THS - Earnings call 3 2023 | TreeHouse Foods, Inc.

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Operator

Hello. Welcome to the TreeHouse Foods Third Quarter 2023 Conference Call. [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 statement.

Colleen Shrader

Good morning, and thanks for joining us today.

earnings Investor issued website Relations and available morning, at release the in section press deck, this both are treehousefoods.com. Our of our

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

divestiture our completed On September business. we XX, Snack of XXXX, the Bars

cover as on whole quarter on incorporated for in with our the and third For operations. are Snack third our discontinued the the press Results discontinued provided release, operations purposes we of quarter company business Snack a in briefly discussion previously reported basis the guidance Bars also will today, that quarter business. issued the continuing Bars results a basis we

The performance majority continuing an today of basis. and our operations on adjusted center will our financial results operating discussion around around

today's be today's in reconciliation measures of their to found comparable release appendix continuing ] and non-GAAP measures on [ operations performance. provided of can best compare for that on can so A and deck. and We have for a operating XXXX historical you most direct and XXXX an financials earnings XXXX, GAAP recaps XXXX to tables XXXX, basis, press TreeHouse XXXX annual quarterly basis the

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

Steven Oakland

our today financial of the I'm good here be third an our and year. outlook you, everyone. provide remainder morning, to and pleased the on update Thank quarter for to results Colleen, discuss

we've in on on noted shareholders. to create TreeHouse strategy X, important date, for takeaways the On for long-term the we'll value our has consumer discuss capitalize positioning the detail executing and progress the and of Slide quarter, industry and them call. to made company our key trends each

our results. to Turning

For private see sales the increase brand net year-over-year core the were to a X% pleased retail volume the in voluntary supply product broader recall outperformed despite retail volume third and quarter, combined growth channel. disruption sales a particularly we and factors, consumption and our and in We delivered in quarter. expectations. weaker market original These resulted below select food-away-from-home categories chain late co-manufacturing retail discrete lower-than-anticipated the with our sales in and

EBITDA continuing result high Importantly, our year-over-year, from as team's in XX% our a line nearly operations execution, with by of guidance adjusted grew the we strong of range. end

our changes Turning from sales in Reflected originally issued year significant our are to guidance guidance. full we when outlook briefly.

discrete chain third end impacted the fourth the of disruption the First, our us voluntary beginning supply and of mentioned that behind the now, although quarters. earlier, recall I and

Next, million a Bar year. impact current speak was full to I'll the shifted, have Snack divestiture And more detail. on an in of which consumer approximately the $XXX trends finally,

X% the expectations $XXX revised year-over-year midpoint. EBITDA year our approximately approximately XX% are which reaffirming now of growth. and into growth achieving account, our million, to adjusted year-over-year at represents this these to we million we anticipate for X% the range sales Taking sales, $XXX Against lower net guidance full adjusted

allocation Given our results, the number Pat and presentation in outlook of more on strategy. moving his will capital provide parts, detail our

company recent nearly stock. increase depth acquisitions and the support capital we strategy million $XXX million I our to capabilities approximately and our execution shareholders. This to to includes of highlight have the our our do value of for deployed $XX and want repurchase create that of of

and our into this of CapEx year. approximately our million also facilities directly supply We $XXX deploy expect to manufacturing chain

note seller proceeds in to item One of of receipt like from highlight approximately million the our $XXX October. I'd in the is additional repayment

this remember, step note in Preparation relates seller transformative this a marks the transaction. our final to you'll and As divestiture, repayment Meal

are capital and strength sheet asset, on focused balance deploying an where we returns. is Our we can maximize

We as team brand private and our snacking in and categories. has are higher-margin beverage across and and Year-to-date, higher-growth, depth supply on categories, our enhancing on and quality superior continuing our a our and build powerhouse TreeHouse's remained to sustaining position chain strengthen focused leadership our service to growing delivering customers.

$XX Bar are category Minnesota focused contribute although on positive is million. greatest this is was X actions. category, penetration portfolio-shaping we not Bar private categories business this very facility of expected for bars EBITDA a Lakeville, this brands' X can The Slide company sale recent adjusted consumer our our moving on business and the opportunity With see Snack We the Snack closed forward. where to Noted approximately for good low. in divestiture, portfolio And be more now year. the

inventory. agreement Canada Separately, in a of primarily acquired business last announced month, purchase for we approximately an relating purchase Bick's pickle to to the million, $XX base price

enhance to fourth Canada. a arrangement this capabilities volume margin-accretive into in pickle will bring This our network. years, Bick's in had quarter. expands scale with the many our for we additional and and and We to in has pleased presence expect transaction our close category co-packing manufacturing TreeHouse our are

chain Turning to our internal supply initiatives.

you can We X. Slides on and our continued invest chain, to directly see have supply into X as

EBITDA which supply continue long-term years, million, Over expect savings will the our growth. approximately we next $XXX to chain to gross adjusted targeted support achieve of X

our me execution system implementing that progress you Let supply TMOS, an on initiatives of we other We give manufacturing are chain update margin TMOS performance. improving the remain network. on to and this On our continuing contribute and the focused front. across on rollout

XXXX, this result our we've as with improvement percentage X processes cost-saving to expect of In substantial XXXX to overall work points initiatives. seen place. in date, We or effectiveness, TMOS in significant of start OEE, a our enable equipment us to a

in we As the at our end facility example, TMOS XXXX. manufacturing refrigerated our at dough an started of journey Texas

over I'm volume that perspective, lowest are we pull to some at maintenance results. significant third end a seeing that You the of repairs and year. may by from Through production this the second time points increased on our dough customers the took quarter, XX season. peak that will refrigerated quarter, the back into This grocery their and facility we our XX versus by have for is over recall million during heading prior forward shelves, the important pleased service to retail facility. who seasonally activities want particularly improved pounds

In make results the first logistics and opportunities, we And on logistics our also our plans initiatives off exercise. remains our are improve the completed warehouse procurement identifying scoping finally, third progressing here and customer-centric. completed of We've initial on utilization and procedures quarter, track. the to our we stages around efforts to and work kicked our and our consolidation network distribution efficiency. seeing positive from more are We've

seen private across compared broader an national on Slide results brands. can strength brand industry, X. to to trends relative Next, continued see you TreeHouse the third In volume saw the on in we've which quarter, update we

the For private brand measured in brands, retail compared quarter, continued flat the to unit channel decline. were national sales which to

delivering growth of retail outperformed, approximately channel volume TreeHouse the X%. in Importantly, organic

include the volume from our acquisitions, you X%. were If recent cases our retail up

recent consumption particular Now focus turning in months. food trends, have been which in to

supply demand in disruptions changes more mix, trends closely have in retailers the years. chain experienced retailers at consumer orders the further seen we've past seen current to as align and industry TreeHouse, we've recent moved size basket As

the underscores of and continue response affordable their their trends, macroeconomic are their waste consumers on This among is September, strength expensive now and prioritize shows anticipate grocery have habits, and environment not clear private in which also options. growth continuing on continuing to show brands. who brands and wallets. It respondents that say store Slide pressure more In We that at-home to their X, have that fielded XX% consumers are been switching they us options. to to we food but consumer eating adjust to on strength brand a changed less this Notably, and supporting to consumption focuses survey near it on private only consumers term, patterns in switched the reducing value shopping purchases, opportunities. of

shelf of goods quarters, With by fact consumer products offset for is a today brand inflation. to consumer, retailers value including this discussed in private of savings that of same the absolute As The brands. the have the past offered TreeHouse $XX our is on grocery the over few categories to continued impact we've the categories increase basket prices, generates in pressures significant. national approximately versus

share proposition this unit gap, brands gained high for weeks, Given undeniable. consecutive reaching private in for now value an all-time XX is The have price private third quarter. brands the

chart XX. Looking on at the Slide

to in You and of private XXXX's prepandemic continue share the brand can gains for compared retailers These levels. to importance brands consumers. year-to-date private XXXX support see gains

We of believe healthy. Additionally, millennials, consumption with showing long-term we see supporting is with long-term outlook the trends. brands' and private share Gen continue how we winning are gain private generation brands consumers and to next quite the Z

quarter. to to the Before reinforce as key what we for like I over see turn the the call I'd Pat, takeaways

in volume and First, in business growth quarter. we market our of private impacted broader channel disruptions face in the even delivered that the retail brands outperformed retail the the

million we next TMOS chain initiatives years. over and through supply X and are margin our our goal to Second, driving savings are improvement committed $XXX the

value have I Third, the deploy And we to we year sales track annual continuing strategically puts finally, exit creation. us items $XXX reaffirmed earlier, million net our to the EBITDA while run at we to for that targeted adjusted on long-term drive our have updated which spoke to guidance, guidance capital adjusted range our rate. are

a look We are TreeHouse we into point positive inflection XXXX. to year-end at as for and

categories portfolio on As are focused win. reshaping, confidence can key of have where a the we result we our we

our note sheet balance to our financial seller Our supply our beginning repayment, And an in chain enhancements strength with show full is are results. asset.

positioned of groceries snacking. trends: current X and consumer attractively growth benefit consumer from private we incredibly at to continue the towards tailwinds. the are America shift long-term in of brand We macroeconomic And North powerful intersection the

today, on As targets. we are against long-term we well sit our track here

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

Patrick ODonnell

on morning. and Steve, our good quarter Slide summary a XX. with third of results Thanks, I'll start

approximately late we guidance EBITDA million. Total results of approximately of to that $XXX Snack delivered Bars and to These of divested business and top third adjusted including $XX we million adjusted million third our that we $XX the net sales adjusted line in the issued to For million million. $XXX $XX TreeHouse, EBITDA the of compare on $XXX million quarter, quarter

performance our X to by expectations, was impacted Relative these factors. sales

crackers, cases we growth. than came growth the consumption strong crackers, First, our in total more delivered than unit businesses. retail was which in higher co-manufacturing In anticipated, than category of food-away-from-home we X%, particularly and lighter unit in

expectations higher consumption. However, predicated category on this for our were

continue and to Additionally, businesses quarter expectations. food-away-from-home restaurant again third the with foot of and down by in co-manufacturing short broader consumer consumption our falling be and impacted trends, traffic macro

impacted quarter, and disruption our business adjusted pretzels were broth in by packaging in adversely and quarter. late chain million we in businesses. by our disruption including the impacted sales with in Second, a $XX our net the supply These product the approximately recall cookies voluntary items vendor

Importantly, taken our address teams to have actions items. these

of sales that While we supply were of disappointed we've short that the chain adjusted guidance TMOS range, end that are described. driven delivered pleased fell by and initiatives Steve high EBITDA our our savings towards our we expectations,

to results a basis. our operations continuing Turning on

XX Slide to $XXX strong on of across XX margin our EBITDA metrics. see versus to delivered grew X.X% that and of basis XX.X% million. nearly Net XX% Adjusted million, financial points sales year. EBITDA expanded You'll last approximately we growth approximately key $XX by adjusted year-over-year all by increased

at Slide provided look to year-over-year Turning our We've drivers. revenue a XX.

recover driven we've by to quarter inflation. look case provided pretzel growth, of our from pricing volume and the slide, our double-click sales on volume a right-hand and channel. including into previous our volume were the seasoned volume by at third To net acquisitions, the side coffee actions our Our performance overall

channel. and the units our As channel quarter. bar, coffee as the was up the from from see, and market pretzel grew our were you volume reported by its core pretzel seasoned seasoned excluding which case in can was measured the in acquisitions, been private flat units than own the has retail volume acquisitions, broader in the brand coffee X%. better the X% retail retail business where This the Including volume

supports chain not growth declines faced have noting It's we in brands. discrete business worth higher supply in would that which offset The disruption our our earlier. the growth that retail been I our co-manufacturing noted volume was food-away-from-home also in and retail had business, by

our more TMOS last pricing to actions the Slide million significantly down inflation, lap PNOC, you our last the million net of see XX, recover pricing versus million EBITDA initiatives. to was take by continue was positive to year. of in mix. marks drivers. milestone driven as commodities, I'll we again as primarily and impacts mix, once absorption, and supply adjusted through Operations On an and year. contributed previous $XX category contributing versus including starting This savings chain important quarter, Volume our $XX we supply are $X chain

negative versus as costs associated of last Lastly, other interest $X pension receivable higher and to sales program and with contributed year SG&A million due rates. result our higher a

on in availability the $XX under Next, sheet. over million. million we quarter We cash borrowings of quarter. and facility revolving repaid touch of third $XXX credit balance with the under I'll our revolver remaining the approximately our liquidity the our ended strong Between position,

This in transformation were Preparation Additionally, bring received the to that seller as October, actions of the part up took divestiture the life. have we strategic we wraps to we the repayment last pleased issued TreeHouse's Meal year. of note that a to

leverage. you see The sheet on repayment further and Slide can strengthens our covenant net meaningfully profile, debt as XX, also balance our reduces and

the disciplined the will Steve follow proceeds deploying As we from in capital allocation approach note. shared, our

work I'd XX. is that to We $XXX of highlight deliver we like the we've allocation strategy growth to our execute capital capital. on to our Slide disciplined understand a on on targets deployed million approach. almost predicated done allocation on that date, strategically now To our ability capital

Our strong asset. an balance is sheet

we pickles, to and is includes share most capital of with will our third Our At repurchases disciplined by more and million end in the seller of end the management that in Xx, repayment on Board in quarter, the X range, and Xx the low than the at X.Xx. repurchases, leverage a the further in share business, maximizes The investments and the opportunistic focused EBITDA. adjusted QX were long-term such leverage $XX acquisitions, are for our deploying shareholders. third target reduced note recently the expectations as quarter. for returns the be This of CapEx manner of

With will now risk-adjusted our asset based balance the prioritize company, capital returns. sheet an deployment we upon for

range. means deployment be capital leverage to approach at disciplined target may, below times, Our that our

strategically discussed, in capabilities. investments and and CapEx our priority business, inorganically is adding first we As which we investing by have through organically our do depth

now Slide to our XX. guidance Turning on

to the We range revising the and growth updated sales from net year $X.XXX Bars X% year-over-year are approximately our billion business X.X% our billion. $X.XXX removes full range operations X% with to sales continuing Snack outlook This a reflects or to net of business. to X.X% growth associated

discussed Additionally, recall earlier. the the of product a impact the chain updated range reflects and voluntary supply discrete disruption

and of our more in Finally, with revised current demand closely food-away-from-home our to businesses. have we align particularly expectations levels consumption, crackers, co-manufacturing

year profitability From million adjusted standpoint, we to of are our EBITDA range $XXX $XXX full a reaffirming million.

against initiatives and Our line profitability top our TMOS supply chain are enabling us commitments expectations. deliver our to revised despite

of expense also We income million. net reflecting seller million, finally, interest the less in be quarter repayment CapEx the $XX due expect the our fourth And $XXX are range of expectations $XX interest in the approximately note. to to to million

we of million expect With in fourth decline quarter, regard of to sales $XXX a the range at representing be midpoint. the $XXX approximately to the million, X% to

voluntary recall flat volume driven recover net items, would expect a to to by the lapped down and have to the we fully year-over-year we and combined as be now mix disruption. Absent sales these pricing in inflation. pricing our be actions supply expect to decline slightly We chain

disruption million of chain services operating portions Our wind-down the by fourth adjusted driven impact as divestiture. supply million of related expected well of expenses product voluntary in midpoint. be driven substantial quarter the transition discrete million expected of to X% Preparation primarily recall range to million, of is is the at to approximately representing $X Meal the the $X The and the to a EBITDA decline decline $XXX expected temporary agreement the as of by $XXX

adjusted improvement expect and drive will chain for sequential to expectation our Importantly, initiatives year-over-year savings sales. margin despite in our net and lower supply we gross continue TMOS

believe continue focused Looking to further on XXXX adjusted clear and and free to we cash ahead, growth we our these have deliver to EBITDA be pathway around sales, against a XXXX annual targets. targets flow

through our continue our are to our year and top fiscal in grow business. and to XXXX line capabilities build we While not today, opportunities we see depth core offerings guiding

savings planned the chain track anticipate growth. drive run supply adjusted on exit year and adjusted are at $XXX approximately We EBITDA our million will to of an rate EBITDA

I'm ability confident proud targets. is in our to and the growth the of for position our to on deliver business that TreeHouse feel team growth our executing success work and

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

Steven Oakland

Thanks, Pat.

this thank brand call focused I leader. the to team in the to hard up accomplished proud work entire TreeHouse has open as for their we powerhouse. TreeHouse Before up brand wanted in the I'm questions, as private driving team private setting your of for our our a and dedication leadership year success work a

margin prioritize progress expansion. and we execution, and to strategy Today, continue growth our make on

for ahead, enhanced in extending delivering our we value in turn, consumers our will on leadership Looking and private This, remain shareholders. our for brands. customers and focused create

With up the line turn that, operator I'll call the to over for to your open questions. the

Operator

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

Andrew Lazar

roughly less have ongoing I the I the And drag seems trying don't depth. Steve, for know if I of categories to specifically business got like actions you you've retail some areas necessarily percentage business depth? you've you're the areas is while recently where feel now the portion in depth, that sort of you you've those of a we sort know taken versus for around just where depth the and think areas with that less have about are your a where the of business have are like in this that guess deployment still where minute, the increased capital what it of have about appropriate retail talked percentage you of some minimize. and you has that

the Or for to depth retail that And are early how have you continue the of as how some sort do we on up going trying even have to address year, rest I where be more of importantly, much into drag a get should, like, any, again, term extent you a is I that? that at to a into think likely to of you'd moment, 'XX, Or sense makes forward. the of retail that to handle forward the don't where business drag be it as appropriate compartmentalize are part next longer if a year? next it it, guess, those -- you sort and you of just can how guess, Just areas think part the you it? expect on of for we

Steven Oakland

say over half you, our to Thank categories, our depth that well of I have and new Sure. effective, Sure. Andrew. growing. construction, be in would we the we're

solved I things think vendor we do did Coffee the capability And in be really but and needed is packer, of -- advantage it's we like that think We you'll we coffee. to of see category, acquisition in a those categories the has great pot us order that. were a that one for take Northlake more we right? where customer.

organic those So opportunities doing we think some CapEx, with things there's simple investment both we're or with and and bolt-ons.

the So in market. scale business effort making give us pickle in our I the we're and pickles strengthen think will Canadian

I have targeted and be those of inorganically. we help, of that categories organically them. question to will And one whether it each in we've So got we the do need think activities or sight clear line

really is inorganic not The good opportunities news the big. are that

do within Hopefully, us our think very comfortably seen months. helped. last in of I the these And that's I capital think a structure. these we of categories you've bolster can couple couple that

Andrew Lazar

like one even guess both of label if income you trends a the bit are the consumption the and the that we've are [indiscernible] thus maybe case. Yes. private I that behavior of And know, out seen that hasn't of But maybe currently economic of trying a consumers that's far, some industry, than understood, surprised in been greater under? all some are that with we're the happening we private branded. still broader. trade-down little from you lot just lower sort there given one a pressure that the some I'm I that's label just of even laid broader in slides folks then hearing realize

do why think that so And is? you

Steven Oakland

gave left run Well, The and much things performed category are think than are in that label prudent to shifted they out fourth I think mean that. thought you significantly how categories can, trends to we all We consumer it of savings the that, was enough? have better a really stressed there's When was I for for outperform when kinds just written this is The the embed our going over flat going the right? is to just flat. way. really to quarter, quarter basically We I little time, down brands. the down a private of be those. that think guidance being trends we are bit. on we

see were good is We X our it The news is really pleased business just up retail over our way. to shifting point.

add If X%. business about acquisition you the it's in,

that So right? that than think on over I we way. And we it's think X% has time. I volume in margins, coming slower think you growth, lever saw we So It our can our thought. been all

Andrew Lazar

Yes. super very quick And a clarification.

that You in sort increases Is way different pound case of unit Or you've I sort about just the imagining that? to this it talked of sort past about volume. of, a than as volume in quarters? I am talked lot opposed guess, quarter

Patrick ODonnell

both, those No, say I we've numbers probably would I the talked Andrew, same. roughly think are and about

in So mystery there's no that.

to of track is I easy kind case for consistently. think the us

Steven Oakland

where don't we converted businesses the haven't yet, we the new yet. own the systems Brothers' on Especially systems Farmer

being for system. harder without to us on it see outside it's our So things

units cases virtually So and the same. are

Operator

Your Dickerson line Rob next Jefferies. the comes question with of from

Robert Dickerson

your been happening more ability, your kind gauge innovation private feel the label maybe with from what's less core other on you're within Clearly, to has benefit some about I'm to label. activity, all private kind private you you label scaled trends seeing do those overall. how coming, play label. kind TreeHouse don't or just there's private scale of we you to And categories Like more side. private competitive always that Steve, within maybe curious relative can Great. players brands. I'm categories about categories Just in just of within kind increasing? label private agility of then kind speak curious, But of like what of trying speak and in of

Steven Oakland

reset our look try clearly and look another really Sure. to in just is what Rob, see outside our give that TreeHouse the label, we data Sure. we private because market it to try data presentation Well, we do is you'll total of TreeHouse presentations, to to at people know So there, in most where right? just at for categories, of our you our categories how right? are decks try hard categories we aggregated, really we the

I categories, from balance see our would equity have different our But They've very say, now. label rate are I maybe less sheets They've different competitors than innovation leverage private our And competitor. virtually got we them do, sheet. mean the got us, in smaller in much especially right? private Many we're I investors. a we think at of balance than of most companies. unlevered higher private

in think make at our I now. than a set. are we capability that We So and technology, in faster investments able packaging to competitive right see pace

crackers broth a may sound pleased are see but The we're of want those and media will They coming back categories and drive this to pleased doesn't put the like we marketing see brands the behind retailer private label. the we strange, and -- to right? consumer lot in shelf, to Now merchandise. because things

regardless for decision that's brands that shelf shelf, people when what media, great that is of is. so bring made when to the us, right, at And the the through

the is it's So been. think so are the significant today. point gaps most that ever We price significant penny we the price think absolute

spending shelf. traffic we brand's -- the it welcome even to the promotional drives brands because So the

set private think those little the bringing we're less to a looking as label as category, interest right -- now I the normalize. normalize, would competitive competitive I attention we expect So to now would it. will the our more things it's in then, and brands suggest forward rates competitors, But

Robert Dickerson

right. kind All respect allocation quickly, to I sheet forward guess, capital the just and Great. go Got And then, needs. balance it. of with

kind I on an say basis. is the to priority you fund put on business kind clear of you of organic a think I slide, still heard

had just of have and run remember, You now think year, the are look say, of as had than of a are I you I'm CapEx a you you more what, thinking little historically. year, into bit of as when Day. higher still let's maybe cash? you very chain? there that clearly say, curious, sheet maybe could time, balance at projects still with you relative clearly a kind plenty we're next little some is clean but other this to incremental year than know there bit we have I forward supply your next we probably higher get needs If kind even through Investor average kind CapEx be

Patrick ODonnell

Yes, think subsequent about repairs the and would chain weren't it. of do disruption COVID that's that times of right exactly all way liked and the to upgrades kind things able to the during We we the times. and have to supply then

help to us the think kind the over can have chain of savings we supply the have 'XX now to and our of so and us And to horizon. we ability, list we that put deliver plants capital drive that work allow we in a projects that XXXX to go

think so several help for And investments years. pay about will we now, that those think we by making itself the as next

And supply savings. us of will help that drive chain the some

for products unlock that capacity the help will like that us line. that then And help will top innovation of to some we where of things and drive Some our to can with customers. bring

And investments we medium the prudent so because and term. think delivers to while we over think that we can now we want make it's those

Operator

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

Matthew Smith

you a ask lot positive of about as today. I but realize quarter, a was inflation into we business the lap PNOC to where head the this quarter. inflation you're that contributor benefits Wanted in pricing seeing and the fourth

percentage I'm to regular as private actually would seeing today and basis, you you is have And if as curious we're the gap you level the caught where might label about we the the narrow in your And a need to pricing, see I'm inflation So part to will business today the on on shelf. of opinion process? at actually can and that think a expand a retail that gap negotiation price up begin label private on as you again. when pricing asking contract you're reason talk to seeing that's that take think retailers

Patrick ODonnell

Yes.

into what would sort experienced. and standpoint, think would we say that's an from we've So I see went we thinking I of inflation mid-single-digit this inflation, year

And so planning line at XXXX. headed change next we inflation this into point, process don't to for we our as in of have start significant year sight

feel is our spot. good we So like in a pricing

we to earlier, As some competition. than it I did the price the gaps, think of think, -- relates I price

sense next lap think over the So pricing brand and that of to several do through, private gap label quarters. are of I were flow to narrowing more to you is some the which merchandising, that start some we'll here okay. seeing in continue related kind of price macro the

price had more I broadly. more healthy to our very still merchandising think XXXX normalized relative you levels of remain gap when

so very are. the generally gaps where we're price comfortable And with

And been so that's for issue an us. think don't really we

Steven Oakland

that very discrete Yes. And we see next think would in not any but broad-based. be a ingredient specific I pricing, would or specific into category year

Matthew Smith

the materialize? trended Or half the in that on I co-manufacturing portfolio. And question you've sequential is and you you Did areas didn't first headwinds and a to just weakening are your those could basis? Okay. outlined just those businesses the second of relative more if businesses to about have sales ask some expect that one talk in Can half? here, which how stronger away-from-home

Patrick ODonnell

think I to We they're of out weaker growth expecting weren't the those sectors. relative half. slightly coming first significant

a bit end I towards saw think the quarter. third foodservice the of we traffic decelerate

in of a brands we significant from the And some business. food-away-from-home so co-manufacturing, couple And categories that the there. support a drove then down

a trends. little saw that bit, And reflection is the decelerate macro of so which we some just more broader of a

them. our way through -- get those we operating I keep that so a So use think, some us throughput and channels, plants in and helps

bit how about we them. And think so a that's about

to But a from try seeing customers those we'll reflect we standpoint. to with we're So what as continue grow necessary. trend

Operator

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

Carla Casella

going going comfortable while? You I back you to M&A mentioned the you're of it turn leverage take below in up for there guess you what you're to Thoughts sale. are seeing Or market? the a level? are staying it in the if your And to kind that to X down be inside asset you're but now, target, there leverage to your or in bring X.Xx with -- you're

Patrick ODonnell

Yes.

what capital to But right as in not our to drive hurry think is to X term. trying that to kind we're I is a goal. cost tried the of go being a over that illustrate X.Xx place think we be in of the we to longer from

in And that to and disciplined return. we're to be pick investments going very so on allocation, the highest our capital going approach the we're drive

And -- we so try in terms date. done to be what we'll continue and could invest the we've through to scenarios, speaking, of business, that build-versus-buy think generally to in

look we invest capital so continue you'll way. how that And us at see to our

strong balance that And want we'll to sheet. then maintain

not do to So looking go that. we're

drives And so when risk-adjusted make returning the to about lastly, needed. as sense, capital think then continue investments we'll best most the And what evaluate return. we'll

Steven Oakland

of is of thing a the company This biggest Yes, started think lots ago. the Carla, of transformation byproduct got we've that there we I room year really is now. a

for a us. it's So sheet, Pat got now and think, has have the remarks, asset company lot we in a an prepared of I flexibility, balance said the

our business sheet strong. in of plenty to room incredibly invest and our there's keep So balance

Carla Casella

conversation thoughts I your Or whether levered rating look -- the credit? the mean agencies? Any on for low with relatively ratings you had have Xx a the

Patrick ODonnell

Yes.

we're We well. forward side dialogue in We've at that. leverage, with we agencies. have look some the quarters the continue and deliver delivering to of here continue as how as ongoing rating they'll got of progressing. look to we expect we terms leverage, That's to profit improve And other to

Steven Oakland

Yes. And that fair, unable were to an paid give to for off. to exact be we be them note timing

calculation, in don't think and us I So note credit -- give they net. as -- the not they for did their

cash, think relook I So that it. to have at they'll now that's

Operator

Your the of William Blair. Andersen Jon question from line comes with next

Jon Andersen

Two advance. quick apologize in and ones, I

guidance were have relative the was unit quarter units quarter. what on your Where of that think growth? core to X% in? into expect we the Core in in expectation then retail that asked. I kind up these fourth been your going in XXXX should sequentially already retail and And

kind have repurchases business to of complexity to through I'm shareholders decision, more why about is today not And second optimize of returning thinking more? you referred to the M&A? before disruption with businesses considering of kind was the capital acquiring supply the adding the then supply maybe in allocation across press chain release, the or that you mentioned question chain before And cash kind the more that share

Patrick ODonnell

I Jon, start part. Yes. with the can first

relatively retail in down over seen -- I core and think been X%, we've been we've X%. the the have brands seen trends flat, label generally, has year private

something And so similar to our expectation was that. see

the pleased a this we're crackers speaking, did. do better category, the as bit little we -- quarter. That category about But of movement we over there's out, we thought that's X% see thinking -- we're where really how could than to some increase volume a year. So case generally we pointed in there, one couple

Steven Oakland

is this Steve. Jon,

those You weak in made a to business. good we our here And system. opportunity do the that broth be might took in that this our quarter regard question to really places fortifying with

shut the it not training. down. of out on rebuild One the did was really how did full took basically thing plants entire performing whole We broth wanted and comprehensive We we to. a it, our staff

that drag a And And has we on years. us quite we -- as of convinced, XXXX, go to number business it so going it's -- a for that a frankly, I'm be TreeHouse. been contributor into will to be

quarter did it more this our Now it in We dough in We that That was the a it capital. times. did second we business. business. we've that needed We the it facility spring. and refrigerated a in talked did cookies also business, in about in our done now some couple

of And got so those we've I think us. most behind

on we Remember, those have amount deeper us, we got we're So additional of to have existing been historic TreeHouse. our in actually add main go going strategy very X that be We've so addressed with drags careful think. I complexity. is that of to behind agree complexity. areas not you, categories, to But on the

'XX. us for And going set so that's to really a nice up

Operator

today comes Jim question line with from Stephens. of The last Salera the

James Salera

you And an business? give guys brand or the that to kind historical label brands wanted kind you for, follow-on like than of Truth to gaps I Simple ask, that, the GreenWise, wider does to about private opportunity of growth private expand the higher-tier price parts that the like at kind margin offerings? up higher-tier of private and as talked some of portfolio give Kroger a label then I'll Publix at of say, their Does opportunity to range. that support

Steven Oakland

Simple in large private think right? I mentioned the right? the largest what natural, and where I all the strength private Jim, I one mean of who of different to is is gaps business, it So We program. the the categories. regardless have using buying, given do those they're value natural think Truth, gives that just consumers, opportunity are more you given that's for more do And sheer brand, right, and there consumers' country see we I We retailers. -- an customers out brand and value see chance do believe clearly organic within retailers a want now, differently. label their organic, label head our But in do happening very added.

of and changes lot talk a about strong. the to health different there's all but in purchase And wellness continues behavior, be

grow. continue and natural organic label, not private So continue They're to ingredients enormous in to but they grow.

James Salera

systems systems. you're transferring on helpful. Okay. in know Is Farmer you're orders anything Brothers, of it can addressed the apologize operations aware already, create on we so expect? you over, should there be headaches side, we And when I lumpiness I That's sometimes migrating just the but if mentioned there. that still might near-term this guys any then you believe I

Patrick ODonnell

We're No, of the wrapped lumpiness we're those things type terms things. of quarter. be will to we do that. avoid that types prebuilding expecting here of anticipating that in fourth and necessary up inventory Obviously, not the in

And we'll manage through so that transition.

we've well that's these over think time in we've number of manage done terms something of to a been system transitions. as able I

Steven Oakland

key Sure. well. that one And say really small. so I would is We the know customers just

customers on have the ship We'll customers. key the we there. we those other is handle sure So And make a product items.

one that So I seamlessly. think we can manage

Operator

to question-and-answer conference like the our over concludes I to for would turn closing Mr. Steve Oakland back remarks. session. This

Steven Oakland

like you forward Well, us, for the with being thank you to opportunity to and each look to to individually. speak I'd all we

a great So have day. Take care.

Operator

Thank conference today's call. for joining. concludes you This

You may now disconnect your lines.

TreeHouse Foods (THS) 6 Nov 232023 Q3 Earnings call transcript