Whole Earth Brands, Inc.

For Q3 2023, Whole Earth Brands reported consolidated product revenues of $134.4 million, down 0.6% reported and down 1.5% constant currency. Reported gross profit was $37.5 million versus $35 million a year ago, and adjusted gross profit was $42.5 million versus $41.7 million; reported gross margin was 27.9% versus 25.9%, and adjusted gross margin was 31.6% versus 30.8%. Consolidated operating income was $6.7 million versus $6.8 million, net loss was $5.4 million versus $2.5 million, and adjusted EBITDA was $21 million versus $21.5 million. For the nine months ended September 30, 2023, product revenue was $399.7 million, operating income was $12.7 million, and adjusted EBITDA was $55.8 million. Updated full-year 2023 guidance calls for revenue of $540 million-$550 million, adjusted EBITDA of $77 million-$79 million, capital expenditures of about $8 million, and free cash flow to exceed $10 million.

Rajnish Ohri said the company is evolving despite a challenging macro backdrop and highlighted the second straight quarter under the new co-CEO structure. He emphasized simplification, supply-chain optimization, and expansion into adjacent categories, saying the North America reinvention project is near completion and service levels are around 99%. His tone was constructive and upbeat, particularly on Branded CPG’s renewed growth opportunity after the operational reset.

Bernardo Fiaux focused on margin recovery, cash generation, and balance-sheet progress. He cited reported gross profit of $37.5 million, adjusted gross profit of $42.5 million, adjusted gross margin of 31.6%, and adjusted EBITDA of $21 million in Q3; he also noted nine-month operating cash flow of $10.6 million versus $17.3 million used last year, capex of $4.1 million, and free cash flow of about $6.5 million, with year-to-date adjusted free cash flow of $19.9 million. He said supply-chain reinvention costs should keep declining into 2024, cash and equivalents were $24.2 million, long-term debt was $424.5 million, and the company had $70 million drawn on its $125 million revolver.

Analysts pressed management on whether weight-loss drugs and sugar substitutes threaten the Branded business; management said the trend can also benefit low- and no-sugar products and pointed to growth opportunities in nutritive and adjacent categories. Questions also focused on debt reduction and the lower revenue outlook, with Bernardo saying the business is prioritizing cash flow and that lower add-backs plus higher EBITDA should accelerate paydown in 2024. On the strategic review, Irwin Simon declined to give a timeline, saying the board wants to maximize shareholder value and get the process right rather than force a date.