Treehouse Foods, Inc.

Welcome to the Treehouse Foods first quarter 2021 conference call. This call is being recorded. At this time, I will turn the call over to Treehouse Foods for the reading of the safe harbor statement.

Good morning and thanks for joining us today. Before we get started, I'd like to point out that we've posted the accompanying slides for our call today on our website at treehousefoods.com. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts and can generally be identified by the use of words such as guidance, may, should, could, expects, seeks to, anticipates, plans, believes, estimates, approximately, nearly, intends, predicts, projects, potential, promises, or continue, or the negative of such terms and other comparable terminology. These statements are only predictions. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors, including COVID-19, that may cause the company or its industry's actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievement expressed or implied by these forward-looking statements. Treehouse is Form 10-K for the period ending December 31, 2020. Treehouse's Form 10-Q for the period ending March 31, 2021, and other filings with the SEC discuss some of the risk factors that could contribute to these differences. You are cautioned not to unduly rely on such forward-looking statements, which speak only as of the date made when evaluating the information presented during this conference call. The company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein, to reflect any change in expectations with regard thereto or any other change in events, conditions, or circumstances on which any statement is based. For purposes of our discussion, our results and outlook are provided on a continuing operations basis, which excludes the impact of the ready-to-eat cereal business. I'd now like to turn the call over to our CEO and President, Mr. Steve Oakland.

Thanks, PI, and good morning, everyone. Thank you for joining us. On today's call, I'll cover the highlights of our performance in the first quarter and also frame the macro environment for you. I'll then turn the call over to Bill to take you through our results for the quarter in more detail and share our current thinking for the balance of the year. I'll come back at the end to talk more about the progress we're making towards building a company with long-term sustainable growth. On slide three, we've shared the key points that we hope you'll take away from today's call. In short, we are pleased with our results and our progress. We were up against a tough cop given the unprecedented pantry loading we saw a year ago as we entered the shelter in place. Against all of that, we delivered a solid first quarter. And we drove improved EBITDA margins while keeping adjusted EPS roughly flat, despite the inflationary headwinds that we were seeing across the industry. Since I joined Treehouse roughly three years ago, We have meaningfully improved our operations and strengthened our performance. I'm really proud of what we've accomplished and how we continue to evolve and position ourselves for the future. Our investments over the last several years have stabilized our foundation, allowing us to support retailers through the pandemic and differentiate us from private label competition. We have optimized operations, improved service levels, built a strong centralized commercial organization and realigned our portfolio into two divisions, better aligning our categories with how our customers think about their roles in their stores. Our move last year to a two-division structure was timely, and we continue to benefit from having aligned ourselves with how our customers operate. The new structure has streamlined decision-making, enabled us to compete more effectively and to better serve our retail customers, which has in turn deepened our customer partnerships. All of those changes were important in enabling us to generate strong first quarter results. And with that strong foundation, we are well positioned to address the macro environment. As evidence of that, we are maintaining our guidance for the full year. Bill will talk about how our expectations around the cadence of our results by quarter has changed, but we remain confident in our outlook for the top and bottom line. As we take actions to navigate the current environment, we are continuing to invest to drive excellence in areas that our customers value most, cost, quality, and service. We are focused on building commercial capabilities to drive organic growth, as well as operational capabilities to improve manufacturing cost, efficiency, agility, and margins. We also see opportunities to add depth in advantage categories through M&A. With a primary focus on our growth engine categories to accelerate our top line, we are confident that we have a number of good options to profitably grow our business. Turning to slide four, in addition to the changes we made to enhance performance, our results reflect the hard work and effort of our teams. I want to express my continued thanks to our Treehouse employees for their ongoing dedication and focus over the last 13 months. Our first quarter revenue of $1.06 billion declined only 2.5% from last year's sales. We estimate that last year's first quarter benefited by $66 million as consumers navigated the early days of the pandemic. In the first quarter, we made solid progress in expanding adjusted EBITDA margins, which improved 20 basis points versus last year. Adjusted EPS of 36 cents was also strong and just shy of last year's first quarter. As we look to the rest of the year and beyond, let me take a few minutes to talk about our strategy and the environment in the near term. Turning to slide five, as I shared with you on our last call and at Cagney, with the benefit of our stronger foundation, we have taken our learnings from our strategy and the pandemic and are focusing on building depth in our growth engine categories. These categories represent about 40% of our portfolios. and are characterized by strong consumer trends, defined pockets of growth, and existing depth, where we have meaningful opportunities to go further. We also have a set of cash engine businesses, where our goal is to generate cash that we can reinvest and fuel our high-growth businesses. The cash engine categories comprise another 40% of our portfolio. The remaining 20% consists of categories where we are reviewing our opportunities to either revitalize the businesses or to deploy that capital elsewhere. Later, I'll talk more about the progress we're making in these areas. But before I get to that, let me address the macro environment as it is shaping how we see the balance of the year unfolding. Turning to slide six, we've provided a look at both at-home and away-from-home consumption. There are two important takeaways here. First, the year-over-year comparisons for retail consumption are uneven, as consumers started navigating the pandemic last spring. When you compare March of 2021 to two years ago, or 2019, total edibles grew 14%, and private label grew 13% in measured channels. If you then consider private label strength in unmeasured channels, We think this demonstrates that takeaway remains healthy. Second, you can see on the right that the away from home sector is recovering as restrictions across geographies begin to ease, which has positive implications for our food service business. While the pandemic is not yet over, the availability and acceptance of vaccines in the U.S. has been supportive of reopening efforts across much of the country. Beyond the pandemic, Slide 7 captures several of the headwinds across the food and beverage landscape. Specifically, upward pressure on commodities, and in particular soybean oil, has continued. On top of that, freight costs are escalating across the entire landscape due to increased demand and the limited availability of drivers. To a lesser degree, but worth noting, weather headwinds in the first quarter presented challenges. In our case, several plants were affected, with some, like our San Antonio, Texas plant, where we make red sauces and salsa, impacted more extensively than others. Despite the headwinds that were affecting the entire food and beverage industry, we remain confident in our outlook, and as I mentioned, we are reaffirming our full year guidance for 2021 today, as seen on slide 8. Several factors give me confidence that we can continue to deliver the year. First, we are a much healthier business today with stronger customer relationships and a pipeline of opportunities. We've also restored service levels back to the pre-pandemic levels in the 98% range. Second, while the top line will face tough comparisons in the near term, we are taking actions to address those issues within our control, specifically additional pricing to offset the incremental commodity inflation that I spoke to earlier. And third, our retail customers continue to express support for private label. In recent weeks and months, we've heard several customers publicly address their attentions to further expand their private label programs. We remain confident that the long-term opportunities for private label remain intact and that we're in a strong position to benefit, particularly as the environment normalizes. With that, let me turn it over to Bill to take you through the quarter and our outlook for the balance of the year.