POST - Earnings call transcript Q4 2019

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Operator

Welcome to Post Holdings Fourth Quarter and Fiscal Year 2019 Earnings Conference Call and Webcast. Hosting the call today from Post are Rob Vitale, President and Chief Executive Officer and Jeff Zadoks, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12:00 PM Eastern Time. The dial-in number is (800) 585-8367 and the passcode is 9777955. At this time all participants have been placed in a listen-only mode. pleasure relations the introductions. of my Jennifer over now Investor Meyer, Post is to floor turn to It Holdings for

may begin You

Jennifer Meyer

Post's the a Rob Vitale, remarks our Good us and CEO call. you thank Zadoks, with prepared site President will Investor supports me fourth our begin Jeff The these for CFO. With is Rob morning press earnings Jeff quarter filing postholdings.com. are on session. for and today and XXXX and sections and today in remarks and Relations both brief afterwards SEC the release question-and-answer we'll Web posted have our at that joining

In the SECs addition on available release the Web site. is

to considered materially from Before actual call and to statements. are and this management you differ risks that update contain by results no of that could These to are this statements. we current like date call be these should investors as subject continue, the obligation uncertainties I as carefully remind statements forward-looking forward-looking would these will statements undertakes which of

a being an be replay will Web recorded on is reminder, our this audio available site. and As call

And measures. finally, discuss call this non-GAAP will certain

of to GAAP see and the press non-GAAP a measure yesterday these Web posted release nearest issued site. our For our on reconciliation measures

With turn that, Rob. the I will call to over

Rob Vitale

you morning. for good and joining thank Thanks all Hey, Jennifer us.

my Most This strategic morning, our I'm going XXXX expectations. go comments address of our over to results. very briefly and XXXX our activities

Each came business expected. reasonably in quarter as Our fourth performed well.

exceeds of will a breakdown pro our our full of on growth range. basis, segment a X.XX the landed which This rate the billion at the For consolidated guidance discuss our midpoint X%. of adjusted year of of algorithm EBITDA X.X% performance. Jeff long-term forma represents

that our It teams BRBR. and trading under XXXX possible. was effort ticker strategic Active made the XX, the Inc. known the I now initiative of for key as thank congratulate want on began our NYSC the The October BellRing IPO Brands Nutrition on IPO exceptional the business for to

the and of tax XX%. is illustrating but structure retained Active in approximately sold site A complicated, equity XX% and essence in continuing is its look and and Web leader legal Web the as BellRing in SECs Post we public its site. well-positioned on of business The nutrition growth. to interest ownership a forward structure is on convenient document support to posted our the the Nutrition to

hear leadership team can on conference the You from BellRing this later call our directly morning.

continue cereal intense government is We Ready-to-Eat We the believe to aggressively. achieved business our allow the TreeHouse us and clearance business. to acquisition the compete that more competition receive Cereal in this and is will efficiencies should there that that of pro-consumer deal we for believe unambiguously

we that this approve scrutiny engaging We to to and received are are transaction has the surprised combination hope it the the that FTC FTC of has, but actively with the convince soon. we degree

Our XXX% $X.XX BellRing billion, from outlook line $X.XX with in X% algorithm. fiscal for XXXX which is contribution to billion adjusted is added EBITDA growth our midpoint long-term including to

year. of favorability the modest expect We half the to second

range a has As fiscal million. XXXX to you guided seen at EBITDA $XXX of likely for BellRing have million adjusted $XXX

others guidance assumptions. the among incorporates Our following

the see markets slightly cereal domestic to continue We declining. in as flat to U.K.

products. strong business and to the growth dish response convenient side food of Demand Our in retail half for and our competitive timing product introductions business, activities. second promotional XXXX service remains our favors nutrition our

footprint. in Accelerating capacity constraint. and service we third-party commodity growth. dampen various refrigerated costs tools pricing will faced demand the navigate our products expanding have limitations retail pressured incur supply capacity including offset we our remain as manufacturing most tight but it consumption Labor wide the cost reduction. category retail associated with capacities, temporarily potato we These will sourcing trap have businesses, food through of in to We and inflation and markets

company X.XX. growth adjusted growth be of million as last, dollar exchange and incremental expected historical approximately incur pound we substantial ratio public to assume support BellRing And $X to top-line of for below invest trends EBITDA cost. to XXXX we is a

these will build algorithm, that be respect to expect with year to our cash and long-term to line assumptions we in respect growth to generation. a both Again, with with

of because a XX. owns forecast common to the that X% structure we XXX do any The Post September of more announced Recall in akin provisions XXXX Avenue range consolidate EBITDA includes approximately week. exclude million and impact of XXX capital for Xth Food million. Xth the and a we XXX investment. the equity not of Xth adjusted its & last control These to at challenging of Avenue estimates and equity million XXXX are acquisition debt Provisions, had preferred capital Avenue minority structure net planned the

Considering flow Regarding cash projects. XXXX, approximately for we million repurchased proceeds in from reduced capital operating invested million generated internal IPO, capital We meaningfully the flow XXX adjusted allocation, organically growth million in EBITDA and million. we cash in generated we XXX shares of stock and $XXX the common leverage. X.X

which For opportunistically flow capital approach reduction similar earmarks the balance capital uses XXXX, sheet market allocation, would towards or anticipate investment and cash I debt in conditions. free to depending a on shares M&A

With that, Jeff. now call turn over I will the to

Jeff Zadoks

everyone. Thanks, Rob, and good morning

X.X%. and net fiscal and for primarily unfavorable from quarter this resulting sales X.X% and expectations. results $X.XX Average pricing forma consolidated our by consumer volume the grew improved and billion met X.X% EBITDA the despite respectively. gains. Pro were respectively. X.X% quarter year mix labeled for volumes net net Post private sales grew quarter brands million Our $XXX.X Adjusted

grew commodities, from EBITDA growth with the We sales. this Consistent net freight year-over-year systemic the which inflation saw in the compared fully third year, offset quarter pricing prior X% in this to wages benefiting primarily a quarter. in good improvement adjusted and segment quarter,

weak to growth the sales promotional lap XXX net created sales British prior continue we quarter Weetabix the strategy headwind points. pricing reset. pound, approximately year decreased which net XX.X% net increased driven our year-over-year as the Average X.X% by of to basis over

exchange declines from declined capacity resulting Weetabix's products Strong volume extruded in constraints offset growth products. non-biscuit stabilize. which investments the volumes from a more raw rate. balance brand-building unfavorable was on and continued currency the decline resulted of by premium material volumes of biscuit at costs. Weetabix in in compensation X% half level than branded incentive was private label Core restoration increased greater adjusted of by biscuit to caused EBITDA The

points to in important full is incentive year headwind a building note for of EBITDA Weetabix increased and and of compensation. adjusted the XXX grew and the It that approximately in investments currency segment in spite X% brands excess basis the

and segment supported higher by products. X% driven volumes year-over-year The Net EBITDA adjusted egg value respectively. fourth sales products service gains sales product X.X% up by grew good ag volumes and growth Volume in growth with favorable added a in mix in refrigerated growth increased and growing had with both quarter X.X% strong X%. net and retail food X% up of potato

remain this quarter. Side growing dish X.X% volumes healthy

to branded nearly XXXX. While continued grow volumes dishes inhibit the mentioned Bob growth with Rob rate XX%, side capacity in constraints Evans temporarily up the will

grew this and Segment sausage price products. benefited volume an this to adjusted costs from dish modest improved and growth cost offset Higher manufacturing were growth. quarter EBITDA X.X% side relationship for

net favorable input adjusted segment decreased from EBITDA X.X% benefiting Interactive costs. while nutrition grew X.X%, sales

this later results conference will can Active call You morning. Nutrition's held BellRing about which this detail on fourth quarter be hear further the quarter

how to forward. Nutrition we business will explanation our like the I to going Before report moving provide would guidance, Active a of brief

the beneficially transactions complicated, at Post business, the I did this keep but and BellRing mentioned, a structure The IPO Rob our of consolidate IPO public shareholders. not high As is but owned XXXX continue will to impact XX% non-controlling related or interest will perspectively the quarter its the report a fiscal level. discussion for will by fourth reporting

will not duplicate BellRing Brands which have disclosures. SEC its and filings, calls earnings Inc., conference overlap may Post own but necessarily releases

the and obligor's terms BellRing other of Inc., Brands unrestricted credit its have Post our as as guarantors the nor such party's designated debt. or or neither subsidiaries We agreements BellRing under of

leverage Accordingly, $X.XXX of close made basis BellRing debt following independent term This repayment pro forma loan of billion reflects October statistics we the and report EBITDA. Post on this the net adjusted in IPO. approximately X.Xx. will leverage we is proposed

XXXX be from for expect EBITDA billion in we XXX% range adjusted a including billion the Turning contribution to $X.XX $X.XX of fiscal guidance, BellRing. to to

and XXXX million capital we in Additionally, expect $XXX investments fiscal to expenditure make million. $XXX between

cash BellRing, XXXX and taxes $XX interest be for to we expense approximately exclusive estimate fiscal million will expect $XXX we be approximately cash Finally, of million.

With that, for operator back the over turn call to I'd Operator? like questions. to the

Operator

Thank Stifel. you. from Instructions] Our [Operator the of comes question Chris first line Growe of

Chris Growe

morning. Good Hi.

Rob Vitale

Chris. Hi,

Chris Growe

year I just to gave rate, relation X% Hi. guess company going is forward? wanted first I the for rate Rob, talked a I Post. to first, for guidance about could in of reasonable you the the all, for long-term that ask you if

whether constraints that upper the that lower limit growth then, some capacity may of your push the just areas kind there XXXX? the some costs to And factors end. the could understand end or in or maybe Are of it EBITDA that be

Rob Vitale

X% break pure because algorithm generating of being long-term Yes. those when roughly flow. growing half into both We've aren't long the about talked of both you and and aspects the sides cash business definitions half growth generation, do the cash portfolio the

guidance make of In the X.XX. midpoint, shy million terms a the higher just or of what it's $XX range would at lower, on

the changes of zero there to change rapidly contribution in businesses could the certainly And unit could portfolio. slight a our impact small business down equation where then, that, on instead X range, cost -- cereal being It's category throughout portfolio. any implications that meaningful is So demand a relatively are changes growing of six that.

that So, there pieces that are could range. lot guidance of moving impact

Chris Growe

an -- relation one going or you would in each at follow-on from in offset like that noted, look how and inflation, and you that businesses you input but but balance? whether for it 'XX? Okay. not business general different six We're that that cost inflation be just And pricing as fiscal maybe through question opportunity to, just have

Rob Vitale

important context Foodservice we've retail while different the it So that a of it's pricing that to inflation, business mechanism in I about. inflation I precisely business mentioned of think has talked the because has note the

different So in tend inflation think that we about sector. to

So, priced retail it more really impacts businesses. our traditionally

infrastructure at I and growth expect you X% the around promotional maintain it We're we inflation And commodity through have to what be grains, we mix reduction, the activities and oats. cost that that I modest pricing, enough that look to categories seeing sugar, would but to of as persistent corn, think offset when across the predicted. able characterize

Chris Growe

for divisions? this price already of for businesses just, sorry, there year any you've one your And follow-on, announced quick any are increase where

Rob Vitale

Carryover but new. not

Chris Growe

Okay. Thanks so much.

Rob Vitale

you. Thank

Operator

line Our Andrew next question comes Lazar the Barclays. of of from

Andrew Lazar

everybody. morning, Good

RobVitale

Good morning, Andrew.

Andrew Lazar

catch a there be that concern building some first been time. largest two some donors players either the fiscal that competitive RTE company, share Post to guess one given, has of speak fact for of being, And over gainer category off, So the think I business to pretty the consistent market seems dynamics are in consistently. somehow sort to to guess expect to I so going accept this share year. coming the up I wouldn't

So maybe performance sort for year? the maybe in are you the context some category can perhaps potentially? to your of I of Maybe discuss flexibility and that the in type expectations share of coming this guess of for in growth, expectations so building account or if you RTE for

Rob Vitale

would competitors as to naive shared Well, donors. assume consistently we would certainly, be I that be tenants ours resource talented think has

So, competitors we year not and certainly this vibrant aggressive in expect to them be each year.

in last good large and that growth fortune of been were the sweetened early addressed. has [indiscernible] into I that of of and have the products part overly We is licensed areas think around fortune a in year that years moving we perhaps handful some good had

activities we over think starting way driving XX we to we category many look as company, growth, so at broader category that real last months now up that made as planning that created for a competitors the that for opportunity to that handful and is not reinvestment the look with rather ongoing each on in changing to if than dust we changes of expect share about kicking up and that And I look all all fighting growth and at this share. cost I at we've at look aimed category some an you share so each make to of challenge all at sure a the competitive for both than a rather be we as we right tell and compete our highly licensed detail processes bolder it's bit and as talked leadership, sweet trying all that a to are we engaged of and to innovation not need the fully our looking are would free share. within forward, that key manner products. equal, that -- But have focused

Andrew Lazar

little sort to could deal us of fiscal Okay. have, harder you some saves what still that be incremental saves it then, cost bit into a flow progresses. sort and And is But a recent know cost track I as of deals the integration little expected from of of you to again that remind gets of synergies sort sort 'XX.

a get come sense better EBITDA saves can you that much from clarity of to like -- areas trying growth discrete how an would essentially here. kind Just cost have usually of deal of

Rob Vitale

Sure.

So a just blended to because couple for and some going improvement. between are memory deal continuous additional going that beg results old I'm on have deals I'm latitude, and of years out

So, forgive me error for of high but -- are margin relatively we

Andrew Lazar

Rob. That's I life, how live my

RobVitale

with We the the end year. Weetabix the closed at acquired of facility Clinton that transaction we the

into million So to million will roll XXXX. that cost $X reduction over a $X

supply the then the we it expensive at we involves chain their closing excess because Bob announced conversions ongoing an actually We half that of occur integration Evans, of and in will duration at ongoing announced IT have an but cost Weetabix we in XXXX have and facility in at effort more reduction more it than at when undertook amounts in it. acquisition, is we aggressive longer aimed

in the from EBITDA, on reduction it through flowing All 'XX, between but through is difficult to to the it portfolio, of of $XX and the P&L. number where that it's million $XX in directly there magnitude flows cost the million given track that number told

Andrew Lazar

Thank you. Okay.

Rob Vitale

Sure.

Operator

comes Evercore question of the Our of from next David ISI. line Palmer

Kevin Lehmann

eggs. think this Hi, about Question capacity step on that boost good a on morning. you it Kevin for million, in was of value-added David. had most of Lehmann to CapEx I $XX up year,

Will on in that So, that. plan assuming rate that spending? you're two ROI some the And what get on how spend to is on value-added XXXX? also will measuring Then and of bleed ultimately you judging the eggs there? into then, growth questions Thanks. that

Jeff Zadoks

spillover first value-added question, mid-single XXXX now the as rate to order, producing reverse to from part been digits. there and is commissioned which In has some of we finalize products. will growth your eggs Skipping the factory, XXXX is on be the

So, is the of carryover. the yes, and eggs will utilization our utilization project, with invested. factory lift year capacity look a value be to And some and that the related on we added the capital measure there to the respect resulting the should toward out, of this return

We are aggressive being and costs investments are capital more as labor higher, capital costs in lower. are

internal capital more bit active are of So in we terms being a identifying opportunities.

Kevin Lehmann

you. Thank it. Got

Jeff Zadoks

Thanks, Kevin.

Operator

of the Chappell question next Our from Bill comes line of SunTrust.

Bill Chappell

ask, Thanks, of the in the would what good look want the the quarter But morning. M&A I cash Rob, M&A? to I pipeline want some holding of to process kind does know back for like? thought behind potential that repurchase aggressive versus share

RobVitale

the think we constant relative a and M&A. don't necessarily the capital cash We to our value make I sheet available tend Well, on look decisions as just capital on at accordingly. at balance you of know, allocation as source basis look for

and equation So we then as opportunity side and the look at source dynamic it more a look it. for

act sourcing independently side side and Let that. at opportunistically each the of me both rephrase investment the We look and other.

Bill Chappell

to some that that the your looking than at? of you felt way a that deals stock was is like cheaper So you're say

Rob Vitale

I I'm repeat I to what going think just said.

So that -- I

Bill Chappell

this to year we year don't to Xth Avenue. moving have the on brands, million understand, Can a mean us improving ago in you are we of as about then there? I the things or Well, help would completed. close private EBITDA had think talk which original thought just business $XXX was I much

year are what improvement? and kind we goal the So next that for path that's where of do for see size and in we

RobVitale

them to and go-to in intended that three one went I these for be into and laid discrete melded integrated market we out, which businesses the and it one we're We year think model you poorly. a behind. year about precisely XXXX took

better. So XX has set of months. going It back us execution that the is

We under have it think now, over resourced we it. I resourced

fix So, look when need I But some comment, the that. to optimistic you we the this look outlook, but at on have you at and remain I to strategic executed we the categories fairly poorly skepticism and expect on business.

Bill Chappell

Got much. it. Thanks so

Rob Vitale

Thank you.

Operator

question next comes Zaslow Bank Ken Montreal. of of Our line the Instructions] of [Operator from

Ken Zaslow

morning Hey, good everyone.

Rob Vitale

Hi, Ken.

Ken Zaslow

in how in two the how cereals and just and the obviously talk about and about You one the you the it of said the the about then what's said U.S. talk Weetabix, constraints you that Can them? Can over to timing? you in capacity and way overcome came get you

Rob Vitale

with US. growth start issue. terrific potato me had We've retail. in really It's in a in one the foodservice of Let sided the refrigerated our in both dual demand products and

So that's driving very high category utilization.

category. we we likely need the So have intermediate term, term capacity add longer trap to address to capacity, to plans

the our facility in at facility time relatively a Mars in Unfortunately, which Hill same Maine. is smaller

had until failure have season. lines, three defer a we that to have consciously equipment We to our that of chosen to breakdown related busy an them one after repair

not digits So through takes inventory we elsewhere. of is drive capacity to manage high-single to have add disruption this trying output to that that and out retail

positive a will of unfortunate in in dual-sided need for So that to said that a I we problem equation very January. be fix a fixed short-term

we capacity the had In that out. to U.K., take have we are trying some

out are to execution overshot next will in little two levels back of and the having service service no capacity, that need the they than bit taking of where probably a months, we customer more handful a quarters we customer be. get to rebuild in So bit issues

Ken Zaslow

second question it leave And licensed there. And Okay. is, my your cereals? is progress I'll on what the then

Rob Vitale

that is again? sorry. you progress, the question ask I'm Can What what?

Ken Zaslow

prognosis do, they tested your of On going kind is? out, think ones about it, keep? to you've that licensed the you How you which how cereals, them are now do what

Rob Vitale

Yes.

the going I an important with part products. the tool only our I'm of What the an portfolio. brand It's I that it's innovation comment be you but to overall important of part level will it So specific think share toolbox. not on can't category, in is

it important of overall part an to it, remain but need will remains we our broaden product So, mix. and

Ken Zaslow

you. Thank it leave I'll there. Okay.

Rob Vitale

Thanks, Ken.

Operator

Wells John of from line Our of Fargo. the comes next Baumgartner question

John Baumgartner

morning, the for Good question. thanks

Rob Vitale

Hey, John.

John Baumgartner

if lack Rob, more you walk I in could bit should dig here? timing wondered in just through you anticipate the foodservice into capacity? terms to of in business exposure terms channels. non-measured that development just how of any given from about ramp you're FY visibility you potatoes? a Can the Are just 'XX for thinking helpful the be about with wins of we in business, the how the any of there new business precooked think highlights Just will expectations

RobVitale

This that step-ups. for growth. grows it's the the that our the that assume would considerable given a should within the recent major I business for looks demand see position like we Michael that drive in, steady we not It's a business lot are Michael, categories consistent a outlook past in steadily as categories. is

As it is do will relates have because as we them. Norwalk, facilities backfill our to to we that what where ramp the newer first some logistically will our just facility of fill tied we cost better older Norwalk up it's deleverage

will entire returned there as question, it it? margin won't be capacity, it remains So, part will third was an the just step a was new be system a or as pickup. the factory. what that of optimal thinking be or of of function Kind once full But the is to a

John Baumgartner

a it. That But actually follow-up. I was have

how the other a to time? reasonable grow same one and of it you and about cereals are reinvestment aggressive you kind down, on you cereals cereals wellness General health of category thinking And category? cereal is lucky really it taste less on think cereals, or and of When in kind the of charms, does getting the to in environment. that what's trend wellness back based the for how of some one health if pricing totality, just Cheerios asked I'm Kellogg's period? that the thinking taste game can is both or the both somebody Or level me of at trade-off that, think that really about back I've is it's to terms growth promotion noticed competitive or getting more In lower. great in the parts based that inform look and other the to growth do think at on question things your theory, Mills, about the Andrew's you're more some the curious

Rob Vitale

tried but to it, great taste great want And But last that we're effectively. attempting the and solved have solve create in sound like because been that don't be solved people the I with those solution of tried, do can of making. to it months lot pollyannaish who XX to step equation changes a people Well, other we have health. first the been is to hasn't to which of is resources the we've some that do what driving in believe

be toward just to of to the strive being we're say, cures So person portfolio continue able great that entirety one but whatever a you I grow have want product ills we to the tasting it. have, not to sub-segment to don't latest of our and going

John Baumgartner

Thanks your time. for Okay.

RobVitale

John. Thanks,

Operator

from Our the next of Lavery comes Michael Jaffray. question line of Piper

Michael Lavery

morning. Good you. Thank

Rob Vitale

Hey, Mike.

Michael Lavery

in ahead or might is, give Just to keep how more you see Is look the two the some little talked historically be innovation? to shift then of at on can I had some that momentum and on? not the in more look that just new you wide there any model dynamic you maybe or from spaces, premiumization to outperformance quick a there at current reason peek some continue there? we might unmeasured ones One channels. scanner look looking ways think guess trying at has of you that how any something just Is cereals. portfolio and opportunity out ahead, second, and is going able the And will evolving you do about as that to as data

Rob Vitale

want But the tell order, What in asking are that. to this reverse right about that you respond innovation. talk in those Taking is questions. forum would this the questions kind the I our right wouldn't isn't to forum of to I you're

that short-term fairly over tell that would year, changes results club I be there a can events, multiple such meaningfully. what changes. the of With promotional non-measured quarters material you portion because they there caution a they quarter-to-quarter, you But is material as can to swing big be respect shouldn't as have channel would or course channels, of non-measured I

Michael Lavery

Okay. That's lot. helpful. a Thanks

RobVitale

you. Thank

Operator

wish disconnect. gentlemen, Q&A This We a allotted today. conference have for now day reached may and ladies today's will conclude great call. we time and the you you And

Rob Vitale

Thank you.

Post (POST) 22 Nov 192019 Q4 Earnings call transcript