B&G Foods, Inc.

Good day, ladies and gentlemen, and welcome to the B&G Foods, Inc. Second Quarter 2023 Financial Results Conference 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 Michael Bauer, Director of Corporate Strategy and Business Development for B&G Foods. Please go ahead.

Good afternoon and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacca, 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 condition. 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. 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 the remainder of fiscal 2023. Bruce will then discuss our financial results for the second quarter of 2023 and our guidance for fiscal 2023. I would now like to turn the call over to Casey.

Good afternoon. Thank you, Michael, and thank you all for joining us today for our second quarter 2023 earnings call. Second quarter results continued strong profit and margin recovery. Adjusted EBITDA increased plus 26.4% versus last year to $68.5 million. Margins improved significantly, with adjusted EBITDA as a percentage of net sales at 14.6%. increasing 330 basis points from Q2 2022. Base business net sales, which excludes net sales from the recently divested Back to Nature brand, were up slightly at plus 1.1% versus Q2 2022. On a two-year stack, base business trends remain strong, up plus 0.38% versus Q2 2021. Some of the key drivers of the results. Pricing recovery. In total, Q2 pricing realization, including product mix, contributed $54.1 million versus Q2 last year. Pricing flow through to offset higher costs and inflation with Q2 gross profit as a percentage of net sales, including items affecting comparability, at 21.9%, up from 16.5% last year. Almost all pricing actions have been implemented to recover total inflation in fiscal year 23, which is currently tracking at roughly 4% to 5%, well below fiscal year 22 levels. Volume sales. Q2 volumes were down versus last year, offset by higher pricing. The major volume drivers were Crisco, Green Giant, price elasticities, and to a lesser extent, retail inventory reductions. Excluding Crisco and Green Giant, which have unique factors impacting net sales performance, net sales of the remainder of our brands in the aggregate increased plus 3.6% in Q2 versus last year. Specifically on Crisco, price elasticities remain high, greater than one, above the key $5 and $6 per bottle price points. We are reducing our net prices to reflect lower commodity oil costs and expect to drop back below key price thresholds on shelf during baking season this fall and project volumes to improve at lower price points. As previously discussed, the objective on Crisco is to maintain gross profit dollars and margin in a volatile commodity market. Second, Green Giant. Volume declines continue to reflect the discontinuation and rationalization of lower margin innovation in the frozen portfolio, which we will begin to lap at the end of Q3. For shelf-stable products, we have also seen Del Monte and others become very aggressive on pricing and promotion to work down higher prior season pack inventories. Supply and service. On a company-wide basis, customer service and fill rates improved during the quarter, reaching over 97% in June. We are on track to deliver above 98% CFR, our long-term target, before year-end. Inventory. Total inventory decreased by $25 million to $675 million in Q2 from the ending position in Q1, and down $52 million from fiscal year 22 year-end. We are well on track to reduce inventories year-over-year at the end of Q4 2023. The major drivers are unit efficiencies, lower soybean oil costs, and a smaller seasonal pack on green giant shelf stable versus last fall. For the balance of the year outlook, we expect a more modest year-over-year margin in adjusted EBITDA recovery in Q3 and to be relatively flat in Q4 against the strong last year. Last year, pricing actions began to partially offset inflation in Q3 and fully recover higher costs in Q4. We remain on track to deliver within the communicated guidance of adjusted EBITDA in the range of $310 to $330 million. We expect second-half base business net sales to be between 0% and plus 1.5% versus last year and improvement from the first-half trend of minus 0.6%. Cash flow generation was very strong in Q2. Net cash from operations was $62.9 million in Q2, increasing from negative $4.1 million last year. With year-to-date net cash from operations of $132.4 million. Proforma net leverage came down to 6.74 times from 7.2 times in Q1. We are on track to continue to reduce leverage by the end of 2023, driven by adjusted EBITDA recovery, lower working capital and inventory needs, and debt reduction from available cash flow. Through June, we have reduced the principal amount of our debt by $147.9 million as compared to year end. Further, the new business unit organization is becoming fully operational, with multifunctional teams accountable for and driving P&L performance for their portfolio responsibility. Finally, we continue to evaluate exiting businesses that have lower margin and cash flow, higher working capital complexity, or do not fit with our core capabilities and BU structure, with Back to Nature as the first step last January. There is a target list being worked to reshape the portfolio with no specified timeframe, but we expect that any proceeds from divestitures would primarily be used to reduce long-term debt. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the year.