Post Holdings, Inc.

Good day, and welcome to the Post Holdings Quarter 3 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone, and you will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel O'Rourke, Investor Relations. Please go ahead.

Daniel O' Good morning, and thank you for joining us today for POST's third quarter fiscal 2023 earnings call. I'm joined this morning by Rob Vitale, our president and CEO, and Matt Maynor, our CFO and treasurer. Rob and Matt will begin with prepared remarks, and afterwards we'll answer your questions. The press release that supports these remarks is posted on both the investors and the SEC filing sections of our website and is also available on the SEC's website. As a reminder, this call is being recorded and an audio replay will be available on our website at postholdings.com. 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 the 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. And finally, this call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, please see our press release issued yesterday and posted on our website. With that, I will turn the call over to Rob.

Thank you, Daniel, and thank you all for joining us this morning. We had a really terrific quarter, and we expect a strong finish to fiscal 23. This morning, I'm going to be a bit more prescriptive than usual as it relates to how we think about our business trajectory one year out. We realize that between adding the pet business and our outsized food service performance, we are making for a challenging model. So let's start with our pet acquisitions. You can infer from PCB's reported margins that pet food margin realization is exceeding expectations. In fact, contribution has well exceeded our underwriting case. There are three reasons. First, changes in factory leadership and behaviors within our factories have enabled us to improve service levels and rebuild customer inventories. Second, our G&A assumptions are proving to be conservative. And last, we have not yet begun to invest in brand rehabilitation. While we are not going to give specific PED guidance, it is fair to say our expectations for its contribution have increased in the short term and meaningfully more so once we move past full integration and synergy realization. Recall our three-tiered approach to evaluating this acquisition. We said if we can increase margins, it will prove to be a good investment. Our margin opportunity is greater than expected and already starting to hit the P&L. The second tier was brand rehabilitation. In 2024, we will start to reinvest some of the margin upside and seek to revitalize these brands. That was investment success tier two. And finally, we are building this over the long term as a platform for inorganic growth. Related to inorganic growth, I am very proud of this team's integration efforts, going back all the way to Mom Brands, Treehouse, Private Label, Peter Pan, and now PET. They have developed a real proficiency at delivering sustainable synergies. The other contributor to outsized results this quarter was food service. The business continues its terrific performance. Ignoring the outsized performance, baseline is performing extremely well. Volumes grew 3% and mix continues to shift towards higher value-added products. In tandem, the volume growth and favorable mix produce a sustainably higher level of EBITDA than pre-COVID. We estimate this to be approximately $90 million per quarter prior to the impact of ready-to-drink protein shake manufacturing, which will come online in the first quarter of fiscal 24. On top of a strong baseline, we delivered outsized performance. Matt will provide some detail on its drivers and the trajectory to normalization. Last night, we raised our adjusted EBITDA guidance to $1.18 to $1.2 billion. Back to my comment about helping you model by being more prescriptive. While our FY24 planning is in the preliminary stages, we expect to show modest EBITDA growth next year with our current guidance as the baseline. Further, we expect to be well positioned for FY25 as we realize synergies from the pet acquisition, continue to improve supply chains, and make incremental investments in marketing. The step up in marketing is not limited to pet. We are stepping up marketing spend across categories including U.S. and U.K. cereal and the Bob Evans brand. Last, I want to be as clear as possible that in anticipating growth next year, we are including seven more months of PET results and normalizing food service. Those are the significant offsets. Hopefully, the outlook for 23 and these preliminary comments around 24 give you the ability to appropriately factor recent M&A and current year performance in your models. Turning to ready-to-eat cereal, there have been questions lately about volume resiliency in the face of two years of stacked pricing. In fact, category pounds were down 3.9%. We attribute this to lapping Omicron, a shift to away-from-home breakfast consumption, and most significantly, the March reduction in SNAP benefits. Omicron and SNAP are non-repeating, and as a result, we tend to think of the category as mean reverting to a pre-COVID 0% to 2% decline. We are also seeing a notable shift to value price products. Our shipment volumes this quarter declined 5.7%, but half of the volume decline was a result of Peter Pan shipments lapping the temporary market withdrawal of the Jif brand. On a consumption basis, we grew sequential dollar share in cereal to 19.9%, and Peter Pan has grown half a share point on a two-year basis. Refrigerator retail had a mixed quarter. Supply chains have markedly improved over last year and have enabled product continuity, and margin expansion. On the negative side, we continue to see pressure from private label impacting volumes, and we are responding with our first television advertising in two years. We fully expect to see this brand resume its growth as we drive incremental households and expand distribution, both supported by re-engaged marketing. We to VIX is in a tough macro environment, with UK consumers facing food, energy, and housing inflation well ahead of the US. The business is being well managed, and we are investing in the brand for the long term. In fact, against the backdrop of strong company-wide quarter, we are increasing marketing, and we'd have extended 2024 in stronger shape. In terms of capital allocation, we continue to weigh M&A, deleveraging, and share buybacks against each other. We have been aggressive purchasers lately. Since the announcement of our pet acquisition, we have open market repurchased approximately 60% of the amount of shares that we issued to JM Smucker, all while keeping our leverage ratio on a downward trajectory. In closing, we remain quite confident in our recent portfolio moves, and we continue to see momentum building in our business. With that, I will turn the call over to Matt.