Reynolds Consumer Products Inc.

and you're welcome to the Reynolds Consumer Products Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listening mode. After the speaker presentation, there will be a question and answer session. If anyone should require operator assistance, please press star zero on your telephone keypad. Please be advised that today's call is being recorded. I would now like to hand the conference over to your speaker today, Mark Swartzberg. Thank you. Please go ahead.

Good afternoon. Thank you for joining us on Reynolds Consumer Products Third Quarter 2020 Earnings Conference Call. On the call today are Lance Mitchell, President and Chief Executive Officer, and Michael Graham, Chief Financial Officer. During the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results and outcomes to differ materially from those described in these forward-looking statements. These refer to Reynolds Consumer Products Annual Report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission and its press release issued this afternoon for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note management's remarks today will focus on non-GAAP or adjusted financial measures. A reconciliation of GAAP results to non-GAAP financial measures is available in the earnings release posted under the investor relations heading on our website at reynoldsconsumerproducts.com. The company has also prepared a few presentation slides and additional supplemental financial information which are posted on Reynolds' website under the investor relations heading. This call is being webcast and an archive of it will also be available on the website. I'd also like to note that we are conducting our calls today from our respective remote locations. As such, there may be brief delays, cross-talk, or other minor technical issues during this call. We thank you in advance for your patience and understanding. While we would like to answer all of your questions during the question and answer session, in the interest of time, we ask that you ask one question and a follow-up and rejoin the queue if you have additional questions. And now I'd like to turn the call over to Lance Mitchell.

Thanks, Mark. Before we begin, with the surge of COVID-19 across our country, I'd like to thank our employees for continuing to follow prevention measures and putting safety first, always. And on Veterans Day, we also thank our many colleagues and all who served our country, men and women and their families, who've made personal sacrifices to assure the security of our nation and our democracy. For our agenda today, Mike will review our strong quarter and outlook. and I'll cover performance highlights, brand performance, our near-term priorities, and fourth quarter demand. Together, our remarks will be brief. A good quarter requires very little explanation, and then we'll open it up for questions. We're very pleased with our quarterly results and the progress we're making against the goals and initiatives we established to position us for future growth and success. Revenue is up strongly. reflecting increased everyday use at home and the impact of new products. Gross margin expanded substantially. We invested significantly in advertising and promotion and market research. All of this together resulted in a $30 million increase in adjusted EBITDA, enabling us to increase our financial outlook for the year. Turning now to our brands and businesses. Three years ago, we set out to make Reynolds a billion-dollar brand at retail. And I'm happy to tell you, we recently crossed that threshold, growing 18% in the last 52 weeks, or more than $150 million compared to 2019. Reynolds wrapped oil grew 17% over that period, and we saw even faster growth in parts of paper, plastic wrap, and wax and freezer paper. Needless to say, running brand strength and momentum is benefiting from our increases in capacity. We're also seeing strong performance for Hefty. The waste bag category is large and growing strongly, and the Hefty brand continues to do very well growing with the category. According to Harris, U.S. households are using more than 3.5 kitchen waste bags per week, up from approximately 2.5 bags per week prior to COVID. Innovation has also picked up in the quarter and was led by our hefty tableware unit, which benefited from a number of new products, including EcoSave, a new line of disposable tableware made of plant-based materials which is 100% compostable. Excellent service across our categories remains a priority, and our Presto unit continues to grow with our retail partners and their brand, even with year-to-date headwind of last year's exits. of low margin business. Our e-commerce business is also doing very well, growing very strongly again in the quarter. We estimate our e-commerce shares to be equal to or better than our brick-and-mortar shares, depending on the category. Looking forward, our near-term priorities remain employee health and safety, maximizing the availability of our products and investment in our category. We remain vigilant as COVID-19 positivity rates increased nationally, and our recordable injury rates remained very low and below year-ago levels. We continue to improve the availability of our products in response to strong demand. In-stocks are improving, and we continue to bring on more capacity than planned at the start of the year, with most of it online by year-end. We are also increasing spending on advertising and promotion and market research as consumer habits change and benefit our categories. We've previously called out significant second-half increases in A&P due to timing. For the year, we plan for A&P to be up strong double digits. We are completing our plans for 2021, but you can expect strong support for our brands next year considering the favorable demand environment. Most of us are spending more time at home. And our research finds that the behavior that comes with this is a long-lasting positive. Repeat rates among new users are up across our categories. In addition, according to Numerator, more than 80% of active users of our categories indicate they intend to maintain or increase elevated consumption of foil, waste bags, food bags, and disposable tableware beyond 2021. This is a positive for our categories. Then it means more innovation. We have a strong new product pipeline. We've invested in market research during this change in consumer behavior to aid in the development of new products. We remain committed to our goal of 20% of our revenue from products that are less than three years old, and we're excited about the new product pipeline that we have heading into next year. Demand remains stronger than historical trends. And as you saw in our release, we estimate a mid-single-digit net revenue increase in the fourth quarter. After a stronger-than-expected third quarter, households entered October with increased inventory of our products, and we anticipate smaller gatherings around the holidays. This has reduced the need for promotion, in contrast to last year's fourth quarter, when we did what we usually do. step-up promotions at the start of the quarter to build household inventory ahead of the holidays. Additionally, we've seen some softening of business and restaurant items sold by certain retailers as restaurant restrictions have increased. We remain firmly focused on leadership of our categories, and I could not be more pleased that we're able to simplify daily life for consumers by meeting the sustained and fundamental shift in demand for our products. We are aware of next year's comparison and leaning into the opportunity with capacity, innovation, and investment. I'm confident our people and our priorities will allow us to deliver another year of strong performance. I'll now turn it over to Michael to discuss our results for the quarter and our outlook.