Treehouse Foods, Inc.

welcome to the treehouse foods first quarter 2022 conference call all participants will be in a listen only mode after today's presentation there will be an opportunity to ask questions to ask a question simply press star followed by the number one on your telephone keypad if you would like to withdraw your question press the star one again please note this event is being recorded At this time, I would like to turn the call over to Treehouse Foods for the reading of the Safe Harbor Statement.

Good morning, and thanks for joining us today. This morning we issued our earnings release, which is available along with the slide deck in the Investor Relations section of our website at treehousefoods.com. Before we begin, we'd like to advise you that all forward-looking statements made on today's call are intended to fall within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and projections and involve risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. Information concerning those risks is contained in the company's filings with the SEC. In addition, we will be discussing operating and financial results on an adjusted basis. Reconciliation of these non-GAAP measures referenced during today's discussion to their most direct comparable GAAP measures can be found in today's press release on our website. I'd now like to turn the call over to our CEO and President, Mr. Steve Oakland.

Thank you, Fiay, and good morning, everyone. Before I get into the details of the quarter, let me make a couple of quick comments around some strategic and governance updates since our last call. As a reminder, we announced in mid-March that the Board unanimously decided that the focus of our ongoing strategic review will be on reshaping Treehouse by building leadership and depth around a focused group of categories in our higher growth snacking and beverage businesses. While we will not be speculating on potential outcomes or the timing, it remains ongoing and will continue to provide updates as we make progress. We also announced several changes to our board of directors. We've recently welcomed Scott Osvelt, partner with Channa Partners, and Joe Scalzo, CEO of Simply Good Foods. Both are already contributing a great deal of unique financial and industry knowledge and insight. Scott and Joe will make great additions to Treehouse. I want to thank Ashley Buchanan and John Gaynor, who stepped down this year. They have brought excellent perspective to our board and we greatly appreciate their time and contributions. As we continue our strategic journey to drive growth and create value, the work we have done over the last several years to optimize the business, focus on commercial and operational excellence, and align our structure with how our customers think has enabled us to execute throughout this dynamic environment. In the first quarter, our execution was strong. Our focus on commercial excellence enabled us to successfully implement pricing to recover inflation while furthering our customer collaboration. These efforts combined with our ongoing focus on the operations and the continued strong demand for our private label products position us well to deliver our full year guidance. But before I get further into the first quarter numbers, Let me start, as I usually do, by framing the macro environment. This continues to be an unprecedented operating environment. On slide four, you can see that inflation continues and commodity inputs are still escalating. While we see improvements in our business, labor markets remain tight across the country and are going to take some time to normalize. The supply chain continues to be disrupted. particularly across the ingredients and materials complex, often reflected in longer delivery lead times and allocated availability. Against the backdrop of these macro headwinds, private label demand has continued to strengthen with strong growth in both measured and unmeasured channels. This is very encouraging and is a sign that the private label value proposition is becoming increasingly important to consumers. This value proposition is being supported by broad consumer trends. Consumer savings rates, as you can see on the left of slide five, have now dipped below pre-pandemic levels as government stimulus has abated. On the right, you can see that inflation, as reflected in higher shelf prices, continues to rise. These higher prices are being felt in the grocery store, at the gas pump, and across the economy. further pressuring the consumer. On slide 6, on the left, you can see that the price gap between branded and private label for our treehouse categories has widened, a key data point supporting our value proposition to the consumer. Price gaps have historically ranged from 26% to 30%. Gaps widened above this range to the low 30s more recently. This will vary from month to month. But gaps at this level present the consumer with a more attractive private label value proposition. Today, given the absolute price point inflation, the dollar value savings of a basket of private label goods is simply more substantial. As a result, consumer shopping patterns are beginning to shift, and we're seeing it in the data. On the right, you can see that private label unit share posted gains on a year-over-year basis. These have shifted meaningfully in the recent months, and share in the most recent period is now trending slightly above pre-pandemic levels. This reaffirms the strong underlying fundamentals for private label. Slide 7 tracks buying patterns for households earning above and below $100,000 a year. It's clear that private label unit share is on an upward trajectory with both demographics. supporting strengthening demand for private label regardless of income level. Let's now turn to the first quarter results on slide eight. We executed well in the quarter. We again invested in service for our customers, and our teams continue to collaborate with them to successfully implement pricing to recover inflation. It's a muscle that we have now exercised for more than a year, and our commercial organization has demonstrated strong capability here. We have also slowly been able to improve service in certain categories, particularly in snacking and beverages. These efforts, coupled with improving private label demand, enabled us to deliver first quarter revenue of $1.14 billion, up 7.9% from last year. Given the supply chain constraints and the broad macro factors I highlighted earlier, this was a solid start to the year. This quarter, we again had more demand than these constraints allowed us to fulfill. We are working very hard to improve service levels, which are in the low 90s when you take into account that we have several categories on allocation. First quarter adjusted EBITDA totaled $58 million. Adjusted EBITDA margin of 5% declined 460 basis points, driven by inflation, labor, and supply chain disruption, and the timing lag as we implement our pricing. Adjusted diluted EPS for the first quarter was a loss of 15 cents compared to 36 cents last year. And as you saw in our release, we are reaffirming our annual guidance today. We have work to do to return the business to historic levels of profitability, but I'm encouraged with our progress and the start to the year. I believe that we are on track and we have the building blocks in place to continue to improve service and profitability throughout the year and to position ourselves well for our fourth quarter seasonal peak. Demand for private label is growing and even in this environment of unprecedented pricing, we have several successes with both new product wins and expanded distribution. In fact, in the first quarter, In eight of our ten largest categories, we are outperforming the broader private label market, which has returned to pre-pandemic unit market share levels. While inflation continues, our teams are on top of it, and we're working with our customers. Our March pricing is now in effect, and we have communicated additional pricing that will become effective at the beginning of the third quarter. As we look to drive savings across the network, Cost control and continuous improvement are also important areas of focus. Along these lines, on the labor front, we are making headway. We are seeing slow but steady success, implementing new labor strategies to attract and specifically to retain talent. We are also doing what we can to mitigate supply chain disruption, where challenges range from ingredient and packaging availability to driver and equipment shortages. Our solutions span securing backup ingredient suppliers to, in certain cases, collaborating with our customers to reformulate where necessary. These are capabilities that will support our customers over the long term. I'll close by stressing that through all of this, we continue to be intently focused on the customer. In the near term, that means additional investment, but we believe investing in the customer is the right long-term decision and will strengthen our relationships and our business. We will continue to work diligently to fill every order that we can and to supply our customers with food and beverages that provide a strong value proposition to their consumers. Let me now turn it over to Bill to walk you through the details of the quarter and the outlook. Bill?