THS - Earnings call transcript Q1 2024

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Operator

Welcome to the TreeHouse Foods First Quarter 2024 Conference Call. [Operator Instructions]

Please note that this event is being recorded. At this time, I would like to turn the call over to Matt Siler of TreeHouse Foods for the reading of the safe harbor statement.

Matthew Siler

Good morning, and thank you for joining us today. Earlier this morning, we issued our earnings release and posted our earnings deck, both of which are available within the Investor Relations section of our website at treehousefoods.com.

of would on advise to today's the harbor I 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 is the these risks contained SEC. concerning company's with in Information filings the

Consistent with of continuing On release business. measures earnings September the of and in our completed our their discuss GAAP divestiture XXXX, operations to be direct most today's reconciliation adjusted deck. quarters, XX, Snack prior the results we the A non-GAAP an appendix will measures found of can comparable we Bars on basis. tables

the let over and me Chairman, CEO Oakland. turn Mr. that, our now President, to Steve call With

Steven Oakland

the everyone. Thank of be year. results and accomplished quarter pleased and like I'm we've moment to you, a leader that all our be provide first outlook take to reflect and beverages. the good to an on our as and you our private to brands, journey a in financial to on snacking But for Matt, discuss positioned morning, today first, with update I'd remainder

create we new just XX the to months has TreeHouse. our It of was and ago sharpened a the team focus tirelessly worked transformation that began portfolio company, our and

that am our the strategy transformation shareholders. While I still execution confident our our will absolute results returns of and forthcoming. drive for are

our stakeholders. in for create organic and superior let are value We results, our and all across by categories. Slide first and start with do our that, chain depth remain quarter long-term of which Snacking delivering growing enhancing Beverage on will, We growth turn, me our leadership This on outlined focused and With X. this service. drive and sustaining supply

which our of We range of $XXX delivered year-over-year, million. of end million, $XXX guidance above the while top X.X% sales down net was

business, million $XX about range. was burdened speak work of results were EBITDA the adjusted our I by These Broth guidance more within addition, In which our will our restart shortly. to

our believe well start our outlook. with positioned on pleased solid full the I'm we that year year to are to deliver and

XXXX our on a quarter drive provide reaffirming will pipeline results our at our sales and we first are detail growth. shortly. significant Taking look TreeHouse on Pat this to more net guidance. provide Slide to would opportunity for I As update an guidance result, and the a like organic X,

the team partnerships. transform this XX% tandem grown built XX I'm pipeline undertaken months. last encouraged as our pursue to our to The the new the customer company has continue size over commercial quarter, the that last by in by the of during teams over work with has pipeline

including Pickles We of the year, and we to growth capabilities will Dough, categories are the in and drive well the plans within Pretzels for opportunities since the executing in XXXX, Refrigerated a half depth. have start name showcase and where our Cookies, action results numerous and advantaged against strategy securing our wins These second few.

an our Broth to facility. on Moving on update

our X, as to Slide efforts anticipated. see As you continue on can progress

We have tracking and in are it. a place against plan

have Broth half our our second to facility upgraded as and in the performing this to customers period. our our to doing with have expectation much product lift facility best that trained will to the other We a profitability. at been workforce process In should and possible the improved provide continue and maintained in This and provide increase have coming we our equipment, meaningful well, meantime, production refined as months. is our our the

drive supply with network, to and enhance invest competitive chain execution supply in directly our like to to partnerships chain positioning our strengthen I'd initiatives. our Next, our consistent continued our briefly through discuss our We've customers.

X our priorities around are improving teams procurement of distribution progress and TMOS, Our network. our driving

of or on seen quarter. momentum equipment has Slide example where X, and is good impacting our effectiveness, how overall first be in An OEE, the can company continued the TMOS to improve

further in are levels Additionally, the in that contributing of our we XXXX. restored half improvements to first service TMOS procedures

confident in the that feel from work achieve distribution. logistics can our and procurement, also We benefits we across

year. significant With the we the expect to initiatives, half these timing of roughly of cost in latter $XX drive savings of gross million this

brand Turning powerful positioned attractively TreeHouse of long-term now incredibly to consumer remains of an North update trends, and X towards growth snacking. the America the consumers' on private intersection the groceries at in the shift industry.

the for see still in you on decades. brands regardless last economic private significant can the As the X, Private Slide over of changes backdrop. runway gained growth, has X share consistently have brands short-term

consumer of enable strategy in deploying drive market organic leadership to should growth. beverage and trending share to categories capital Our with TreeHouse consistently food focus deliver a

measured to Taking compared In look brands. unit national categories which saw continued at quarter, we a brand first volume the to strength of retail which modestly were closer in national channel private decline. the compared to positive we operate, brand continued private brands, sales in

help Additionally, X, the with see quarter. private private you private price historical growth. that can unit to offer continues brands remain relative second top prospects our our brands expected performance new This and national elevated brands our the in between levels and strong environment sales the value is remain consumers. of on to supportive volume opportunities half to Slide month share, be in to our can Indeed, which gaps brand categories, improving, each increased line of underscoring

the latter facility meaningful the deliver progress with half business also and this our have against well We Broth restart are of in plans in to positioned our year. of made segment the

cost against trajectory within in distribution consumer are industry. of capture strong expansion half. excited second tracking well positioning positioned to plans, seeing margin we're by I'm out, our and the the drive procurement play help Overall, our the and which TMOS, should the we are our tailwinds and savings goals business We with

now will Pat. call the I turn to over

Patrick ODonnell

team entire and to for good their a solid summary fiscal the work results XX. with like Steve, of our our Slide begin on I'd has year. to I'll start which TreeHouse quarter, thanking Thanks, this first quarter start morning, past driven a everyone. by

as prior Adjusted Net range. quarter $XXX end declined year-over-year expected of year Net exceeded million adjusted XX, of with net to line guidance detail $XXX in first relative of EBITDA top million. expected. sales we $XX and Slide On our our of on the our provided EBITDA sales the was both million drivers. sales have further

net sales first X.X%. quarter Our were down

and driven by Broth Coffee Volume carryover down partially at and we the acquisition. primarily business from of our the mix year-over-year, year facility. downtime our last This exited offset was was contribution that volume planned by

pricing we to due declined as commodity-driven adjustments pricing Additionally, targeted expected.

due through Volume absorption, was you driven we've passed our coffee including million down drivers. category mix, quarter, and On to prior discussed. mix, to Slide lower in XX, with EBITDA net customers. where that adjusted restart was I'll including have Broth $XX year, of PNOC, take the primarily our from contributed lower unfavorable our million. volume business commodities, we This the $XX driven by including the through pricing costs compared commodity overall arrangements by

our about and have continued are basket year-to-date, commodity think others what inflationary, moved there seen we've to lower. input have while we As be costs that

year, basket that believe continue to will the We full be inflation our modest. across on

those the in to we move where the we of we higher increased recover remainder through Within inflation, of costs are are the process pricing taking as seeing the cocoa, specifically pockets actions year.

drive $X chain hard and our restart. by network our headwind are and work procurement year, costs prior improvement. teams primarily initiatives labor Broth driven versus an executing were profitability throughout at higher impact planned of to and our Additionally, Operations supply the million the facility logistics

to primarily $XX contributed Lastly, versus SG&A other period due prior the to year, expected. million negative less we last income relative and TSA as

operating these with TSA contemplated guidance arrangement. Our first the expenses quarter higher associated

have forward. the temporary to We expenses operating actions reduce taken necessary these moving

management be manner Board on enhances capital focused Slide Moving strategy. I'll to in that to capital XX, allocation for continue on returns on our a touch shareholders. deploying The and

and do inorganically CapEx remains our Our business, we by adding recently the we Pickles quarter. with through and like in which first priority depth strategically in did organically investing first capabilities investments

We share execute stock program first opportunistically to million company our of repurchased $XX the and in quarter. also continue repurchase on

while a risk-adjusted look our returns lens, deployment sheet will balance be We all capital at and continue decisions disciplined to maintaining through strength.

to our now on guidance XX. Turning Slide

maintaining billion. are billion to $X.XX a of We outlook full X% year-over-year our $X.X flat sales net of range year to or growth

We for expect positive perspective, commodity-driven for slightly we to modest planning and volume a the a pricing are From still be year. mix our decline organic year-over-year.

acquisitions We the continue the to year. from volume completed anticipate mix and in benefit a slight last

expect range We the of million. EBITDA adjusted in $XXX to million $XXX

cash expect Additionally, we free million. $XXX flow of still at least

of anticipate of net we approximately $XXX $XX and million expense expenditures capital million. to Finally, million $XX interest

pricing X% the a of the million $XXX As $XXX be of sequential the single-digit contribution acquisition The second a million, primarily due mix, facility. a decline by decline offset downtime first be will midpoint we versus will quarter, range the by at largely in quarter. to low from primarily sales the driven year-over-year to volume the coffee. it in Broth net representing single-digit low The expect at to organic and to be to improvement approximately related planned relates decline volume, positive

I'd can inflation the remainder adjusted XXXX. general restart the second impacting to the EBITDA range in expect to of on of provide and the and pricing what Broth $XX expected like sales headwinds the volume for be million EBITDA in million. lag our period. $XX additional impact net you the Our adjusted on of also quarter context provide cadence to and cocoa of is mix, to recover The facility and some

utilization, differences impacting and our slightly We period. XXXX in call, fourth stronger with to regard our to believe and quarter will due which strongest of experience our on from sales lower with facility. the we the the the are given most the second second lowest seasonally the the our fourth net seasonally Broth net prior typically volume more EBITDA, us quarter driven the also in first year, split half which demand on standpoint first discussed still to constraints our sales we quarter. sales historical driven our is of half As during close cadence. relatively sales, There the quarter The half by in some adjusted is higher year, a by net higher being in pronounced seasonality look pronounced is in

EBITDA will adjusted historical skewed be our split, closer which However, XX-XX second more is likely a performance results. the than half to our to

to midpoint believe between EBITDA EBITDA to second we adjusted similar quarter the guidance we third $XX sequential $XX magnitude third fourth a will of range improvement of see in and another anticipate we improvement specifically, what quarter. in the the in our of More quarter million then year. We earned from this of adjusted million

ability We confident strong half our in are to for second several reasons. the deliver

exercise The show our and provide largely in both beginning the third $XX savings One, gross began greatest procurement due improvement efforts our quarters ongoing TMOS allow profitability our the by in initiatives. to distribution savings to to to ahead one the improvement driven third cost the restore of continuous as well quarter; Three, fourth be with of our service season roughly peak sales new million. should should two, facilities as of partnerships will the net savings improve initiatives that the impact levels our fourth ahead and of us broth quarter. Broth

to actions recent related incremental perspective us the will some pricing to have in we Finally, in inflation place which a timing cocoa, back recover half. benefit our from commodity

With remarks. closing that, I'll turn it back over to for Steve

Steven Oakland

Pat. Thanks,

the private up your as brand the strategic I TreeHouse dedication in a open I work thank questions, entire Before hard call their driving team want to our and leader. for to execution

margin growth expansion capitalize and the We execution, on we prioritize industry continue and trends. consumer to as

to result, our guidance. well are deliver positioned a we full As year

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

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

Operator

Instructions] [Operator

Dickerson first Jefferies. Rob The of comes from question

Robert Dickerson

questions. X Just quick

Steve, why one curious, kind price volume-decline of over environment Just given just gaps. First your we've experiencing you I'm is the those the just price have the like been showed widened, branded maybe few to even is maybe the perspective past gaps what slide as when quarters. right? of kind

Steven Oakland

Sure.

couple I things. think there's a of

customers. reset in actually I a data recently think there's the larger a of small set to include

that it. data has Now the in data that's back all

all data. it's So apples-to-apples

is discounters little think it one gives that in now the largest of I perspective. a data. Again, So hard clearer

that news a good I looking clearer understands of segment But it that's also it's the looking investment there's consumer think us is consumers making example of So in is retailer at the for brand, picture. least retailer private value because large for value. right? gives a or the an The

both they're the national investments can the you've and X at of I making. think last articles, a look media largest and you customers weeks, seen our over couple on the

investing So I the -- the it's excuse think label. customer retailer, in me, private

Robert Dickerson

volatility clearly, right, then All lot cocoa. super. commodity. been of a on I And in just mean, the there's

to hedging needs mean you're wait right? and pricing commodity larger that the some as I that some offset much fairly well-defined kind You around about hedging the clearly of comments goes, made a how have curious of where help to trying on have they're of commodity. don't that. you some to brand manufacturers I'm dynamic pricing, just see practices thinking maybe

So needs like pricing of you those think bit like know, a take over XX% kind so. goes or months of where higher and those XX the needs, commodity that or all. kind I'm of to when just X curious, don't pricing pricing are next, of little I That's see

Patrick ODonnell

Yes.

this Rob, So is Pat.

we bit, our from go would is we than branded the when to national with hedging much would but to term say, We I what product. it little we more So cycles our we -- deliver hedge know see do a tend of need tie players. you short

the well, we commodity factually to cocoa not particular, pause the the us what's need a but go been which it our And us, for very back inflation. realize that obviously, in in was customers, point we several that received, on over inflation, has going the given today, customers to of for bring to we with see some terms so pace market. of largest where last factual in and very is And months have conversations pricing take

Steven Oakland

I Yes. in world the is and know you've -- written it, a you established lot I well cocoa the pretty Rob, mind. customer about mean

said, a speculate what -- hedging we tie we the have commodity our We And So Pat pricing we to do tends which cover contracts, big that. cover us. it's not need on the for So our we committed. as basically to right? don't cycles, beyond to

has and dramatically. been So the pricing about cocoa we moved customer as feel the from good the response They has expected. know

Operator

from The next Lazar of Barclays. Andrew comes question

Andrew Lazar

'XX, of year back The to historical suggest end. million implies conservative second call $XXX or of closer of $XXX of, the full more EBITDA first half, rate, cadence trying normalized chain about so, to if more you've so suggest rate assuming early right you've I'm you a run spoken it's does guidance into your XX-XX to guess, half the back think bit way to a second that's about obviously, bit? to on that sort it? provided get half than but the million derisked it, I run half And if EBITDA the split, get you a power think to now that supply quite just the And higher maybe million. sort earnings' $XXX of And typical that

Patrick ODonnell

Yes, reasons what Andrew, reflects I really pipeline feel think in that savings cost that half line, we're progress back we about that a just and of in of procurement year. to making our top is exercise. able lot compared of then the a strongly the we've $XX the terms the the couple And broth, which that build return a been of prior up related the to to service million, big our to lap terms on

what back like we're when But heading continue we the good progress the when the making next we'll And making. the half we see to get year. And head into we to the back environment -- feel good have XXXX we'll more. into macro progress so we we're talk that year. feel about as about of we Obviously, that looks

Steven Oakland

The the only would is would exit Andrew, year only broth we being algorithm, the only kept us $XXX on thought million. is I that really the kept last thing us that that thing our from we from that exercise. add thing

that a So better in us, behind with much place. we're

Andrew Lazar

of P&L? quarter of that really confidence much -- this through more can half some you the got, wins sort more may in this it that does increase impactful, the when what's to end, The of it of it's missed that can really the the towards Is flowing the the generally well? and pipeline the I so Or that if much and as fourth obviously, the of visibility in 'XX? And this. have actually Great. timing some you've more back year then start you give the new apologize I covered -- XX% that

Patrick ODonnell

really and think in We pipeline QX. starts to Yes. that QX deliver

So you'll both. see in

we've very standpoint. that active so been from And

set marketplace now. broadly of having in constructive largest private customers our invest what very is I think up to We're environment our seeing label. made in to terms we're very continue -- conversations with the more reference Steve the regional much in

So we're encouraged by that.

Operator

Matt comes question next of from The Smith Stifel.

Matthew Smith

of you guidance about can When us the million the were idea level? the and you plant phased still you an first EBITDA. or $XX second quarter? Broth phased towards Is a the year, provided that quarter talked for in disruption costs And the being give drag about on the how between first it are trending

Patrick ODonnell

Matt. Yes,

right. don't more we we little materially, think line quite what few curve, dollars QX. to with are continue say QX look continue from Broth, think we more probably materially timing thought. but there's a We we that. -- given bit at QX impact million the as as probably to it's had probably bit it we little what ramp I get was didn't QX, And there a doing a So of than will were do We But QX, work, I different in than the we I throughout ramp what would was that in anticipated.

product today. We are making

and on And we But what's glide of work terms so that's through of the happening today. in -- as our quarter. the we we're we rest path thought we're believe about how it

Matthew Smith

during see more talked partners profitability. or private just hearing the private -- for more promote one of you in second label seasonal for frame? Last label they that lift seeing positive maybe about as will And the become retailers the your with their me. that the time they you promotional very are quarter, when you being year, Are from half

Steven Oakland

things things coffee, kinds see in the supply really want they Yes, some year. And margin, half. think to refrigerated like in it's the I for think that more we'll the in those dough, that chain high the this it of they're but of back we'll categories, I see do seasonal Matt, confident driven. with

So of things, little last uncertainty cetera. year, there was bit and a packaging et on some still ingredients

activity more that returned service the I drive little quarter. to promotional in think a we've fact fourth will the

Operator

comes JPMorgan Our next Chase. from question from Carla Casella

Carla Casella

just a where With could into it is on contracts? have all the is with of that category movement follow-up hedging? way going where more pass-through still bigger coffee, I Or better managed go you a through cocoa. you there, the it see

Steven Oakland

to will Carla, I have think we volatility. see

I think market in the dramatically. the one volatility, swings coffee is because pass-through right, event Brazil weather of

structural retailers that's And because way is participate the case, that. are functional they there know step-changed be that I the the it we that what so in maybe some that If the pass-through volatility, of fact, appears as for them as like If in cocoa. from to truest feel kind of it like we issues the would commodities. pass-through we both is just now for have that, cost don't saw sides volatile see of use

Carla Casella

a in slides, you wins And you Walmart trends, a new talk you explanation any bunch wondering some any private did even but your can you're seeing Great. on if label just give to, announced other just gaining losses good, through... if or to then how key can label Okay. talk talk private -- share, of just other could you if and across categories. big it's or I'm expansions

Steven Oakland

XX I the new sales systems, separate aligning TSA distribution intertwined on and for was and back focused the on now or opportunities organization and it touched the capacity I'd XX% right? run focused last and has those step. a are think say building We prepared the year reorganization of pipeline couple sold a both the this the things. I been right? ago, on they et all that months we X cetera. margins focused would them we so our across best of one remarks, solely our business so, on combination that take in organization And capabilities that the and industry. have with our and And company, of in And to for

new Wall announcement So an well. of one label, think in article saw as hard the Street had that things like Journal the you of discounters what private I

but lately, on on So our the opportunities now can we're team, and there's the been really pleased divestiture. team a focus align we that rather than administration lot those out of

we pipeline now. opportunity biggest that's we see is So where the why so and think solid right the

Carla Casella

Okay. And balance sheet. just then on

side, you're normal quarter, this also Is the you the we On Or to the should decisions in cash kind more lower. see of levels talked capture that were payable that those better of capital back working few but about use your expand next making terms? quarters? just days to

Patrick ODonnell

that. that I different was decisions on think there we've really nothing made

So that's function probably just of I a think timing.

see seeing not as we continue be those terms historical pressure anything we'll so at levels. forward. any go And on to vendor We're or

Carla Casella

statutory you did did capital guide it -- use? year, And working I'm you on be like Okay. the sorry, whether for will a

Patrick ODonnell

We guide not. -- free million did sorry. least at we of $XXX cash million, No, did $XXX flow

Operator

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

William Reuter

-- are a business have wins out, to being laid in a bit were My these by Broth -- first would Or wins already guidance? some your or be the to of that you question, that positive were delay knew on facility? since maybe offset these getting you of going new are benefits that been compared awarded initial in kind you little guidance they're the have that you been to provided? those wins these are So

Steven Oakland

progression, as go. to year, these and is We natural materialize right? the No, in this things guide the early we tend

sort it's a of rolling cycle. So

what So guided, we we the on and that right? it's as new And I to is are plan, we progress, say, would we on good where initially think Broth probably right really We right thought. news. these earlier, we feel spoke think about

William Reuter

more becoming less been past? there any in is bidding the the change And it profitability for less or such than competitive private or label it. environment greater either of that of some is in in Got these volumes terms the competitive, is it had

Steven Oakland

No.

areas there's of think I volatility.

simpler lot different categories. than still a before, is business, although Our of

category-specific. think I it's very So

have we're where the those areas where in we're it's we have cost that investing think those is depth. assortment I well we necessary. structure means have And -- to to deep, tend other we areas build we and which capability, do in really

margins have capabilities structure the cost best find to tend the we the the in those places where all and So we appropriately aligned.

William Reuter

capital then And me just lastly it. Got allocation. on for

You've prepared allocated some in between And acquisitions What additional about versus repurchases? your the share made of capital handful you a you think do share are you potential Last had repurchases. M&A year, be landscape? comments acquisitions. seeing will how

Steven Oakland

Sure.

I think capital always Coffee -- acquisitions say last addressed our priority to we all first it the we late Pickles been first gaps really right? that capability our closed is here. the seen capability-driven, that you've in And business. of last in actually for but We announced our have of in invest year. We year, actually did January. It week

So to that opportunities. key see in where M&A build businesses would be we growth those an capabilities opportunity

transformational term. see don't then the sheet to don't returning But maintaining our near the say see balance then Never in I in following about near capital balance but never, shareholders. I sheet, term. obviously, So that that, and M&A it's strength it's

X, we all think do frankly. quite we So can

Operator

from Inc. comes from Salera Stephens today question last James The

James Salera

costs. on talk ask us move I labor And your manufacturing labor to sticky on to kind as of front. guys heard you that areas across of seeing of wanted companies the just input just any their being we've I labor about color other for give the are opportunity any facilities? Can know you forward? leverage inflation one you

Patrick ODonnell

Jim, this is Pat. Sure. Yes.

paying year ensure over right forward. going some we're built seeing tried the structure labor very terms we done We've say about got and wages in the would pool, generally the years. of are of our into cost in and locations that we've the was right we how I inflation, thought labor working be forward that to and couple with a to we've So

we're place. feel probably we while location, speaking, so on depending And there's that we good a challenges in pretty generally like think

from as attractive well we like wage operate. are And just us those in things that make shift as both which so investments and we've a employer in schedules places made to trying an

Steven Oakland

would we it one locations places value, kinds tight. and things forklifts a investment growth, do did put the in to and improved and the where can to is where that And we're just can our our rewarding labor We we it our automation, workforce we our that in higher-margin But target a talk thing. of in positions. transformation other put of where using side using the those lot automated cobots have that is sheet, supplement business. I Yes. higher transformation right, it higher add we're invest put categories. us are in those balance position us we more where some labor and about and And

And so transformation other current put we us I not future, will place side challenges the think the our bring a really in we ones. manage the just think ones, labor, the over can the of where of but future

James Salera

That's helpful. And a ask maybe if follow-up on that. I can

enough better in turnovers now You making -- worked somebody the and and OEE your of with labor much make started the that have manufacturing that the employees the that on target in of that better talked overall about your just how is have lower [indiscernible] long internal that mistake visibility XQ, just plants maybe process. some for they who lines of have, just like automation you in versus

Patrick ODonnell

and recall, last took plants, if invest I of plants. you a couple We time to things, we're from a TMOS consistently in our think both ensuring our across it's Jim. probably year, some operating

the we So investment deliver -- and it's I to could some in say that invested where important. of equipment that's in season that our of ways get then years think would know the activities the maintenance we of we tried And over running We've TMOS sure also I reliably. to make some the that's places terms the we more the work.

investment combination we've made And I last a equipment as it's over the people so of well think both our that investment as year. the and

Operator

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

Steven Oakland

next a like all you today. to Have you quarter. speaking thank And with great look individually forward to and I Yes, Pat to being day. and for us I'd with

Operator

call. This today's conference concludes

disconnect. now may You

TreeHouse Foods (THS) 6 May 242024 Q1 Earnings call transcript