Treehouse Foods, Inc.

Good morning and welcome to the Treehouse Foods, Inc. second quarter 2023 conference call. Please note that this call is being recorded. All lines have been placed on listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question at this time, please press star 1. Thank you. I will now turn the call over to Colleen. You may begin your conference.

Good morning and thanks for joining us today. Our press release and earnings deck, both issued this morning, are available in the investor relations section of our website at treehousefoods.com. Before we begin, we would 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. On October 3, 2022, we completed the divestiture of a significant portion of our meal preparation business. Consistent with the prior three quarters, we will discuss our results on an adjusted continuing operations basis. A reconciliation of non-GAAP measures to their most direct comparable GAAP measures can be found in today's press release and the appendix of today's earnings deck. With that, let me turn the call over to our Chairman, CEO, and President, Mr. Steve Oakland, for his opening remarks.

Thank you, Colleen, and good morning, everyone. I'm pleased to be here today to discuss our second quarter financial results, our outlook for the remainder of the year, and Outline how Treehouse continues to execute against our strategy and track towards our long-term targets. Treehouse today is a stronger, more focused company following the actions we took to transform our business. And this is demonstrated in our second quarter and first half performance. Further, the positive momentum that we've generated so far this year gives us confidence in our ability to deliver on the remainder of 2023 and continue to create value for our shareholders for years to come. Now, taking a look at slides 3 and 4 in our deck, we've outlined key takeaways for the second quarter and presented a summary of our results versus the guidance we provided. First, We delivered a year-over-year net sales increase of 4.1% that exceeded our guidance for the quarter. In addition, we improved adjusted EBITDA by nearly 44% at the high end of our guidance. Second, we are delivering improved execution and consistency. We are continuing to drive better service, returning to target levels of 98%. across most of our categories in the quarter. Our supply chain investments and the implementation of our TMOS initiatives are supporting our results. We are also successfully building depth and leadership in higher growth, higher margin categories. You can see our strategy in action with our recent acquisition of the North Lake Coffee Facility that closed in June. This transaction enables Treehouse to drive greater category depth in our coffee business and strengthen our strategic capabilities. Third, we have purposely positioned Treehouse at the intersection of two incredibly powerful long-term consumer trends. The growth of private label groceries in North America and the consumer shift towards snacking. In addition, we continue to benefit from current macroeconomic tailwinds. Finally, with our strong first half performance and our outlook for the remainder of the year, we are raising our 2023 revenue guidance and narrowing our full year adjusted EBITDA range to $360 million to $370 million. This updated outlook, which Pat will cover in more detail, takes into account the contributions from our coffee facility acquisition. The next two slides provide some context on the current macro environment and private brands. On slide five, you can see how retailers are increasing shelf prices to reflect inflation, particularly in categories in which Treehouse operates. The absolute dollar savings for a basket of private brands' groceries continues to be significant and is even higher today than when we spoke last quarter. To put it into perspective, when you look at our categories, a shopper would save approximately $22 when purchasing a basket of private brands as compared to the same products offered by national brands. Private brands have gained share for 79 consecutive weeks, and on slide 6, you can see that unit share reached an all-time high for the second quarter. It is consistently outperforming national brands. At the same time, average price gaps remain above historic levels, which is reflective of the importance retailers are continuing to place on private brands. As consumers experience pressure from increasing shelf prices, the significant price gaps are not only a strong indicator of the value proposition private brands offer, but also a tremendous opportunity for Treehouse. Indeed, retailers are increasing their investments in our snacking and beverage categories to drive trial and loyalty among consumers, and we expect that to continue going forward. Before I turn the call over to Pat, I want to share an update on our sustainability efforts. ESG is an important focus area for many of our customers. Our ability to deliver on our ESG initiatives not only represents a competitive advantage that positions Treehouse as a better strategic partner for our customers, but it also supports our prioritization of enhanced execution and operational performance. Last week, we published our new ESG goals, which have been adjusted to reflect the transformation of our business following our divestiture in October of last year. As you know, this divestiture meaningfully reduced our manufacturing and distribution footprint, which has enabled us to set new goals such as reducing our Scope 1 and 2 carbon footprints by 25% by 2030, and set a reduction target for Scope 3 by the end of 2025. We look forward to updating you on our progress against these goals in the future. Turning back to our second quarter results, I'm proud of all our team has accomplished. We are executing on our strategy and are well positioned to deliver on our targets through the back half of the year and capitalize on the significant growth prospects ahead.