Lamb Weston Holdings, Inc.

Please stand by. We're about to begin. Good day, everyone, and welcome to the Lamb-Weston Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Dexter Kongbele. Please go ahead.

Good morning, and thank you for joining us for Lamb-Weston's Third Quarter 2023 Earnings Call. This morning, we issued our earnings 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 that 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 gap to non-gap 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 operating environment, while Bernadette will provide details on our third quarter results and our updated 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 delivered strong results in our physical third quarter as we continued to build good operating momentum. Specifically, sales grew 31% while gross margin expanded in each of our core business segments. This in turn drove strong EBITDA and earnings per share growth. I want to thank the entire Lamb-Wesson team for their dedication and focus on serving our customers so that together we delivered another great quarter and positioned us for a strong finish to the year. This thank you is also to our more than 1,500 colleagues in Europe who are now officially members of the global Lamb-Weston team after we recently completed the purchase of the remaining interest in Lamb-Weston Meijer. Lamb-Weston Europe, Middle East, and Africa, or Lamb-Weston EMEA, adds six factories and about 2 billion pounds of production capacity to our global manufacturing footprint. It strengthens our ability to serve customers in key markets around the world, and it enhances a world-class management operating and commercial team with deep knowledge of the frozen potato industry. We've kicked off the process to integrate LAMWES and EMEA's operations and are excited to see what we can deliver together both now and over the long term. Before turning the call over to Bernadette, let me first provide some quick updates on the current operating environment. While the macro environment remains highly challenging, overall French fry demand remains healthy. Total restaurant traffic improved versus the prior year quarter when traffic was negatively affected by the Omicron variant. QSR has essentially accounted for the entire growth in traffic, including strong growth across burger and chicken restaurant chains, which are significant contributors to driving fry demand. In contrast, traffic at casual dining and full-service restaurants fell versus the prior year. This has a more pronounced effect on our food service segment and contributed in part to a decline in that segment's volume. The fry attachment rate, which is the rate at which consumers order fries when visiting a restaurant or other food service outlets, remains solid. As we previously noted, we're encouraged by how the category is currently performing in away-from-home channels, but continue to expect restaurant traffic and demand trends will be volatile through fiscal 2023 and into physical 2024 as consumers continue to deal with a challenging macro environment. Demand for fries and food at home channels remain solid. Shipments by a retail segment grew in the third quarter, led by strong performance in products sold under licensed restaurant brands. We expect demand in this channel will remain solid into physical 2024. With overall category demand holding up relatively well and as industry supply expected to be constrained for at least the next couple of years, we believe the environment for pricing actions to counter input cost inflation may remain generally favorable. In addition, we've been building our revenue growth management and execution capabilities. We've made good progress as shown by our ability to offset input cost inflation to drive the recovery in our gross margins over the past year in each of our core business segments. Nonetheless, we're continuing to work on maximizing revenue and margin by further evaluating markets and sales channels by using a broader set of variables and leveraging data-backed insights on our customers and consumers. Pricing in the quarter in our global segment was in line with our expectation as we continued to incorporate new pricing structures for customer contract renewals, inflation-driven price escalators, and benefits from pulling forward pricing actions for contracts up for renewal in the coming years. Despite lapping some of the pricing actions we took in fiscal 2022, price mix in both the food service and retail segments in the quarter was better than we anticipated as we continued efforts to rationalize pricing structures and strategically improve customer and product mix across the respective portfolios. During the remainder of fiscal 2023, In our global segment, we don't expect any additional notable pricing actions to take effect. In food service, we expect the year-over-year growth rate and price mix will decelerate as we continue to lap more of the physical 2022 pricing and mix improvement actions. And in retail, we expect the year-over-year growth rate and price mix will also decelerate as we continue to lap last year's pricing actions, although this will be tempered by a recent price increase that took effect towards the end of the third quarter. With respect to the potato crop in North America, we believe we have secured enough open market potatoes to meet our production forecast until the early potato varieties are harvested in July. We purchased open potatoes from growers in the Columbia Basin and Idaho, but also secured supply from as far away as the East Coast. This adds up to our potato costs through the first half of fiscal 2024. With respect to the upcoming potato crop, As previously discussed, we've agreed to a nearly 20% increase in the contract prices for potatoes grown in the Columbia Basin and have locked in the targeted contracted acres to be planted in that region. We're in the process of securing most of the acres in our other growing regions in North America and expect to have this process completed shortly with contract prices largely in line with the 20% increase in the basin. In Europe, we have secured the acres in our key growing regions and expect to complete the contracting process shortly. Like North America, contract prices are up significantly to reflect input costs inflation for growers. So, in summary, we delivered another strong quarter of sales and earnings growth, which has enabled us to raise our financial targets for the year and continue to build good operating momentum across each of our core segments. We're excited about more than 1,500 new LambWest and EMEA colleagues that have joined the global team and believe that leveraging EMEA's capabilities will help us better serve customers around the world. And finally, category demand remains healthy, and we believe that industry supply should remain constrained for at least the next couple of years. Let me now turn the call over to Bernadette to review the details of our third quarter results and our updated financial physical 2023 outlook.