B&G Foods, Inc.

Good day, and welcome to the B&G Foods second quarter 2022 earnings call. Today's call, which is being recorded, is scheduled to last about one hour, including remarks by B&G Foods management and the question and answer session. I would now like to turn the call over to Sarah Gerolim, Senior Director of Corporate Strategy and Business Development for B&G Foods. Sarah?

Good afternoon, and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Walker, our Chief Financial Officer. You can access detailed financial information on the quarter in the earnings release we issued today, which is available at the investor relations section of bgfoods.com. Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer you to B&G Foods' annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial conditions. B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. We will also be making references on today's call to the non-GAAP financial measures adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, and base business net sales. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. CC will begin the call with opening remarks and discuss various factors that affected our results selected business highlights, and his thoughts concerning the outlook for the remainder of fiscal 2022 and beyond. Bruce will then discuss our financial results for the second quarter of 2022 and our guidance for full year fiscal 2022. I would now like to turn the call over to Casey.

Good afternoon. Thank you, Sarah. And thank you all for joining us today for our second quarter earnings call. The second quarter was difficult. Similar to Q1, we experienced continued pressure from inflation ahead of recovering price actions. Total Q2 net sales increased 3.1% versus last year, with adjusted EBITDA at $54.1 million, a 35.4% decline to prior year. Simply put, our pricing actions have not yet caught up to the higher inflation flowing into our cost of goods sold. Within the quarter, we saw improvement in June results after a tough April-May behind some early realization from pricing implemented in June. And we expect to see further improvement starting in mid-July with additional pricing actions across the portfolio. Some key perspectives on the quarterly results. Pricing. The price increases effective in the last couple months, Crisco plus 25%, Green Giant plus 8%, have been implemented and are yielding benefits. but are just taking effect in the market with the required customer lead times. We realized $56.7 million of pricing benefit in the first half of fiscal year 22, slightly below initial expectations. In addition, elasticity on some brands have increased modestly in recent weeks, although still well below historical levels. Crisco elasticity, for example, is now at 0.5 to 0.6, with the last increase as a few consumers trade down to private label. Inflation. The total cost of goods sold inflation impact in the P&L is now projected at $270 to $280 million year over year, or over a 20% increase. The latest culprit is fuel and energy costs, which have driven up our freight, transportation, and utility costs rapidly. The July pricing action covered diesel costs at roughly $5.10, with a forthcoming price increase across the portfolio covering costs closer to projected levels. Downsized conversions. Q2 sales were also impacted by delays in the conversion of the Crisco 48 to 40-ounce bottle and the new reduced Ortega taco shell packs. Retail inventories took longer to work through before shipments started on the new bottles and shell packs. The good news is that we are seeing most bottles and packs shipping and converting on shelf now. Spices and seasonings. B&G's spices and seasonings portfolio was down versus last year, impacting volume and mix in Q2 results. Key drivers were the overall category contraction against elevated pandemic demand in early 2021, as well as supply and customer service issues related to Q1 disruptions and labor shortages in our Ankeny spices and seasonings facility. Customer service levels have now significantly improved and recovered to over 92% in July. Despite the recent trend, both the category and our spices and seasonings are up double digits versus pre-pandemic levels. We are also seeing improved trends in most recent month results. Looking forward, we expect to return to last year adjusted EBITDA performance in the back half behind pricing catching up to costs. Specifically, Looking at the flow and timing of pricing against rising costs in 2022, first half pricing realization covered about 50% of actual year-over-year inflation. Q3 total pricing is projected to cover approximately 85% of year-over-year inflation, and Q4 total pricing is projected to fully cover year-over-year inflation. As a result, Q3 adjusted EBITDA is expected to be below last year with more pricing actions implemented against rising costs, and Q4 higher than last year with full pricing benefit against stabilized costs and service recovery compared to the Omicron and Delta challenges in Q4 2021. Now, let me shift gears to talk about the recent changes we announced to create a business unit structure effective August 1st. We are making these changes to, one, establish clear focus and expectations within the complex and fragmented B&G Foods portfolio. The business units define the categories and brands that we will resource and grow, the platforms for future acquisitions, the brands that will run for efficiency and cash flow, and the businesses we may exit over time. Two, push accountability and multifunctional responsibility down to more closely managed parts of the broad B&G Foods portfolio. improving the speed and clarity of decision-making to deliver growth and financial performance. For example, the BU structure will make us more effective in the current inflationary environment, improving visibility to brand and product-specific cost drivers and accelerating decisions to drive productivity and implement pricing to recover higher input costs. Three, improve the external visibility and understanding of the relative performance and composition of the broad B&G Foods portfolio. In moving to a BU structure, we expect over time to be able to provide analysts and investors with deeper insights into the financial performance and key priorities for each unit. We announced the formation of the four business units last month. They are Spices and Seasonings, representing approximately 18% of B&G Foods' net sales and the number two player in the high-margin spices and seasonings category, with a strong portfolio of consumer-facing brands including Dash, Weber, Spice Islands, et cetera. Our aspirations are to grow this business organically in the low single digits long-term and add new positions to the B&G Foods portfolio through product expansion and acquisition. This unit will be led by Jordan Greenberg, formerly B&G's Chief Commercial Officer. Meals. representing approximately 22% of B&G's net sales, capitalizing on elevated at-home breakfast and casual lunch dinner occasions driven by remote working. This unit has a strong position in the growing Mexican category with Ortega, Las Palmas, et cetera, as well as a solid breakfast foundation with Cream of Wheat, McCann's, and Maple Grove Farms. Our aspirations are to grow this business organically in the low to mid single digits and add targeted new positions to build scale in specific subcategories and occasions. We expect to announce the appointment of the meals president shortly following an external search. Frozen and vegetables, representing approximately 27% of P&G's net sales, with positions in frozen and shelf-stable vegetables behind the Green Giant and LeSueur brands. Initially, this unit's focus will be on improving the economic model through supply consolidation, for example, the grower's acquisition, productivity savings and enhancements, and better innovation design. Longer term, our aspirations are to grow this unit at a low to mid-single digits consistent with the frozen category. This unit will be led by Kristen Thompson, formerly the marketing director on Green Giant, who has extensive experience in the frozen category on other brands. Specialty, representing approximately 33% of B&G's net sales with a portfolio of shelf-stable, center-of-store brands, including a strong baking category position behind Crisco, Collabor Girl, Baker's Joy, etc. Our expectations for this unit are to maintain cash flow, margin, and reasonably stable sales trends, with heavy focus on sales and operating costs. This unit will be led by Ellen Shum, formerly our Chief Customer Officer, who has had additional experience in operations and finance roles earlier in her career. I'm personally excited to strengthen B&G's food performance and portfolio through the business unit structure. We are underway, working in the new organization and going through transition and startup in the next couple months. But already in the first days and weeks, I can see sharper focus, faster decisions, and bigger and better actions. Much more to come. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the remainder of the year.