Earnings call transcript Q1 2023

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Operator

Welcome to the TreeHouse Foods' First Quarter 2023 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 statements.

P.I. Aquino

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.

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

of is will the the to we continuing two operations those their appendix risks with contained earnings significant divestiture SEC. deck. tables discuss completed October today's concerning can company's Consistent basis. with in measures our comparable an Information filings quarters, direct in non-GAAP measures of of GAAP today's XXXX of On X, the our results most business. Meal a portion be the we Preparation on prior and A release adjusted found reconciliation press the

to Mr. remarks. With call me CEO over the opening his Chairman, for President that, turn Oakland our and let Steve

Steve Oakland

morning, for Thank guidance today quarter our you, reaffirm P.I., and results and strong everyone. I'm share our to to first here XXXX. be pleased good

Over label and our business Today, the portfolio, Foods optimized have higher TreeHouse growth, a snacking private simplified and is higher beverages. focused business. balance our on last margin we strengthened year, sheet our

our Our trending journey in by we've and strategic heading. categories. direction driven so ambition consumer accomplished the is leadership I'm far in profitable growth all excited about we're

start growth, and supports algorithm. with and label our support that We a guidance our business, environment year our I'm our which with had continue in our our We the pleased to a see supply performance. strong investments private coupled very improved chain macro to and

we hard execute to for their my continue our want our strategy. I work to express gratitude to Importantly, on teams as

summary at our quarter our first versus of a key and and deck, guidance. cover Looking results four takeaways three slides

actions we are our EBITDA the and took by our company First, high-end to transform and that It's clear we a $XX we year million, benefiting respectively. the guidance million and outperform sharpen revenue from of $XX focus. last

as and result We a performance. financial improved are execution driving better

recovery our ahead of chain supply in improvement quarter. and service Second, the were both expectations

demand As planned in that was fulfilled the a result, quarter. second shipment we for customer originally

pricing continues has be Third, on improved reflected as in year-over-year to our recover inflation basis, our profitability significantly to financials. a

And looking first our the at second are positioned expectations, solid and and track our are quarter for fourth, on year. performance quarter first-half for well we a

selectively As we a reaffirming build investing opportunities result, And our drive growth XXXX capabilities to are finally, full-year chain. supply are our guidance. organic and we in across

context slide six the slides, current some two and label. private macro and five on provide environment next The

Let me take detail. you then through discuss the financials more I'll over turn call to Pat in those and the to

are On the form five, left along hand inflation that shelf the see prices. passing higher slide you can side of retailers of in

comparison a slowing from their persistent, it While year. of and like natural gas We've couple in peaks. is seen inflation is items last to wheat, retreat

remain costs input at historically However, high levels.

for consumers versus significant the the right, label savings makes value This as very of goods dollar at attractive. steady it the On proposition $XX. about basket private brands national label is of is a holding private absolute

gaps on right the share average six, to slide shown label private remain the continues On you'll grow. the time, units on levels. that see same historic the price At left, above

placing label share now on many trial saw the to for not label weeks. we loyalty. trend that for retailers return growth, are label fact, investments pandemic. making the In long-term pre also it reflective But of private has unit share the and only data a to private and years gained private supports they're XX The importance something drive is consecutive of

snacking levels and in prospects long-term service confidence our portfolio, execution, in across trends higher these capacity, growth leverage give our Our our focused with improved ability attractive more us and investments beverage to categories.

Pat, to a I over recent turn moment I capacity. role appointment permanent CFO take wanted in recognize call a to to Before his the to the

proven stepping CFO results-driven for understanding come. the basis Pat value year, six industry on Pat he business TreeHouse, joined right the years in as deep partnership himself expertise. an greatly to TreeHouse. looking of has During to a his our since drive into me he's since sustainable leader we continuing last the role growth made our that and and the years, interim last has it a our and I'm we forward to as he clear has

With to that, Pat. I'll call over turn the

Patrick O'Donnell

my into company last in year, the and In how we'll Steve, permanent to good developed particular growth transitioned the future my I've I'm CFO strategic drive ahead. at for inflection morning. the a at greater to appreciation our in honored the deepened opportunities understanding and and Thanks, that important have point role time journey. an the such lie over for

with to expect build I'm forward financial and you months. the value, in shareholder long-term say deliver enthusiastic least We and drive continue on connecting I look our to all commitments, credibility coming the to to

our guidance. results covered comparison to Slide quarter Earlier, year-over-year a seven Steve financials basis. our the through you first takes QX in on

adjusted XXX% clear. basis Our and grew EBITDA margin nearly Sales XX%, EBITDA points. progress improved XXX adjusted is rose

we previously quarter. the better capacity certain orders shipment allowing in fulfill in had beat constrained supply drivers I I first, and drove increase the in certain service to our we first our around easing to have that fill anticipated, than the a quarter, improved earlier Before rates the earlier the chain in comments operations. of some planned This wanted top quarter in we We our on enabled Steve's saw customer improved second line. us revenue attribute vendor few for into to and which been get build in the factors: to categories more that execution originally us

of in about averaged XXX an basis first improvement XX% quarter sequentially. the service points Our

to back progress. While we do some target, still work have making we're great to get to

slide to to now cover drivers. revenue Turning eight our

contributed total, anticipated, basis down points points. cumulative in efforts line prior FX flattish XX recover our versus it negative and over As drove XX mix year as the to the basis the top were pricing reflects year and Volume inflation. past

On the measured comparison we've a unit provided data. volume industry channel and for TreeHouse the right, using

Total declined unit a edible X%. consumption on basis about

private brands flattish and operate, here declined to national label similar the X%, in TreeHouse was total in which performing line gain is also message share. unit The and we that Within label. TreeHouse was continues outperformed private with categories

costs. quarter. slide well of commodities I'll operations of nine was adjusted due on take our you and low was $XX versus million was disruption, million headwind escalation drivers. chain inflation $X last as change and of improved absorption, as EBITDA and the through million Recall that we level supply contributing to profitability year. mix, quarter The first significant last abnormally year's continued input in a versus in continue $XX pricing including Volume to labor recover PNOC, the as once again year. net positive last

investments in growth. well engagement, make improvement to as continue position around labor, and continuous as as we retention We for future ourselves better

don't improvement than room seen disruption. target quarter, the where in that to couple we back of and believe have we yet was better levels. a last While anticipated the take to it of improve macro service, them bring have quarters to categories first fully more anticipate we chain supply we’ve We still a couple will

on guidance our slide to XX. now Turning

the It with million top in in expect second that recover I'll revenue our we of represents that for the will of line. is quarter, inflation. the second to seasonally also point be We continuing quarter out worth lapping $%XXX the our be range actions last volume pricing drive pricing to new year's to noting quarter $XXX year to lowest initial million portfolio. QX the

were orders to I that ability largely was our originally planned first QX. in due quarter noted to our As earlier, fulfill revenue for shipment outperformance

with line consider tracking as to and So continues our last you year. first-half we in against expectations revenue, improve profitability are

we are full-year guidance. XXXX Today, our reaffirming

We revenue continue million of $XXX to X% adjusted grow to EBITDA to million. X% expect $XXX and to

interest to and million $XXX $XX net anticipate expense million. range million the We $XX in CapEx of continue to

I'd In closing, if team. remiss TreeHouse our didn't thank I be

the demonstrates better is start work and everyone Our service execution to hard to strong year to customers. a in our putting testament the

let that, to over turn back now With me Steve. it

Steve Oakland

Thanks, Pat.

discussed, X% X% adjusted three deliver we Beyond revenue in at to that next With plus confident X% growth least the in and we over Pat flow just XXXX of EBITDA. million. cash the XX% to of $XXX years, remain free can annual guidance

supported chain, our is category have leadership in outperforming on supply and Our purpose by defined by ambition depth. advantage, focus world-class pillars, we competitive growth a clear confidence and strategic our where categories a building and

further leader. And talent developing a strategic be customer finally and striving to partnerships

before, said we're point at I've a in As our journey. pivot

financial sheet returns. balance build strong. is free attractive to flow growth, opportunities long-term allowing us Our We cash and generate capture deliver and capabilities, drive healthy to near

priority for invest is in our first to capital allocation business. Our

this Pat $XXX leverage approximately mentioned, million year network. to our we'll As in and spend operations our CapEx strengthen

us to highly attractive to label. drive more synergistic to The selectively in last We and organic financial in add our in it's pursue That to a discipline April. returns. pretzel subcategory led a growing growth capabilities are million XX% and category $XX also portfolio have year than is seasoned underdeveloped and are acquisition inorganic private opportunities complete that season pretzel rapidly, position

been to TreeHouse. demand season plenty for York Importantly, upcoming to have ability serve June leadership new We Day accelerates flavors coming a pretzel customer season Investor City. you have XX pretzels. at try to for pretzel in to looking acquisition our our The us season customers of Tuesday, category for in on plan New our

snacking ultimately our across on portfolio right of positioned join faster revenue growth the we've and how and I the of work higher is understanding business financial investments our focus drive stakeholders. value private month. this give making To priorities to label hope the how goal event share a maintaining management our been for and beverage you next creation better all and showcase team, categories. can across sustainable us profit better to To community the right threefold. Our of margin, growing, us has and

call the With that, let's your open to questions. up

Operator

Your Instructions] Lazar Andrew Barclays. [Operator of question a from from line first comes

Your line open. is

Andrew Lazar

morning Great. congratulations, and Thanks. Good Pat.

Patrick O'Donnell

you. Thank

Steve Oakland

Good morning.

Andrew Lazar

of two which I reported for were guess now -- have think that full-year EBITDA right, see? supply supply main dwindling of out now I called mean, positive see at morning. PNOC normalized And sort buckets, nice And and been is provided [Indiscernible] difference I around disruption EBITDA between think quickly, have costs right I to in was million? you these costs? a you $XXX three and row then things quarters for PNOC ‘XX we ultimately what that's are in as sort chain guidance, Good some obviously chain the accounted ‘XX what two and when

million. hoping difference So I could $XXX million with square $XXX of this the these current to year between $XXX guidance maybe you for million and the your was I dynamics guess,

moving Just, see conservative accounting this knowing you do right know, year a fourth that asking of really kind buckets two is, that you direction. it way for what's got kind the it's of somewhat another seasonally you've and important in only I quarter? potentially those guess are of, left has difference given XQ

Steve Oakland

touch I'll let -- it will I Steve. and follow-up. is this I'll on Hi, you. thank Andrew, Yes, Pat

are And to it's a right? great off our early We in start, year.

smallest the have next. up We sequential quarter coming

you to So to great areas as two the on we are start these And to recovery. forward look our we forward, updates got did a it. go but out on that touch key we

it's necessarily think don't right at know you call I conservative, Pat the that to? So right? I right but So do guidance it want I would moment, the

Patrick O'Donnell

Yes. And I thinking if do about you're think those I add, rights.

to from inflation seeing mid-single-digit, a expected So what PNOC we're that's I our of and across think perspective, sort portfolio. we be

that I expected we we the have. with think squares what pricing and in So line that reflects

But allowed here we maybe it's line in of And how -- we from better largely as acceleration of to just chain the with for the the playing year. orders. if had supply in year, think had little what we rest the we that's some out with for think largely a look little then I a quarter. expected in we bit improved which hoped us first that's think bit accelerate thought I a perspective QX, I So

Andrew Lazar

guess it. chance the is a Thank be or it not to pull let's supply XQ forward thing continue some you're might for that Got I have to how say initially is works? is improving. able then just planned to customers, you shipments And Yes. would in last really XQ volume chain that you. there given that

Steve Oakland

the QX, that we weren't filled right? probably had full. would up There back call were categories rather I that We the retailer some places in pipeline it. completely getting we

value items And they're of happy time assortment a obviously that, so right? is when the value. got consumer with They've looking at for really their full

We in the -- that's really quarter, happened end So first I right? of pipelines. the first think at the refilled those what

in merchandising think of more we the actually important the about able can we is that thing to before. now I have weren't conversations the half back have year

And to think so going conversation be now. are interesting I and that's the those starting

now, in can of like is label They right a have value support confidence a to think we're And back the we private big that do the what want drive. So I try image they to given half would they right? that. retailer all to as part

that So that is the and know as the unfolds. opportunity we'll I year more about think

Andrew Lazar

Great. Thank you so much.

Operator

from And Truist your of next Securities. question Bill a from comes Chappell line

is Your open. line

Bill Chappell

Good Thanks. morning.

Steve Oakland

morning, Good Bill.

Bill Chappell

as Just at back volume few that past commentary if pricing to retail. both you're moved or little were little the back to quarter? hard. kind increases you or that continue the pricing from We've what they drive delaying we months Didn't first both increases front, those a price -- a either you're kind price passing bit still pushing through seeing faster But the consumers from put over retailers a what on the on of through retailers the commentary that and the the bit pass over and some of, whole know drive to, also some seeing of pricing of, of the here of into see heard they faster. were traffic were,

Steve Oakland

I know, by lot Bill, it varies You retailer. think a

We we've are seen seeing going before. private than a up label little what bit pricing slower

think pricing that good we The remarks the talk solid, remain quicker. levels, is through. is news tend say our we are our it's gaps really in historic get about still gaps fair prepared to that I that above So So passing right? it they're to when

other And we're nature have of the on of front that of contracts that of fact margin and our structure trade end our just given advertising. so the we the and don't the curve levers

fortunate the pricing that and done to us, have we very have when I right? we're it think did So behind

Bill Chappell

because then with well trying of, the And across just But past we again see the kind over and it. kind market XX-weeks, share to above, secondly improvements Got hard lost levels, a long just you us for highs? various the on, label, I'm of, understand are to the XXXX a it's mean, it, categories. working toward new understand as if share or way to trying at board new of know back of, to kind lot remember, I private I across the pandemic. during had made we now we're but your highs

Steve Oakland

we just we which were below now, yes, know, is are. number pre-pandemic, at XX% are right, You And that. we that

a now. shape the But them pre-pandemic. had it bit we share growth that private that So we years private right, was seeing pre-pandemic normal the for and label so return consumer during slightly to above was for is behavior all the good with in And growth stimulus It label just poured rates, changed nice little the were on time. we're period of we're where in ‘XX. only

Bill Chappell

so you Thank Perfect. much.

Operator

the next comes Smith Your Stifel. question from line Matt from of

is line open. Your

Matt Smith

Hi, you. Thank morning. good

Steve Oakland

Matt. morning, Good

Matt Smith

expected of higher I in an XXXX. stronger an a the from the was about that's elevated and in was to higher question was part very volume there quarter. But performance which timing area chain absorption, the the cost had margin than in shipments. It from that drag benefited due incremental still supply

in when here -- look incremental first costs those we the the of get substantial -- quarter from quarter fourth headwind the much higher higher quarter. So through second XXXX. they're incrementally more I'm the costs at surprised Those

move expect as lower you do year? go costs the -- So year-over-year through to those to we

Patrick O'Donnell

Yes, I -- benefited there I Pat, some think is think mix positive from too. this we we've in

sort So type of, little when late some, last of exiting think you the a lower last particular. bit early of year think around categories, in we of types I year business or about talked margin

things of a push would time seeing would have those positive quarter -- or than saw. a more in liked over inefficient bit have that you're the maybe think we probably more I little them some that so And inefficiencies of we do what We call mix. some I and

around glide of curves things we're seeing feel to investments play some the the on so our improvement really continuous got And out through pleased the and year. benefits are supply of the we like some doing ramp expected see. we and with I we expect other pay from we And how had progress a to off that we're the to starting and we're and think chain of far slowly path we've those still or

Matt Smith

I as lower the looks a a year-over-year it's follow-up guidance -- And with on stronger basis. EBITDA you on question the like had now a guidance modestly first-half, Thank for second-half a Okay. that. just

could it really second-half? in know some So growth of EBITDA positively there, about in on your the would inflation offset I seem talk is you but pricing tough XXXX? comparisons weighing there's what's PNOC second-half like to going still the

Steve Oakland

that look follow-up, we way. it Yes, start I'll maybe I Pat and at let I'll think don't

look I solid the we looks we think want have what like. weaker. think into think you to reflect don't anything back visibility we we really is it. We've the guided at obviously first-half had that we I great We'll better half a we report as back think to half start. a

Matt Smith

Okay.

Steve Oakland

And if lose do lost we we him? him,

P.I. Aquino

next Operator, the question. to we go can

Steve Oakland

Operator?

Operator

Hello, you hear can me?

Steve Oakland

Yes. Got it.

Operator

technical some issues. had we Sorry,

about Sorry that.

from of Your comes Bank America. next question William Reuter from

Your line is open.

William Reuter

bit. so Good two, another now a addressed morning. mentioned retailers increases this all lapping that come? point then back price the need quarter. the that increases you little here you're you've was like feel you or to through have And fact question that the pushing price opportunity I further there increases just pushed for are you've in the second at lapsed or that price is Do you there

Steve Oakland

or of price to macro stuff rest very there relief, cost some We've price things some bring down. things wheat the and some could there'll all increases will structure. those hope that like their year think right, selective actually We the and of we of be individual do. done I this we needed other commodity big be

affect won't just because passing we be simply that would So that margins, did that cost. our that on if

the the it in where pricing the for we we So we place think year. have need

William Reuter

did was modest size. pretty which then me, acquisition, you secondarily pretzel the And in for Okay. seasoned

any about you acquisition ones. talk reductions to on to position then on You've size that, that this with to mentioned at there a that what take Is in And leverage? you're will way related you could further complete still balance how of point?

Steve Oakland

Sure, really of about mostly capital I first that But million sure. take wanted is It's that's depth can about. equipment the acquisition categories the used that's in Pat are $XX be, for investors today. driving today But right, we look, part what -- talk than leverage. isn't we frame strategy talk that we really right? in and I'll I'll have something in normally the to different about it how to this an

And bolster is key a chain category really a us pretzels a quickly. leaders, supply so growing right, and when our we key that's get for to we add capability, to opportunities where segment are that's

So were we We us that right? actually -- to equipment have we it's take small able it order by XX-months on going to buy and a it. buying get vendor, to

there's that now out that we're again to a it the help to we drive protect us supply growth and what two. be. do. financial example and use that so year chain -- to opportunities or to community used than that's And is for how strategy And really only our algorithm different And so that what fortify trying understand

you firepower, -- know, horsepower but… So Pat, don't want I about to talk if

Patrick O'Donnell

have we've low-end a at, leverage we the to sort X.X target be Yes, target continue so range. about times times of talked range that we and of X to of,

leverage have level So very that with comfortable now? we're the we

Steve Oakland

Day. past. us about But exactly have allocation there the right and great They'll the on to that we'll say our season in for and just come when pretzels us day capital talk would capital. that a did we'll will larger are here do synergistic in think at are great returns returns be I that close lot what And in don't that so seen we are I a Investor Yes. ones for us opportunities those are

William Reuter

Very you. Thank helpful commentary.

Operator

the line Your Carla of next JPMorgan. question from Casella from comes

line open. Your is

Michael Coppola

Mike This on Hi, Carla. for good is morning.

Just questions from two us.

slowest quarter? mentioned this of that being or for might pull that sales there XQ that? that sales to in Was for beat at some the pricing Is to assume areas that earlier? pull what volume been was like it's typically it like due the one second first safe that the upside The magnitude other are quarter you or this else guys surprised quarter and the versus all anything forward you that the to have there's whether forward or guided

Patrick O'Donnell

to way would Yes, with we so… to We're that majority I in thought the beat to think that had think what pull we related that's When about that the was of like, expected we revenue. about see from or think what HX forward. falling look line HX it. The right

Michael Coppola

pickle when second Thank And one guys of you. did what you business you the Great. margin then guys the you -- was was And expect magnitude that? guys the anniversary to do that low exited?

Patrick O'Donnell

Yes. think the an be will but perspective, the will the it, year. us we've talked we totality lap that here I half quarter of in for about of in that second don't from issue less of that so the back

Michael Coppola

Thank Okay, all you. all right. Great, that's us. from

Operator

question the comes line Barclays. Your from Holden of next from Hale

Your line open. is

Hale Holden

constraints morning. If I the acquisition us rest seen the capacity given wondering the sort of of of was growth traditional last M&A. if CapEx or months? had in the a view tell the spend, Hi, good in back areas like pickles season guess, more you've six I we how you could network snap some a any was than you looking if

Steve Oakland

are to into baked there's speak that CapEx, because business, in areas, other any and individual they're like we specifically. them to want But really our things in right? to It us don't season things forward basically there's we'd pretzels to they we'd and our growing really capability a like extended great. right? yes, increase couple capacity, add reason They're so like really mean there's there's coffee a wasn’t I we'd it's our there's the but of it to goods to areas trying look I to in one businesses, add a fast,

returns, us look But opportunities at we things. in to and way have have that, of great areas like of chain increase or our tight that those there's obviously supply if those right? those capacity over think for to returns capital I bolster they But cost all would

Hale Holden

As natural your lower through flow quickly pass do those through was second wheat gas, And had costs how or I you P&L? the customers? the to on question wheat your now potentially I

Steve Oakland

Sure.

XX agreement or We have day XX a with most of our day customers.

that saw the we on up, on the would benefit you hit the us so from lag. lag And way way down,

would be those XX So days XX to days. on

some And enjoy make are again, our But annual that that We of so for some a make try value for for prices try on are we on customers, XX-months, bids, period to money the proposition. commodity right? time. whole not number swing, money locked And that's we'll customers of right? to

So but margins I think down on, if they pass improve, penny come things we will and affect those the won't them our profit per case.

Hale Holden

Great. much. it. I Thank so you appreciate

Operator

And I final further turn there are to no over questions for this Oakland comments. call would the at time. Steve closing some

Steve Oakland

our just Take to Day day. I chance all to want care. Yes, up you Have we today. will have see at hope great say City. in York we New coming a a thank to you everyone And Investor

Operator

today's concludes This Thank participation. you call. conference your for

disconnect. now may You

TreeHouse Foods (THS) 8 May 232023 Q1 Earnings call transcript