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Item 2. Management’s Discussion and Analysis

2023-05-09 compared with 2023-02-07 · 186 added, 192 removed, 250 unchanged (60% 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 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.

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 March 31, 2023 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.

The Hain Celestial Group, Inc., a Delaware corporation (collectively, along with its subsidiaries, the “Company,” and herein referred to as “Hain Celestial,” “we,” “us” and “our”), was founded in 1993 and is headquartered in Lake Success, New York.

The Company’s mission has continued to evolve since its founding, with health and wellness being the core tenet.

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The Company is committed to growing sustainably while continuing to implement environmentally sound business practices and manufacturing processes.

Hain Celestial sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, drug and convenience stores in over 75 countries worldwide.

The Company manufactures, markets, distributes, and sells organic and natural products, providing consumers with the opportunity to lead A Healthier Way of Life ® .

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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.

Economic conditions during fiscal year 2022 and the first nine months 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.

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• 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.

These higher interest rates, together with a higher outstanding debt balance, has led to an increase in our interest expense and we expect this high rate environment 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.

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.

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 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.

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 nine months 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.

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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 in the future remains uncertain.

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 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.

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

As part of the succession plan, 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

Comparison of Three Months Ended March 31, 2023 to Three Months Ended March 31, 2022

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 December 31, 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 March 31, 2023 and 2022 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Three Months Ended Change in

December 31, 2022 December 31, 2021 Dollars Percentage

March 31, 2023 March 31, 2022 Dollars Percentage

Net sales $ 455,243 100.0% $ 502,939 100.0% $ (47,696) (9.5)%

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Selling, general and administrative expenses 75,047 16.5% 75,750 15.1% (703) (0.9)%

Intangibles and long-lived asset impairment 156,583 34.4% — —% 156,583 *

Amortization of acquired intangible assets 2,842 0.6% 3,110 0.6% (268) (8.6)%

Productivity and transformation costs 3,933 0.9% 1,679 0.3% 2,254 134.2%

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)%

Operating (loss) income (140,926) (31.0)% 35,164 7.0% (176,090) (500.8)%

Interest and other financing expense, net 13,421 2.9% 3,224 0.6% 10,197 316.3%

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

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)%

Other expense (income), net 439 0.1% (712) (0.1)% 1,151 (161.7)%

(Loss) income before income taxes and equity in net loss of equity-method investees (154,786) (34.0)% 32,652 6.5% (187,438) (574.0)%

(Benefit) provision for income taxes (39,587) (8.7)% 7,738 1.5% (47,325) (611.6)%

Equity in net loss of equity-method investees 528 0.1% 383 0.1% 145 37.9%

Net income $ 10,966 2.4% $ 30,889 6.5% $ (19,923) (64.5)%

Net (loss) income $ (115,727) (25.4)% $ 24,531 4.9% $ (140,258) (571.8)%

Adjusted EBITDA $ 37,260 8.2% $ 58,669 11.7% $ (21,409) (36.5)%

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

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.

Diluted net (loss) income per common share $ (1.29) $ 0.27 $ (1.56) *

* Percentage is not meaningful due to one or more numbers being negative.

Net sales for the three months ended March 31, 2023 were $455.2 million, a decrease of $47.7 million, or 9.5%, as compared to $502.9 million in the three months ended March 31, 2022.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $28.9 million, or 5.8%, 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 December 31, 2022 was $103.9 million, a decrease of $13.4 million, or 11.5%, as compared to the prior year quarter.

Gross profit for the three months ended March 31, 2023 was $97.5 million, a decrease of $18.2 million, or 15.8%, as compared to the prior year quarter.

Additionally, gross profit margin of 21.4% was lower when compared with 23.0% in 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.

The decrease in gross profit was driven primarily by the North America reportable segment as a result of lower net sales, changes in sales mix of high margin products and inflation.

The International reportable segment also had a decrease in gross profit mainly resulting from lower net sales in the Europe operating segment, change in sales mix of high margin products and higher energy and supply chain costs when compared to the prior year period.

Selling, General and Administrative Expenses

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.

Selling, general and administrative expenses were $75.0 million for the three months ended March 31, 2023, a decrease of $0.7 million, or 0.9%, from $75.8 million for the prior year quarter.

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

Intangibles and long-lived asset impairment

During the three months ended March 31, 2023, the Company recognized an aggregate impairment charge of $156.6 million, primarily related to the ParmCrisps ® and Thinsters ® indefinite-lived trademarks and ParmCrisps ® definite-lived customer relationships, which reduced the carrying value of such assets to their estimated fair value.

The fair value of indefinite-lived trademarks and definite-lived customer relationships were determined using the relief from royalty method and multi-period excess earnings method, respectively.

See Note 8, Goodwill and Other Intangible Assets and Note 14, Fair Value Measurements , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Amortization of Acquired Intangible Assets

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.

Amortization of acquired intangibles was $2.8 million for the three months ended March 31, 2023, a decrease of $0.3 million from $3.1 million in the prior year quarter due to complete amortization of certain acquired intangible assets primarily in the Europe and the United Kingdom operating segments when compared with the prior year quarter.

Productivity and Transformation Costs

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 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.

Productivity and transformation costs were $3.9 million for the three months ended March 31, 2023, an increase of $2.3 million from $1.7 million in the prior year quarter.

The increase was primarily due to increased spending related to productivity and transformation strategy consulting costs as a part of the Company’s strategic plan update.

Operating Loss (Income)

Operating loss for the three months ended March 31, 2023 was $140.9 million compared to income of $35.2 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 $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.

Interest and other financing expense, net totaled $13.4 million for the three months ended March 31, 2023, an increase of $10.2 million, or 316.3%, from $3.2 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 and 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 $1.1 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

Other Expense (Income), Net

Other expense, net totaled $0.4 million for the three months ended March 31, 2023, compared to income of $0.7 million in the prior year quarter.

The decrease in income was primarily attributable to the recognition of foreign exchange gain in the prior year quarter compared to foreign exchange loss in the current quarter.

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

Loss before income taxes and equity in net loss of our equity-method investees for the three months ended March 31, 2023 was $154.8 million compared to income of $32.7 million in the prior year quarter.

The decrease was due to the items discussed above.

(Benefit) Provision for Income Taxes

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

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.

Our income tax benefit was $39.6 million for the three months ended March 31, 2023 compared to income tax expense of $7.7 million in the prior year quarter.

The effective income tax rate was a benefit of 25.6% and an expense of 23.7% for the three months ended March 31, 2023 and 2022, respectively.

The effective income tax rate for the three months ended March 31, 2023 was impacted by ParmCrisps ® and Thinsters ® trademarks and ParmCrisps ® asset group impairment charges, stock-based compensation and changes in uncertain tax positions.

The effective income tax rate for the three months ended March 31, 2022 was impacted by deductions related to stock-based compensation and the finalization of fiscal year 2021 income tax returns.

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 December 31, 2022 was $0.3 million and $0.5 million in the prior year quarter.

Our equity in net loss from our equity-method investments for the three months ended March 31, 2023 was $0.5 million and $0.4 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 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.

Net (Loss) Income

Net loss for the three months ended March 31, 2023 was $115.7 million, or $1.29 per diluted share, compared to net income of $24.5 million, or $0.27 per diluted share, in the prior year quarter.

The change was attributable to the factors noted above.

Adjusted EBITDA

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.

Our Adjusted EBITDA was $37.3 million and $58.7 million for the three months ended March 31, 2023 and 2022, 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 $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.

On a constant currency basis, Adjusted EBITDA decreased by $19.3 million, or 33.0%, from $58.7 million for the three months ended March 31, 2022 to $39.3 million for the three months ended March 31, 2023.

Segment Results

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:

The following table provides a summary of net sales and operating income (loss) by reportable segment for the three months ended March 31, 2023 and 2022:

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

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% change (12.0) % (4.9) % n/a (9.5) %

Operating income (loss)

Three months ended 12/31/22 $ 32,262 $ 11,940 $ (16,813) $ 27,389

Operating (loss) income

Three months ended 3/31/23 (a)

$ (136,127) $ 13,604 $ (18,403) $ (140,926)

Three months ended 3/31/22 28,526 18,303 (11,665) 35,164

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% change (577.2) % (25.7) % 57.8 % (500.8) %

Operating income margin

Operating (loss) income margin

Three months ended 3/31/23 (47.5) % 8.1 % n/a (31.0) %

Three months ended 3/31/22 8.8 % 10.3 % n/a 7.0 %

(a) North America operating loss includes non-cash impairment charges of $156,298 related to ParmCrisps ® and Thinsters ® trademarks and ParmCrisps ® customer relationships (see Note 8, Goodwill and Other Intangible Assets).

North America

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.

Our net sales in the North America reportable segment for the three months ended March 31, 2023 were $286.6 million, a decrease of $39.1 million, or 12.0%, from net sales of $325.7 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 10.8%.

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.

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

The net sales decrease within snacks was substantially driven by reduced distribution and customer promotions associated with the ParmCrisps ® brand.

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.

Operating loss in North America for the three months ended March 31, 2023 was $136.1 million, a decrease of $164.7 million compared to operating income of $28.5 million in the prior year quarter.

The decrease was mainly driven by aggregate non-cash impairment charges of $156.3 million related to the ParmCrisps ® and Thinsters ® intangible assets and lower net sales in the United States operating segment, partially offset by cost improvements due to higher productivity.

International

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.

Our net sales in the International reportable segment for the three months ended March 31, 2023 were $168.6 million, a decrease of $8.6 million, or 4.9%, from net sales of $177.2 million in the prior year quarter.

On a constant currency basis, net sales increased 3.5% from the prior year quarter primarily due to an increase in sales in the United Kingdom operating segment, partially offset by softness in plant-based categories in the rest of Europe.

Operating income in our International reportable segment for the three months ended March 31, 2023 was $13.6 million, a decrease of $4.7 million from $18.3 million for the three months ended March 31, 2022.

Operating income was lower in the current quarter when compared to the prior year quarter mainly due to increased energy and input costs and volume mix, partially offset by improved pricing and productivity.

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 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.

Our operating loss in Corporate and Other for the three months ended March 31, 2023 was $18.4 million, an increase of $6.7 million, from $11.7 million for the three months ended March 31, 2022.

This change was primarily due to higher strategic consulting charges and employee related 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.

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

Comparison of Nine Months Ended March 31, 2023 to Nine Months Ended March 31, 2022

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

The following table compares our results of operations, including as a percentage of net sales, on a consolidated basis, for the nine months ended March 31, 2023 and 2022 (amounts in thousands, other than per share data and percentages, which may not add due to rounding):

Nine Months Ended Change in

March 31, 2023 March 31, 2022 Dollars Percentage

Net sales $ 1,348,802 100.0% $ 1,434,783 100.0% $ (85,981) (6.0)%

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Selling, general and administrative expenses 222,355 16.5% 229,679 16.0% (7,324) (3.2)%

Intangibles and long-lived asset impairment 156,923 11.6% 303 —% 156,620 **

Amortization of acquired intangible assets 8,415 0.6% 7,254 0.5% 1,161 16.0%

Productivity and transformation costs 5,692 0.4% 8,448 0.6% (2,756) (32.6)%

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

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

Operating (loss) income (97,714) (7.2)% 92,732 6.5% (190,446) *

Interest and other financing expense, net 31,910 2.4% 7,672 0.5% 24,238 315.9%

Other income, net (2,413) (0.2)% (10,570) (0.7)% 8,157 (77.2)%

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)%

(Loss) income before income taxes and equity in net loss of equity-method investees (127,211) (9.4)% 95,630 6.7% (222,841) *

(Benefit) provision for income taxes (30,599) (2.3)% 19,425 1.4% (50,024) *

Equity in net loss of equity-method investees 1,226 0.1% 1,374 0.1% (148) (10.8)%

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

Net (loss) income $ (97,838) (7.3)% $ 74,831 5.2% $ (172,669) *

Adjusted EBITDA $ 123,106 9.1% $ 165,249 11.5% $ (42,143) (25.5)%

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.

Diluted net (loss) income per common share $ (1.09) $ 0.79 $ (1.88) *

* Percentage is not meaningful due to one or more numbers being negative.

** Percentage is not meaningful due to significantly lower number in the comparative period

Net sales for the nine months ended March 31, 2023 were $1,348.8 million, a decrease of $86.0 million, or 6.0%, as compared to $1,434.8 million in the nine months ended March 31, 2022.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased approximately $44.2 million, or 3.1%, 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 for the nine months ended March 31, 2023 was $295.7 million, a decrease of $42.7 million, or 12.6%, as compared to the prior year comparable period.

Gross profit margin was 21.9% of net sales, compared to 23.6% 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.

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 and higher energy and supply chain costs when compared to the prior year period.

The North America reportable segment gross profit remained relatively flat due to 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.

Selling, general and administrative expenses were $222.4 million for the nine months ended March 31, 2023, a decrease of $7.3 million, or 3.2%, from $229.7 million for the prior year comparable period.

The decrease was primarily driven by reductions in the United States and the United Kingdom operating segments.

The decrease reflected reduced broker fees and sales related expenses primarily in the United States operating segment and lower marketing costs, as well as efficiencies gained from the Company's productivity and transformation initiatives.

Intangibles and long-lived asset impairment

During the nine months ended March 31, 2023, the Company recognized aggregate impairment charge of $156.9 million , an increase of $156.6 million from $0.3 million in the prior year comparable period, related to the ParmCrisps ® and Thinsters ® indefinite-lived trademarks and ParmCrisps ® definite-lived customer relationships, which reduced the carrying value of such assets to their estimated fair value.

The fair value of indefinite-lived trademarks and definite-lived customer relationships were determined using the relief from royalty method and multi-period excess earnings method, respectively.

See Note 8, Goodwill and Other Intangible Assets and Note 14, Fair Value Measurements , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

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.

Amortization of acquired intangibles was $8.4 million for the nine months ended March 31, 2023, an increase of $1.2 million from $7.3 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.

Productivity and transformation costs were $5.7 million for the nine months ended March 31, 2023, a decrease of $2.8 million from $8.4 million in the prior year comparable period.

The decrease was primarily due to wind down of prior year restructuring costs partially offset by new spending on our strategic plan update.

Operating (Loss) Income

Operating loss for the nine months ended March 31, 2023 was $97.7 million compared to income of $92.7 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, net totaled $31.9 million for the nine months ended March 31, 2023, an increase of $24.2 million, or 315.9%, from $7.7 million in the prior year comparable period.

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.

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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.

Other income, net totaled $2.4 million for the nine months ended March 31, 2023, compared to $10.6 million in the prior year comparable period.

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

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

Loss before income taxes and equity in net loss of our equity-method investees for the nine months ended March 31, 2023 was $127.2 million compared to income of $95.6 million in the prior year comparable period.

The decrease was due to the items discussed above.

Provision for Income Taxes

(Benefit) 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.

Our income tax benefit was $30.6 million for the nine months ended March 31, 2023 compared to expense of $19.4 million in the prior year comparable period.

The effective income tax rate was a benefit of 24.1% and expense of 20.3% for the nine months ended March 31, 2023 and 2022, respectively.

The effective income tax rate for the nine months ended March 31, 2023 was impacted by ParmCrisps ® and Thinsters ® trademarks and ParmCrisps ® asset group impairment charges, gain on the sale of Westbrae (See Note 4, Acquisition and Disposition , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q), 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 changes in uncertain tax positions.

The effective income tax rate for the nine months ended March 31, 2022 was impacted by the reversal of uncertain tax position accruals based on filing and approval of certain elections by taxing authorities, deductions related to stock-based compensation, non-deductible transaction costs related to acquisition of THWR, the reversal of a valuation allowance due to the utilization of a capital loss carryover, and the finalization of fiscal year 2021 U.S.

income tax returns.

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.

Our equity in net loss from our equity-method investments for the nine months ended March 31, 2023 was $1.2 million compared to $1.4 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.

Net (Loss) Income

Net loss for the nine months ended March 31, 2023 was $97.8 million, or $(1.09) per diluted share, compared to income of $74.8 million, or $0.79 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.

Our Adjusted EBITDA was $123.1 million and $165.2 million for the nine months ended March 31, 2023 and 2022, 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.

On a constant currency basis, Adjusted EBITDA decreased by $34.5 million, or 20.9%, from $165.2 million for the nine months ended March 31, 2022 to $130.7 million for the nine months ended March 31, 2023.

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:

The following table provides a summary of net sales and operating income by reportable segment for the nine months ended March 31, 2023 and 2022:

(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

Nine months ended 3/31/23 $ 857,406 $ 491,396 $ — $ 1,348,802

Nine months ended 3/31/22 866,281 568,502 — 1,434,783

$ change $ (8,875) $ (77,106) n/a $ (85,981)

% change (1.0) % (13.6) % n/a (6.0) %

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

Operating (loss) income

Nine months ended 3/31/23 (a)

$ (79,420) $ 33,219 $ (51,513) $ (97,714)

Nine months ended 3/31/22 72,530 69,740 (49,538) 92,732

$ change $ (151,950) $ (36,521) $ (1,975) $ (190,446)

% change (209.5) % (52.4) % 4.0 % (205.4) %

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 %

Operating (loss) income margin

Nine months ended 3/31/23 (9.3) % 6.8 % n/a (7.2) %

Nine months ended 3/31/22 8.4 % 12.3 % n/a 6.5 %

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.

Our net sales in the North America reportable segment for the nine months ended March 31, 2023 were $857.4 million, a decrease of $8.9 million, or 1.0%, from net sales of $866.3 million in the prior year comparable period.

On a constant currency basis, adjusted for the impact of acquisitions, divestitures and discontinued brands, net sales decreased by 3.7% due to decreased sales in the Canada operating segment due to lower sales in personal care product categories and reduced club distribution and programming for certain brands, partially offset by increased sales in the United States operating segment due to stronger sales in snacks.

Operating loss in North America for the nine months ended March 31, 2023 was $79.4 million, compared to operating income of $72.5 million in the prior year comparable period.

The decrease was mainly driven by ParmCrisps ® and Thinsters ® indefinite-lived trademarks and ParmCrisps ® definite-lived customer relationships impairment charges and lower net sales in the Canada operating segment, partially offset by cost improvements due to higher productivity.

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.

Our net sales in the International reportable segment for the nine months ended March 31, 2023 were $491.4 million, a decrease of $77.1 million, or 13.6%, from net sales of $568.5 million in the prior year comparable period.

On a constant currency basis, net sales decreased 2.3% from the prior year comparable period mainly due to lower sales in the Europe and United Kingdom operating segments, particularly in relation to plant-based categories and snacks, and 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 nine months ended March 31, 2023 was $33.2 million, a decrease of $36.5 million from $69.7 million for the nine months ended March 31, 2022.

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 and higher energy and supply chain costs, partially offset by lower delivery and warehouse costs due to improved utilization of warehouse space and efficiencies.

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.

Our operating loss in Corporate and Other for the nine months ended March 31, 2023 was $51.5 million, an increase of $2.0 million, from $49.5 million in the prior year period.

This change was primarily due to higher general and administrative expenses mainly related to increased 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.

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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%.

The weighted average interest rate on outstanding borrowings under the Credit Agreement at March 31, 2023 was 5.90%.

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.

As of March 31, 2023, there were $567.0 million of loans under the Revolver , $290.6 million of Term Loans, and $4.1 million let ters of credit outstanding under the Credit Agreement.

As of March 31, 2023, $228.9 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 March 31, 2023, 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 $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.

See Note 7, Leases , in the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Our cash and cash equivalents balance decreased $21.8 million at March 31, 2023 to $43.7 million as compared to $65.5 million at June 30, 2022.

Our working capital was $348.1 million at March 31, 2023, an increase of $19.1 million from $329.0 million at the end of fiscal 2022.

Additionally, our total debt decreased by $32.1 million at March 31, 2023 to $856.6 million as compared to $888.6 million at June 30, 2022 as a result of $31.6 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.

As of March 31, 2023, substantially all cash was held outside of the United States.

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

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

Six Months Ended December 31, Change in

Nine Months Ended March 31, Change in

(amounts in thousands) 2023 2022 Dollars

Cash flows (used in) provided by:

Cash flows provided by (used in):

Operating activities $ 26,309 $ 99,186 $ (72,877)

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Effect of exchange rate changes on cash (104) (5,836) 5,732

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.

Net decrease in cash and cash equivalents $ (21,830) $ (18,063) $ (3,767)

Cash provided by operating activities was $26.3 million for the nine months ended March 31, 2023, a decrease of $72.9 million from cash provided by operating activities of $99.2 million in the prior year period.

This decrease versus the prior period resulted primarily from a reduction of $60.5 million in net income adjusted for non-cash charges in the current period and higher cash utilization of $12.3 million from our working capital accounts primarily due to a higher account receivable balance due to timing of cash receipts, partially offset by a reduction in the change in other current assets.

Cash used in investing activities was $13.2 million for the nine months ended March 31, 2023, a decrease of $271.0 million from $284.3 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 $34.8 million for the nine months ended March 31, 2023, a decrease of $207.7 million compared to $172.9 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

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.

Operating free cash flows were $4.9 million for the nine months ended March 31, 2023, a decrease of $60.4 million from $65.2 million provided by operating free cash flows in the nine months ended March 31, 2022.

This decrease versus the prior year period resulted primarily from a decrease in cash flow from operations of $72.9 million driven by the reasons explained above, partially offset by reduction in capital expenditures.

See the Reconciliation of Non-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 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.

During the nine months ended March 31, 2023, the Company did not repurchase any shares under the repurchase program.

As of March 31, 2023, the Company had $173.5 million of remaining authorization under the share repurchase program.

Reconciliation of Non-U.S.

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(amounts in thousands) North America International Hain Consolidated

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

Net sales - Three months ended March 31, 2023 $ 286,649 $ 168,594 $ 455,243

Acquisitions, divestitures and discontinued brands (163) — (163)

Impact of foreign currency exchange 1,881 14,760 16,641

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

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Three months ended March 31, 2023 $ 288,367 $ 183,354 $ 471,721

Net sales - Three months ended March 31, 2022 $ 325,742 $ 177,197 $ 502,939

Acquisitions, divestitures and discontinued brands (2,311) — (2,311)

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) %

Net sales adjusted for acquisitions, divestitures and discontinued brands - Three months ended March 31, 2022 $ 323,431 $ 177,197 $ 500,628

Net sales decline (12.0) % (4.9) % (9.5) %

Impact of acquisitions, divestitures and discontinued brands 0.6 % — % 0.4 %

Impact of foreign currency exchange 0.6 % 8.4 3.3 %

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

Net sales (decline) growth on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands (10.8) % 3.5 % (5.8) %

Net sales - Nine months ended March 31, 2023 $ 857,406 $ 491,396 $ 1,348,802

Acquisitions, divestitures and discontinued brands (34,663) — (34,663)

Impact of foreign currency exchange 5,024 64,266 69,290

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

Net sales on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands - Nine months ended March 31, 2023 $ 827,767 $ 555,662 $ 1,383,429

Net sales - Nine months ended March 31, 2022 $ 866,281 $ 568,502 $ 1,434,783

Acquisitions, divestitures and discontinued brands (7,142) — (7,142)

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) %

Net sales adjusted for acquisitions, divestitures and discontinued brands - Nine months ended March 31, 2022 $ 859,139 $ 568,502 $ 1,427,641

Net sales decline (1.0) % (13.6) % (6.0) %

Impact of acquisitions, divestitures and discontinued brands (3.3) % — % (1.9) %

Impact of foreign currency exchange 0.6 % 11.3 % 4.8 %

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

Net sales decline on a constant currency basis adjusted for acquisitions, divestitures and discontinued brands (3.7) % (2.3) % (3.1) %

Adjusted EBITDA

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 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, intangibles and long-lived asset impairment 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 (loss) to Adjusted EBITDA is as follows:

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

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

Three Months Ended March 31, Nine Months Ended March 31,

(amounts in thousands) 2023 2022 2023 2022

Net income $ 10,966 $ 30,889 $ 17,889 $ 50,300

Net (loss) income $ (115,727) $ 24,531 $ (97,838) $ 74,831

Depreciation and amortization 13,784 12,638 37,909 34,396

1 unchanged sentence

Interest expense, net 12,924 2,846 30,582 5,677

Provision for income taxes 6,357 7,145 8,988 11,687

(Benefit) provision for income taxes (39,587) 7,738 (30,599) 19,425

Stock-based compensation, net 3,228 3,846 10,657 12,289

10 unchanged sentences

Transaction and integration costs, net 215 3,419 1,984 12,151

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

(Gain) loss on sale of assets (134) 55 (3,529) (9,047)

Impairment charges

Inventory write-down — — — (46)

Long-lived asset impairment 340 303 340 303

Intangibles and long-lived asset impairment 156,583 — 156,923 303

Adjusted EBITDA $ 37,260 $ 58,669 $ 123,106 $ 165,249

4 unchanged sentences

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:

A reconciliation between Adjusted EBITDA and constant currency Adjusted EBITDA for the three months ended March 31, 2023 and 2022 is as follows:

(amounts in thousands) Hain Consolidated

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

Adjusted EBITDA - Three months ended March 31, 2023 $ 37,260

Impact of foreign currency exchange 2,067

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:

Adjusted EBITDA on a constant currency basis - Three months ended March 31, 2023 $ 39,327

Adjusted EBITDA - Three months ended March 31, 2022 $ 58,669

A reconciliation between Adjusted EBITDA and constant currency Adjusted EBITDA for the nine months ended March 31, 2023 and 2022 is as follows:

(amounts in thousands) Hain Consolidated

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

Adjusted EBITDA - Nine months ended March 31, 2023 $ 123,106

Impact of foreign currency exchange 7,594

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

Adjusted EBITDA on a constant currency basis - Nine months ended March 31, 2023 $ 130,700

Adjusted EBITDA - Nine months ended March 31, 2022 $ 165,249

Operating Free Cash Flows

6 unchanged sentences

We do not consider Operating Free Cash Flows in isolation or as an alternative to financial measures determined in accordance with U.S.

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

Six Months Ended December 31,

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

Nine Months Ended March 31,

(amounts in thousands) 2023 2022

Net cash (used in) provided by operating activities $ (2,652) $ 68,031

Net cash provided by operating activities $ 26,309 $ 99,186

Purchases of property, plant and equipment (21,434) (33,939)

14 unchanged sentences

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