Lamb Weston Holdings, Inc.

Good day, and welcome to the Lamb-Weston First Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Dexter Congolet. Please go ahead.

Good morning, and thank you for joining us for Lamb-Weston's First Quarter 2023 Earnings Call. This morning, we issued our earnings rate press release, which is available on our website, lambweston.com. Please note that during our remarks, we'll make some forward-looking statements about the company's expected performance. These statements are based on how we see things today. Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward-looking statements. Some of today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results. You can find the GAAP to non-GAAP reconciliations in our earnings release. With me today are Tom Warner, our President and Chief Executive Officer, and Bernadette Madriada, our Chief Financial Officer. Tom will provide an overview of the current environment. Bernadette will then provide details on our first quarter results and our fiscal 2023 outlook. With that, let me now turn the call over to Tom.

Thank you, Dexter. Good morning and thank you for joining our call today. We're pleased with our performance in the quarter. We drove strong sales growth, expanded our gross margin, and nearly doubled adjusted EBITDA, including unconsolidated joint ventures. Our results reflect our continued focus on implementing pricing actions to offset input and transportation cost inflation, driving productivity and cost saving initiatives, increasing service levels for our customers in each of our sales channels, and supporting our people and talent. We built good operating momentum over the past few quarters by focusing on these near-term objectives, and we are confident in our ability to deliver the upper end of our sales and earning target ranges for the year. I'm especially proud of the Lamwesson team has continued to generate solid results in a very difficult macroeconomic environment. We expect this environment to remain challenging at least through physical 2023 as inflation A growing threat of recession and industry-wide supply chain disruptions continue to pressure demand for fries, as well as our cost structure. It's no surprise that inflationary trends for food, energy, and housing have affected restaurant traffic in the U.S. over the past six months. We saw similar restaurant traffic trends during the Great Recession as consumer discretionary income came under pressure. While traffic at quick service restaurants has held up relatively well, It has come at the expense of casual dining and full-service restaurants as consumers increasingly choose less expensive options when dining away from home. In the past month or so, we've seen casual dining and full-service restaurant traffic tick up from summer lows, but traffic remains below levels achieved just prior to the war in Ukraine. Unlike traffic trends, fry demand continues to be solid when dining out. The fry attachment rate, which is the rate at which consumers order fries when visiting a restaurant or other food service outlets, remains above pre-pandemic levels. Fry demand in retail channels has also benefited as restaurant traffic slows. Overall, we expect volatility in restaurant traffic and demand trends will continue through fiscal 2023, but history has shown that this category is resilient during economic downturns. Although we may see some category weakness in the near term, we remain confident in the long-term growth prospects of the category in the U.S. and in our key international markets. In addition, as category growth returns to historical rates, we should be well-positioned to capture at least our share of growth with our investments in new processing capacity in Idaho and China, as well as our newly announced expansion in Argentina. With respect to pricing, our overall price mix growth accelerated for the fourth consecutive quarter. In our food service and retail segments, we continue to realize the carryover benefit of multiple product pricing actions that we have taken over the past 15 months and expect the benefit of these actions will continue to gradually build through the first half of fiscal 2023. In our global segment, we made good progress in increasing price mix through price escalators included in multi-year contracts, while also securing some price adjustments outside of these agreements. In addition, we've nearly completed negotiating contract renewals that represent about a third of our global segment volume. Overall, we feel good about how the discussions played out and will generally begin to see the results of these new pricing structures during the second half of fiscal 2023. Finally, with respect to this year's potato crop, our preliminary view is the potato crop in our growing regions in the aggregate will be around the lower end of historical average range. Specifically, the overall quality of the crop, including shape, color, level of defects, and solid content is good and consistent with historical averages. Yields, however, are below average. The unusually hot weather during August affected the growth of the potatoes and resulted in a greater than average proportion of potatoes failing to bulk up to the desired size. In response, we've already begun to secure the additional potatoes needed to meet our production forecast and expect to purchase most of this from growers in the Columbia Basin and Idaho. That's in contrast to last year when we purchased potatoes at significant premiums to contracted prices and transported them from as far away as the East Coast. As you may recall, our financial targets for the year were predicated in part on an average potato crop, and we believe this crop is broadly consistent with our expectations. While below average yields will result in additional open market purchases at higher than contracted prices, we do not expect this to affect our ability to deliver our financial targets. To be clear, We view this crop as significantly better than last year's, which was poor both in terms of yield and quality due to the prolonged extreme summer heat in the Pacific Northwest. We'll provide our final assessment of the crop, including how it performs out of storage when we report our second quarter results in early January. So in summary, we generated strong sales and earnings growth in the first quarter by executing pricing actions in each of our business segments and driving productivity savings. We expect restaurant traffic and fry demand will be volatile in the near term as consumers continue to adjust to the inflationary environment. And on a preliminary basis, we believe that potato crops in our growing regions are at the lower end of historical average range and that any effect on our operations or financial performance will be manageable. Let me now turn the call over to Bernadette to review the details of our first quarter results and our progress towards our physical 2023 financial commitments.