Post Holdings, Inc.

Welcome to Post Holdings' first quarter 2021 earnings conference call and webcast. Hosting the call today from Post are Rob Vitale, President and Chief Executive Officer, and Jeff Zadoks, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12 p.m. Eastern Time. The dial-in number is 800-585-8367. and the passcode is 1539554. At this time, all participants have been placed in a listen-only mode. It is now my pleasure to turn the floor over to Jennifer Meyer, Investor Relations of Post Holding, for introductions. You may begin.

Good morning, and thank you for joining us today for Post's first quarter fiscal 2021 earnings call. With me today are Rob Vitale, our President and CEO, and Jeff Zadoks, our CFO. Rob and Jeff will begin with prepared remarks and afterwards we'll have a brief question and answer session. The press release that supports these remarks is posted on our website in both the investor relations and the SEC filing sections at postholdings.com. In addition, the release is available on the SEC's website. Before we continue, I would like to remind you that this call will contain forward-looking statements which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward-looking statements are current as of the date of this call and management undertakes no obligation to update these statements. As a reminder, this call is being recorded and an audio replay will be available on our website. This call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Rob.

Good morning. Thanks, Jennifer, and thank you all for joining us. The year started with a quarter very much in line with our expectation, and the first half is shaping up in the same manner. Our expectation remains that EBITDA will dip in Q2 and will accelerate in the second half versus the first half. After I briefly review the business, I will share some additional color regarding our expectations. Our U.S. cereal business had a solid quarter. However, it was hampered by supply constraints. During November and December, our COVID absenteeism at our Battle Creek facility required us to temporarily suspend production for one building. In fact, this resulted in the highly publicized grape nut shortage. Production was also suppressed on honeycomb and peanut butter products. We are back to full production, but it will take through early spring to restore inventory levels. We estimate the first quarter impact was lost revenue and adjusted EBITDA of approximately $10 million and $6 million, respectively. Longer term, COVID has revealed some areas in which we can improve supply chain effectiveness and efficiency. The demand surges and the supply pressures are testing our demand planning and production planning. These learnings are constructive, and we expect to emerge from COVID with improved processes. While most pronounced at post-consumer brands, supply chains across the company are learning and improving from the experience. For some time, we have sought more fundamental serial category innovation. While quite early, I am cautiously optimistic about two of our efforts. Premier Protein Cereal has launched with great success at limited distribution. This launch combines our heritage strength in cereal with our competence in protein and we believe delivers great tasting cereal with high protein. Second, we have launched snacking products which leverage our iconic brands into more rapidly growing day parts. Weetabix continues to perform exceptionally well. COVID has helped the category and Weetabix has gained share in the category. Similar to the US, we have an intriguing innovation pipeline that we will soon introduce. Our core refrigerator platform, the Bob Evans side dish business, continues its rapid growth by increasing consumption dollars 21% over last year. Volume grew a healthy 11%. Meanwhile, our retail branded egg business also turned in a solid quarter with volumes increasing 13%. The weak spot remains our cheese business. In addition to commodity price volatility, production delays from a co-packer resulted in lost sales volume. Bellring will be holding a separate call. The business continues to rapidly grow its core ready-to-drink franchise. Transportation costs accelerated faster than expected and pressured gross margins. We expect to mitigate the margin pressure in Q3. Further, we are excited to share that Dymatize 2 is growing nicely. You will have seen Bellring reaffirmed its guidance for the full year. In 8th Avenue, we continue to be encouraged by recent trends. Like several of our categories, peanut butter is supply constrained. We also expect 8th Avenue to be more active in looking to add to its portfolio. That leaves food service, which has borne the brunt of the COVID burden. We had an encouraging quarter in that there is a near perfect correlation between our increased demand and the loosening of COVID restrictions. As expected, late in the quarter, restrictions tightened in many key markets across the country. That pressured demand early in Q2 with an expectation that it reverses entering Q3. Because of the reduced demand, non-contracted pricing is generally weak. Therefore, the EBITDA decline remains more than linear to the volume decline. Category capacity has not expanded. In fact, it has modestly declined. Therefore, we expect this will reverse with demand recovery. Finally, the quarter saw the beginning of what has turned into a rather substantial run-up in commodity costs. Our pass-through pricing model captures this increase, but there is a lag between the cost change and the pricing change. Jeff will speak more about this. In terms of recovery, we remain highly confident across the channels with the possible exception of business travel. We expect business travel to lag recovery in other segments. So, to summarize, We have a growing confidence in demand recovery and its implication on profitability, but we remain cautious in trying to estimate the timing of the full recovery. With respect to capital allocation, we have been quite active. This quarter and continuing into the second quarter, we were aggressive in repurchasing shares. We also announced two tuck-in acquisitions that we expect to be highly accretive. Both have since closed. As I mentioned last quarter, there seems to be more opportunities available than since the pandemic started, and we have an interesting pipeline. I want to close with some comments on our outlook. We gave first half outlook in November and continue to expect to deliver on it. The implied sequential decline from the first to second quarter was planned. We continue to expect the second half to materially outperform the first half. The two key drivers of this cadence are, first, Bellring's normal quarterly promoted pricing fluctuations. and the timing of its marketing spend. The results in Q2 being a slow point with the second half materially more profitable. And second, our planning assumed food service would dip in the second quarter as a result of tighter COVID restrictions during the winter months. We expect even the limited rollout of the vaccine, along with more favorable weather, will drive material improvement to each of quarters three and four. The more effective and rapid the vaccine rollout becomes, the more material we expect the improvement to be. Again, this is entirely consistent with our planning assumptions. The increase in grain prices exceeded our short-term expectations, but we plan with sufficient conservatism to allow for this type of short-term volatility. In closing, we expect to meet our targets for the first half, and with the additional clarity we hope to have when we announce second quarter, we intend to then provide specific second-half guidance. With that, I will turn the call over to Jeff.