ConAgra Brands, Inc.

Good morning and welcome to the ConAgra brand's first quarter full year 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Melissa Napier. Please go ahead.

Good morning. Thanks for joining us for the ConAgra Brands first quarter fiscal 2023 earnings call. I'm here with Sean Connolly, our CEO, and Dave Marburger, our CFO, who will discuss our business performance. We'll take your questions when our prepared remarks conclude. On today's call, we will be making some forward-looking statements. And while we are making these statements in good faith, we do not have any guarantee about the results we will achieve. Descriptions of our risk factors are included in the documents we filed with the SEC. We'll also be discussing some non-GAAP financial measures. These non-GAAP and adjusted numbers refer to measures that exclude items management believes impact the comparability for the period referenced. Please see the earnings release for additional information on our comparability items. The GAAP to non-GAAP reconciliations can be found in the earnings press release and the slides that we'll be reviewing on today's call, both of which can be found in the investor relations section of our website. I'll now turn the call over to Sean.

Thanks, Melissa. Good morning, everyone, and thank you for joining our first quarter fiscal 23 earnings call. Let's jump right in with what we want you to take away from our presentation shown here on slide five. Overall, ConAgra delivered strong first quarter results. We had robust net sales growth across our portfolio, mainly due to the impact of our inflation-driven pricing actions, coupled with ongoing limited elasticities. We continued to gain market share at the total portfolio level, particularly within our strategic frozen and snacks domains, and drove solid profit improvement during the quarter. We also saw another strong performance from Ardent Mills, Effective management enabled the joint venture to continue capitalizing on volatility in the wheat markets. Our supply chain productivity continued to improve. However, we experienced some internal and external operational challenges during the quarter, like many of our peers. These challenges led to both increased costs and inefficiencies, which more than offset the benefits from improved productivity and impacted our business in the quarter. I'll unpack this later in the presentation. We also continue to strengthen our balance sheet, improving our leverage ratio during the quarter while investing in our business and returning cash to shareholders. Finally, our solid start to the year reaffirms our confidence in the fiscal 23 guidance we announced last quarter. With that backdrop, let's dive into the results shown on slide six. As you can see, in the quarter we delivered, Organic net sales of just over 2.9 billion, representing a 9.7% increase over the year-ago period. Adjusted operating margin of 13.7%, which is down slightly compared to last year as a result of the supply chain inefficiencies I mentioned a moment ago. And adjusted earnings per share of 57 cents, 14% higher than what we generated last year. Slide 7 breaks down our strong sales performance during the quarter. At the total ConAgra level, retail sales grew by almost 9% compared to the first quarter of last year, and just over 24% compared to three years ago. Our momentum continued as we gained share in the marketplace, demonstrating the valuable connection our brands have with consumers. These share gains are most pronounced in our frozen and snacks domains, which increased share 0.8 and 1.5 percentage points on a one and three year basis respectively. Diving further into our top line performance by retail domain, you can see on slide eight that Frozen generated a significant acceleration of quarterly sales growth on a one and three year basis of 8% and 27% respectively. Clearly, our focus on catering to consumer preferences for convenience, quality, and great taste continued to resonate. Similar to prior quarters, this growth was led by key categories such as plant-based protein and single-serve meals, which, along with breakfast sausages, increased sales by double digits compared to the first quarter of fiscal 22 while gaining market share from our competitors. Our snacks domain also continued to deliver strong sales growth on a one and three year basis shown here on slide nine. Compared to the first quarter last year, snacks retail sales increased 13% and as you can see, we have delivered sustained growth versus the period three years ago, including 36% in the most recent quarter. In particular, We saw significant growth in sales of microwave popcorn, which increased more than 20% compared to the prior year. Our highly relevant staples domain also accelerated sales growth, increasing 8% compared to the prior year and 15% versus three years ago. This was driven by strong performance in single-serve dinners and entrees with toppings, pickles, and canned tomatoes. Slide 11 highlights the relationship between price and volume over time. As I mentioned on last quarter's earnings call, we continued to take strategic pricing actions during the first quarter to help offset ongoing COGS inflation. As you would expect, pricing has driven some volume elasticities, both for ConAgra and the overall industry. This tends to be most acute in the immediate aftermath of new pricing and wanes over time as consumers adjust. As you can see at the bottom of this slide, our net elasticities have remained nearly flat over the past few quarters. These relatively modest elasticities, both compared to historic norms and our peers, are a testament to the strength of our brands. As we monitor the impact of our pricing actions on volume, we also look at the relative impact between branded foods and private label. As you can see on slide 12, Private Label has increased its dollar share of certain categories on average since 2019, including a jump in share gains at the beginning of this calendar year. However, it's worth noting that those share gains are much more modest in the categories in which we compete. We're confident that the continued investments in our brands as part of the ConAgra way will ensure they continue to resonate with consumers. These important efforts combined with our limited exposure to private label will help us retain the market share we've gained during the pandemic. Before I turn the call over to Dave, I want to talk about ConAgra's supply chain and both the improvements and inefficiencies I referenced earlier. As I said, our supply chain continues to make progress. Pricing actions we implemented in the quarter and over the last year were largely able to offset continued inflation, and our service metrics continued to improve in Q1. While we're pleased with what we've accomplished to date, our supply chain is not yet fully normalized. We've continued to see some discrete inefficiencies pop up that resulted in higher costs in Q1. I'll give you two examples to illustrate this. In our food service business, we identified an off-spec finished good issue while producing product for a customer. We disposed of the product and lost manufacturing time during our diagnostic. This pulled sales and gross margin below where they should have been. My second example is in our canned chili and beans businesses, where late in Q1, we found cans that were off-spec. No product was recalled, and while production is now back up and running properly, the lost inventory effect will linger into Q2 impacting volumes and margins. The point is, these types of challenges can result in downtime needed to determine and solve the root cause of the issue, as well as proper testing to ramp production back up. That lost time can result in higher costs and less production. Looking ahead, we're not expecting these discrete supply chain interruptions to disappear overnight, as the external environment remains dynamic. Despite these transitory disruptions, we are making good progress in the supply chain with core productivity continuing to improve. Accordingly, we remain committed to our operating margin target for the year and to the productivity targets we announced at our investor day in July. In summary, we're off to a strong start in fiscal 23, fueled by robust top-line growth as a result of inflation-driven pricing increases and muted elasticities. Operationally, we continue to make progress in our specific areas of focus. For the balance of the year, we're planning for the operating environment to remain dynamic. While we expect consumer response to our brands to stay strong, we are planning for this quarter's volumes to be impacted by the supply chain disruptions I just outlined and from our most recent wave of inflation-driven pricing introduced to the market in early Q2. However, as I covered earlier, we expect this elasticity to wane over time. And while inflation remains persistent, we are starting to see moderation in certain areas and anticipate relief for commodities as the year unfolds. Overall, we're off to a great start. But one quarter doesn't make a year, and we remain focused on delivering for our customers and consumers. continue to see a clear path to achieving the guidance we issued for Fiscal 23 behind the strength of our brands and ongoing productivity initiatives, leading us to reaffirm those targets. With that, I'll pass it over to Dave.