B&G Foods, Inc.

Good day, and welcome to the B&G Foods fourth quarter and fiscal 2023 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 AJ Schwab, Associate Corporate Strategy and Business Development for B&G Foods. AJ?

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 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' most recent 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, adjusted gross profit, adjusted gross profit percentage, 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 2024 and beyond. Bruce would then discuss our financial results for the fourth quarter and fiscal 2023, and our guidance for fiscal 2024. I would now like to turn the call over to Casey.

Good afternoon. Thank you, AJ. And thank you all for joining us today for our fourth quarter and fiscal 2023 earnings call. B&G Foods' fourth quarter results were solid, slightly exceeding expectations. Base business net sales, which exclude net sales of the divested green giant U.S. canned vegetable and back-to-nature businesses, were essentially flat, but for the impact of lower Crisco oil commodity pricing year over year. In addition, base business volume in the aggregate across the portfolio was slightly up for the quarter, stabilizing for the first period since the significant pricing actions in fiscal year 22. Profit margins also demonstrated steady progress. Adjusted gross profit percentage increased 130 basis points versus last year to 21.9%, reflecting pricing recovery of higher costs and productivity savings. Adjusted EBITDA as a percentage of net sales was flat to last year at 15%, with adjusted gross profit improvement offset by the reinstatement of the short-term management incentive accrual in G&A expenses versus zero in fiscal year 22. With fourth quarter results, B&G Foods delivered fiscal year 23 net sales of $2.062 billion in and adjusted EBITDA of $318 million, well within our revised guidance reflecting the divestiture of Green Giant U.S. canned vegetables in November. Bruce will provide more details on Quarter 4 and Fiscal Year 23 results. Stepping back, we achieved several critical milestones in Fiscal Year 23 on the journey to reshape and strengthen B&G Foods. First, margin recovery. After historic inflation pressure in fiscal year 22, margins recovered strongly in fiscal year 23 behind pricing actions and productivity efforts. Adjusted gross profit percentage increased 280 basis points year over year from 19.4 percent to 22.2 percent in fiscal year 23. Adjusted EBITDA as a percentage of net sales increased 150 basis points to 15.4 percent in fiscal year 23. Going forward, input cost inflation has moderated to low single digits, and in some cases, such as soybean oil, has come down from historic highs. Number two, portfolio shaping. We divested the low-margin, working capital-intensive businesses of back-to-nature cookie crackers and green giant U.S. canned vegetables. Both did not fit with our future portfolio focus and were strained to deliver adequate cash flow against the leverage model. As previously disclosed, we expect to divest additional business and brands over the next year to focus the portfolio for future success and intend to use the proceeds to pay down debt. Third, cash flow and working capital. Net cash from operations improved dramatically, increasing from $6 million last year to $248 million in fiscal year 23. These results were driven by better operating performance and margin recovery and critically by significant improvement in working capital. Inventories in fiscal year 23 declined by $157 million, down from $726 million last year to $569 million at year end, reflecting the divestiture of the seasonal green giant U.S. canned business, lower Crisco soybean oil costs, and efficiencies in base business inventory levels while delivering higher service. Fourth, debt and leverage. During fiscal year 23, B&G Foods reduced net debt by $335 million, primarily using improved cash flow and the proceeds from divestors to pay down debt. As a result, B&G Foods pro forma adjusted net leverage ratio, as calculated per our credit agreement, decreased from 7.62 times at fiscal year 22 end to 6.32 times by the end of fiscal year 23. We are making excellent progress towards returning to our long-term range of 4.5 to 5.5 times. The expectation is to further close that gap in fiscal year 23-4 through additional divesters and paying down debt with excess cash flow. Five, Crisco pricing model. During the first quarter fiscal year 23, we implemented a new commodity pricing model on Crisco with our customers. Prices for Crisco products move quarterly to reflect the volatility in soybean and vegetable oil inputs and match market pricing with actual oil costs. The result has been stable gross profit dollars and cash flow for Crisco in a volatile market, particularly over the past two years. As discussed, we do expect to see some up and down movement on Crisco net sales results based on changes in oil pricing without any impact on the bottom line. And last, spices and seasonings. Representing approximately 18% of our portfolio, the core high-margin spices and seasoning business increased net sales by 2.2%. Trends were particularly strong on the food service and members mark Sam's label business, which largely serve out-of-home and small business customers. The core retail branded trends, Dash, Weber, Spice Islands, et cetera, are improving and have recovered from temporary service and production issues in our Ankeny factory. We have also strengthened our innovation and new product pipeline, launching new licensed seasoning and grilling blends under the Buffalo Trace, Fireball, and Southern Comfort brands, which are performing very well in initial distribution. Overall, we are pleased with the performance in the fourth quarter and the recovery of the B&G Foods business in fiscal year 23. There is clearly more work to do, but our team has made significant progress toward creating a stronger, more valuable B&G Foods. Bruce will discuss specific guidance, but our focus in fiscal year 24 is to generate slight top-line and low single-digit bottom-line growth on the base business, which excludes the divested green giant U.S. canned vegetable business. Further reshape the business through strategic divesters to focus the long-term portfolio for higher margins and valuation growth. We continue to evaluate existing businesses that have lower margin and cash flow and higher working capital complexity, or do not fit with our core capabilities and business unit structure. Reduce net debt and leverage through divestiture proceeds and strong excess cash flows. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and results for the year.

Thank you, Casey. Good afternoon, everyone. Thank you for joining us on our fourth quarter and fiscal year 2023 earnings call. As you can see, we had another strong quarter and we finished the year largely in line with our guidance. As we explained at the outset of the year, we expected to see large year-over-year increase in adjusted EBITDA and adjusted EBITDA as a percentage of net sales in the first two quarters of the year, followed by a more modest increase in adjusted EBITDA and adjusted EBITDA as a percentage of net sales in the third quarter. And for the fourth quarter, we expected similar performance to the prior year before accounting for the divestiture of Green Giant U.S. shelf-stable product line. This is essentially how the year played out for us. In fiscal 2023, we generated $2.062 billion in net sales, $318 million in adjusted EBITDA, adjusted EBITDA as a percentage of net sales of 15.4%, and adjusted diluted earnings per share of 99 cents. Base business net sales, which excludes net sales from the Back to Nature brand and the Green Giant U.S. shelf-stable product line, decreased by approximately $30 million, or 1.5%, in fiscal 2023 compared to the year-ago period. Base business net sales include a benefit of $93.3 million from pricing and the impact of product mix. This was offset by negative impacts of $5.1 million from FX and $118.2 million from volumes. And the pricing helped, particularly in our results in the early part of the year. For fiscal 2023, adjusted EBITDA increased by $17 million, or 5.7%, compared to $301 million for fiscal 2022. Adjusted EBITDA as a percentage of net sales was 15.4% for fiscal fiscal 2023 compared to 13.9% for fiscal 2022. For the fourth quarter of 2023, we generated $578.1 million in net sales, $86.8 million in adjusted EBITDA. Adjusted EBITDA is a percentage of net sales of 15% and adjusted diluted earnings per share of 30 cents. Base business net sales decreased by $13.3 million or 2.3% in the fourth quarter of 2023 compared to the prior year. The decrease in base business net sales in the fourth quarter was largely driven by a decrease in net pricing and the impact of product mix of $15.9 million or 2.8% of base business net sales. The decrease in pricing was in part a product of our CRISCO commodity pricing model that we have instituted, coupled with modest increases in promotional trade spending in other areas of the portfolio where it made sense. The impact of foreign currency was also a slight drag on net sales, contributing to another $0.3 million of the decline. These were partially offset by an increase in unit volume of $2.9 million for the quarter. We are obviously encouraged by the improving volume story that we are now seeing, although we are closely monitoring the trade-offs between pricing, promotional strategy, and volumes, as well as the current consumption trends. I will now highlight the performance of some of our larger brands. Clapper Girl had incredibly strong momentum coming into the holiday bake season, and similar to its performance all year long, Clapper didn't disappoint. Net sales of Claver Girl increased by $8.2 million, or 26.3% in the fourth quarter of 2023, as compared to the fourth quarter of 2022. Net sales of Claver Girl benefited from both pricing and increased volumes during the quarter. Net sales of Maple Grove Farms increased by about $0.7 million, or 3.4%. Our spices and seasonings continue to benefit from improved supply chain performance and new product launches, finishing the year with a solid quarter. Net sales of the company's spices and seasonings increased by $0.7 million, or 0.8% in the fourth quarter of 2023, as compared to the fourth quarter of 2022. As Casey mentioned earlier on the call, we are very excited about the prospects for these new partnership brand launches coming out of our spices and seasonings business. which include the licensed seasoning products, Einstein's Everything Bagel, Einstein's Avocado Toast, and Sazerac Weber Flavors Buffalo Trace, Fireball, and Southern Comfort. We also have a robust pipeline and expect to be able to announce additional new and exciting products. While net sales of Crisco decreased by $10.6 million, or 8.7% in the fourth quarter of 2023 when compared to the prior year period, This was largely expected due to favorable input cost relief and the execution of our commodity pricing model, which allowed us to reduce pricing to our customers and still maintain profit dollars. As a result of the lower pricing, we are starting to see a nice recovery in Crisco volumes. Increased volumes for Crisco contributed to $1.8 million to net sales, or 1.5% in the fourth quarter of 2023 compared to the fourth quarter of 2022. We expect this trend to continue throughout 2024, with lower pricing leading to an improved volume recovery for Crisco throughout the year. Our Green Giant business was not immune to the category-wide industry challenges seen throughout 2023 in the shelf-stable and frozen vegetable sets. Net sales of Green Giant, including LeSore, but excluding the divested Green Giant U.S. shelf-stable product line, decreased by $5.2 million, or 4.4%. We expect more favorable industry trends in the category during 2024, and quite frankly, we expect much more favorable trends for our business. The goal is to get this brand back to being the industry leader from an innovation perspective and to generate category-leading growth rates like we did before the pandemic. The hot breakfast aisle is another category that is still seeing some normalization in its post-pandemic trends. Net sales of cream of wheat were approximately 78.5 million dollars in 2023, which was well ahead of the pre-pandemic levels that had been consistently in the 60 to 70 million dollar range annually. Although 2023 net sales were somewhat lower than fiscal 2022 annual net sales of 81.4 million dollars. In the fourth quarter of 2023, net sales of cream of wheat decreased by $2.2 million or 9% compared to the prior year. Net sales of Ortega decreased by $0.3 million or 1% in the fourth quarter of 2023 as compared to the fourth quarter of 2022. Ortega finished the quarter with some momentum despite a challenging year. While Q4 net sales were down 1%, They were up approximately 0.9% in the month of November and another 0.6% in December compared to the prior year periods. Taco sauces, green chilies, and seasonings mixes led the way for the brand, driving positive performance in the back half of the fourth quarter. Taco shells and taco kits continued to be somewhat challenged. Ortega began the year with a tough comp relative to prior year and some softness in shells and kits, as well as pricing elasticity-driven volume declines in some SKUs where we took pricing. These factors combined with the general post-COVID category normalization helped cause much of the declines. Total net sales for Ortega were $147.9 million in fiscal 2023, down from $154.3 million in fiscal 2022. but also up substantially from pre-pandemic 2019 net sales of $140.4 million. Base business net sales of all other brands in the aggregate decreased by $4.6 million or 3.5% for the fourth quarter of 2023 as compared to the fourth quarter of 2022. Gross profit was $125.2 million for the fourth quarter of 2023 or 21.7% of net sales. Adjusted gross profit was $126.8 million or 21.9% of net sales. Gross profit was $126.1 million in the fourth quarter of 2022 or 20.2% of net sales. Adjusted gross profit was $128.6 million or 20.6% of net sales. Adjusted gross profit increased by approximately 130 basis points in the fourth quarter of 2023 compared to last year's fourth quarter. The improvement in gross profit percentage was largely driven by a moderation in input costs and logistics inflation. This represents a continued turnaround compared to the first half of fiscal 2022, where we suffered from the severe industry-wide input cost inflation, which led to large declines in our gross profit and margins. Selling general and administrative expenses increased by $1.3 million, or 2.7%, to $53.2 million for the fourth quarter of 2023, from $51.9 million for the fourth quarter of 2022. The increase was composed of increases in general and administrative expenses of $5.8 million and consumer marketing expenses of $0.9 million. partially offset by decreases in warehousing expenses of $2.6 million, selling expenses of $2.3 million, and acquisition divestiture-related and non-recurring expenses of $.5 million. Expressed as a percentage of net sales, selling general and administrative expenses increased by 90 basis points to 9.2% for the fourth quarter of 2023, as compared to 8.3% for the fourth quarter of 2022. The increase in general and administrative costs was largely driven by modest inflation in wages, insurance, and other professional services, as well as an increase in short-term management incentive accruals, as no annual bonuses were rewarded for fiscal 2022 due to the shortfall in performance in fiscal 2022. As I mentioned earlier, we generated $86.8 million in adjusted EBITDA for the fourth quarter of 2023 compared to $93.6 million in the fourth quarter of 2022. Fourth quarter 2023 adjusted EBITDA benefited from the moderation in industry-wide input cost inflation and logistics inflation that have plagued the industry since the fourth quarter of 2021, which were offset in part by the modestly higher G&A costs as well as the impact of divestitures. Fourth quarter of 2022 included a full quarter of profits from Back to Nature brand and the Green Giant U.S. Self-Stable product line, while the fourth quarter of 2023 had no benefit from Back to Nature and approximately five and one-half weeks of benefit from Green Giant U.S. Self-Stable business. Adjusted EBITDA as a percentage of net sales was 15%, in the fourth quarter of 2023, in line with the 15% in the fourth quarter of 2022. Net interest expense was $40.2 million in the fourth quarter of 2023, compared to $36.3 million in the fourth quarter of 2022. The increase was primarily attributable to higher interest rates on our borrowings and a $0.5 million loss on extinguishment of debt, partially offset by reduction in our average debt outstanding. Depreciation and amortization was $17 million in the fourth quarter of 2023 compared to $19.5 million in the fourth quarter of last year. We generated 30 cents in adjusted diluted earnings per share in the fourth quarter of 2023 compared to 40 cents last year. We remain very encouraged by the progress we have made over the past year in terms of restoring our P&L. and perhaps even more impressive than our P&L improvements was the progress that we made in the improvement of our cash flows and our balance sheet. We generated $92.1 million in net cash from operations in the fourth quarter of 2023 and $247.8 million in the full 12 months of fiscal 2023. This compares to $54.4 million in net cash from operations generated in the fourth quarter of 2022 and just $6 million during the full 12 months of 2022. Increased operating profits, improved margins, and a more favorable working capital were the primary drivers of improved cash flows from operations, which was offset in part by increased interest expense. We finished the year with approximately $569 million in inventory in fiscal 2023, compared to $726.5 million in inventory at the end of last year. Approximately $90 million of the reduction was due to our focus on supply chain efficiencies and a moderation in input costs. The remainder came from the sale of the Green Giant U.S. self-stable product line, which, as we mentioned previously, was highly capital-intensive and came with large seasonal swings in working capital. We reduced net debt by more than $335 million during the course of fiscal 2023 to $2.02 billion at the end of the year, down from $2.36 billion at the end of fiscal 2022. We also reduced pro forma adjusted net leverage ratio as defined in our credit agreement to approximately 6.3 times at the end of fiscal 2023 compared to 7.6 times at the end of fiscal 2022. We expect to continue to reduce our net debt and pro forma adjusted net leverage ratio throughout fiscal 2024 and beyond as we diligently work toward achieving our long-term target of 4.5 to 5.5 times. Now as a reminder, before we get to our fiscal 2024 guidance, we are still living in highly unpredictable times. We have two major military conflicts going on in the world that have far-reaching global implications. We also have separate but ongoing disruptions in both important canal zones that impacted the global supply chain. Although we are not immune from the challenges that these issues present, we are happy to have a much simpler operational footprint than many of our larger packaged food peers. For B&G Foods, though, M&A will have an impact on our numbers. We have now fully lapped the sale of Back to Nature, but we still have to lap the sale of the Green Giant U.S. shelf-stable product line. As we mentioned on our prior call, the Green Giant U.S. shelf-stable product line had approximately $75 to $85 million in annual net sales and low double-digit contribution margins. The business had approximately $65 million in net sales under our watch in fiscal 2023 that we need to lap this year. It is also worth noting that while the majority of the heavy lifting in our adjusted EBITDA margin and dollar recovery has already happened, we still do expect to see some modest improvements going forward in 2024. So based on what we know today, we expect 2024 net sales of $1.975 to $2.020 billion. Our net sales guidance is generally in line with our long-term guidance of 0% to 2% base business top line growth after adjusting for the removal of the Green Giant US Shell Stable product line, which we sold in November other non-recurring sales, and an estimated $15 million reduction in net sales of Crisco due to anticipated lower oil input costs and a corresponding reduction in our Crisco net selling prices. We expect adjusted EBITDA to be in a range of $305 to $325 million. This range largely reflects the elimination of approximately $8 to $10 million of adjusted EBITDA due to the recent sale of our Green Giant ULC shelf-stable product line. Based on this adjusted EBITDA guidance range, we expect adjusted EBITDA as a percentage of net sales to remain at approximately 15%. And based on this guidance, we expect adjusted diluted earnings per share to be in a range of $0.80 to $1. Additionally, we expect for full year 2024, interest expense of $145 to $150 million, including cash interest of $138 to $143 million, depreciation expense of $47.5 to $52.5 million, amortization expense of $20 to $22 million, an effective tax rate of 26 to 27 percent, and capex of $35 to $40 million. We expect to use a little bit less than 50 percent of our excess cash to pay our dividend and the remaining 50% to 60% to pay down debt. And now I will turn the call back over to Casey for further remarks.

Thank you, Bruce. In closing, our quarter four and fiscal 2023 results demonstrated strong progress with improved margins, stabilizing volumes, stronger cash flows, and a reduction in leverage. We remain on track to further improve the business in fiscal 2024 and beyond. We have also made significant progress against reshaping the portfolio through our focused M&A strategy, including the divestiture of two businesses, the Back to Nature brand and the Green Giant U.S. Shelf Stable business that are not core to the B&G Foods of the future. This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. The confirmation sign will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We also request that you get to one question and one follow-up question. The first question we have is from Andrew Lazar of Barclays. Please go ahead.

Good afternoon, Casey and Bruce. How are you? Hey, Andrew. Good, good. First off, I guess your base business growth expectation, as you mentioned, for 24, I think is roughly flattish. And I'm trying to get a sense of how you see that playing out for the year. both from a volume and a price standpoint. I think you mentioned another $15 million impact from negative pricing for the year for just the Crisco pass-through pricing model, if I got that right. So that's about maybe down a percent. So does that assume that volume is probably up a percent or so for the year? I just want to make sure I have that right.

Specific to Crisco.

Okay. So could there be some additional negative pricing activities such that I'm trying to get a sense of what you think pricing looks like and just how positive your value expectation is.

Yeah, so just let's address these separately. So for Crisco, as we've said over the past year or so, we put in place a pricing model where we interact with our customers quarterly. And based on where input costs are, we adjust price. If we think about how last year played out, input costs were still high from the 2022 levels at the beginning of the year. and over time came down, and so quarterly we were reducing price for Crisco. We will be lapping those higher prices for Crisco for the first half to three quarters of this year, which will then mean, assuming everything was perfect, margins would be the same from a dollar standpoint, sales would be down, margins would be up from a percent standpoint, pricing would come down for Crisco, and we actually think we get a little volume elasticity benefit, and that's kind of what we're seeing for Crisco today.

But if you look at the base business excluding the divestors and excluding the impact of Crisco, we're basically saying we're going to be flat to slightly up. And that will be probably on both volume and pricing. So those two will be kind of running more closely together. And if I think about the flow of that, we still are kind of coming out of that. The trend's improving, but I would expect that the first half, of the year is a little bit below that. And the second half is a little bit better than that. And that's how we kind of see it playing out right now. And we are seeing kind of volumes in pricing stabilize. And we don't have a lot of growth plan from pricing, you know, other than the movement of Crisco, which is kind of irrelevant to the bottom line. Got it. Yeah, that's helpful.

And then your guidance, obviously, at the midpoint on EBITDA margins suggests, like you said, some additional modest improvement. And obviously, there was a big jump up in margins in 23 versus 22. EBITDA margins, though, still fell below where they were just a couple of years ago. So I'm trying to get a sense of maybe what would impede more significant EBITDA margin improvement as we go forward. Is it something just in the portfolio that's changed versus where you were a couple of years ago? Or what would it take to get back to those levels if that's even a reasonable expectation at some point?

Well, I mean, Andrew, our goal is to get back to 18% to 20%. So that's what we're driving to. And I think it's going to take a couple of things. So one is M&A, divesting businesses that are low margin, a lot of working capital intensity, continued productivity. So we've started on that productivity savings journey. We've got that kind of going. This is going to be our second year where we're really focused on it. So we see some improvement from that. And then the third... The thing for me would be, as Crisco oil pricing comes down, we will get some benefit on margin from that. Ironically, as sales come down, but the same gross profit, we're going to improve our margins on the Crisco business just because of that compression of oil pricing. So those three things together, that's where we're trying to head, to get back to 18% to 20%. But it's going to take those three things working together to get there.

And if you think about some of that drag, what Casey is describing on Crisco, a bigger example for that brand, but to the same degree across a lot of the rest of our portfolio, when costs were rapidly rising, we took price to protect profit dollars, which just the algebra suggests lower margins as a percent. That's how math works. Yep.

Crisco being the most extreme example of that, yeah.

Right. Okay. Thanks so much. I'll pass it on. Yep.

The next question we have is from William Reuter of Bank of America. Please go ahead.

Good afternoon. My first question on the topic of future additional asset sales, I wasn't aware that you were still actively pursuing these. I guess, is this new or have you been continuing to pursue over the last handful of months and quarters? And I don't know, any sense of magnitude or what types of assets you're looking at?

Sure. So our M&A process... And we tend and we will tend to be a long-term net acquirer, but we are reshaping the portfolio. And as part of that, there's some things that are going to come out. So we've sold two businesses that we felt were not a fit to the portfolio that we want to run in the future and over the long term. There's probably a couple other things. There's nothing that we're active in the market in terms of running a process for right now. So there's a little bit of stay tuned and when it's appropriate to talk about it We'll talk about likely what you will see is other things that maybe are not a good fit for us or that could be a better fit for other people. Got it.

That's helpful. And then in the answer to a previous question, you mentioned that you weren't expecting to take much pricing this year. I don't know if I heard explicitly what your outlook is for input costs, and let's exclude Crisco since that's the pass-through model. But for the remainder of the products, what's your outlook on where they should be this year versus last year, or any other sources of either inflation or deflation?

I think what we're seeing right now in our input costs, and obviously this is still early in the year and we're still trying to project it fully, but I'm seeing something more in the 1% to 2% range, 1% to 2% on the high end in terms of input cost inflation, probably on the lower end of that range right now as I see it, but maybe a little bit in freight and transportation, but I think it's probably more in line with that range. So I'm I feel like, you know, right now our job is to get the business back, stabilize on volumes, not take as much pricing as we have over the past year, but drive productivity to offset that inflation and then maybe give us a little bit of margin improvement. That's our focus right now.

Got it. Perfect.

There may be some selective places where we're going to take price where we might have a big jump in one particular small commodity input, but that's going to be very, very selective.

Got it. Very helpful. All right. That's all for me. Thank you.

The next question we have is from Carl Martinson of Jefferies Company.

Please go ahead.

Good afternoon. What has been kind of the competitive response in terms of your peers? We constantly keep hearing about the consumer trading down to private label, the give back in pricing, the elasticity that you referenced. Are you seeing that sustained shift in terms of competing products for your categories?

It really depends on the category. Honestly, because we have the pass-through model on Crisco, we're actually seeing volumes increasing on that business. We're seeing a pickup in our unit sales as a result of bringing the price back down to reflect the lower oil commodity cost pricing. Even though the percentage gap to private label might be the same, the absolute gap has come down and the absolute price point has come down. So on that one, we're kind of moving where we'd expect to in terms of our share performance. I would say there's a couple of other places where we've seen inflation drive up pricing. And even though we try to maintain our percentage gaps to private label, You know, at the higher absolute price points and just maybe a couple categories like, well, canned vegetables, you know, we're out of now. But that was one where we were seeing a little bit of that dynamic. But, you know, for the most part, we watch the gap to private label pretty closely. And we try and manage to that so that we don't have a lot of pressure from, you know, trade down or we maintain the same relative position in the marketplaces.

Okay. And when we look at the kind of the implied cash flow guidance here for the year with a $70 million or so for the dividend, when it was $300 million maturity in 2025, would it leave kind of $230 million that you would need to refinance? Is that to be paid off through the asset sales or how would you look at addressing that?

So for the remaining stub on the 2025, the base case assumption is it's a combination of cash from operations and revolver draw. And keep in mind, we've got a big revolver, so we've got plenty of capacity there. I think there's always options around potential refinancing as part of a broader refinancing if the market is hospitable and it makes sense to us. to the extent that we have any more asset divestitures, you know, there's money coming in the door from that as well. And so I think there's a couple things, but I would use as the base case what we laid out to investors, you know, ample cash from operations coupled with liquidity from the revolver.

Thank you very much.

Appreciate it.

The next question we have is from Connor Ratzigan of Consumer Edge Research.

Please go ahead.

Hey guys, good afternoon. Hey, afternoon.

So correct me if I'm wrong, but it sounds like you registered positive base business volume growth in the quarter. So that was quite a bit ahead of what we saw in the track data. I guess, could you maybe help us understand what drove that differential? And looking ahead to 2024, how we should sort of think about volume trends over the course of the year, and if maybe there are any items we should keep in mind in terms of divergences versus track data?

Yeah, so first of all, you know, in the fourth quarter, we saw, you know, a small growth in volume. So I want to be careful that we don't, you know, we don't, you know, over call that one. But honestly, we kind of celebrated getting stable volume trends on the business after the, you know, the past year coming off all the inflationary pricing. What we're, you know, what we're trying to move forward is to kind of get that same trend line, you know, small growth in volume in 2024. Yeah, the difference between the measured data, the tracked data, and what you guys are seeing is there's a lot of things. I mean, there's channel coverage that's not complete with what we do. We sell to – we have businesses that are selling to other food service outlets, particularly in the spices and seasonings business, in some cases in syrups. We have some private label business that we're selling that's not tracked in your data. So, you know, we are a heavy player in private label in – you know, in the baking powder business. So there's a lot of our business you don't see in the track data. So it's hard to really look at the track data and directly translate it to our sales results because we're participating in, you know, we're participating in food service business. We're participating in some private label manufacturing. We're participating in some other businesses that we do with other kinds of customers. So it's a difficult thing to translate it directly. But obviously, we look at everything pretty closely in terms of what the trends are.

So I guess just following up on that, would it be fair to say that I guess maybe the non-track businesses are outperforming what you're seeing at retail?

I mean, for sure, we're seeing the food service businesses in the past year outperforming trends in retail. And honestly, I think that would be not just us. You would see that in other businesses as well. So, you know, that was the opposite, you know, during the pandemic. Now we've seen it kind of flip back to where food service growth has outpaced retail growth. I expect that to normalize this year at some point. Honestly, I expect both of those, that trend to kind of stable, get to more stable trends year over year. But that obviously depends a lot of economic conditions, whether or not we, you know, we hit a recession or something that could change that dynamic. But right now we're kind of seeing those two come back in balance. in terms of consumer behavior and trends.

Okay, makes total sense. And then just as a quick follow-up, Bruce, in your prepared remarks, you noted some increases in promotional and trade spend in certain parts of the business, I guess. Could you maybe be a little more specific as far as maybe what brands those impacted, and I guess what type of list you might have seen from that spend, and just overall if you were happy with what you saw?

I don't think we're necessarily going to talk about the specifics on the brand promotional strategy, but this is, you know, again, in a way to improve volumes. I think we're seeing this across many of our, you know, competing or just peer group where people are increasing promotional spend. I think it's been somewhat rational, but spend is still lower than it was pre-pandemic. So it's going to be higher than it was last year or the year before, but it's still sort of normal. And we expect to get some volume benefits, and I think you do see that.

Yeah, I mean, for the most part, when we put trade spend into businesses because we're going back to more normal, you know, promotion patterns, we do see volume lift behind that. And we watch that pretty carefully. And if we don't see volume lift from it, we change. But for the most part, that's been successful play. And as Bruce said, we're not all the way back to where we were pre-pandemic. So we're kind of moving back there, you know, over time, as I think most players in the food industry are, as normal promotion patterns and merchandising patterns resume.

All right, sounds good. Thank you. Next question we have is from Hal Holden of Barclays.

Please go ahead. Hi, afternoon. Thank you. I'm super excited to try the fireball seasoning, by the way.

Don't drink too much of it with the seasoning.

I'm trying to age myself out of life here. Bruce, the half-million-dollar debt return extinguishment cost in the quarter, did you buy some bonds back, or was that a term loan pay down?

Yeah, it's just all the refinancing stuff that we did kind of back half of last year.

Okay. And then the second question I had was, as you're – Thinking about divestitures in the market, you've obviously been talking about it for six, nine, 12 months in various forms, and I was wondering if you had seen the market improve as a seller standpoint or multiples come up or more interest in the pipeline.

I think there's certainly chatter that sounds like there should be more activity. I would have told you the same thing six months ago or a year ago, but I think as the market financing environment starts to stabilize, we're going to see more activity. We probably have seen some nice little brand deals get done. You know, we saw two of our deals get done. I think it's fine. I don't think it's shut down. It's just not, you know, gangbusters like it was a few years ago, but it should be fine.

Okay, great. Thank you very much.

The next question we have is from David Palmer of Ivercore ISI. Please go ahead.

Thanks. Hey, guys. Inventory decline in the quarter, obviously, with the divestiture. I'm wondering how, and I always ask you about free cash flow conversion, but I wonder how much the inventory change will happen in 24 and where you see free cash flow conversion settling in of EBITDA going forward.

Yeah, so I think, you know, the inventory reduction in 23 from both the sale of, you know, green giant U.S. canned vegetables and honestly base business improvement coming off the inflationary cycle and the supply shortages, you know, we did a lot of reduction in this year. So in the future, I wouldn't expect to see that kind of magnitude of change. Obviously, a divestiture would impact that. But in terms of our base business and organic kind of trends here, I'm looking for kind of a 2% to 3% continuous improvement trend line as we get better in terms of our operations and our demand-supply integration. That's kind of our expectation. So you will see some benefit from reducing working capital, but nothing to the magnitude you saw this year. Look, our long-term perspective, and I think we've said this before, is that we want enough excess cash that half of it can be used to pay the dividends and half of it can be used to pay down debt. And that's where we're driving. That's where we're driving so that we have the ability to kind of reduce debt year in, year out with our excess cash flow.

I think in the past you might have had a 60% of EBITDA type target. Is that?

Yeah, give or take that. So, I mean, if you think about the midpoint of our guidance range, call it $315 million of adjusted EBITDA, throw in $5, $10 million in non-cash or share-based comp as sort of your baseline. And then, again, we gave guidance on the call, but cash interest at the midpoint is about $140 million. Cash taxes have been bouncing around $30-plus million a year. CapEx is $35, $40 million. Casey talked to modest, certainly not what we had last year, but modest levels of inventory there. Reduction slash working capital improvement. You could see a number that's $110, $125 million or so in excess cash before dividends. If you get the benefit of working capital in there, dividends are about $60 million.

That's all helpful. Just a question on Crisco. You said you were expecting profit dollars from Crisco to remain pretty steady this year, which is great to hear. And going forward, what do you think will be your biggest watchouts for that brand's profitability? Is there a level of volatility of soybean oil that makes keeping profit steady much more difficult? Or are there price thresholds where trade down accelerates? What are things that would kind of throw you off the horse, so to speak, on keeping profit steady for Crisco?

Yeah, I think it's our ability to just pass through the oil costs. And so far, we've been doing that. I mean, if you would have talked to me in 2022, I would have said, you know, the risk was much higher. But since, you know, January, kind of January, first quarter of last year, we implemented this pass-through model with customers. And they like it. They like it. We come to them, you know, every quarter and say, here's what the oil costs, here's what we're going to price to relative to that. And, you know, they've been pretty good about reflecting that in the pricing and So it's been successful as a strategy to maintain our gross profit dollars. I would say the only things I worry about is if soybean oil goes back up to, I don't know, 80 cents, then, you know, we're going to pass that through and take pricing up. you know, unfortunately at that level, we see the absolute dollar gap to private label growing. Percentage is the same, but the absolute dollar gap. And so we see, you know, some risk to the volume trend of the business with that kind of commodity structure. I mean, look, fortunately right now, you know, soybean oil prices last time I checked are kind of in the 45 cents per pound range, which is well down from where it was last year and well down from the high of 80 cents that we saw probably 18 to 24 months ago. So, That's really the big risk. The only other thing we watch is we have a shortening business, which is a key part of that whole Crisco business outside of the oil. The shortening, we look at the long-term household penetration on that business just to make sure people are still baking, cooking, frying at the same level.

That's great.

Thank you.

Ladies and gentlemen, just a final reminder, if you would like to ask a question, you're welcome to press star and then one.

We will pause for a moment to see if we have any other questions. There are no further questions at this time.

I would like to turn the floor back over to Casey Keller for closing comments.

Thank you all for joining us today for the fourth quarter earnings call. Obviously, reach out if we want to talk anything. Appreciate your attention. Look, we're pleased with the results in the fourth quarter, but obviously we have more work to do in 24 to get this business in the shape we want it.

So thank you very much.

Ladies and gentlemen, this concludes today's conference. Thank you for joining us. You may now disconnect your lines. Thank you. Thank you.

Thank you. you Thank you. Thank you. Thank you. Thank you.

Good day, and welcome to the B&G Foods fourth quarter and fiscal 2023 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 AJ Schwab, Associate Corporate Strategy and Business Development for B&G Foods. AJ?

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 and full year in the earnings release we issue 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' most recent 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, adjusted gross profit, adjusted gross profit percentage, 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 2024 and beyond. Bruce would then discuss our financial results for the fourth quarter and fiscal 2023, and our guidance for fiscal 2024. I would now like to turn the call over to Casey.

Good afternoon. Thank you, AJ. And thank you all for joining us today for our fourth quarter and fiscal 2023 earnings call. B&G Foods' fourth quarter results were solid, slightly exceeding expectations. Base business net sales, which exclude net sales of the divested green giant U.S. canned vegetable and back-to-nature businesses, were essentially flat, but for the impact of lower Crisco oil commodity pricing year over year. In addition, base business volume in the aggregate across the portfolio was slightly up for the quarter, stabilizing for the first period since the significant pricing actions in fiscal year 22. Profit margins also demonstrated steady progress. Adjusted gross profit percentage increased 130 basis points versus last year to 21.9%, reflecting pricing recovery of higher costs and productivity savings. Adjusted EBITDA as a percentage of net sales was flat to last year at 15%, with adjusted gross profit improvement offset by the reinstatement of the short-term management incentive accrual in G&A expenses versus zero in fiscal year 22. With fourth quarter results, B&G Foods delivered fiscal year 23 net sales of $2.062 billion in and adjusted EBITDA of $318 million, well within our revised guidance reflecting the divestiture of Green Giant U.S. canned vegetables in November. Bruce will provide more details on Quarter 4 and Fiscal Year 23 results. Stepping back, we achieved several critical milestones in Fiscal Year 23 on the journey to reshape and strengthen B&G Foods. First, margin recovery. After historic inflation pressure in fiscal year 22, margins recovered strongly in fiscal year 23 behind pricing actions and productivity efforts. Adjusted gross profit percentage increased 280 basis points year-over-year from 19.4 percent to 22.2 percent in fiscal year 23. Adjusted EBITDA as a percentage of net sales increased 150 basis points to 15.4 percent in fiscal year 23. Going forward, input cost inflation has moderated to low single digits, and in some cases, such as soybean oil, has come down from historic highs. Number two, portfolio shaping. We divested the low-margin, working capital-intensive businesses of back-to-nature cookie crackers and green giant U.S. canned vegetables. Both did not fit with our future portfolio focus and were strained to deliver adequate cash flow against the leverage model. As previously disclosed, we expect to divest additional business and brands over the next year to focus the portfolio for future success and intend to use the proceeds to pay down debt. Third, cash flow and working capital. Net cash from operations improved dramatically, increasing from $6 million last year to $248 million in fiscal year 23. These results were driven by better operating performance and margin recovery and critically by significant improvement in working capital. Inventories in fiscal year 23 declined by $157 million, down from $726 million last year to $569 million at year end, reflecting the divestiture of the seasonal green giant U.S. canned business, lower Crisco soybean oil costs, and efficiencies in base business inventory levels while delivering higher service. Fourth, debt and leverage. During fiscal year 23, B&G Foods reduced net debt by $335 million, primarily using improved cash flow and the proceeds from divestors to pay down debt. As a result, B&G Foods pro forma adjusted net leverage ratio, as calculated per our credit agreement, decreased from 7.62 times at fiscal year 22 end to 6.32 times by the end of fiscal year 23. We are making excellent progress towards returning to our long-term range of 4.5 to 5.5 times. The expectation is to further close that gap in fiscal year 24 through additional divesters and paying down debt with excess cash flow. Five, Crisco pricing model. During the first quarter fiscal year 23, we implemented a new commodity pricing model on Crisco with our customers. Prices for Crisco products move quarterly to reflect the volatility in soybean and vegetable oil inputs and match market pricing with actual oil costs. The result has been stable gross profit dollars and cash flow for Crisco in a volatile market, particularly over the past two years. As discussed, we do expect to see some up and down movement on Crisco net sales results based on changes in oil pricing without any impact on the bottom line. And last, spices and seasonings. Representing approximately 18% of our portfolio, the core high-margin spices and seasoning business increased net sales by 2.2%. Trends were particularly strong when the food service and members mark Sam's label business, which largely serve out-of-home and small business customers. The core retail branded trends, Dash, Weber, Spice Islands, et cetera, are improving and have recovered from temporary service and production issues in our Ankeny factory. We have also strengthened our innovation and new product pipeline, launching new licensed seasoning and grilling blends under the Buffalo Trace, Fireball, and Southern Comfort brands, which are performing very well in initial distribution. Overall, we are pleased with the performance in the fourth quarter and the recovery of the B&G Foods business in fiscal year 23. There is clearly more work to do, but our team has made significant progress toward creating a stronger, more valuable B&G Foods. Bruce will discuss specific guidance, but our focus in fiscal year 24 is to generate slight top-line and low single-digit bottom-line growth on the base business, which excludes the divested green giant U.S. canned vegetable business. Further reshape the business through strategic divesters to focus the long-term portfolio for higher margins and valuation growth. We continue to evaluate existing businesses that have lower margin and cash flow and higher working capital complexity, or do not fit with our core capabilities and business unit structure. Reduce net debt and leverage through divestiture proceeds and strong excess cash flows. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and results for the year.

Thank you, Casey. Good afternoon, everyone. Thank you for joining us on our fourth quarter and fiscal year 2023 earnings call. As you can see, we had another strong quarter and we finished the year largely in line with our guidance. As we explained at the outset of the year, we expected to see large year-over-year increase in adjusted EBITDA and adjusted EBITDA as a percentage of net sales in the first two quarters of the year, followed by a more modest increase in adjusted EBITDA and adjusted EBITDA as a percentage of net sales in the third quarter. And for the fourth quarter, we expected similar performance to the prior year before accounting for the divestiture of Green Giant U.S. shelf-stable product line. This is essentially how the year played out for us. In fiscal 2023, we generated $2.062 billion in net sales, $318 million in adjusted EBITDA, adjusted EBITDA as a percentage of net sales of 15.4%, and adjusted diluted earnings per share of 99 cents. Base business net sales, which excludes net sales from the Back to Nature brand and the Green Giant U.S. shelf-stable product line, decreased by approximately $30 million, or 1.5%, in fiscal 2023 compared to the year-ago period. Base business net sales include a benefit of $93.3 million from pricing and the impact of product mix. This was offset by negative impacts of $5.1 million from FX and $118.2 million from volumes. And the pricing helped, particularly in our results in the early part of the year. For fiscal 2023, adjusted EBITDA increased by $17 million, or 5.7%, compared to $301 million for fiscal 2022. Adjusted EBITDA as a percentage of net sales was 15.4% for fiscal fiscal 2023 compared to 13.9% for fiscal 2022. For the fourth quarter of 2023, we generated $578.1 million in net sales, $86.8 million in adjusted EBITDA. Adjusted EBITDA is a percentage of net sales of 15% and adjusted diluted earnings per share of 30 cents. Base business net sales decreased by $13.3 million or 2.3% in the fourth quarter of 2023 compared to the prior year. The decrease in base business net sales in the fourth quarter was largely driven by a decrease in net pricing and the impact of product mix of $15.9 million or 2.8% of base business net sales. The decrease in pricing was in part a product of our CRISCO commodity pricing model that we have instituted, coupled with modest increases in promotional trade spending in other areas of the portfolio where it made sense. The impact of foreign currency was also a slight drag on net sales, contributing to another $0.3 million of the decline. These were partially offset by an increase in unit volume of $2.9 million for the quarter. We are obviously encouraged by the improving volume story that we are now seeing, although we are closely monitoring the trade-offs between pricing, promotional strategy, and volumes, as well as the current consumption trends. I will now highlight the performance of some of our larger brands. Clapper Girl had incredibly strong momentum coming into the holiday bake season, and similar to its performance all year long, Clapper didn't disappoint. Net sales of Claver Girl increased by $8.2 million, or 26.3% in the fourth quarter of 2023, as compared to the fourth quarter of 2022. Net sales of Claver Girl benefited from both pricing and increased volumes during the quarter. Net sales of Maple Grove Farms increased by about $0.7 million, or 3.4%. Our spices and seasonings continue to benefit from improved supply chain performance and new product launches, finishing the year with a solid quarter. Net sales of the company's spices and seasonings increased by $0.7 million, or 0.8% in the fourth quarter of 2023, as compared to the fourth quarter of 2022. As Casey mentioned earlier on the call, we are very excited about the prospects for these new partnership brand launches coming out of our spices and seasonings business. which include the licensed seasoning products, Einstein's Everything Bagel, Einstein's Avocado Toast, and Sazerac Weber Flavors Buffalo Trace, Fireball, and Southern Comfort. We also have a robust pipeline and expect to be able to announce additional new and exciting products. While net sales of Crisco decreased by $10.6 million, or 8.7% in the fourth quarter of 2023 when compared to the prior year period, This was largely expected due to favorable input cost relief and the execution of our commodity pricing model, which allowed us to reduce pricing to our customers and still maintain profit dollars. As a result of the lower pricing, we are starting to see a nice recovery in Crisco volumes. Increased volumes for Crisco contributed to $1.8 million to net sales, or 1.5% in the fourth quarter of 2023 compared to the fourth quarter of 2022. We expect this trend to continue throughout 2024 with lower pricing leading to an improved volume recovery for Crisco throughout the year. Our Green Giant business was not immune to the category-wide industry challenges seen throughout 2023 in the shelf-stable and frozen vegetable steps. Net sales of Green Giant, including LeSore, but excluding the divested Green Giant U.S. shelf-stable product line decreased by $5.2 million, or 4.4%. We expect more favorable industry trends in the category during 2024, and quite frankly, we expect much more favorable trends for our business. The goal is to get this brand back to being the industry leader from an innovation perspective and to generate category-leading growth rates like we did before the pandemic. The hot breakfast aisle is another category that is still seeing some normalization in its post-pandemic trends. Net sales of cream of wheat were approximately 78.5 million dollars in 2023, which was well ahead of the pre-pandemic levels that had been consistently in the 60 to 70 million dollar range annually. Although 2023 net sales were somewhat lower than fiscal 2022 annual net sales of 81.4 million dollars. In the fourth quarter of 2023, net sales of cream of wheat decreased by $2.2 million or 9% compared to the prior year. Net sales of Ortega decreased by $0.3 million or 1% in the fourth quarter of 2023 as compared to the fourth quarter of 2022. Ortega finished the quarter with some momentum despite a challenging year. While Q4 net sales were down 1%, They were up approximately 0.9% in the month of November and another 0.6% in December compared to the prior year periods. Taco sauces, green chilies, and seasonings mixes led the way for the brand, driving positive performance in the back half of the fourth quarter. Taco shells and taco kits continued to be somewhat challenged. Ortega began the year with a tough comp relative to prior year and some softness in shells and kits, as well as pricing elasticity-driven volume declines in some SKUs where we took pricing. These factors combined with the general post-COVID category normalization helped cause much of the declines. Total net sales for Ortega were $147.9 million in fiscal 2023, down from $154.3 million in fiscal 2022. but also up substantially from pre-pandemic 2019 net sales of $140.4 million. Base business net sales of all other brands in the aggregate decreased by $4.6 million or 3.5% for the fourth quarter of 2023 as compared to the fourth quarter of 2022. Gross profit was $125.2 million for the fourth quarter of 2023 or 21.7% of net sales. Adjusted gross profit was $126.8 million or 21.9% of net sales. Gross profit was $126.1 million in the fourth quarter of 2022 or 20.2% of net sales. Adjusted gross profit was $128.6 million or 20.6% of net sales. Adjusted gross profit increased by approximately 130 basis points in the fourth quarter of 2023 compared to last year's fourth quarter. The improvement in gross profit percentage was largely driven by a moderation in input costs and logistics inflation. This represents a continued turnaround compared to the first half of fiscal 2022, where we suffered from the severe industry-wide input cost inflation, which led to large declines in our gross profit and margins. Selling general and administrative expenses increased by $1.3 million, or 2.7%, to $53.2 million for the fourth quarter of 2023, from $51.9 million for the fourth quarter of 2022. The increase was composed of increases in general and administrative expenses of $5.8 million and consumer marketing expenses of $0.9 million. partially offset by decreases in warehousing expenses of $2.6 million, selling expenses of $2.3 million, and acquisition divestiture-related and non-recurring expenses of $.5 million. Expressed as a percentage of net sales, selling general and administrative expenses increased by 90 basis points to 9.2% for the fourth quarter of 2023, as compared to 8.3% for the fourth quarter of 2022. The increase in general and administrative costs was largely driven by modest inflation in wages, insurance, and other professional services, as well as an increase in short-term management incentive accruals, as no annual bonuses were rewarded for fiscal 2022 due to the shortfall in performance in fiscal 2022. As I mentioned earlier, we generated $86.8 million in adjusted EBITDA for the fourth quarter of 2023 compared to $93.6 million in the fourth quarter of 2022. Fourth quarter 2023 adjusted EBITDA benefited from the moderation in industry-wide input cost inflation and logistics inflation that have plagued the industry since the fourth quarter of 2021, which were offset in part by the modestly higher G&A costs as well as the impact of divestitures. Fourth quarter of 2022 included a full quarter of profits from Back to Nature brand and the Green Giant U.S. Self-Stable product line, while the fourth quarter of 2023 had no benefit from Back to Nature and approximately five and one-half weeks of benefit from Green Giant U.S. Self-Stable business. Adjusted EBITDA as a percentage of net sales was 15%, in the fourth quarter of 2023, in line with the 15% in the fourth quarter of 2022. Net interest expense was $40.2 million in the fourth quarter of 2023, compared to $36.3 million in the fourth quarter of 2022. The increase was primarily attributable to higher interest rates on our borrowings and a $0.5 million loss on extinguishment of debt, partially offset by reduction in our average debt outstanding. Depreciation and amortization was $17 million in the fourth quarter of 2023 compared to $19.5 million in the fourth quarter of last year. We generated 30 cents in adjusted diluted earnings per share in the fourth quarter of 2023 compared to 40 cents last year. We remain very encouraged by the progress we have made over the past year in terms of restoring our P&L. and perhaps even more impressive than our P&L improvements was the progress that we made in the improvement of our cash flows and our balance sheet. We generated $92.1 million in net cash from operations in the fourth quarter of 2023 and $247.8 million in the full 12 months of fiscal 2023. This compares to $54.4 million in net cash from operations generated in the fourth quarter of 2022 and just $6 million during the full 12 months of 2022. Increased operating profits, improved margins, and a more favorable working capital were the primary drivers of improved cash flows from operations, which was offset in part by increased interest expense. We finished the year with approximately $569 million in inventory in fiscal 2023, in inventory at the end of last year. Approximately $90 million of the reduction was due to our focus on supply chain efficiencies and a moderation in input costs. The remainder came from the sale of the Green Giant U.S. self-stable product line, which, as we mentioned previously, was highly capital intensive and came with large seasonal swings in working capital. We reduced net debt by more than $335 million during the course of fiscal 2023 to $2.02 billion at the end of the year, down from $2.36 billion at the end of fiscal 2022. We also reduced pro forma adjusted net leverage ratio as defined in our credit agreement to approximately 6.3 times at the end of fiscal 2023 compared to 7.6 times at the end of fiscal 2022. We expect to continue to reduce our net debt and pro forma adjusted net leverage ratio throughout fiscal 2024 and beyond as we diligently work toward achieving our long-term target of 4.5 to 5.5 times. Now as a reminder, before we get to our fiscal 2024 guidance, we are still living in highly unpredictable times. We have two major military conflicts going on in the world that have far-reaching global implications. We also have separate but ongoing disruptions in both important canal zones that impacted the global supply chain. Although we are not immune from the challenges that these issues present, we are happy to have a much simpler operational footprint than many of our larger packaged food peers. For B&G Foods, though, M&A will have an impact on our numbers. We have now fully lapped the sale of Back to Nature, but we still have to lap the sale of the Green Giant U.S. Shell Stable product line. As we mentioned on our prior call, the Green Giant U.S. shelf-stable product line had approximately $75 to $85 million in annual net sales and low double-digit contribution margins. The business had approximately $65 million in net sales under our watch in fiscal 2023 that we need to lap this year. It is also worth noting that while the majority of the heavy lifting in our adjusted EBITDA margin and dollar recovery has already happened, we still do expect to see some modest improvements going forward in 2024. So based on what we know today, we expect 2024 net sales of $1.975 to $2.020 billion. Our net sales guidance is generally in line with our long-term guidance of 0% to 2% base business top line growth after adjusting for the removal of the Green Giant US Shell Stable product line, which we sold in November other non-recurring sales, and an estimated $15 million reduction in net sales of Crisco due to anticipated lower oil input costs and a corresponding reduction in our Crisco net selling prices. We expect adjusted EBITDA to be in a range of $305 to $325 million. This range largely reflects the elimination of approximately $8 to $10 million of adjusted EBITDA due to the recent sale of our Green Giant U.S. shelf-stable product line. Based on this adjusted EBITDA guidance range, we expect adjusted EBITDA as a percentage of net sales to remain at approximately 15%. And based on this guidance, we expect adjusted diluted earnings per share to be in a range of $0.80 to $1. Additionally, we expect for full year 2024, interest expense of $145 to $150 million, including cash interest of $138 to $143 million, depreciation expense of $47.5 to $52.5 million, amortization expense of $20 to $22 million, an effective tax rate of 26 to 27 percent, and capex of $35 to $40 million. We expect to use a little bit less than 50 percent of our excess cash to pay our dividend and the remaining 50% to 60% to pay down debt. And now I will turn the call back over to Casey for further remarks.

Thank you, Bruce. In closing, our quarter four and fiscal 2023 results demonstrated strong progress with improved margins, stabilizing volumes, stronger cash flows, and a reduction in leverage. We remain on track to further improve the business in fiscal 2024 and beyond. We have also made significant progress against reshaping the portfolio through our focused M&A strategy, including the divestiture of two businesses, the Back to Nature brand and the Green Giant U.S. Shelf Stable business that are not core to the B&G Foods of the future. This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. The confirmation sign will indicate your line is in the question queue. You may press star and then two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We also request that you get to one question and one follow-up question. The first question we have is from Andrew Lazar of Barclays. Please go ahead.

Good afternoon, Casey and Bruce. Hey, how are you? Hey, Andrew. Good, good. First off, I guess your base business growth expectation, as you mentioned, for 24, I think is roughly flattish. And I'm trying to get a sense of how you see that playing out for the year. both from a volume and a price standpoint. I think you mentioned another $15 million impact from negative pricing for the year for just the Crisco pass-through pricing model, if I got that right. So that's about maybe down a percent. So does that assume that volume is probably up a percent or so for the year? I just want to make sure I have that right. Specific to Crisco. Okay. So could there be some additional negative pricing activities such that I'm trying to get a sense of what you think pricing looks like and just how positive your buying expectation is.

Yeah, so just let's address these separately. So for Crisco, as we've said over the past year or so, we put in place a pricing model where we interact with our customers quarterly. And based on where input costs are, we adjust price. If we think about how last year played out, input costs were still high from the 2022 levels at the beginning of the year. and over time came down, and so quarterly we were reducing price for Crisco. We will be lapping those higher prices for Crisco for the first half to three quarters of this year, which will then mean, assuming everything was perfect, margins would be the same from a dollar standpoint, sales would be down, margins would be up from a percent standpoint, pricing would come down for Crisco, and we actually think we get a little volume elasticity benefit, and that's kind of what we're seeing for Crisco today.

But if you look at the base business, excluding the divestors and excluding the impact of Crisco, we're basically saying we're going to be flat to slightly up. And that will be probably on both volume and pricing. So those two will be kind of running more closely together. And if I think about the flow of that, we still are kind of coming out of that. The trend's improving, but I would expect that the first half, of the year is a little bit below that. And the second half is a little bit better than that. And that's how we kind of see it playing out right now. And we are seeing kind of volumes in pricing stabilize. And we don't have a lot of growth plan from pricing, you know, other than the movement of Crisco, which is kind of irrelevant to the bottom line. Got it.

Yeah, that's helpful. And then your guidance, obviously, at the midpoint on EBITDA margins suggests, like you said, some additional modest improvement. And obviously, there was a big jump up in margins in 23 versus 22. EBITDA margins, though, are still well below where they were just a couple of years ago. So I'm trying to get a sense of maybe what would impede more significant EBITDA margin improvement as we go forward. Is it something just in the portfolio that's changed versus where you were a couple of years ago? Or what would it take to get back to those levels if that's even a reasonable expectation at some point?

Well, I mean, Andrew, our goal is to get back to 18% to 20%. So that's what we're driving to. And I think it's going to take a couple of things. So one is M&A, divesting businesses that are low margin, a lot of working capital intensity. continued productivity. So we've started on that productivity savings journey. We've got that kind of going. This is going to be our second year where we're really focused on it. So we see some improvement from that. And then the third thing for me would be, as Crisco oil pricing comes down, we will get some benefit on margin from that. Ironically, as sales come down, but the same gross profit, we're going to improve our margins on the Crisco business just because of that compression of oil pricing. So those three things together, that's where we're trying to head, to get back to 18% to 20%. But it's going to take those three things working together to get there.

And if you think about some of that drag, what Casey's describing on Crisco, a bigger example for that brand, but to the same degree across a lot of the rest of our portfolio, when costs were rapidly rising, we took price to protect profit dollars, which just the algebra suggests lower margins as a percent. That's not a math word. Yeah. Yep.

Crisco being the most extreme example of that, yeah.

Right. Okay. Thanks so much. I'll pass it on. Yep.

The next question we have is from William Reuter of Bank of America. Please go ahead.

Good afternoon. My first question on the topic of future additional asset sales, I wasn't aware that you were still actively pursuing these. I guess, is this new or have you been continuing to pursue over the last handful of months and quarters? And I don't know, any sense of magnitude or what types of assets you're looking at?

Sure. So our M&A process... And we tend and we will tend to be a long-term net acquirer, but we are reshaping the portfolio. And as part of that, there's some things that are going to come out. So we've sold two businesses that we felt were not a fit to the portfolio that we want to run in the future and over the long term. There's probably a couple other things. There's nothing that we're active in the market in terms of running a process for right now. So there's a little bit of stay tuned and when it's appropriate to talk about it. We'll talk about likely what you will see is other things that maybe are not a good fit for us or that could be a better fit for other people.

Got it. That's helpful. And then in the answer to a previous question, you mentioned that you weren't expecting to take much pricing this year. I don't know if I heard explicitly what your outlook is for input costs, and let's exclude Crisco since that's the pass-through model. But for the remainder of the products, what's your outlook on where they should be this year versus last year, or any other sources of either inflation or deflation?

I think what we're seeing right now in our input costs, and obviously this is still early in the year and we're still trying to project it fully, but I'm seeing something more in the 1% to 2% range, 1% to 2% on the high end in terms of input cost inflation, probably on the lower end of that range right now as I see it, but maybe a little bit in freight and transportation, but I think it's probably more in line with that range. So I'm I feel like right now our job is to get the business back, stabilize on volumes, not take as much pricing as we have over the past year, but drive productivity to offset that inflation and then maybe give us a little bit of margin improvement. That's our focus right now.

Got it. Perfect.

There may be some selective places where we're going to take price where we might have a big jump in one particular small commodity input, but that's going to be very, very selective.

Got it. Very helpful. All right. That's all for me. Thank you.

The next question we have is from Carl Martinson of Jefferies Company.

Please go ahead.

Good afternoon. What has been kind of the competitive response in terms of your peers? We constantly keep hearing about the consumer trading down to private label, the give back and pricing, the elasticity that you referenced. Are you seeing that sustained shift in terms of competing products for your categories?

It really depends on the category. Honestly, because we have the pass-through model on Crisco, we're actually seeing volumes increasing on that business. We're seeing a pickup in our unit sales as a result of bringing the price back down to reflect the lower oil commodity cost pricing. You know, even though the, you know, the percentage gap to private label might be the same, the absolute gap has come down and the absolute price point has come down. So on that one, we're kind of moving, you know, where we'd expect to in terms of our share performance. You know, I would say, you know, there's a couple of other places where we've seen, you know, inflation drive up pricing. And even though we try to maintain our percentage gaps to private label levels, You know, at the higher absolute price points and just maybe a couple categories like, well, canned vegetables, you know, we're out of now. But that was one where we were seeing a little bit of that dynamic. But, you know, for the most part, we watch the gap to private label pretty closely. And we try and manage to that so that we don't have a lot of pressure from, you know, trade down or we maintain the same relative position in the marketplaces.

Okay. And when we look at the kind of the implied cash flow guidance here for the year with a $70 million or so for the dividend, when it was $300 million maturity in 2025, would it leave kind of $230 million that you would need to refinance? Is that to be paid off through the asset sales, or how would you look at addressing that?

So for the remaining stub on the 2025, the base case assumption is it's a combination of cash from operations and revolver draw. And keep in mind, we've got a big revolver, so we've got plenty of capacity there. I think there's always options around potential refinancing as part of a broader refinancing if the market is hospitable and it makes sense to us. to the extent that we have any more asset divestitures, you know, there's money coming in the door from that as well. And so I think there's a couple things, but I would use as the base case what we laid out to investors, you know, ample cash from operations coupled with liquidity from the revolver.

Thank you very much.

Appreciate it.

The next question we have is from Connor Rattigan of Consumer Edge Research.

Please go ahead.

Hey guys, good afternoon. Hey, afternoon.

So correct me if I'm wrong, but it sounds like you registered positive base business volume growth in the quarter. So that was quite a bit ahead of what we saw in the track data. I guess, could you maybe help us understand what drove that differential? And looking ahead to 2024, how we should sort of think about volume trends over the course of the year, and if maybe there are any items we should keep in mind in terms of divergences versus track data?

Yeah, so first off, you know, in the fourth quarter, we saw, you know, a small growth in volume. So I want to be careful that we don't, you know, we don't, you know, over call that one. But honestly, we kind of celebrated getting stable volume trends on the business after the, you know, the past year coming off all the inflationary pricing. What we're, you know, what we're trying to move forward is to kind of get that same trend line, you know, small growth in volume in 2024. Yeah, the difference between the measured data, the tracked data, and what you guys are seeing is there's a lot of things. I mean, there's channel coverage that's not complete with what we do. We sell to – we have businesses that are selling to other, you know, food service outlets, particularly in the spices and seasonings business, in some cases in syrups. We have some private label business that we're selling that's not tracked in your data. So, you know, we are a heavy player in private label in – you know, in the baking powder business. So there's a lot of our business you don't see in the track data. So it's hard to really look at the track data and directly translate it to our sales results because we're participating in, you know, we're participating in food service business. We're participating in some, you know, some private label manufacturing. We're participating in some other businesses that we do with other kinds of customers. So it's a difficult thing to translate it directly. But obviously, we look at everything pretty closely in terms of what the trends are.

So I guess just following up on that, would it be fair to say that I guess maybe the non-track businesses are outperforming what you're seeing at retail?

I mean, for sure, we're seeing the food service businesses in the past year outperforming trends in retail. And honestly, I think that would be not just us. You would see that in other businesses as well. So, you know, that was the opposite, you know, during the pandemic. Now we've seen it kind of flip back to where food service growth has outpaced retail growth. I expect that to normalize this year at some point. Honestly, I expect both of those, that trend to kind of stable, get to more stable trends year over year. But that obviously depends a lot of economic conditions, whether or not we, you know, we hit a recession or something that could change that dynamic. But right now we're kind of seeing those two come back in balance. in terms of consumer behavior and trends.

Okay, makes total sense. And then just as a quick follow-up, Bruce, in your prepared remarks, you noted some increases in promotional and trade spend in certain parts of the business, I guess. Could you maybe be a little more specific as far as maybe what brands those impacted, and I guess what type of lift you might have seen from that spend, and just overall if you were happy with what you saw?

I don't think we're necessarily going to talk about the specifics on the brand promotional strategy, but this is, again, in a way to improve volumes. I think we're seeing this across many of our competing or just peer group where people are increasing promotional spend. I think it's been somewhat rational, but spend is still lower than it was pre-pandemic. So it's going to be higher than it was last year or the year before, but it's still sort of normal. And we expect to get some volume benefits, and I think you do see that

Yeah, I mean, for the most part, when we put trade spend into businesses because we're going back to more normal, you know, promotion patterns, we do see volume lift behind that. And we watch that pretty carefully. And if we don't see volume lift from it, we change. But for the most part, that's been successful play. And as Bruce said, we're not all the way back to where we were pre-pandemic. So we're kind of moving back there, you know, over time, as I think most players in the food industry are, as normal promotion patterns and merchandising patterns resume.

All right, sounds good. Thank you. Next question we have is from Hal Holden of Barclays.

Please go ahead. Hi, afternoon. Thank you. I'm super excited to try the fireball seasoning, by the way. Don't drink too much of it with the seasoning.

Okay.

Trying not to age myself out of life here. Bruce, the half-million-dollar debt return extinguishment cost in the quarter, did you buy some bonds back or was that a term loan pay down?

Yeah, it's just all the refinancing stuff that we did, you know, kind of back half of last year.

Okay. And then the second question I had was, you know, as you're – Thinking about divestitures in the market, you've obviously been talking about it for six, nine, 12 months in various forms, and I was wondering if you had seen the market improve as a seller standpoint or multiples come up or more interest in the pipeline.

I think there's certainly chatter that sounds like there should be more activity. I would have told you the same thing six months ago or a year ago, but I think as the financing environment starts to stabilize, we're going to see more activity. We probably have seen some nice little brand deals get done. We saw two of our deals get done. I think it's fine. I don't think it's shut down. It's just not gangbusters like it was a few years ago, but it should be fine.

Okay, great.

Thank you very much. The next question we have is from David Palmer of Ivercore ISI. Please go ahead.

Thanks. Hey, guys. Inventory decline in the quarter, obviously, with the divestiture. I'm wondering how, and I always ask you about free cash flow conversion, but I wonder how much the inventory change will happen in 24 and where you see free cash flow conversion settling in of EBITDA going forward.

Yeah, so I think, you know, the inventory reduction in 23 from both the sale of, you know, green giant U.S. canned vegetables and honestly base business improvement coming off the inflationary cycle and the supply shortages, you know, we did a lot of reduction in this year. So in the future, I wouldn't expect to see that kind of magnitude of change. Obviously, a divestiture would impact that. But in terms of our base business and organic kind of trends, I'm looking for kind of a 2% to 3% continuous improvement trend line as we get better in terms of our operations and our demand-supply integration. That's kind of our expectation. So you will see some benefit from reducing working capital, but nothing to the magnitude you saw this year. Look, our long-term perspective, and I think we've said this before, is that we want enough excess cash that half of it can be used to pay the dividends and half of it can be used to pay down debt. And that's where we're driving. That's where we're driving so that we have the ability to kind of reduce debt year in, year out with our excess cash flow.

I think in the past you might have had a 60% of EBITDA type target. Is that?

Yeah, give or take that. So, I mean, if you think about the midpoint of our guidance range, call it $315 million of adjusted EBITDA, Throw in $5, $10 million in non-cash or share-based comp as sort of your baseline. And then, again, we gave guidance on the call, but cash interest at the midpoint is about $140 million. Cash taxes have been bouncing around, $30-plus million a year. CapEx is $35, $40 million. Casey talked to modest, certainly not what we had last year, but modest levels of inventory there. Reductions slash working capital improvement. You could see a number that's $110, $125 million or so in excess cash before dividends. If you get the benefit of working capital in there, dividends are about $60 million.

That's all helpful. Just a question on Crisco. You said you were expecting profit dollars from Crisco to remain pretty steady this year, which is great to hear. And going forward, what do you think will be your biggest watchouts for that brand's profitability? Is there a level of volatility of soybean oil that makes keeping profit steady much more difficult? Or are there price thresholds where trade down accelerates? What are things that would kind of throw you off the horse, so to speak, on keeping profit steady for Crisco?

Yeah, I think it's our ability to just pass through the oil costs. And so far, we've been doing that. I mean, if you would have talked to me in 2022, I would have said, you know, the risk was much higher. But since, you know, January, kind of January, first quarter of last year, we implemented this pass-through model with customers. And they like it. They like it. We come to them, you know, every quarter and say, here's what the oil costs, here's what we're going to price to relative to that. And, you know, they've been pretty good about reflecting that in the pricing and So it's been successful as a strategy to maintain our gross profit dollars. I would say the only things I worry about is if soybean oil goes back up to, I don't know, 80 cents, then we're going to pass that through and take pricing up. you know, unfortunately at that level, we see the absolute dollar gap to private label growing. Percentage is the same, but the absolute dollar gap. And so we see, you know, some risk to the volume trend of the business with that kind of commodity structure. I mean, look, fortunately right now, you know, soybean oil prices last time I checked are kind of in the 45 cents per pound range, which is well down from where it was last year and well down from the high of 80 cents that we saw probably 18 to 24 months ago. So, I mean, that's really the big risk. I mean, the only other thing we watch is we have a shortening business, which is a key part of that whole Crisco business outside of the oil, the shortening. We look at the long-term household penetration on that business just to make sure people are still baking, cooking, frying at the same level.

That's great.

Thank you.

Ladies and gentlemen, just a final reminder, if you would like to ask a question, you're welcome to post a star and then one.

We will pause for a moment to see if we have any other questions.

There are no further questions at this time.

I would like to turn the floor back over to Casey Keller for closing comments.

Thank you all for joining us today for the fourth quarter earnings call. Obviously, reach out if we want to talk anything. Appreciate your attention. Look, we're pleased with the results in the fourth quarter, but obviously we have more work to do in 24 to get this business in the shape we want it.

So thank you very much.

Ladies and gentlemen, this concludes today's conference. Thank you for joining us. You may now disconnect your lines.