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Item 2. Management’s Discussion and Analysis

2023-02-07 compared with 2022-11-08 · 263 added, 138 removed, 179 unchanged (69% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended September 30, 2022 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto for the period ended December 31, 2022 contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Forward- looking statements in this Form 10-Q are qualified by the cautionary statement included in this Form 10-Q under the sub-heading “Forward-Looking Statements” in the introduction of this Form 10-Q.

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The Company’s personal care brands include Alba Botanica ® , Avalon Organics ® , JASON ® , Live Clean ® and Queen Helene ® .

In fiscal year 2022, the Company announced its “Hain 3.0” long-term strategy, to support the Company’s continued evolution to position the Company to be a global health and wellness company with industry-leading topline growth.

The drivers of growth for Hain 3.0, which the Company intends to fund through productivity initiatives, are:

• Distribution,

• Innovation, and

We have re-segmented the brand portfolio with a more global view to where we have the most growth potential.

As a result, we have migrated from a strategy focused on rejuvenating North America behind a construct of “Get Bigger” and “Get Better” brand categories to one that focuses on growing global brands in categories where we think we have the most potential.

The categories we have identified are called Growth and Fuel:

• The Growth category includes Turbocharge brands and Targeted Investment brands.

Turbocharge brands are leading-share brands in categories that we believe provide the most opportunity for growth.

The Targeted Investment brands are made up of leading-share brands in lower-growth categories.

The Growth category consists of our brands in snacks, tea, baby, yogurt, plant-based meat, non-dairy beverages and personal care.

• The Fuel brands are stable brands that will be leveraged to fuel investment in the Growth brands.

The Fuel brands are premium pantry brands with scale, in categories such as soup, cooking oils and nut butters.

We are establishing the foundation and the tools to deliver Hain 3.0 by stabilizing our business, delivering strong margin improvement and continuing to grow our net sales.

Additionally, as part of Hain 3.0, we plan to continue to simplify our brand portfolio as we continue to identify brands that are declining and have low margins, which we refer to as Simplify brands.

We view Simplify brands to be subscale declining businesses that have limited long-term potential for the Company, and therefore expect to manage such brands for profit until they are potentially divested, likely over the course of the next several years.

We see momentum in our Growth brands and believe that we are well-positioned for the long term.

As Hain 3.0 progresses, acquisitions are expected to play a role to help us strengthen our position in our priority categories.

Supply Chain Disruptions and Higher Costs

We continue to experience disruption in our supply chain network, including the supply of certain ingredients, packaging, and other sourced materials, which has resulted in higher costs, including escalating transportation and other supply chain costs.

Both the disruptions and higher costs have resulted in higher inventory levels.

We expect this higher cost environment to continue, although we expect these higher costs to be partially mitigated by pricing actions we have implemented to date and further pricing actions that we plan to implement in fiscal year 2023.

It is possible that more significant disruptions to our supply chain could occur.

Global Economic Environment

Economic conditions during fiscal year 2022 and the first half of fiscal year 2023 have been marked by inflationary pressures, rising interest rates and shifts in consumer demand.

• Inflation – The inflationary environment has led to higher costs for ingredients, packaging, energy, transportation and other supply chain components.

• Interest Rates – Loans under our credit agreement bear interest at a variable rate, and the interest rate on our outstanding indebtedness has increased as market interest rates have risen significantly starting in the second half of fiscal year 2022.

These higher interest rates, together with a higher outstanding debt balance, has led to an increase in our interest expense, which we expect to continue.

• Consumer Demand – Recent economic conditions have resulted in changes in consumer spending patterns, which has had an impact on our sales.

During an economic downturn, factors such as increased unemployment, decreases in disposable income and declines in consumer confidence can cause changes in consumer spending behavior, particularly with respect to higher priced better-for-you products.

Economic conditions have prompted some consumers, particularly in Europe, to shift to lower-priced products.

Supply Chain Disruptions

We continue to experience disruption in our supply chain network, including the supply of certain ingredients, packaging, and other sourced materials.

These disruptions, in addition to the higher costs described above, have resulted in higher inventory levels.

In some cases the disruptions result in an inability to fulfill certain customer orders, which can lead to fines from the customers.

Although we believe the unprecedented industry-wide supply chain disruptions are largely behind us, it is possible that additional disruptions to our supply chain could occur.

Russia-Ukraine War

Although we have no material assets in Russia, Belarus or Ukraine, our supply chain was adversely impacted by the Russia-Ukraine war during the fiscal year ended June 30, 2022 and the quarter ended September 30, 2022, and we continue to face other challenges and risks arising from the war.

In particular, the war has added significant costs to existing inflationary pressures through increased energy, fuel, and raw material prices.

Although we have no material assets in Russia, Belarus or Ukraine, our supply chain was adversely impacted by the Russia-Ukraine war during the second half of fiscal year 2022 and the first half of fiscal year 2023 and we continue to face other challenges and risks arising from the war.

In particular, the war has added significant costs to existing inflationary pressures through increased energy and raw material prices.

Further, beyond increased costs, labor challenges and other factors have led to supply chain disruptions.

While, to date, we have been able to identify replacement raw materials where necessary, we have incurred increased costs in doing so.

For example, the supply of sunflower oil has become constrained, compelling us to identify and procure alternative oils.

The war has also negatively impacted consumer sentiment, particularly in Europe, with some consumers shifting to lower-priced products, which has somewhat affected demand for our products.

Additionally, we face increased cybersecurity risks, as companies based in the United States and its allied countries have become targets of malicious cyber activity.

While we are continuing to monitor and manage the impacts of the war on our business, the extent to which the Russia-Ukraine war and the related economic impact may affect our financial condition or results of operations remains uncertain.

The COVID-19 pandemic continues to contribute to challenging and unprecedented conditions.

Challenges exacerbated by the ongoing effects of the pandemic include but are not limited to:

• manufacturing and supply chain challenges, including labor market shortages;

• a shifting demand environment as a result of changing consumer behaviors amid uncertain economic conditions;

• increased costs of operating our business and managing our supply chain.

If we are unable to successfully manage our business through the continued challenges and uncertainty related to the COVID-19 pandemic, our business and operating results could be materially adversely affected.

The COVID-19 pandemic continues to contribute to the challenging economic conditions described above, including manufacturing and supply chain challenges, labor market shortages and changing consumer behaviors amid uncertain economic conditions.

On December 28, 2021, the Company acquired all outstanding stock of Proven Brands, Inc.

(and its subsidiary That's How We Roll LLC) and KTB Foods Inc., collectively doing business as "That's How We Roll" ("THWR"), the producer and marketer of ParmCrisps ® and Thinsters ® .

See Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of Form 10-K for additional details.

Comparison of Three Months Ended September 30, 2022 to Three Months Ended September 30, 2021

See Note 4, Acquisitions and Dispositions , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

On December 15, 2022, the Company completed the divestiture of its Westbrae Natural ® brand ("Westbrae") for total cash consideration of $7,498.

The sale of Westbrae is consistent with the Company’s portfolio simplification process, to focus on the brands and categories with the most growth potential.

Westbrae operated out of the United States and was part of the Company’s North America reportable segment.

CEO Succession

On November 22, 2022, the Board of Directors (the "Board") of the Company approved a succession plan pursuant to which Mark L.

Schiller transitioned from his position as President and Chief Executive Officer of the Company effective as of December 31, 2022 (the “Transition Date”).

Schiller remains as a director on the Board following the Transition Date.

The Board appointed Wendy P.

Davidson to the role of President and Chief Executive Officer and as a director on the Board, in each case effective as of January 1, 2023 (the “Start Date”).

Comparison of Three Months Ended December 31, 2022 to Three Months Ended December 31, 2021

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended September 30, 2022 and 2021 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the three months ended December 31, 2022 and 2021 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Three Months Ended Change in

September 30, 2022 September 30, 2021 Dollars Percentage

December 31, 2022 December 31, 2021 Dollars Percentage

Net sales $ 454,208 100.0% $ 476,941 100.0% $ (22,733) (4.8)%

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Productivity and transformation costs 986 0.2% 2,786 0.6% (1,800) (64.6)%

Proceeds from insurance claim — —% (196) —% 196 (100.0)%

Long-lived asset impairment 340 0.1% 303 0.1% 37 12.2%

Operating income 27,389 6.0% 32,021 6.7% (4,632) (14.5)%

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Other income, net (1,062) (0.2)% (9,070) (1.9)% 8,008 (88.3)%

Income from operations before income taxes and equity in net loss (income) of equity-method investees 9,936 2.3% 24,479 5.4% (14,543) (59.4)%

Income before income taxes and equity in net loss of equity-method investees 17,639 3.9% 38,499 8.1% (20,860) (54.2)%

Provision for income taxes 6,357 1.4% 7,145 1.5% (788) (11.0)%

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Diluted net income per common share $ 0.12 $ 0.33 $ (0.21) (63.6)%

Net sales for the three months ended September 30, 2022 were $439.4 million, a decrease of $15.6 million, or 3.4%, as compared to $454.9 million in the three months ended September 30, 2021.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $3.8 million, or 0.8%, from the prior year quarter due to a decline in the International reportable segment, partially offset by growth in the North America reportable segment.

Net sales for the three months ended December 31, 2022 were $454.2 million, a decrease of $22.7 million, or 4.8%, as compared to $476.9 million in the three months ended December 31, 2021.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $11.5 million, or 2.4%, from the prior year quarter driven by both the North America and International reportable segments.

Further details of changes in net sales by segment are provided below in the Segment Results section.

Gross profit for the three months ended September 30, 2022 was $94.3 million, a decrease of $11.1 million, or 10.5%, as compared to the prior year quarter.

Gross profit for the three months ended December 31, 2022 was $103.9 million, a decrease of $13.4 million, or 11.5%, as compared to the prior year quarter.

Additionally, gross profit margin of 22.9% was lower when compared with 24.6% in the prior year quarter.

The decrease in gross profit was driven primarily by the International reportable segment, mainly due to lower net sales in the United Kingdom and Europe operating segments, higher energy and supply chain costs, as well as under absorption of overhead costs at our manufacturing facilities when compared to the prior year period.

The North America reportable segment had an increase in gross profit mainly driven by top-line sales due to pricing increases and cost improvements driven by higher productivity, partly offset by inflation and lower net sales in the Canada operating segment when compared with the prior year quarter.

The decrease in gross profit was driven primarily by the International reportable segment mainly resulting from lower net sales in the United Kingdom and Europe operating segments, higher energy and supply chain costs, and under-absorption of overhead costs at our manufacturing facilities when compared to the prior year period.

The North America reportable segment had an increase in gross profit mainly driven by pricing increases and cost improvements due to higher productivity, partly offset by inflation and lower net sales in the Canada operating segment when compared with the prior year quarter.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $75.0 million for the three months ended September 30, 2022, an increase of $1.0 million, or 1.3%, from $74.0 million for the prior year quarter.

The increase was primarily driven by the North America reportable segment and Corporate, with the United States operating segment accounting for the increase in the North America reportable segment due to the acquisition of THWR.

The increase was partially offset by a decrease in selling expenses primarily in the International reportable segment as well as efficiencies gained from the Company's productivity and transformation initiatives.

Selling, general and administrative expenses were $72.4 million for the three months ended December 31, 2022, a decrease of $7.8 million, or 9.7%, from $80.1 million for the prior year quarter.

The decrease was driven by lower labor-related expenses primarily in Corporate, marketing costs primarily in the North America reportable segment as well as efficiencies gained from the Company's productivity and transformation initiatives.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $2.8 million for the three months ended September 30, 2022, an increase of $0.7 million from $2.1 million in the prior year quarter due to the acquisition of THWR in the second quarter of the prior fiscal year.

Amortization of acquired intangibles was $2.8 million for the three months ended December 31, 2022, an increase of $0.7 million from $2.0 million in the prior year quarter due to the acquisition of THWR in the second quarter of the prior fiscal year.

Productivity and Transformation Costs

Productivity and transformation costs were $0.8 million for the three months ended September 30, 2022, a decrease of $3.2 million from $4.0 million in the prior year quarter.

Productivity and transformation costs were $1.0 million for the three months ended December 31, 2022, a decrease of $1.8 million from $2.8 million in the prior year quarter.

The decrease was primarily due to reduced spending related to productivity and transformation initiatives as the current transformation effort approaches its conclusion.

Long-lived Asset Impairment

During the three months ended December 31, 2022 the Company recognized an impairment charge of $0.3 million, relating to a facility in the United States.

During the three months ended December 31, 2021, the Company recognized a pre-tax impairment charge of $0.3 million related to a facility in the United Kingdom.

Operating Income

Operating income for the three months ended September 30, 2022 was $15.8 million compared to $25.5 million in the prior year quarter as a result of the items described above.

Operating income for the three months ended December 31, 2022 was $27.4 million compared to $32.0 million in the prior year quarter as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $7.7 million for the three months ended September 30, 2022, an increase of $5.8 million, or 313.6%, from $1.9 million in the prior year quarter.

The increase resulted primarily from a higher outstanding debt balance driven primarily by the acquisition of THWR in the second quarter of the prior fiscal year as well as share repurchase activity during fiscal 2022.

The increase is also attributable to higher borrowing rates compared to the prior year quarter.

Interest and other financing expense, net totaled $10.8 million for the three months ended December 31, 2022, an increase of $8.2 million, or 317.1%, from $2.6 million in the prior year quarter.

The increase resulted primarily from rising interest rates and a higher outstanding debt balance driven primarily by the acquisition of THWR in the second quarter of the prior fiscal year as well as share repurchase activity during fiscal 2022.

See Note 9, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Income, Net

Other income, net totaled $1.8 million for the three months ended September 30, 2022, compared to $0.8 million in the prior year quarter.

The change was primarily attributable to higher unrealized foreign currency gains, partially offset by lower gain on sale of business.

Income from Operations Before Income Taxes and Equity in Net Loss of Equity-Method Investees

Income from operations before income taxes and equity in net loss of our equity-method investees for the three months ended September 30, 2022 was $9.9 million compared to $24.5 million in the prior year quarter.

The decrease was due to the items discussed above.

Other income, net totaled $1.1 million for the three months ended December 31, 2022, compared to $9.1 million in the prior year quarter.

The decrease in income was primarily attributable to the gain on sale of assets related to the sale of undeveloped land plots in Boulder, Colorado resulting in a gain of $8.7 million in the prior year quarter.

Income Before Income Taxes and Equity in Net Loss of Equity-Method Investees

Income before income taxes and equity in net loss of our equity-method investees for the three months ended December 31, 2022 was $17.6 million compared to $38.5 million in the prior year quarter.

T he decrease w as due to the items discussed above.

Provision for Income Taxes

The provision for income taxes includes federal, foreign, state and local income taxes.

Our income tax expense was $2.6 million for the three months ended September 30, 2022 compared to $4.5 million in the prior year quarter.

The effective income tax rate was an expense of 26.5% and 18.6% for the three months ended September 30, 2022 and 2021, respectively.

The effective income tax rate for the three months ended September 30, 2022 increased due to tax expense related to stock-based compensation and uncertain tax positions.

The effective income tax rate for the three months ended September 30, 2021 was mainly decreased due to the reversal of uncertain tax position accruals based on filing and approval of certain elections by the tax authorities.

Our income tax expense was $6.4 million for the three months ended December 31, 2022 compared to an income tax expense of $7.1 million in the prior year quarter.

The effective income tax rate was an expense of 36.0% and 18.6% for the three months ended December 31, 2022 and 2021, respectively.

The effective income tax rate for the three months ended December 31, 2022 was impacted by the gain on sale of Westbrae, an operating lease modification during the second quarter, severance with respect to our former CEO (as part of the limitation on the deductibility of executive compensation) , stock-based compensation and uncertain tax positions.

The effective income tax rate for the three months ended December 31, 2021 was impacted by deductions related to stock-based

compensation, non-deductible transaction costs related to the acquisition of THWR and the reversal of a valuation allowance due to the utilization of a capital loss carryover.

The effective income tax rates in each period were also impacted by the geographical mix of earnings and state income taxes.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the three months ended September 30, 2022 was a loss of $0.4 million compared to $0.5 million in the prior year quarter.

Our equity in net loss from our equity-method investments for the three months ended December 31, 2022 was $0.3 million and $0.5 million in the prior year quarter.

See Note 13, Investments , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Net income for the three months ended September 30, 2022 was $6.9 million, or $0.08 per diluted share, compared to $19.4 million, or $0.20 per diluted share, in the prior year quarter.

The decrease was attributable to the factors noted above.

Net income for the three months ended December 31, 2022 was $11.0 million, or $0.12 per diluted share, compared to $30.9 million, or $0.33 per diluted share, in the prior year quarter.

The change was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $36.0 million and $47.3 million for the three months ended September 30, 2022 and 2021, respectively, as a result of the factors discussed above and the adjustments described in the Reconciliation of Non-U.S.

Our Adjusted EBITDA was $49.8 million and $59.3 million for the three months ended December 31, 2022 and 2021, respectively, as a result of the factors discuss ed above, and the adjustments described in the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

GAAP Measures presented following the discussion of our results of operations.

On a constant currency basis, adjusted EBITDA decreased by $8.7 million, or 18.3%, from $47.3 million for the three months ended September 30, 2021 to $38.6 million for the three months ended September 30, 2022.

On a constant currency basis, Adjusted EBITDA decreased by $6.5 million, or 11.0%, from $59.3 million for the three months ended December 31, 2021 to $52.7 million for the three months ended December 31, 2022.

Segment Results

The following table provides a summary of net sales and operating income (loss) by reportable segment for the three months ended September 30, 2022 and 2021:

The following table provides a summary of net sales and operating income (loss) by reportable segment for the three months ended December 31, 2022 and 2021:

(dollars in thousands) North America International Corporate and Other Consolidated

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North America

Our net sales in the North America reportable segment for the three months ended September 30, 2022 were $288.4 million, an increase of $22.9 million, or 8.6%, from net sales of $265.5 million in the prior year quarter.

On a constant currency basis, adjusted for the impact of the THWR acquisition and divestitures, net sales increased by 3.4%.

In the United States operating segment, adjusted sales were higher compared to the prior year quarter mainly due to stronger sales in snacks, yogurt, baby, and other product categories.

In the Canada operating segment, adjusted sales decreased compared to the prior year quarter primarily due to lower sales in personal care product categories.

Operating income in North America for the three months ended September 30, 2022 was $24.4 million, an increase of $7.6 million from $16.8 million in the prior year quarter.

The increase in operating income was mainly driven by top-line sales due to pricing increases and cost improvements driven by higher productivity, partly offset by inflation and lower net sales in the Canada operating segment when compared with the prior year quarter.

Our net sales in the North America reportable segment for the three months ended December 31, 2022 were $282.4 million, an increase of $7.3 million, or 2.7%, from net sales of $275.0 million in the prior year quarter.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased by 1.9%.

In the United States operating segment, adjusted sales were lower compared to the prior year quarter mainly due to retailer inventory adjustments, particularly in tea, and lower sales in personal care, partially offset by higher sales in snacks.

Similar trends were noted in the Canada operating segment.

Sales were also impacted by the industry-wide formula and pouch supply challenges in the baby food category.

Operating income in North America for the three months ended December 31, 2022 was $32.3 million, an increase of $5.1 million from $27.2 million in the prior year quarter.

The increase was mainly driven by pricing increases, cost improvements due to higher productivity, and lower marketing spend, partially offset by inflation.

International

Our net sales in the International reportable segment for the three months ended September 30, 2022 were $151.0 million, a decrease of $38.4 million, or 20.3%, from net sales of $189.4 million in the prior year quarter.

On a constant currency basis, net sales decreased 6.7% from the prior year quarter primarily due to a decline in sales in the Europe operating segment, partially offset by an increase in sales in the Ella's Kitchen UK and United Kingdom operating segments.

The net sales decrease in the Europe operating segment was primarily due to the loss of a large non-dairy co-manufacturing customer.

The net sales increase in the United Kingdom operating segment was due to higher sales of private label grocery items.

Operating income in our International reportable segment for the three months ended September 30, 2022 was $7.7 million, a decrease of $16.4 million from operating income of $24.1 million for the three months ended September 30, 2021.

Operating income was lower in the current quarter when compared to the prior year quarter mainly due to lower gross profit resulting from a decline in sales, higher energy and supply chain costs, as well as under absorption of overhead costs at our manufacturing facilities.

Our net sales in the International reportable segment for the three months ended December 31, 2022 were $171.8 million, a decrease of $30.1 million, or 14.9%, from net sales of $201.9 million in the prior year quarter.

On a constant currency basis, net sales decreased 3.2% from the prior year quarter primarily due to a decline in sales in the Europe operating segments, partially offset by an increase in sales in the Ella's Kitchen UK and United Kingdom operating segments.

In the Europe operating segment, net sales were lower due to continued softness in plant-based categories and non-dairy beverages, including the impact of the loss of a large non-dairy co-manufacturing customer in the second half of the prior fiscal year.

Operating income in our International reportable segment for the three months ended December 31, 2022 was $11.9 million, a decrease of $15.4 million from operating income of $27.4 million for the three months ended December 31, 2021.

Operating income was lower in the current quarter when compared to the prior year quarter mainly due to lower gross profit resulting from a decline in sales, higher energy and supply chain costs, and under-absorption of overhead costs at our manufacturing facilities.

Corporate and Other

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Such Corporate and Other expenses are comprised mainly of compensation and related expenses of certain of the Company’s senior executive officers and other employees who perform duties related to our entire enterprise as well as expenses for certain professional fees, acquisition and divestiture transaction costs, facilities, and other items which benefit the Company as a whole.

Our operating loss in Corporate and Other for the three months ended September 30, 2022 was $16.3 million, an increase of $0.9 million, from operating loss of $15.4 million for the three months ended September 30, 2021.

This change was primarily due to higher general and administrative expenses mainly on account of higher salaries, wages, and benefits.

Our operating loss in Corporate and Other for the three months ended December 31, 2022 was $16.8 million, a decrease of $5.7 million, from operating loss of $22.5 million for the three months ended December 31, 2021.

This change was primarily due to lower general and administrative expenses mainly on account of lower salaries, wages, and benefits.

Refer to Note 17, Segment Information , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Comparison of Six Months Ended December 31, 2022 to Six Months Ended December 31, 2021

Consolidated Results

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the six months ended December 31, 2022 and 2021 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Six Months Ended Change in

December 31, 2022 December 31, 2021 Dollars Percentage

Net sales $ 893,559 100.0% $ 931,844 100.0% $ (38,285) (4.1)%

Cost of sales 695,367 77.8% 709,131 76.1% (13,764) (1.9)%

Gross profit 198,192 22.2% 222,713 23.9% (24,521) (11.0)%

Selling, general and administrative expenses 147,308 16.5% 153,929 16.5% (6,621) (4.3)%

Amortization of acquired intangible assets 5,573 0.6% 4,144 0.4% 1,429 34.5%

Productivity and transformation costs 1,759 0.2% 6,769 0.7% (5,010) (74.0)%

Long-lived asset impairment 340 —% 303 —% 37 12.2%

Operating income 43,212 4.8% 57,568 6.2% (14,356) (24.9)%

Interest and other financing expense, net 18,489 2.1% 4,448 0.5% 14,041 315.7%

Other income, net (2,852) (0.3)% (9,858) (1.1)% 7,006 (71.1)%

Income before income taxes and equity in net loss of equity-method investees 27,575 3.1% 62,978 6.8% (35,403) (56.2)%

Provision for income taxes 8,988 1.0% 11,687 1.3% (2,699) (23.1)%

Equity in net loss of equity-method investees 698 0.1% 991 0.1% (293) (29.6)%

Net income $ 17,889 2.0% $ 50,300 5.4% $ (32,411) (64.4)%

Adjusted EBITDA $ 85,846 9.6% $ 106,580 11.4% $ (20,734) (19.5)%

Diluted net income per common share $ 0.20 $ 0.52 $ (0.32) (61.5)%

Net sales for the six months ended December 31, 2022 were $893.6 million, a decrease of $38.3 million, or 4.1%, as compared to $931.8 million in the six months ended December 31, 2021.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $15.3 million, or 1.7%, from the prior comparable period primarily driven by International reportable segment.

Further details of changes in net sales by segment are provided below in the Segment Results section.

Gross profit for the six months ended December 31, 2022 was $198.2 million, a decrease of $24.5 million, or 11.0%, as compared to the prior year comparable period.

Gross profit margin was 22.2% of net sales, compared to 23.9% in the prior year comparable period.

The decrease in gross profit was driven primarily by the International reportable segment mainly due to lower net sales in the Europe and United Kingdom operating segments, higher energy and supply chain costs, as well as under absorption of overhead costs at our manufacturing facilities when compared to the prior year period.

The North America reportable segment had an increase in gross profit mainly driven by pricing increases and cost improvements driven by higher productivity, partially offset by inflation and lower net sales in the Canada operating segment when compared with the prior year comparable period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $147.3 million for the six months ended December 31, 2022, a decrease of $6.6 million, or 4.3%, from $153.9 million for the prior year comparable period.

The decrease was primarily driven by reductions in Corporate and the International reportable segment.

The decrease was driven by lower labor-related expenses primarily in Corporate and lower marketing costs, as well as efficiencies gained from the Company's productivity and transformation initiatives.

Amortization of Acquired Intangible Assets

Amortization of acquired intangibles was $5.6 million for the six months ended December 31, 2022, an increase of $1.4 million from $4.1 million in the prior year comparable period due to the acquisition of THWR in the second quarter of the prior fiscal year.

Productivity and Transformation Costs

Productivity and transformation costs were $1.8 million for the six months ended December 31, 2022, a decrease of $5.0 million from $6.8 million in the prior year comparable period.

The decrease was primarily due to reduced spending related to productivity and transformation initiatives as the current transformation effort approaches its conclusion.

Long-lived Asset Impairment

During the six months ended December 31, 2022, the Company recognized an impairment charge of $0.3 million relating to a facility in the United States.

During the six months ended December 31, 2021, the Company recognized a pre-tax impairment charge of $0.3 million related to a facility in the United Kingdom.

Operating Income

Operating income for the six months ended December 31, 2022 was $43.2 million compared to $57.6 million in the prior year comparable period as a result of the items described above.

Interest and Other Financing Expense, Net

Interest and other financing expense, net totaled $18.5 million for the six months ended December 31, 2022, an increase of $14.0 million, or 315.7%, from $4.4 million in the prior year comparable period.

Interest and other financing expense was also impacted by higher interest rates compared to the prior comparable period.

See Note 9, Debt and Borrowings , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Other Income, Net

Other income, net totaled $2.9 million for the six months ended December 31, 2022, compared to $9.9 million in the prior year comparable period.

The increase in income was primarily attributable to the gain on sale of assets related to the sale of undeveloped land plots in Boulder, Colorado resulting in a gain of $8.7 million in the prior year period.

Income from Operations Before Income Taxes and Equity in Net Loss of Equity-Method Investees

Income before income taxes and equity in net loss of our equity-method investees for the six months ended December 31, 2022 was income of $27.6 million compared to $63.0 million in the prior year comparable period.

The decrease was due to the items discussed above.

Provision for Income Taxes

The provision for income taxes includes federal, foreign, state and local income taxes.

Our income tax expense was $9.0 million for the six months ended December 31, 2022 compared to $11.7 million in the prior year comparable period.

The effective income tax rate was an expense of 32.6% and 18.6% for the six months ended December 31, 2022 and 2021, respectively.

The effective income tax rate for the six months ended December 31, 2022 was impacted by the gain on sale of Westbrae, an operating lease modification during the second quarter, severance with respect to our former CEO (as part of the limitation on the deductibility of executive compensation), stock-based compensation and uncertain tax positions.

The effective income tax rate for the six months ended December 31, 2021 was impacted by the reversal of uncertain tax position accruals based on filing of certain elections by taxing authorities, deductions related to stock-based compensation, non-deductible transaction costs related to the acquisition of THWR, and the reversal of a valuation allowance due to the utilization of a capital loss carryover.

The effective income tax rates in each period were also impacted by the geographical mix of earnings and state income taxes.

Equity in Net Loss of Equity-Method Investees

Our equity in net loss from our equity-method investments for the six months ended December 31, 2022 was $0.7 million compared to $1.0 million in the prior year comparable period.

See Note 13, Investments , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Net income for the six months ended December 31, 2022 was $17.9 million, or $0.20 per diluted share, compared to $50.3 million, or $0.52 per diluted share, in the prior year comparable period.

The change was attributable to the factors noted above.

Adjusted EBITDA

Our Adjusted EBITDA was $85.8 million and $106.6 million for the six months ended December 31, 2022 and 2021, respectively, as a result of the factors discussed above, and the adjustments described in the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

GAAP Measures presented following the discussion of our results of operations.

On a constant currency basis, Adjusted EBITDA decreased by $15.2 million, or 14.3%, from $106.6 million for the six months ended December 31, 2021 to $91.4 million for the six months ended December 31, 2022.

Segment Results

The following table provides a summary of net sales and operating income by reportable segment for the six months ended December 31, 2022 and 2021:

(dollars in thousands) North America International Corporate and Other Consolidated

Six months ended 12/31/22 $ 570,757 $ 322,802 $ — $ 893,559

Six months ended 12/31/21 540,539 391,305 — 931,844

$ change $ 30,218 $ (68,503) n/a $ (38,285)

% change 5.6 % (17.5) % n/a (4.1) %

Operating income (loss)

Six months ended 12/31/22 $ 56,707 $ 19,615 $ (33,110) $ 43,212

Six months ended 12/31/21 44,004 51,437 (37,873) 57,568

$ change $ 12,703 $ (31,822) $ 4,763 $ (14,356)

% change 28.9 % (61.9) % (12.6) % (24.9) %

Operating income margin

Six months ended 12/31/22 9.9 % 6.1 % n/a 4.8 %

Six months ended 12/31/21 8.1 % 13.1 % n/a 6.2 %

North America

Our net sales in the North America reportable segment for the six months ended December 31, 2022 were $570.8 million, an increase of $30.2 million, or 5.6%, from net sales of $540.5 million in the prior year comparable period.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales increased by 0.7% due to increased sales in the United States operating segment due to stronger sales in snacks, partially offset by decreased sales in the Canada operating segment due to lower sales in personal care product categories.

Operating income in North America for the six months ended December 31, 2022 was $56.7 million, an increase of $12.7 million from $44.0 million in the prior year comparable period.

The increase was mainly driven by pricing increases, cost improvements driven by higher productivity, and lower marketing, partly offset by inflation, higher selling, general and administrative costs, and lower net sales in the Canada operating segment when compared with the prior year period.

International

Our net sales in the International reportable segment for the six months ended December 31, 2022 were $322.8 million, a decrease of $68.5 million, or 17.5%, from net sales of $391.3 million in the prior year comparable period.

On a constant currency basis, net sales decreased 4.8% from the prior year comparable period mainly due to lower sales in the Europe and United Kingdom operating segments.

Operating income in our International reportable segment for the six months ended December 31, 2022 was $19.6 million, a decrease of $31.8 million from operating income of $51.4 million for the six months ended December 31, 2021.

Operating income was lower in the current period when compared to the prior year comparable period mainly due to lower gross profit resulting from a decline in sales, higher energy and supply chain costs, as well as change in sales mix of high margin products.

Corporate and Other

Our Corporate and Other category consists of expenses related to the Company’s centralized administrative functions, which do not specifically relate to an operating segment.

Our operating expenses in Corporate and Other for the six months ended December 31, 2022 were $33.1 million, a decrease of $4.8 million, from $37.9 million in the prior year period.

This change was primarily due to lower general and administrative expenses.

Refer to Note 17, Segment Information , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Liquidity and Capital Resources

We finance our operations and growth primarily with the cash flows we generate from our operations and from borrowings available to us under our Credit Agreement (as defined below).

We believe that our cash flows and borrowing capacity under our Credit Agreement will be adequate to meet anticipated operating and other expenditures for the foreseeable future.

On December 22, 2021, the Company refinanced its revolving credit facility by entering into a Fourth Amended and Restated Credit Agreement (the “Credit Agreement”).

We believe that our cash flows from operations and borrowing capacity under our Credit Agreement (as defined below) will be adequate to meet anticipated operating and other expenditures for the foreseeable future.

Amended and Restated Credit Agreement

On December 22, 2021, the Company refinanced its revolving credit facility by entering into a Fourth Amended and Restated Credit Agreement (as amended by a First Amendment dated December 16, 2022, the “Credit Agreement”).

The Credit Agreement provides for senior secured financing of $1,100.0 million in the aggregate, consisting of (1) $300.0 million in aggregate principal amount of term loans (the “Term Loans”) and (2) an $800.0 million senior secured revolving credit facility (which includes borrowing capacity available for letters of credit, and is comprised of a $440.0 million U.S.

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Both the Revolver and the Term Loans mature on December 22, 2026.

The Credit Agreement includes financial covenants that require compliance with a consolidated interest coverage ratio, a consolidated leverage ratio and a consolidated secured leverage ratio.

The minimum consolidated interest coverage ratio is 2.75:1.00.

The maximum consolidated leverage ratio is 6.00:1.00.

Through December 31, 2023 or such earlier date as elected by the Company (the “Amendment Period”), the maximum consolidated secured leverage ratio is 5.00:1.00.

Following the Amendment Period, the maximum consolidated secured leverage ratio will be 4.25:1.00, subject to possible temporary increase following certain corporate acquisitions.

During the Amendment Period, loans under the Credit Agreement will bear interest at (a) the Secured Overnight Financing Rate, plus a credit spread adjustment of 0.10% (as adjusted, “Term SOFR”) plus 2.0% per annum or (b) the Base Rate (as defined in the Credit Agreement) plus 1.0% per annum.

Following the Amendment Period, loans will bear interest at rates based on (a) Term SOFR plus a rate ranging from 0.875% to 1.750% per annum or (b) the Base Rate plus a rate ranging from 0.00% to 0.750% per annum, the relevant rate in each case being the Applicable Rate.

The Applicable Rate following the Amendment Period will be determined in accordance with a leverage-based pricing grid, as set forth in the Credit Agreement.

The weighted average interest rate on outstanding borrowings under the Credit Agreement at December 31, 2022 was 5.59%.

Additionally, the Credit Agreement contains a Commitment Fee (as defined in the Credit Agreement) on the amount unused under the Credit Agreement ranging from 0.15% to 0.25% per annum, and such Commitment Fee is determined in accordance with a leverage-based pricing grid.

As of December 31, 2022, there were $587.0 million of loans under the Revolver , $292.5 million of Term Loans, and $6.8 million let ters of credit outstanding under the Credit Agreement.

As of December 31, 2022, $206.2 million was available under the Credit Agreement , subject to compliance with the financial covenants, as compared to $204.0 million as of June 30, 2022.

As of December 31, 2022, the Company was in compliance with all associated covenants.

In addition to obligations under the Credit Agreement, we are party to other contractual obligations involving commitments to make payments to third parties, including purchase commitments and lease obligations, which impact our short-term and long-term liquidity and capital resource needs.

See Note 7, Leases.

Our cash and cash equivalents balance decreased $13.7 million at September 30, 2022 to $51.8 million as compared to $65.5 million at June 30, 2022.

Our working capital was $336.4 million at September 30, 2022, an increase of $7.4 million from $329.0 million at the end of fiscal 2022.

Additionally, our total debt increased by $10.1 million at September 30, 2022 to $898.8 million as compared to $888.6 million at June 30, 2022 as a result of increased net borrowings to manage working capital.

As of September 30, 2022, $188.2 million was available under the Credit Agreement as compared to $204.0 million available as of June 30, 2022.

The Company was in compliance with all covenants at September 30, 2022.

Our cash balances are held in the United States, United Kingdom, Canada, Europe, Middle East, and India.

As of September 30, 2022, substantially all of the total cash balance from operations was held outside of the United States.

Our cash and cash equivalents balance decreased $22.1 million at December 31, 2022 to $43.4 million as compared to $65.5 million at June 30, 2022.

Our working capital was $357.4 million at December 31, 2022, an increase of $28.4 million from

$329.0 million at the end of fiscal 2022.

Additionally, our total debt decreased by $10.2 million at December 31, 2022 to $878.4 million as compared to $888.6 million at June 30, 2022 as a result of $9.8 million of net repayments carried out during the period.

Our cash balances are held in the United States, United Kingdom, Canada, Europe, the Middle East and India.

As of December 31, 2022, substantially all of the total cash balance from operations was held outside of the United States.

We maintain our cash and cash equivalents primarily in money market funds or their equivalent.

As of September 30, 2022, all of our investments were expected to mature in less than three months.

As of December 31, 2022, all of our investments were expected to mature in less than three months.

Accordingly, we do not believe that our investments have significant exposure to interest rate risk.

Cash provided by (used in) operating, investing, and financing activities is summarized below.

Three Months Ended September 30, Change in

Cash (used in) provided by operating, investing and financing activities is summarized below.

Six Months Ended December 31, Change in

(amounts in thousands) 2022 2021 Dollars

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Financing activities (10,892) 208,849 (219,741)

Decrease in cash and cash equivalents (2,220) (43,983) 41,763

Effect of exchange rate changes on cash and cash equivalents (11,498) (2,926) (8,572)

Net decrease in cash and cash equivalents $ (13,718) $ (46,909) $ 33,191

Cash used in operating activities was $5.1 million for the three months ended September 30, 2022, a decrease of $42.7 million from cash provided by operating activities of $37.6 million in the prior year period.

This decrease versus the prior year period resulted primarily from lower cash generation of $31.4 million from our working capital accounts which was mainly due to higher inventory balance and lower accounts payable and reduction of $11.4 million in net income adjusted for non-cash charges in the current period.

Cash used in investing activities was $6.9 million for the three months ended September 30, 2022, a decrease of $11.1 million from $18.1 million in the prior year period primarily due to lower capital expenditure in the current period due to phasing of capital projects.

During the three months ended September 30, 2022, $7.2 million of capital expenditures were incurred on account of capital projects primarily related to the United States and the United Kingdom operating segments.

Cash provided by financing activities was $9.8 million for the three months ended September 30, 2022, an increase in cash provided of $73.3 million compared to $63.5 million of cash used in the prior year period.

The increase in cash provided by financing activities was primarily due to no share repurchases under our repurchase program during the three months ended September 30, 2022.

Effect of exchange rate changes on cash (2,517) (3,204) 687

Net increase in cash and cash equivalents $ (22,075) $ 1,331 $ (23,406)

Cash used in operating activities was $2.7 million for the six months ended December 31, 2022, a decrease of $70.7 million from cash provided by operating activities of $68.0 million in the prior year period.

This decrease versus the prior period resulted primarily from a reduction of $25.5 million in net income adjusted for non-cash charges in the current period and lower cash generation of $45.2 million from our working capital accounts primarily due to higher inventory balances as a result of inflation, and a higher account receivable balance due to timing of cash receipts.

Cash used in investing activities was $6.0 million for the six months ended December 31, 2022, a decrease of $266.3 million from $272.3 million in the prior year period primarily due to the acquisition of THWR in the same period of the prior year.

Cash used in financing activities was $10.9 million for the six months ended December 31, 2022, a decrease in cash provided of $219.7 million compared to $208.8 million of cash provided in the prior year period.

The decrease in cash provided by financing activities is primarily due to higher borrowings under the Credit Agreement to finance the THWR acquisition, higher share repurchases, and payment of shares withheld for employee payroll taxes during the same period in the prior year.

Operating Free Cash Flows

Our operating free cash flows were negative $12.3 million for the three months ended September 30, 2022, a decrease of $32.1 million from $19.8 million in the three months ended September 30, 2021.

This decrease versus the prior year period resulted primarily from a decrease in cash flows from operations of $42.7 million driven by the reasons explained above.

The decrease was partially offset by $10.6 million due to lower property, plant and equipment purchases in the current period.

See Reconciliation of Non-U.S.

Operating free cash flows were negative $16.7 million for the six months ended December 31, 2022, a decrease of $56.7 million from $40.0 million provided by operating free cash flows in the six months ended December 31, 2021.

This decrease versus prior year resulted primarily from a decrease in cash flow from operations of $70.7 million driven by the reasons explained above.

See the Reconciliation of Non-U.S.

GAAP Financial Measures to U.S.

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The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations.

During the three months ended September 30, 2022, the Company repurchased no shares under the repurchase program.

As of September 30, 2022, the Company had $173.5 million of remaining authorization under the share repurchase program.

During the six months ended December 31, 2022, the Company did not repurchase any shares under the repurchase program.

As of December 31, 2022, the Company had $173.5 million of remaining authorization under the share repurchase program.

Reconciliation of Non-U.S.

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GAAP measure and the most directly comparable U.S.

GAAP measure, an explanation of why our management and

Board of Directors believe the non-U.S.

GAAP measure, an explanation of why our management and Board of Directors believe the non-U.S.

GAAP measure provides useful information to investors and any additional purposes for which our management and Board of Directors use the non-U.S.

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(amounts in thousands) North America International Hain Consolidated

Net sales - Three months ended September 30, 2022 $ 288,396 $ 150,955 $ 439,351

Net sales - Three months ended December 31, 2022 $ 282,361 $ 171,847 $ 454,208

Acquisitions, divestitures and discontinued brands (16,849) — (16,849)

Impact of foreign currency exchange 2,075 23,720 25,795

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Three months ended September 30, 2022 $ 273,458 $ 176,741 $ 450,199

Net sales - Three months ended September 30, 2021 $ 265,525 $ 189,378 $ 454,903

Divestitures and discontinued brands (949) — (949)

Net sales adjusted for divestitures and discontinued brands - Three months ended September 30, 2021 $ 264,576 $ 189,378 $ 453,954

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Three months ended December 31, 2022 $ 267,587 $ 195,567 $ 463,154

Net sales - Three months ended December 31, 2021 $ 275,014 $ 201,927 $ 476,941

Acquisitions, divestitures and discontinued brands (2,280) — (2,280)

Net sales adjusted for acquisitions, divestitures and discontinued brands - Three months ended December 31, 2021 $ 272,734 $ 201,927 $ 474,661

Net sales growth (decline) 2.7 % (14.9) % (4.8) %

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Impact of foreign currency exchange 0.8 % 11.7 5.4 %

Net sales decline on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands (1.9) % (3.2) % (2.4) %

Net sales - Six months ended December 31, 2022 $ 570,757 $ 322,802 $ 893,559

Acquisitions, divestitures and discontinued brands (34,499) — (34,499)

Impact of foreign currency exchange 3,143 49,506 52,649

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Six months ended December 31, 2022 $ 539,401 $ 372,308 $ 911,709

Net sales - Six months ended December 31, 2021 $ 540,539 $ 391,305 $ 931,844

Acquisitions, divestitures and discontinued brands (4,832) — (4,832)

Net sales adjusted for acquisitions, divestitures and discontinued brands - Six months ended December 31, 2021 $ 535,707 $ 391,305 $ 927,012

Net sales growth (decline) 5.6 % (17.5) % (4.1) %

Impact of acquisitions, divestitures and discontinued brands (5.5) % — % (3.2) %

Impact of foreign currency exchange 0.6 % 12.7 % 5.6 %

Net sales growth (decline) on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands 0.7 % (4.8) % (1.7) %

Adjusted EBITDA

Adjusted EBITDA is defined as net income before net interest expense, income taxes, depreciation and amortization, equity in net loss (income) of equity-method investees, stock-based compensation, net, unrealized currency gains and losses, litigation and related costs, plant closure related costs, net, productivity and transformation costs, warehouse and manufacturing

consolidation and other costs, costs associated with acquisitions, divestitures and other transactions, gains or losses on sales of assets and businesses, inventory write-downs, impairment of long-lived assets and intangibles and other adjustments.

The Company defines Adjusted EBITDA as net income before net interest expense, income taxes, depreciation and amortization, equity in net loss of equity-method investees, stock-based compensation, net, unrealized currency losses (gains), certain litigation and related costs, CEO succession costs, plant closure related costs, net, productivity and transformation costs, warehouse and manufacturing consolidation and other costs, costs associated with acquisitions, divestitures and other transactions, gains on sales of assets, certain inventory write-downs, long-lived asset impairments and other adjustments.

The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition.

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GAAP results.

A reconciliation of net income to Adjusted EBITDA is as follows:

Three Months Ended September 30,

A reconciliation of net income (loss) to Adjusted EBITDA is as follows:

Three Months Ended December 31, Six Months Ended December 31,

(amounts in thousands) 2022 2021 2022 2021

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Stock-based compensation, net 3,435 4,156 7,429 8,443

Unrealized currency gains (1,711) (1,023)

Unrealized currency losses (gains) 2,160 (480) 449 (1,503)

Litigation and related costs

Litigation expenses 2,463 1,956

Proceeds from insurance claim — (196)

Certain litigation expenses, net (a)

2,482 1,624 4,945 3,384

Restructuring activities

CEO succession 5,113 — 5,113 —

Plant closure related costs, net 53 (183) 51 813

Productivity and transformation costs 986 2,247 1,759 5,451

Warehouse/manufacturing consolidation and other costs — 2,289

Warehouse/manufacturing consolidation and other costs, net (1,972) 249 (1,972) 2,538

Acquisitions, divestitures and other

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Gain on sale of assets (3,355) (8,656) (3,395) (9,102)

Impairment charges

Inventory write-down — (46) — (46)

Long-lived asset impairment 340 303 340 303

Adjusted EBITDA $ 49,817 $ 59,264 $ 85,846 $ 106,580

(a) Expenses and items relating to securities class action and baby food litigation.

Adjusted EBITDA - Constant Currency Presentation

We believe that this measure provides useful information to investors because it provides transparency to underlying performance in adjusted EBITDA by excluding the effect that foreign currency exchange rate fluctuations have on year-to-year comparability given the volatility in foreign currency exchange markets.

To present this information for historical periods, current period adjusted EBITDA for entities reporting in currencies other than the U.S.

Dollar are translated into U.S.

Dollars at the average monthly exchange rates in effect during the corresponding period of the prior fiscal year, rather than at the actual average monthly exchange rate in effect during the current period of the current fiscal year.

As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

A reconciliation between adjusted EBITDA and constant currency adjusted EBITDA is as follows:

The Company provides Adjusted EBITDA and Adjusted EBITDA on a constant currency basis because the Company’s management believes that these presentations provide useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition.

In addition, management uses these measures for reviewing the financial results of the Company as well as a component of performance-based executive compensation.

The Company believes presenting Adjusted EBITDA on a constant currency basis provides useful information to investors because it provides transparency to underlying performance in the Company’s Adjusted EBITDA by excluding the effect that foreign currency exchange rate fluctuations have on period-to-period comparability given the volatility in foreign currency exchange markets.

A reconciliation between Adjusted EBITDA and constant currency Adjusted EBITDA for the three months ended December 31, 2022 and 2021 is as follows:

(amounts in thousands) Hain Consolidated

Adjusted EBITDA - Three months ended September 30, 2022 $ 36,029

Adjusted EBITDA - Three months ended December 31, 2022 $ 49,817

Impact of foreign currency exchange 2,909

Adjusted EBITDA on a constant currency basis - Three months ended September 30, 2022 $ 38,648

Adjusted EBITDA - Three months ended September 30, 2021 $ 47,316

Adjusted EBITDA on a constant currency basis - Three months ended December 31, 2022 $ 52,726

Adjusted EBITDA - Three months ended December 31, 2021 $ 59,264

A reconciliation between Adjusted EBITDA and constant currency Adjusted EBITDA for the six months ended December 31, 2022 and 2021 is as follows:

(amounts in thousands) Hain Consolidated

Adjusted EBITDA - Six months ended December 31, 2022 $ 85,846

Impact of foreign currency exchange 5,527

Adjusted EBITDA on a constant currency basis - Six months ended December 31, 2022 $ 91,373

Adjusted EBITDA - Six months ended December 31, 2021 $ 106,580

Operating Free Cash Flows

In our internal evaluations, we use the non-U.S.

GAAP financial measure “Operating Free Cash Flows.” The difference between Operating Free Cash Flows from continuing operations and cash flows provided by or used in operating activities, which is the most comparable U.S.

GAAP financial measure “Operating Free Cash Flows” The difference between Operating Free Cash Flows and cash flow provided by or used in operating activities, which is the most comparable U.S.

GAAP financial measure, is that Operating Free Cash Flows reflects the impact of purchases of property, plant and equipment (capital spending).

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A reconciliation from cash flows (used in) provided by operating activities to Operating Free Cash Flows is as follows:

Three Months Ended September 30,

Six Months Ended December 31,

(amounts in thousands) 2022 2021

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Operating free cash flows $ (16,707) $ 40,035

We believe that our cash on hand of $51.8 million at September 30, 2022 as well as projected cash flows from operations and availability under our Credit Agreement are sufficient to fund our working capital needs in the ordinary course of business, anticipated fiscal 2023 capital expenditures and other expected cash requirements for at least the next 12 months.

Critical Accounting Estimates

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Recent Accounting Pronouncements

There were no recently adopted accounting pronouncements or recently issued accounting pronouncements not yet effective that the Company believes will have a significant impact on its consolidated financial statements.

Refer to Note 2, Basis of Presentation , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Certain of our product lines have seasonal fluctuations.

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As such, our results of operations and our cash flows for any particular quarter are not indicative of the results we expect for the full year, and our historical seasonality may not be indicative of future quarterly results of operations.

In recent years, net sales and diluted earnings per share in the first fiscal quarter have typically been the lowest of our four quarters.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis