Treehouse Foods, Inc.

Welcome to the Treehouse Foods second quarter 2024 conference call. All participants will be in 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 star one again. Please note that this event is being recorded. At this time, I would like to turn the call over to Matt Seiler of Treehouse Foods for the reading of the Safe Harbor Statement.

Good morning, and thank you for joining us today. Earlier this morning, we issued our second quarter earnings release and posted our earnings deck, both of which are available within the investor relations section of our website at treehousefoods.com. Before we begin, I 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 these risks is contained in the company's filings with the SEC. On September 29, 2023, we completed the divestiture of our snack bars business. Consistent with prior orders, 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 the release and the appendix tables in today's earnings deck. With that, let me now turn the call over to our Chairman, CEO, and President, Mr. Steve Oakland. Thank you, Matt, and good morning everyone.

I'm happy to be here with you today to discuss our second quarter financial results and our update on the outlook for the remainder of the year. First, I'd like to reflect on the first half of 2024, where we met our financial objectives. We achieved the upper end of our net sales guidance and came within a few million dollars of the upper end of our adjusted EBITDA range. We made significant progress converting a set of net sales pipeline opportunities, which should contribute to positive volume growth in the second half. Additionally, we executed well against our supply chain initiatives, driving improved service levels across our network, as well as securing anticipated savings, which will provide benefits this year and beyond. I'm pleased with our strengthening momentum, including at our broth facility, which is operating in line with our plan and ahead of the second half seasonal peak. This progress reinforces my confidence that we have positioned the business well to deliver on our annual net sales targets and to achieve our updated profitability guidance. And importantly, it's coming at a time when the private brand consumer landscape is also improving. With that, let me dive into our second quarter results, where our organic volume trend improved sequentially. As you can see on slide four, we delivered net sales of $789 million. While down 1.9% year over year, it was above the midpoint of our guidance range. Our adjusted EBITDA of $71 million exceeded our guidance range of $55 to $65 million for the period. We are reiterating our 2024 net sales guidance, supported by volume growth in the third and fourth quarters. Additionally, we are narrowing our adjusted EBITDA range to $360 million to $380 million. Pat will provide more detail on our second quarter results and this guidance in a few minutes. Turning now to an update on the industry, as you have heard me say before, Treehouse remains attractively positioned at an intersection of two incredibly powerful long-term consumer trends, the growth of private brand groceries in North America and the consumer's shift towards snacking. As you can see on slide five, Private brands have consistently gained share over the last two decades, and we believe private brands have significant runway for growth. Many grocery retailers also see significant runway for growth in private brands and are making their own strategic investments, as you can see on slide six. Recently, Walmart launched Better Goods, the largest food and beverage private brand in roughly 20 years. There are other examples of significant investments in private brands, with both Kirkland and Simple Truth. And finally, Aldi continues its store-based expansion across the U.S. with an assortment that is focused almost exclusively on private brands. Taking a closer look at the second quarter, in the categories in which we operate, private brand unit sales in measured retail channels grew low single digits compared to national brands, which declined slightly. Additionally, you can see on slide seven that price gaps between national brands and private brands remain elevated relative to historic levels in our categories. Although we expect these gaps may narrow as national brands promote during the holiday season, We believe the gaps will be well within the historic range that supports continued private brand growth. Taking a look at slide 8, we provide an illustration that breaks down key elements of our net sales growth strategy. As we've discussed previously, core growth refers to the external factors driving our sales. It considers category growth, changes in private brand penetration, and our retail partners' strategies and level of their investment. In addition to the core growth, we believe we can deliver additional growth through what we call at Treehouse our depth. Depth can be broken down into several elements. One, having advantage capabilities within our categories where we operate that makes us stand out as the private brand supplier of choice. Two, competing in categories where there is high demand, and we are making investments to capitalize on that demand. Three, leveraging our unique category expertise and consumer insights to help our retail partners drive growth in the overall category. And finally, understanding our customers and the categories will allow us to drive enhanced margins over time. As a result of this strategy, we have created a net sales pipeline that we are excited about. We are executing well against our plan for 2024. We've secured a variety of opportunities throughout the first half of the year, including wins in cookies, refrigerated dough, pretzels, and pickles, bolstering my confidence and our ability to deliver volume growth, not only in the third and fourth quarters, but beyond. Next, I'd like to briefly discuss our supply chain initiatives, which are outlined on slide 9, and are core to our company's strategy of driving profitable growth. We continue to invest directly in our supply chain to drive consistent execution throughout our network, enhancing our competitive position and strengthening our partnership with customers. Our teams are focused on three priorities, driving manufacturing efficiencies through team-offs, our treehouse management operating system, procurement savings opportunities, and improving the efficiency of our distribution network. The benefits of TMOS can be seen in our Overall Equipment Effectiveness, or OEE. We have seen good momentum throughout the first half of the year, driving an increase in our service level metrics as planned. We also feel confident in the benefits we can achieve from our recent work across procurement. This particular supply chain initiative is integral to the roughly $50 million of gross cost savings we outlined as a driver of the improvement in our second half profitability. More specifically, in many cases, the procurement contracts we have negotiated provide savings in the current year, as well as the opportunity for further savings throughout the life of these agreements. Finally, work to improve the efficiency of our distribution network continues, with logistics utilization and efficiency initiatives providing savings today. We continue to develop long-term strategies as it relates to our distribution network consolidation, which will bear more fruit over time. Moving on to an update on one of our broth facilities, as you can see on slide 10, our efforts continue to progress as anticipated. I'm happy to report that we are running the key broth production lines and shipping product from this facility today. We have upgraded our equipment, refined and improved our processes, and are progressing against our internal timeline. Looking ahead, we will continue to work with our customers to fulfill current needs and prepare for the upcoming broth season. We believe the restoration of this facility will provide the planned contributions to net sales and profitability in the back half. Before I turn the call over to Pat, I'd like to provide a brief update on our sustainability efforts. Last week, we released our annual Environmental, Social, and Governance Report, which captured the progress we've made in 2023 relative to our sustainability goals, including reducing greenhouse gas emissions and increasing the use of recycled content. Sustainability remains an important focus area for many of our customers, and we are continuing to make progress on our initiatives. We believe this work will represent a long-term competitive advantage for Treehouse and better align our business strategy with the priorities of our key stakeholders. We are pleased with the strides we are making and encourage you all to read our 2024 report. With that, I'll now turn the call over to Pat for further detail on our second quarter results and our updated 2024 outlook.