Lamb Weston Holdings, Inc.

Good day and welcome to the Lamb-Weston first quarter fiscal year 2025 earnings call. Today's call is being recorded. At this time, I'd like to turn the call over to Dexter Congolet. Please go ahead.

Good morning and thank you for joining us for Lamb-Weston's first quarter 2025 earnings call. Yesterday, 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 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 operating environment and cost reduction actions that we announced yesterday, and an update on this year's potato crop. Bernadette will then provide details on our first quarter results, as well as our updated fiscal 2025 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 financial results for the first quarter that were generally in line with our expectations. Sales came in above our target, driven by better than expected volume and price mix. Our volume performance reflected our effort to recapture customer share and win new business, solid execution in many of our key international markets, and only a slight improvement in restaurant traffic trends. Overall, price mix increased as inflation-driven pricing actions in our key international markets more than offset investments in price in North America. Adjusted EBITDA for the quarter was slightly above our target due to better sales and SG&A performance. However, this was partially offset by higher than anticipated manufacturing costs. While we're encouraged by our first quarter performance relative to our expectations, We continue to expect frozen potato demand and global restaurant traffic to remain challenging through fiscal 2025. According to restaurant industry data providers, during our fiscal first quarter, we saw early evidence of U.S. restaurant traffic trends improving during the summer months as QSRs stepped up promotional activity and as consumers continued to adjust to the cumulative effect of menu price inflation. However, traffic remained negative. Overall, U.S. restaurant traffic, as well as QSR traffic, in the quarter was down 2% versus the prior year. That's a sequential improvement from the down 3% that we observed during our fiscal 2024 fourth quarter. Traffic at QSR chains specializing in hamburger, a highly important channel for fry consumption, in our fiscal first quarter was down about 3%. That's an improvement from down more than 4% during our physical 2024 fourth quarter. Importantly, traffic trends in QSR hamburger improved sequentially each month of our first quarter as promotional activity increased. We're obviously pleased with the growth in restaurant traffic, but it's important to note that many of these promotional meal deals have consumers trading down from a medium fry to a small fry. So while we benefit from improving traffic trends, consumers trading down in serving size acts as a partial headwinds for our volumes. Outside the U.S., overall restaurant traffic trends in our key international markets in our first quarter were softer than what we observed in our physical 2024 fourth quarter. Restaurant traffic in the U.K., our largest market in Europe, declined about 3%, which is down sequentially from a decline of about 2%. In Germany, traffic was also down about 3% after only being down slightly in the fourth quarter. Traffic in France and in Italy continued to rise, but at a slower rate than the fourth quarter, while traffic in Spain was essentially flat. In Asia, overall restaurant traffic grew in both China and Japan. Unlike the changes in global traffic trends, the fry attachment rates in the U.S. and our key international markets were largely steady. This resilience of consumers' demand for fries, as well as their importance to customers' menus, are key reasons why we remain confident that the global fry category will return to its historical long-term growth rate over time as global traffic rates improve. Given our expectations about traffic and demand trends, we also believe that the supply-demand imbalance that's been driven by the decline in traffic will persist through much, if not all, fiscal 2025. With respect to the bigger customer contracts, the season for competing for these contracts is essentially behind us, and the overall outcome was largely as we expected. We had good success in protecting customer share and retaining business with existing large chain restaurant customers. We also had some success in winning new chain restaurant customer business, most notably in our international segment. and we'll begin to realize more meaningful volume associated with these new customers beginning in our physical third quarter. Pricing associated with contract renewals and customer wins was competitive, but in total was broadly in line with what we expected. With respect to the smaller and regional customers in the U.S., we continue to leverage our direct sales force to acquire new customers and recapture customers that we lost either directly or indirectly from the transition to our new ERP system in the second half of fiscal 2024. As with the larger chain restaurant contracts, pricing levels needed to regain customer share or when new business have been competitive, but also broadly in line with what we expected. With respect to our cost structure, as we noted during our previous earnings call, we have been evaluating opportunities to drive down supply chain costs, reduce operating expenses, and improve cash flow. Yesterday, we announced a restructuring plan, which includes a number of key actions. First, we permanently closed our Connell, Washington facility, which is one of our older, higher cost facilities. Closing this nearly 300 million pound capacity facility reduces our total capacity in North America by more than 5%. We stopped production at this site yesterday. Second, we're temporarily curtailing production lines and chisels across our manufacturing network in North America, to focus more production on our more efficient, lower-cost lines and steadily work down our elevated finished goods inventory levels. And third, we're reshaping future investments to modernize production capabilities. Together, these actions will help us leverage recently capacity investments, better manage utilization rates across our manufacturing network, and reduce capital expenditures. In addition, we're reducing our global headcount by approximately 4% and eliminating certain job positions that are currently unfilled. This affects team members and positions across our manufacturing, supply chain, and commercial organizations in both our North America and international segments, as well as in our corporate functions. Bernadette will provide details about the cost savings that we expect to generate, as well as the charges we'll incur in connection with our restructuring plan. These are very tough decisions, but necessary proactive steps in the current operating environment to improve our operating efficiency, competitiveness, and financial results. Now to the potato crop. We're harvesting and processing the crops in our growing regions in both North America and Europe. At this time, we believe the crops in the Columbia Basin, Idaho, Alberta, and the Midwest are slightly above historical averages. As a reminder, North America We've agreed to a 3% decrease in the aggregate in contract prices for the 2024 potato crop, and we will begin to realize the benefit of these lower potato prices beginning in our fiscal third quarter. With respect to the crop in Europe, a few months ago, we in the market expected that the crop for the later potato varieties in the industry's main growing regions in the Netherlands, Belgium, and northern France and northern Germany would be well below average since planting was completed late due to poor weather conditions. However, growing conditions were good in August and September, which improved the outlook for the crop. We currently believe the European potato crop in the aggregate will be in line with historical averages. Overall, we expect our potato costs in Europe will increase, largely reflecting the mid to high single-digit price increase associated with our fixed price contracts. We'll provide our final assessment of the potato crops in North America and Europe when we report our second quarter results in early January. So in summary, we delivered first quarter results that were generally in line with our expectations, driven by improved volume performance, solid price mix, and strict management of operating costs. While U.S. restaurant traffic trends have improved modestly in recent months, they remain negative. And we continue to take a cautious view of frozen potato demand and the consumer. We've announced a restructuring plan to improve our operating efficiency, protect our bottom line, and improve cash flow during this challenging operating environment. And finally, at this time, we believe the potato crop in North America will be slightly above average and that the European crop will likely be in line with historical averages. Let me now turn the call over to Bernadette for more detailed discussion of our first quarter results, our restructuring plan, and our updated fiscal 2025 outlook.