Sovos Brands, Inc.

The Sovos Brandt First Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that portion of the call, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Josh Levin. Please go ahead.

Good afternoon, and thank you for joining us on SoBus Brands' first quarter fiscal year 2022 earnings conference call. On the call today are Todd Lackman, President and Chief Executive Officer, and Chris Hall, Chief Financial Officer. By now, everyone should have access to the earnings release for the period ended March 26, 2022, that went out this afternoon at approximately 4 p.m. Eastern Time. The press release, as well as supplemental slides, can be found on the company's website at ir.sobusbrands.com. And shortly after the conclusion of today's call, a webcast will also be archived and available for replay. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it, and as such, does include risks and uncertainties. If you refer to the company's earnings release, as well as its most recent SEC filings, you will see a discussion of factors that could cause Sobos Brand's actual results to differ materially from these forward-looking statements. Please remember the company undertakes no obligation to update or revise these forward-looking statements in the future. We will make a number of references to non-GAAP financial measures. We believe that these measures provide investors with useful perspective on the underlying growth trends of the business and have included in our earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. Please note that all consumption data cited on today's call will refer to dollar consumption as the 13-week period ended March 27, 2022, and growth versus the prior year unless otherwise noted. With that, I'd now like to turn the call over to Todd.

Thanks, Josh. For those of you who may have missed it, a little over a week ago, we announced that Josh has joined us as our new Vice President of Investor Relations. Many of you already know him well from his time on both the buy and sell side. And given his familiarity, not to mention his deep knowledge of the packaged food sector, having covered it for nearly 10 years, we are excited to welcome him to the team. I'd like to start today's call off by discussing a few highlights on the quarter. Following updated comments to the current operating environment, I will turn things over to Chris Hall for greater detail on our first quarter results as well as our full year outlook. Looking to our first quarter results, I am extremely proud of how well our team executed. Faced with unprecedented inflationary and supply chain headwinds, as well as lapping 41% brand net sales growth in Q1 2021, we were once again able to deliver double digit top line growth, with results continuing to be led by volume growth in our core categories of sauce, yogurt, and frozen. In regards to these core businesses, which represent over 90% of our portfolio, our brands continue to deliver dollar growth rates that are in line or better than their respective categories. For Sauce, represented by the Rao's brand, we grew dollar consumption by 34% versus 10% for the category. Yogurt, represented by the Noosa brand, grew in line with the category at 5%. And finally, frozen, which includes Rao's and Michelangelo's entrees, as well as Birchbender's waffles, grew by a combined 13% compared to 7% for the combined categories. The combination of sauce, yogurt, and frozen for Sobo's brands grew dollar consumption by nearly 22% versus 7% for the categories in aggregate, with a key point of differentiation being that we delivered such outsized growth almost entirely through increased volume, while the categories were the opposite, with price as the sole driver to growth while volumes were negative. Looking to our largest brand, Rayos, which continues to be the fastest growing center store brand of scale in the United States and represents approximately half of our portfolio, net sales growth remains strong, increasing nearly 20% in the quarter versus 84% in the prior year period. Total Rayo's dollar and unit consumption grew by nearly 35% and 30% respectively. supported by continued gains in TDPs and velocities for the entire franchise. From a household penetration standpoint, total RAOs increased by more than 290 basis points versus prior year to 14 percent, primarily due to sauce and frozen entrees, as they continue to realize substantial distribution, dollar, and unit velocity growth. Specific to sauce, Rayo's dollar consumption increased by over 30% or over three times faster than the category. This rate of growth translated into a 270 basis point increase in dollar share versus the prior year period to 15.1% as dollars, units, TDPs and velocities continued to grow by double digits. which remains in stark contrast to the category where units are down low single digits and the entirety of growth is being driven by price. As a result, household penetration growth for Rayosauce was the fastest in the category, increasing by 250 basis points versus the same time last year to 11.5%, despite the size of the brand at over half a billion dollars in retail sales. And as discussed previously, significant upside opportunity remains to gross sauce distribution given our share of shelf remains low versus dollar share of the category. For perspective, Rayo's has a 20% share or greater in retailers representing 27% of the past 52-week pasta and pizza sauce category sales. Notably, these retailers are geographically dispersed throughout the U.S. Our total frozen entree portfolio, which includes Rao's and Michelangelo's, also outperformed, as dollar consumption of 15% was over two times faster than the category, while units grew in contrast to a decline for the category. Rao's served as the primary driver to growth, with dollars up over 50% on the back of considerable distribution gains. In addition, Michelangelo's also contributed solid middle single-digit growth on strong dollar and unit velocity growth rates that notably outperformed this frozen entree category. Our soup business, the fifth largest brand in the category, also showed great strength in the quarter, with dollar consumption up nearly 30%, or three times the category, making it the fastest-growing soup brand in during the first quarter. Our Noosa yogurt brand. Dollar consumption trends were generally in line with the spoonable yogurt category, while Noosa unit consumption trended 290 basis points ahead of the category. Our 5% growth was primarily driven by strategic efforts to drive trade up to and distribution for larger formats. with our multi-pack and 24 ounce offerings up strong double digits on dollars, units, and TDPs. Our previously announced list price increase on Noosa is starting to take effect here in Q2. As noted on our Q4 call, we recently launched a first of its kind Noosa frozen yogurt gelato into the $7 billion ice cream category. While still early, selling continues to exceed expectations. In an effort to foster additional distribution gains and drive velocities, we plan to ramp up our sales and marketing efforts for the offering as we enter Q2 and the all-important summer selling season. On perch vendors, the first quarter proved challenging, with performance not living up to our expectations. Specifically, some diet-focused segments of our pancake and waffle mix business have been trending down as consumer interest in keto has softened following material growth during the pandemic, while competitive offerings have increased substantially. As a result, we will be introducing new pancake and waffle mixes that are crafted for specific dietary lifestyles in order to drive improved performance in this important segment of our portfolio. Meanwhile, we will continue to execute on other key initiatives of the brand. First, we are focusing sales resources on white space opportunities, including our organic pancake and waffle mixes, which have consistently posted double-digit growth, along with frozen waffles and baking mixes, which are continuing to grow given the brand's ability to travel across categories. And second, the transition of our waffle production to the U.S. from Belgium in the second half of the year will provide meaningful long-term savings as well as greater control over the supply and quality of our product. We remain committed to leveraging Birchbender's differentiated and better few offerings to deliver improved performance. Continuity of supply remains critical to meeting the outsized demand for our products. However, supply disruptions became increasingly frequent during the first quarter. Due to a confluence of factors at play across the industry, we have observed intermittent outages on certain packaging materials such as trays, foil, and lids, as well as continued congestion at the ports. This resulted in service rates below target levels and the suppression of incremental consumption on all brands during the first quarter. While several of these shortages will persist to varying degrees for the foreseeable future, I am proud of how swiftly our team has reacted to this rapidly evolving environment as service rates have improved in recent weeks. Nonetheless, as is the case any time demand outstrips supply, the cost to acquire ingredients and materials rises. As a result, we will continue to execute against our full suite of productivity, net revenue management, and pricing initiatives. With that said, we recently announced we will be taking another round of pricing on our sauce effective late July. Taken all together and based on how we see the world today, we believe these actions should partially offset this latest wave of incremental inflation. As we've stated in the past, we will not hesitate to respond with additional actions if warranted by the market. In summary, we're off to a strong start in 2022 on the top line with line of sight to hitting the high end of our full year net sales guidance. We will remain laser focused on driving household penetration by expanding distribution and awareness. And we will continue to make strategic investments behind sales, marketing and innovation to drive future share gains for our one-of-a-kind brands. At the same time, we will work tirelessly to ensure supply and protect our profitability in this ever-involving, highly inflationary environment. With that, let me hand it over to Chris for more details on the quarter and their updated perspective on the remainder of the fiscal year.