First Quarter Highlights
- Consolidated revenue of
$129.5 million , a decrease of 2.2% on a reported basis and 2.3% on a constant currency basis compared to the prior year period. - Branded CPG revenue decreased 3.5% on a reported basis and 3.5% on a constant currency basis as compared to 2023 primarily due to lower volumes.
- Flavors & Ingredients revenue grew 2.1% on a reported basis and 1.9% on a constant currency basis compared to the prior year period, driven by volume growth and price increases.
- Operating income of
$3.1 million and Adjusted EBITDA of$19.1 million .
First Quarter Net Segment Revenue Growth Overview | ||||||
Reported | Foreign Currency Exchange | Constant Currency | ||||
Branded CPG | (3.5%) | 0.1% | (3.5%) | |||
Flavors & Ingredients | 2.1% | 0.2% | 1.9% | |||
Consolidated | (2.2%) | 0.1% | (2.3%) | |||
"We’re pleased with our first quarter performance, which marked our third consecutive quarter of meaningful gross margin expansion," said
FIRST QUARTER 2024 RESULTS
- Consolidated product revenues were
$129.5 million , a decrease of 2.2% on a reported basis and 2.3% on a constant currency basis, as compared to the prior year first quarter. - Reported gross profit was
$37.3 million , compared to$32.3 million in the prior year first quarter. The increase was largely driven by lower raw material and freight costs, a decline in costs associated with the supply chain reinvention project, and favorable product mix. Adjusted gross profit was$42.1 million , compared to$39.5 million in the prior year first quarter. - Reported gross profit margin increased to 28.8% in the first quarter of 2024, compared to 24.4% in the prior year period. Adjusted gross profit margin increased to 32.5%, compared to 29.9% in the prior year first quarter.
- Consolidated operating income was
$3.1 million compared to$3.0 million in the prior year first quarter. The increase was driven by the improvement in gross margin, which was partially offset by costs associated with the Company’s pending merger. - Consolidated net loss was
$9.4 million in the first quarter of 2024 compared to a net loss of$19.8 million in the prior year period. - Consolidated Adjusted EBITDA was
$19.1 million compared to$16.6 million in the prior year quarter, representing an increase of 15.2% driven by lower costs.
SEGMENT RESULTS
Branded CPG Segment
Branded CPG segment product revenues were
Operating income was
Flavors & Ingredients Segment
Flavors & Ingredients segment product revenues increased 2.1% to
Operating income was
Corporate
Corporate expenses for the first quarter of 2024 were
BALANCE SHEET
As of
Cash used in operating activities was
DEFINITIVE AGREEMENT TO BE ACQUIRED
As previously announced, on
A special committee of the Company’s board of directors (the “Board”), consisting solely of disinterested members of the Board, in consultation with its independent financial and legal advisors, unanimously recommended the Transaction and the disinterested members of the Board unanimously approved the Transaction.
The Transaction is expected to close later in the second quarter of 2024. Consummation of the Transaction is conditioned on, among other things, the approval at a special meeting of the Company’s stockholders (i) of the holders of a majority in voting power of the Company’s outstanding stock and (ii) of the holders of 66 2/3% of the Company’s outstanding stock not owned by Sababa, and is subject to other customary closing conditions. The Transaction is not subject to any financing conditions.
In connection with the Transaction, the Company initially filed a preliminary proxy statement, (as amended and supplemented, the “Proxy Statement”), with the
About
Forward-Looking Statements
Certain of the matters discussed in this communication constitute forward-looking statements. The forward-looking statements include, among other things, statements regarding the intent, belief or expectations of the Company and can be identified by the use of words such as “achieve,” “aim,” “anticipate,” “believe,” “can,” “continue,” “could,” “drive,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “grow,” “improve,” “increase,” “intend,” “maintain,” “may,” “opportunities,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strategy,” “will,” “will be,” “will continue,” “will likely result,” “would,” or the negative version of these words and other comparable terms. Examples of forward-looking statements include, but are not limited to, the statements made by
All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting. There are a number of factors that could have material adverse effects on our future results, performance or achievements and cause our actual results to differ materially from the forward-looking statements. These factors include, but are not limited to, the ability of the parties to satisfy the conditions precedent and consummate the proposed Transaction, the timing of consummation of the proposed Transaction, the ability of the parties to secure any required stockholder approval in a timely manner or on the terms desired or anticipated, failure of Sweet Oak to obtain the financing required to consummate the Transaction, the ability to achieve anticipated benefits and savings of the proposed Transaction, risks related to the potential disruption of management’s attention due to the pending Transaction, operating results and businesses generally, the outcome of any legal proceedings related to the proposed Transaction and the general risks associated with the respective businesses of the Company and Sweet Oak, including the general volatility of the capital markets, terms and employment of capital, the volatility of the Company’s share price, interest rates or general economy, potential adverse effects or changes to the relationships with the parties’ customers, competitors, suppliers or employees or other parties resulting from the announcement or completion of the proposed Transaction, unpredictability and severity of catastrophic events, including but not limited to the risks related to the effects of pandemics and global outbreaks of contagious diseases (such as the COVID-19 pandemic) and domestic or geopolitical crises, such as terrorism, military conflict (including the outbreak of hostilities between
Contacts:
Investor Relations Contact:
312-840-5001
investor@wholeearthbrands.com
ICR
646-277-1263
jeff.sonnek@icrinc.com
Reconciliation of GAAP and Non-GAAP Financial Measures
(Unaudited)
The Company reports its financial results in accordance with accounting principles generally accepted in
DEFINITIONS OF THE COMPANY’S NON-GAAP FINANCIAL MEASURES
The Company’s non-GAAP financial measures and corresponding metrics reflect how the Company evaluates its operating results currently and provide improved comparability of operating results. As new events or circumstances arise, these definitions could change. When these definitions change, the Company provides the updated definitions and presents the related non-GAAP historical results on a comparable basis. When items no longer impact the Company’s current or future presentation of non-GAAP operating results, the Company removes these items from its non-GAAP definitions.
The following is a list of non-GAAP financial measures which the Company has discussed or expects to discuss in the future:
- Constant Currency Presentation: We evaluate our product revenue results on both a reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our product revenue results, thereby facilitating period-to-period comparisons of our business performance and is consistent with how management evaluates the Company’s performance. We calculate constant currency percentages by converting our current period local currency product revenue results using the prior period exchange rates and comparing these adjusted amounts to our prior period reported product revenues.
- Adjusted EBITDA: We define Adjusted EBITDA as net income or loss from our consolidated statements of operations before interest income and expense, income taxes, depreciation and amortization, as well as certain other items that arise outside of the ordinary course of our continuing operations specifically described below:
Goodwill impairment charges: We exclude the impact of charges related to the impairment of goodwill. We believe that the exclusion of these impairments, which are non-cash, allows for more meaningful comparisons of operating results to peer companies. We believe that this increases period-to-period comparability and is useful to evaluate the performance of the company.- Long-term incentive plan: We exclude the impact of costs relating to the long-term incentive plan. We believe that the adjustments of these items allow for more meaningful comparison of our operating results.
- Severance and related expenses: We exclude employee severance and associated expenses related to roles that have been eliminated or reduced in scope as a productivity measure taken by the Company. We believe that the adjustments of these items allow for more meaningful comparison of our operating results.
- M&A transaction/strategic review: We exclude expenses directly related to the acquisition of businesses, the Company’s strategic review and pending merger. We believe that the adjustments of these items allow for more meaningful comparison of our operating results.
- Supply chain reinvention: To measure operating performance, we exclude certain one-time and other costs associated with reorganizing our North America Branded CPG operations and facilities in connection with our supply chain reinvention program, which will drive long-term productivity and cost savings. These costs include incremental expenses such as hiring, training, startup, exit and other temporary costs. We believe that the adjustments of these items allow for more meaningful comparison of our operating results.
- Other items: To measure operating performance, we exclude certain expenses and include certain gains that we believe are not operational in nature. We believe the exclusion or inclusion of such amounts allows management and the users of the financial statements to better understand our financial results.
Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA may vary from the use of similarly titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation. Adjusted EBITDA margin is Adjusted EBITDA for a particular period expressed as a percentage of product revenues for that period.
We use Adjusted EBITDA to measure our performance from period to period both at the consolidated level as well as within our operating segments, to evaluate and fund incentive compensation programs and to compare our results to those of our competitors. In addition to Adjusted EBITDA being a significant measure of performance for management purposes, we also believe that this presentation provides useful information to investors regarding financial and business trends related to our results of operations and that when non-GAAP financial information is viewed with GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance.
Adjusted EBITDA should not be considered as an alternative to net income or loss, operating income, cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance or cash flows as measures of liquidity. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
The Company cannot reconcile its expected Adjusted EBITDA to Net Income under “Outlook” without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted. These items include, but are not limited to, stock-based compensation expense and acquisition-related charges. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance period.
Adjusted Gross Profit Margin: We define Adjusted Gross Profit Margin as Gross Profit excluding all cash and non-cash adjustments impacting Cost of Goods Sold, included in the Adjusted EBITDA reconciliation, as a percentage of Product Revenues, net. Such adjustments include: depreciation, purchase accounting adjustments, long-term incentives and other items adjusted by management to better understand our financial results.
Condensed Consolidated Balance Sheets | |||||||
(In thousands of dollars, except for share and per share data) | |||||||
(Unaudited) | |||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 23,750 | $ | 30,513 | |||
Accounts receivable (net of allowances of | 70,067 | 74,012 | |||||
Inventories | 218,040 | 209,271 | |||||
Prepaid expenses and other current assets | 7,502 | 6,429 | |||||
Total current assets | 319,359 | 320,225 | |||||
Property, Plant and Equipment, net | 53,887 | 54,937 | |||||
Other Assets | |||||||
Operating lease right-of-use assets | 25,218 | 19,223 | |||||
186,479 | 193,610 | ||||||
Other intangible assets, net | 222,821 | 229,936 | |||||
Deferred tax assets, net | 509 | 500 | |||||
Other assets | 7,362 | 7,266 | |||||
Total Assets | $ | 815,635 | $ | 825,697 | |||
Liabilities and Stockholders’ Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 58,592 | $ | 55,662 | |||
Accrued expenses and other current liabilities | 25,949 | 32,173 | |||||
Current portion of operating lease liabilities | 7,273 | 7,370 | |||||
Current portion of long-term debt | 3,750 | 3,750 | |||||
Total current liabilities | 95,564 | 98,955 | |||||
Non-Current Liabilities | |||||||
Long-term debt | 422,379 | 417,929 | |||||
Deferred tax liabilities, net | 32,021 | 31,579 | |||||
Operating lease liabilities, less current portion | 20,133 | 14,336 | |||||
Other liabilities | 11,551 | 11,208 | |||||
Total Liabilities | 581,648 | 574,007 | |||||
Commitments and Contingencies | — | — | |||||
Stockholders’ Equity | |||||||
Preferred shares, | — | — | |||||
Common stock, | 4 | 4 | |||||
Additional paid-in capital | 367,026 | 365,721 | |||||
Accumulated deficit | (132,680 | ) | (123,284 | ) | |||
Accumulated other comprehensive (loss) income | (363 | ) | 9,249 | ||||
Total stockholders’ equity | 233,987 | 251,690 | |||||
Total Liabilities and Stockholders’ Equity | $ | 815,635 | $ | 825,697 | |||
Condensed Consolidated Statements of Operations | |||||||
(In thousands of dollars, except for share and per share data) | |||||||
(Unaudited) | |||||||
Three Months Ended | |||||||
Product revenues, net | $ | 129,500 | $ | 132,417 | |||
Cost of goods sold | 92,193 | 100,076 | |||||
Gross profit | 37,307 | 32,341 | |||||
Selling, general and administrative expenses | 29,494 | 24,689 | |||||
Amortization of intangible assets | 4,688 | 4,651 | |||||
Operating income | 3,125 | 3,001 | |||||
Interest expense, net | (10,859 | ) | (10,704 | ) | |||
Other income (expense), net | 230 | (629 | ) | ||||
Loss before income taxes | (7,504 | ) | (8,332 | ) | |||
Provision for income taxes | 1,892 | 11,465 | |||||
Net loss | $ | (9,396 | ) | $ | (19,797 | ) | |
Net loss per share: | |||||||
Basic | $ | (0.22 | ) | $ | (0.47 | ) | |
Diluted | $ | (0.22 | ) | $ | (0.47 | ) | |
Condensed Consolidated Statements of Cash Flows | |||||||
(In thousands of dollars) | |||||||
(Unaudited) | |||||||
Three Months Ended | |||||||
Operating activities | |||||||
Net loss | $ | (9,396 | ) | $ | (19,797 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Stock-based compensation | 2,024 | 1,792 | |||||
Depreciation | 1,642 | 1,690 | |||||
Amortization of intangible assets | 4,688 | 4,651 | |||||
Deferred income taxes | 492 | (124 | ) | ||||
Amortization of debt issuance costs and original issue discount | 587 | 522 | |||||
Change in fair value of warrant liabilities | (2 | ) | (154 | ) | |||
Changes in current assets and liabilities: | |||||||
Accounts receivable | 2,430 | 706 | |||||
Inventories | (9,626 | ) | 1,579 | ||||
Prepaid expenses and other current assets | (1,416 | ) | (740 | ) | |||
Accounts payable, accrued liabilities and income taxes | (1,184 | ) | 14,084 | ||||
Other, net | 197 | (142 | ) | ||||
Net cash (used in) provided by operating activities | (9,564 | ) | 4,067 | ||||
Investing activities | |||||||
Capital expenditures | (1,085 | ) | (1,556 | ) | |||
Proceeds from the sale of equity method investment | 200 | — | |||||
Net cash used in investing activities | (885 | ) | (1,556 | ) | |||
Financing activities | |||||||
Proceeds from revolving credit facility | 11,000 | — | |||||
Repayments of revolving credit facility | (6,000 | ) | (4,000 | ) | |||
Repayments of long-term borrowings | (938 | ) | (938 | ) | |||
Tax withholdings related to net share settlements of stock awards | (463 | ) | (405 | ) | |||
Net cash provided by (used in) financing activities | 3,599 | (5,343 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 87 | 788 | |||||
Net change in cash and cash equivalents | (6,763 | ) | (2,044 | ) | |||
Cash and cash equivalents, beginning of period | 30,513 | 28,676 | |||||
Cash and cash equivalents, end of period | $ | 23,750 | $ | 26,632 | |||
Supplemental disclosure of cash flow information | |||||||
Interest paid | $ | 10,364 | $ | 10,284 | |||
Taxes paid, net of refunds | $ | 1,212 | $ | 3,228 | |||
Adjusted EBITDA Reconciliation | |||||||
(In thousands of dollars) | |||||||
(Unaudited) | |||||||
Three Months Ended | Three Months Ended | ||||||
Product revenues, net | $ | 129,500 | $ | 132,417 | |||
Net loss | $ | (9,396 | ) | $ | (19,797 | ) | |
Provision for income taxes | 1,892 | 11,465 | |||||
Other (income) expense, net | (230 | ) | 629 | ||||
Interest expense, net | 10,859 | 10,704 | |||||
Operating income | 3,125 | 3,001 | |||||
Depreciation | 1,642 | 1,690 | |||||
Amortization of intangible assets | 4,688 | 4,651 | |||||
Long term incentive plan | 2,024 | 1,279 | |||||
Severance and related expenses | (19 | ) | (30 | ) | |||
M&A transaction/strategic review | 3,589 | - | |||||
Supply chain reinvention | 1,844 | 4,886 | |||||
Other items | 2,204 | 1,099 | |||||
Adjusted EBITDA | $ | 19,097 | $ | 16,577 | |||
Constant Currency Product Revenues, Net Reconciliation | ||||||||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
$ change | % change | |||||||||||||||||||||||||
Product revenues, net | 2024 | 2023 | Reported | Constant Dollar | Foreign Exchange (1) | Reported | Constant Dollar | Foreign Exchange | ||||||||||||||||||
Branded CPG | $ | 98,453 | $ | 102,010 | $ | (3,557 | ) | $ | (3,610 | ) | $ | 53 | -3.5 | % | -3.5 | % | 0.1 | % | ||||||||
Flavors & Ingredients | 31,047 | 30,407 | 640 | 566 | 74 | 2.1 | % | 1.9 | % | 0.2 | % | |||||||||||||||
Consolidated | $ | 129,500 | $ | 132,417 | $ | (2,917 | ) | $ | (3,044 | ) | $ | 127 | -2.2 | % | -2.3 | % | 0.1 | % | ||||||||
(1)The "foreign exchange" amounts presented, reflect the estimated impact from fluctuations in foreign currency exchange rates on product revenues. |
GAAP to Adjusted EBITDA Reconciliation | |||||||||||||||||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||||
GAAP | Non- cash adj. | Cash adj. | Adjusted EBITDA | GAAP | Non- cash adj. | Cash adj. | Adjusted EBITDA | $ Change | % Change | ||||||||||||||||||||||
Product revenues, net | $ | 129,500 | $ | - | $ | - | $ | 129,500 | $ | 132,417 | $ | - | $ | - | $ | 132,417 | $ | (2,917 | ) | (2.2 | %) | ||||||||||
Cost of goods sold | 92,193 | (3,112 | ) | (1,669 | ) | 87,413 | 100,076 | (2,307 | ) | (4,898 | ) | 92,871 | (5,459 | ) | (5.9 | %) | |||||||||||||||
Gross profit | 37,307 | 3,112 | 1,669 | 42,087 | 32,341 | 2,307 | 4,898 | 39,546 | 2,542 | 6.4 | % | ||||||||||||||||||||
Gross profit margin % | 28.8 | % | 32.5 | % | 24.4 | % | 29.9 | % | 2.6 | % | |||||||||||||||||||||
Selling, general and administrative expenses | 29,494 | (2,622 | ) | (3,882 | ) | 22,990 | 24,689 | (1,761 | ) | 41 | 22,968 | 22 | 0.1 | % | |||||||||||||||||
Amortization of intangible assets | 4,688 | (4,688 | ) | - | - | 4,651 | (4,651 | ) | - | - | - | - | |||||||||||||||||||
Operating income | $ | 3,125 | $ | 10,422 | $ | 5,550 | $ | 19,097 | $ | 3,001 | $ | 8,720 | $ | 4,857 | $ | 16,577 | $ | 2,520 | 15.2 | % | |||||||||||
Operating margin % | 2.4 | % | 14.7 | % | 2.3 | % | 12.5 | % | 2.2 | % | |||||||||||||||||||||
Adjustments to Operating Income by Income Statement Line and Nature | |||||||||||||||||||||
(In thousands of dollars) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||||||||||
Non-Cash adjustments | Cost of Goods Sold | SG&A | Amort. Of Intangibles | Operating Income | Cost of Goods Sold | SG&A | Amort. Of Intangibles | Operating Income | |||||||||||||
Depreciation | $ | 1,462 | $ | 181 | $ | - | $ | 1,642 | $ | 1,484 | $ | 206 | $ | - | $ | 1,690 | |||||
Amortization of intangible assets | - | - | 4,688 | 4,688 | - | - | 4,651 | 4,651 | |||||||||||||
Long term incentive plan | 142 | 1,881 | - | 2,024 | 237 | 1,042 | - | 1,279 | |||||||||||||
Supply chain reinvention | 166 | - | - | 166 | - | - | - | - | |||||||||||||
Other items | 1,342 | 560 | - | 1,902 | 586 | 513 | - | 1,099 | |||||||||||||
Total non-cash adjustments | $ | 3,112 | $ | 2,622 | $ | 4,688 | $ | 10,422 | $ | 2,307 | $ | 1,761 | $ | 4,651 | $ | 8,720 | |||||
Cash adjustments | |||||||||||||||||||||
Severance and related expenses | - | (19 | ) | - | (19 | ) | - | (30 | ) | - | (30 | ) | |||||||||
M&A transaction/strategic review | - | 3,589 | - | 3,589 | - | - | - | - | |||||||||||||
Supply chain reinvention | 1,669 | 10 | - | 1,678 | 4,898 | (11 | ) | - | 4,886 | ||||||||||||
Other items | - | 301 | - | 301 | - | - | - | - | |||||||||||||
Total cash adjustments | $ | 1,669 | $ | 3,882 | $ | - | $ | 5,550 | $ | 4,898 | $ | (41 | ) | $ | - | $ | 4,857 | ||||
Total adjustments | $ | 4,780 | $ | 6,504 | $ | 4,688 | $ | 15,972 | $ | 7,205 | $ | 1,721 | $ | 4,651 | $ | 13,576 | |||||
Source:
2024 GlobeNewswire, Inc., source