B&G Foods, Inc.

Good day and welcome to the B&G Foods second quarter 2026 earnings call. Today's call, which is being recorded, is scheduled to last about an hour including remarks by B&G Foods management and the question and answer session. I would now like to turn the call over to A.J. Schwab, Director, Corporate Strategy and Business Development for B&G Foods. A.J.?

Good afternoon and thank you for joining us. With me today is Bruce Wacha, our Chief Financial Officer. You can access detailed financial information on the quarter 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, under-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, segment adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage, base business net sales, and segment adjusted expenses. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Bruce 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 2026 and beyond. I would now like to turn the call over to Bruce.

Thank you, AJ. Good afternoon, everyone. Thank you for joining us today. I'm going to cover a number of topics on our call this afternoon, which will include our change in CEO, and why we are so excited to have Rob Mills join our executive leadership team at B&G Foods. Our portfolio reshaping efforts, which consists of the divestitures of low margin, working capital intensive business, including Green Giant U.S. Frozen, LeSore U.S. Shelf Stable and the Don Pepino brand over the past 12 months. The establishment of our Green Giant U.S. Frozen contract manufacturing business which we expect to provide a modest but consistent contribution to adjusted EBITDA and cash flows, as well as the acquisition of the higher margin cash generative College Inn and Kitchen Basics brands. Our second quarter results, which demonstrate our ability to grow adjusted EBITDA and net cash provided by operating activities despite a challenging industry backdrop, and an update on our fiscal 2026 guidance, which we are reaffirming at previous levels across net sales, adjusted EBITDA, and adjusted diluted earnings per share. While it is taking time to implement this portfolio reshaping and we are still evolving today, we can see the green shoots as our business results continue to improve and we continue to better position ourselves for a more steady and more balanced financial performance in the future. Now, before I move on to our performance in the second quarter, I'd like to take a moment to comment on our CEO transition and the appointment of Rob Mills as our chief executive officer. Having served on our board of directors for the past eight years, Rob brings a unique combination of deep knowledge of our company and extensive operating experience. He understands our brands, our customers, our opportunities, and importantly the challenges that we need to address. This familiarity significantly reduces the traditional transition period for a new CEO and positions Rob to move quickly, establish clear priorities and accelerate the actions necessary to improve execution, strengthen the business and create sustainable shareholder value. Rob's experience is particularly well aligned with what B&G Foods needs at this point in our evolution. He joins us from Tractor Supply Company, where he has held senior executive leadership roles spanning strategy, digital commerce, technology, and business operations with direct P&L accountability. During his tenure, Rob helped lead large-scale transformation and growth initiatives across a complex, multibillion-dollar public company. while building deep experience in digital, data, AI, productivity and operating execution. Rob also brings extensive M&A and corporate development experience, including evaluating, acquiring and integrating businesses. This combination gives Rob a broad perspective on organic and inorganic value creation, disciplined capital allocation and active portfolio management. Rob comes into this role with a strong sense of urgency and a clear understanding of B&G Foods. During his first 90 days, he intends to spend considerable time with our employees, customers, business partners, and shareholders, listening and developing an even deeper understanding of the challenges and opportunities in front of us. His eight years on our board provide an important head start allowing him to use this period not simply to learn the business, but to quickly establish priorities and begin translating these priorities into action. Rob's immediate focus will be on strengthening execution, maximizing the potential of our core brands, improving productivity and cash generation, and accelerating the strategies that can return the business to sustainable growth. Rob is excited about the future of B&G Foods and the opportunity to build upon the strength of our brands while bringing new capabilities and greater speed to the organization. And so am I. We believe that his experience in digital transformation, data and AI can help us modernize how we operate, better understand and serve our customers, consumers and improve decision making and identify new opportunities for growth and productivity. Rob is also looking forward to engaging directly with the analyst and investor community in the months and years ahead and sharing more about his priorities and vision for B&G Foods. We believe that Rob has the right combination of institutional knowledge, operating experience, strategic leadership, M&A expertise, and transformation capabilities to move quickly, make disciplined decisions, and accelerate value creation for our shareholders. We are very excited to have Rob as part of the B&G Foods family. Rob will be joining our third quarter earnings call in November. And now back to the quarter. For the second quarter of 2026, we generated $383.3 million in net sales, a net loss of $4 million, or 5 cents per diluted share, adjusted net income of $4.9 million, or 6 cents per adjusted diluted share. adjusted EBITDA of $60.4 million, and adjusted EBITDA as a percentage of net sales of 15.8%. As we review our second quarter 2026 results, we will highlight the impact of our various M&A transactions, which include the divestitures of the Don Pepino and LeSore U.S. brands in the summer of 2025, and the divestiture of the Green Giant U.S. frozen business in early March 2026. Simultaneous with the Green Giant U.S. frozen divestiture, we commenced the contract manufacturing business pursuant to which we produced Green Giant U.S. frozen products at our vegetable manufacturing facility in Mexico on behalf of the new owner of the Green Giant U.S. frozen business. In addition, we acquired the College Inn and Kitchen Basics brands in late March of 2026. Otherwise noted, the three divestitures are included in our Q2 2025 financials, but not our Q2 2026 financials. While the new contract manufacturing business and the acquired brands are included in our Q2 2026 financials, but not our Q2 2025 financials. Because the divestiture of the Green Giant Canada has not yet closed, there is no impact to our net sales or adjusted EBITDA. However, because Green Giant Canada is classified as an asset held for sale for accounting purposes, the pending divestiture does impact how Green Giant Canada assets are carried on our balance sheet and within certain line items of our P&L. We expect the Green Giant Canada divestiture to close during the third quarter and look forward to providing an update after the divestiture has been completed. Net sales for the quarter 2026 decreased by $41.1 million, or 9.7%, to $383.3 million from $424.4 million for the second quarter of 2025. The decrease was primarily attributable to the Green Giant U.S. Frozen, LeSore U.S. Shelf Stable, and Don Pepino brand divestitures, partially offset by by incremental net sales from the Green Giant U.S. frozen contract manufacturing business and the acquisition of the College Inn and Kitchen Basics brands. Net sales of divested brands contributed approximately $68 million to Q2 2025 net sales. Net sales of acquired brands plus the contract manufacturing business contributed approximately $37 million in net sales during the second quarter of 2026. Base business net sales for the second quarter of 2026 decreased by $10.2 million, or 2.9%, to $346.3 million, as compared to $356.5 million for the second quarter of 2025. The decrease in base business net sales was driven by a decrease in volume of $15.5 million, or 4.3%, of base business net sales. partially offset by an increase in net pricing and product mix of $5.1 million or 1.4% of base business net sales and the positive impact of foreign currency of $0.2 million or 0.1% of net sales. The timing of the 4th of July holiday cost us about one and a half shipping days in the quarter or approximately $5 to $7 million of net sales in the second quarter of 2026. For the year-to-date period, base business net sales are on track with our plan and were essentially flat or up $0.2 million to $711.4 million for the first two quarters of 2026 from $711.2 million for the first two quarters of 2025. Gross profit was $79.6 million for the second quarter of 2026 or 20.8% of net sales and adjusted gross profit was $83.7 million or 21.8% of net sales. Gross profit was $87 million for the second quarter of 2025 or 20.5% of net sales and adjusted gross profit was $89.1 million or 21% of net sales. Gross profit as a percentage of net sales increased due to the acquisition of higher margin collagen and kitchen basics brands, the divestiture of the lower margin green giant U.S. frozen business, and certain tariff refunds received from the U.S. government during our second quarter. Selling general and administrative expenses decreased by $6.6 million, or 14%, to $40.6 million for the second quarter of 2026, from $47.2 million for the second quarter of 2025. The decrease was comprised of a decrease in warehouse expenses of $3.7 million, general and administrative expenses of $2.7 million, consumer marketing expenses of $1.7 million, and selling expenses of $0.8 million. These were partially offset by an increase in acquisition divestiture related and non-recurring expenses of $2.3 million. Expressed as a percentage of net sales, Selling general and administrative expenses improved by 0.5 percentage points to 10.6% for the second quarter of 2026, as compared to 11.1% for the second quarter of 2025. We continue to follow these costs closely, and we are taking steps to reduce our ongoing SG&A commitments to better reflect the size of our business going forward, minimizing the impact of stranded costs on our overhead structure from recent divestitures. We generated $60.4 million of adjusted EBITDA or 15.8% of net sales in the second quarter of 2026 compared to $58 million or 13.7% in the second quarter of 2025. The increase in adjusted EBITDA was primarily attributable to the acquisition of the collagen and kitchen basics brands, the divestiture of the Green Giant U.S. Frozen Business, the commencement of the Green Giant U.S. Frozen Contract manufacturing business, and tariff refunds received from the U.S. government during the second quarter. Net interest increased $2.7 million, or 7.5%, to $38.5 million for the second quarter of 2026, from $35.8 million for the second quarter of 2025. The increase in net interest expense was primarily attributable to an increase in average long-term debt outstanding during the second quarter of 2026 relative to the average long-term debt outstanding during the second quarter of 2025 and the 11% interest rate on our new senior unsecured notes due 2031. During the second quarter of 2026, net interest expense was also negatively impacted in connection with our debt refinancing because the new 11% senior unsecured notes due 2031 were issued on June 10th, 2026 prior to the redemption of our five and a quarter senior unsecured notes due 2027. And therefore, during a 24-day period, we incurred interest expense on both sets of notes, which was only partially offset by the interest earned on the net proceeds of the issuance of the 11% senior unsecured notes due 2031. Depreciation and amortization was $14.5 million in the second quarter of 2026 compared to $16.7 million in the second quarter of 2025. We had a net loss of $4 million or 5 cents per diluted share for the second quarter of 2026 compared to a net loss of $9.8 million or 12 cents per diluted share for the second quarter of 2025. The net loss for the second quarter of 2026 was primarily attributable to approximately $9.7 million of acquisition divestiture-related expenses and non-recurring expenses, including certain organizational restructuring efforts to reduce the cost overhang related to the divestitures. We had adjusted net income of $4.9 million, or six cents per diluted adjusted share, in the second quarter of 2026. In the second quarter of 2025, we had adjusted net income of $2.9 million, or 4 cents, per adjusted diluted share. Adjustments to our EBITDA net income are further described in our earnings release that was issued today and our Take 10Q, which we expect to release later this week. I would now like to touch on the results by business unit for the second quarter. Net sales for spices and flavor solutions increased by $0.1 million or 0.1% in the second quarter of 2026 to $96.6 million from $96.5 million in the second quarter of 2025. Spices and Flavor Solutions Segment Adjusted EBITDA increased by $7 million or 29% in the second quarter of 2026 compared to the second quarter of 2025. The increase in Segment Adjusted EBITDA primarily due to an increase in net pricing and the impact of product mix, an improved cost environment for spices relative to the prior year, and tariff refunds received from the US government during the second quarter. Net sales for meals increased $6.4 million or 6.2% in the second quarter of 2026 to $110.5 million from $104.1 million for the second quarter of 2025. The acquisition of College Inn and Kitchen Basics brands added approximately $13.2 million of net sales during the quarter. Meal segment adjusted EBITDA increased by approximately $0.1 million, primarily driven by the acquisition, which offset declines in certain brands. Net sales for specialty decreased by $5.9 million, or 4.4%, in the second quarter of 2026. to $128.9 million from $134.9 million in the second quarter of 2025. The decrease was due in part to the divestiture of the Don Pepino business, which generated $1.8 million of net sales in the second quarter of 2025. Specialty segment adjusted EBITDA decreased by $8.9 million in the second quarter of 2026 compared to the second quarter of 2025. The decrease was due in part to the divestiture of the Don Pepino business, certain unfavorable cost comparisons in raw materials, increased manufacturing expenses, and our investment in Crisco oil pricing, which on the positive side benefited from increased volumes in the quarter. Financial performance for the frozen and vegetable unit during the second quarter of 2026 and the second quarter of 2025 are not comparable due to the impact of the LeSore U.S. and Green Giant U.S. frozen divestitures and the impact of our new contract manufacturing agreement for Green Giant U.S. frozen. Net sales of Green Giant Canada remain strong and increased by $0.5 million or 2.4% to $23.4 million for the second quarter of 2026 compared to $22.9 million for the second quarter of 2025. Separately, the new Green Giant U.S. frozen contract manufacturing business generated $23.9 million in net sales during its first full quarter of operation following our sale of the Green Giant U.S. frozen business. Our team is looking to build this business, add new customers, and increase its volumes. Before I discuss 2026 guidance, I'd like to remind the audience that we continue to live in unpredictable times and depending on the day, we are at war in the Middle East. Our 2026 guidance reflects only what we know today and for example does not factor in significant changes in inflation, tariff policies or the potential impact of escalation and conflicts in Eastern Europe, the Middle East or Latin America could have on our results. Also, please note that our guidance reflects the expected impacts only of acquisitions and divestitures that have already closed. In other words, our guidance reflects the expected impacts of Don Pepino, LeSore U.S., and Green Giant U.S. frozen divestitures, the commencement of the Green Giant U.S. frozen contract manufacturing business, and the College Inn and Kitchen Basics acquisition. But our guidance does not reflect the expected impact from the pending Green Giant Canada divestiture because that divestiture has not yet closed. Also, as a reminder, Guidance reflects that fiscal 2026 has one fewer week than fiscal 2025, which had a 53rd week. The benefit of the 53rd week was included in our fiscal 2025 results, and we will lap that benefit or approximately $18 million in net sales during the fiscal fourth quarter of 2026. That said, we are reaffirming our guidance. We are maintaining fiscal 2026 net sales guidance in the range of $1.735 billion to $1.775 billion, adjusted EBITDA guidance in the range of $275 to $290 million, and adjusted EBITDA as a percentage of net sales in the range of approximately 15.8 to 16.3%. And based on this guidance, we still expect adjusted diluted earnings per share to be in a range of 57.5 to 67.5 cents per share. Additionally, we expect for full year 2026, interest expense of $157.5 million to $162.5 million, including cash interest of $150 to $155 million, depreciation expense of $40 to $45 million, amortization expense of $17 to $19 million, cash taxes of approximately $5 million or less, and effective tax rate of 26 to 27%, and CapEx will likely be at the lower end of our $30 to $35 million target. As a reminder, we are making strong progress against our long-term goals, which include improving the base business net sales trends of the core business to the long-term objective of 0 to 2% growth, reshaping the portfolio for future growth, stability, higher margins and strong cash flows, Proactively managing our capital structure by using excess cash flow and the net proceeds of divestitures to facilitate debt reduction and ultimately to fund strategic acquisitions. We believe that we have the ability, even in a challenging environment for packaged food companies, to maintain a stable base business and enhance our performance through our growth by acquisition strategy, while simultaneously returning a meaningful portion of our excess cash Two investors to our longstanding commitment to both debt reduction and a healthy dividend policy. We are very excited about the future of B&G Foods, and we thank you for turning into our earnings call this afternoon. This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?