The Hain Celestial Group, Inc. (NASDAQ:HAIN) Q4 2023 Earnings Call Transcript

The Hain Celestial Group, Inc. (NASDAQ:HAIN) Q4 2023 Earnings Call Transcript August 24, 2023

The Hain Celestial Group, Inc. reports earnings inline with expectations. Reported EPS is $0.11 EPS, expectations were $0.11.

Operator: Greetings, and welcome to The Hain Celestial Group Fourth Quarter Fiscal Year 2023 Earnings Call. At this time all participants’ are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Alexis Tessier, Investor Relations for Hain Celestial Group. Thank you. You may begin.

Alexis Tessier: Good morning, and thank you for joining us on Hain Celestial’s fourth quarter fiscal year 2023 earnings conference call. On the call today are Wendy Davidson, President and Chief Executive Officer and Chris Bellairs, Executive Vice President and Chief Financial Officer. During the course of this call, we may make forward-looking statements within the meanings 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 and 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 Securities and Exchange Commission, as well as the press release issued this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statement made today.

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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. Please note that remarks today will focus on non-GAAP or adjusted financial measures. Reconciliations of GAAP results to non-GAAP financial measures are available in the earnings release and the slide presentation accompanying this call. This call is being webcast and an archive will be made available on the website. And now I’d like to turn the call over to Wendy.

Wendy Davidson: Thank you, Alexis, and good morning, everyone. We appreciate you joining the call today. I’ll start today’s call by reviewing our fourth quarter results before discussing the steps we’re taking to transform our business and the progress we’re already seeing on the journey to return the company to sustainable, profitable growth. Then Chris will review our financial results in more detail along with our outlook for fiscal 2024, before I offer some closing remarks. I’m pleased to report that we achieved fourth quarter results, which were near the high-end of our expectations. Adjusted net sales on a constant currency basis were down slightly 1.5% year-over-year, consistent with our guidance. And adjusted EBITDA on a constant currency basis was $43.5 million at the high-end of our guidance.

As expected, the net sales decline in the fourth quarter was driven by the North American segment, where a large customer promotion for snacks in the prior year period was not repeated and by some softness in personal care. There were several bright spots in our results stemming from strategic actions we began taking in the third quarter for both our North American and International businesses. In North America, we are seeing bright spots in key snack and beverage brands, with Garden Veggie snacks and Celestial seasoning bagged tea, both returning to growth after a challenging third quarter. Garden Veggie snacks grew dollar sales by 4% in the 12-weeks ended July 16th, on 14% growth in TDP, and Celestial seasoning bagged tea grew dollar sales by 2% on 7% growth in TDP.

Additionally, Greek Gods yogurt continued its standout performance, growing dollar sales 12% on a 20% increase in velocity and our Earth’s Best baby and kids grew dollar sales 20%, excluding formula on 19% TDP growth, in part due to Earth’s Best snacks innovation launched earlier this year. Formula continues to be a challenge, driven by industry-wide supply shortages. In the international segment, we continued the momentum from the third quarter to achieve another quarter of adjusted net sales growth. The growth was driven by the U.K. led by meal prep formerly called Pantry, particularly in private label, where we have a meaningful presence, as well as by snacks. We were also encouraged to see sequential improvement in meat free with our private label growing 9% in the quarter and gaining share, as the category continues to show signs of stabilization.

Strength in the U.K. was only partially offset by softness in the non-dairy beverage business in Continental Europe. While non-dairy beverages were down year-over-year for fourth quarter as a whole, we are encouraged by sequential improvement we’ve seen throughout the year, especially in our strong private label segment and by growth in both June and July. The recovery in non-dairy beverage is largely led by private label, and appears to gaining positive momentum. As a category leader in both branded and non-diary private label, we believe our portfolio is well positioned to benefit from this development. During the quarter, we delivered improvements in gross margin across the business, through both pricing and productivity initiatives, including the consolidation of our meat free manufacturing footprint.

As we expect continued moderation in the inflationary environment in fiscal ‘24, so still above normal levels, we see further opportunity to improve gross margin. We also made progress on our debt levels in the quarter paying down $28 million in debt. Debt repayment coupled with reinvesting in strategic business capabilities remains a top priority for free cash flow. Overall, we are pleased with the stabilization of many of our core categories as we finished the year. As you know, we’ve been undertaking a significant review of our company’s strategy and reimagining our business in order to realize our full potential and return Hain to consistent profitable growth. We’ve begun taking meaningful steps to simplify our business and set the foundation for our transformation by focusing on enhancing our capabilities, optimizing our organization, strengthening our end-to-end supply chain, improving our productivity pipeline, optimizing our route to market and fueling our brand building initiatives.

Early actions are bearing fruit, reinforcing our confidence in our strategy and future growth potential. Let me share a few examples. We spoke last quarter about our efforts to enhance our capabilities and expand into margin accretive channels such as immediate consumption and away from home. We believe there is a significant opportunity for our brands outside of traditional retail and on the go consumption occasions within C-stores, airports, offices, and universities amongst others. These immediate consumption channels drive brand reach and visibility and are both price and margin accretive as shoppers are willing to pay more for convenience. Our portfolio is well positioned to take share in this channel, particularly our snacks and tea brands.

Hot tea is one of the fastest growing beverages in food service and we are seeing consumers adding to their morning and evening routines with snacking occasions away from home. Morning and evening snacking occasions are up 3% versus a year ago. We are enhancing our away from home capability and our go to market strategy as it requires a very unique sales process and a distinctive and focused sales model, different than that used for traditional retail channels. While a new focus for Hain, this is a channel in which I have in-depth experience, and I’m pleased that we are already seeing progress against this effort with C-store sales growing double-digits in the 12-weeks ended July 16th. Additionally, we are building out our revenue growth management capability to drive effectiveness and efficiency in price realization, brand building, and end market share growth.

For example, we recently executed a successful SKU rationalization initiatives within our international segment, which streamlined a brand’s offering by nearly half. These efforts resulted in a highly productive core, which is now seeing double-digit growth and increased velocity, a win for both Hain and our retail partners. Furthermore, e-commerce continues to be a focus with increased support and optimization on marketplacesandretailer.com with updated content, expanded assortment, improved media efficiency, and increased spend on key brands. Garden Veggie snacks, Earth Best, and Celestial seasonings are all grown consumption with double-digit increases in traffic online. We continue to focus on refining our operating model so that it is future fit to drive effectiveness and efficiency, supported by Global Centers of Excellence.

Earlier this month, we announced our new global headquarters in Hoboken, New Jersey. The space and location was thoughtfully selected to meet the evolving needs of our business. At nearly half the size of our footprint in Lake Success, our new headquarter will serve as the anchor to our hub and spoke flexible working model where teams will come together to collaborate at significantly less cost than our prior location. This approach aligns to our purpose of inspiring healthier living and serves as a competitive advantage in attracting and retaining top talent, regardless of where they are located. The headquarter will also serve as the home of Hain’s Innovation Experience Center, where team members, customers, and consumers will be able to immerse themselves in our products, explore consumer insights, and create innovative opportunities for the future.

Our Centers of Excellence are designed to leverage global scale where appropriate, enembley execute locally for impact. Our first global center, which we announced earlier this year, was for supply chain. Through this COE, we have simplified our end-to-end planning and enhanced our productivity pipeline process, generating $34 million in productivity in the back half of fiscal ’23. When coupled with pricing this has allowed us to offset record levels of inflation, while maintaining average on shelf availability fill rates ahead of the industry over the course of the fiscal year. We are in the process of establishing additional global Centers of Excellence in areas such as innovation, brand building, talent management, and technology. Our Baby and Kids businesses in North America and international have begun collaborating to share consumer and category insights, brand strategy, innovation, and creative assets across the Ella’s Kitchen and Earth’s Best brands.

This facilitated the launch of Earth’s Best crunchy sticks in the U.S., which are similar to the best-selling Ella’s Kitchen Melti sticks in the U.K. This partnered innovation over delivered expectations at launch, helping to deliver strong growth in Earth’s Best snacks in the quarter, with expanded distribution and support in fiscal ‘24. Our strategic reinvestment in marketing and brand building is also beginning to yield positive results. As you may recall, the supply chain challenges we faced in fiscal ‘22 led to a temporary pullback in marketing efforts, which negatively impacted sales in fiscal ‘23. In quarter three, we began taking action and reinstated brand support and are encouraged by the positive momentum as a result. In the fourth quarter, we saw marked improvement in Celestial seasonings tea due in part to the Magic in Your Mug campaigns that we activated in fiscal quarter three.

Celestial bagged tea grew 2.3% in the latest 12-weeks, while the category posted a mild decline resulting in Celestial gaining share. Tea also benefited from our work as a category captain with a large retail partner on the optimization of assortment and shelf set. Furthermore, we are seeing encouraging early results from Peppermint K-Cups and Sleepy Time with Melatonin, both new tea innovations supported by strong customer programming this summer. Also, launching in the third quarter was our Earth’s Best Good Food Made Fun campaign, which helped to drive Earth’s Best snacks growth of 8%, on 18% growth in TDPs in the latest 12-weeks. We have programming in place with our key retail partners focusing on 360 activation, including retail media, in-store events, digital coupons, and retailer website engagement.

We will continue to deliver Good Food Made Fun across all consumer touch points in fiscal ‘24, including new packaging, websites, and public relations social media. In the fourth quarter, we launched our Crazy Delicious Vegetables, media campaign for Terra Chips. The early results show campaign effectiveness, brand awareness, and purchasing intent, all surpassing industry benchmarks. The early success we are seeing across these areas of focus gives us confidence that we have the right comprehensive plan in place to build our brands and return the business to growth in fiscal 2024. We view fiscal 2024 as an inflection point, a year during which we will reset our foundation and pivot to growth. Consistent with what I shared on the last call, we plan to make brand building investments across key brands to drive growth, while also optimizing the effectiveness of our marketing dollars to work harder.

We will begin to make investments to enhance our away from home and e-commerce capabilities. Two channels, which we expect will provide meaningful growth in the future. Before I hand the call over to Chris to share the financial details, I want to thank the entire Hain team for their commitment to our purpose of inspiring healthier living through better for you purpose driven brands. I recently completed my first seven months of visits to see all of our global sites, including manufacturing, distribution, and offices across the U.S., Europe, and Canada, which left me energized by our capabilities and our team’s passion. I am encouraged by our potential to leverage our reach and scale to deliver sustainable and profitable growth as the leading better for you branded enterprise.

With that, I’ll turn it over to Chris.

Chris Bellairs: Thanks, Wendy, and good morning everyone. Fourth quarter consolidated net sales decreased 2% versus the prior year period to $447.8 million, inclusive of a $1.3 million impact from foreign exchange. On an adjusted basis, consolidated net sales decreased 1.5% in the quarter, consistent with our guidance of low-single-digit decline. Adjusted gross margin was 22.7% in the fourth quarter, an increase of approximately 330 basis points versus the prior year period and an increase of 130 basis points from the third quarter of 2023. Driven by pricing and productivity, partially offset by inflation. Adjusted EBITDA on a constant currency basis was $43.5 million versus $35.4 million in the prior year period. This came in near the high-end of our guidance range of $40 million to $44 million.

Total SG&A came in at 14.9% of net sales for the quarter, as compared to 15.5% of net sales in the prior year period, benefiting from cost management. Net loss for the quarter was $18.7 million or $0.21 per diluted share, compared to net income of $3 million or $0.03 per diluted share in the prior year period. This is inclusive of a non-cash intangible asset impairment charge, totaling $19 million, resulting in an impact of $14 million after tax. Adjusted EPS was $0.11 versus $0.08 in the prior year period. Turning now to our individual reporting segments. In North America, reported net sales decreased 5.1% to $281.8 million in the fourth quarter. Adjusted net sales decreased 4.3% versus the prior year period, an improvement from the rate of decline in the third quarter.

The year-on-year decrease was primarily a function of previously discussed non-repeated customer promotions and softness in personal care. Q4 adjusted gross margin in North America was 22.7%, a 270 basis point increase versus the prior year period. Our margin performance reflects pricing and productivity, partially offset by inflation. Adjusted EBITDA at constant currency in North America was $27 million, a 1.8% decrease versus the prior year period. The decrease was driven by lower sales and increased marketing spend. North America’s adjusted EBITDA margin was 9.5% on a constant currency basis, a 30 basis point increase from the prior year period. In our International business, reported net sales increased 3.7% to $166.1 million in the fourth quarter.

When adjusted for the impact of foreign exchange, net sales increased 3.6%, compared to the prior year period. This represents the second consecutive quarter of growth in the segment and a significant improvement from decline in the first-half of the year. Our year-over-year increase for International adjusted net sales reflects an 8.2% increase in the U.K. partially offset by an 8.7% decline in Continental Europe. The U.K. increase was driven by a benefit from the category recovery in private label and the diversification of our portfolio in both brand and private label. The year-over-year decline for Continental Europe was driven by non-dairy beverage performance, which, as Wendy mentioned, appears to be stabilized. International gross margin was 22.7%, up approximately 440 basis points year-over-year, as pricing and productivity more than offset inflation.

International adjusted EBITDA at constant currency was $27.5 million, a 62.8% increase for the prior year period. On a constant currency basis, adjusted EBITDA margin was 16.6%, up approximately 600 basis points versus the prior year period and 400 basis points, compared to the third quarter. Shifting to cash flow and the balance sheet. Fourth quarter operating cash inflow was $40.5 million versus an outflow of $18.9 million a year ago. The higher operating cash flow resulted from a strong improvement in net working capital. As we anticipate generating incremental positive cash flow in fiscal 2024, we expect resulting cash to be used to pay down debt, while strategically investing in the business. CapEx was $6.4 million in the quarter and $27.9 million for fiscal 2023.

Finally, we ended the quarter with cash on hand of $53.4 million and net debt of $775.4 million, translating into a net leverage ratio of 4.3 times as calculated under our amended credit agreement. Consistent with our stated priorities for cash, we have reduced net debt by $70 million since the end of the first quarter of 2023. Turning now to our outlook. As Wendy said, we view 2024 as an inflection point where we will reset our foundation and return to top line growth. In fiscal ‘24, we anticipate balanced growth across the portfolio within both our North America and International segments, achieving low-single-digit organic net sales growth. Fueled by productivity increases year-over-year, we expect to make brand building investments across key brands to drive growth, and will also make modest investments in our away from home and e-commerce capabilities.

We expect these investments along with the refunding of our incentive plan, as compared to fiscal ‘23 will create an adjusted EBITDA drag of approximately $20 million as we invest for the future. As such, we are offering the following guidance for fiscal ‘24. We expect adjusted net sales to increase by 2% to 4% year-over-year. Adjusted EBITDA to be between $155 million and $165 million. And lastly, we expect to generate free cash flow of $50 million to $55 million. Our 2024 guidance assumes that currency exchange rates will remain near current levels, pricing will recover most expected cost inflation, and productivity will drive gross margin expansion and fuel investments in brand building, channel growth capabilities, and employee incentive compensation.

Our full-year guidance is heavily back half weighted. The first quarter of the fiscal year is typically our seasonally smallest quarter in terms of net sales and adjusted EBITDA. This dynamic will be enhanced in the first quarter of fiscal ‘24 as there are several headwinds that we expect to impact our North America business, which we don’t expect to continue over the balance of the year, because of these factors we are providing guidance for fiscal Q1. On the top line, we are continuing to experience industry-wide supply constraints related to our Earth’s Best organic baby formula business, which we are currently working through. In addition, we are optimizing promotional activity for Terra chips resulting in a near-term revenue headwind, but we anticipate longer term the move will unlock a more profitable growth mix.

Lastly, there has been a timing shift in a personal care program within a non-measured channel. On the margin front, carryover inflation in Q1 is expected to be higher than that in the balance of the fiscal year. And we expect pricing and productivity will begin accelerating in Q2. As such, we expect the following for the fiscal first quarter. Adjusted net sales to decline by a low-single-digit percentage year-over-year and adjusted EBITDA to be between $20 million and $21 million. We expect results to improve starting in the second quarter as fuel initiatives and pricing take hold with operating model improvements positively impacting the back half of the year. With that, I’ll turn the call back to Wendy for closing remarks.

Wendy Davidson: Thank you, Chris. Before I close out today’s call, I would like to share the news that Chris will be stepping down as CFO of Hain Celestial on September 4th. Chris has played a key role with the company through a time of extensive change and has helped to build a strong finance team with deep expertise to deliver for the future. With this new I’m pleased to share that Lee Boyce Chief Financial Officer of Hearthside Food Solutions will become Hain’s new CFO effective September 5th. Lee brings more than 30-years of experience in leading finance within organizations across the food and hospitality industries, including Hearthside, a leading contract manufacturer in the food industry’s largest privately held bakery.

With [Technical Difficulty] Company and with American Hotel Register. Prior to that, he spent more than 20-years at Mondelez and Kraft Heinz. Lee’s extensive and broad experience will be a tremendous asset to Hain as we transform our business into a globally integrated enterprise. Chris will continue to serve as CFO through the transition, he will participate in Hain’s upcoming Investor Day event in September, and will stay on into November to ensure a smooth transition. On behalf of the company, I want to thank Chris for his many contributions to Hain Celestial and wish him the very best. At this time, I’d like to turn it over to Chris to say a few words.

Chris Bellairs: Thanks, Wendy. I want to thank you and the team for your partnership during my time at Hain. I look forward to seeing the new Hain Reimagined strategy take flight. And I’d like to thank everyone on the call. It’s been a real pleasure working with you. You are in good hand and know I will be cheering Hain on from the sidelines.

Wendy Davidson: Thanks, Chris. As mentioned previously we have examined really every aspect of our business to identify key unlocks to drive our business forward. Over the last several months, our team has been laser focused on developing Hain Reimagined, our multi-year transformation strategy to return our business to predictable, profitable growth. We have identified where we will play and our right to win and the right building blocks to get there. We are simplifying a winning portfolio, and we have identified the right channel mix and geographies to drive our core, expand our reach and gain share across our portfolio. As we lay out our strategy during Investor Day on September 13th, we’ll share how we’re building our future for growth through our commercial focus, where we’re reshaping our market coverage and building capabilities and revenue growth management.

You’ll hear how we’re reimagining our supply chain, where we’re implementing new capabilities, expanding capacity in critical categories, and enhancing operating efficiency. We will share how we are transforming our end-to-end business planning process with news way of working and focused investment in digital that is people led technology enabled, and we’ll share how we’re redefining how we approach brand building to drive greater awareness and loyalty and to get our products into the hands of more consumers everywhere they shop. Same size, scale, and structure, provides us the unique opportunity to blend aspects of traditional CPG growth models with disrupted startups and use it as a competitive advantage. We are taking the best of both world, which enable us to how small the big and how big the small.

All of this of course is only possible through the talent and passion of our Hain teams, who are committed to our company purpose of inspiring healthier living and who live our values every day. It’s an exciting time to be at Hain, and I am optimistic about the future of our business and unlocking the full potential of our brands. We look forward to laying out the details of our new strategy next month and introducing you to Hain Reimagined. Operator, please open the line for questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.

Andrew Lazar: Great, thank you. Good morning. Wendy and Chris.

Wendy Davidson: Good morning.

Andrew Lazar: Wendy, I know that you had initially described sort of the approach going forward regarding reinvestment as kind of a, pay-as-you-go approach, and maybe as opposed to a large kind of one-time reset. And I guess, that’s partly due to balance sheet flexibility and such. With the $20 million incremental investment and amended credit agreement. And now it seems like maybe a little bit less of a pay-as-you-go and maybe a little bit more of an upfront kind of reset. So if I’ve got that right, I guess, why the change in approach. And do you now believe this gets Hain to a more sustainable place on brand support? Or is more needed and as you go forward, as more productivity comes through? And then I’ve just got a follow-up. Thanks.

Wendy Davidson: Yes. I appreciate the question. The reality is that a large chunk of that $20 million is actually just re-funding our incentive plans, on a year-on-year basis. So that’s where a large amount of that is. As we look into the year and the investments around brand building, the bulk of it we won’t actually put in place until the back half of the year. So I think we are building the shape, fairly prudent, to ensure that we’re driving productivity and efficiencies in the front half of the year. And as Chris said, we’ll begin to see pricing catch up with inflation, as we go into quarter two. That gives us a bit more flexibility to then lean into some of those reinvestments around brand building. So while the full-year, we’ve built it into the shape, what you’ll end up seeing is, a bit more of productivity in the front half that gives us the freedom to then lean into some of those investments in the back half.

Andrew Lazar: Got it. Okay, thanks for that. And then, guidance for the fiscal first quarter adjusted net sales was for a low single-digit decline year-over-year. I guess what are you expecting more specifically for North America in 1Q? And I guess, to what do we owe — you mentioned a couple of things, but maybe what do we think is driving some of the weaker trends that we’re sort of currently seeing, at least in scanner data. And I guess what gives you the confidence in the inflection that’s needed to hit that 2% to 4% target for the full-year?

Wendy Davidson: Yes, I think there’s a couple of things that play into it. First, for quarter one, as Chris said, there are some really unique, one-time impacts that happened in the quarter. The largest of that being availability of baby formula that supports Earth’s Best, in North America. And that — we believe a quarter one impact, but we don’t see that as we go throughout the balance of the year, given some of the arrangements that we’ve made with some of our suppliers there. We then also made a choice to margin up the mix around our snacks portfolio, as we pulled back from some promotional activity that was margin dilutive, to make sure that we’re using those brands and putting them into the marketplace in the best way possible.

The challenge with that is, that lapping those big chunks of volume, has an impact in a short period of time, but over time we will improve the overall mix of that. So you’ve got a little bit of that phenomenon. And then the timing of Alba sun care, lapping prior year. So we shipped later in the sun-season last year, and we shipped earlier in the sun-season this year and so you see a quarter-on-quarter view, but it’s not necessarily a weakness overall. So some of this is very much timing related for North America. To your question about what we’re seeing in end market activity, we’re actually really encouraged. We’re encouraged because TDPs continued to grow, which is good. We’re encouraged, because the pricing actions we’ve taken have gone through.

And we’re not seeing an impact in the consumer take rate and probably the third piece that I am more encouraged about is the efficiency of our promotions. If you recall, we didn’t really turn back on promotional activity until quarter three, really late quarter three of fiscal ’23. And we knew it would take a little bit of time for that to catch up. We were far behind category average in the places where we play. We’re now promoting about at industry rate, we’re seeing effectiveness of those promotions. And we’ll have a sort of always on marketing strategy and an always-on promotional strategy, that I think will allow our velocities to catch up with our TDPs. So that’s what gives us real confidence.

Chris Bellairs: Andrew, the three headwinds that Wendy described are in aggregate about 10 growth points of headwinds for North America. So, it is a material headwind in the first quarter. and specifically in the first quarter. And then additionally, if you go back and look at how fiscal ’23 seasonality was for North America. Recall that the first quarter in North America was exceptionally strong last year. So, it was a quarter that got the year off to a very good start for North America, whenever the anniversary. If you go back to two years ago, and adjust for those 10 growth points of headwind versus two year ago actually, it looks like acceptable levels of growth in the first quarter for me. And then the balance of year, North America will recover nicely.

Andrew Lazar: Yes. Thanks for the clarity.

Operator: Thank you. Our next question comes from the line of Ken Goldman with JPMorgan. Please proceed with your question.

Ken Goldman: Thank you, Chris. Good luck to you. I appreciate your help, over the last year or two. Just curious if you can help us a little bit and thank you for all the guidance for next year, including the first quarter. Just wondering if there is a few other line items for the full-year that we could get a little bit of help with, including maybe just directionally how you’re thinking about the gross margin. And then maybe some help on just below the line items for interest and tax, is there anything abnormal there we should think about as we model the year?

Chris Bellairs: Yes. So for gross margin we do continue to see improvement, we expect improvement throughout the year. Call it between a 100 and 200 basis points of gross margin improvement throughout the year. It’ll be a little lumpy, but that would be our full-year expectation. Interest expense will continue to go up modestly in fiscal ‘24, not nearly as much as the increase that you saw from fiscal ‘23 to from ‘22 to ‘23. And then the adjusted tax rate will continue to be competitive in that 23.5%, 24.5% range.

Ken Goldman: Okay, thank you for that. And then just wondering if I can just if you could remind me a little bit of how the incentive program works, just because it sounds like from Wendy what you were saying most of that $20 million is coming from a — I don’t know if it’s a reset or forget the exact word you use of the incentive program, but your EBITDA will be down next year. So could you just walk us through a little bit, what drives that reset to deliver the benefits?

Wendy Davidson: Yes. The structure is actually very comparable to what you see just across, really industry. It’s 50% based on revenue growth, 50% based on EBITDA growth. The challenge we have in fiscal ‘23, is that for the majority of the business, they clipped on both net sales growth and EBITDA. And so, what was accrued to pay out in bonuses, essentially went back into profit. With the plans for fiscal ‘24, we’re building top-line growth, we’re also planning relatively flat EBITDA, even with the investments in the business, and so, the combination of that in the refunding or the accruing for that bonus plan, that’s what you see as an accrual phenomenon, more than anything else. And to be honest, I really hope that we maxed out in both revenue and EBITDA and pair our folks, based on the results that we plan to deliver next year.

Chris Bellairs: And if you decompose the $20 million, about two-thirds of it is the bonus dynamic.

Ken Goldman: Great, thank you to you both.

Wendy Davidson: You bet.

Chris Bellairs: Thanks, Ken.

Operator: Thank you. Our next question comes from the line of Alexia Howard with Bernstein. Please proceed with your question.

Alexia Howard: Good morning, everyone.

Wendy Davidson: Good morning.

Alexia Howard: Hi, there. So, can I ask about what you’re seeing with consumer dynamics here. Other more mainstream packaged food companies are saying that the lower income consumer is quite vulnerable here. I’m assuming that that’s not a huge concern of yours, but I’m wondering if there’s anything that you’re seeing between measured and non-measured channels, or just consumer dynamics that as they’re evolving right now?

Wendy Davidson: Yes, great question. And we’ve talked before about, our portfolio tends to play at the higher end of maybe conventional, at the lower end of premium. So it’s sort of puts us in a unique spot. What we’re finding is consumers want the products that are a regular part of their routine, and they want the brands. They are looking for different pack sizes. So for instance, with our Greek Gods yogurt, we’ve seen tremendous growth, and that is a brand that we don’t really do in single-serve. We do it all multi-serve, with consumers are sort of looking at multi-serve as a way for them to drive overall cost per serving reductions. Internationally, it’s a little bit different dynamic that marketplace, I find the consumer is much more sensitive and they’re actually shifting their shopping behavior to discount retailers.

We’re in a very good position there, in which, in both — and really switching to discounters, but also in private label. And we’re well positioned there, because we’re across the marketplace in both large retailers and discounters, but we’re also in both brand and private label. And for non-dairy beverage and meat-free we’re greater than half of our sales are private label versus brand, and especially meat-free we’ve seen the category recover and private label faster, than we’ve seen brand recover. In the U.S. we really are — our products don’t really skew to a more price sensitive consumer. And so, we haven’t really seen the consumer shifting their behavior except in that that multi-served focus.

Alexia Howard: Great, thank you very much. I’ll pass it on.

Wendy Davidson: You bet. Thanks.

Operator: Thank you. Our next question comes from the line of Jim Salera with Stephens Inc. Please proceed with your question.

Jim Salera: Hi guys, good morning. Thanks for taking my question.

Wendy Davidson: Good morning.

Jim Salera: Wendy, I wanted to ask you got a lot of moving pieces here on the brand reinvestment side. Can you maybe give us an idea of rank order, which brands or kind of sub categories are the primary focus and maybe when some of those promotions come on?

Wendy Davidson: Yes. You’ll see a continuation of some of the reinvestment that we put in place, latter part of quarter three and into quarter four. In Snacks, Baby Kids and in to tea or beverages in our U.S. business primarily. So, Celestial Seasonings Magic in Your Mug campaign was very successful. As well as some of the new innovation launch. You’ll see us continue to lean in and support Celestial Seasonings. You’ll see us continue to support Snack brands, but underneath that, it will be primarily Garden Veggie and Terra, in our Snacks portfolio. And then in Baby Kids, it will be the Earth’s Best campaign to continue to support that and support innovation. I would say that our — so those are category and brand prioritization.

The bigger piece for us is ensuring that we’ve got an always-on pressure around those brands, that keeps them top of mind with the consumer. But then we also want to make sure that we’re keeping them available to the consumer and easy to find. So some of our brand-building will be driving distribution across channels, to ensure that our products are available where the consumer is shopping, during the week. So, I would say that probably about half of our brand-building. The other half is making sure that we’re supporting our innovation that we’ve launched and in the past, Hain’s had some fantastic innovation, but we’ve not kept sufficient pressure to keep the consumer trying those products, or buying those, in addition to the core. For instance, this year we’ve launched the Sleepy time with Melatonin, that’s it in the top selling SKUs now, with the retailers, who have that on shelf.

We also launched Melty Sticks in Earth’s Best, that’s one of the top selling products as well in snacking for kids. And we feel really good about what those new pieces of innovation are doing. We’ve got some new innovation that will launch in the next year as well. So we want to make sure we’re supporting that with our brand building dollars.

Jim Salera: That’s all very helpful. Maybe one more. Just on the way that you view in-store promotions and driving trial through in-store offerings, versus kind of more high-level, brand marketing that somebody would see on social media or on television. Do you have a sense for which one you get more bang for your buck or what the appropriate mix between those two are?

Wendy Davidson: Well, it would depend on the brands, but I would say in general for Hain, our — and this is part of our desire to be disciplined in brand building from what you would see from a large CPG branded enterprise, but we want to make sure that we are also moving fast and nimble, in the way that you might see from a disruptor or start-up. And our brands aren’t going to be the time that we’re doing mass media promotions and media spend. That’s just not really effective spend for us, where we do get a lot of efficiency is in overall portfolio, but also in social media, but also in-store activation. And it really depends on the brands, but the team has implemented a pretty disciplined approach to marketing media mix, and using that modeling to then adjust on a quarter-on-quarter basis, channel-by-channel.

Jim Salera: That’s all very helpful color. Thanks Wendy. I’ll pass on.

Wendy Davidson: Thanks.

Operator: Thank you. Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Michael Lavery: Thank you. Good morning.

Wendy Davidson: Good morning.

Michael Lavery: Just would love to understand some of the brand spending and investments step-ups, a little bit better. When you talk about it being more second-half skewed, should we also think about is spilling into fiscal ‘25. I know that’s a way out and we just finished ‘23, but is that — which should we think of it as you’re just kind of getting started, mid ‘24, or maybe a little bit of a flip side of the same coin, you’re at around a 6% EBIT margin now, do you have a target in mind of like kind of when and how you recover, maybe we’ll hear some of this more at Investor Day, but maybe just a sense of how the spending and profitability balance is, how you’re thinking about that and what you expect in terms of the timing of the spend ramp up?

Wendy Davidson: Yes, I’ll start and I’ll pass over to Chris to give a bit more color. But I think the — two things, one, Investor Day. We’ll provide a lot of clarity and what we’re seeing around the multi-year and the expectations within each one of those years. Year one, as we said, is really a reset, it is a reset of our foundation. And I would characterize it as the front half we will lean heavily into driving the fuel to invest in the business and driving productivity, and then being very prudent in where we lean into the investments in the back half. The investments you’ll see, some of that will be organizationally to support our channel expansion, and a slight increase in marketing investment year-on-year, but the bulk of that will fall in back half of the year.

So, you’ll see consistency in the pressure we had from quarter three, quarter four, for some of our key brands, continue into the front half of this year, but incremental, you won’t really see until the back half of the year.

Chris Bellairs: Yes, Michael, the only thing I would add is, definitely questions as Wendy said, that we’ll go into much more detail at Investor Day. But we, in the past have talked about the pacing of our investments and the pacing our investments will be determined by two things. The attractiveness of the investment and the amount of fuel that we were able to be generating over what period of time. So, yes, you get into the back half of the year as Wendy said, more generation of that productivity of that fuel that pays for the investments, and then better visibility into fiscal ‘25, to come in a few weeks.

Michael Lavery: Okay, that’s helpful. And just a follow-up to clarify on the club promo for I think it was Alba, would we hear this correctly that you that was pulled into 4Q and has already done, that’s not something that we should expect into — it’s not shifting into 2Q, correct, it’s out of 1Q and in the review mirror, is that correct?

Chris Bellairs: Correct.

Michael Lavery: Okay, great, thanks so much.

Wendy Davidson: You bet.

Operator: Thank you. [Operator Instructions] Our next question comes from the line of Matt Smith with Stifel. Please proceed with your question.

Matt Smith: Hi, good morning.

Wendy Davidson: Good morning.

Matt Smith: Wanted to dig in a little bit on productivity savings. I believe, previously the company was targeting over $100 million of savings between fiscal ’24 and fiscal ’25. Can you give a little more detail as to the level you now expect to realize in fiscal ’24? And then how much of the productivity savings that you expect for the year, do you expect to be used alongside pricing, to offset lingering inflation, versus fund investments in the business in the second half?

Wendy Davidson: Yes, this is an area that I’ve been really pleased joining the company have to see how robust the team’s productivity processes have been. And I think we’ve provided the detail that in fiscal ’23 we actually over delivered to expectations in productivity, and that combined with pricing allowed us to cover for inflation. For fiscal ’24, you’ll see that continuing. So we actually have a ramp up of productivity in fiscal ’24, the traditional things that the team has in the regular pipeline, but there are some incremental to that, that will lay out in more specificity, when we go into Investor Day. We’ve got some pricing as well. And the combination of both of those gives us the ability to invest back in the business without a significant step back, but I’ll let Chris provide a little bit more color.

Chris Bellairs: And continue to accrue gross margin, as I said earlier to Ken’s questions. So if you think about kind of the combination of pricing, productivity, offset by inflation, we think the net of those three things is positive and you’ll see that in gross margin improvement.

Matt Smith: Okay, thank you for that. And then, just in general, the overall level of investment behind the business that you achieve in the second-half of the year. Can you talk about, how you view that level, relative to where you need to take the business overall in terms of spending. When you — I think last quarter you provided some commentary about needing to spend more behind some of the core brands to unlock growth potential. Do you get most of the way there in the second-half of the year or do you expect investment spending to continue to outpace sales growth even beyond fiscal ’24?

Chris Bellairs: I wouldn’t say that we. So we certainly don’t get to the levels, that we would want to be able to support the brands, in the out years. And you’ll see some of that laid out. When we talk on Investor Day. But we also realize that there is a lot of cost in the business that we can drive out, that can help to fund that. And so, it’s going to be a combination of those two things. And I think I’ve said this in the last couple of quarters, we definitely want to make sure that we are prudent in how we do that. So, I don’t have a desire to take a giant step back, to be able to fund that overnight. I think there is an opportunity for us to drive efficiency and effectiveness of the spend we have today. In trade, how are we driving the efficiency of our trade spend, that’s giving us the right reach and getting the right activity with the consumer.

The reality is our spend levels are about where they need to be. But we probably need to do that a little different. In marketing, we’d like to step it up, but I’d also like our working non-working marketing mix to be improved before we just add more dollars to it. So the team’s done a lot of work to actually drive marketing investments, analysis. So what’s the return on the dollars that we’re spending? How do we shift it to working marketing rather than non-working? And how we are measuring the impact on household penetration, brand awareness. How is it helping us drive distribution and reach? So we’ll do more effectiveness work in ’24, before we drive incremental investment in the out years. I think we want to get better at using the dollars we have today, before we just put more dollars to things.

Matt Smith: Great, thank you for that. Wendy, I can pass it on.

Wendy Davidson: You bet.

Operator: Thank you. Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.

David Palmer: Thanks, good morning. A follow-up on Ken’s question, he said that he put it in a presumption that there was a — the vast majority of the $20 million is incentive pay refunding and not brand building. Could you maybe confirm if that’s true? And if it is, clearly there’s going to be some shifts in spending, and it sounds like snack, beverage, baby, are big investment areas. And you want to have the promotion firepower to support past innovation, which all makes a lot of sense. I wonder, generally, where do you see inefficiency, where maybe you’re shifting dollars out of, generally speaking?

Wendy Davidson: Yes, well, first to your first question, as Chris said, about two-thirds of that $20 million is refunding our incentive plans, and those are self-funding. So you would expect as we deliver on revenue growth, as we deliver on profit growth, that’s what would trigger the payment of those, but they self-fund, but in the mechanics of it on a year-on-year basis is why you see it as an increase. The other third is a little bit of investment in capability. Revenue growth management, that we’re driving trade efficiency and effectiveness of the spend we have today. Our push into away from home and enhancing our e-commerce capabilities. So you’ll see a little bit of investment there around capabilities. From a where do we see inefficiencies in the business?

If we just look at our cost versus the industry benchmark, and I think we’ve shared this before. I think actually in your fireside chat, in June, we talked about this. That, there’s a fair amount of inefficiencies in number of distribution locations, number of manufacturing locations, effectiveness of our supplier spend and supplier base. The amount of inventory we have on hand in both raw and pack and finished. Our days it takes to pay, et cetera. So there’s, as we think about this scrutinizing every part of the business end-to-end. There are pockets of cost, that’s just been baked in. I think largely because we were a company built on multiple acquisitions, that largely weren’t integrated. So part of what we are leaning into is integrating where we can drive efficiencies, that allows us to push those dollars to support brand building, rather than just supporting the running of the business.

And that’s where you’ll see us outlining on Investor Day, that pace of fuel delivery and productivity, the pace of operating model change that enables us to then lean in and fund, how we want to support our brands and pushing them out into the marketplace.

David Palmer: That’s great, and just if you had to say the biggest variables, you’ll be tracking, as you’re heading into fiscal ’24. I would imagine shifts in the spending, and the response to those. But if you had to describe what are the big must-haves for this year, what would they be? Thank you.

Wendy Davidson: Yes. The big must-haves. We’ve got to drive distribution growth and we’ve got to drive good velocity of our distribution. So, we want to be our customer’s best partner, in the most highly productive offering on shelf, and ensuring that not only get it in on shelf, but we are in place to stay on shelf, because we’re a highly productive SKUs. So those will be things that we look at it end market. From brand health will look at, basic brand health guide the household penetration and awareness of our brands. Making sure that the spending we’re doing in our marketing dollars is getting us the return that we would expect. And then from a business standpoint, we’re watching very closely our cash conversion cycle. So, days of inventory both in raw and pack, days of payables, days of sales outstanding, because every one of those days in our cash conversion cycle is money that’s just tied-up, that could be invested back into the business.

So we’ll be looking at the efficiency of how we use our working capital.

David Palmer: Thank you.

Operator: Thank you. Our next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question.

Anthony Vendetti: Thank you. Just in terms of the price increases, is that relatively the same across the board, or there certain products where you can’t take price? And then as a follow-up, obviously, you’re talking about slight revenue decline in the first quarter and then low-single-digit growth for the full year. Organic revenue growth of 2% to 4%. I know we’re not talking about ’25 here, but as we move into the back half of the year and into ’25, should we expect the growth in revenues to start to move towards mid-single digits, as we move to the back half of ’24 and into fiscal year ’25? Thanks.

Wendy Davidson: We’ll definitely give you a lot more color around those questions on Investor Day. And certainly what our long-term algorithm looks like, but also what we think the building blocks are that gives us the reason to believe that it’s both believable and achievable. So more to come on September 13th relative to that. I would say, if I just step back, and look at the categories that we’re in. And we look at the brands that we have. And we look at the market reach potential that we have. Those are the things that give me confidence that we have brands that earned their place on shelf. That we have an opportunity to drive reach across the marketplace that gives us revenue and margin expansion opportunity. But it’s ours to go drive into that.

So you need to see us show you that essentially on Investor Day. From a pricing standpoint, the team did a really nice job of taking pricing holistically, this last year. You won’t see us do that kind of pricing, because it’s a very different environment now. And I think every company has seen this opportunity to take a wholesale price list change, the consumer is just not going to be willing or the retailers to do that. So it has to be bit more surgical. For us this means, and this is the investment around revenue growth management, we need to be looking at trade efficiency and effectiveness. But we need to really be looking at price-pack architecture. So do I have — could I take pricing on particular pack sizes, to particular channels, where the consumer my view less price sensitive, because they’re willing to pay a premium for convenience for instance.

Versus, I probably can’t take pricing a bulk-pack in another particular channel, because the consumer is much more price sensitive there. So I think what you’ll see us do and the team has done a really nice job with identifying where we can take the price that won’t be an impact on volume and reach, but you won’t see it as a wholesale price increase.

David Palmer: Okay, great, thanks very much looking forward to Investor Day.

Wendy Davidson: Absolutely.

Operator: Thank you. Our next question comes from the line of Jon Andersen with William Blair. Please proceed with your question.

Jon Andersen: Hi, Good morning, everybody. Thanks for the question.

Wendy Davidson: Good morning.

Jon Andersen: Good morning. Wendy you mentioned in the prepared comments, some work had been done rationalizing I think an international brand and resulting in kind of a core assortment on that brand, that’s been more productive on the shelf. Is there more kind of SKU rationalization that will be happening, as you move forward? Is that an opportunity, I guess, and to what extent? And then a bigger picture question on the portfolio is there additional kind of broader based pruning that you’re evaluating I think about business like Personal Care, being a little bit outside the wheelhouse of better-for-you food and beverage. Thanks.

Wendy Davidson: Yes. No. Great question, in terms of SKU rationalization, this should be a regular part of how we run the business, to be honest. And every one of our brand managers, every one of our portfolio leads, every one of the market leads, should be looking at the assortment of SKUs that they have, and make sure that is the hardest working assortment of SKUs. It also has an impact on innovation. We don’t want to launch innovation, just for the sake of innovation, it has to be truly incremental to the brand and incremental to the category. So we can go to a retailer, justify the space, and use innovation to create greater brand awareness back to the core. And it’s an incremental sale, not just swapping now sales, otherwise it’s a lot of work and effort is very low return on that investment.

So, the particular similar instance we talked about in the prepared remarks, was actually in Europe in our non-dairy beverage business. The team rationalized a pretty large chunk of the portfolio, down to the hardest working assortment, and that had a positive impact in driving real volume, real business impact. That’s an example to be used across lots of parts of our business. So, long answer to your question, but we absolutely see an opportunity for us to eliminate parts of the tail, it will help our supply chain to be more efficient. It will help our dollar spend to be more efficient and it will help our relationships with our retail partners, because we’re using our space wisely, to bring in more shoppers and keep the shopper in their longer.

As we think about the overall company portfolio. I mean, obviously, we’re always looking at the portfolio on to shape it, but that’s not going to be the primary strategy. So, you shouldn’t expect to see Hain’s future growth be just buying new businesses, or selling off businesses. We have to actually run the businesses that we have, and then we can make strategic choices around what does or doesn’t fit in the portfolio. But then we are selling off healthy businesses. So our focus right now in particular, with something on Personal Care is stabilizing that business, ensuring that against the right fighting core of brands and fighting core products, so then we then have optionality with that portfolio. I can’t say what in our portfolio will exist with us in Hain in the next three years, but we have an opportunity to ensure that we are good stewards of the brands we have, so that if we choose to sell those off.

We’re selling-off a healthy business to somebody.

Jon Andersen: Thanks. That’s really helpful. And I look forward to seeing you at Investor Day.

Wendy Davidson: Absolutely, look forward to it as well.

Operator: Thank you. Our next question comes from the line of Andrew Wolf with CL King & Associates. Please proceed with your question.

Andrew Wolf: Thanks, good morning. I wanted to follow-up on Personal Care. Just wanted to your assessment — I think you’ve done across the company’s portfolio. The softness there, it sounded like you think you need it — sounds like from what you just said, it’s more of a rightsizing it into the strength, which is you’ve shown works and others have shown works. But have you unearthed any structural issues either internally, such as just the scale of operations may not be sufficient, or anything externally. Maybe it’s a different competitive set than food, or do you think it’s just more of a traditional solution in the way that you just sort of refer to it?

Wendy Davidson: Yes, I would say that we’ve — we’re taking a very holistic review of the business. I mentioned I think in the last earnings call that we’ve brought in new leadership, to run that business and to take it through that evaluation. But, I would say it’s pretty typical of any business that you evaluate. You look at where our opportunities to grow in the marketplace. What’s the right — what’s the strength of the brand. What’s the right categories of those brands are playing in? Are we getting the right price in market with the channel opportunity there in personal Care, for instance, is a very big product line in online versus the rest of our portfolio. What might that look like in the future around our omni and e-commerce approach?

Looking at your distribution footprint and your manufacturing footprint. Could that be optimized or made more efficient? Similar to what we did with meat-free in Canada. So we’ve consolidated our meat-free operations in Canada, to more effectively use the footprint we have there. We’re doing lots of work around our distribution centers holistically within Hain. So I would say yes and is everything in the portfolio, but it’s also making sure that we understand how the brands can effectively breakthrough and compete in the categories that we choose to have them in. And so, you’ll see a fair amount of transformation around the Personal Care business over the next 12-months. That then again, gives us optionality if either returning to growth with us or returns to growth and it’s a business that we can effectively find a home before.

But we want to make sure that we’re running a healthy business, before we make those choices.

Andrew Wolf: Thank you. And the other question I’d like to ask is, you brought up addressing the away from home market, convenience stores and other food service opportunities. Does the current existing brand, the products as they are — they can fit them right into that distribution into that channel, through the distributors or directly. Or are there a lot of changes in pack sizes or even usage types that are going to have to come, just on the product itself to fit the channel?

Wendy Davidson: Yes, the primary products that we would see in brands that have application away from home. It’s going to be our snack portfolio, it is going to be Celestial Seasonings tea and it’s going to be Greek Gods yogurt. So the beauty of Greek Gods is it’s already and multi-pack, in multi-serve, which is ideally suited for that space. Not taking into C-store, but taking it into back of house and contract management. Our Snack portfolio already has single-serve in the pack sizes that we need. It’s a driving distribution and really pleased that we’ve picked up some very large distribution gains in both Garden Veggie and Terra in C-store in particular, that you’ll see come through in fiscal ’24. So, getting some early good green shoots which is great.

For tea, we have, single-serve, and we actually have K-Cups for Celestial Seasonings, we don’t have as many of the flavors, as we would like. Although we did just launched the Peppermint K-Cup . We just had really great receptivity, this is going to be one that’s driving distribution reach. And we’re in the process of putting together that go-to-market model, to ensure that we’ve got right coverage to go after the right channels, but I feel very, very good about it and the opportunities in front of us, but won’t require a lot of food change or product change won’t require a lot of packaging change, it is very much around commercial execution.

Andrew Wolf: Great. Thank you.

Wendy Davidson: You bet.

Operator: Thank you. Our final question this morning comes from the line of John Baumgartner with Mizuho Securities. Please proceed with your question.

John Baumgartner: Good morning, thanks for the question. I wanted to ask, Wendy, just thinking about the demographics for this category you Hain’s fallback for a number of years has been this highly affluent consumer, more installation from elasticity in the economy, but you look at broader natural organic, category growth has slowed off a larger base, you’ve got private label coming into the category. You’ve got many larger CPGs, with larger economies of scale offering products at more competitive price points. And I’m curious, as you sort of think about the next couple of years in this business, where you want to grow, the channel you want to grow, the consumers you want to market to? I guess how do you think about the risk of sort of riding your — I guess your largest buying consumer, highest-intensity consumption consumer, even harder where they may hit a wall at some point, as opposed going down the demographic or it’s more middle-income households that opens up to more elasticity risk, but also a much broader addressable market as well?

Wendy Davidson: Yes, I think it’s a great question and certainly historically, Hain’s growth has been predicated on a highly affluent consumer who is shopping, largely in specialty retail. What we’re seeing, the dynamics changed in the last few years, is that our products and brands actually appeal to a wider consumer cohort then just that consumer and consumers are looking to buy the products in more places. So the two things that we need to do, is make them available in more places, than just traditional specialty retail. But we also need to make sure that we’ve got the right pack configuration, so that we meet the consumer’s price points, in those particular points of distribution. So it’s an opportunity, you can have and that’s the opportunity for Hain we are under indexed in lots of channels, and we are under-penetrated in a variety of categories, that’s the opportunity.

The great news is, that when we look at consumer appeal of our brands, there’s a love for the products. Greek Gods yogurt for instance, has almost a near cult following, and Terra Chips and Garden Veggie Straws. So there is an opportunity for us to make the brands that consumers love, available in more places at a pack type and a size that they that meets the needs in that particular occasion.

John Baumgartner: Okay. Thank you.

Wendy Davidson: You bet.

Operator: Thank you. That concludes our question-and-answer session. I will turn the floor back to Ms. Davidson for any final comments.

Wendy Davidson: Yes, I really want to thank everybody for the time today and for interest in last quarter. And I want to especially again thank Chris for his partnership and Alexis in all of her work and preparation as we go into these earnings calls. I very much look forward to seeing everybody on Investor Day, in a few weeks. And thank you again.

Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.