Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Q3 2024 Earnings Presentation
40 slides from Conagra Brands's earnings presentation, Apr 4, 2024
Slide 1: FY24 Q3 Earnings Presentation
FY24 Q3 Earnings Presentation April 4, 2024 1
Slide 2: 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 3: Sean Connolly, President and Chief Executive Officer
Sean Connolly President and Chief Executive Officer 3
Slide 4: Q3 Headlines
Q3 Headlines • Continued top line progress: o Sequential top line improvement supported by brand building investments o Solid share gains, particularly in Frozen Single-Serve Meals • Delivered significant cost savings, enabling investment while sustaining margin recovery • Continued progress on de-l
Slide 5: Q3 Unfolded Largely In-Line With Expectations
Q3 Unfolded Largely In-Line With Expectations Q3 Expectations Q3 Results • Continued volume recovery in • Sequential volume Domestic Retail improvement over Q2 • Increased merchandising & • Strong merchandising lifts; advertising investment A&P up over Q2 and YA • Gross margin stability • Gross marg
Slide 6: Solid Q3 Results
Solid Q3 Results Q3 Q3 vs. YA Organic Net Sales1 $3,024 (2.0)% Adj. Gross Margin1 28.7% +52 bps Adj. Operating Margin1 16.4% (49) bps Adj. EPS1 $0.69 (9.2)% 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP measure. 6
Slide 7: Strong Year-Over-Year Progress in Supply Chain
Strong Year-Over-Year Progress in Supply Chain SERVICE INVENTORY COST LEVELS1 LEVELS2 SAVINGS3 4.0% 96% (7.1)% 3.1% 89% Q3 FY23 Q3 FY24 Q3 FY23 Q3 FY24 Q3 FY23 Q3 FY24 YTD YTD End Bal End Bal YTD YTD 1 Represents Case Fill Rate 2Represents reduction in inventory balance from Q3FY23 to Q3FY24. Ending
Slide 8: Ramped Up Investments in Q3
Ramped Up Investments in Q3 DISCIPLINED I N N O VAT I O N ADVERTISING MERCHANDISING 8
Slide 9: Volume Recovery Continued To Progress
Volume Recovery Continued To Progress Total Domestic Retail Shipments (Conagra CSU Volume, % Change vs. YA) (1.8)% (3.5)% (7.0)% Q1 FY24 Q2 FY24 Q3 FY24 Note: Total Domestic Retail consists of Refrigerated and Frozen and Grocery and Snacks segments. Data represents Conagra shipments which equates to
Slide 10: Consumption Also Improved in All Domains
Consumption Also Improved in All Domains Conagra Retail Sales (Volume Sales, % Change vs. YA) Staples Snacks Frozen (Grocery & Refrigerated) (1.9)% (2.6)% (3.0)% (3.2)% (2.8)% (5.1)% (5.0)% (7.6)% (7.8)% Q1 FY24 Q2 FY24 Q3 FY24 Q1 FY24 Q2 FY24 Q3 FY24 Q1 FY24 Q2 FY24 Q3 FY24 Source: Circana POS, Tot
Slide 11: Strong Year-Over-Year Share Gains Across the Portfolio
Strong Year-Over-Year Share Gains Across the Portfolio… % of Conagra Portfolio Holding or Gaining Unit Share 59% for strategic Frozen & Snacks 51.9% domains 39.9% +12 pts Q3 FY23 Q3 FY24 Source: Circana POS, Total US-MULO+C, Syndicated Hierarchy, 13 Weeks Ended February 26, 2023 and February 25, 202
Slide 12: Enabled by Growth in Merchandising Lifts
…Enabled by Growth in Merchandising Lifts Unit Lift on Merchandising Q3 FY23 Q3 FY24 56.0% 50.0% 46.3% 46.4% 41.6% 41.8% 39.9% 35.2% Total Frozen Snacks Staples Source: Circana POS, Total US-MULO+C, Conagra Custom Hierarchy, 13 Weeks Ended February 26, 2023 and February 25, 2024 12
Slide 13: Solid Share Gains Within Frozen
Solid Share Gains Within Frozen Conagra Frozen Frozen Unit Share Gains Highlights Weighted Unit Share 37% +1.0 pts 36% Q3 FY23 Q3 FY24 Source: Circana POS, Total US-MULO+C, Conagra Custom Hierarchy, 13 Weeks Ended February 26, 2023 and February 25, 2024 13
Slide 14: Investments in Single-Serve Meals Drove Record Share Levels
Investments in Single-Serve Meals Drove Record Share Levels Conagra Frozen Single-Serve Meals Unit Share of Category Enhanced Merchandising 51.2% 50.8% 49.5% +1.7 pts 48.9% 49.0% +1.6 pts vs. YA Avg. Share vs. YA Prior to Merch +0.5 pts 47.9% vs. YA +0.4 pts vs. YA NC vs. YA Q3 FY23 Q4 FY23 Q1 FY24
Slide 15: Exciting 2024 Innovation
Exciting 2024 Innovation Dolly Parton owns all rights to the Dolly™ and DOLLY PARTON™ trademarks, as well as her name, image and likeness, which are used under license by Conagra® 15
Slide 16: International and Foodservice Solid Top Line Contributors
International and Foodservice Solid Top Line Contributors International Foodservice Q3 ONS1: +1.0% Q3 ONS1: (1.0)% YTD ONS1 +4.8% YTD ONS1 +2.9% 1. Organic Net Sales is a non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP mea
Slide 17: Strong Free Cash Flow Continued in Q3
Strong Free Cash Flow Continued in Q3 Free Cash Flow1 Net Leverage Ratio1 (Dollars in Millions) $1,222 3.65x 3.44x $436 YTD Q3 FY23 YTD Q3 FY24 Q3 FY23 Q3 FY24 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP measure. 17
Slide 18: Updated Fiscal 2024 Guidance; Increased Adj. Operating Margin
Updated Fiscal 2024 Guidance; Increased Adj. Operating Margin 1 1 Updated Guidance Organic Net Sales1 Growth (vs. FY23) (1)% to (2)% Adj. Operating Margin1 ~15.8% Adj. EPS1 $2.60 to $2.65 1. Forward-looking non-GAAP financial measure. See the appendix for more information. 18
Slide 19: Dave Marberger, Chief Financial Officer
Dave Marberger Executive Vice President and Chief Financial Officer 19
Slide 20: Performance Summary
Performance Summary Dollars in Millions, except per share data Increase/(Decrease) Q3 vs. YA Reported Net Sales $3,033 (1.7)% Organic Net Sales1 Growth (2.0)% Adj. Gross Profit1 870 +0.1% Adj. Gross Margin1 28.7% +52 bps A&P 86 +6.5% A&P as % of NS 2.8% +22 bps Adj. SG&A1 286 +7.4% Adj. SG&A1 as % o
Slide 21: Net Sales Bridge vs. Year Ago
Net Sales Bridge vs. Year Ago Q3 Drivers of Net Sales Change (% Change vs. YA) Organic Net Sales1: (2.0)% +0.3% (0.2)% (1.7)% (1.8)% Volume Price/Mix Foreign Total (incl. Retailer Exchange Conagra Investments) Brands 1. Non-GAAP financial measure. See the appendix for certain definitions and reconci
Slide 22: Net Sales by Segment
Net Sales by Segment Dollars in Millions Increase/(Decrease) Net Sales 1 1 Reported Organic1 Q3 vs. YA vs. YA Grocery & Snacks $1,286 +3.4% +3.4% Refrigerated & Frozen 1,202 (8.1)% (8.1)% International 272 +4.6% +1.0% Foodservice 273 (1.0)% (1.0)% Total Conagra Brands $3,033 (1.7)% (2.0)% 1. Non-GAA
Slide 23: Operating Margin Bridge
Operating Margin Bridge Q3 Adj. Operating Margin1 (% Change vs. YA) Adj. Gross Margin1: +52 bps vs. YA Productivity: +3.3% One-time benefits: +0.4% Absorption: (1.0)% 1 2 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP
Slide 24: Segment Adjusted Operating Profit & Margin Summary
Segment Adjusted Operating Profit1 & Margin1 Summary Dollars in Millions Increase/(Decrease) Adj. Op. Profit1 Adj. Op. Margin1 1 1 Q3 vs. YA Q3 vs. YA Grocery & Snacks $299 +16.5% 23.3% +261 bps Refrigerated & Frozen 203 (25.2)% 16.9% (385) bps International 43 +16.4% 15.9% +161 bps Foodservice 35 +
Slide 25: Q3 Adjusted EPS Bridge
Q3 Adjusted EPS1 Bridge Drivers of Q3 Adjusted EPS1 vs. YA Adj. Op Profit1 $(0.04) 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 measure. Numbers may not add due to rounding. 25
Slide 26: Strong Free Cash Flow Continued in Q3
Strong Free Cash Flow Continued in Q3 Free Cash Flow1 Net Leverage Ratio1 (Dollars in Millions) $1,222 3.65x 3.44x $436 YTD Q3 FY23 YTD Q3 FY24 Q3 FY23 Q3 FY24 • YTD Free Cash Flow1 Conversion ~124% • Debt repayment of ~$400mm since Q2 and over $700mm in the last 12 months • Expecting year end net l
Slide 27: Updated Fiscal 2024 Guidance
Updated Fiscal 2024 Guidance Updated Guidance Organic Net Sales1 Growth (vs. FY23) (1)% to (2)% 1 1 Adj. Operating Margin1 ~15.8% Adj. EPS1 $2.60 to $2.65 Updated P&L Assumptions Capex $425M Interest Expense $435M 1. Forward-looking non-GAAP financial measure. See the appendix for more information.
Slide 28: Appendix
<b VY wbx CONAGRA “BRANDS -° Appendix
Slide 29: 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 30: Reconciliation of Q3 FY24 Organic Net Sales by Segment YOY Change
Reconciliation of Q3 FY24 Organic Net Sales by Segment YOY Change (in millions) 30
Slide 31: Reconciliation of FY24 YTD Organic Net Sales by Segment YOY Change
Reconciliation of FY24 YTD Organic Net Sales by Segment YOY Change (in millions) 31
Slide 32: Reconciliation of Q3 FY24 Adj. Operating Profit by Segment
Reconciliation of Q3 FY24 Adj. Operating Profit by Segment – YOY Change (in millions) 32
Slide 33: Reconciliation of Q3 FY24 Adj. Operating Profit by Segment Cont.
Reconciliation of Q3 FY24 Adj. Operating Profit by Segment – YOY Change Cont. (in millions) 33
Slide 34: Reconciliation of Q3 FY24 Adj. Gross Margin, SG&A, Net Income, EPS
Reconciliation of Q3 FY24 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change (in millions) Diluted EPS from income Selling, general Net income attributable to and attributable to Conagra Brands, administrative Conagra Brands, Inc common Q3FY24 Gross profit ex
Slide 35: Reconciliation of Q3 FY23 Adj. Gross Margin, SG&A, Net Income, EPS
Reconciliation of Q3 FY24 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change Cont. (in millions) Diluted EPS from income Selling, general Net income attributable to and attributable to Conagra Brands, administrative Conagra Brands, Inc common Q3FY23 Gross pro
Slide 36: Reconciliation of YTD FY24 Free Cash Flow
Reconciliation of YTD FY24 Free Cash Flow – YOY Change (in millions) and Free Cash Flow Conversion Q3FY23 YTD Q3FY24 YTD Net income attributable to Conagra Brands, Inc. $ 646.1 $ 914.5 Restructuring plans 6.9 22.0 Acquisitions and divestitures 0.6 0.2 Corporate hedging derivative losses (gains) 18.5
Slide 37: Reconciliation of YTD FY24 Net Debt
Reconciliation of YTD FY24 Net Debt (in millions) 37
Slide 38: Reconciliation of Q3 FY24 Net Leverage Ratio
Reconciliation of Q3 FY24 Net Leverage Ratio (in millions) 1. As of February 25, 2024 2. Excludes comparability items related to depreciation. 3. Excludes comparability items attributable to noncontrolling interests. 4. The company defines its net leverage ratio as net debt divided by adjusted EBITD
Slide 39: Reconciliation of Q3 FY23 Net Leverage Ratio
Reconciliation of Q3 FY23 Net Leverage Ratio (in millions) Q3 FY23 1 Net Debt $ 9,181.4 Net income attributable to Conagra Brands, Inc. $ 805.0 Add Back: Income tax expense 263.7 Income tax expense attributable to noncontrolling interests 0.1 Interest expense, net 397.8 Depreciation 308.7 Amortizati
Slide 40: Reconciliation of Q3 FY24 EBITDA
Reconciliation of Q3 FY24 EBITDA (in millions) 1. Excludes comparability items related to depreciation. 40