Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Q4 2023 Earnings Presentation
60 slides from Conagra Brands's earnings presentation, Jul 13, 2023
Slide 1: FY23 Q4 Earnings Presentation
FY23 Q4 Earnings Presentation July 13, 2023 1
Slide 2: Today's Presenters
Today’s Presenters Melissa Napier Investor Relations Sean Connolly President and Chief Executive Officer Dave Marberger Executive Vice President and Chief Financial Officer 2
Slide 3: Legal Disclosure
Legal Disclosure Note on Forward-Looking Statements This document contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Reader
Slide 4: Sean Connolly
Sean Connolly President and Chief Executive Officer 4
Slide 5: Agenda
Agenda Business Update Looking Ahead 5
Slide 6: Key Messages
Key Messages • Delivered solid profit and margin growth in Q4 despite impact from Americold disruption • Strong overall FY23 performance in a challenging operating environment • Brands well positioned emerging from COVID and inflation super- cycle • Fiscal 2024 outlook reflects a transition toward a
Slide 7: FY23 Q4 and Full Year Results
FY23 Q4 and Full Year Results Q4 vs. FY23 Q4 FY23 YA vs. YA Organic Net Sales1 $2,976 +2.2% $12,298 +6.6% Adj. Gross Margin1 27.0% +216 bps 27.1% +226 bps Adj. Operating Margin1 14.6% (39) bps 15.6% +125 bps Adj. EPS1 $0.62 (4.6)% $2.77 +17.4% 1. Non-GAAP financial measure. See the appendix for cert
Slide 8: Delivered on Our FY23 Priorities
Delivered on Our FY23 Priorities Executed pricing actions Drove margin recovery Strengthened supply chain Reduced net leverage Invested to maintain brand strength 8
Slide 9: Pricing Peaked in Q3; Elasticities Softened in Q4
Pricing Peaked in Q3; Elasticities Softened in Q4 but Remained Muted vs. Historical Norms Conagra Elasticities vs. Price per Unit (Rolling 52 Week Periods) Conagra Price per Unit % Change vs. YA Conagra Price Elasticities +21.0% +0.0 +17.6% +16.8% +16.0% +15.4% (0.1) +12.1% Price per Unit % Change v
Slide 10: Q4 FY23 Delivered Third Consecutive Quarter of Strong Adj. Gross Margin Improvement
Q4 FY23 Delivered Third Consecutive Quarter of Strong Adj. Gross Margin1 Improvement Adj. Gross Margin1 by Fiscal Year FY23 Adj. Gross Margin1 (Change vs. YA) 409 bps 28.5% 28.6% 28.1% +310 27.1% +409 bps vs bps vs 310 bps YA YA +216 310 bps 24.8% 216 bps bps vs 216 bps vs YA vs YA YA FY19 FY20 FY21
Slide 11: Supply Chain Progress Continued; Still Not Normalized
Supply Chain Progress Continued; Still Not Normalized REBUILT CAG SUPPLY SERVICE LEVELS INVENTORY DISRUPTIONS 95% 95% 11
Slide 12: Consumers Continued To Embrace Conagra Innovation
Consumers Continued To Embrace Conagra Innovation Conagra Innovation Retail Sales Winning Platforms (Dollars in Millions) (FY23 Dollars in Millions) FY18-FY20 Launches FY21-FY23 Launches $1,777 MM Bowls Slim Jim Savage & PPA ~$740 MM ~$260 MM $114 MM FY18 FY19 FY20 FY21 FY22 FY23 Value-Added Vegetab
Slide 13: Progress in Strategic Frozen and Snacks Domains
FY23 Delivered Continued Progress in Our Strategic Frozen and Snacks Domains Conagra Frozen and Snacks Categories Conagra Weighted Dollar Share Retail Dollar Sales Frozen and Snacks (FY23, 4-Year CAGR) 68% +9.0% Combined CAG Domestic 30.8% Retail Dollars 30.6% 30.2% 30.3% +8.1% 29.6% Total Food: +7.
Slide 14: Multi-Year Journey To Become Leader in Frozen Domain
Multi-Year Journey To Become Leader in Large and Attractive Frozen Domain Conagra Frozen Categories Conagra Frozen Retail Sales Weighted Dollar Share +7% CAGR $54 B +4.7 points 41.7% $29 B 37.0% FY14 FY23 FY14 FY23 Source: NielsenIQ, Total US xAOC+Conv, Categories where CAG dollar sales >$1M in late
Slide 15: Grew Unit Share in the Majority of Frozen Portfolio
Even in a Year of Significant Pricing, We Grew Unit Share in the Majority of Frozen Portfolio 7 of 10 CAG Largest Frozen Product Segments Held or Grew Unit Share Source: Circana POS, Total US-MULO+C, Custom Conagra Hierarchy, 52 Weeks Ended May 28, 2023 15
Slide 16: Our Two Largest Snacking Platforms Gained Share
Our Two Largest Snacking Platforms Gained Share Microwave Meat Snacks Popcorn $1,068 MM $564 MM +0.5 pts +1.9 pts Unit Share vs. YA Unit Share vs. YA Source: Circana POS, Total US-MULO+C, Conagra Custom Hierarchy, 52 Weeks Ended May 28, 2023 16
Slide 17: Agenda
Agenda Business Update Looking Ahead 17
Slide 18: Expect FY24 To Be a Dynamic Transition
Expect FY24 To Be a Dynamic Transition Toward a More Typical Operating Environment FY24 Normalized COVID Inflation Operating Super-Cycle Environment 18
Slide 19: FY24 Will Navigate Tailwinds and Headwinds vs. FY23
FY24 Will Navigate a Combination of Tailwinds and Headwinds vs. FY23 FY24 Business Drivers Tailwinds Headwinds • Wrapping supply chain disruptions • Shifting consumer behavior • Re-energized productivity program • Select deflationary categories • Strong innovation slate • Ardent Mills wrap & pension
Slide 20: FY24 Brand Support Includes Biggest Innovation Slate Yet
FY24 Brand Support Includes Biggest Innovation Slate Yet; Mix of Premium and Value Offerings Convenient, Restaurant Exciting Licenses Va l ue - Adde d M e a l s Experiences Duncan Hines Dolly Parton Banana Nut Muffin packaging is for placement only and subject to change 20
Slide 21: Fiscal 2024 Guidance
Fiscal 2024 Guidance 1 1 Guidance FY24 Organic Net Sales1 Growth (vs. FY23) ~+1% Adj. Operating Margin1 16.0% to 16.5% Adj. EPS1 $2.70 to $2.75 1. Forward-looking non-GAAP financial measure. See the appendix for more information. 21
Slide 22: Dave Marberger
Dave Marberger Executive Vice President and Chief Financial Officer 22
Slide 23: Strong FY23 Performance vs. Expectations
Strong FY23 Performance vs. Expectations FY23 Original FY23 Actual 1 Guidance 1 Organic Net Sales1 Growth (vs. FY22) +6.6% +4% to +5% Adj. Operating Margin1 15.6% ~15% Adj. EPS1 $2.77 $2.38 to $2.48 Net Leverage Ratio1 3.63x 3.7x 1. Non-GAAP financial measure. See the appendix for certain definition
Slide 24: Performance Summary
Performance Summary Dollars in Millions, except per share data Increase/(Decrease) Q4 vs. YA FY23 vs. YA Reported Net Sales $2,973 +2.2% $12,277 +6.4% Organic Net Sales1 Growth +2.2% +6.6% Adj. Gross Profit1 803 +11.0% 3,327 +16.1% Adj. Gross Margin1 27.0% 216 bps 27.1% 226 bps A&P 69 49.7% 290 18.6
Slide 25: Net Sales Bridge vs. Year Ago
Net Sales Bridge vs. Year Ago Q4 Drivers of Net Sales Change Organic Net Sales1: +2.2% (% Change vs. YA) +9.9% +2.2% +0.0% (7.7)% Volume Price/Mix Foreign Total (incl. Retailer Exchange Conagra Investments) Brands FY23 Drivers of Net Sales Change Organic Net Sales1: +6.6% (% Change vs. YA) +14.1% +6
Slide 26: Net Sales by Segment
Net Sales by Segment Dollars in Millions Increase/(Decrease) Net Sales 1 1 Reported Organic1 Reported Organic1 Q4 FY vs. YA vs. YA vs. YA vs. YA Grocery & Snacks $1,200 +3.6% +3.6% $4,982 +6.1% +6.1% Refrigerated & Frozen 1,219 (1.1)% (1.1)% 5,156 +6.1% +6.1% Foodservice 303 +5.5% +5.5% 1,136 +12.7%
Slide 27: Operating Margin Bridge
Operating Margin Bridge Q4 Adj. Operating Margin1 (% Change vs. YA) Adj. Gross Margin1: +216 bps vs. YA Market Inflation: (2.1)% Sourcing: (3.3)% 1 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP measure. 27
Slide 28: Segment Adjusted Operating Profit & Margin Summary
Segment Adjusted Operating Profit & Margin1 Summary Dollars in Millions Increase/(Decrease) Adj. Op. Profit1 Adj. Op. Margin1 1 1 Q4 vs. YA Q4 vs. YA Grocery & Snacks $235 (8.1)% 19.6% (248) bps Refrigerated & Frozen 218 +17.7% 17.9% +286 bps Foodservice 28 (2.3)% 9.4% (75) bps International 34 +70.
Slide 29: Q4 and FY Adjusted EPS Bridge
Q4 and FY Adjusted EPS1 Bridge Drivers of Q4 Adjusted EPS1 vs. YA Op Profit1 Flat vs YA 1 1 1 1 1 Drivers of FY23 Adjusted EPS1 vs. YA Op Profit1 +$0.41 vs YA 1 1 1 1 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP meas
Slide 30: Key Balance Sheet & Cash Flow Metrics
Key Balance Sheet & Cash Flow Metrics May 28, May 29, (dollars in millions) 2023 2022 Debt $9,239 $8,980 Cash $94 $83 Ending Net Debt1 $9,145 $8,897 Net Leverage Ratio1 3.63x 3.99x (dollars in millions) FY23 FY22 Net Cash Flow1 from Operating $995 $1,177 Activities Capital Expenditures $362 $464 Fre
Slide 31: Fiscal 2024 Guidance
Fiscal 2024 Guidance 1 1 Guidance FY24 Organic Net Sales1 Growth (vs. FY23) ~+1% Adj. Operating Margin1 16.0% to 16.5% Adj. EPS1 $2.70 to $2.75 1. Forward-looking non-GAAP financial measure. See the appendix for more information. 31
Slide 32: FY24 Adj. EPS Reflects 2% to 4% Underlying Growth
FY24 Adj. EPS1 Reflects 2% to 4% Growth From Underlying Business Operations Drivers of Adjusted EPS1 Guidance vs. FY23 $2.83 to $2.88 $2.70 to $2.75 2 1 1 1 1 1 1. Forward-looking non-GAAP financial measure. See the appendix for more information. 32 2. Non-GAAP financial measure. See the appendix fo
Slide 33: FY24 P&L Considerations and Assumptions
FY24 P&L Considerations and Assumptions • ~3% for FY24 net inflation* Pricing / Inflation • Surgical pricing effective early Q2 • Gross Productivity Savings of ~$300M Supply Chain • Capex of ~$500M • Interest Expense of ~$450M; no Pension income Below Line Items • Adj. Tax Rate1 ~24% • Ardent Mills
Slide 34: Reiterating Long-Term Financial Algorithm
Reiterating Long-Term Financial Algorithm Metric Target Organic Net Sales1 Growth Low Single Digits 1 1 Adj. Operating Margin1 Mid to High Teens Adj. EPS1 Mid to High Single Digits Free Cash Flow1 from Operations > $1.2 billion annually CapEx % of Net Sales ~4% to 5% Dividend Payout Ratio ~50% to 55
Slide 35: Dividend Update
Dividend Update • Increasing dividend 6% reflecting confidence in outlook • New dividend to be $0.35 per quarter of $1.40 annualized • Represents a 51% payout ratio based on FY24 guidance 35
Slide 36: Q&A
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Slide 37: Appendix
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Slide 38: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures This document includes certain non-GAAP financial measures. Management considers GAAP financial measures as well as such non-GAAP financial information in its evaluation of the company’s financial statements and believes these non-GAAP financial measures provide
Slide 39: Q4 FY23 Organic Net Sales by Segment YOY Change
Reconciliation of Q4 FY23 Organic Net Sales by Segment YOY Change (in millions) 39
Slide 40: FY23 Organic Net Sales by Segment YOY Change
Reconciliation of FY23 Organic Net Sales by Segment YOY Change (in millions) 40
Slide 41: Q4 FY23 Adj. Operating Profit by Segment
Reconciliation of Q4 FY23 Adj. Operating Profit by Segment – YOY Change (in millions) 41
Slide 42: Q4 FY23 Adj. Operating Profit by Segment Cont.
Reconciliation of Q4 FY23 Adj. Operating Profit by Segment – YOY Change Cont. (in millions) 42
Slide 43: Q4 FY23 Adj. Gross Margin, SG&A, Net Income, EPS
Reconciliation of Q4 FY23 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expense, ne
Slide 44: Q4 FY23 EPS YOY Change Cont.
Reconciliation of Q4 FY23 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change Cont. (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expen
Slide 45: FY23 Adj. Gross Margin, SG&A, Net Income, EPS
Reconciliation of FY23 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expense, net a
Slide 46: FY23 EPS YOY Change Cont.
Reconciliation of FY23 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change Cont. (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expense,
Slide 47: FY23 EPS YOY Change Cont.
Reconciliation of FY23 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change Cont. (in millions) Effective Effective 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding ba
Slide 48: FY23 EPS YOY Change Cont.
Reconciliation of FY23 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change Cont. (in millions) Diluted EPS from income Income from from continuing continuing operations Selling, operations before Net income attributable general and income taxes and attributabl
Slide 49: Q3 FY23 Adj. Gross Margin and Gross Profit
Reconciliation of Q3 FY23 Adj. Gross Margin and Adj. Gross Profit – YOY Change (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expense, net and removing Pension and postretireme
Slide 50: Q3 FY23 Adj. Gross Profit Cont.
Reconciliation of Q3 FY23 Adj. Gross Margin and Adj. Gross Profit – YOY Change Cont. (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expense, net and removing Pension and postre
Slide 51: Q2 FY23 Adj. Gross Margin and Gross Profit
Reconciliation of Q2 FY23 Adj. Gross Margin and Adj. Gross Profit – YOY Change (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expense, net and removing Pension and postretireme
Slide 52: Q2 FY23 Adj. Gross Profit Cont.
Reconciliation of Q2 FY23 Adj. Gross Margin and Adj. Gross Profit – YOY Change Cont. (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expense, net and removing Pension and postre
Slide 53: Q1 FY23 Adj. Gross Margin and Gross Profit
Reconciliation of Q1 FY23 Adj. Gross Margin and Adj. Gross Profit – YOY Change (in millions) Effective 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expense, net and removing Pension and po
Slide 54: Q1 FY23 Adj. Gross Profit Cont.
Reconciliation of Q1 FY23 Adj. Gross Margin and Adj. Gross Profit – YOY Change Cont. (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expense, net and removing Pension and postre
Slide 55: FY23 Free Cash Flow and Net Debt
Reconciliation of FY23 Free Cash Flow and Net Debt – YOY Change (in millions) 55
Slide 56: FY23 Net Leverage Ratio
Reconciliation of FY23 Net Leverage Ratio (in millions) 1. As of May 28, 2023 2. Excludes comparability items related to depreciation. 3. Excludes comparability items attributable to noncontrolling interests. 4. The Company defines its net debt leverage ratio as net debt divided by adjusted EBITDA f
Slide 57: FY22 Net Leverage Ratio
Reconciliation of FY22 Net Leverage Ratio (in millions) 1. As of May 29, 2022 2. Excludes comparability items related to depreciation. 3. Excludes comparability items attributable to noncontrolling interests. 4. The Company defines its net debt leverage ratio as net debt divided by adjusted EBITDA f
Slide 58: Q4 FY23 EBITDA
Reconciliation of Q4 FY23 EBITDA (in millions) 1. Excludes comparability items related to depreciation. 2. Excludes comparability items attributable to noncontrolling interests. 58
Slide 59: FY23 EBITDA
Reconciliation of FY23 EBITDA (in millions) 1. Excludes comparability items related to depreciation. 2. Excludes comparability items attributable to noncontrolling interests. 59
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