Lamb Weston Holdings, Inc.

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

Good morning and thank you for joining us for Lamb-Weston's Second Quarter 2024 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 potato crop and the current operating environment. Bernadette will then provide details on our second quarter results, as well as our updated fiscal 2024 outlook. With that, let me now turn the call over to Tom.

Thank you, Dexter. Happy New Year, and thank you for joining our call today. The entire Landwesson team delivered another solid quarter, and I want to thank them for these results and continuing to execute the strategies that we outlined in our Investor Day presentation in October. We strongly believe that our investments to expand capacity organically and through acquisitions, improve manufacturing and system capabilities, penetrate new channels and markets around the world, strengthen product, customer, and channel mix, and develop our people, have generated good near-term operating momentum, and have us well positioned to capture our share of growth and profitability over the long term. In the second quarter, we delivered record sales, reflecting the consolidation of our EMEA business and solid price mix growth. Sales volumes, excluding acquisitions, declined. primarily driven by our decision to exit lower price and lower margin business. But as we expect, the year-over-year trend improves sequentially. Adjusted EBITDA growth was also solid behind incremental earnings from consolidating EMEA, as well as higher sales and gross profit in the base business. However, the increase was tempered by a $71 million charge to write off excess raw potatoes, $65 million of which was recorded in cost of sales, and $6 million in equity method investment earnings. The reason and magnitude of this chart is very unusual, so let me give you a little more color on it. In January 2023, we developed an initial sales forecast for the following fiscal year that reflected a gradually strengthening consumer and recovering global demand. That forecast was developed based on the information available at that time. We use this initial sales forecast to determine the number of contracted acres to grow the raw potatoes needed to deliver that sales forecast. For our agreements with our growers, we're obligated to purchase all the potatoes grown on these contracted acres. However, our initial sales forecast has turned out to be more aggressive than our current estimate, reflecting recent restaurant traffic and demand trends as consumers continue to absorb the cumulative effect of inflation. As a result, we have purchased more potatoes than we need to meet our current sales targets and have taken a charge to write off the estimated excess. Although overall demand growth is slower than we anticipated a year ago, it remains resilient. Pry attachment rates in the U.S. are stable and in line with what we projected in January 2023. Outside the U.S., restaurant traffic in most of our key international markets continues to grow and including double-digit growth in China. We remain confident that our volume trends will continue to improve in the back half of fiscal 2024 as we begin to lap and backfill exited volumes with higher margin business. This includes our target for year-over-year volume growth in the fourth quarter. In addition, we expect our volumes will continue to recover in fiscal 2025 and have planned to contract for acres accordingly. While we are disappointed with the write-offs, the underlying fundamentals of the business, our operations, and the category remain solid. Our volume trends are improving in line with our expectations. Global demand is resilient as consumers continue to face stiff food away from home inflation. Our new greenfield processing facility in China is now operational. Price mix trends in the U.S. and most of our key international markets remain solid, while input cost inflation is decelerating. We deliver strong adjusted EBITDA growth and gross margin expansion, excluding the potato write-off. And as Bernadette will explain in greater detail, we're reaffirming our physical 2024 adjusted EBITDA guidance range despite absorbing the write-off while raising our EPS estimates. Overall, we continue to be pleased with our operating momentum and confident in our ability to deliver our full-year financial targets. Let me now turn the call over to Bernadette for a more detailed discussion on our second quarter results and updated outlook.