Whole Earth Brands, Inc. (the “Company” or “we” or “our”) (Nasdaq:
FREE), a global food company enabling healthier lifestyles
by providing access to premium plant-based sweeteners, flavor
enhancers and other foods through a diverse portfolio of trusted
brands and delicious products, today announced its financial
results for its first quarter ended March 31, 2021. The Company
also reiterated fiscal year 2021 guidance.
Irwin D. Simon, Executive Chairman, stated, “Our
expanded portfolio of brands continues to outpace the category
growth rate and is confirmation of our strong positioning within
the sweetener category that is experiencing powerful tailwinds
driven by an increasing movement toward health and wellness
products. We have completely transformed our Branded CPG business
over the past ten months since becoming a public company and I’m
excited by the speed at which our acquisitions have been integrated
and the value our new Branded CPG North America organization is
creating. We look forward to continued execution of our growth
strategy by our team and are excited about the opportunities in
2021.”
Albert Manzone, Chief Executive Officer,
commented, “Our business is off to a strong start in 2021,
generating proforma organic constant currency product revenue
growth within the Branded CPG segment of 10% and delivering $17.5
million of Adjusted EBITDA in the first quarter. Our portfolio of
natural brands – Whole Earth Sweetener, Swerve, and Wholesome
Sweeteners Incorporated (“Wholesome”) – each performed
exceptionally well with double-digit revenue growth versus prior
year. The integration of our acquisitions is fully complete and
with our “Power of One” strategy, our newly integrated North
American team is focused on building our brands, bringing
innovation to market, increasing our market penetration and
transforming our entire supply chain. We are further encouraged by
the positive data regarding an economic recovery including for the
food service industry, and by the continued consumer preference
shifts towards plant-based better-for-you alternatives, all of
which provide our business with near-term and long-term
tailwinds.”
FIRST QUARTER 2021
HIGHLIGHTS
Our consolidated financials reflect both
predecessor and successor periods indicative of the June 25, 2020
business combination date. The first quarter results discussed
below compare the successor’s 2021 first quarter results ended
March 31, 2021 to the predecessor’s 2020 first quarter results
ended March 31, 2020.
Additionally, we completed the acquisition of
Swerve on November 10, 2020 and the Wholesome acquisition on
February 5, 2021. Our reported results include Swerve and Wholesome
from those dates of acquisition.
- Consolidated product revenues were
$105.8 million, an increase of 60.4% on a reported basis and an
increase of 57.2% on a constant currency basis, as compared to the
prior year first quarter. On a proforma basis, including the impact
of both acquisitions for the full quarter in both the current and
prior year periods, organic product revenue grew 7.9%, or increased
6.1% on a constant currency basis, compared to the prior year first
quarter.
- Branded CPG segment product
revenues were $81.8 million, an increase of 103.4% and an increase
of 98.1% on a constant currency basis, as compared to the prior
year first quarter. Constant currency results reflect the
acquisitions of Wholesome and Swerve and strong growth in our
natural brands. On a proforma basis, including the impact of both
acquisitions for the full quarter in both the current and prior
year periods, organic constant-currency product revenue grew 9.7%,
compared to the prior year first quarter.
- Flavors & Ingredients segment
product revenues were $24.0 million, a decrease of 6.7% in the
first quarter, primarily due to a difficult comparison to the prior
year first quarter as the business realized a surge in product
orders in March 2020 related to third parties building stock in
connection with the COVID-19 global pandemic.
- Reported gross profit was $35.7
million, compared to $25.9 million in the prior year first quarter,
and gross profit margin of 33.7% in the first quarter of 2021,
compared to 39.2% in the prior year period. Results for the first
quarter of 2021 included $10.1 million of gross profit from the
Swerve and Wholesome acquisitions and revenue gains, partially
offset by $1.6 million of non-cash purchase accounting
charges.
- Adjusted Gross Profit Margin, when
adjusting for all non-cash and cash adjustments, was 36.9% percent
down from 41.8% percent in the prior year driven by the inclusion
of Wholesome‘s lower-margin private label business, partially
offset by productivity and favorable product mix within the
business.
- Consolidated operating loss was
$3.1 million compared to an operating loss of $33.2 million in the
prior year and consolidated net loss was $12.0 million in the first
quarter of 2021 compared to a net loss of $28.7 million in the
prior year. The primary driver of the difference was a $40.6
million impairment charge recorded in the first quarter of 2020
under previous ownership, partially offset by increased SG&A
resulting from transaction costs and increased costs of being a
public company.
- Consolidated Adjusted EBITDA
increased 38.2% to $17.5 million driven by contributions from the
Swerve and Wholesome acquisitions, organic revenue growth and
productivity, partially offset by public company costs and
increased bonus expense. Adjusted EBITDA as a percentage of sales
for the quarter was approximately 17%.
SEGMENT RESULTS
Branded CPG SegmentBranded CPG
segment product revenues increased $41.6 million, or 103.4%, to
$81.8 million for the first quarter of 2021, compared to $40.2
million for the same period in the prior year. On a constant
currency basis, product revenues increased 98.1% driven by the
addition of Swerve and Wholesome revenue, which was not comparable
to the prior year period. Constant currency results reflect the
strong growth in our natural brands. On a proforma basis, including
the impact of both acquisitions for the full quarter in both the
current and prior year periods, organic constant-currency product
revenue grew 9.7%, compared to the prior year first quarter.
Operating income was $10.2 million in the first
quarter of 2021 compared to an operating loss of $6.8 million for
the same period in the prior year. The increase of $16.9 million
was driven by an $11.1 million non-cash asset impairment charge in
the prior year predecessor period, which did not exist in the first
quarter of 2021, contributions from the acquired Swerve and
Wholesome businesses and revenue growth within the segment.
Flavors & Ingredients
SegmentFlavors & Ingredients segment product revenues
decreased 6.7% to $24.0 million for the first quarter of 2021,
compared to $25.8 million for the same period in the prior year.
The decrease was driven by a difficult comparison to the prior year
quarter as the business realized a surge in product orders in March
2020 as customers were building inventory in connection with the
COVID-19 global pandemic.
Operating income in the segment was $1.0 million
in the first quarter of 2021, an increase of $25.0 million compared
to an operating loss of $24.0 million in the prior year period. The
increase was driven by a $29.5 million non-cash asset impairment
charge in the prior year predecessor period, partially offset by a
$1.7 million restructuring charge associated with the upcoming
closure of the Camden, NJ factory, a $1.0 million increase in
amortization of intangible assets resulting from the June 25, 2020
business combination and $0.7 million of non-cash purchase
accounting charges related to inventory revaluations.
CORPORATE
Beginning with the first quarter of 2021, our
corporate office functions are now reported and included under
Corporate. Corporate is not a reportable or operating segment.
Certain prior year amounts have been reclassified to conform to the
current presentation.
Operating loss for Corporate was $14.2 million
in the first quarter of 2021, compared to a $2.6 million loss in
the prior year. The additional loss reflects $8.1 million of
acquisition expenses, $2.1 million of public company expenses,
including both one-time and ongoing expenses, $0.8 million of
stock-based compensation expense and $0.5 million of increased
bonus expense.
CASH FLOW & BALANCE
SHEET
Net cash used in operating activities was $5.6
million and capital expenditures were $1.5 million for the first
quarter of 2021.
As of March 31, 2021, the Company had cash and
cash equivalents of $27.8 million and $389.0 million of debt, net
of unamortized debt issuance costs.
On February 5, 2021, the Company entered into an
amended and restated credit agreement, in part, to finance its
acquisition of WSO Investments, Inc. the holding company for
Wholesome. The new agreement provides for a new $75 million
five-year revolving credit facility, and a $375 million seven-year
senior secured first-lien term loan B. Reducing balance sheet
leverage is a corporate priority and the Company expects to achieve
a ratio of Net Debt to Adjusted EBITDA of approximately 4.0x by
December 31,
2021.
RECENT STRATEGIC
ACQUISITIONS
On February 5, 2021, the Company closed on its
acquisition of Wholesome, the #1 organic sweetener brand in
North America.
The acquisition of Wholesome and its previous
purchase of Swerve, a rapidly growing manufacturer and marketer of
a portfolio of zero sugar, keto-friendly, and plant-based
sweeteners and baking mixes, have doubled the Company’s North
American market share in only eight months since the closing of its
business combination on June 25, 2020. These acquisitions
significantly move the Company’s portfolio mix toward natural
sweeteners, which now represent approximately 87% of its North
American Branded CPG business.
ACCOUNTING FOR WARRANTS
On April 12, 2021, the Acting Director of the
Division of Corporation Finance and Acting Chief Accountant of the
Securities and Exchange Commission together issued a statement
regarding the accounting and reporting considerations for warrants
issued by special purpose acquisition companies entitled “Staff
Statement on Accounting and Reporting Considerations for Warrants
Issued by Special Purpose Acquisition Companies” (the “SEC
Statement”). As a result of the SEC Statement, the Company’s
management reevaluated the accounting treatment of (i) the
15,000,000 redeemable warrants that were included in the units
issued by the Company in its initial public offering (the “Public
Warrants”) and (ii) the 5,263,500 redeemable warrants that were
issued in a private placement (the “Private Warrants”, collectively
with the Public Warrants, the “Warrants”) in accordance with
Accounting Standards Codification (“ASC”) 815-40, Derivatives and
Hedging: Contracts in an Entities Own Equity. ASC 815-40 states
entities must consider whether to classify contracts that may be
settled in its own stock, such as warrants, as equity of the entity
or as an asset or liability. The Company previously accounted for
the Warrants as components of equity.
After consideration of the guidance in the SEC
Statement, the Company concluded that the Private Warrants should
be accounted for as a liability and measured at fair value with
changes in fair value each period reported in the Company’s
statement of operations. The Company has completed its final
analysis of this change and has reflected the appropriate
adjustments in its first quarter 2021 financial statements. The
impact was not material to the Company’s previously issued
financial statements. The first quarter of 2021 reflects a non-cash
loss of $2.4 million related to the change in fair value of the
Private Warrants, which is net of a $1.2 million non-cash gain
related to the correction of an immaterial error for the fiscal
year ended December 31, 2020. The warrant liability included in the
Company’s consolidated balance sheet as of March 31, 2021 was $8.0
million.
OUTLOOK
The Company is reiterating its outlook for full
year 2021, including the impact of its recent acquisitions of
Swerve and Wholesome. The outlook includes expectations for growth
on a proforma organic basis and margins for the combined business.
The Company defines proforma organic growth to be as if the Company
owned both Swerve and Wholesome for the full years 2020 and 2021.
The Company’s 2021 outlook is as follows:
- Net Product Revenues: $493 million
to $505 million (representing reported growth of greater than 78%,
and proforma organic growth of 3% to 5%)
- Adjusted EBITDA: $82 million to $85
million (representing reported growth of greater than 50%, and
proforma organic growth of 3% to 5%)
- Adjusted Gross Profit Margin: 34%
to 35% of product revenues
- Adjusted EBITDA Margin:
Approximately 17% of product revenues
- Capital Expenditures: $10 million
to $12 million
- Tax Rate: Approximately 23%
CONFERENCE CALL DETAILS
The Company will host a conference call and
webcast to review its first quarter results today, Friday, May 14,
2021 at 8:30am EDT. The conference call can be accessed live over
the phone by dialing (877) 705-6003 or for international callers by
dialing (201) 493-6725. A replay of the call will be available
through May 31, 2021 by dialing (844) 512-2921 or for international
callers by dialing (412) 317-6671; the passcode is 13718232.
The live audio webcast of the conference call
will be accessible in the News & Events section on the
Company's Investor Relations website at
investor.wholeearthbrands.com. An archived replay of the webcast
will also be available shortly after the live event has
concluded.
About Whole Earth Brands
Whole Earth Brands is a global food company
enabling healthier lifestyles and providing access to premium
plant-based sweeteners, flavor enhancers and other foods through
our diverse portfolio of trusted brands and delicious products,
including Whole Earth Sweetener®, Wholesome®, Swerve®, Pure Via®,
Equal® and Canderel®. With food playing a central role in people’s
health and wellness, Whole Earth Brands’ innovative product
pipeline addresses the growing consumer demand for more dietary
options, baking ingredients and taste profiles. Our world-class
global distribution network is the largest provider of plant-based
sweeteners in more than 100 countries with a vision to expand
our portfolio to responsibly meet local preferences. We
are committed to helping people enjoy life’s everyday moments and
the celebrations that bring us together. For more information on
how we “Open a World of Goodness®,” please visit
www.WholeEarthBrands.com.
Forward-Looking Statements
This press release contains forward-looking
statements (including within the meaning of the Private Securities
Litigation Reform Act of 1995) concerning Whole Earth Brands, Inc.
and other matters. These statements may discuss goals, intentions
and expectations as to future plans, trends, events, results of
operations or financial condition, or otherwise, based on current
beliefs of management, as well as assumptions made by, and
information currently available to, management.
Forward-looking statements may be accompanied by
words such as “achieve,” “aim,” “anticipate,” “believe,” “can,”
“continue,” “could,” “drive,” “estimate,” “expect,” “forecast,”
“future,” “guidance,” “grow,” “improve,” “increase,” “intend,”
“may,” “outlook,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “target,” “will,” “would,” or similar words,
phrases or expressions. Examples of such forward-looking statements
include, but are not limited to, the statements of Messrs. Simon
and Manzone, statements related to the Net Debt to Adjusted EBITDA
and the projected date, the statements in the “Outlook” section of
this press release, and statements related to the 2021 guidance and
long-term sales growth targets. Factors that could cause actual
results to differ materially from those in the forward-looking
statements include, but are not limited to, the Company’s ability
to integrate Wholesome and Swerve and achieve the anticipated
benefits of the transaction in a timely manner or at all; the
extent of the impact of the COVID-19 pandemic, including the
duration, spread, severity, and any recurrence of the COVID-19
pandemic, the duration and scope of related government orders and
restrictions, the impact on our employees, and the extent of the
impact of the COVID-19 pandemic on overall demand for the Company’s
products; local, regional, national, and international economic
conditions that have deteriorated as a result of the COVID-19
pandemic, including the risks of a global recession or a recession
in one or more of the Company’s key markets, and the impact they
may have on the Company and its customers and management’s
assessment of that impact; extensive and evolving government
regulations that impact the way the Company operates; and the
impact of the COVID-19 pandemic on the Company’s suppliers,
including disruptions and inefficiencies in the supply chain.
These forward-looking statements are subject to
risks, uncertainties and other factors, many of which are outside
of the Company’s control, which could cause actual results to
differ materially from the results contemplated by the
forward-looking statements. These statements are subject to the
risks and uncertainties indicated from time to time in the
documents the Company files (or furnishes) with the U.S. Securities
and Exchange Commission.
You are cautioned not to place undue reliance
upon any forward-looking statements, which are based only on
information currently available to the Company and speak only as of
the date made. The Company undertakes no commitment to publicly
update or revise the forward-looking statements, whether written or
oral that may be made from time to time, whether as a result of new
information, future events or otherwise, except as required by
law.
Contacts:Investor Relations
Contact:Whole Earth
Brands312-840-5001investor@wholeearthbrands.com
ICRJeff
Sonnek646-277-1263jeff.sonnek@icrinc.com
Media Relations Contact:Wyecomm Penny
Kozakos202-390-4409Penny.Kozakos@wyecomm.com
Whole Earth Brands, Inc. |
Condensed Consolidated Balance Sheets |
(In thousands of dollars, except for share and per share
data) |
(Unaudited) |
|
|
|
|
|
March 31, 2021 |
|
December 31, 2020 |
Assets |
|
|
|
Current
Assets |
|
|
|
Cash and cash equivalents |
$ |
27,806 |
|
|
$ |
16,898 |
|
Accounts receivable (net of allowances of $723 and $955,
respectively) |
72,205 |
|
|
56,423 |
|
Inventories |
191,837 |
|
|
111,699 |
|
Prepaid expenses and other current assets |
11,807 |
|
|
5,045 |
|
Total current assets |
303,655 |
|
|
190,065 |
|
|
|
|
|
Property, Plant and
Equipment, net |
49,752 |
|
|
47,285 |
|
|
|
|
|
Other
Assets |
|
|
|
Operating lease right-of-use assets |
18,749 |
|
|
12,193 |
|
Goodwill |
236,895 |
|
|
153,537 |
|
Other intangible assets, net |
283,845 |
|
|
184,527 |
|
Deferred tax assets, net |
2,479 |
|
|
2,671 |
|
Other assets |
6,926 |
|
|
6,260 |
|
Total Assets |
$ |
902,301 |
|
|
$ |
596,538 |
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current
Liabilities |
|
|
|
Accounts payable |
$ |
36,915 |
|
|
$ |
25,200 |
|
Accrued expenses and other current liabilities |
34,616 |
|
|
29,029 |
|
Contingent consideration payable |
52,672 |
|
|
— |
|
Current portion of operating lease liabilities |
5,074 |
|
|
3,623 |
|
Current portion of long-term debt |
3,750 |
|
|
7,000 |
|
Total current liabilities |
133,027 |
|
|
64,852 |
|
Non-Current
Liabilities |
|
|
|
Long-term debt |
385,257 |
|
|
172,662 |
|
Warrant liabilities |
7,999 |
|
|
— |
|
Deferred tax liabilities, net |
52,722 |
|
|
23,297 |
|
Operating lease liabilities, less current portion |
16,281 |
|
|
11,324 |
|
Other liabilities |
16,230 |
|
|
15,557 |
|
Total Liabilities |
611,516 |
|
|
287,692 |
|
Commitments and
Contingencies |
— |
|
|
— |
|
Stockholders’
Equity |
|
|
|
Preferred shares, $0.0001 par value; 1,000,000 shares authorized;
none issued and outstanding at March 31, 2021 and
December 31, 2020 |
— |
|
|
— |
|
Common stock, $0.0001 par value; 220,000,000 shares authorized;
38,426,669 shares issued and outstanding at March 31, 2021 and
December 31, 2020 |
4 |
|
|
4 |
|
Additional paid-in capital |
322,758 |
|
|
325,679 |
|
Accumulated deficit |
(38,544 |
) |
|
(25,442 |
) |
Accumulated other comprehensive income |
6,567 |
|
|
8,605 |
|
Total stockholders’ equity |
290,785 |
|
|
308,846 |
|
Total Liabilities and Stockholders’ Equity |
$ |
902,301 |
|
|
$ |
596,538 |
|
Whole Earth Brands, Inc. |
Condensed Consolidated and Combined Statements of
Operations |
(In thousands of dollars, except for share and per share
data) |
(Unaudited) |
|
|
|
|
|
|
(Successor) |
|
|
(Predecessor) |
|
Three Months Ended March 31, 2021 |
|
|
Three Months Ended March 31, 2020 |
Product revenues, net |
$ |
105,825 |
|
|
|
$ |
65,972 |
|
Cost of goods sold |
70,174 |
|
|
|
40,112 |
|
Gross profit |
35,651 |
|
|
|
25,860 |
|
|
|
|
|
|
Selling, general and
administrative expenses |
32,907 |
|
|
|
16,048 |
|
Amortization of intangible
assets |
4,151 |
|
|
|
2,534 |
|
Asset impairment charges |
— |
|
|
|
40,600 |
|
Restructuring and other
expenses |
1,657 |
|
|
|
— |
|
|
|
|
|
|
Operating loss |
(3,064 |
) |
|
|
(33,322 |
) |
|
|
|
|
|
Change in fair value of
warrant liabilities |
(2,362 |
) |
|
|
— |
|
Interest expense, net |
(5,078 |
) |
|
|
(172 |
) |
Loss on extinguishment and
debt transaction costs |
(5,513 |
) |
|
|
— |
|
Other income, net |
310 |
|
|
|
1,721 |
|
Loss before income taxes |
(15,707 |
) |
|
|
(31,773 |
) |
Benefit for income taxes |
(3,682 |
) |
|
|
(3,118 |
) |
Net loss |
$ |
(12,025 |
) |
|
|
$ |
(28,655 |
) |
|
|
|
|
|
Net loss per share – Basic and
diluted |
$ |
(0.31 |
) |
|
|
|
Whole Earth Brands, Inc. |
Condensed Consolidated and Combined Statements of Cash
Flows |
(In thousands of dollars) |
(Unaudited) |
|
|
|
|
|
|
(Successor) |
|
|
(Predecessor) |
|
Three Months Ended March 31, 2021 |
|
|
Three Months Ended March 31, 2020 |
Operating
activities |
|
|
|
|
Net loss |
$ |
(12,025 |
) |
|
|
$ |
(28,655 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
Stock-based compensation |
1,639 |
|
|
|
— |
|
Depreciation |
969 |
|
|
|
679 |
|
Amortization of intangible assets |
4,151 |
|
|
|
2,534 |
|
Deferred income taxes |
3,402 |
|
|
|
(648 |
) |
Asset impairment charges |
— |
|
|
|
40,600 |
|
Pension |
(115 |
) |
|
|
— |
|
Amortization of inventory fair value adjustments |
1,619 |
|
|
|
— |
|
Non-cash loss on extinguishment of debt |
4,435 |
|
|
|
— |
|
Change in fair value of warrant liabilities |
2,362 |
|
|
|
— |
|
Changes in current assets and liabilities: |
|
|
|
|
Accounts receivable |
(1,341 |
) |
|
|
312 |
|
Inventories |
(4,903 |
) |
|
|
3,959 |
|
Prepaid expenses and other current assets |
665 |
|
|
|
(949 |
) |
Accounts payable, accrued liabilities and income taxes |
(7,052 |
) |
|
|
(431 |
) |
Other, net |
597 |
|
|
|
(2,791 |
) |
Net cash (used in) provided by
operating activities |
(5,597 |
) |
|
|
14,610 |
|
|
|
|
|
|
Investing
activities |
|
|
|
|
Capital expenditures |
(1,544 |
) |
|
|
(894 |
) |
Acquisitions, net of cash
acquired |
(186,601 |
) |
|
|
— |
|
Net cash used in investing
activities |
(188,145 |
) |
|
|
(894 |
) |
|
|
|
|
|
Financing
activities |
|
|
|
|
Proceeds from revolving credit
facility |
25,000 |
|
|
|
3,500 |
|
Repayments of revolving credit
facility |
(47,855 |
) |
|
|
(5,000 |
) |
Long-term borrowings |
375,000 |
|
|
|
— |
|
Repayments of long-term
borrowings |
(136,500 |
) |
|
|
— |
|
Debt issuance costs |
(11,589 |
) |
|
|
— |
|
Funding to Parent, net |
— |
|
|
|
(12,430 |
) |
Net cash provided by (used in)
financing activities |
204,056 |
|
|
|
(13,930 |
) |
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
594 |
|
|
|
314 |
|
Net change in cash and
cash equivalents |
10,908 |
|
|
|
100 |
|
Cash and cash equivalents,
beginning of period |
16,898 |
|
|
|
10,395 |
|
Cash and cash equivalents, end
of period |
$ |
27,806 |
|
|
|
$ |
10,495 |
|
|
|
|
|
|
Supplemental
disclosure of cash flow information |
|
|
|
|
Interest paid |
$ |
4,491 |
|
|
|
$ |
— |
|
Taxes paid, net of
refunds |
$ |
3,535 |
|
|
|
$ |
1,070 |
|
Whole Earth Brands, Inc.
Reconciliation of GAAP and Non-GAAP Financial
Measures (Unaudited)
The Company reports its financial results in
accordance with accounting principles generally accepted in the
United States (“GAAP”). However, management believes that also
presenting certain non-GAAP financial measures provides additional
information to facilitate the comparison of the Company’s
historical operating results and trends in its underlying operating
results, and provides additional transparency on how the Company
evaluates its business. Management uses these non-GAAP financial
measures in making financial, operating and planning decisions and
in evaluating the Company’s performance. The Company also believes
that presenting these measures allows investors to view its
performance using the same measures that the Company uses in
evaluating its financial and business performance and trends. The
Company considers quantitative and qualitative factors in assessing
whether to adjust for the impact of items that may be significant
or that could affect an understanding of its ongoing financial and
business performance and trends. The adjustments generally fall
within the following categories: constant currency adjustments,
intangible asset non-cash impairments, purchase accounting charges,
transaction related costs, long-term incentive expense, non-cash
pension expenses, severance and related expenses associated with a
restructuring, public company readiness, M&A transaction
expenses and other one-time items affecting comparability of
operating results. See below for a description of adjustments to
the Company’s U.S. GAAP financial measures included herein.
Non-GAAP information should be considered as supplemental in nature
and is not meant to be considered in isolation or as a substitute
for the related financial information prepared in accordance with
U.S. GAAP. In addition, the Company’s non-GAAP financial measures
may not be the same as or comparable to similar non-GAAP measures
presented by other companies.
DEFINITIONS OF THE COMPANY’S NON-GAAP
FINANCIAL MEASURES
The Company’s non-GAAP financial measures and
corresponding metrics reflect how the Company evaluates its
operating results currently and provide improved comparability of
operating results. As new events or circumstances arise, these
definitions could change. When these definitions change, the
Company provides the updated definitions and presents the related
non-GAAP historical results on a comparable basis. When items no
longer impact the Company’s current or future presentation of
non-GAAP operating results, the Company removes these items from
its non-GAAP definitions.
The following is a list of non-GAAP financial
measures which the Company has discussed or expects to discuss in
the future:
- Constant Currency Presentation: We
evaluate our product revenue results on both a reported and a
constant currency basis. The constant currency presentation, which
is a non-GAAP measure, excludes the impact of fluctuations in
foreign currency exchange rates. We believe providing constant
currency information provides valuable supplemental information
regarding our product revenue results, thereby facilitating
period-to-period comparisons of our business performance and is
consistent with how management evaluates the Company's performance.
We calculate constant currency percentages by converting our
current period local currency product revenue results using the
prior period exchange rates and comparing these adjusted amounts to
our current period reported product revenues.
- Adjusted EBITDA: We define Adjusted
EBITDA as net income or loss from our consolidated statements of
operations before interest income and expense, income taxes,
depreciation and amortization, changes in fair value of warrant
liabilities, other income and expense, losses on extinguishment and
debt transaction costs as well as certain other items that arise
outside of the ordinary course of our continuing operations
specifically described below:
- Asset impairment charges: We
exclude the impact of charges related to the impairment of goodwill
and other long-lived intangible assets. Impairment charges during
the calendar year 2020 were incurred only during the predecessor
period. We believe that the exclusion of these impairments, which
are non-cash, allows for more meaningful comparisons of operating
results to peer companies. We believe that this increases
period-to-period comparability and is useful to evaluate the
performance of the total company.
- Purchase accounting adjustments: We
exclude the impact of purchase accounting adjustments, including
the revaluation of inventory at the time of the business
combination. These adjustments are non-cash and we believe that the
adjustments of these items more closely correlate with the
sustainability of our operating performance.
- Transaction-related expenses: We
exclude transaction-related expenses including transaction bonuses
that were paid for by the seller of the businesses acquired by the
Company on June 25, 2020. We believe that the adjustments of these
items more closely correlate with the sustainability of our
operating performance.
- Long-term incentive plan: We
exclude the impact of costs relating to the long-term incentive
plan. We believe that the adjustments of these items more closely
correlate with the sustainability of our operating
performance.
- Non-cash pension expenses: We
exclude non-cash pension expenses/credits related to closed,
defined pension programs of the Company. We believe that the
adjustments of these items more closely correlate with the
sustainability of our operating performance.
- Severance and related expenses: We
exclude employee severance and associated expenses related to roles
that have been eliminated or reduced in scope as a productivity
measure taken by the Company. We believe that the adjustments of
these items more closely correlate with the sustainability of our
operating performance.
- Public company readiness: We
exclude non-recurring organization and consulting costs incurred to
establish required public company capabilities. We believe that the
adjustments of these items more closely correlate with the
sustainability of our operating performance.
- Brand Introduction expenses: To
measure operating performance, we exclude the Company’s sampling
program costs with Starbucks. We believe the exclusion of such
amounts allows management and the users of the financial statements
to better understand our financial results.
- Restructuring: To measure operating
performance, we exclude restructuring costs. We believe that the
adjustments of these items more closely correlate with the
sustainability of our operating performance.
- M&A transaction expenses: We
exclude expenses directly related to the acquisition of businesses
after the business combination on June 25, 2020. We believe that
the adjustments of these items more closely correlate with the
sustainability of our operating performance.
- Other items: To measure operating
performance, we exclude certain expenses and include certain gains
that we believe are operational in nature. We believe the exclusion
or inclusion of such amounts allows management and the users of the
financial statements to better understand our financial
results.
Adjusted EBITDA is not a presentation made in
accordance with GAAP, and our use of the term Adjusted EBITDA may
vary from the use of similarly-titled measures by others in our
industry due to the potential inconsistencies in the method of
calculation and differences due to items subject to interpretation.
Adjusted EBITDA margin is Adjusted EBITDA for a particular period
expressed as a percentage of product revenues for that period.
We use Adjusted EBITDA to measure our
performance from period to period both at the consolidated level as
well as within our operating segments, to evaluate and fund
incentive compensation programs and to compare our results to those
of our competitors. In addition to Adjusted EBITDA being a
significant measure of performance for management purposes, we also
believe that this presentation provides useful information to
investors regarding financial and business trends related to our
results of operations and that when non-GAAP financial information
is viewed with GAAP financial information, investors are provided
with a more meaningful understanding of our ongoing operating
performance.
Adjusted EBITDA should not be considered as an
alternative to net income or loss, operating income, cash flows
from operating activities or any other performance measures derived
in accordance with GAAP as measures of operating performance or
cash flows as measures of liquidity. Adjusted EBITDA has important
limitations as an analytical tool and should not be considered in
isolation or as a substitute for analysis of our results as
reported under GAAP.
The Company cannot reconcile its expected
Adjusted EBITDA to Net Income under “Outlook” without unreasonable
effort because certain items that impact net income and other
reconciling metrics are out of the Company’s control and/or cannot
be reasonably predicted at this time. These items include, but are
not limited to, share-based compensation expense, impairment of
assets, acquisition-related charges and COVID-19 related expenses.
These items are uncertain, depend on various factors, and could
have a material impact on GAAP reported results for the guidance
period.
Adjusted Gross Profit Margin: We define Adjusted
Gross Profit Margin as Gross Profit excluding all cash and non-cash
adjustments, impacting Cost of Goods Sold, included in the Adjusted
EBITDA reconciliation, as a percentage of Product Revenues, net.
Such adjustments include: depreciation, purchase accounting
adjustments, long term incentives and other items adjusted by
management to better understand our financial results.
The Company cannot reconcile its expected
Adjusted Gross Profit Margin to Gross Profit Margin under “Outlook”
without unreasonable effort because certain items that impact Gross
Profit Margin and other reconciling metrics are out of the
Company’s control and/or cannot be reasonably predicted at this
time. These items include, but are not limited to, share-based
compensation expense, impairment of assets, acquisition-related
charges and COVID-19 related expenses. These items are uncertain,
depend on various factors, and could have a material impact on GAAP
reported results for the guidance period.
Whole Earth Brands,
Inc.Adjusted EBITDA
reconciliation(In thousands of dollars)
(Unaudited)
|
(Successor) |
|
|
(Predecessor) |
|
Three Months Ended March 31, 2021 |
|
|
Three Months Ended March 31, 2020 |
Product revenues, net |
$ |
105,825 |
|
|
|
$ |
65,972 |
|
Net
Loss |
$ |
(12,025 |
) |
|
|
$ |
(28,655 |
) |
Benefit for
income taxes |
|
(3,682 |
) |
|
|
|
(3,118 |
) |
Other
income, net |
|
(310 |
) |
|
|
|
(1,721 |
) |
Loss on
extinguishment and debt transaction costs |
|
5,513 |
|
|
|
|
- |
|
Interest
expense, net |
|
5,078 |
|
|
|
|
172 |
|
Change in
fair value of warrant liabilities |
|
2,362 |
|
|
|
|
- |
|
Operating
Loss |
|
(3,064 |
) |
|
|
|
(33,322 |
) |
Depreciation |
|
969 |
|
|
|
|
706 |
|
Amortization
of intangible assets |
|
4,151 |
|
|
|
|
2,534 |
|
Asset
impairment charges |
|
- |
|
|
|
|
40,600 |
|
Purchase
accounting adjustments |
|
1,619 |
|
|
|
|
- |
|
Transaction
related expenses |
|
210 |
|
|
|
|
- |
|
Long term
incentive plan |
|
2,093 |
|
|
|
|
402 |
|
Non-cash
pension expense |
|
- |
|
|
|
|
152 |
|
Severance
and related expenses |
|
- |
|
|
|
|
188 |
|
Public
company readiness |
|
454 |
|
|
|
|
283 |
|
Brand
introduction costs |
|
- |
|
|
|
|
753 |
|
Restructuring |
|
1,657 |
|
|
|
|
- |
|
M&A
transaction expenses |
|
8,472 |
|
|
|
|
- |
|
Other
items |
|
890 |
|
|
|
|
335 |
|
Adjusted
EBITDA |
$ |
17,452 |
|
|
|
$ |
12,631 |
|
|
|
|
|
|
Whole Earth Brands,
Inc.Constant Currency Product Revenues, Net
Reconciliation(In thousands of
dollars)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
$ change |
% change |
|
Product revenues, net |
|
|
2021 |
|
|
2020 |
Reported |
Constant Dollar |
Foreign Exchange
(2) |
Reported |
Constant Dollar |
Foreign Exchange |
|
Branded CPG |
|
$ |
81,797 |
|
$ |
40,219 |
|
$ |
41,578 |
|
|
$ |
39,445 |
|
|
$ |
2,133 |
|
103.4 |
% |
|
98.1 |
% |
|
5.3 |
% |
|
Flavors & Ingredients |
|
$ |
24,028 |
|
$ |
25,753 |
|
$ |
(1,725 |
) |
|
$ |
(1,725 |
) |
|
$ |
- |
|
-6.7 |
% |
|
-6.7 |
% |
|
0.0 |
% |
|
Combined |
|
$ |
105,825 |
|
$ |
65,972 |
|
$ |
39,853 |
|
|
$ |
37,720 |
|
|
$ |
2,133 |
|
60.4 |
% |
|
57.2 |
% |
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma Organic(1) |
|
|
|
|
|
|
|
|
|
Branded CPG |
|
$ |
102,177 |
|
$ |
91,183 |
|
$ |
10,994 |
|
|
$ |
8,832 |
|
|
$ |
2,162 |
|
12.1 |
% |
|
9.7 |
% |
|
2.4 |
% |
|
Flavors & Ingredients |
|
$ |
24,028 |
|
$ |
25,753 |
|
$ |
(1,725 |
) |
|
$ |
(1,725 |
) |
|
$ |
- |
|
-6.7 |
% |
|
-6.7 |
% |
|
0.0 |
% |
|
Combined |
|
$ |
126,205 |
|
$ |
116,936 |
|
$ |
9,269 |
|
|
$ |
7,107 |
|
|
$ |
2,162 |
|
7.9 |
% |
|
6.1 |
% |
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Product revenues,
net shown on a like for like basis, including the impact of both
acquisitions for the full quarter in both the current and prior
year periods |
|
(2) The "foreign
exchange" amounts presented, reflect the estimated impact from
fluctuations in foreign currency exchange rates on product
revenues. |
|
|
|
|
|
|
|
|
|
|
|
Whole Earth Brands,
Inc.GAAP to Adjusted EBITDA
Reconciliation(In thousands of
dollars)
$ in
Thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020 |
|
Three Months Ended March 31, 2021 |
|
|
|
|
GAAP |
Non-cash adj. |
Cash adj. |
Adjusted EBITDA |
|
GAAP |
Non-cash adj. |
Cash adj. |
Adjusted EBITDA |
|
$ Change |
% Change |
Product revenues, net |
$ |
65,972 |
|
$ |
- |
|
$ |
- |
|
|
65,972 |
|
|
$ |
105,825 |
|
$ |
- |
|
$ |
- |
|
|
105,825 |
|
|
$ |
39,853 |
60.4% |
|
Cost of goods sold |
|
40,112 |
|
|
(706) |
|
|
(1,027) |
|
|
38,379 |
|
|
|
70,174 |
|
|
(2,835) |
|
|
(556) |
|
|
66,783 |
|
|
|
28,404 |
74.0% |
|
Gross profit |
|
25,860 |
|
|
706 |
|
|
1,027 |
|
|
27,593 |
|
|
|
35,651 |
|
|
2,835 |
|
|
556 |
|
|
39,042 |
|
|
|
11,449 |
41.5% |
|
Gross profit margin % |
|
39.2% |
|
|
|
|
41.8% |
|
|
|
33.7% |
|
|
|
|
36.9% |
|
|
|
(4.9%) |
|
Selling, general and administrative expenses |
|
16,048 |
|
|
(152) |
|
|
(934) |
|
|
14,962 |
|
|
|
32,907 |
|
|
(1,943) |
|
|
(9,374) |
|
|
21,590 |
|
|
|
6,628 |
44.3% |
|
Amortization of intangible assets |
|
2,534 |
|
|
(2,534) |
|
|
- |
|
|
- |
|
|
|
4,151 |
|
|
(4,151) |
|
|
- |
|
|
- |
|
|
|
- |
- |
|
Asset impairment charges |
|
40,600 |
|
|
(40,600) |
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
- |
|
Restructuring and other non-recurring expenses |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
1,657 |
|
|
(358) |
|
|
(1,299) |
|
|
- |
|
|
|
- |
- |
|
Operating income |
$ |
(33,322) |
|
$ |
43,992 |
|
$ |
1,961 |
|
$ |
12,631 |
|
|
$ |
(3,064) |
|
$ |
9,287 |
|
$ |
11,229 |
|
$ |
17,452 |
|
|
$ |
4,821 |
38.2% |
|
Operating margin % |
|
(50.5%) |
|
|
|
|
19.1% |
|
|
|
(2.9%) |
|
|
|
|
16.5% |
|
|
|
(2.7%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note – Q1 2020 is a predecessor period and Q1 2021 is a
successor period.
Whole Earth Brands,
Inc.Adjustment to Operating Income by Income
Statement line and nature(In thousands of
dollars)
$ in
Thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020 |
|
Three Months Ended March 31, 2021 |
|
Non-Cash adjustments |
Cost of Goods Sold |
SG&A |
Amort. Of Intangibles |
Asset impair-ment |
Restruct-uring |
Operating Income |
|
Cost of Goods Sold |
SG&A |
Amort. Of Intangibles |
Asset impair-ment |
Restruct-uring |
Operating Income |
|
Depreciation |
706 |
|
- |
|
- |
|
- |
|
- |
|
706 |
|
|
969 |
|
- |
|
- |
|
- |
|
- |
|
969 |
|
|
Amortization of intangible assets |
- |
|
- |
|
2,534 |
|
- |
|
- |
|
2,534 |
|
|
- |
|
- |
|
4,151 |
|
- |
|
- |
|
4,151 |
|
|
Asset impairment charges |
- |
|
- |
|
- |
|
40,600 |
|
- |
|
40,600 |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Restructuring |
- |
|
- |
|
- |
|
- |
|
- |
|
|
|
|
- |
|
- |
|
- |
|
- |
|
358 |
|
358 |
|
|
Non-cash pension expense |
- |
|
152 |
|
- |
|
- |
|
- |
|
152 |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Long term incentive plan |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
247 |
|
1,943 |
|
- |
|
- |
|
- |
|
2,189 |
|
|
Purchase accounting costs |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
1,619 |
|
- |
|
- |
|
- |
|
- |
|
1,619 |
|
|
Total non-cash adjustments |
706 |
|
152 |
|
2,534 |
|
40,600 |
|
- |
|
43,992 |
|
|
2,835 |
|
1,943 |
|
4,151 |
|
- |
|
358 |
|
9,287 |
|
|
Cash adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- |
|
- |
|
- |
|
- |
|
1,299 |
|
1,299 |
|
|
Long term incentive plan |
47 |
|
355 |
|
- |
|
- |
|
- |
|
402 |
|
|
(22 |
) |
(75 |
) |
- |
|
- |
|
- |
|
(97 |
) |
|
Transaction related expenses |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- |
|
210 |
|
- |
|
- |
|
- |
|
210 |
|
|
Severance and related expenses |
|
|
188 |
|
- |
|
- |
|
- |
|
188 |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Public company readiness |
|
|
283 |
|
- |
|
- |
|
- |
|
283 |
|
|
- |
|
454 |
|
- |
|
- |
|
- |
|
454 |
|
|
Brand introduction costs |
753 |
|
- |
|
- |
|
- |
|
- |
|
753 |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
M&A transaction expenses |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
- |
|
8,472 |
|
- |
|
- |
|
- |
|
8,472 |
|
|
Other items |
227 |
|
108 |
|
- |
|
- |
|
- |
|
335 |
|
|
578 |
|
313 |
|
- |
|
- |
|
- |
|
890 |
|
|
Total cash adjustments |
1,027 |
|
934 |
|
- |
|
- |
|
- |
|
1,961 |
|
|
556 |
|
9,374 |
|
- |
|
- |
|
1,299 |
|
11,229 |
|
|
Total adjustments |
1,733 |
|
1,086 |
|
2,534 |
|
40,600 |
|
- |
|
45,953 |
|
|
3,391 |
|
11,317 |
|
4,151 |
|
- |
|
1,657 |
|
20,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash adjustments: The Adjusted EBITDA
reconciliation includes certain transactions that are non-cash in
nature. Such items include depreciation, amortization of
intangibles, asset impairment charges, non-cash pension expense,
long-term incentive plan expenses (stock based compensation) and
purchase accounting adjustments.
Cash adjustments: The Adjusted EBITDA
reconciliation includes certain transactions that are one-off,
non-recurring in nature, but have been or will be settled with
Company cash.
Whole Earth Brands (NASDAQ:FREE)
Historical Stock Chart
From Jul 2024 to Jul 2024
Whole Earth Brands (NASDAQ:FREE)
Historical Stock Chart
From Jul 2023 to Jul 2024