TreeHouse Foods (THS) 7 Aug 232023 Q2 Earnings call transcript

Good morning. And welcome to the TreeHouse Foods, Inc.

Second Quarter 2023 Conference Call. Please note that this call is being recorded. All lines have been placed on listen-only mode. there a remarks, session. speakers the will question-and-answer be After [Operator Instructions]. Thank you. turn now to the Colleen will [ph]. over call I

You may begin your conference.

Good us morning. today. joining And thanks for

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

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

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

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

execute of long morning, year here I'm second remainder Treehouse be outlook term and you, our Colleen. Thank outline And targets. good our to the to today track our continues the everyone. against and for discuss pleased towards to quarter results, how strategy financial our

quarter is demonstrated to focused and Treehouse second today this our the transform a business. company, actions following our performance. And half first took more stronger, is in we

far our continue to years to that the of deliver ability confidence gives and come. for momentum us year positive for this the XXXX shareholders we've value on remainder generated create our to so Further, in

we takeaways provided. results outlined presented Now, and guidance look in versus of a summary our taking second key our deck. slides and at the the for four a We've three quarter

we our increase sales quarter. X.X% of exceeded a First, delivered the that for guidance year-over-year net

at In the addition, we XX% guidance. our of nearly end high improved adjusted EBITDA by

improved Second, delivering we are execution consistency. and

to levels most better the continuing of in are drive quarter. returning We XX% of to our across service, categories target

Our and of our our supporting results. initiatives investments TMOS are supply the implementation chain

building categories. and also leadership in higher higher We're growth, depth successfully margin

You our action can strategy greater our our enables Treehouse the June. coffee in transaction that acquisition coffee strategic see closed recent facility category of with capabilities. our and depth This strengthen drive business to in Northlake in

groceries the positioned have two of private intersection Treehouse label America Third, and the shift powerful consumer growth the we in of trends incredibly consumer at snacking. North – purposefully long-term towards

addition, we continue In macroeconomic current to from tailwinds. benefit

to Finally, updated million the detail, our and takes remainder into first million. from year, $XXX revenue half adjusted guidance facility we're and EBITDA acquisition. performance will full-year the in outlook, our range account for coffee outlook to strong our Pat which raising XXXX with our the contributions of narrowing This cover our $XXX more

inflation, provide On next can particularly private shelf prices in current you some context retailers and see reflect are the in slides on operates. two slide brands. to macroenvironment The Treehouse categories which how increasing X,

when shopper a perspective, we when national it to purchasing brands, basket groceries spoke put significant private at of dollar a brands. the last as higher To of absolute basket save for offered brands and would today you approximately is The compared a to savings into products even than continues categories, our look same quarter. be by private when $XX

brands. continuing the national price the is you on are And time, second for of slide Private that brands quarter, same share an have weeks. XX historic place remain outperforming brands. reflective importance which thus levels, private consecutive on six, reached see unit above the average share all-time high retailers can gaps gained At for consistently to

opportunity beverage experience to consumers categories value prices, and we but trial not Indeed, in our proposition loyalty to a from drive significant brands private their continue expect only of snacking and And tremendous among investments are indicator pressure Treehouse. offer, shelf the going consumers. also gaps the a price increasing for strong are forward. retailers As increasing that

I call to our many over I focus Before turn on update to share want our important area ESG is for Pat, sustainability efforts. the of an an customers.

customers, positions to initiatives our of also supports deliver ESG competitive as that partner and on a for our advantage better performance. operational Treehouse Our execution prioritization not enhanced our represents only but strategic a ability it

business October Last week, our reflect we which last the in following our published new transformation divestiture to year. ESG of have of adjusted our been goals,

progress our you of the As reducing a future. in set against has reduced X as and by enabled new our reduction XXXX, for by X set goals, scope footprint, which end XXXX. distribution and to footprints such goals on know, manufacturing scope the you and our this divestiture carbon to look these XX% X updating meaningfully forward by us target We

to back proud quarter our second has accomplished. all I'm our Turning of team results,

back for executing are ahead. our on the prospects and strategy capitalize are targets on We significant of year positioned the growth half deliver to and our well on the

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

customers successful Thanks, our in Steve. hard And start morning. quarter. good gratitude delivering by and to the servicing their Treehouse to execution work another entire I'd team and my expressing like for diligent

we all on with execution quarter improved greater continue Starting financial slide X, key and our our from benefit metrics. focus performance to results solid with second across

X% adjusted nearly to and Net XX% last EBITA $XX.X X.X% Adjusted basis to million. by expanded increased million $XXX versus margin by of XXX points EBITDA grew sales year.

double-digit on This basis. year-over-year these slightly better year-to-date played drivers drove out a provided a contributing revenue slide Overall, year. Pricing than look our recover we anticipated. the growth inflation. top a line, to to our Turning X, drivers cumulative at the prior efforts revenue and quarter-to-date versus we've reflects

Volume versus and mix year. prior declined the

in than part quarter anticipated categories that Recall faster planned that in quarter. to shipments levels in how performance enabled was the for to last in quarter first restore talked second quarter, initially about related. were second certain us Our service the the timing fulfill customer ability our we

which our understand sales decline modestly volume across are down are and results consumption year-to-date driven a without between mix our unit approximately quarters, Also total was this which by basis, look better recall that is a A we timing Private better. supports performing on was of while and XX% food performance, at X%. To our down down portion brands, impact the beverage. co-manufacturing, brands. unit also as business approximately provided of

exits prior In low continue losses. lap distribution margin we addition, to and business of

once down continue contributing to I'll versus were PNOC, was and EBITDA chain year. $XX supply versus drivers. through last million as recover in adjusted Volume absorption, year. mix, million last On you pricing again quarter. million slide we X, headwind of inflation, $XX including take of commodities, was positive $X the our a and Operations net

part, We've progress our around supply most in made facilities. has network been, stabilizing in categories. service returning labor to and and target manufacturing our increased progress in of chain levels investment That back retention great XX% in of due to our engagement

be executing these down initiatives chain We to over savings continue to time. supply costs bring our on focused

we've slide costs and In our on addition the the for to resiliency took drove quarter that an in in our our invest increased labor increase with second X. items investments, we of to spending. highlighted quarter, this These particular maintenance repairs the opportunity machinery also in in

second result peak. is the our of we as half year, of investment, seasonal throughput in expect Importantly, a the this which benefit our to

and foreign SG&A currency $X million. negative Lastly, contributed impacts

give I'd slide our like you progress to operations. XX, look better are we Turning a making the to at in

service As side noted, levels which of I target, returned slide. hand our the left can the to you we've back see on

across greater meaningfully with TMOS our in OEE those can track on be consistent the than facilities delivered XX three to see have where System, improvement initiatives, continue manufacturing facilities To effectiveness, our the year-over-year Operating our at our seeing end Management Treehouse improvement. Half plans on XXXX. as we TMOS, hand addition, you known of have slide. equipment we In side X% date, facilities improvement in deploy by have our implemented we of network of overall and to double-digit the are right the also as delivered

improved as greater and focused remain our over operating will throughput, continue the network time. improve downtime, enable to reduced across effectiveness profitability rollout We TMOS and expect our our we

remains up highlight ticked the Turning to of the credit Texas primarily finance to strong. facility. revolving use acquisition the Northlake, sheet XX, quarter, coffee of our slide the facility balance our in I'll that

have to invest we in service addition, inventory In continued to our customers.

$XXX Importantly, over we the of revolver million remaining ended the availability and with under the between liquidity quarter second cash position. our

at low We to end continue the of of to X.X range be target times. X leverage our

on Turning our now XX. to slide guidance

X% profitability our sales the Texas of business. half top facility. the reflects primarily the full-year over in X.X% and integrate coffee we we anticipate net is X% to X.X% as our second volume This growth. The We benefits coffee outlook our from year-over-year Northlake, seeing to line growth acquisition of acquisition and from to the are to incremental increase year, time the contributing raising the

first in a of and half our guidance performance remainder for our our $XXX With to strong outlook are the to we EBITDA million of million. year, range adjusted narrowing $XXX the the

the our CapEx We noted use $XX million million, expense $XX to million. previously in of continue to also and increased that credit $XXX be revolving range of interest expect expect the net reflecting to of facility I

year, in the the pricing and step worth we lap as be to that half taken to primarily the additional top coffee actions of including from of driven It's the expect remainder second the acquisition. the With will volume last the we growth volume line year, regard down by mix, pricing noting our year. contribution

at slide sales With XX% million, be growth million year. range to to in the representing quarter that, the net we third versus midpoint last $XXX on $XXX XX, expect approximately of

expect the range $XX approximately to we $XX EBITDA profit, at million year. versus last midpoint third to XX% quarter adjusted the million, be of terms In representing in of growth

in the quarter. to adjusted operations strong the expectation fourth Our our for guidance full EBITDA momentum year business continue in captures

initiatives. sequential primarily expect to and improvement be year-over-year TMOS margin driven gross savings chain by and in We supply our

temporary operating assumed services Preparation have $X EBITDA In addition, $X to guidance, operating we expected expenses, wind model help transition of Meal portions you our the about in adjusted related agreement resulting of will full-year down the million million from to divestiture. to substantial expenses, we've the

TSA will to expiration this. offset actions we expect that agreement, the Following implement reduction cost of the

expect the November. our more to we wind down in TSA third We results of expenses implications the when have quarter report timing around related clarity to operating and

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

incredibly changes I well Thanks, the due and portfolio private Pat. Treehouse snacking is positioned made to house that transformative which label we're end we to seeing to tailwinds and where the I'd beverage. our across like is began,

and underway performance our slide long reflective first XX. momentum outlook are positive underpins is of in confidence Our to full-year deliver our on term our noted half ability the our on and which targets, team's

progress. discussed continuation create significant forward provides and are strategy of themes updating our that you believe on recent at a our look opportunity We what we value, Day. our These to Investor shareholder to

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

[Operator Instructions].

comes question from with first Your Jefferies. Rob Dickerson

guess facility are first just just just numbers? contribution is question, the from the you Are providing housekeeping, you I year. Northlake this those

over profit the benefits the systems majority see time, our like, in put to vertical somewhat $X of I And headwind Rob, contribution I a Northlake get that's the on as then, contribution contribution. and to a year of the the we've modest. and integration, the $X our is profit into this indicated we to we that be of on million guidance revenue as will facility. for increase our think we terms integrate guidance. tick this modest of business standpoint, from continue incorporated year, sort From up the But that the million that think we'll them start

you in maybe maybe pressures that a softer? consumer are you little through more QX, macro overall QX, private continues label bit I'm about how broadly, see we positive as anything the you into you of of is the volumes expected? maybe the of while the a orders step other seeing kind and then kind bit get could there consumption just softer, we kind in think filled fitting guess of is think curious, food I I of kind get and some as actually to the it as marketplace just back half, like, shift, look, momentum timing overall you're that construct, QX, suggests little Or given back respect

a label gain on take deck our would performing on couple down. But think environment. continues in cautious. the I to things. you this back volumes The are share I private gain, consumer to right? is significantly share slides label Total better. is Private

disrupted quarter. of back fourth year is volume third we the you the little guide most because, remember, half Why in if better the last can were a was we and

of our service in that levels, So we service the didn't demand was us. front

Our supply a very place. chain is different in

to And than half. a the great we're we ago. So, the we be of comfortable have to it going of that back able to line we demand more year did sight feel in fill

assumes So our that. guidance

and us the on come that of the consumer guided. does see from we've economy If growth and continue would organic trends there's get takeaway, we of shift, a bit you consumer but just little continued be what top towards

comes from Stifel. question next Matt Your with Smith

even curious given year, expect lean when of categories? with on dynamic label the going they're are to half with moment, we given weakness with the performance, conversations higher gaps at you private label of at brands across into as your pricing do gap having volume seeing some price here retailers Just you that private the shift? to conversations that label, than price And second strong to private we're are indicating retailers, expanding get the a the rate various

Yeah.

show that value a our goods That's our a of we price branded just In slide proposition. the a basket branded goods, versus I if is allows $XX. a you of are think high. private label in a to show big where so Overall, number that deck buy number. good that's headline basket points actually retailers

retailer the and value, private showing in opportunity. them is So interested label so their consumer gives that in

we're from more fall. know brand private this about And that. promotion and excited both really We be there'll label

not in We our promote been in able couple years. categories to of seasonal private label have key a

think see fall. this you'll see I private promoted you'll label label merchandise, So private

retailer their to doing message is value I to think the is that send there their that that consumer store. in

that the offset that follow-up will cost and overhead? as savings impact we quarter, drag is on the for think put in a EBITDA Pat. incremental the about to expiring stranded into programs year something fourth When next carry TSAs on of place into you the Maybe that

– how thinking that out year. we the to I uncertainty expectation think us. were and there's for of a we timing, terms our little there put you model That help it's about in

exiting Do think action. take But TSA? may little take be and few from upon depending of bit we have us there'll a we'll exit, us just to that impacts at we'll earnings so get our from go point. the to so, months that. overall We to don't. And TSA. significant QX get when take a It'll implement through in we better this the we'll profit don't time fourth back of line We sight point, But as see impacts we the quarter. at it because you significant

setting and on of hard business we date really them the a putting sold pin the of complexity a Given taking to size do. is off our systems theirs, on that

have timing. once the better of So we line a to sight exact

the both When you do sales your probably budgeted, we margins models, we want assuming you and when to know there'll and our bit assume that's happens. to that's that we in strong want you little now. in be expect And SG&A we the drag, right quarter. quarter, year. that'll fourth what a all in we it understand what fact, strong line that, of frankly, And that's And hit

Your comes next question Truist. Chappell Bill from with

[Technical volumes. [Technical Did QX give you Difficulty] volume? Difficulty] for

we hopefully I'm you heard I What what on QX? correct up. give volume ask, drove here color the breaking in you're any Bill, is, did

Correct.

into of to pieces tried couple cover. that a chunk probably we I'd

we one, think, impacted anticipated the up bit would like just have – others seen QX, sales, saw that obviously talked timing other guided. pipeline be and the where overall impact And a down felt would I little consumption we've we challenge that I bigger bit. we which QX in we little a say about we the experienced, when

margin And then business thirdly, some about. that did exit lower we we've talked

quarter the talked is those some about. quarter of we'll losses this exits so, of and that distribution And last lap where sort we

the towards a more see line growth of starting we QX. year, in second in half sight the volume So of

decline much the versus how trying other I'm guess was parts. of to in two consumption I it understand

being to we pattern channel say. of hard or strong and when And point kind ended our service full how quarter, it's had order first a We categories given think a then, was was. strong I how their down two. the

I think data. measured X at in to down categories you – the were the X look if our for points consumption

the it. middle of the So was somewhere two bulk in things those of

trying categories of certain the a in that's in As do you trend just understand, is are a terms something that to or you think of to change? that, more seeing follow-up mobility year-over-year

Oh, no.

about think label We really is I talked its well in that. private performing category.

weeks them XX almost got – of You've got gain. share

its label in doing And fine is so, categories. private

think we because good cautious. I said see as position is the demand that in earlier back about consumer the to just we getting, fulfill that the I comment, in And chain the that we're know half feel we signal better our supply and a demand. is

it's numbers can we just guided we've I our gain not If think continues that's the private that we meet So the label what right But above those service improved on out to to see we that think share, to. units unreasonable turn with will now. does, demand if put positive.

time. further back Oakland. I There no this call the turn at With Steve are questions to that, will

to busy with like I'd I us know day. for you Well, thank being today. a all it's

We peak are in a sharing IR see quarter you and happen with of we'll I person. that forward seasonal events after you you there's our third the in information If into lot going results. Take months getting ready to know look and we'll care. to soon. few not, our go we hopefully to talk next to

call. This will conference you us joining conclude today. today's for Thank

may now You disconnect.