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The call conveyed a balanced tone: material operational progress on cash generation, deleveraging, sequential margin improvement and accelerated innovation were highlighted as evidence of a turning point, but meaningful year-over-year top-line and profitability declines—especially in International and Baby & Kids—plus ongoing strategic review and refinancing uncertainty temper the outlook. Management emphasized that the divestiture and restructuring actions position the go-forward North American portfolio for stronger margins and that they expect continued cash generation and deleveraging while executing further strategic actions.
The company did not give numeric FY2026 guidance because of its ongoing strategic review but provided metric-based directional guidance: Q3 adjusted EBITDA was $26M (7.8% margin, up from 6.3% in Q2) and adjusted gross margin was 21% (≈90 bps y/y decline, ≈150 bps sequential improvement); overall organic net sales declined 6% (North America -3%, International -8%), driven by an 11‑point volume/mix headwind and +5 points of price; North America adjusted gross margin was 23.4% (would be ~30% excluding the divested Snacks business) and North America adjusted EBITDA was $17M (10% of sales; go‑forward North America targeted >30% gross margin and low‑double‑digit EBITDA margin); category moves included Baby & Kids -14%, Meal Prep -5%, Beverages flat and Snacks -7%; Q3 free cash flow was +$35M (vs -$2M LY), cash on hand $44M, net debt $505M (leverage 4.3x with 5.5x covenant), $196M revolver availability and net‑debt reduction of $145M YTD ( $272M over 11 quarters); inventory days 73 (every day ≈ $3.5M), DPO 59, capex $4M in Q3 (≈$20M expected for FY26); interest expense $14M, >70% of rate exposure hedged at 7.1%; restructuring charges taken $108M of an expected $115–125M, targeting $130–150M of benefits through FY27; stranded costs now expected at the high end of $20–25M with ~70% removed and the remainder exiting through FY27 (half by end Q2, rest by end Q4).
Generated free cash flow of $35M in Q3 versus an outflow of $2M a year ago; total debt reduced by $155M in the quarter, net debt of $505M (a $145M reduction year-to-date) and net debt down $272M over the last 11 quarters.
Sale of North America snacks completed Feb 27, 2026; divestiture materially contributed to cash generation, helped eliminate stranded costs (nearly 70% of actions implemented) and is expected to be gross margin and EBITDA accretive to the go-forward portfolio.
Adjusted gross margin improved sequentially by ~150 basis points to 21% (despite a ~90 bps YoY decline). North America adjusted gross margin rose 100 bps YoY to 23.4%; excluding snacks, North America gross margin would have been ~30% and adjusted EBITDA margin would have been 16.4%.
Innovation renewal rate >12% of net sales (up >2.5 points YoY). Greek Gods showing high-teen dollar sales growth and low-20s% unit growth; wellness tea dollar sales up high single digits; Earth's Best finger foods mid- to high-single-digit growth. New product launches include high-protein yogurt (20g protein), new gut/throat wellness teas and better-for-you Hartley's relaunch.
Days inventory outstanding improved to 73 days (down from 79 a year ago and 75 in Q2), contributing to working capital improvement; accounts receivable collections improved and capex was modest at $4M in the quarter.
Taken $108M of transformation charges to date (of expected $115–125M); still on track to deliver $130–150M of benefits through fiscal 2027; stranded costs now expected at high end of $20–25M with roughly half of remaining reduction by end of Q2 FY27.
Cash on hand $44M with $196M available under revolver; leverage 4.3x with covenant at 5.5x (headroom). More than 70% of loan facility hedged at a fixed rate of 7.1%, demonstrating partial protection vs variable rate exposure.
Thank you for standing by. My name is [Carlene], and I will be your conference operator today. At this time, I would like to welcome everyone to the Hain Celestial Fiscal Third Quarter Earnings Call. [Operator Instructions] I would now like to turn the call over to Alexis Tessier, Vice President of Investor Relations. Please go ahead.
Good morning, and thank you for joining us for a review of our fiscal third quarter 2026 results. I am joined this morning by Alison Lewis, our President and Chief Executive Officer; and Lee Boyce, our Chief Financial Officer. Slide 2 shows our forward-looking statements disclaimer. As you are aware, during the course of this call, we may make forward-looking statements within the meaning of federal securities laws. These include expectations and assumptions regarding the company's future operations and financial performance. These statements are based on our current expectations that involve risks and uncertainties that could cause actual results to differ materially from our expectations. Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed from time to time with the SEC as well as the press release issued this morning for a detailed discussion of the risks. We have also prepared a presentation inclusive of additional supplemental financial information, which is posted on our website at hain.com under the Investors heading.
As we discuss our results today, unless noted as reported, our remarks will focus on non-GAAP or adjusted financial measures. Reconciliations of non-GAAP financial measure...