The Hain Celestial Group, Inc. (HAIN) Q2 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Hain Celestial Second Quarter Fiscal Year 2018 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over Ms. Mary Celeste Anthes, Senior Vice President, Corporate Relations. Ma’am, you may begin.

Good morning, Skyler, and thank you all for joining us today. We are pleased to report Hain Celestial’s second quarter fiscal year 2018 earnings results. Irwin Simon, our Founder, Chairman, President and Chief Executive Officer; Gary Tickle, Chief Executive Officer, Hain Celestial North America; and James Langrock, Executive Vice President and Chief Financial Officer, as well as several members of Hain Celestial’s management team are here with us today. Our discussion today will include forward-looking statements which are current as of today’s date. We do not undertake any obligation to update forward-looking statements either as a result of new information, future events or otherwise. Our actual results may differ materially from what is described in these forward-looking statements, and some of the factors which may cause results to differ are listed in our publicly filed documents, including our 2017 Form 10-K and other reports filed with the SEC. A reconciliation of GAAP results to non-GAAP financial measures is available in our earnings release, which is posted on our website along with the presentation under Investor Relations. This conference call is being webcast, and archive of the webcast will be available on our website under Investor Relations. Our call will be brief. So, please limit yourself to one question. And if time allows, we’ll take additional questions, and management will be available after the call for further discussion. Now, let me turn the call over to Irwin Simon. Irwin?

Thank you, Mary, and good morning, everyone. Our global teams continued to make significant progress across key areas of our business in fiscal 2018 second quarter. We remain committed to the four-point plan we laid out in June of last year which includes investing in our top brands and capabilities to grow globally; delivering on Project Terra cost savings and productivity; enhancing our leadership team to deliver to our strategic plan; and last but not least, returning value to Hain Celestial shareholders. Hain Celestial remains uniquely positioned in the growing organic, natural and better-for-you products industry. Across the U.S., UK, Rest of the World, we have 24 of the leading brands that are number one and number two in their respective categories. And our most significant brand building investments to-date started this fiscal year. With regards to the quarter’s performance, our worldwide net sales reached $775 million, a 5% increase compared to $740 million last year. Adjusted EBITDA increased 19% to $83 million from $70 million in the prior year. And adjusted EPS increased 28% to $0.41 compared to $0.32 in quarter two of last year. Our second quarter results reflect the strength of our diversified businesses. Our international business segments generate solid growth year-over-year. UK and the Rest of the World, which includes Europe, Canada, Cultivate were up mid single digits in constant currency net sales. Our UK net sales growth primarily reflects 13% growth from Tilda, 15% growth from our Ella’s business and 12% growth from Hain Daniels brands, with strong brand performance from Hartley’s, Linda McCartney and the Cully & Sully brand. Net sales growth for Hain Celestial Canada was driven by the Yves Veggie Cuisine, Sensible Portions and Live Clean brands. Hain Celestial Europe had strong growth from Natumi, the Joya brand, the Dream brand, and their own labels. In the U.S., we continued to execute on our strategic plan to drive growth of our top 11 brands and top 500 SKUs. We have made significant brand building investments and identified numerous opportunities to drive improved growth and profitability. While the U.S. business is not yet growing at the level of our international business or my expectations, we expect these investments to pay significant returns in the future period. The results of some of our brand building investments are evident in this quarter. Celestial Seasonings net sales were up 13%, a significant turnaround. Net sales for MaraNatha increased 8%, a significant turnaround. Earth’s Best increased 6%. And in snacks, Terra and Garden grew low single digits. Our personal care portfolio also continued to outperform with Alba Botanica’s Avalon Organics, Live Clean brands, all up solid double digits. We also got ones that had issues and declined, and Gary will discuss the plans to grow them in the future. We are also very pleased with Hain Pure Protein’s improved results during the most important quarter of the year, for the protein business. Plainville Farms, net sales increased 15%; FreeBird brand net sales increased 17%; and our Empire Kosher brand net sales increased 7%, which was partially offset by a decrease in private label and the discontinuation of our Round Hill conventional brand. Hain Pure Protein remains one of the leading 100% organic and antibiotic-free, fresh poultry producers in the U.S. For Q2, we had a very strong finish to the holiday season, delivering well over 1.4 million turkeys to our customers and consumers. While we incurred incremental costs to meet the strong demand, our profitability tripled compared to the prior year. In addition, we are pleased to report that everybody got their turkey for Thanksgiving and our services levels are 99%. Now, moving on to an important project called Project Terra, global cost savings and worldwide productivity initiatives. We delivered approximately $35 million of savings in the first half of 2018, in line what we said out to achieve, as we move forward our target of $100 million. As we have told, most of these savings are backend loaded. During the quarter, to help achieve this number, we engaged Alix Partners, a leading consultant firm that specializes in implementing cost savings initiatives to work with us, to ensure we drive that is much non-value added costs out of the business as possible. Alix Partners is supporting our efforts to accelerate and amplify our savings initiative, especially in procurement-related areas by consolidating resources around direct product costs such as ingredients, packaging and co-manufacturers. We’re also addressing general administration costs across our operations as we execute on our $350 million Project Terra plan. Today, we announced, we’re exploring a divestiture of Hain Pure Protein, as we look to reduce complexity and drive the greater efficiencies across our businesses, simplify our brand portfolio. The category for fresh, organic, antibiotic-free protein remains strong. While we continue to believe this is a highly attractive business with very good growth potential, as you saw in our numbers last quarter, we have determined, it is not core to our go-forward strategy. We have received a tremendous amount of interest in this business. We believe this strategic move will enhance shareholder value as we position Hain for future growth. Before I turn the call over to Gary, let me share a few thoughts on the direction of the industry and how Hain is uniquely positioned to benefit from where the industry is headed. In my 25 years at Hain Celestial, I haven’t seen an industry change as much it has over the last couple of years. During our meetings with major retail partners, we have a seat at the table, and they are focused on three key areas, brick and mortar, click and pick, and e-commerce. They are collaborating with our teams on organic natural products that resonate with their consumers, particularly as we position ourselves for the shift that continues to increase the move to e-commerce. Today, a solid part of Hain Celestial business occurs via e-commerce. In the United States alone, we have approximately $80 million in net sales. Three years ago, we had minimal sales. We expect to double or even triple that over the next two to three years. According to IRI, e-commerce could represent 10% of grocery sales by 2022. In addition, it is estimated that 70% of shoppers will be buying their groceries online within five to seven years according to projections from the Food Marketing Institute and Nielsen; total online grocery spending could reach $100 billion. So, we’d be moving where the consumers are moving to. Organic products have three times greater share of sales online than conventional products, and we continue to position Hain to win with our leading organic natural products. Other investment areas include international. We expect our business in India, Middle East and Africa to grow nearly $100 million by the end of fiscal 2021. At the same time, in China, we see tremendous e-commerce opportunities for our Earth’s Best brand, particularly in infant formula. We believe we’re making the right strategic changes and investments in our go-to-market strategy with particular emphasis in the U.S., to support the shifting consumer purchasing dynamics and evolving retail landscape. We acknowledge these efforts will take some time to yield results but we are encouraged with what we are seeing in our business. As I mentioned earlier, a key piece of creating stronger and more profitable Hain Celestial is simplifying our business. Part of this strategy requires us to walk away from overly complex and low-margin SKUs. As a result, our team remains intensely focused on the growth and investment behind our top 11 brands and our top 500 SKUs in the U.S. And last but not least, always to keep expanding on our Project Terra cost savings and productivity initiatives. These efforts are creating an even stronger Hain Celestial for the long-term. Gary will discuss his U.S. business wins, challenges and an update on their transformational strategic initiatives in more detail in a few minutes. I also want to touch on tax reform. James will review it in greater detail. But, I am really excited about the opportunities for Hain, as we go from an effective tax rate of 30%, to a much lower rate in the mid 20s. This will provide a significant opportunity to use these savings to fuel incremental investments into our brands, to grow the top line to drive awareness and household penetration as well through invest in our people and infrastructure, which we’ve already started. Over the last 25 years, we’ve created an incredible company at Hain Celestial. We’ve been a visionary in the organic natural products industry and we are still leading the way. We have made a lot of progress on our business transformation with our greatest opportunities still ahead. With that, I will now turn over to Gary, to take you through his U.S. business. Thank you.

Thank you, Irwin. Good morning, everybody. In the U.S., our team continued to execute on our strategic plan to drive growth for our top 500 SKUs, driven by the top 11 brands in both measured and non-measured channels. During the second quarter, we made progress in key areas of our business, a few of which I’ll highlight today. We acknowledge that we are in the early innings of realizing our full growth potential. Our focus is on winning where our consumers and our shoppers are engaging with our products and brands. The evolution of our consumer preferences and shopping behaviors is creating different growth dynamics between traditional or what we refer to as measured MULO+C channel and our non-measured channels, which includes Whole Foods, and Sprouts, the natural channel club and e-commerce amongst others. This evolution is evident in both the performance of our top 500 SKUs in the overall U.S. business and the performance; I’ll discuss these dynamics in more details shortly, but first let’s review our U.S. performance. U.S. net sales were down 3% for the second quarter. Excluding SKU rationalization, the divestiture of Rosetto and inventory realignment of $13.5 million, Q2 net sales were down 4.5%. Turning to our price mix and volume, we saw a slight decline in our price of 60 basis points and mix of 30 basis points; volume impact was a further 200 basis points. From a brand perspective, we have recognized approximately $15 million in topline net sales headwinds in the quarter. Firstly, Sensible Portions was down $6.5 million year-on-year. We experienced supply issues related to our co-packer and we continued to cycle through the loss of distribution from one large mass customer. This lowered our planned promotional programming and delayed one club program to Q3. We believe the supply has been resolved and we are now able to fulfill demand. We have strong incremental programs in the second half of this fiscal year including club programs and expanded distribution in the non-measured channels that we expect to drive future growth. Secondly, Spectrum net sales were down double-digits or around $2 million, driven primarily by the category decline in coconut oil, which is declining around 23%. However, we continue to grow share in coconut oil as we cycle extensive changes from our rebranding initiatives for the total Spectrum oil offering. In addition, our brand marketing campaign was kicked in mid-October 2017. Thirdly, Rudi’s Organic Bakery net sales were down double digits or around $2.8 million, as a result of lower velocities and some distribution losses. Our team continued to work on regaining distribution, including the development of our new DSD model for Rudi’s in fresh bread, with the new product formulation, commencing in late Q3 for the Northeast region. In addition to the Midwest, this will be the first in a potential expansion of this new route to market for Rudi’s. Finally, we saw some service level issues related to our personal care soups and broths brands, this impacted results by around $3.7 million year-over-year. We expect the full recovery in supply chain through Q3 for both, personal care, soups & broths. For comparative purposes versus the prior year period, we had a shift in the timing of promotional spending for tea and another promotional program for snacks from Q2 to Q3 of this fiscal year which in total was a drag of approximately $2.5 million. Turning now to the top 11 brands. There were also a number of positive results from our brand building efforts as these efforts gained traction and momentum. Six of our top 11 brands posted solid increases in net sales versus Q2 last year and one brand was essentially flat. Celestial Seasonings tea and Alba Botanica personal care each generated double digit net sales growth. MaraNatha had net sales increase of high single digits, Earth’s Best net sales increased was mid single digits, and Terra and Garden of Eatin’ net sales increased low single digits. Other brands that are up double digits are Live Clean, Avalon Organics and Arrowhead Mills. As we’ve previously reported, we had engaged in a strategic evaluation of our product portfolio in order to reduce complexity and eliminate lower margin SKUs. We believe this will enhance our long-term growth prospects and drive stockholder value. As a result of this ongoing review, we added about 120 additional SKUs to our rationalization program for a total of over 700 to date, which we expect to be phased out of our portfolio by the first quarter of 2019. In total, SKU rationalization represented $4.4 million of drag to Q2 segment net sales versus prior year and $1.7 million of which was from the incremental SKUs we added this quarter. As Irwin mentioned today, natural organic product share is three times greater online versus bricks and mortar stores. This is an opportunity for us but it also distorts growth trends in measured versus non-measured channel sales. Many of our major traditional retail partners are investing in a range of dotcom solutions, either separately or in association with the physical stores, and the result is more consumer products are becoming available online. This is a clear strategic focus for us and we’re investing across these solutions to drive our future growth. E-commerce is growing strongly for us with growth at around 40% in consumption sales and this is coming across a range of our key brands. This includes strong growth of a small base of our portfolio in the range of dotcom solutions our retail partners are investing in. In addition, other specialty channels and club formats continue to show a strong potential for our products and brands. Starting in mid-Q3, there will be expanded investment in the online channel with new dedicated programs and new methods of selling online. We have built strong growth plans on the back of this investment for late Q3 and into Q4. Now, I would like to focus on our second quarter consumption data for the U.S. business. Our fundamental strategy remains of being clear focused on the top 11 brands and top 500 SKUs which is our core portfolio for the future growth and 93% of our sales today. This focus will allow us to continue to drive cost and complexity out of our business including the rationalization of overly complex and lower margin SKUs. While the U.S. growth rate will be impacted by this portfolio transition, the end result will be a higher quality, more profitable portfolio that will be better positioned to drive growth going forward. In MULO+C our top 500 SKUs were down 2.3% for the 12 weeks ended 12/31/2017, which would be time period I reference throughout unless otherwise noted. We are not pleased with the performance particularly, given natural organic category was up mid single digits in the quarter for MULO+C, driven in part by expanded distribution of private label in the category. Our team continues to strengthen our position in MULO+C with improved promotional programs planned in the second half of fiscal 2018. We’ve had positive meetings with all our key retail partners across MULO and non-measured channels with a focus on our top 11 brands and top 500 SKUs as we look towards category resets. We expect -- expanded distribution with key retail partners including for MaraNatha, Alba, Sensible Portions, Earth’s Best and Live Clean. As a result, we expect to have improved trends in MULO+C in the second half of the year as these changes yields benefits. In the non-measured channels which includes Whole Foods, the natural, Amazon Club and specialty stores, our brands are strong and getting stronger. The top 500 SKUs grew at 10% in the non-measured channels and the trends in the natural channel continue to improve in the quarter for at our top 500 SKUs across the following key brands. Alba Botanica, Avalon Organics, Arrowhead Mills, MaraNatha and Terra were all up double-digits; Celestial Seasonings, Garden of Eatin’ and Ella’s Kitchen were up high single-digits. We will continue to see expanded programs in the fourth quarter in the club channel, particular for personal care. So, the question is why is this scanner data in our internal U.S. numbers showing a weaker level of performance. It can be explained with all of these SKUs outside the top 500 which to put in perspective is approximately $23 million of consumption sales in the quarter and about $90 million of annual consumption sales. These of tail of SKUs are declining double-digits in measured channels and in our unmeasured channels. That is what’s dragging down our growth. Over time, the impact of the SKU rationalization in the SKU tail [ph] will decline. The net results of these initiatives will be a stronger, higher growth U.S. business. As that happens, you’ll see our reported numbers in the scanner data become more representative of the performance of the business. For the second half of fiscal 2018, we will expand, execute against our strategic plan for growth. This includes brand building efforts and investments in our top 11 brands which we expect to generate ongoing momentum for the top 500 SKUs across the total channel view, especially in non-measured channels, particularly with positive performance in e-commerce; we have a stronger promotional programming in the -- than in the first half of the year, particularly in snacks and tea and expanded distribution on core SKUs, as I mentioned. We have a strong club program in place for personal care in quarter four and a very strong plan on e-commerce expansion. That concludes my overview and I look forward to meeting with you many of you in the coming weeks and continuing to update you on our U.S. business. Thank you and I’ll now turn the call over to James.

Thank you, Gary, and good morning, everyone. Consolidated net sales increased 5% to $757 million or 2% on a constant currency basis. When adjusted for constant currency, acquisitions, divestitures and certain other items, net sales increased 1%. Adjusted gross margin was a $157 million or 20.2%, a 140 basis-point year-over-year improvement. This improvement was driven by operating efficiencies achieved in the UK, HPP and Rest of World segments and Project Terra cost savings of $18.6 million, partially offset by commodity inflation, higher freight costs as well as unfavorable mix in the United States segment. SG&A as a percentage of net sales is 11.6%, a 30 basis-point increase, primarily due to increased marketing and headcount investments in the U.S. Adjusted EBITDA increased 19% to $83 million from $70 million in the prior year period. We reported adjusted EPS of $0.41 compared to $0.32 in Q2 last year, based on effective tax rate of 24.2%. The lower tax rate had a $0.02 benefit in the quarter. I’ll talk more about the implications of tax reform in a bit. I will now provide you with key financial results for each of our business segments. For the U.S., Gary discussed the topline highlights. So, I’ll discuss the underlying financial results. U.S. adjusted gross margin declined 85 basis points year-over-year to 26.4%, largely driven by commodity inflation, unfavorable mix and higher freight costs, partially offset by Project Terra cost savings. U.S. SG&A increased due to planned marketing investments of $5 million as well as planned headcount increases in sales and marketing of $1.6 million. Accordingly, U.S. adjusted operating profit decreased from $40.6 million to $31 million as we continued to invest in the U.S. business to drive growth in the back half of the year. At Hain Pure Protein, net sales increased 4% to $159 million. Adjusted gross margin increased 510 basis points to 10.6% and adjusted operating margin increased 560 basis points to 7.9%. This was due to operating efficiencies achieved and Project Terra cost savings along with the strategic shift to more organic and antibiotic-free poultry. In the UK, net sales increased 12% to $238.2 million over the prior year period or 5% on an adjusted basis. Adjusted gross margin improved 200 basis points to 17.8%. Adjusted operating margin increased 140 basis points to 6.9%, driven by sales growth, price realization and continued operational efficiencies, partially offset by commodity inflation. Net sales for the Rest of the World increased 12% to $107.7 million over the prior year period, or 6% on a constant currency basis with Canada, Europe and Cultivate all growing mid-single-digits. Adjusted gross margin within the Rest of World segment increased 210 basis points to 24.1% and adjusted operating margin increased 290 basis points to 10.6%. Sales growth, operating efficiencies and Project Terra cost savings drove the increased profitability in the Rest of World segment. As Irwin mentioned, we are pleased with the growth in net sales and profitability across our Hain Pure Protein and international business segments Now turning to our cash flow and balance sheet. For the second quarter, capital expenditures were $16.1 million and operating free cash flow was $28.8 million as compared to operating free cash flow of $89.1 million in the prior year period. The change in operating free cash flow resulted from favorable working capital in the prior year due to the timing of inventory purchases. At December 31st, our cash balance was $139.2 million and net debt was $627.9 million, which is an $18 million improvement from the prior year period. Our bank leverage ratio was 2.97 times at the end of Q2 2018, down from 3.01 times in Q2 2017. We also announced an amended senior credit facility. This provides for unsecured borrowings up to $1.3 billion from $1 million with the same pricing grid and financial covenants as our prior facility. There is a $1 billion revolver and $300 million term loan with 5% annual amortization all due in five years maturing in February 2023. With regard to the Tax Cuts and Jobs Act, we expect our effective tax rate for fiscal 2018 to be 26% and for fiscal 2019 to be approximately 24% to 25%. In addition to the benefit from a lower effective tax rate, we also had a one-time Q2 net benefit of $23 million, associated with the corporate tax reform, including the reduction in the statutory federal income tax rate from 35% to 21%, resulting in a deferred tax benefit of $29 million. We also recorded repatriation toll charge estimated to be approximately $5 million, payable over an eight-year period, beginning in fiscal year 2019. Now, moving on to 2018 guidance. We are reiterating our fiscal 2018 net sales guidance. We expect net sales in the range of $2,967 million to $3,036 million, an increase of approximately 4% to 6% as compared to fiscal year 2017. We are expecting low to mid single digit growth in the U.S. and HPP, while the UK and the Rest of World are expected to grow mid to high single digits. We are updating our adjusted EBITDA and earnings per share guidance to take into account continued investment in marketing and brand awareness, primarily in the United States, as well as recent freight and certain commodity price headwinds. We expect adjusted EBITDA in the range of $340 million to $355 million, an increase of approximately 24% to 29% compared to fiscal 2017, which reflects a $100 million of Project Terra savings and an increase in brand investment of $40 million to $50 million primarily in the United States. These investments are important to our efforts to deliver an accelerated, topline growth over the long-term. Adjusted earnings per diluted share in the range of a $1.64 to a $1.75, which includes an $0.08 to $0.09 benefit due to tax reform. We are utilizing these savings from the tax reform to continue to fund the marketing investment and to offset headwinds, I mentioned previously. We expect significant contributions in fiscal 2018 from topline growth and margin enhancement, while also making important investments in the business. Now, turning to our outlook for fiscal 2018 cash flow. Based on fiscal 2018 EBITDA and working capital expectations, we anticipate cash flow from operations of $200 million to $235 million and we expect capital expenditures to be approximately $75 million. With respect to the cadence for the remainder of the fiscal year, from a net sales perspective, we continue to expect Q3 and Q4 essentially consistent with one another. Adjusted EBITDA and EPS will improve each quarter throughout fiscal 2018. As a reminder, our guidance is provided on a non-GAAP or adjusted basis, excluding the impact of any future acquisitions and other non-recurring items we will continue to identify with our future financial results. In summary, each of our business segments has done a thorough view of their opportunities and potential challenges for the second half of fiscal year 2018, and we are confident on achieving our results. With that, Irwin, Gary and I are now available for questions. Operator?

Thank you. [Operator Instructions] And our first question comes from the line of Scott Mushkin from Wolfe Research. Sir, your line is now open.

Hey, guys, thanks for taking my questions and thanks for the slide deck. I think it’s very useful. So, I just wanted…

Scott, could you speak up. We can’t hear you in your low voice today.

I’m in my low voice, is that better?

Yes, it’s better. Thank you. Sorry about that. Anyway, I just said thank you for the detail in the slide deck, I appreciate it. So, what I wanted to do is ask you a little bit about the U.S. business, how to turn it around. And I was hoping you guys could give us a little bit more detail on the brand building activities, what you’re spending, what you’re doing to try to drive some pull-through the channel. And then, the second question I have is related to the exact same thing. It seems to us like in the measured channel, and I know it’s having its challenges. But, if we -- I was just down in Texas at HEB and I was surprised to see how little space Earth’s Best baby food had down there. And I was just wondering -- it seems to us that you guys are maybe losing some momentum in that measured channel, and I wanted to you guys to maybe walk through some of the actions maybe you can take to stop that? Thanks.

Thanks for the questions, Scott, multi-headed questions. Maybe the best way of addressing it is let’s talk about the outlook on where we’re going. And I’ll talk about it in a few specific buckets that are important to our success. Firstly is programming, secondly is expanded distribution, the third one is online acceleration, the fourth one is innovation and the fifth one is channel focus. So, in terms of programming, in the back half of the year, we already have a clear line of sight to a stronger programming schedule. We know we knew something specifically for tea out of quarter two into quarter three, and we are doing that on the back of strong base velocity. So, we expect that program to pay out. In snacks, we have a much stronger program laid out for Sensible Portions and Terra, some of that is in MULO, some of it is unmeasured channel but we have a clear line of sight to that as well. And we know in terms of our pantry business, we have some clear objectives around distribution drives and some in-store programming and marketing with a couple of our key retailers. So, we definitely see clear programming growth in the back half. In distribution, because you talked a little bit about this, of course, we have to cycle through each of the retailer’s review processes. And of course in some of these, we are still cycling out of lost distribution in previous cycles. But, if we look forward to what our expanded distribution looks like, we have expanded distribution on Sensible Portions, Alba, Live Clean, a number of expansions in the specialty channels such as T.J. Maxx, some expanded distribution coming at Rite Aid as well as in our club channels. And all of those are quite significant in the back half of this year, on top of still going through review cycles right now for a number of customers where we’re waiting decisions. So, there is still opportunity for us to expand even further on the distribution front. In terms of online, we have clear plans, as I pointed out, to really accelerate the online opportunities. Here, our brands definitely over index already, had very high ratings and reviews four plus stars, and we are setting up a differentiated way of going to market in online, which you’ll see come out in the middle of this quarter. We can talk more about it at the end of this quarter. But it’s an opportunity, not just to sell but also to market our brands because many of our consumers go online first to find out which brands to choose, even if they choose to buy them in bricks and mortar. Fourthly in innovation, we have a very strong plan around spectrum in terms of some new innovation. MaraNatha has new innovation coming out; we have new packaging coming out for Spectrum as well as well as some changes to our Rudi’s bread formulations. These are just some of the things that are coming out as well as some of the personal care innovation. So, we have a very strong back half program for innovation. And finally, in the channels themselves, you call out MULO, but for us, if we look at the non-measured channels and we look particularly to the natural channel, we’re seeing sequential improvement quarter-on-quarter with each read in terms of our core performance, the TDPs that we have and the growth and velocity of those core ranges. So, I am very encouraged what I am seeing in what is our bread and butter channel from past days; it’s definitely going through renewal. So marketing plans are giving us the opportunities to obviously represent our brands, come back to our core retailers and give them a reason to give us distribution. And I feel strongly, the investments we have made giving us these opportunities, and this is why we are getting these expanded distribution chances in the back half of this year.

And Scott, just to jump in here. Number one, I think, as we mentioned, Earth’s Best up 6%, Ella’s in the UK is the number one baby food in the UK and one of the fastest growing in Europe. So, I think we have a big focus on baby. One of the biggest changes going on in where baby products are sold is e-commerce. And if you come back and look at HEB, I wouldn’t be surprised, again, a big part of their assortment is e-commerce and I’m not sure what was in the store. But, if you just look today what’s happened with our baby business where Babies and Toys R Us was a big, big customer; they are closing stores and we see what’s happening there. So, there is a such a big transformation, I’ve never seen, as you go to a retailer today, you talk about their brick and mortar, which they hope to keep flat, their click and pick and then their e-commerce. Now, let’s be very clear, in e-commerce, through a retailer, that does not show up in IRI and Nielsen numbers, okay? So, I think as you look the baby business, in regards to birth rate, it’s flat; we’re up; it’s ultimately taking share. And I just think it’s continuously a shift in regards to where shoppers shop today. And I think the more important is the conversations we’ve been having with retailers is how they want to take out conventional products and put more and more natural products. So, I am a little surprised at that in HEB, because where the space is going to is more and more from grubber [ph] products to more and more natural organic products. And that’s what we are seeing out there, and that’s why we see the growth in Earth’s Best that you do.

Yes. Baby is the fastest platform online in terms of growth for us.

Because you want moms.

Yes.

Scott, does that answer your question?

Yes. That was great, guys. Thanks for all the detail and good luck with that U.S. business. I think people really want to see it turned around.

Thank you.

Our next question comes from the line of Andrew Lazar from Barclays. Your line is now open.

Hi. Good morning, everybody. So, I guess, Irwin, my question revolves around some of the decisions around portfolio optimization. I guess, regarding HPP, I am just curious, why now is the right time to explore divestiture and what led to kind of that decision being talked about now? And then, maybe more importantly is, I guess, what does that decision mean or not mean for further possible portfolio moves? I guess, could or should Hain be moving maybe even faster or more aggressively around, identifying those pieces of portfolio with the most value potentially to others? We all see some of the multiples, as you see being paid for some assets that don’t have anywhere close to the growth of some of yours. So, if you could address those things, that would be great.

So, number one on HPP, Andrew, I think, we’ve built this business from basically scratch to over $500 million business today. We’re if not the leading, one of the fastest growing leading organic and antibiotic-free protein businesses. And with that, our protein business -- FreeBird grew 15%, 17%, Plainville grew in the same range. One of the things, as we look at this business and as we’re approached today, number one is, how we become a global supplier of protein. And when you have your plants basically on the East Coast, it’s hard to ship past the Midwest or past the Southeast. So, it’s a tremendous CapEx investment. And in regards to supply today and turkey pricing and labor, I think it being part of a larger strategic protein company makes a lot more sense. So, that’s why a lot of interest. And I come back and say we’ve really built a great business there. I think, the Plainville brand is a big brand today within turkey, within deli, within turkey breast, turkey burgers et cetera. You walk into most fast casual restaurants today, and we created the name FreeBird, you see the name FreeBird on a lot of restaurants, lot of fast casual, a lot of white table, and then a lot of retailers. So, there is something we’ve built, that’s worth a lot. Andrew we come back today and look at the rest of our business, and we’ll look through where are the opportunities that could be a part of someone else. But, again, you need to look through what’s you trapped overhead, what’s your other investments here, and how you reinvest back in the business. And as I say, we have a board today and a working group that’s working through this. And there is great valuations out there, yes, they are, but what do we replace it with and how do we reduce trapped overhead if we were to divest that. HPP was easier as it’s run separately, it’s not integrated. But, I will tell you this here, we are continuously evaluating our portfolio, both from a sale and from an acquisition standpoint, and what makes sense if we -- it’s kind of like a hockey tray, [ph] we tray two players and we get one major player. So, we’re looking at it from both standpoints.

And our next question comes from the line of Ken Goldman from JP Morgan. Sir, your line is open.

I just wanted to ask a couple quick questions, if I can. The tax benefits that you talked about, I think you said $0.08 to $0.09. Is that a gross number, does it assume some more investment? I could do the simple math on what it means but I just kind of wanted to hear it from you and make sure I’m looking at it correctly?

Ken, that’s the gross, that’s the tax savings component of it and then we spent it, and that’s one of the reasons the EBITDA has come down.

But, Ken, we will spend it in the back half, as James said.

Okay. Thank you. I just wanted to clarify that.

As you know that affects EBITDA as you spend it. So, we will spend it on marketing, we will spend it to offset some of the freight headwinds out there, but it will be spent and no different than the $0.02 was spent in the second quarter outside some of the freight that is there.

Great, thank you for that clarification. And then, Irwin and Gary, you have kind of a unique insight, given how much of your product is sold online, how much of the volume is shifting to that channel. There is a little bit of a debate going on in the I guess the food and retail community about which is going to be a more powerful driver in the near-term. Whether it’s going to be -- you called it click and pick, click and collect, whatever you want to call it, versus home delivery. As you guys look at the options and benefits, the negatives of sort of both of those systems, can you help us understand what you’re seeing, which is growing better in your view and maybe which has a longer term potential and why?

So, Ken, I’ll answer that first. I don’t think there is any negative benefit because that’s where the consumer is going. So, you are not going to persuade the consumer today from ordering online. We are not going to tell Mrs. Goldman that she can’t order products online today, because that’s where she’s going to order, okay. And I see it within my house, I see in it regards to young moms and that. So, the consumer is going there, whether there is a negative benefit from margin, cost et cetera. In regards to click and pick, I mean, you are going to see more and more retailers I think close stores and use those stores for click and pick, because that’s where consumers want to pull up and do that. So, I always say, you got to go where the puck is, you got to make it work in regards to the finances and the economics, and you got to take this serious. It will be a $100 billion out of the $800 billion over the next two to three years. And I see what our online business is growing, as you heard we say before, our online business was minimal two, three years ago. We expect to triple it over the next two to three years. Now, there is some cannibalization there, of course, there is from brick and mortar. But, every major retailer today, as you step back, all three of these are major, major initiatives with different products and different plans to grow their top line and to grow their business.

Yes. I’d just add into that that the shopping experience of the millennial consumer is very different and that it’s very fragmented; they have many more shopping trips, and they do it over many different formats in any given week. And I think the winners will be those who do the best job of servicing the consumer, providing the best offer at the right price, with the best convenience. So, it’s a rice really, to see who does that best. But the reality is, we see it in click and collect models with our brick and mortar retailers who are performing very strongly, they were over indexing in their baskets which tells us that we have brands that are very, very strong and they appeal to the consumer base who are interested in these types of models, which is very encouraging for us. But I think you’re going to see a fragmentation continue. And I echo Irwin’s point that bricks and mortar, pure bricks and mortars are probably going have to play a different role, down the line.

And Ken, the other opportunity for us is where conventional categories are declining. If the snack category, conventional snacks are declining, it’s the opportunities for there. If the soda category is declining 5% a year, there is space available in brick and mortar for more and more, healthier foods. And that’s why you are seeing the resurging of private label, because they are taking space away from more and more conventional foods. So, I come back and say from a Hain standpoint, there is major opportunities for us in brick and mortar, as they want more and more health and wellness products. From a pick and click, that’s what consumers are going after. And in regards to e-commerce, that is what our consumers want. You heard me talk about the percentage of natural organic products sold on e-commerce. So, there is multiple benefits for us, across all three classes of trade and all three channels.

And our next question comes from the line of Amit Sharma from BMO Capital Markets. Your line is now open.

Irwin and Gary, a couple of questions on -- actually clarifications on the guidance, and then, I have little of a longer term. So, when you give $80 million stock-based compensation in the adjusted EBITDA, how much of that has yet to come in the back half? That’s one. Number two, any outlook on commodities inflation for the rest of the year?

Stock-based comp, it’s pretty even throughout the year. So, from a model standpoint, I would just take the 80 and divide it by 2, so 20 million in amortization for the back half. So that’s how we do it. It’s pretty consistent throughout the year.

Commodities inflation?

We believe that we still have some commodity inflation in the back half, including we got hit pretty hard on freight, we don’t see that abating at the back half of the year as well.

So, it’s basically three items. It’s freight, it’s vanilla, and butterfat. We hope to see those abating near the end of the year. So, they’re the big ones.

Got it. And then, Irwin, you said $80 million online, so you’re talking about the retail sales right, not your sales in the U.S. in the online channel, right?

Well, I don’t think we’ve been so precise in our numbers but absolutely we would expect to be significantly closer to a 100 than to 50 in terms of our expected sale shipments. So, if you talk about in consumption, it will be a lot higher than that.

And then, Julie joined the Company last quarter or maybe this quarter. Can you just talk about some of the things that she is doing? And is that part of the reason why you feel a lot more optimistic about your progress in the online channel?

Hopefully she is listening on the call. I know she’s up for a bit. Absolutely...

Our budget has been doubled to $300 million.

To come back to your question which is very valid one. First of all, in the click and collect model, obviously, we’re engaging with each of -- with the retailers around how we accelerate that and how we are clear with what portfolio we go with and we get that right. But, the biggest play for us is the investment and the structure we’re putting in for how we actually market online. It’s extremely important that when you’re online you have the right content, you have the right material, you have the right way of driving, if you like, eyeballs to the product because being online is not enough, you’ve got to be online, present and available and also found by the consumer. I don’t know many people who buy products from an online site on page 50. So, you can be online but you have to be consequently online. So, a lot of the work that Julie is doing is getting the structure of our content right, making sure we were eight plus, making sure that we have the right marketing vehicles behind it to drive the consumers to the products and then ultimately setting up a lot of the fulfillment work that we’re doing right now, so, we’ll have a different fulfillment model coming forward for Hain Celestial as well to help facilitate to make sure the product is available. Also, I should say, on the logistics side and I’ve mentioned this on previous calls, we’ve made significant investment in our logistic setup, investing in two mixing centers to ensure that we can get the product to the e-com providers in the right format and the timely basis and at the right cost because this is also important because we have a complex portfolio. So, a lot of work going on but it’s a mixture of structure, investment and marketing, go-to-market strategy and fulfillment, which is all going to be unleashed in this quarter.

And then, I think any company, any retailer that is not moving to online or click and pick is going to fail. And I think that’s a big part of Hain’s business and that will continue to be. And that’s where our consumers are today and that’s where our consumers will continue to go. And I have never seen, and I’ve been out with Gary and his team visiting most major retailers where that is a big, big part of our -- their business today and their future growth. And I must say, with Julie joining us and bringing on her team, coming from a very experienced consumer package food business, what we have in place today, both in supply, both in being enable to ship and being able to support our brands. And if you go to online today, one of the number one words searched is organic.

And, Irwin, just last one for me. Does this shift has margin implications that we should be considering, if we model for a faster growth from your online portfolio?

I think, the main thing is, I mean of course you make the upfront investment, which is something we’ve already called out. You have to build this, you have to invest in it, you have to bring the consumer to the model and then you ultimately start to build it out. I think people oversimplify online by saying I am online, so tomorrow I sell $100 million with. Reality is, like everything else, you have to build it and you have to bring the consumer to you. So, you have to invest upfront, but that’s been called out already by James.

And I think again, the online business is growing in numbers that are unbelievable. If you moved our online business to a MULO number, it’s 6%, 7% of that business already. So, just think how important that is and the growth opportunity there. So, again, from a margin standpoint, margin is important here. But if you missed those sales, it’s going to be so hard to come and try and get those back later on.

And our next question comes from the line of Alexia Howard from Bernstein. Your line is now open.

Can I ask about the innings that you are in on the SKU rationalization? You’ve been active I think for a couple of years now. And it sounds as though if that tailored product is still about $90 million in annual sales, it’s still got a long ways to go. So, I am just wondering I guess when you would see the heavy lifting, and also when you expect to see the North American business get back to growth? Thank you. And I’ll pass it on.

Gary, you take it and then, I’ll jump in there.

Yes. So, thanks Alexia. Obviously, we indicated on the last earnings call that we were doing a complete strategic review of the [indiscernible] portfolio. I called out we have added some SKUs to the list immediately that we feel need to easy wins. That strategic review will continue to conclude probably by the end of this quarter, early next quarter, and then which of course is quite detail, we’re going through cost of complexity review and making sure we are very clear that the choices we make will result in a biggest shift, if you like in the portfolio. So, that work is ongoing. So, I think we will have more to say about that probably in the next earnings call, about our final choices. But, yes, that work is ongoing behind the scenes now.

And I think Alexia, what we are looking at also, a lot of these SKUs are profitable SKUs and cover lot of overhead and made in plants were SKUs in the top 500. And is there opportunity to take these SKUs at a MULO and sell them into e-commerce or sell them into natural organic as they are profitable and they have the sales to support it. And, you pull -- it’s about $70 million of sales, and that’s what it is, $70 million of sales at shipment level, with some good contribution there. As you pull that out, what’s important here is to get the head growing also to support the overhead that you are pulling out from these brands. The other thing which we got to make sure, is can we grow these brands, somewhere else, because there is some real good products there. So, there is a lot of work going into this. But our biggest definers are $70 million of sales here, which gives some good contribution to Hain.

Yes. I think that’s an important point that we’re being very careful about this because some of these brands which may not perform in traditional channels are performing in e-com. And so, we have to have a close understanding of what their future role might be, maybe more a channel player than maybe a smaller business but very profitable business on a specific channel. So, this is why we’ve got to be very confident with our choices that it may not have a role in conventional bricks and mortar but definitely have a role in e-com.

And our next question comes from the line of Akshay Jagdale from Jefferies. Your line is now open.

Good morning. So, I wanted to ask about the U.S. first, just a point of clarification. You haven’t changed your sales guidance for the U.S. So, I want to make sure I heard that correctly. And what’s the update on the EBITDA guidance for the U.S.? And then, I have a couple of follow-ups?

So, we haven’t changed, you’re right, we have not changed the sales guidance for the U.S. Obviously, we’re making investments in the U.S. and we also have some headwinds there, we talked about. So, from an EBITDA standpoint, we are guiding to low double digit EBITDA growth in the U.S. But, now, with the revised guidance, it’s probably more mid single digit EBITDA growth on a year-over-year basis.

Got it, okay. And then, just in terms of these investments and the effectiveness of this, and this is more for Gary. So, I understand -- I wanted to ask about the tail but first if we just focus on the top 11 brands, what we’re seeing especially in the measured channel and you have more color in the total channel, what we’re seeing is a three brands really underperforming what I think is their long-term growth potential. So, you got Sensible Portions, you got Greek Gods, and then you got Spectrum. They are way off from where the trend has been long-term. And so, help me in the context of those five points that you mentioned earlier today. It seems like Sensible Portions is a distribution problem, which might get reset here with one of your larger customers. And then, this quarter, it looks like there was an additional Sensible Portions with the supply chain issue. So, one, am I reading that correctly on Sensible? And then, you didn’t mention Greek Gods at all with the new seriously indulgent product and where you are. So, just give us a high level view of, like, can we actually grow Sensible Portions, Greek Gods and Spectrum at mid single digits? And when is that -- from a timeline perspective, is that two years from now, is it in the near term, and how do we get there? Because it seems like when people look at your results, they were unexpectedly lower. And we’re going to assume the trend line continues from here which is lower unless you give us reasons to believe otherwise. So, just help me understand longer term, how to think about that.

I think, again, we come back and I think Gary explained, I’ll let him take you through Sensible Portions. But, I think the big thing on the Sensible Portions, I mean, we had a manufacturing issue that goes back to the beginning of the summer; we just didn’t have supply. And when you are down, it’s not a distribution issue, it was a supply issue, and we had to pull off promotions. And now being back in supply with our supplier and scrambling like we are, I think Sensible Portions is an incredible snack and an incredible product, and tremendous opportunity. And I think there is whole plan which Gary read to you of distribution that we will get in the back half that will suffice and get us back to flat and growth. Greek Gods, great yogurt product, I think the category has been down 2%, 3%. I mean Greek Gods for us from a shipment standpoint has basically been flat. And we just did overlapping some innovation there and there is some new innovation coming and there is timing as we are filtering out of the key for product et cetera. But I got to tell you, I mean Greek Gods is the business that was built from $11 million to well into the hundreds of millions of dollars today, and there is a lot of emphasis on new packaging, new products. The Indulgent product is doing extremely well. And actually what we are seeing in MULO today, I think Greek Gods is seeing some Walmart and had some great growth. Spectrum, and I am stealing Gary’s thunder here. We are seeing and we are in the midst of the major, major overhaul on Spectrum. And I think what Gary will tell you is the growth that’s going on in Spectrum in conventional channels today is up double digits. And I think as you saw coconut oil where the big growth was in coconut oil, coconut oil has lost some of its wind in growth. Now, it’s moved into olive oil and Spectrum Naturals. So, I think there is really good plans in place and Gary will add to those. So, hopefully, you believe that Akshay and look at where the growths are and the opportunities are.

I’ll pick up the question. So, on Sensible, you are right. We’ve had good growth in Sensible, it’s a great product, it’s a great brand, and it’s been doing very well. Very frustrating to have the quarter we did in terms of some of the supply issues and of course choices we made. And as you know, we have been cycling some rotation out of one of our large retailers. We have stronger programming coming, we have actually distribution gains with three major customers coming in the back half, and that’s very encouraging for us. We think that’s a huge opportunity to get growth and expansion of opportunities. We’ve got other things coming down the pipe, I can’t discuss yet. We’re little bit early in that for to talk about that work. But, there is more coming for Sensible. We will continue to cycle out of distribution with one of our major retailers and we know we have got more distribution losses coming in March. So, we have got puts and takes in this fiscal year for Sensible. But longer term, I feel very confident. We still have a great brand, a great product with still lots of opportunities to grow both in the -- major channels. We’re still very small online, huge upside opportunity to drive more growth in the online business and we certainly have some acceleration plans there as well. In Spectrum, it’s a couple of tales. I think the Spectrum is a brand it rolls up with many different sub-sections. Over the last few years, we’ve had very good success with coconut oil, and the coconut oil category has grown very strongly. That’s flipped over in the last six months in particular; it’s in something like 23% decline. We are growing share in that business, which is great, but it’s not great when the category is not growing. So, that’s definitely dragging down this -- the overall Spectrum number. Within the core oils business, the biggest opportunity is distribution. We still have relatively low distribution of our core oil set, which as Irwin said, we are just in the process of rebranding, repackaging and of course we’ve just started marketing it for the first time. Encouraging to see olive oil outperforming the category for olive oil for the first time which is just an early indication that we can get traction for this portfolio but really distribution is our opportunity. And we’re in front of customers now talking about that. So, we moved away from being dependent on coconut oil for the success of Spectrum. So, I still feel confident we can do that. We’re doing a lot of work in natural channel as well to drive this. And I’m very encouraged to see by one of our major, let’s say, natural channel partners and the performance we see for Spectrum. So, I still believe we’re very early on here. It’s a category that’s growing. We should be growing with it. And I think we’ve got a nice opportunity to do that.

And then…

Sorry. Just to complete, Greek Gods, we’re cycling out of course some innovation that didn’t stick from prior year. We are seeing continued growth for Seriously Indulgent in Walmart but obviously we’re looking for distributional opportunities beyond Walmart, and that’s the plan in the back half of this year and into 2019. And then, on the core set, I mean the core SKUs are performing strongly. If you look at the natural channel, we’re up mid single digits; they are doing very well. And it’s still the most efficient product on shelf in terms of the category; the actual performance of our core set is very strong. So, distribution push on that core is still the biggest opportunity for Greek Gods and that’s where we are spending our energy. So, I still think we’ve got great products and where they are available, they are doing well. We have to improve the availability, and that’s our focus.

Got it. And on profitability, again in the U.S., first of all, like Celestial turnaround has been outstanding, so the numbers you reported are impressive. But that didn’t translate into the margins. And my question on margins is really, most of the companies that do SKU reductions, especially to the extent that you’re undertaking, have a pretty significant positive profit benefit pretty early on. And we haven’t -- we have definitely not seen that in your results. So, just trying to gauge that, I mean, should that be an expectation going forward or is there something structural, definitely you think with Hain that transformation is not going to be margin and profit accretive.

So, for a margin perspective, as we work through and it should be what is being masked by some of the headwinds that we’ve talked about. So, we are starting to see the benefit; those are lower margin SKUs. So, as we cycle through this, you will see the benefit of getting out of these SKUs.

And our last question comes from the line of Rupesh Parikh from Oppenheimer. Your line is now open.

Good morning and thanks for taking my questions. So, in your prepared comments, you discussed additional private label, I think competition or maybe more product additions within the MULO+C channel. I was just curious what you guys are seeing from a competitive front on the private label side and also from other branded players?

So, Rupesh, good morning, good question. Listen, and again, meeting with the retailers, the comment on private label and being asked to manufacturer private label versus supply, I think retailers have really jumped into private label because what they saw out there were conventional brands were not changing to more healthier products, were not innovating and not supporting their brands. And they’ve said why should they make the margin where they’re not investing, And that’s not what the consume wants today, and we could do it better with our brands. And with that, what it creates for Hain and what it’s doing, there is a private label brand and you see what Kroger and 365 have built and other retailers. But they also want brands. So, it’s not a race to the bottom in regards to private label. They want brands. And I think as we’ve met with every one of our customers in regards to how we revitalize the center of the store, how we have healthier products, how we have different packaging, how we want between private label and branded natural organic products, to replace some of these conventional products that consumers are not buying today. So, that’s why you see retailers jumping into more and more private label and coming up with some great products.

And then, one more quick question. Just, you called out freight and other cost items, hearing that from a number of other players. Is there an ability to pass through these higher costs, as the year progresses, or is this the environment probably not supposed [ph] to that?

Absolutely, and I think, it’s something that’s happening throughout and we are doing that as we go through pricing. It’s not only freight, higher vanilla cost, higher butterfat costs as I have said. But, we’re in the midst right now of pushing some pricing through because of freight and seeing how we can do that. Because it is something that’s just did not happen last quarter, because the hurricanes and that; there is shortage, truck shortage, the drivers. The other thing as we go through some of our Project Terra, as we look at our lanes and reformatting that how we’re able to take costs out of it and how we’re able to ship by rail. But, if you come back and look at Hain and it is $2 million to $3 million a quarter, it’s a lot of dollars that we really are looking at from a freight standpoint. And the other thing is, what we are doing right now with retailers, we are working with them of how to ship directly from our factory, how they are picking up, how we are using some of their back hauls to try and get some costs out. So, it’s an industry issue and we are all trying to deal with it. But, we’re going to have to pay some pricing because of that.

Okay, great. Thank you.

All right. Thank you everybody for your comments today. Hopefully, everybody had a chance to look at our press release, listen to our comments. Listen, there is a lot going on here, there is a lot of transformation. I think the team has showed what we can do. Things don’t happen overnight. We have invested close to $10 million between in SG&A between marketing, people. In the trade spend, you can’t just pull the plug on trade spend and offset one, and sort of say I am taking the trade spend, it takes time. In regards to the U.S. business whether it’s Celestial, in regards to our packaging overhaul, MaraNatha, Earth’s Best, Terra, Garden of Eatin’, Avalon Organics, we’ve shown how we turn brands around. And things happen out there, unfortunately, and you get back and say well, it’s another thing, it’s another thing. Sensible Portions, unfortunately, we had a product issue; it’s a great product with great distribution opportunity. And you had what I said before as the conventional snack category declines 5%, they want healthier products, healthier snacks and Garden, Terra and Sensible Portions are opportunities there. So, I really feel we got the portfolio to drive growth both at brick and mortar, both at pick and click and both at e-commerce, and that’s where the growth is. So, as they say in the hockey, you go where the puck is and that’s where the puck is going today. In regards to our strategy, yes, we are redefining our strategy, looking at the portfolio. We made an announcement on Hain Pure Protein, where does it make sense to streamline, where is it going to make sense streamline, and is going to make sense to skew [ph] that; and that is something the working group, the board will continuously look at and do. In regards to people, and with that we today have some of the best team in place. It takes time to get everybody up to speed. In regards to the U.S., there is almost a completely new team. In regards to shareholders and returning to shareholders, it’s something that we’ll continuously do. In regards to what happens with the dollars in divesting Hain Pure Protein in buying back our stock, investing and paying down debt but there is -- as you look to our leverage today, there is a lot of bandwidth here in regards to whether it’s doing another acquisitions, buying back our stock, paying down debt. And what I say is, we are not starting from a white paper. Think about the 24 brands that we own around the world today and think about what we have to offer and what consumers want. So, with that, I close this call thanking everybody. Some of you I hope to see at the Natural Organic Food Show in Anaheim in March, which we will introduce and parlay some of our great new products, innovation that Gary talked about both on food, personal care. And I look forward to discussing more about Hain with those that are going to be attending CAGNY. And last but not least, I hope when you’re out there buying, you think of Hain and buy one of our products. With that, have a great day and be safe out there. Thank you.

Ladies and gentlemen, thank you for participating in this conference. This concludes today’s program and you may all disconnect. Everyone have a great day.