B&G Foods, Inc.

Good afternoon, and welcome to the B&G Foods fourth 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 Jirelem, Senior Director of Corporate Strategy and Business Development for B&G Foods. Please go ahead, ma'am.

Good afternoon, and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Baca, our Chief Financial Officer. You can access detailed financial information on the quarter and full year 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 condition. B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements, whether it is the 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. Casey 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 fiscal 2023 and beyond. Bruce will then discuss our financial results for the fourth quarter and fiscal 2022 and our guidance for fiscal 2023. 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 fourth quarter and fiscal 2022 quarter earnings call. Fourth quarter performance demonstrated strong recovery with cumulative pricing actions covering inflationary costs as we expected. Net sales increased plus 9% versus last year, with adjusted EBITDA as a percentage of net sales at 15% compared to 14.9% last year. Excluding items affecting comparability, gross profit as a percentage of net sales improved to 20.6% in Q4 2022, increasing versus 19.7% in Q4 2021. This is the first quarter in 2022 where margins were at least flat or improving year over year. Some key perspectives on the results. Inflation. Total fiscal year 22 input cost inflation impact finished at greater than plus 20%. We are starting to see some moderation in key commodities, including soybean oil, wheat, corn, but costs still remain at historically high levels. In addition, freight, transportation, and warehousing costs moderated from last summer highs, although still above last year. Pricing. In total, pricing realization, including product mix, contributed $99.2 million in Q4, compared to $75.5 million in Q3. Net pricing actions fully recovered input cost inflation in the quarter, following final price increases for 2022 implemented in August and October. Volume. Q4 sales volumes were relatively resilient against the significant price increases to offset inflation, partly reflecting the improvement in year-over-year customer service levels. In total, sales volume declines were approximately $45 million in Q4. In particular, spices and seasonings net sales grew plus 17.4% in Q4, driven by improved production and service performance. More than half of the Q4 volume declines were in green giant, driven by the exit of a low-profit canned business in the dollar channel and higher elasticity following fall seasonal pack price increases. Supply and service. Customer service and fill rates improved during the quarter, reaching over 95% in December. Last year, December service levels were less than 90%, impacted by disruptions from the Omicron COVID variant in the supply and distribution network. At this stage, some supply issues remain behind materials availability and co-packer availability, but those are becoming more isolated situations. In totality, fiscal year 2022 was challenging, with rapidly rising inflationary inputs across key commodities, particularly following the Ukraine war, and the constant pressure of implementing pricing actions that lagged cost increases to adhere to customer lead time requirements. But we are encouraged by Q4 results and performance, reflecting the catch-up of pricing against costs across the portfolio, a moderating inflationary environment, and the recovery of our higher margin spices and seasonings business. In fiscal year 23, we expect inflation to continue but at lower rates, currently estimated at plus 5% to 6%, with the biggest new pressures on tomatoes, glass, et cetera. So far, we have not seen significant declines on key commodities, for example, soybean oil, corn, wheat, et cetera, from average cost levels in fiscal year 22. Again, we have raised prices selectively to recover higher input costs, but only against key commodity categories versus the broader actions required in fiscal year 22. We have also modified our pricing approach with customers on Crisco to more accurately adjust to market costs on a quarterly basis. Finally, price elasticities are estimated to increase somewhat as the economy tightens and some consumers trade down on the margin to cheaper alternatives. As a result, we expect fiscal year 23 to demonstrate continued margin recovery as previously implemented pricing actions offset year-over-year inflation, particularly in the first half. Net sales, excluding investors, are expected to increase at plus 1% to 2%, driven by pricing benefits offset by volume elasticity. We expect that sales growth will also be impacted by moderate price declines on Crisco to reflect projected lower soybean oil costs in the second half of the year, while maintaining gross margin dollars. Bruce will discuss fiscal year 23 guidance in more detail. Further, we are continuing to make progress on reshaping the B&G Foods portfolio. The sale of the Back to Nature brand to Barilla was completed in early January. as a proactive step to exit the small, fragmented, lower-margin snacks portfolio that is outside of the future B&G Foods core. The proceeds from the Back to Nature divestiture were used to make a partial prepayment of our variable rate term loan. We are actively reviewing other divestiture possibilities to sharpen the portfolio focus and reduce leverage and debt. Finally, the transition to four business units, spices and flavor solutions, meals, frozen and vegetables, and specialty, remains on track, and they are largely up and running. As discussed, these units clarify the portfolio focus and future platforms for acquisition and push accountability down to improve management and decision-making. Business unit leadership is working to drive improved margins, better manage supply and demand, and build stronger growth plans. We expect to be in a position to share business unit financial performance later this year. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the year.