Reynolds Consumer Products Inc.

Greetings, and welcome to the Reynolds Consumer Products third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press the star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Flexberg, Vice President of Investor Relations. Thank you, sir. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us on Reynolds Consumer Products' third quarter 2023 earnings conference call. Please note that this call is being recorded and webcast on the investor relations section of our corporate website at ReynoldsConsumerProducts.com. Our earnings press release and accompanying presentation slides are also available. With me on the call today are Lance Mitchell, our President and Chief Executive Officer, Michael Graham, our Chief Financial Officer, and Scott Huckins, who recently joined RCP and becomes Chief Financial Officer on November 13th. For our call, Lance will discuss our results, the macroeconomic environment, and our category performance. Michael will provide additional detail on the third quarter, our guide, and capital allocations. Following prepared remarks, we will open the call for questions. Before we begin, I would like to provide a couple reminders. First, this morning's discussion may contain forward-looking statements based on current expectations and beliefs. These statements are subject to risks, uncertainties, and changes in circumstances that could cause actual results and outcomes to differ materially from those described today. Please refer to our risk factors section in our SEC filings, including in our annual report on Form 10-K and our quarterly report on Form 10-Q. Please note that the company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after the call. Second, during today's call, we will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these GAAP to non-GAAP financial measures are available in our earnings press release, investor presentation deck, and 410Q, copies of which can be found on the investor relations section of our site. Now I'd like to turn the call over to Lance.

Thank you, Mark, and good morning, everyone. Please join me in welcoming Scott Huckins. Scott comes to RCP at a great moment in our history of our company, when our brands, our market position, and financial profile are strong and getting stronger. He is with us on the call today as part of the transition plan. I'll begin by discussing our results. Then I will turn to the macroeconomic environment our performance in our largest categories, and what we're doing to improve the volume trends in disposable tableware. After that, I'll turn the call over to Michael to provide more detail on the quarter in our guide. The RCP team continues to perform very effectively in a dynamic, challenging economic environment, and I'm extremely proud of all that we've accomplished. We've delivered net revenues and earnings at the upper end of our expectations for the quarter. We expanded EBITDA margin more than 500 basis points in each of our businesses, reflecting effective execution of our plans to increase share across RCP, continued disciplined investments in our business, and additional successful implementation of the Reynolds Cooking and Baking Recovery Plan. WE CONVERTED HIGHER EARNINGS INTO SIGNIFICANT CASH FLOW, RESULTING IN OUR DELEVERAGING MORE QUICKLY THAN PREVIOUSLY ANTICIPATED. WE INTRODUCED THE HEFTY BRAND IN PRESS TO CLOSE FOOTBACK CATEGORY AND INCREASED LOYALTY WITH GEN Z AND MILLENNIALS. AND FOLLOWING QUARTER END, WE ACQUIRED A COMPANY THAT IS A RESEARCH-DRIVEN BUSINESS WHICH WILL ALLOW US TO ACCELERATE PRODUCTION AND COMMERCIALIZATION OF AFFORDABLE high-quality sustainable products, and material blends. As you know, U.S. households are facing significant economic challenges, including inflation and rising interest rates and other headwinds, which have impacted sales volume across consumer staples. We continue to respond to these challenges by adapting and innovating to meet consumers' needs, leveraging our unique business model, including brands and store brands, executing planned increases in promotion and advertising, and continuing strong management of costs and manufacturing productivity. As a result, our retail sales volume is stable and growing in our three largest categories, and we are implementing actions to improve disposable tableware trends. We are also benefiting from continued consumer shifts to untracked channels. As a reminder, a large portion of our business is not tracked. I will now review our performance by business segment. The Reynolds cooking and baking team has done an outstanding job executing the Reynolds recovery plan while also increasing market share. Volume, operational, and gross profit objectives set at the start of the year were met for the third quarter in a row. Our primary foil production facility, located in Louisville, has stabilized at historical production rates, and extensive work continues to further increase efficiencies to expand margins. Reynolds Wrap continued to drive the household foil category, our second largest category, retaining the first half significant share gains and increasing share nearly 300 basis points in the quarter. We increased household penetration for Reynolds Wrap among all major demographics while also raising aided and unaided awareness for Reynolds foil and parchment among millennials. And we expanded distribution of Reynolds Kitchen's air fryer liners in the U.S. and Canada while increasing distribution of Reynolds Kitchen's stay-flat parchment paper with Smart Grid nationally. Reynolds now surpasses $1 billion in annual retail sales, and we have the capabilities, share strength, and plans to grow Reynolds cooking and baking volume and margins. Our waste and food bag businesses are also performing well, driven by the Hefty brand and our integrated brand and store brand model. Hefty retail sales are growing and continue to climb towards $2 billion led by sales of waste bags, our largest category. Hefty acquired additional waste bags here in the quarter driven by innovation. Our largest innovation of the last three years, Hefty Fabuloso, was recently recognized by Cercana, previously known as IRI, as the number three pace setter brand for 2023, and ACB for both Fabuloso scents, lavender and lemon, continued to increase. Our Presto business gained additional share of store brand food bags, our third largest category, and Hefty introduced Hefty branded press-to-close food bags during the quarter. Hefty press-to-close food bags come in multiple sizes and offer consumers the features and reliability of the Hefty brand. Hefty Renew, our community-based program to aid curbside recycling of hard-to-recycle plastics, EXPANDED TO THE GREATER CINCINNATI MARKET IN OCTOBER. AND WE DROVE A MAJOR PICKUP IN SOCIAL MEDIA IMPRESSIONS WITH HEFTI CINNAMON PUMPKIN SPICE WASTEBAGS, AVAILABLE FOR A LIMITED TIME THIS FALL, AND THE REINTRODUCTION OF HEFTI ZOOPAL'S DISPOSABLE PLATES IN AUGUST. ZOOPAL'S ONLINE-ONLY LAUNCH DROVE MORE THAN 3 BILLION SOCIAL MEDIA IMPRESSIONS FOR THE HEFTI BRAND and we plan to extend the relaunch to other major channels in 2024. Turning now to our disposable tableware segment. The HEPTI tableware team has done an exceptional job recovering profitability, and the HEPTI brand is holding share in the category. In recent months, the team has also done extensive research to identify opportunities to improve tableware volume trends in response to elasticity pressures which are impacting the entire category. As a result, we have begun implementing comprehensive plans to improve tableware's top-line performance, drawing on proprietary consumer insights and extensive experience aligning with our retail partners on pack sizes and promotions that hit key retail price points. Here are some of the highlights of those plans. We've increased advertising of hefty party cups and disposable plates, to bring in lapsed and lost users, reminding them we'll do the dishes in addition to showcasing the party cups used for crafting and other non-food occasions. We're modifying features and displays based on very encouraging results from a new feature we recently trialed. We are adjusting counts while still providing consumers the value they seek from large pack sizes. Disposable plates, for example, We can make small reductions to pack counts and plate size, allowing for reductions in everyday retail pricing. And we are adjusting key pack sizes, promoted price points. It'll take time to realize an improvement in disposable tableware volume trends. We have a high level of confidence in that improvement based on the advantages of our brand and store brand model, our experience managing our categories, together with our retail partners, in our previous implementation of proven plans to drive product growth. We began in 2023 committed to driving our categories, expanding margins and increasing cash flow in a challenging macroeconomic environment, and we've been very successful doing that. We recovered margins across RCP and anticipate further margin expansion. We're paying down debt faster than initially expected, we are increasing share in the vast majority of our business, and we are implementing proven plans to improve trends in disposable tableware. All this adds up to being very well positioned for further deleveraging and for sustaining volume and earnings growth beyond 2023. Now, before I hand the call over to Michael, I would like to remind you that Michael will remain in an advisory role to the company after Scott becomes CFO and until Michael's retirement early next year. I'd also like to express my gratitude to Michael for his many years of service to the company. We've accomplished a lot together, including the growth of Reynolds Consumer Products, the introduction and expansion of our revolution program of business transformation initiatives, the successful listing as a publicly traded company, and steady financial management through a period of unprecedented macroeconomic volatility. Michael, you're a trusted friend, and I know that I speak for all of us at RCP when I tell you that you will be missed as our business partner. Over to you.