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Date

Monday, May 11, 2026 at 8:00 a.m. ET

Call participants

  • Chief Executive Officer — Alison Lewis
  • Chief Financial Officer — Lee Boyce

Takeaways

  • Organic net sales -- Declined 6%, driven by an 11-point decrease in volume mix and a 5-point increase in price, with lower sales in the International segment as the main contributor.
  • Adjusted gross margin -- 21%, a decrease of roughly 90 basis points year over year but an improvement of about 150 basis points sequentially from fiscal Q2 ended Feb. 29, 2026.
  • Adjusted EBITDA -- $26 million, down from $34 million; margin improved sequentially to 7.8% from 6.3% in fiscal Q2.
  • North America segment -- Organic net sales declined 3%, but growth was reported in yogurt, tea, finger foods, and cereal; adjusted gross margin reached 23.4%, up 100 basis points; adjusted EBITDA margin would have been 16.4% excluding snacks.
  • International segment -- Organic net sales declined 8%, impacted by lower sales in Meal Prep and Baby & Kids categories; adjusted gross margin fell to 18.5%, a drop of 270 basis points, with adjusted EBITDA down 12% to $20 million.
  • North America snacks divestiture -- Completed, generating a total debt reduction of $155 million, materially strengthening the balance sheet.
  • Stranded costs -- Now expected at the high end of the $20 million to $25 million range, with nearly 70% already removed, mainly people-related, and the remainder targeted for elimination by fiscal 2027.
  • Adjusted net loss -- $1 million, or $0.01 per diluted share, compared to adjusted net income of $6 million, or $0.07 per diluted share, a year ago.
  • Free cash flow -- Improved to $35 million, up from a $2 million outflow; driven by better inventory management, improved receivables collection, and insurance proceeds.
  • Cash on hand and net debt -- Cash on hand at $44 million; net debt reduced to $505 million, a decline of $145 million since the fiscal year's start; available liquidity under revolver stands at $196 million.
  • Inventory metrics -- Days inventory outstanding improved to 73 days, the lowest in two years, while days payable outstanding reached 59 days.
  • Capital expenditures -- $4 million for the quarter, down from $7 million, and expected to total approximately $20 million for the fiscal year ending May 31, 2026.
  • Interest expense -- Increased 17% to $14 million, primarily due to higher spreads over variable rates and increased deferred financing fee amortization; more than 70% of loan facility hedged at a 7.1% fixed rate.
  • Innovation pipeline -- 12% of net sales from new or relaunched SKUs within three years, up 2.5 points from last year; significant further innovation planned for fiscal Q4 and beyond.
  • Portfolio simplification -- Ongoing SKU rationalization and cost controls driving improved margins and margin stability in North America.
  • SG&A expense -- Decreased 6% to $59 million, representing 17.5% of net sales versus 16.1% previously, mainly from reduced employee-related costs.
  • Go-forward profitability guidance -- North America is expected to sustain gross margin above 30% and low double-digit adjusted EBITDA margin after snacks divestiture.

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Risks

  • Lee Boyce noted, "Interest expense rose 17% year over year to $14 million in the quarter, primarily driven by higher spreads over variable rates due to last year's refinancing as well as increased amortization of deferred financing fees."
  • International segment reported an 8% net sales decline, with adjusted gross margin down by 270 basis points and ongoing volume softness in wet baby food, spreads, drizzles, and branded soup.
  • Lee Boyce stated, "Adjusted net loss, which excludes the effect of restructuring charges amongst other items, was $1 million in the quarter, or $0.01 per diluted share as compared to adjusted net income of $6 million or $0.07 per diluted share in the prior year period," highlighting a reversal into loss territory.
  • Alison Lewis said, "While our organic net sales performance was not as strong as we expected," indicating underperformance relative to internal expectations.

Summary

Hain Celestial Group (HAIN +10.58%) delivered sequential improvements in gross margin and EBITDA margin following the completed North America snacks divestiture, enabling a $155 million debt reduction and enhanced liquidity. The company generated $35 million in free cash flow as inventory and operating discipline improved, yet faced a 6% drop in organic net sales, driven mostly by volume losses in the International segment. A robust product innovation pipeline contributed to double-digit growth in key North American brands and increased new product sales contribution, while persistent weakness in International—especially in Baby & Kids and Meal Prep categories—dampened overall performance. Management reiterated its commitment to delivering further cost reductions and advancing strategic asset sales, with no numeric guidance for fiscal 2026 as the multistage strategic review continues.

  • Management emphasized that more than 12% of net sales in the quarter originated from SKUs launched or relaunched within the last three years, demonstrating accelerated portfolio renewal.
  • Adjusted SG&A as a percent of net sales increased to 17.5% despite lower absolute spend, reflecting sales decline dilution.
  • Free cash flow increased by $37 million compared to the previous year, providing near-term financial flexibility.
  • Alison Lewis noted, "total debt reduction of $155 million, with materially improved our financial position" due to portfolio streamlining and cost actions, clarifying the company's ongoing turnaround.

Industry glossary

  • Organic net sales: Net sales adjusted to exclude the impact of acquisitions, divestitures, and currency fluctuations, providing a measure of true underlying growth or decline.
  • Stranded costs: Expenses remaining after a divestiture that are not fully eliminated with the sold business and must be reduced over a transition period.
  • Transition services agreement (TSA): An agreement wherein the selling company provides interim operational support to the buyer after a business divestiture, usually for a defined period.
  • SKU rationalization: The process of reducing the number of product variants (stock-keeping units) to improve margins and simplify operations.

Full Conference Call Transcript

Alison Lewis: Thank you, Alexis. Good morning, everyone, and thank you all for joining the call. Our third quarter performance reflects improved execution and financial discipline as we continue to strengthen our foundation and advance our turnaround strategy. We remain focused on our near-term priorities, optimizing cash strengthening the balance sheet, improving profitability and stabilizing sales. As a reminder, our goal is to position Hain for sustainable growth. The road map to achieving that growth is guided by our 5 actions to win: Portfolio streamlining, accelerating brand renovation and innovation; revenue growth management and pricing; productivity and working capital management; and enhanced digital capabilities.

During the quarter, strong cash generation and total debt reduction of $155 million materially improved our financial position with a major contribution coming from the completion of the North America Snacks business divestiture. From an operating perspective, we delivered Q3 adjusted EBITDA of $26 million, reflecting disciplined execution. Overall profitability improved sequentially with both gross margin and adjusted EBITDA margin improving versus Q2. While our organic net sales performance was not as strong as we expected, the resilience we are seeing across much of the portfolio based on the actions we have put in place is encouraging, and we understand and are actively addressing several isolated challenges.

Importantly, the work we have accelerated in innovation as a clear differentiator in our turnaround. We have significantly stronger renovation and innovation pipelines, meaningful new news to reenergize core categories. Recent launches delivering early share gains and a clear focus on continuing to scale these wins to drive sustainable growth. I'll now drill down into the net sales drivers, including the progress on innovation as we review each of our regions. Q3 was a pivotal quarter for North America. We completed the divestiture of the Snacks business and made good progress in eliminating associated stranded costs, which Lee will expand on.

The remaining core North American business is more focused, stable and profitable portfolio capable of generating gross margins exceeding 30% and low double-digit adjusted EBITDA margin. In the third quarter, North America organic net sales declined 3%, which was consistent with Q2 trends, excluding the impact of that divestiture. Importantly, our core business is stable with organic net sales growth across yogurt, tea, baby & kids: finger foods and cereal. And we delivered expansion in both gross margin and adjusted EBITDA margin year-over-year. Sales pressure in the quarter was largely confined to select smaller brands and included the impact of portfolio simplification as we will discuss. Notably, we continue to see improving innovation, driving momentum and share gains.

Let me give you more color on how our innovation success is contributing to core category performance. In tea, wellness tea remains a bright spot with dollar sales up high single digits and segment share gains in the quarter, supported by strong distribution increases and elevated consumer demand in functional benefit areas. Building upon this momentum, Celestial Seasonings is expanding its wellness platform with innovation launching beginning this month in gut health and throat support, further broadening its presence in these high-growth segments. This builds upon the successful wellness launches this year in emerging benefit areas: Detox, energy and women's wellness.

In baby & kids, finger foods remains the primary growth driver with Earth's Best holding the #2 position in this segment. Momentum continues behind our self-feeding platform, particularly our crunchy sticks Teething snacks. We are energized about the upcoming launch of Earth's Best Big Kids finger food. This multi-SKU expansion with protein and fiber for high-density nutrition is designed to extend the brand into new consumption occasions beyond baby and toddler into its backpack territory, and will be supported by a full funnel marketing campaign. In yogurt, Greek Gods continues to exhibit strong momentum with high-teen dollar sales growth and share gain.

Multi-serve remains the foundation of the business continuing to drive performance, and we have the power to expand distribution supported by strong underlying demand. Innovation remains a key focus, and we are moving with pace against the biggest growth opportunities. Our new single-serve packaging format is beginning to scale, helping to drive trial and introduce new customers to the brand. We are seeing promising incrementality both to the Greek Gods brand and to the single-serve category as a whole. In April, at select grocery retailers, Greek Gods launched a new high-protein offering, delivering 20 grams of protein per serving while maintaining the brand's differentiated indulgent taste profile.

As we move through the balance of fiscal 2026, we remain focused on advancing our turnaround strategy and positioning Hain for sustainable growth at or above category growth rates. Across our portfolio, key performance indicators point to improving brand health and stronger execution. We are increasingly effective at reaching and engaging core consumers through a more disciplined digitally-led approach with measurable returns and the momentum is evident across our core. Supported by an accelerated innovation and renovation pipeline, we are executing with greater consistency and impact, reinforcing our path towards a more focused, resilient and built-to-win Hain in North America. Turning now to our international business.

We have a portfolio of well-recognized and loved brands with decades of quality and category leadership and a track record of resilient financial performance. The categories we operate in have struggled with volume as heightened geopolitical uncertainty and elevated inflation, including rising fuel prices are contributing to a decline in U.K. and European consumer confidence. In the quarter, we saw an organic net sales decline of 8% due to continued industry-wide volume softness in wet baby food ongoing challenges in spreads and drizzles as well as a decline in branded soup from a challenging year-ago comparison and strong private label competition. As a result, gross margin and adjusted EBITDA margin contracted in the quarter.

The industry-wide decline we have seen in purees in the Baby and Kids category has stabilized, and we expect it to begin to recover as this month, we anniversary the beginning of the slowdown. As a reminder, the industry decline began last May, following a [BBC] documentary on nutritional content in baby food. Encouragingly, we have seen early signs of consumption improvement in Ella's Kitchen in the last two months. Ella's Kitchen remains the #1 baby and kids food brand in the U.K. and Ireland. We have a strong pipeline of finger foods and new frozen meals innovation coming to the market, all supported by exceptionally strong nutritional credentials when compared to the competitive set.

All of our innovation will be completely in-line with Office for Health Improvement and Disparities guidelines. The launches are backed by fully integrated end-to-end marketing activation. We believe this innovation will fuel the category and brand recovery by bringing new news at shelf while advancing our better for little ones positioning. The spreads and drizzles category continues to be challenged as increased consumer focus on health and wellness is impacting consumption patterns. We are leaning in and making bold moves with a robust end-to-end transformation of the Hartley's brand, anchored by a full relaunch hitting shelves in June.

This includes comprehensive product reformulation across the core portfolio with meaningful upgrades to improve fruit content and flavor and a step change in better-for-you innovation. As part of this relaunch, we are also rolling out Hartley's first ever 100% fruit spread along with new fruit flavor combination products designed to energize the category. The brand will debut with a new visual look and feel and will be supported by premium pricing and an in-store promotion strategy for consumption acceleration. Along with consumer communication designed to drive trial, reappraisal and category engagement. This innovation has been very well received by retail partners with expanded distribution and support confirmed for Q1.

Additionally, we continue to address near-term margin pressures by optimizing our manufacturing operations. In soup, we are the market leader with the top three brands in the U.K. New Covent Garden, Yorkshire Provender, and Cully & Sully, which span distinct propositions and good, better, best price tiers. Our most premium offering, Cully & Sully, again grew value double digits and share. And our private label soup grew organic net sales by high single digits. However, our remaining brands face aggressive private label competition and a tough distribution gain comparison in the year-ago period. We have a full brand relaunch plan for Yorkshire Provender this fall, representing a meaningful upgrade to the franchise.

We are updating every single recipe with high-quality ingredients redesigning the packaging to visually demonstrate our naturally abundant and honestly delicious food and introducing premium innovation through our special collection and adding [too] to our successful destination launch program. In spite of the pressure points in Baby & Kids, spreads and drizzles and soup, 50% of our brands are holding or gaining share, demonstrating brand and competitive strength in a tougher operating environment. We see renovation and innovation-led growth critical to energizing the categories with innovation rates that are accelerating across the portfolio.

Our innovation renewal rate or percent of net sales coming from SKUs launched or relaunched the last 3 years was more than 12% in the quarter, up over 2.5 points from a year ago. And we have significant renovation and innovation plan for Q4 and beyond as we have discussed. This innovation, along with the lap of the start of the industry-wide baby food softness is expected to drive improved organic net sales trends in Q4. Before I turn the call over to Lee for a closer look at the financials, I want to touch briefly on our ongoing strategic review. We are in the execution phase and our first action against North America snacks has been completed.

We are actively executing additional actions with a clear priority on further deleveraging and driving long-term shareholder value. As we've indicated previously, while this work is ongoing, we will provide updates only when there are definitive actions or outcomes to share. With that, I'll turn the call over to Lee for a more detailed discussion of Q3 results.

Lee Boyce: Thank you, Alison, and good morning, everyone. Before I go through our Q3 performance, I want to remind everyone that we completed the sale of our North American snacks business on February 27, 2026. Accordingly, our reported and adjusted financial results contain the results of North American snacks in January and February, but not in March. When we speak about organic net sales, by definition, we exclude the results of North American snacks from the calculation, both in the current quarter as well as in the comparable period. When we talk about certain items, excluding snacks, we exclude the impact of North American snacks and TSA proceeds and assume removal of associated stranded costs.

For the third quarter, we saw an organic net sales decline of 6% year-over-year, driven primarily by lower sales in the International segment. The decline in organic net sales reflects an 11-point decrease in volume mix and a 5-point increase in price. Adjusted gross margin was 21% in the third quarter. This represents an approximately 90 basis point decrease year-over-year, while improving by approximately 150 basis points sequentially. The year-over-year decrease was driven primarily by inflation and lower volume mix, partially offset by productivity savings and pricing. The sequential increase reflects the North American snacks divestiture as well as actions taken, including SKU simplification, more effective trade management, targeted pricing and productivity initiatives.

SG&A decreased 6% year-over-year to $59 million in the third quarter, primarily driven by a reduction in employee-related expenses. SG&A represented 17.5% of net sales for the quarter as compared to 16.1% in the year ago period. SG&A stranded costs less the impact of mitigation actions and TSA proceeds were negligible in the quarter. As Alison mentioned, we are making good progress in the elimination of stranded costs, which are now expected to be in the high end of the $20 million to $25 million range. We've already initiated actions to remove nearly 70%, primarily people-related costs, which we were able to implement quickly.

The remaining costs will be reduced through fiscal 2027, with roughly half coming out by the end of Q2 and the remainder by the end of Q4. In the near term, our transition services agreement, or TSA, is generating proceeds from providing ongoing support to the recently divested snacks business. Together with actions taken to date, this has essentially eliminated any near-term stranded cost impact. We are nearly finished with our restructuring program to date, having taken $108 million in charges associated with the transformation program, excluding inventory write-downs, out of an expected charges of $115 million to $125 million. We remain on track to deliver the targeted $130 million to $150 million in benefits through fiscal 2027.

Interest expense rose 17% year-over-year to $14 million in the quarter, primarily driven by higher spreads over variable rates due to last year's refinancing as well as increased amortization of deferred financing fees related to the credit agreement amendment and repayment of term loans using proceeds from the snacks divestiture. We have hedged our rate exposure of more than 70% of our loan facility with fixed rate of 7.1%. We continue to prioritize reducing net debt over time.

Adjusted net loss, which excludes the effect of restructuring charges amongst other items, was $1 million in the quarter, or $0.01 per diluted share as compared to adjusted net income of $6 million or $0.07 per diluted share in the prior year period. We delivered adjusted EBITDA of $26 million in the third quarter compared to $34 million a year ago. The decrease was driven primarily by lower gross margins partially offset by a reduction in SG&A. Adjusted EBITDA margin was 7.8%, demonstrating sequential improvement from 6.3% in the second quarter. Turning now to our individual reporting segments.

In North America, organic net sales declined 3% year-over-year, primarily driven by lower sales in Baby & Kids, partially offset by growth in Beverages. As Alison mentioned, the core is relatively healthy with growth in tea, yogurt and Earth's Best finger food and cereal. Excluding country brands, which consist of oil, nut butter and soup brands, organic net sales in North America would have grown 3%. Third quarter adjusted gross margin in North America was 23.4%, an increase of 100 basis points versus the prior year period. The increase was driven primarily by productivity savings and pricing, partially offset by lower volume mix and cost inflation. Excluding snacks, gross margin would have been 30% in the quarter.

Adjusted EBITDA in North America was $17 million or 10% of net sales, reflecting a decrease of 1% from the year ago period. The decrease resulted primarily from lower volume mix and cost inflation, nearly offset by SG&A reduction, pricing and productivity savings. Excluding snacks, adjusted EBITDA margin would have been 16.4% in the quarter, demonstrating the strength of the go-forward margin profile in North America. In our International business, organic net sales declined 8% in the quarter, primarily driven by lower sales in Meal Prep and Baby & Kids. International adjusted gross margin was 18.5% and a 270 basis point decrease versus the prior year period.

The decrease was driven primarily by cost inflation, partially offset by productivity savings and pricing. Adjusted EBITDA was $20 million or 11.7% of net sales, reflecting a decrease of 12% compared to the prior year period. The decrease resulted primarily from cost inflation and lower volume mix, partially offset by productivity savings and pricing. Now turning to category performance. In Baby & Kids, organic net sales were down 14% year-over-year, driven primarily by continued industry-wide volume softness in purees in the U.K., as well as by purees and formula in North America, partially offset by growth in finger foods in both regions and cereal in North America.

In terms of consumption, we have continued to see strength in Earth's Best finger foods and cereal in North America, with each showing dollar sales growth of mid- to high single digits year-over-year. Ella's Kitchen finger food also saw value sales growth of low single digits year-over-year. And while still in decline, we are seeing signs of stabilization in the wet baby food category in the U.K. and expect to see improvement as we begin to lap the industry-wide declines in May. In the Beverages category, organic net sales were flat year-over-year as growth in tea in North America and private label nondairy beverages in international was offset by a decline in branded non-dairy beverage.

We expect branded non-dairy beverage trends to improve in Q4 as we roll out significant innovation, including clean label and protein offerings. In Meal Prep, organic net sales were down 5% year-over-year. The decline was driven primarily by pantry brands in North America, spreads and drizzles in the U.K., partially offset by strength in yogurt in North America. [Greek God] continue to outpace the category, growing dollar and unit sales by high teens and low 20s percent, respectively, and gaining share.

Our SKU simplification efforts in our pantry brands had approximately a negative 1 point impact on Meal Prep organic net sales in the quarter, though these efforts are driving a more productive assortment that positions the business for stronger margin performance over time. Following the sale of the North American snacks business, the snacks category is comprised of [indiscernible] in the International segment. Organic net sales in snacks were down 7% year-over-year. Hartley's remains the #1 brand in Jelly pops, and we expect the category to recover as consumers continue to prioritize healthy snacking, and we bring meaningful new innovation.

Further, we are launching upgraded [four] jelly SKUs in Q1 with the cleaner ingredient list and the new look and category-leading innovation with our new protein collagen jelly, offering 10 grams of protein. Shifting to cash flow and the balance sheet. As Alison mentioned, we had a strong cash delivery in the quarter. Free cash flow in the third quarter was $35 million, an increase compared to the outflow of $2 million in the year ago period. The improvement was primarily driven by inventory delivery, improved accounts receivable collections and insurance proceeds, partially offset by lower benefits from accounts payable and accrued expenses. We are pleased with the progress we made on inventory, driven by improved operating discipline.

Inventory continues to be an area of focus for fiscal 2026. Days inventory outstanding improved to 73 days in the quarter to our lowest level in 2 years. This compared to 75 days in Q2 2026 and 79 days in the prior year period. As a reminder, every day of inventory is worth approximately $3.5 million. We also made progress in our days payable outstanding with days payable outstanding of 59 days in the quarter, an improvement from 57 days in Q2 2026, but down from 61 days in the year ago period. CapEx of $4 million in the quarter was down from $7 million in the prior year period.

We expect capital expenditures to be approximately $20 million for fiscal 2026. The completion of the North American snack sale and cash generation this quarter brought cash on hand to $44 million and net debt to $505 million, a reduction of $145 million since the beginning of the fiscal year. We also have $196 million of available liquidity under our revolver and remain in compliance with all credit agreement covenants. With leverage of 4.3x in the quarter, we have plenty of headroom under the covenant of 5.5x. We have a disciplined approach to capital management and continue to prioritize debt reduction. We have reduced net debt by $272 million over the last 11 quarters.

We are proactively addressing our December maturity. Our strategic review yielded a multistage plan aimed at materially improving liquidity and leverage, while creating value for shareholders. The sale of the North American Snacks business was an important first step. As we continue to execute the next phases of this plan, we are advancing additional actions, including further asset sales and operational improvements. We remain actively engaged with our lenders while we evaluate potential strategic transactions. We continue to believe that aligning the maturity solution timing with the execution of the strategic plan will enable us to achieve the strongest long-term outcome for the company and for shareholders.

We are confident that we will be able to refinance, extend or repay our debt prior to maturity. Turning now to our outlook. As previously communicated, we are not providing numeric guidance on fiscal 2026 operating results given the uncertainty around the outcome and timing of the completion of our strategic review. Looking ahead, we expect the divestiture of North American snacks to be gross margin and EBITDA accretive, and the profile of the go-forward North American portfolio to have gross margin above 30% and EBITDA margin in the low double digits. For fiscal 2026, we continue to expect positive free cash flow for the full year.

While it's too early to provide guidance on fiscal 2027, I did want to provide a little bit of context. In fiscal 2027, our fundamental priorities will be continuing to stabilize as through our five actions to win, thereby setting the foundation for future growth, driving gross and EBITDA margin improvement versus fiscal 2026, generating cash and eliminating stranded costs. Upon completion of our strategic review, we plan to provide guidance for fiscal 2027. Now I'll turn the call back to Alison for some closing remarks.

Alison Lewis: Thanks, Lee. We are making tangible progress on our turnaround, strengthening our foundation through improved operating discipline, strong cash generation and ongoing net debt reduction. We simplified the portfolio with the completion of the North America Snacks divestiture, positioning North America for a stronger margin profile and focused reinvestment in growth and we are actively executing the next phase of our strategic review. We delivered gross margin and adjusted EBITDA margin expansion in North America while advancing brand renovation and innovation across tea, Baby & Kids and yogurt. Internationally, we're growing or holding share in half of our brands supported by innovation pipeline while navigating category softness and a few isolated challenges that we are quickly and aggressively actioning.

We are actively addressing the December debt maturity and remain confident that we will be able to refinance, extend or repay prior to maturity. Q3 reinforce view that while stabilizing the top line remains a priority, the underlying operating trajectory is improving. As we close out fiscal 2026, we remain focused on executing our 5 action to win to drive sustainable, profitable growth. That concludes our prepared remarks, and we are now happy to take your questions. Operator, please open the line.

Operator: [Operator Instructions] Your first question comes from Jim Salera with Stephens Inc.

James Salera: I appreciate the update on some of the new innovations. Are you able to give us some details about how you're thinking about supporting kind of the continued innovation and the success once the products launched and are on shelf amidst all the other activity. I mean should we think about some of the flow-through benefit on the improved gross margin is going to support either trade spend or marketing or in kind of the remainder of the calendar year is all the incremental savings just going to drop down to the upcoming maturity that you mentioned?

Alison Lewis: Yes. Happy to jump in. So innovation, overall, we believe it's a really important part of our growth story, as you heard. I think many of these categories rely on new news to not only create interest in the category and drive the category but also expand distribution, expand presence, drive new occasions, et cetera. In terms of that innovation, we do believe that, that innovation does need to be supported with marketing. It's really important to create that awareness, to create that trial, to create that repeat.

And we believe that innovation isn't one-and-done, meaning launch innovation, but then you have to leverage it and leverage it over a 3-year time horizon to make sure that it sticks and is sustainable. So we have been able to increase our marketing investment in North America, and we're putting that investment against the innovation. We've worked out ways where we can get a halo on the [base] brand, but also drive the innovation. And the same with international, while international has remained relatively flat year-over-year. We are looking to, as we go forward, continue to accelerate that innovation behind -- marketing investment behind that innovation. So I think we're talking about from a P&L standpoint, balance.

We're looking to stabilize and grow, particularly our core businesses, as we talked about. We are seeing improvement in gross margin and you saw a sequential improvement. We are looking to take some of the benefit of the simplification actions that we've taken in North America not only from the sale of snacks, but also the SKU rationalization and use that more productive portfolio and gross margin while to invest a little bit back into the business. We're going to be balanced in doing that. But we believe that investment is an important part of our growth story to support that innovation.

Lee Boyce: I would just say we're also prioritizing our spend. We talked about this before on the marketing to make it more effective as well. So we do want to drive awareness and trial in the innovation and renovation. And I think as we talked about previously, we are accelerating the shift to digital and social-led as well. So it's not just about kind of the investment. It's also just the effectiveness of that investment as well.

James Salera: Great. And then a follow-up question on the core business you guys called out, you've seen some stability on the organic sales line across yogurt tea and the baby segments. Anything we should think about in the back half of the year just as a lot of uncertainty on kind of the overall economic backdrop. I don't know if you've seen competitors maybe engaging in more trade spend, the same way that we've seen in more kind of mainstream categories? And do you have any flexibility if you see more competition or more discounting to be able to kind of address that while also working through some of the other parts of the strategic plan.

Alison Lewis: Yes. So I'll comment on North America, if you asked about North America. I mean, we have not seen a significant uptick in competitive activity. Just if you look at the published data out there, [indiscernible] on promotion. It's remained relatively stable, a little bit of puts and takes by some segments, but relatively stable. In terms of what we expect, we can expect that the business those core businesses in North America. So yogurt, tea and our baby business will remain relatively stable and retain that growth.

We have seen that consistently quarter-on-quarter as we continue to launch innovation, as we continue to keep the marketing investment on the business, we do expect that we'll continue to see the results that we've seen as we go forward. In terms of flexibility, if competition becomes more aggressive. We will always be surgical and smart about how we think about that investment. But obviously, we do need to be -- remain competitive in the marketplace. And so we'll appropriately focus dollars as we need to based on where competition is moving.

Lee Boyce: And then maybe just on the international side. We do continue to see the major brands leaning heavily on promotions. So there is some increase in media investment there, but the same strategy with North America, we continue -- we will be surgical as we look at our spend.

Operator: [Operator Instructions] Your next question comes from Anthony Vendetti with Maxim Group.

Anthony Vendetti: Yes. I was just -- in terms of private label, it seems like in this economic environment, probably consumers are moving towards that a little bit more. Maybe just talk a little bit about your private label strategy, how you're addressing that? And then certainly, I like the fact that you're moving towards these higher protein offerings with Greek God, that seems to be resonating. And in terms of branded non-dairy, it sounds like you have a new offering coming out that's high protein. When is that scheduled to hit the shelves, and are you going to be putting marketing dollars behind that?

Alison Lewis: Great. So on private label, I mean, I'll break it down by North America versus international, because I think actually there's quite a difference in terms of those two regions. So from a North America perspective, with the exception of yogurt and our pantry brands, private labels are relatively low share and we have not seen significant growth in private label. So tea and baby, two categories where quite low private label, 5% or below. When it comes to the yogurt brands, I mean, yogurt definitely has more private label in the category. However, it is also a category that really relies on innovation and relies on sort of benefits such as protein, which you mentioned.

And so the branded players by default, I think, have a leg up because they innovate faster in those areas. So not overly concerned about private label in yogurt as long as we continue to innovate and follow where the consumer is going and what the consumer needs. In our Pantry brands, we do have more competition from private label. As you can imagine, those can be -- those are used for baking ingredients, those sorts of things. So they're more substitutable brands, and so you do see more competition there. And so again, continuing to make sure that we're managing versus and driving stability versus private label is important.

When it comes to international, we have quite a different story. We actually have seen private label increase in international. I mean overall, while inflation in international versus North America is sort of the same from a rate basis. Consumer sentiment is very different in North America versus international. And so you do see a lot more shifting to private label. You see a lot more premiumization in private label in international. The piece of good news, I will say, as we've talked about with you in the past, is we actually have quite a balanced portfolio in international. So while we have brands and play well in the branded space. We also have significant private label business.

And so we're able to sort of compete on both fronts depending on where the market is shifting.

Anthony Vendetti: Okay. And then just lastly, on Meal Prep, that segment seems to be a good segment in the U.S. Is there a plan to return that to growth? How do you see your strategy there playing out?

Alison Lewis: In the U.S. specifically, you're asking?

Anthony Vendetti: Yes.

Alison Lewis: Okay. So yes, in the U.S., I mean Meal Prep consists of our yogurt business, which is growing very well, gaining share. You mentioned, and I actually forgot to answer that part of your question. You mentioned the innovation. We've moved into single-serve, we've moved into protein that has launched with -- started with one large retailer and obviously, we'll continue to roll that. So moving into sort of new occasion space, and we are absolutely supporting that with marketing. So that's a very important and valuable part and the largest part of our Meal Prep segment. When you look at the remainder of Meal Prep, it really is what we call the Pantry brands.

The Pantry brands consist of our nut butters, our oils and our broth business. That is under 20% of our total portfolio. And that business, as I mentioned, is a little more it's been a little more challenging for us because they're busy categories. They have higher private label, higher substitutability. We're relatively small share in those categories. So our focus in those categories is really stabilizing. We're doing a lot of work sort of by retailer on how do we stabilize those businesses with trade investment and a little bit of marketing investment to keep those businesses healthy as we move forward.

Operator: At this time, there are no further questions. I'll now turn the call back over to Alison Lewis, CEO, for closing remarks.

Alison Lewis: Well, thanks for joining today. We appreciate the questions, and we appreciate the time. I guess what I'll close with is really what I opened with, which is, you saw that this quarter represented a quarter of strong cash generation, total debt reduction of $155 million, with materially improved our financial position, and we closed the divestiture of the snack business. We're also seeing our turnaround take hold with a meaningful EBITDA and margin improvements as we look at the business quarter-on-quarter. And while revenue was slightly below expectations, we see growth in many of our core categories, and we're very focused and actively addressing the isolated challenges.

So we believe that as we closed the quarter, the underlying operating trajectory is improving, and we're going to continue to move that forward as we move into the fourth quarter and beyond. So thanks for joining.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.