Sovos Brands, Inc.

And welcome to Sovel's Brand's first quarter 2023 earnings 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 star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Josh Lifkin, VP, Ambassador's Relations. Please go ahead.

Good afternoon, and thank you for joining us on Sobos Brand's first quarter 2023 earnings conference call. On the call today are Todd Lachman, 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 April 1st, 2023, 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.sovosbrands.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 refers to dollar consumption on a total MULO basis as of the 13-week period ended April 2, 2023, and growth versus the prior year comparable period unless otherwise noted. And lastly, to avoid any confusion, for discussions pertaining to first quarter results and full fiscal 2023 guidance and growth expectations, organic net sales growth is calculated as net sales growth adjusted for acquisitions, divestitures, and the 53rd week in 2022. With that, I will now pass it to Todd.

Thanks, Josh. I will begin with the discussion of the exceptional performance we delivered this quarter. and that we continue to expect in future quarters, before turning it over to Chris to provide greater detail on our results and updated 2023 outlook. When we spoke to you in our last earnings call, we said that Q1 was off to a strong start, building on the robust fourth quarter. Today's results reflect sector-leading, volume-driven net sales and profit growth with meaningful margin expansion as a result of excellent operational execution. We have generated very strong momentum in the Rayos Mega Brand, which we expect to continue through the second quarter and balance of the year. Given our robust Q1 results and the continued momentum in our business, we are raising our guidance for net sales and adjusted EBITDA. Robust trends for the Rayos brand continued in Q1. Rao's grew net sales 38%, surpassing $600 million on an LTM basis, and for the first time ever achieved the number one dollar share in the food channel. The primary driver of this growth was the substantial gain in household penetration. Up 120 basis points versus Q4 for the total franchise, and up nearly 100 basis points for sauce. These gains represented the largest quarterly increase in household penetration in the last three years, benefiting from robust distribution growth, which was up 22% for sauce in the quarter, as well as higher brand awareness that was driven by a substantial increase in marketing. Recall that awareness grew 10 full percentage points to 58% in 2022. As a result, dollar consumption for the Rao's franchise grew 26% in the quarter. In sauce, we grew dollar consumption 22%, with units up 16%, both well ahead of the category. We also delivered sustained growth in frozen entrees, soup, and pasta. with combined retail dollars up 46% in the quarter, with each of these RAO's businesses growing distribution, household penetration, and dollars well ahead of their respective categories, resulting in market share gains. As we show on slide eight, we have made considerable progress over the last few years developing these highly incremental businesses. with our non-sauce Rao's branded products now accounting for nearly 20% of trailing 52-week measured retail sales. And our most recent non-sauce launch into frozen pizza, although still in the early stages, is delivering in line with our expectations, and we are excited about the retailer and consumer interest we have received thus far. Importantly, we continue to see massive white space for the Rayos franchise and Rayos Sauce in particular. While we did experience the largest quarterly household penetration gains in three years on Rayos Sauce, our household penetration is still less than half the level of several competitors, unit share is below 7%, and awareness of 58% is well below the greater than 90% levels for peers. and the brand remains highly under-penetrated and under-shared in each of its non-sauce businesses. With many more at-home eating occasions today than prior to COVID, and traffic trends at restaurants remaining under pressure from cautious consumers, we see a long runway to provide many more consumers the opportunity to enjoy a restaurant-quality meal at home with their family. Turning to Noosa, the brand grew net sales 8% in the quarter, driven by strong performance in non-measured channels. Our core eight-ounce offering grew dollar consumption 9%, outperforming the category on a unit basis and benefiting from distribution and velocity. We continue to invest meaningfully in the brand, highlighting its taste leadership and strengthening our assortment to drive higher trial and consumption. And we're building a pipeline of delicious innovation, most notably in core spoonable yogurt to capitalize on the brand's leadership and indulgence and appeal across all day parts. Michelangelo's net sales were down 6% in the quarter with the launch of sauce partially offsetting the proactive decision to exit certain lower margin frozen SKUs. We continue to drive growth in frozen with key grocery retail partners and are gaining distribution in new channels. Our total frozen entrees business, inclusive of Michelangelo's and Rayo's, grew net sales 10% in the quarter with consumption up 11%, which was ahead of the category. With healthy inventories, significantly better service and increased brand investments, we are growing distribution and velocity in our Sobos Brands frozen business and remain confident there is a long runway ahead for growth. Broadly speaking, our increased investments in marketing, R&D, selling and supply chain are driving robust sales and profit results for our company. In marketing and R&D, we increased our growth investments a combined 27% in the quarter following a high single-digit increase last year. For example, our new advertising campaign for Rao's called The Deliciousness of Slow highlights key points of what makes Rao's sauce so unique, including high-quality fresh ingredients, and the slow-simmered, open-kettle cooking process that results in our thick, delicious, one-of-a-kind sauce. We're leveraging a roster of celebrity fans and influencers who showcase the many ways they use Rao's products in their kitchens to their millions of followers. In R&D, we're leveraging our new Innovation Center of Excellence in Austin, Texas, to continue delivering delicious innovation and new products across the portfolio. In sales, we're adding more resources in customer-facing roles, we're strengthening our net revenue management capabilities, and we're investing in data to enable better decisions. And in our supply chain, Our investments in talent and capabilities are really paying off. I want to commend the team on their performance in the quarter, helping to deliver over 200 basis points of gross margin expansion and 30% adjusted EBITDA growth. Our inventories are healthy with service for sauce and yogurt consistently above target, and service for frozen is in a significantly better position than this time a year ago. In addition, our team is doing an excellent job proactively managing our input costs, and we are successfully delivering on a wide range of productivity initiatives within the four walls of our factories. We see our supply chain capabilities as an important enabler in sustaining our volume-led growth. In summary, we are very proud of our first quarter performance. We are executing well across the organization and investing in the business to drive continued household penetration gains. In fact, with household penetration for Sovos Brands now in excess of 25%, over one quarter of all households in the U.S. have a Sovos Brands product in their kitchen. And to reiterate, given the strong momentum in our business, we are raising our full year guidance. We will continue to invest in brand building, talent, and capabilities to support our sector-leading volume-led growth, and we'll take the right actions to support profitable growth for our business in the quarters and years ahead. Chris Hall will now discuss the details of our first quarter and our updated guidance for 2023.