Post Holdings, Inc.

Good day and welcome to Post Holdings' fourth quarter 2022 earnings conference call and webcast. Hosting the call today from Post are Rob Vitale, President and Chief Executive Officer, and Jeff Saddux, 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 800-839-3742. No passcode is required. 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 Holdings, for introductions. You may begin.

Good morning, and thank you for joining us today for Post's fourth quarter fiscal 2022 earnings call. With me today are Rob Vitale, our President and CEO, and Jeff Daddix, 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 investors 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. And finally, this call will discuss certain non-GAAP measures. For 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.

Thanks, Jennifer, and thank you all for joining us. Before commenting on our results, I want to congratulate both Jeff and Matt in connection with the announcement earlier this week. Jeff is ideal for this role in that he has a deep knowledge of each business as well as the trust and the respect of each business leader. And Matt has been a key architect of many of Post's sophisticated financial transactions. I look forward to working with each of them in their new roles. Post ended the year in strong fashion. Anchored by exceptional performance in food service, we delivered a quarter with nearly $280 million in adjusted EBITDA and a year with over $960 million in adjusted EBITDA. This represents a respective growth rate for the quarter and year of 32% and 8%. Moreover, we look forward to delivering EBITDA growth rates above our historical norm through at least 2024. I would characterize 2022 as having been dominated by inflation management and ongoing supply chain challenges. We expect 2023 to be focused on margin restoration. I will comment more on that shortly. As I mentioned, food service had an exceptional quarter. I'm quite proud of the performance of this team, having now entirely recovered from the depth of COVID and added to the segment's profitability. In addition to facing the global pandemic, We have navigated an avian influenza challenge and done so exceptionally well. For those of you who have been around a while, you may recall that this experience tends to make us a more effective competitor in a more profitable company. That is not to say it comes without risk. There is always a risk that we may be impacted. Our food service segment has been quite resilient now through different environments. We believe we are well positioned for a consumer pullback in that we skew to the less sensitive breakfast day part. To date, we have seen no sign of a pullback from away-from-home consumption. Both consumer brands, too, had a solid quarter. Our branded consumption dollars grew to 19.4 percent. At the same time, we experienced a bit of a category trade-down to value and private label, both of which are profit accretive. Key trends from the year continued in the quarter. We continue to be disciplined in price realization relative to inflation, and we continue to work our way back to pre-pandemic levels of supply chain execution. Refrigerated retail exited 2022 in a markedly improved manner over last year. Recall that last year, supply chain woes inhibited our ability to build inventory for the all-critical holiday season. This year, inventories are at a solid level and customer fill rates dramatically improved. High egg prices inhibited volume and profit in this segment, but on balance, it has made great progress. On a local currency basis, Weetabix continues its rock-solid performance. We continue to face headwinds in currency translation, and we expect ongoing pressure on our consumers and our cost structure. Last night, we provided guidance for 2023 of 990 million to 1 billion 40 million of adjusted EBITDA. Even at this level of growth, we still have opportunity for earnings acceleration, driven primarily by margin recovery. Over the last three years, enterprise-wide EBITDA margins have decreased approximately 440 basis points. Roughly half of this decrease is attributable to growth in food service and attractive acquisitions that yield lower EBITDA margins, so mix-related. The remaining half is our addressable opportunity. Attacking this opportunity will be a multi-year effort focused on several areas, including maintaining pricing discipline vis-à-vis input cost inflation, stabilization of supply chain costs and performance, better leverage on fixed assets within refrigerated retail, and improvements in manufacturing asset reliability aimed at minimizing plant downtime. We do expect to face some temporary margin pressure in the U.K., as energy prices remain at historically high levels. Nonetheless, this bucket of margin opportunity is what affords us the confidence to reference above average EBITDA growth over a multi-year trajectory. With respect to cadence, we anticipate a fairly even split of adjusted EBITDA between the first and second half, with food service favoring the first half and retail channel businesses favoring the second. As you know, We expect to monetize our remaining ownership in Bellring in the next several months. Net of our Bellring position, our leverage ratio is 5.4 times, and positions us for M&A. The market for M&A is interesting. The high-yield market is choppy and struggling to absorb some high-profile credits. Our August financing left us with a cash-rich balance sheet. Post is an advantage buyer in a challenging financing environment, and we welcome all opportunities. In addition to M&A, we continue to see additional opportunities in our own securities. As appropriate, we will invest in our bonds, our equity, our internal operations, and in non-organic growth. We expect the capital expenditures in 2023 to yield attractive incremental EBITDA, competitive with other forms of capital allocation. You all know in 2021, Post sponsored a novel corporate-owned SPAC. We have until May to identify an attractive partner for a business combination. While we continue to believe this is an elegant tool for corporate finance, our timing was terrible. We continue to seek opportunities, but we will certainly not chase an opportunity simply to transact. We're perfectly comfortable acknowledging that some experiments fail. In closing, I want to thank everybody for a successful 2022 against a backdrop that bordered on chaotic. We've had over two years of heightened uncertainty, and my confidence level is higher than it has been since COVID began. With that, I will turn the call over to Jeff.