation. strengthen believe efficiency operations,

business supply customer at are which team of lost very compromising very distribution North our XX%.With consistency this our approximately I'm high working transition service, service regain of We levels to proud without in accounts. to complicated levels, team, across pleased different in this led CPG who has is commercial our America chain say hard branded remains

our clubs, approximately Our and unmeasured healthy North branded account food XX% of and is channels, e-commerce in revenue service. America all CPG for in growing which segments,

in also headwinds, customer side and continues service Our we we opportunities experiencing well-positioned entire us business. the international of are provide business portfolio.Within to to to non-material CPG, across grow, the our business, the needs category label especially private are

gains, identified consumers of opportunity demonstrates trends evolving choice products to and meet our in market across loyalty Africa.Globally, our is the have business on core changes and that trend to shares, leading consumer and competitors launches portfolio. growth we expectations a our through which our the drive categories supply this adjacencies confidence for to strategy of better-for-you focus brands. continue have in we Asia have ability impacting our seen diversified to across result, provides our distribution North new assortment category is category. the are in our place towards us and and And Europe, overcoming our a better-for-you product allows any Within of our energized are natural The an us America, as we limiting shift which new further by the significant also focus our chain building to strengths. not our drive While challenges, this in our aligned to distribution brands

I want help renewed CPG excitement fact, drive summary, recently business. see brought that tremendous advance emphasize within this have on leader to opportunity new to to In these to hand and believe talented take to We make excited that the we Jeff. I build have efforts.I to alignment and announce sure our senior over want I'm this opportunity this important individual business initiatives.In to I thank created entire us focus work of we a now committed and team. them very all their and our for across

Jeffrey Robinson

a free Thank Whole and position & flow in a is entry barriers a at X.X% have new to to compares the and solid operating markets key growth new diversification the revenue traditional with XX.X% currency results.We the our diversification in against Brands. increase strong you, Flavors Flavors generator growth period. generate prior growth initiatives in revenue constant and cash with Rajnish. driven and continue in broader increase, Foods leadership that our third year in continuous which This Ingredients Ingredients in and our a supports opportunities improvement our quarter markets global

the drive some but that will of remain few will next face long-term opportunities end tougher the growth. serve in continued quarters, comparisons continue encouraged we markets We to by for we see the we

which will our licorice us changes nimble and of are continued and the concern product licorice European identify various ability to products. requiring are product to and More be by extracts our share Union success and continued specific grow regulatory with specifically, supported solutions, be sales on we XXXX. rigorous uses purity, deep by experience, of our in to for our all Our in based customers opportunities which seeing focus functions in grow our efforts wallet provides each over

expand polyfluorinated in grew to XXXX segments concerns sales our reinforce alternatives and ability other environmental a and during functional ingredients, XXXX in these to of towards segments, applications sales or such These environmentally extract licorice development per through substances our including personal movement look Our to as ingredients friendly in for invest and for new products. and to naturally care categories specific sales consumer-facing provide PFAS. beyond.We continue all we derived in investments

to global improvements value in our to and for that, proposition and Bernardo, efficiency development, we and service and new quality our competitiveness for our Beyond our manufacturing, will from logistics and are operations over further actions Future business improve our customers.With XXXX. you. continue planning improve our streamline sales

Bernardo Fiaux

our through good start Thank to morning performance. third financial will and walking everyone. by quarter I you, Jeff,

planned our consolidated decreased end Reported gross was release XX.X% the please And X.X% resulting bulk freight a quarter. quarter. from to sales.Reported XXXX, million million year currency in compared to encourage expanded year non-GAAP Relations gross Adjusted sugar versus XX.X% quarter third duties, prior $XX.X third our prior the period. quarter. prior earnings decrease a product As year reconciliations costs revenues the million versus to $XX decreased prior XX.X% in $XXX.X year million prior by quarter X.X% additional The $XX.X to for in website.For of period. $XX.X reduction our to compared Investor basis, a On increase driven prior at press profit was reminder, our XX, refer revenues year the the year. improved view constant margin presentation the third increased margin the product port XXXX in the the profit sales to supplemental profit in XX.X% detail. to on to gross September and to ended I of you the compared compared in third Adjusted profit lower mix million gross was in

net interest income $X.X $X.X of higher higher recovery operating XXXX million increase next XXX loss million Our in team's in million due loss margin net the improvement. profitability expense third driven productivity and adjusted foundation margin margin sustainable income focus $X.X $X.X a on as in our primarily net was testament has improved of to compared interest to basis to for quarter. million period. points This driving profit will compared year maximizing in serve The the Consolidated year.Consolidated prior was prior operating rates. a higher by a gross to year loss an was year-end,

Finally, to consolidated product million for $XXX.X in QX. compared or was CPG our year X% to third revenues the million decrease revenues $XXX.X X.X% as adjusted results $XX.X lower year volumes. than quarter $XX to growth XXXX, in constant segment $X.X due the offset third year. million a quarter.Shifting the more prior prior a for segment product a to were of pricing Branded to EBITDA basis, from down million the currency was prior million were compared of compared period X.X% On for same by X.X% decline actions

a As of for prior Rajnish prior $X.X wholesome to by of Ingredients decline for quarter product The the a was cater third million vacant $XX.X same cover in reduction of lower million constant same XXXX X.X%. On September chain is in for with compared & results. compared revenues million right-to-use decreases prior The currency $X.X leased revenue year. constant XXXX a that prior period briefly segment Alabama revenues to period tariffs the to $XX.X to X.X% to a to was import of income quarter planned million compared $X.X the income for quarter to period. $X.X to associated third segment to year.Operating of operating other reinvention, in primarily facility CPG sales, expenses noted, review period third our the supply bulk of $X an strategic following million in product operating the quarter for third for of branded in co-packer the income a asset same costs of was excluding bonus sugar was impairment offset in optimization.Flavors XXXX of income $X.X expenses now sugar XXXX the by in the and higher in and quarter primarily operating related partially increased million the $X.X third the compared segment were our the increase currency flat.Operating year. income to higher segment was increased bonus F&I increase Operating fees.Now million segment in I'll year associated basis, for million the for professional costs and of million the expense, due $X corporate the compared million due XXXX year-to-date

activities flow product XXXX. ended September X-month period.Consolidated product currency XX, decreased to improvement revenues $XXX.X September to Free September adjusting XXXX, consolidated cash to to operating flow grow increased of year, million exceed on $XX.X cash Consolidated On year of prior $X.X XX, and to same $XX.X compared basis further XXXX, the million.Now flat in XX, million for months the ended Capital income $XX.X $XX.X over and For despite to the as approximately $XX.X full sheet. period reported million was the I used expense moving an year, revenues operating hope the compared Cash $XX expenditures period. adjusted cash the activities X of representing expect million in which million, have incurring $XX.X X.X% were X X million. year-to-date this period EBITDA was million, $X.X million for our year add-backs, period constant were was a adjusted free in XXXX, basis, balance cash essentially prior flow higher interest compared operating we XX, due was XXXX.When to X.X% September a higher year last million. ended million provided and months ended for rates. compared million over the decreased $XX.X cash this $XX same interest in by would months to

cash terms shown to expanded further favorable We the our chain fourth net and in our stabilize has gross our project associated reinvention declining as margins, work in costs vendors. our talk with It working direct core. capital, build flow and payment upon supply strong more of Jeff improvement up expect Rajnish lower well.The hard of quarter heard you this is result to about the a in

which cash made continue of XXXX, free into would free together, proxy good good XXXX. will And have feel be we flow and accelerate I about our reported that me to cash year to very adjusted emphasize Taken efforts we our supply the would to generation. reinvention confidence generate year-end that that we cash through this like gives the decelerate a our costs in flow chain

ability in free will help expect reduce key us our be this We reignite growth and leverage our to increasing a improvement that an at cash in flow pace strategy. element

Additionally, to long-term we reduce million generate cash we're unamortized $XX.X equivalents continuous net issuance $XXX.X September cash costs. flow.As of inventory incremental efforts XX, and of had sustainably debt making of cash further of debt, XXXX, and and million

million. mandatory repayments our $X long-term Our $X repayments there of decreased result of million $XXX by million credit of At XXXX XXXX, $X.X million was term year-end on million facility. revolving debt of revolver as loan a and $X.X drawn September XX,

shifting our Reducing through would updating We $XXX.X of significant through materials and readily this of flow.Now organic continues to have a such and highlight like outlook, we comfortable led level position point composed focal of means, operating cash portion aim be the liquidity tradable us, to as a are licorice. to commodities we accomplish improvement to in inventory navigate Yet, a this in challenging for million. is microenvironment.I to also by our which sugar our leverage today. raw

which on is outlook our foreign of presented reminder, includes a impact a As currency the translation. reported basis,

of XXXX, performance chain now provided milestones we million.Given $XXX to revenues or guidance between we million in we in range to our adjusted EBITDA now supply above the product to $XXX expect million consolidated $XX previously. a the million year-to-date consolidated expect efficiency, range be to be to in million achieved $XX As of $X the result regards

the that quarters past and generate generation that focus XXXX priority those is X flow results in will XXXX. Our expectation a additional is we in extend reflection cash and gains of top of an the with

chain year.Before the call the other assurance agreement review quarters want until for our we sell known appropriate, Those or stock. XXXX.Finally, in plan, to same to decline alternatives about period remainder until or or buy that it's address fourth as the to strategic a a otherwise $X the for offer expenditure for the moment to developments.That another would special a well further and in events, processes to a shall anticipate definite ongoing, The will quarter capital comment When no some can or active expect disclosures the approved goal review. constitute full versus we our to evaluate be as our or committee forecasted remain prepared to at cost Subaba all solicitation maximizing with strategic of modest consolidated. budget Board take complete decline company's to million around formed from other that further this be available update prior this respect give open Holdings reinvention, may any proposal your received which to we they I communication year of common year to approximately of transaction further million and our to million do and the company. the is Operator, open $X company expect an compared nonbinding intend last of puts Thank the review any and That call savings status or any shares for as There offer that million Including remarks. Not please revised in coming and be our committee questions, any you a also supply $X.X We XXXX that appropriate. current the complete on be you. not be $X with questions. the concludes of the made, the value we will of we shareholders. will executed special projects.

Operator

to [Operator Scott with Instructions] go Mushkin first Capital. will RX We

Scott Mushkin

business And business? issues? some pay debt kind these as start loss down to do about of branded we how side of around growing about press substitutes. of the of -- thinking Turning Obviously, How to sugar around weight are that a of side been some the lot a press lot to regards there's think to you try that of the drugs, in business. you

Rajnish Ohri

we I tremendous or question. while Yes. see have on nonnutritive are on will nutritive brands seen -- take we've opportunity in in the I side global is where kind like the we I all our of this I brand have positioned Whole wave nutritive where North to This a degrowth it's et side side of the And plan America And growth on ride the the well of business. in of guess they're you're think the Via, brands Eart, Pure scenario all also, cetera, aligned we the is of of seeing business. Rajnish. these this category of most of categories, launch go the quarters -- a nonsugar there a kind the plan grow the is allied and product categories, to business, which kind are some businesses the we mean to as coming in of forward.

Jeffrey Robinson

add me And that. Scott, let just to

complementary these think to are drugs. weight I loss all these

consumers think more again, drugs, see we where are products for calories some products are much in these that as more they're lower weight I As if nutritionals. use loss they're that sugar, is drinking of sugar-free. in cokes, the in diet research of the and looking And anything, much that lower drinking

absolutely it. calories calories it low inventories. of movement Unfortunately, we at Scott, no So time, and I we thing. think debt turn to on in But the big or our is our we're a we thing just was one buy a And down debt, have.And Rajnish, buying A on million for have reduce we that I big how big very there. some do but inventories sugar buy is part in much referred that and because opportunities our longer. inventories. either $XXX paying think big We're out Nigel the there more us is, sugar-free we products over

do in marketing on inventories, back reduces We that this the suppliers from and inventories, in the our coming but reducing invest in use we ultimately cash with that saleable more our brands on to of debt have focus really how business. which working

Scott Mushkin

actually is That a great segue.

XX able into next we more the frame should my around months question of we how I'll as of that around then being next 'XX and it's of we so the levels pay we of as debt to kind company about and down think move kind over and how your kind And move thoughts the yield. should

Bernardo Fiaux

you Thank Scott, this for is question. the Bernardo.

I and continue one of going we think is the free flow quarter that of cash this expect to as forward. highlights

flow is massively maintaining year. algorithm, You probably heard year growth year while a this increasing would EBITDA to our next highlighting as adjusted that business expecting our reason for to sustainable that's a for next our to I'm driver that we going while the big that well. in as good and allow The my cash that are accelerate while more pay prepared add a debt with growing for be towards reduce us proxy but remarks backs down

Operator

[Operator Instructions] Meyers Ryan go We to with Lake Capital will next Street Markets.

Ryan Meyers

volume you there about Or kind think there? we on can just then seeing something are related? wondering perspective? kind to you a of overall branded else When guide, Is a from whole, you is it bit segment more that's are provide And detail of if it the as revenue of CPG as lower demand what seeing the primarily relates what going on? kind an industry

Bernardo Fiaux

rest is been this and welcome I the complement. cost and our delivered have performance flow margins year-to-date again to take really and has improvements, that. this I'll Bernardo. about one we But cash Ryan,

sales. like revenue this As our has today fairly faced I have performance. too have the year, in And that seen category our you clear think so headwinds

is effort where finish are this and we the on an in all, to year. to be transparent we all So expect what

call part sales, important enhancement margin I we think but that that optimizations driven to bulk our all is and also sugar also cost are by good strategy, executing a efficiency. these it's which job in the through doing out being

XXXX items guidance point, bonus, at our showing think this some inventory even goals. align chain our and working this by and this this strong net lesser and we and the most being are and translated $X lower asset-light cash year bumping generation. positive are also very like to well reducing account by with reinvention savings through of -- expect all costs, EBITDA improved we been million to is extent, a QX a supply I some including improving all that more to combination This capital importantly, modest increasing we to we has flow adjusted margins, for other CapEx move to an But seeing with consistent as as and so and So factors, extend this that these this free model. you're also

Rajnish Ohri

me to add Just that. let

Jeff On happened the shown side. growth of the has the what sales on has licorice think I part business,

you, I think for parts thing where our has the big big tell into in somewhat other the Listen, they levels to move developed categories big was this the are U.K., innovation in package of France, at getting area, and our a stock to in service getting on up of us have Germany. size XXs. the lot team today sugar-free from de-pack in and the markets [ world. distribution pipeline XX% away of to going XXs I consumer got our a back back ], we different whole as were running looked in But

and out So called East. South there's America a the There's called country a Europe. Middle out big big country there there

I growth of lots opportunity the products us. jams, opportunities in other And within is there's jellies, et it's sugar-free, So expansion chocolate a And of cetera. here thing there's the for the big for Swerve. still think big us desserts, whether

And going as sure making the focusing strategic sheet, good team balance on got that. first fixed. focusing a think has now And organic there's said, was year chain growth effort the into plan 'XX. a in place big So on on this I for supply Bernardo

Ryan Meyers

of about Any out you much quarter, think came mix highlighted business? And strong how much that from gross commentary supply reinvention. we the of from if sales there came just how that margin versus be the the taking of would helpful. chain And costs during Okay. then

Rajnish Ohri

including were -- it's this including we of across Yes. lower When widespread. Ryan, lower in terms sugar, tariffs in fairly the ocean items, high some freight. ticket compare there breakdown, the

But were efficiencies are in also we efficiencies. It's widespread, like coming -- levels procurement. the the improvements contracted seeing from So that we prices our year, the on of those this through services end -- We're at other the seeing of improve. the as the for side said, both that, manufacturing coming fairly improvement on of start I at top are year.

Operator

go to will with Odeon Capital. next we Arnold And Alex

Arthur Arnold

opening but of line disappointing would respect I up wrapped be committee date an give not by? this the wondering perspective, kimono on a could a if about just what indication from time if comments process, your was sort the I was of not you

Jeffrey Robinson

to don't I the -- there's is a thing date hate here. big I put think it. think I'd on this and listen,

thing to the think get only right. Board wants the and the else committee, is I everybody it

this So there's a or quarters. like is not X where sporting events X periods

value. think I be disciplined. there's it factors -- lots think full make sure to I I would want sure We in there's to make of here. want shareholder

happening You can see the improvements business. in this

the and see of You the business. margin improvement that now out year, some full next across this year coming of you take costs the

how backs, come You a heard add about pay talk down Bernardo weigh they've or down debt, of inventory. reduction of

this we in the there get they in this strategic have opportunity should is right got paid." But is sort into rates high. interest close the thing this Interest of of have to rates strategic We've "Hey, value come that that's But with of shareholders in sure, and price? ultimately for is not factors moved expand say, the the what lot here moved out make go forward make should company big good new share gone that. wants value coming is, out what to all as committee factors believe our year. Board want we fixed to to more de-pack, those half But we things the there's biggest sure what's sure sell is Or 'XX, make do $XX 'XX, move the fiscal the out there's up. put as what And to for one in million will out lot sure management, there yes, we we of only a we distribution and regards to We've to we sure in of interest there, to right a as inventories that's we've to facts this as debt. of make a have shareholders down. all company, 'XX, shareholders. the of we So leverage if the paid be dealing this with as is working company products. the to in And things of wants COVID, make

think the value we the I thing on thing shareholders. And running it right get this what's team for everybody in the what's big to most is basis. place the right feel wants about good important a So and the and day-to-day right is management thing

Operator

for I to presenters the will turn our closing comments. now call back

Jeffrey Robinson

And can of to great purchasing to at paying business. to same team there, that to to want sugar job Rajnish sales. we're I Earth, I in down. deal get into expanding the paying at guess have. to Whole team take great as made and good to with getting time, down we the moving rates, regards the in see, done call we've headway you some excise regards I doing that. there's licorice The categories the debt, and in is everybody job I'll improvement, bond thank tax same for a just the margin de-pack, the higher cash. great free licorice in of there and it going great today. joining the lot if that that regards next taking the had think what cost business, year, to X and taking lot come regards higher just and of out cash and that regards out interest out In there's business, ingredient time, multiple to annualize this you co-packers, business. quarters have have we our At At a free out last a which that's the see into took cost done good categories, costs closing not a really a this job and savings that to going across Jeff in ingredient Nigel and done

sure So care are I making absolutely reassure make want thing to is here. creating the how to a growth in is value looking I the for But good out shareholder here, is pay most important good news debt. place. and we're good able our on good We're all on and team there's covenants. our plan think We're real we're shareholders, that sure we taken of that there we're and if we you

out thank our forward next to and want better that even results. I'd look you. and team. like really -- management to our Thank us shareholders showing and I So the congratulate call supporting to there are

Operator

Thank you, today's This ladies program. gentlemen. concludes and

may You disconnect. now

Whole Earth Brands Inc - Ordinary Shares (FREE) 9 Nov 232023 Q3 Earnings call transcript