WK Kellogg (KLG) 7 May 242024 Q1 Earnings call transcript

Good day, and welcome to the Q1 W.K. Kellogg's Co Earnings Conference Call. Today's call is scheduled to last one hour, including remarks by management and then a question-and-answer session.

[Operator Instructions]

Thank you. turn and over Investor to Vice Karen like Finance President, Relations. now the to call Duke, I'd Please go ahead.

our I'm Thank you, Pilnick, Dave today of McKinstray, us you our for quarter operator. Good Executive Financial morning, for and Chairman and our a Officer; by Chief this morning joined thank Chief joining first Gary results. and review Officer.

statement Slide #X shows disclaimer. our forward-looking

be statements. the certain different could As today for performance made projected. aware, those materially projections statements company's you Actual are forward-looking are as such future results from

For to further Risk the slide our the on concerning these information in factors that including disclaimer differ, factors Factors cause could section. the as results those filings, to well as please refer SEC listed

be certain respective adjust As measures, which included referencing items financial we results. our reported, the today, discuss non-GAAP for results our unless in GAAP noted we'll as

are to a results For periods basis. spin-off, presented prior on the stand-alone

an our For presented are periods and on results. basis the adjusted to spin-off, after stand-alone adjusted compared results XXXX

definitions of and and of presentation. slide can our GAAP the in the You release within reconciliations each earnings find non-GAAP appendix to measure non-GAAP

the turn call to Gary. now will I over

Thanks, for good everyone. us. morning, Karen, joining and Thanks

we discuss today's and progress For results, our are strategy. business making will quarter the executing performance call, first I

track on we're how delivering hear will on our commitments. in You

our McKinstray, Officer, then our on turn hear the Financial how and provide focused, also which performance. will I Chief our by team, will leads our Dave integrated call You'll to we're additional business optimizing QX margins. a being to line stable expanding who top detail over

time Q&A. call with the out close for will We

remind you that unique to our Kellogg financial On I we Co. Slide like W.K. opportunity results, moving the X, to would of have at before

to by deliver stable are approach, XX%, and we out our horizon. expanding believe our for that while value our EBITDA XXX and believe X% second, maintaining XXXX. by top a basis If points margin First, margin we will our value: growing stakeholders as goal strategic of first top We line. you there X is outsized our deliver from things This line; zoom the exit we simplify will significant maintaining

seen the during have our at discussed line our QX top customer and CAGNY. capacity improved call to already in You've as operating and quarter-over-quarter. early efficiency, that, service Add our results our we improvements has

more What future are on working strategic hear of today you is our how our to calls opportunity. in together priorities unique deliver

adjusted As milestone, is ] not we said, destination. XX% EBITDA have a [ a a margin

our We on during to second drive beyond focus will horizon. margin continuing improvements XXXX strategic

this line QX financial at our expectations Now for for well results as our model. our long-term with let's see year look squarely how fits and as in our performance

Looking at Slide X, our you financial results QX. could see for

in first We execution. likely year increase results of versus margin reflecting our enhanced service quarter. For guidance improved line as sales and the We price net sequential be previously improvement discussed lapping in public QX moved that would saw our full declined Adjusted we our last the with on the versus X.X%, XXXX. we a and through quarter, expanded that you data adjusted the March adjusted ago gross we continued performance and million, points. focusing benefit in and improved of the a everything XXX margin. benefit XX.X% being XX.X%, do EBITDA of $XX on discipline delivered operational reflects of of year a growth organization gross This margin basis our cereal and

how encouraged the executing the by organization and year priorities. start to are We is our our

flat narrowed. and U.S. low on gap and volume previous declining with was cereal broadly QX, single The we improved price X. in Slide category between calls, digits. mentioned as And volume to the Turning sequentially

March. not which lap category U.S. list fully Our performance in lagged the until XXXX as continue increase, we of to we slightly see impact our the the did price

and quarter despite our of our Canada are grew our lapping We XX.X%. price core X brands iconic and share X.X% quarter excellent points in headwind with performance XXX extended position core Four by brands. delivered of category-leading during our basis team to pleased results, the growing the from of the portfolio the

Overall, year. the largely business QX performance on the performed for as our has track us expected and

at of to priorities will of all which and on look before. a X, brief tangible Today, give of I drive strategic seen our let's business to the you've a reminder work priorities then you Slide start Now our how each example with end together end.

to infrastructure pillar commercial we our seamlessly as of integrated together our demand-creating priority idea driving brings allows an consumers' our activation. shelf to with Our from move plan products us win to operate This in-store to pantries. first more

improvement increased supply reliability. market operating gaining our delivering is flexibility chain our to about strategic Next, in agility pillar, and meaningful win the second modernizing driving and

we said, our drive efforts expansion the to and also of centerpiece is top helps this have As our line. margin

Finally, and something our W.K. call culture. do energized underpins how at and pillar, unleashing things we winning This Way. we W.K. third the It's

work Now priorities strategic let's example look business. at and the to drive how an together an our integrated of in way operate

executing with sales brand largest Frosted in dollar end-to-end Flakes, in U.S. are grew which Slide the QX. X.X% X we our demonstrates how

assets we First, Flakes executing of in These we brands and starts was to running our the additional cohorts, and generation U.S. both the expand marketing and new model of their The great on specifically us media are assets, first without with social. which different It with Frosted target channels, one next we're Canada. cost. designed campaign digital for additional focused. including allow which variety notably of reach to developed the our and new a TV, is ad campaign,

force in is activating dedicated our Second, store. sales

teams how One is tandem programming brand better to our to example with During our in-store analytics commercial the utilizing are we collaboration Crocs. and in our store-specific data working and quarter, highlight leveraged of are the drive insights.

a and specialized excite consumers. merchandising, and with team shoes box The drive to Tony brand partner, through. be specialty our secured conversion allowing excitement category of to develop popular secured the a Our shelf to offered innovation sales co-branded food crock collaboration and the to iconic relevant two ready consumers the our growth characters to with customers. SAM team way and selling us customers for is our and our on brought the the all display can partnership and They brings Crocs Tiger to

enabled by looking is different we're one strategy And innovation a We business. our as needs brand, business customer innovation our by consumers. different how sizes and we integrated to ability resulting reliably third, executing supply culturally customers' OEE of work to are for us and success unique core we our results. to channels relevant positive our as is in enabled improvements this and supply sales chain. win means in and pack still service, Better this with well consistently great and we transform example new can across channels. reliable to across marketing, formats fulfill do allow is pack all opportunities, recognize win different have end-to-end the is This multiple sizes as consumers a chain But and this and drive supply

discuss to supply Now to how advancing X priorities. let's we're chain Slide turn our

Here's you. approach the a modernizing of discussed proof with we've reminder how of we with chain points our supply some

investing enhanced approach will in network and of capital, margin efficient operations, the and building consolidating delivering capabilities Our result performance. reliable more

of example, you the equipment Belleville, shift we capital, to new and our First, X most and are facility for investing where locations. about to efficient effective installing we expanding production talked to in

with supplement officials work at location. and Battle city our to investments Creek state We also

our Combined, our capabilities create WK our building systems investments program. work on through and Academy, implementing how through comprehensive high-performing call, in Next, QX are training our you a about these we heard people even in drive of Through capability results. is WK our up is improvement. which showing root, more creating the teams levels and engage already capability that engagement Academy, continuous taking building higher

which we For posture. example, a to product in we reliability of the we QX, we in supply and by X delivered first maintained plants, improving pleased plant our And that efficiency. are improved highest our OEE allowing level us more into efficiency have level achieved that customer of across higher XXXX in reliable years, enter service quarter.

platform are we wheats, how produces lower-cost facilities production mini shared at consolidating X lines that at Shred we facilities. lines CAGNY, our at to separate on X X X from of our Finally,

integration turn QX. for to production across proof This been align visibility let's another we integration working independent to an in our better teams with our provides company, better team within XX margin to we That better teams are right chain us plan our waste our point. Slide to producing fewer have through demand time. Since enabled Now when supply connectivity establish write-offs, plan. manufacturing driver to a materials performance. the at inventory product our the This ensures was end-to-end QX which our right procurement gross positive and reduce our has sourcing allowed us became of

supply with transforming chain. supply enhanced supply and good started we end-to-end have a how this chain our provided our chain, you, through While can just have drive on integrated and enhanced is time updates our planning spoken business team improved getting focused we example Each margin reliability. we're of

You on to call. next and can our expect earnings provide that we'll update continue, another

Since shared XX. Finally, Day let's strategic making Slide at we every the meaningful in which with Investor you we're and priorities. ways last investor our progress turn against August call to since,

Our transformation is underway.

way see the coming You that can our life. new is to marketing in model

supply you by You results. see operating in way, how integrated all Way, organization. strong financial and the is marketing across could This our could in coming WK sales it's our chain unique are in see underpinned how it and an it through and engagement our

delivering our start on and much We're by done, it's to plan, as are I our but near term, said, be As early commitments. our we're year. we longer focused to and both and executing on days work encouraged the

And detail. turn over Dave results now to I'll more the to walk financial through call in our

you, Thank Gary.

XXXX the the of press quarter results for based and on best our of to have XXXX due as this Further provided results stand-alone our our a believe appendix and business. measures presentation. reminder, provides today's the this spin, to we these been comparison adjusted results a are in first future release As details reconciliations and comparable

Now versus Slide versus $XXX prior first decline year adjusted X.X% XX, improved results. quarter will fourth for the looking see sales on is an million, you our at results quarter period. the net the trajectory This a our were

brands quarter March. first brands the outlined, the strong by and the lapped price decline Recall along in sales the X.X% to versus we performance call, elasticities to Flakes, business X%. Flakes which its quarter. last fastest-growing the of quarter. X.X% In Rice quarter. in Price continue continued Frosted in Gary increase expect As last fourth benefited to X with our and were behind category retailer in XX.X%. and as as is first was our the an quarter, we from of volume second in volume also with of trend our normalize realization the Frosted increase the and us we our of during U.S., volume both about in due volume X.X% price impact lower for for in spoke part decline net gap the a This declined positive of and price fourth between improved narrow Krispies, in price inventory Raisin year, like Shipment offset volume major In WK Bran Canada, Mini-Wheats.

quarter XX.X% for by was of and driven a prior EBITDA improved the first quarter, increase versus year Adjusted price million, the productivity. mix the $XX benefit

sustained is QX, In growth significantly XXXX. late chain a supply we EBITDA waste. focus, increased also Our of operations improvements reduced end-to-end realized which in our from result improved and benefited

step volume we business is As as are forecasted and performing and we back, price the narrowing.

we been profitability Our and top stable, has line improvement. delivered

tangible our XX. Turning slide. spoke the prior the margin will our XX.X%, level margin I Recall the operating. about prior the we net a sustained the the by second partially versus of XX.X%, year. a on brand first quarter XX gross versus quarter. XXX during gross integrated quarter highlights. first This increase our result that our on And rephased in Adjusted half investment adjusted as which gross to basis reflects at we EBITDA was margin the higher now that in driven meaningful offset focused operational prior largely QX reached sales was flow-through gross of referenced point basis benefit point the the focus of was year prior highest the we for quarters XXX by improvement in This are way margin and I in first XX.X%. have which operational improvement Building the the margin building was on in QX, period, year. of in a the from Slide efficiencies page, performance off

expect forward, continue margin be Looking the gross of improvement. driver to to we EBITDA primary

was income and interest expense QX was below-the-line million items, $X $X Our other million. in

first was Our reported the quarter rate for XX.X%. tax

For full year be XX%. XXXX, rate to tax our we expect now approximately

a QX. previously performance of already through trailing XX expansion Slide and demonstrates our line coming the opportunity show unique margin through how results. stable and updated showed We XX-month it this top have to is our slide

in sales the consistently Looking we billion this delivering $X.X at range. are slide, net

Our by has margin improving stable supply our a top line performance positive our catalyst enabled has and reliability. for been been improvement

basis adjusted price/mix driving margin, XXXX, QX supply from improvement our chain our gaining meaningful points. revenue since from we've efficiencies Next, initiatives. and management increase growth to XXX This gross within is seen operational related primarily in positive

at looking gross spoke improved, significantly adjusted X.X%, Finally, has profitability on opportunity unique is we for point X% our XX-month to improvement largely margin to and WK. trailing a XXX EBITDA margin, a basis Earlier, moving through flowing increase basis. from a

time short already are our our goal we an progress In as company, we of margin exit XX% horizon independent against EBITDA first XXXX. adjusted making as

quarter. cash $XXX This position compensation equivalents Slide slightly quarter cash first up driven of to increase million, the Overall $XX the XX. an quarter million quarter TSA flow expectations million our of debt on and is the in quarter. ahead with flow, Next, due ended $XXX and timing company million, and cash I'll discuss $XX stand the by by We of of increase our investments of first of seasonal of within largely the net was exit mainly last driven resulting incentive to payment for of impacts debt versus agreements. debt

$XX We this change no work approximately continue is area, there million our to our investment cash progress and on estimated this in year. to of

in on As impact fourth free and cash we underlying due supply in noted this slightly our Note, aforementioned investment XXXX, provide call we'll we standing of the onetime positive company. continue quarter total to the excludes investments chain, update later will to modernizing on our flow, cash expect the be an in which to up flow negative this year. generate our

quarter Today, provided to XXXX now Slide fourth guidance call. our in XX. Turning we reaffirming are on we February our

net X%. year growth to of be sales full range positive adjusted expect in negative We to XXXX the X%

will inventory by reminder, the in QX. As QX retailer net be a sales impacted build

growth to adjusted expect reflects the which EBITDA of delivery X%, X% million. between of million in $XXX We $XXX range dollar and

of benefit this insurance now back of call. of Gary hand XXXX includes growth shape QX, ], [ the the first profit impacts recoupment half our lapping EBITDA which to I'll And recall to of close Importantly, over out the $XX delivery. million in it the onetime

Thank you, Dave.

early heard the executing, top quarter today we're days at said driving that our are confidence we we our how work with call improvement. of it's As what is the know on and strategy executing and you track margin hope to more our us That year. certainly and with do. we provides it more with for the even pleased and said, first results team We is

their how see my I organization I organically, culture and are thanks team our day, for the and every showing how the Importantly, to for is exceptional, to up building express our business would business is is drive it across growing outcomes in efforts results. to the to collaborating forward. we continued drive our this right like

XXX-year-old start-up, just are We a executing like started. and getting we're

to call now Q&A. open the will I

[Operator Instructions]

question Goldman first Our from comes at Ken JPMorgan.

load. the on sure up of not the inventory trade quite I amount I'm picked

you of a and into call, there that the that margin well? EBITDA. the how we Is from we about from rough at how think think mentioned can as in any on little quarter dollar much first about standpoint And during XQ kind profit gross XQ? think a I that pushed maybe some sales range bit point

public about question. if our And it's of data into quarter. timing the X good -- line, public versus a But top and get take look shipments the Ken, details. And I'll at in you Dave Yes, about consumption have the it's about point.

how that's respond. would we Dave, So

Yes.

Ken, to a more. elaborate bit So just little

over data, public are X.X%. we just So the down

about net X.X%. down sales Our were

then in to prepared what the about we we as So that remarks. about, we QX. think to that expect would gap that's alluded the reverse That's we're gap talking

through, about So profit first kind X the on percentage EBITDA that. quarter can you gross will or to point the -- margin volume flow that it's and gross about impact think that directly related of the being and profit

mid- bit, outlook out the between Okay. think, That's XQ for I that gross for high maybe was calls, even was a stronger I back mind, in a previous XX% helpful. with still, expected. couple than little but this, many observers And reversing we're that so margin of your kind in to bouncing the context gross was missed of margin year. I if range

end that. expected to be maybe the XQ the year. already I had rates the You're of high previously think at And of you of lower one

just your as curious is So gross well? in headwind through the thoughts what I'm are cadence on of the the we go year modest XQ margin there that with as understanding

Yes. Good Ken. question,

do volume higher margin, pick on little think one about bit gross we our of of a as it we quarters. benefit up QX in being So based

there's between quarters. Now nuance always our

fluctuations as our at we consistent line our go, and there the the quarters been in margin of some smaller QX nature, the nuance to think last about remarks, full think QX in prepared then our will in over about you to talked be gross XX.X%. with but we've will months QX, as the pretty the If X quarter, be year expect you in roughly performance. be to And between we'd year

Galbo from question next Our Peter is Bank of of America.

just a think shown maybe we has the well as kind quarter think, phasing of expected the the piece price/mix bit a a price/mix kind least business question, as to I now Ken's that had negative, in data, I of of follow-up public stronger the in of in came at than Dave, Nielsen. in bit the flipped has kind

line you for phasing you're can that the item help what of just that the maybe the us rest on of So expecting. year,

Thanks. Yes.

our in call, about nuance QX the the we list So of talked price increase.

And play started quarter, through, PX. to we phasing in the look we And periodic to XXXX within our the of right? realization of price then we little at the PX, point, we've and beginning you reverse at your saw that So lap we if that price increase took last QX list fact would that bit. Our March. a saw that

And pricing is are Now on things in the be thing I the there of actions, all about think we're in base, QX based always some the that of different in environment on marketplace. back think to the base. the have are that's to some And all of nuances the different that again, going things going that we XXXX. what's that remember what's largely that's we one lapping to

so we of activity as reliability. some And we so promo maximize our QX as higher about In about activity having think really promotional challenges, supply our QX. are based QX that were on we in to reliability able is this of XXXX, we year, think still supply

So we were across activity our have more to able brands more portfolio.

And our so some ago. that short the here price has realization of year in again, impacted compared to term, a

talked that as we've think really the it want about we our benefit RGM -- to that's Now within something And we we've that in forward, of and going P&L. the the talked past, about do. to about it fact continue plays

And areas RGM. we focus talked the about of

think would So hey, do actions, we price. had last forward, be big we list but couple saw as continue about, remember, But it. any period the years as as week, price significant want single be of we near there's be nuance or where there we realize X-week nuance marketplace. between go always always we It lapping we to going the won't can to any want to and then to period, price in realize you're in short what any over

a of think just things So about. couple to

free number CapEx flow least flow. free just cash I the relative or had. know light, about we flow year. Okay. saying your in at The That's quarter point you're what slightly came first in then the negative cash cash helpful. on for And to pretty maybe

for year. expectations just out you help the maybe can with So CapEx around us

Yes.

some What full prepared Our year did out. the pushed investments, timing of being in on if the hasn't will, mention CapEx remarks changed you was our stand-up the there for the year. of I

big to So impact. be that's going the

next QX, I you that over increase. to Now the would see expect QX, start

but couple So to the pick our that of full going be numbers haven't QX, just in small up even year next quarters. some changed. phasing QX here It's see to just you'll

from from lazar is next Barclays. Our Andrew question

to little roughly roughly think be I said that is the category for well. The think, a bit for was with as the flat year. guidance, sales I flattish you calling

gaining sort of a bit it little So forward. going or of share maybe implies holding

As bit, a price of was of lapped hadn't that your the increases. fully the mentioned in part you down still quarter, because last share little and was you

right, question So as is my you the look market in market data have cadence of this of progress the progress? you we access some What see how I to move share year? that should guess share would all through around we for,

It's a very fair question, Andrew.

XXXX if take QX, you started and exiting back XX.X. you exited a So around step saying XX.X we this,

of as XXX brands. quarter, impact And the in our had the proceed our the business That saw meaningfully of us And performance. you to share We an It's basis lap. mentioning You through sequentially grew probably core grew as improved. mentioned on impact Canada points price our clearly X that closer our worth XX%. to grew X well.

feel good is we when margins. stable we expand a model work our our where our business, So we think And are. what we Andrew, about as about makes line top

So now, the P&L. rattle through And the is can right the [indiscernible] category stable.

that, did we in as top sure noting line, come drive we thing X so thing will we into was that point. in timing think this We us shipments to making will that than of business. value the mention the is other we occurred stabilize there's our year, that anything of worth them out. can that's some think rest throughout look come QX of QX. for the our back that The I or But key remarkable don't way at So

you I down, last quarter, anticipated low that for Got volume in some single year. to a that it. light of such? then seem And reasonable like full of you still it, the assumption your mentioned on digit call Does and pricing comments think be

QX, we would list a Again, the because of bit in than think been take step Yes, were have Andrew, that I lower a you that. if little back price.

back we so to to the the right, flat up our down forward, X. anticipation, go between we As dollars, get X

year being that's in going what down so And result slightly volume. look like full to would is on it

price price to and narrowing gap the that, us. but -- value sorry, gap between the as happened Andrew, volume about talk and worth -- for price We'd and Probably like I'm about that the how category that in the between happened mentioning well.

as we also, business for the that's our well category. So think, as a sign positive

next from ISI. from David Our question comes Palmer Evercore

Question on top line drivers. the

it's recovery your and line just sort about and just of think about Could for oversimplifying in improvement promotions that. the easy of in key each. of you top Sometimes would around picture line us see recovery be layering then where hear the things innovation, into talk that will improvement the merchandising big and that drivers, and think terms coming biggest you're merchandising sales doing proportions distribution from the to oversimplifying simply you and you chunks anything ahead about top perhaps promotions, in what be useful for us to of

a very fair No, David. question, it's

look business is, we you just operating when at the I would right of a things. first feel X different want mention add to you free. think talk the as me all, our and anything, forecasted. about about is now, way we But couple think let of business, if we Dave, can it But

remarks One the mentioned prepared coming was quarter. into supply our posture in of things the we the

at promotional expansion that know program, back more top impact So on business, were it a for underestimate to terms the as about our that's the start chain -- QX, activity our look was, but in us to I'm with in year, know the as normal we -- margin came the And we as catalyst our of supply something come don't that driving our being line. centerpiece our actually into cadence. we service our I to we line. example going our talked improving has way top we that be had of here I allowed

So we forward. tailwind as that a us that's a what's And think part is do big move of for we happening.

We A This early late force. be force. has year. stood since would the new second been is last in now a -- sales market up sales fall

legs the looked We is relationships new throughout and stores have and fact, And from forward. sea the those we in driving getting with business new you creating the managers. quarter, part if way force coming at that improved sales at the people our of really learning and new business sequentially

well. to might we So those our drive think X line be do that notable us things we as do are unique in top would think that our business

So Dave?

Yes.

I think to just at. a look couple things other of

grew good in remarks. Gary that market a detail. Gary about pretty QX, in think on prepared to And we the I our X think in that we're and big doing I is talked what proof X on Frosted went brands. of point in Flakes,

looking that's new how really out we're taking our reaching So to at -- the consumers.

we great it days, marketing been really place that. we're model on positive gave really the putting as new Frosted about actively call Flakes. a taking we Our early taking again, to have doing it And internally, down Gary and how that, it example into then shelf. have -- but seen results

is example model. So went brands gives that building you marketing we're the an great of idea I think or Flakes how Frosted new a this. one of first the that we after within

our really that portfolio really portfolio. maximize how push out to of So our rest and the do we

next question from comes BNP Paribas. from Gumport Our Max

you your had I know notable the a the margin, headwinds? think the modeled, driven start meaningful year-to-go mentioned to in period, gross versus by posted You there at a it year, incremental least XQ it beat dynamic small. much I'm trade history how are visibility as better-than-expected any the terms of through XQ, you just curious we shift so if headwinds achieving now guidance? in and inventory seeing full you're from to in have you Or the on pretty would any flexibility seems if year say the you other more horizon?

our year, performing confidence expected. have forward. as And hey, the we even or answer in the hear The in the Thanks, confident we're you guidance our fact, we under can is with talked is when future. have And Matt. I quarter more belts, now if whether I we to is, for in appreciate confident would were not And we we what question February, yes. the X our question. go go back about as business

of mentioned and timing something You the the about of lap shipments. QX

our The other And the was that payment. absorbs recall, million prepared that payment that. last be piece are in insurance $XX pre-spin, happened we growth onetime year, insurance might remarks, lapping that

do we feel growth on So than are business. about the Momentum top good with with starting build. to we where of Other that, is that.

we as we're of confidence, we're pleased we as would well the then first that Our our delivered guidance. because to and reaffirm able course, quarter build expected,

type a shift showing economize Great. any curious signs referenced And about sound we any some market, that the doesn't of seeing of hearing be from packaged forward, been understand It meaningful just of market really as like that that in follow-up, we've but you've then serial and peers in as of and in the when right we would business react see tailwind consumer as benefiting seeing to category the it we're to signs your come now. inflation. the of potential change not early now, not from consumers very reaction, companies trajectory remarks. dynamic go your mean mean I'm I food restaurant would and we're right you're seeing if that fair. a the I the food early anything,

Our TD next comes question Securities. from Robert Moskow from

like aware in question TSA parabolically any into high-efficiency margins that boost progression investment give I ask spending a have is, in your sense this noise this you're like just on. should about out next degree equipment the is it us wanted be that new few you be you? very of And for mentioned like Is to you years? the of second provides fast? a couple of Can you'll XXXX? questions the Like this of we the terms is unlock there the out that years? you And equipment ramp then of margin that kind margin once of of can agreement,

Thanks, excellent It's Rob. an question.

priorities of talk let's you're modernizing chain. And X chain supply what right now. referring to our strategic about our So supply of key is

back points we at XX%. to earlier talked basis Investor You our that overall the reiterate heard about growing expanding Day from margin XXX by X% actually -- plan about us

timing. also that, We We talked about would of rate run that be XXXX. the reiterated the out coming

well. follow So will the that now. the have talked be before that continues we're see could investment enhancement looking flowing right We to margin the P&L. the at we that as way And this through

last great deal So about senior we that -- you, of to that's were our as next from The our us the I couple think see of is The Board the tell things the I expect what plants in modernizing calming a chain. enthusiasm all we people. supply executives, encourages through week. years. should one over will you

key when the enduring. investment investment your that's in makes us your you for financial what's match is impact with what And people,

been. program. excited we're have always that So We about

You that the heard about line. just for for me not top but margins, talk

confident So we a that very feel turn detail. to about take Dave our ability in probably over it second some more I'm to get and going forward. to

why don't point think turn off started when you over But on for major a we're to it and we as our But not you both. we TSA, I seeing Dave, TSA, inflection about come operating own.

couple Yes, would of for things I the that. Rob, thanks A question. say on

referenced. confident approach. seen as it we've Gary of And we're think think how step put XX% early being some benefits I well couple that I that he the of talked into things think if it about We've over look you mention margin I'd months modernization. is the last progression A at so. of a that we'd supply of or forward, multipronged X our our we chain

one just we've really infrastructure. built in distribution headwind areas the X we through going and TSA TSA tailwind. then our And be not small where that IT is how the or is have our to TSA, there's big margin On a addition,

be So or other Kellanova ramping So being party costs up, stepping right? right? cost a whatever as we're from P&L off, as about headwind our overall infrastructure, a you own really shouldn't we're and TSA be, we progress. transferred relatively provider think it in can tailwind our smooth. they're may So are those as considered big third just those to They or

a do the X strategy I some think year, and criticism you particular I has brand this execution anything unexpected year, And or advertising talked places, follow-up. changed some about brand Okay. from that. and of your master execution got regarding master strategy Last have you the itself? lot then regarding a advertising for

When the about time that, terrific question. multibrand. a same brands about is reason It's talk that's us Yes. we're When you at a with multi-brand, the similar about do. to That's a advertise why get for able to combination we effective message. talk think what of we we

just would we be can our message. could one imagine that, doing consumers that better by our the great brands So much get you returns with with because to

it terrific a because going good to the different different brands continue it's apply something that I question. a that think can and quite variety we So will into we circumstances, overall, future think be strategy of doing we'll in

Jefferies. from Dickerson of Rob question next comes Our

Great. Maybe question. just first

naturally just I pieces you of QX business? of And of Kind year-over-year I moving to QX which like we in say about -- Co. not QX, I'm I were to would normal seasonality new usually think a understand. kind dynamic. that specifically, quarter heard of is like kind maybe there the think this awkward is lot how you volume kind higher seasonality if curious since of of like how are maybe think you general relative more a the a about

for thanks the question. Yes, Rob,

bit. will changed things, to change I to Do through back a progress think We've pre-COVID do of we seasonality bit we It towards little it couple be is seen little find move we one, new actually see, continue season. a seasonality? has a as COVID. a interesting

little of of still we're is bit, generally January, of promoted In a our working the highest this a for the of QX one the around the year. periods year. traditionally quarter right? it's is business. say lot volume something been the first seasonality shape of So higher would through But activation There's the typically has here I

really So to lot QX. that There's back drives those type after holidays consumer things. routine a of of the

all the routine, thing talk another pantry, right? back getting where, different The you're things. other would big I into again, is typically That's about to back-to-school, area those

going QX, should a you store, dynamics have typically QX. the in lose around X I that say, are volume holiday. does be dynamics, lot right? of of towards seasonal going What the guess, quarter big shelf display or seasons, Christmas the lower holiday is that's holiday activity, there's course, Thanksgiving to you Then and I disrupted, routines to where right? another So QX. holiday us activity a area those geared be than typically everyday that's traditionally So for

of guide. speaking, broadly kind little first rolled there to EBITDA bit half or of also, Fair of It the like into we of the the kind QX how I a lot right, but of clearly implies highest There then kind of speaking as questions of one. QX, the you on even and enough. is and think and of kind that ahead -- of kind they're speaking you're piece have like just the of like if sounds to But but then guide full if year like And the we in maybe you impact back then clearly, run insurance the kind half, lowest EBITDA. of quarter. a inventory EBITDA rate have the the been of to lower to of kind it mean QX. guess think I forthcoming all about Okay. is are said, lap kind should It's guide. get of other headwinds mean kind about I up seasonality end the 'XX high quarter half EBITDA that is clearly, QX back maybe like than QX, that

raise maybe in of some understand be then anything and a why Just trying QX. trying cadence guide? there, Well, thinking there's better. to margin the like, Why is the But else gross half QX is about okay, the gauge to EBITDA great think you should guide? kind EBITDA kind one-offs, lot just had of raise broadly, of hey, not there we a back not

Rob. No, We're this, thinking certainly it's way our year. days. is It's is we're way very very first question, first full the pleased performing. And it business terrific the is this the of about with the a quarter early

fact, perform. thought it In would it way we the performed

it it because that. QX more quarter much is to to have prudent now could that we we're our were confident view guidance. say, our do hey, we're right our under to when we belt. say we saying a reaffirm at it feels We're now fair going pleased also So It's that call, our confident saying

we're really appreciate thinking that's way But about I it. question. the your So

Instructions] [Operator

We have on questions other no call. the

pass So to to back Pilnick, the floor Gary conclude. I'll

you Hope joining for us you I forward. heard Thanks QX you business Thank our track. our which strategy, confidence joining forward you that us. hope heard to for going our in sharing for of results call on with August. today. that all gives executing we're look We we're the

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