THS - Earnings call transcript Q2 2022

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Operator

Welcome To the TreeHouse Foods' Second Quarter Conference Call. All participants will be in listen-only mode. After todays presentation there will be an opportunity to ask questions. [Operator Instructions] 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 statements.

P.I. Aquino

for today. thanks and morning, joining us Good This available, in along issued our treehousefoods.com. the which is earnings release, at with website Relations of morning, section we Investor our the slide deck,

results would we on of safe XXXX. Reform made are harbor the that to expectations like Before current projections of call we involve to may you Private forward-looking and forward-looking today's within that cause fall uncertainties Information to is actual with Act materially are the those based on These advise SEC. intended provisions statements statements. statements differ all risks and the our company's Litigation from risks and begin, the concerning contained filings Securities in

on referenced basis. non-GAAP President, release I'd GAAP today's addition, Oakland. to of those on today's reconciliation during measures and an in website. Steve adjusted to our most be we can financial In will direct measures A press CEO our Mr. to discussing turn over call their operating found comparable the call like be results now and

Steve Oakland

by good joined Chief everyone. I'm Accounting our O'Donnell, Thanks, P.I., CFO and Officer. Interim morning, Pat and

wish We As Pat Bill well. departure. that and stepped appreciate him we Bill's role we Kelly's contributions, upon into previously, announced

CFO. analysis planning We XXXX. has of quickly financial TreeHouse, interim joining and responsibilities led strong, transitioned and and are Pat both since controllership and into deep to He a talent TreeHouse fortunate the of has have the bench here at functions the in role

our talent to our excellence, our operational commercial with pleased optimize and strategy results our continues support to and are second drive dividends. as We quarter pay portfolio and people

block continue to improve seasonal peak. results profitability the service to place have and for are in we quarter quarter that second year fourth yet well and throughout another ourselves our position building Our to

demand label performance businesses. ability that of our broadly, we of operate capture gains weeks categories private & recover top XX posting our Beverage Snacking Our to reflects More and accelerate, in. specifically continues to our straight volume, the consumer impact share to inflation the pricing incremental in in line

of demand in the have inflation and with third increased strengthened, like additional fundamentals the quarter, response, oats. pricing reflected particularly consumers. eggs, will implementing that be underlying value As is In the private wheat communicated and the have resonating Input second cost inputs continued late in proposition label in quarter. demonstrates are that we

and our on agility While chain great focused environment challenges, to operating remain as the supply continues customers. present servicing our teams are we labor demonstrating

being high We in a continue to invest with priority. our and engagement retention workforce

steps from to all environments make schedules to manufacturing our appealing, so more of full the We guidance taking top TreeHouse Taking for and our choice the and in more factors as are outlook be everything raising these work designing reiterating work can employer also effective for market. that viewed facility of are line each our EBITDA. we adjusted account, attractive upgrades into local year

value you proposition side label gaps, noted right, compelling on in As XXs. be Inflation left-hand X, moments momentum. Price even driving private gaining consumers. to is more on low shelf label I few noted the the making Slide prices which higher, of ago, a continue the see is to private the

basket into label, behavior The greater. on you at very will has This translating high value a is that these translates goods toward which shift into never consumer private high-priced the private purchasing a combination private and proposition levels, gas savings of vary, prices X. Slide been see dollar gaps price in label attractive. shelf can a label While of is for

label year, share to in been and reverse private You early can X see years trends that March. accelerating began that the past have the gains this since pandemic-related actually

the seasonal we've to our peak. encouraged very profitability to appendix. included more to you progress the that and continue slides in on points, you'll for service much throughout of few note Overall, of macro we with begin I that as looking believe we enter improve I'm track and are data those these our additional For a year

effectively pricing, day. across executing effort are our to managing collaborating with employees drive cost for our I efforts happen our to network. and customers each things the inflation making to We TreeHouse thank and with savings commitment and want their on every these

a focused let & Before reshape I diligently turn group the it businesses. build to work TreeHouse say can divestment continue of very our Beverage portfolio Meal that categories in that a we Prep our of leadership to Snacking depth higher-growth business around over of me a to significant Pat, portion through so we and

made with the encouraged providing turn but are topic will have we With further We comments to it that, far until me and thus Pat that through details on the on be information have process progress let you unless this to definitive the share. to we quarter. take over not of

Pat O’Donnell

involved intimately TreeHouse. interim to and Thanks, our strategic X be such are billion. second revenue teams a expressing of towards transformation cover offset rose and XX our X. happy today. by $X.X evolution X I'd results our With quarter. XX.X% in over our at you to the be several dedication with by and Steve's our to in of time posted line growth, up role work led quarter having hard Pricing it's everyone's volume growth, in this Steve. FX. evident echoing projects drove Slides the while start on I'm customers. X.X%, points top efforts last of XX.X% servicing basis pivotal particularly to this also taking years, Having our honor our and like been an recognizing here comments for around performance We I'll that, gratitude Those strong

excellent our around with do commodities inflation. continue providing As implementing to customers, Steve transparency job recover our mentioned, working teams an to and pricing

volume several Beverages, Our results in a encouraging, ability in review Snacking I'll to and the capture & has minute. growing incremental categories particular, across been within division

Second or $XX million quarter adjusted EBITDA margin. was X.X%

of very with expectations. in diluted Adjusted were prior Although pleased a was we $X.XX of $X.XX EPS basis points to compared with XX improvement, grew last input oils, loss of and Prep was sequential cost a offset and driven XX XXX basis year, point on the partially margin our XX.X%, by volume/mix line sales points declined income of basis, X.X% durum basis in pricing year. of was by divisional Slide XX.X%, the in which decline oats. primarily inflation, FX. This recovery Meal On versus X, reflecting a

to label commodities pricing demand, Snacking $X growth and delivered mix, measured unmeasured million Volume our XX.X% the of all across was Beverages to demand that the through build to we're encouraged volume in pricing particularly continue Prep the in incremental we you captures absorption, Snacking with & you to coupled see can across quarter. during On progress through to service, year, continued & netted capture enabled net we which X% as Although grew Total Beverage. channels Slide versus & we on the improving including continue in that we're in and XX.X% year. and Meal balance the Slide category both the captured be across sequentially escalation recover quarter our X profit commodities trends, million the takes of categories, which incremental year-over-year the inflation. some constrained contributed in private several pricing making expect with last and healthy Beverages was quarter, and channels. quarter, of by mix. with X, down gains we Snacking Strong drivers. $XX

think of we further reflected you our to As have P&L. will back pricing the about be half year, in actions the

supply So sequentially, the catches chain declined expectations, its to versus improve up. Operations million pricing with and assuming as inflation year. last that aligns our continue impact will $XX

mitigate and to our we continue Here, supply material labor it to to especially burdened be as disruption, chain efforts by availability. relates

Steve address improve labor and noted operational training, efficiency. us to in heavily enable earlier, and investing engagement As also we to challenges are the retention

million other, reflects $X which currency foreign year-over-year, Finally, impacts. contributed negative primarily

with remains covenant balance We ratio the and undrawn close sheet, finished second of the to billion. On leverage X.X liquidity amended our times. X.X the higher quarter below revolver we have of covenant largely debt of times, $X

guidance on Slide XX. Turning to

revenue back to the will we half raising primarily build peak high-teens mid- our as are of that to growth, year guidance year into our We continue the by season. driven pricing full approach to

year digits. Our also for will that in growth low guidance the full single be assumes volume the

$XXX label challenges to to diligently manage are able a million. we fill by result, and work and between to incremental as the million we target. We of The private in remains challenging actively labor our continue take service $XXX demand before levels ongoing guidance some environment materials macro to and, dynamic It restore maintaining and adjusted encouraged are we constraints EBITDA will time orders to will we robust as and availability. are

will the and we pricing on put to quarter, points reported seasonal lag late further we margin in improve as anticipate We so The we we some That But disruption but be profitability profitability. QX. mentioned work X.X% improvement pricing more level are our offset good the into making our actions. XXX we as fully get I fourth third coming its will the in pricing anticipate are to third is inflation. basis mitigate the to EBITDA adjusted earlier, taking quarter, escalation more XX and pressure related of reflected points recent the quarter from quarter's ongoing. basis With regard and in inflation pricing peak, to progress,

it With full be back recover inflationary now Steve. the me entirety Importantly, able that, of to to we headwinds. over the expect turn the to cycle, let

Steve Oakland

Thanks, Pat.

new they that of they is past private These XX% have repeat they importantly, satisfied The like to opportunities as to I'd satisfaction label step close terms consumer the quality brands. better tell with purchasing and making the those survey that of value been tell these changes Before survey a the few economic XX, which respondents changes rate resonating we at brands, that we've corner On periods brands intend during with proposition included you are periods highly your consumers we've store Historically, than periods value try these represent. the in share gains up are from label. include result, that majority XX% questions, of History on confidence would Slide once private label a vast the economic significantly store our and, likelihood to realized. truly Today, that trial, of how for downturn. consumers. and, give spending, of behavior. offer downturn, you with And they June, in embracing open turned increases. showing and that to being private me that of results their keep survey consumers positioned comments purchase are to reduce is results begin

the labor and label in are of the has landscape investment last over And retail The our the to also and combine options spectrum retailers. the the discount whose Today, natural made been several and finally, assortment top year. and strategies we to more line now than number value to number brand only retailers quality are operational in has to the disruption, When support are terms programs and of second, customer, in supply large dramatically. national also and brands. but has their excellent changed half organic continue we their store dramatically. label you include the placed teams part ever momentum from improved their equivalent key the making driven store by on retailers there our investments we've effort to meaningful towards a private years label-focused the traffic of not committed position an And are chain First, private label image. offerings. second in are of drive focus putting play have improvements of commercial a Growth outlets a in role private private

our also quarter into head as have blocks to peak. We profitability place the fourth seasonal in improve we building

values us long-term organization, drive we all our by I'm results. open front these the to that, call sustainable With questions. across of your Our in and and contributions people, I'm about are our have the day to growth. let's the our excited excited critical up see every talent I opportunity to

Operator

question [Operator go Lazar from ahead. Instructions] is Barclays. And your the first with Please line Andrew of

Andrew Lazar

after well to just differences know in guess I because & challenges ability of Prep the as about particularly was case I Beverages. of discussion of two terms Snacks bunch there in of was on press see really there's in the of if of get chain to pickup label sort opportunities, I this Prep those in some demand don't private the and release, the of Meal And supply demand unable increasing wondering sort because TreeHouse sort segments you're if consumer I that the your in the mentioned what fulfill a Steve, seeing behavior. was some Meal the there is or extra discussion. whether didn't in between

Steve Oakland

Yes. the Meal Thank growth okay? you, think across across is segment, categories a things. bit that private Andrew. participate demand hit And so in private commented about the I label remarks the in. would chain Prep scripted say would I the harder, the say supply I label it's two we in and we the disruption

a So it But there's is little categories. happening more. probably across the

As a Snacking standpoint, is the consumer a the more more up, & are economy the in has Beverage businesses those of so in items, normal opened right? those well. much on-the-go economy with and away-from-home the And normal doing mix

So all are disrupted a the of it's is Meal incredibly bit Beverages, strong demand in Snacking across & more them, we in but Prep. strong

Andrew Lazar

in And sort quarter in seems guess of with It's expect in envelope, a I mid-Xs quarter line, the that's just then XQ. I XX% or to step-up the even a not the you so. And be out margins obviously like fourth from fourth major it posted what the like turning the need 'XX. back more company of EBITDA of would range that of guess,

is, us bit more bridge the -- guess, fourth and visibility like of guess kind holding can in you of through, of more maybe pricing how a quarter what back I of coming one, more take you key and through little but the I there what's incremental those get improvement items. appreciate sort importantly, bridge XQ? to I So And a there's in margin your

Pat O’Donnell

Andrew. Thanks, This Pat. Yes. is

some that you expected We in level think had of second of originally I here So touched that. quarter. and on we the inflation saw escalate a

on flow into will through hand little a inventory that bit QX. of have higher-priced We

And see profitability pricing increase in through so the drive that quarter. continue we'll that we to as

of And starting as in to you we and fizzling. to we continue we quarter, increase The constraints in chain, peak, as seasonal saw gradual labor process. see other then think our have in you is see typically we as our to normally and that material see, supply some in expect are improvement an about profit this comp that

Operator

the line Chappell with next Securities. Truist is Your Please from question ahead. go of Bill

Bill Chappell

color of Going and to half? to more for can just normalcy chain -- where little back of start what back give the be should kind supply as get what back we in to you looking are you bottlenecks and issues, how us a the the

Steve Oakland

Sure. we Sure. we've we done controllable you mean, break on activation. right? right? We think, call is then two I'll the most packaging I into have what our buckets, ingredients, labor inside right? lot Labor, have box, labor And it and and a

we shifted think the focus prepared talked about remarks I focus that has in -- its has to retention.

see see So really turning people, to about given keeping is we economy, So we're given surprise all run inflation, right the -- we're starting disruptive. when we So very to getting employment events, we're right? applicants, the right? participation. those a them expensive what more and people, more and hear seeing not starting training right those It's

need quarter? slow for feel the steady are fourth be We side, So right? do I so I starting And up. quarter. On the and happen, commitments, peers, CEOs have of pick we're with materials, our some monthly progress that are I that vendors. our calls starting about we're on that as why inventory, making right? some pace said, We're we Pat to getting vendors and we'll we up better. labor packaging my about the literally to prepared the progress. pick feel good see good it, to And mean, in building biggest And And

think we all it it's do will So guidance. to get be dramatically in that's going We think aligned but our better. don't perfect,

Bill Chappell

some the and seasonal X. the you're what that with in have year. costs, locked at market past of of imagine And your -- especially the items I mean, Should I lot month a and of on your certainly, probably in costs, some the then packing I you, been for relief or there's input over look remainder the

actual year? so just more the is Or could inputs. about cost more Or see that again, that higher, fair? next talking I is you this understand I'm year? And relief And is basket overall any still

Steve Oakland

Yes. and follow on Pat Maybe it, I'll can up. touch

later fourth mechanics And good the to for have what we going year, we our the I right? are our be quarter, get visibility costs obviously, think I we that. think to pricing so in the have to as and understand

production stuff, have have ready. that right, it to You're that and in we own to to have get we

will but the we in year. standpoint. all and process. So there'll don't in more a think, later I be from in a most may pretty announce that of It's fourth pricing. it. And that out to quarter, tiny is the good to done. that of stuff have little visibility But be go in Pat? cost we like forecast. sure us, happen all what I impact, it hits what do There have bit That's but we pricing to nonhedgeable we I'm some we're have our against have own

Pat O’Donnell

Yes, Steve. I with agree

Operator

next Chris go is of line Stifel. with Your the from ahead. Please Growe question

Chris Growe

for curious curious seeing, I very in maybe obviously, some question experience they're been short pricing from volume through strong back. from of And at your term. robust maybe just I'm pricing of had label in private We're to retail. seeing guess a coming you. seeing you're less business. pricing the I've offered holding I your what just that's this. benefit retailers. We're

Steve Oakland

and all retailer that over some where say many seen have places in they've seen We ahead been behind categories. would has the the We've some been operate actually so us. places board. of I us where we it

with in their about the They little the move. right? are their concerned trying value with I a gaps, the They're consumer, offerings solid, room spoke give little remarks, as a to consumer. has more tells bit retailer have room image prepared we which and to their to are think we more me bit

good fourth year. but And about into quarter, just we as roll feel next the so so that's not why I

label be won't perception. We big be will it, will retailer of part a that. that. really in wants of the big but think I that be the only thing Private part a value

But keep I of us. they're think were would behind some and map in I do their sharp. to us best Chris, say going to again, our it's some pricing So the category, over ahead were their all

Chris Growe

flat I being virtually was the curious well PNOC in about as quarter.

So that margin margin was weighing PNOC flat, weaker should year-over-year. that weight, the on I labor I if is that on some look guess, you when down and margin? -- the the I a disruptions chain at with be, surprised margin, But supply mathematically There pricing. are the will, from was still is being EBITDA

Pat O’Donnell

is this Chris, Yes. Pat.

think I right. you're

level continue the disruption both the we as and operate we to some continue see think of to labor. I on material

think seeing And We so that through. QX move you're as I forward. will see inflation in some XQ. impact to we us did of flow additional in continue That

So bridge to QX. I at and wouldn't it try for look that duplicate

Steve Oakland

pretty I do think shows Slide X well. that

which referencing. I how what operating I tough progress to think start It margins there, key why seeing, you're so is, we'd think returning. the that's make that's and feel that that's we're we shows if the to the good environment you

Operator

Credit from question Robert Your of Please next is go line ahead. the Moskow Suisse. with

Robert Moskow

the Steve your to that to objective have It level. get to extra now have XQ. off PNOC I that I up signaling Is leveled you seems inflation? pricing, caught of and that the cost. there's on is guess, a But question. Pat, you're to in the follow-up saying know

is, edible are commodity on So follow-up down. I guess then there oil the markets the prices

then I in that? too. I follow-up. is relation a think Why costs durum wheat And your to going are down have up

Steve Oakland

it Pat up. and touch on follow I'll can Maybe

more is there think ahead of cost I us.

where markets commodity aligned As you see hedge there. are. exactly position what own in would isn't always we the There's know, a you

accomplishment. far taken quarter. we've good for coming think pricing a piece date, isn't quite it we by Rob. that's price the The smallest that's inventory, an okay? is to we to really $X supply a need get do So We feel the get we within build of million to our So chain to I earlier, question needed. We there lot had have to correct. more a And your lot think point, of that

cost the savings. going to priced mechanisms But or materials. raw there a bit that's next a lower yes, year, so, can get most little of we product And the come customer help are little bit, But of maybe. in to lower

Robert Moskow

Like And I'm inflation? above above. trouble Because will your you price figuring we pricing target other what than get out other well for fourth that margin your expect PNOC way be to should quarter? well any in having could

Pat O’Donnell

go to Yes, of mean about to order demonstrate justify Rob, we've that's pricing. we talked right. that level our the past, have in cost I a customers as in to

continue we've do so and we'll to that And done that.

we catch see. that bought, QX commodities as we've in to up so we that's to expect And would what relative

Steve Oakland

again, broader But We'll Yes. fourth it at expect be net. the number quarter, to expect positive. basis on for we to it But we that positive. to turn look a

Operator

the is question Jon Blair. next go Please with line of from William Your Andersen ahead.

Jon Andersen

step-ups go In something trying for Bigger acceleration here -- sustainable consumer understand picture to seeing of Just strength we the in the more that as in it think question of is label that demand quickly? look on the kind view these you're Does of as what demand? about future? you that have the persisting and past, we're this and seen really can foreseeable the how private come kind just about seeing. forward. we in terms should Are duration of they kind we little bit a of

Steve Oakland

Sure, Jon. Sure.

that how in in the right? equivalent different organic value. label right? quality that Our private cut -- both retailer retailer private The you brand data, there European right? are, you feelings I have new the is real hard comments there one X,XXX about this mean and think this didn't me was you'll what scripted landscape. is, North of discount what, recession those think market, largest national mentioned to share and this, hard to the natural And the XXXX. in the in I to label to on have see think focused in and it's a XXXX, But economic if I the step of exist was I -- each some back recessions, we assortment over and gives today both is customers label change had good last and if private are landscape, go retailers the real but of America -- assortment XXXX, say again, their

have retailers So mainstream assortment. the biggest multiple

got You've launching mass it. the brands big private retailers label against

think the than in is dramatically past and So recessions. consumer different assortment I saw quality what the

so none be. can us how a be deep it soft of long And will how it last. landing, will this forecast Will

questions every day. think everybody do those of I that asks All going we're But to better.

shown bunch get a And you the of wouldn't trial past percent. be a in that you trial sticky is have gotten so has certain it ordinarily to and what to tends

With another has we're think I It will step be be is, the way positioned would to today, The that question change. better. certainly how big?

Jon Andersen

I wanted to front. ask flow on the cash

year You second of tend that to of your have the you I'm of could And kind for you generate talk you're about expect and majority how are. that you year. capital half cash the in the your will this cash the to year, what going again wondering forward, priorities allocate free how if thinking and happen whether of range allocation that for a

Pat O’Donnell

highest We year as in didn't the as generation think right, the guide being cash you flow through of our move this about back year, directionally, QX have think peak. and but we statement I cash we half seasonal is your

consistent we this think about or how thought forward. our we capital balance deleveraging to our be kind our As with allocation, to moving we leveraging and of think debt sheet, going think it's then debt about I continue strengthen before about as

previously. flow what So different our from priorities we've than are cash perspective communicated a not

Steve Oakland

it. know. you of to build much still us cash we really a I supply is too going don't inventory about our going good flow think even let the little is expensive, And chain though as to Right. feel more be

enough to So the quarter. thing on pin set first we're for the right inventory for a hoping

Operator

with question comes go The the today line of Carla JPMorgan. Please last ahead. Casella from

Michael Coppola

divestments M&A is liquidity, that a you're calling good looking seeing last you're sort at Snacking bonds? on to it's to Bev on just Prep guys be business comment Meal divesting. on I And to follow-up portion you a the This going as potential or We would Mike you won't ask wanted & then the for -- question, the about know of of consider given just Carla. the the But guys environment. side? anything the your

Steve Oakland

well, think you. I -- to jump I'll of all, first back

years mean for X% in think quite have, I current X us. you lever high-yield we market as more bonds the I are think, we know, those. -- I a on

So today. that really attractive really, looks

of we on think. sponsor-led stuff with the think forward there's coming small But proud hang we're think open to I and there'll is be as Quite those, there, frankly, So to with out on here tight, the regard stuff Yes. I them. market some it so leverage we'll to most normalize, stuff M&A, starts But loan pause. up of right?

Okay.

I that's us look to opportunity I the Take thank just for a being think we question. person you last care. in would see day. our forward to And soon. and like you to today, with all Have great

Operator

This concludes today's conference call.

You disconnect. may now

TreeHouse Foods (THS) 8 Aug 222022 Q2 Earnings call transcript