Company Overview

Whole Earth Brands is a global food company that sells low-calorie sweeteners, baking products, and licorice extract ingredients. The company has two main business units:

• Branded CPG: Sells low-calorie sweetener products under brands like Whole Earth, Pure Via, Wholesome, and Swerve. These products are sold directly to consumers in stores.

• Flavors & Ingredients: Sells licorice extract ingredients and other products to large food and beverage manufacturers.

In February 2024, Whole Earth Brands signed an agreement to be acquired by Ozark Holdings. This deal is still pending approval.

Financial Performance

In the first three months of 2024, Whole Earth Brands generated $129.5 million in product revenue, down 2.2% from $132.4 million in the same period last year. Net loss for the quarter was $9.4 million compared to a $19.8 million loss in the first quarter of 2023.

The Branded CPG unit saw a 3.5% drop in revenue due to lower sales volumes, partially offset by price increases. Flavors & Ingredients revenue grew by 2.1%, driven by higher pricing and volumes.

Despite lower revenue, gross profit margin improved from 24.4% to 28.8% due to lower input costs and more efficient operations. However, higher operating expenses related to the pending acquisition resulted in just a small increase in operating income.

The company used $9.6 million in operating cash flow during the quarter compared to generating $4.1 million in the prior year period. This reflects less favorable working capital trends in 2024.

At quarter end, the company had $426 million of debt outstanding under its term loan and revolving credit facilities. The company amended the terms of its debt agreements over the past year to provide more financial flexibility.

Outlook

The pending merger with Ozark Holdings, expected to close later this year, will significantly impact Whole Earth Brands. Ozark is expected to help expand the company’s portfolio of consumer brands.

In the near term, the company aims to drive growth through price increases and new product innovation under its Branded CPG unit. The Flavors & Ingredients business is focused on deepening relationships with key customers.

To improve profitability, management plans to optimize operations and reduce costs across the supply chain. They have targeted $15 million in cost savings this year.

The company believes its strong cash flow and access to credit provides adequate liquidity to operate the business. However, high debt levels remain a risk factor going forward.