Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Q3 FY2020 Earnings Presentation
49 slides from Conagra Brands's earnings presentation, Mar 31, 2020
Slide 1: FY20 Q3 Earnings Presentation
FY20 Q3 Earnings Presentation March 31, 2020
Slide 2: Today's Presenters
Today’s Presenters Brian Kearney Investor Relations Sean Connolly President and Chief Executive Officer Dave Marberger Executive Vice President and Chief Financial Officer
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
Slide 5: Key Takeaways
Key Takeaways • Through Q3, we remained on-track with our FY20 operational objectives • Executed on integration, synergy capture, and de-leveraging • Drove strong consumption growth in frozen and snacks • Improved trends in Hunt’s tomatoes and Chef Boyardee • Bent the trend in Legacy Pinnacle busine
Slide 6: Q3 Performance In-Line With Updated Expectations
Q3 Performance In-Line With Updated Expectations Q3 Organic Net Sales Growth1 (1.7)% Adj. Op. Margin2 15.7% Adj. Diluted EPS from cont. ops. $0.47 Note: Organic net sales growth is non-GAAP. “Adjusted” financial measures are non-GAAP. See the end of this presentation for a reconciliation of this mea
Slide 7: Consumption Trends Recovered from January Softness
Consumption Trends Recovered from January Softness Before COVID-19-Related Demand Changes Total Conagra Retail Sales (% Change vs. YA) Q3 FY20 ended on Feb. 23, ‘20 +0.9% +0.7% +0.0% (2.8)% 4-weeks ended 4-weeks ended 4-weeks ended 1-week ended Dec. 29, '19 Jan. 26, '20 Feb. 23, '20 Mar. 01, '20 Sou
Slide 8: Q3 Brought Continued Progress on Integration, Synergies, and De-Leveraging
Q3 Brought Continued Progress on Integration, Synergies, and De-Leveraging Integration • SAP plant conversions remained on-track through Q3 • $33 million of cost synergies achieved in Q3 Synergy capture • $145 million of cost synergies achieved through the end of Q3 since closing the acquisition of
Slide 9: Frozen Continued to Grow in Q3
Frozen Continued to Grow in Q3 Total Conagra Brands Frozen Legacy Conagra Brands Frozen Total Retail Sales Total Retail Sales (% Change vs. YA) (% Change vs. YA) +3.0% +2.9% +2.5% +1.9% +1.5% +0.3% +0.3% +0.2% Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 (0.2)% (0.3)% Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 F
Slide 10: Frozen Meals Continued to Gain Share of Shelf and Retail Sales
Through Q3, Frozen Meals Continued to Gain Share of Shelf and Share of Retail Sales at an Accelerated Rate Total Conagra Frozen Meals Total Conagra Frozen Meals Retail Distribution Share Retail Sales Share (Share Point Change vs. YA) (Share Point Change vs. YA) +1.8 pts +1.7 pts +1.4 pts +1.3 pts +1
Slide 11: Snacks Reported Another Quarter of Solid Growth
Snacks Reported Another Quarter of Solid Growth In Q3… Total Conagra Snacks Retail Sales (% Change vs. YA) +9.8% +8.7% Meat Snacks +8.4% +7.0% +5.6% Sweet Treats +5.2% +4.9% +1.2% +2.9% Seeds +5.9% Popcorn Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 (0.4)% % Change vs. YA 2-Year Growth Source (Left Char
Slide 12: Continued to Gain Share in Many Categories
…and Continued to Gain Share in Many Categories Meat Snacks Hot Cocoa Seeds Microwave Popcorn +1 pts +0.2 pts +0.2 pts +1.2 pts Source: IRI Custom Market Advantage, Total US MULO+C, 13 Weeks ended February 23, 2020 12
Slide 13: Hunt's Tomatoes and Chef Boyardee Returned to Dollar Sales Growth
Within Q3, Hunt’s Tomatoes and Chef Boyardee Returned to Dollar Sales Growth… Hunt’s Tomatoes $ Sales Growth Chef Boyardee $ Sales Growth (% Change vs. YA) (% Change vs. YA) +4.5% +2.2% (1.4)% (4.6)% 13-weeks ended 5-weeks ended 13-weeks ended 5-weeks ended Feb. 23, '20 Feb. 23, '20 Feb. 23, '20 Feb
Slide 14: Share Growth in Retail Sales
…As Well As Share Growth in Retail Sales Hunt’s Tomatoes Retail Sales Share Chef Boyardee Retail Sales Share (Share Point Change vs. YA) (Share Point Change vs. YA) +0.3 pts +0.9 pts +0.7 pts (1.0) pts 13-weeks ended 5-weeks ended 13-weeks ended 5-weeks ended Feb. 23, '20 Feb. 23, '20 Feb. 23, '20 F
Slide 15: Legacy Pinnacle Bent the Trend in Q3
Legacy Pinnacle Bent the Trend in Q3… Legacy Pinnacle Retail Sales (% Change vs. YA) (2.6)% (2.5)% (4.6)% (4.8)% (5.8)% (5.6)% (7.0)% Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 % Change vs. YA 2-Year Growth Source: IRI Syndicated Market Advantage, Total US MULO+C, Fiscal Quarters, Dollar Sales 15
Slide 16: Good Progress on Pinnacle's Big 3
…Driven by Good Progress on Pinnacle’s “Big 3” Wish-Bone Retail Sales Birds Eye Retail Sales Duncan Hines Retail Sales (% Change vs. YA) (% Change vs. YA) (% Change vs. YA) +5.7% +1.8% +1.8% (0.8)% (2.1)% (3.1)% (3.5)% (4.7)% 52-weeks 13-weeks 5-weeks 52-weeks 13-weeks 5-weeks (13.0)% ended ended en
Slide 17: Gardein Sales Continued to Accelerate In Q3
Gardein Sales Continued to Accelerate In Q3 After Capacity Expansion Came Online Earlier In FY20 Gardein Quarterly Retail Sales (% Change vs. YA) New Capacity Came Online +24.4% +15.9% +1.5% +1.3% +1.2% Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Source: IRI Syndicated Market Advantage, Total US MULO+C,
Slide 18: COVID-19: Our Response To-Date
COVID-19: Our Response To-Date • Top priorities: Health, safety, and the ability to meet consumer needs • Q4 to-date: Retail demand increase is significant • Expect materially higher growth in the retail business to more than offset significant declines in Foodservice segment • Portfolio well-positi
Slide 19: Thank You to Our Front-Line Employees
Thank You to Our Front-Line Employees 19
Slide 20: Rapid Increases in At-Home Consumption Led to Share Gains
Broad-Based Rapid Increases in At-Home Consumption, Team’s Agility Has Led to Share Gains Total Conagra Retail vs. Categories (Sales % Change vs. YA) Conagra Sales Growth +47.4% vs. YA (4-weeks ended Mar. 22, ’20) COVID-19 Impact Begins +100.2% +90.3% +87.0% +78.8% +6.6% +6.4% +0.7% +0.8% 1-week end
Slide 21: Looking Ahead
Looking Ahead • Will maintain elevated near-term focus on health, safety, and meeting consumer needs • Will continue to execute the Conagra Way during this dynamic time • Updating guidance: now expect to exceed prior full-year guidance for total-company sales and profit metrics, assuming the end-to-
Slide 22: Dave Marberger
Dave Marberger Executive Vice President and Chief Financial Officer
Slide 23: Performance Summary
Performance Summary Dollars in Millions, except per share data Increase/(Decrease) Q3 vs. YA Reported Net Sales $2,555 (5.6)% Organic Net Sales1 (1.7)% Adj. Gross Profit 699 (10.5)% Adj. Gross Margin 27.4% (150) bps A&P 66 (2.8)% A&P as % of NS 2.6% +8 bps Adj. SG&A 233 (15.1)% Adj. SG&A as % of NS
Slide 24: Net Sales Bridge vs. Year Ago
Net Sales Bridge vs. Year Ago Q3 Drivers of Net Sales Change (% Change vs. YA) Organic Net Sales1: (1.7)% +0.1% (0.4)% (1.3)% (4.0)% (5.6)% Volume Price/Mix Acq's, Div's & Foreign Total Incl. Retailer Trenton Sale Exchange Conagra Investments Brands Note: Organic net sales growth is non-GAAP. See th
Slide 25: Net Sales Summary by Segment
Net Sales Summary by Segment Dollars in Millions Increase/(Decrease) Net Sales Reported1 Organic 1 Q3 vs. YA vs. YA1 Grocery & Snacks $1,023 (9.5)% (3.6)% Refrigerated & Frozen 1,077 (1.6)% +0.3% International 221 (3.2)% (1.9)% Foodservice 234 (8.0)% (2.2)% Total Conagra Brands $2,555 (5.6)% (1.7)%
Slide 26: Operating Margin Bridge
Operating Margin Bridge Q3 Adj. Operating Margin1 (% Change vs. YA) Gross Margin: (150) bps Note: “Adjusted” financial measures are non-GAAP. See the end of this presentation for a reconciliation of these measures to the most directly comparable GAAP measures; Numbers may not add due to rounding. 1.
Slide 27: Synergy Capture Remains On Track
Synergy Capture Remains On Track Synergies Captured Total Synergy Target $305 Reinvesting ~$180 $20mm Reinvesting $20mm $33 $145 $112 Synergies Incremental Total cumulative Targeted Targeted captured from synergies synergies cumulative cumulative synergies Pinnacle close captured in captured through
Slide 28: Segment Adjusted Operating Profit & Margin Summary
Segment Adjusted Operating Profit & Margin Summary Dollars in Millions Increase/(Decrease) Adj. Op. Profit1 Adj. Op. Margin1 1 1 Q3 vs. YA Q3 vs. YA Grocery & Snacks $210 (14.5)% 20.6% (122) bps Refrigerated & Frozen 201 (0.3)% 18.7% +24 bps International 22 (20.4)% 10.1% (218) bps Foodservice 27 (2
Slide 29: Adjusted EPS Bridge
Adjusted EPS Bridge Drivers of Q3 Adjusted Diluted EPS from Continuing Operations vs. YA 1 Note: “Adjusted” financial measures are non-GAAP. See the end of this presentation for a reconciliation of these measures to the most directly comparable GAAP measures; Numbers may not add due to rounding. 1.
Slide 30: Key Balance Sheet & Cash Flow Metrics
Key Balance Sheet & Cash Flow Metrics Quarterly Net Debt1 Balances Free Cash Flow Remain Committed to ($ in millions) ($ in millions) FY21 Leverage Target (Net Leverage Ratio2) $641 $11,121 4.8x $509 3.5x to 3.6x $10,441 $9,919 Q2 Q4 Q3 FY19 YTD FY20 YTD As of Q3 FY20 FY21 Target FY19 FY19 FY20 Note
Slide 31: Balance Sheet and Liquidity Remain Strong
Balance Sheet and Liquidity Remain Strong • Free cash flow since the acquisition of Pinnacle has remained on- track • Reduced net debt by $1.2 billion since Q2 FY19 • Fiscal year-to-date free cash flow of $641 million; expect to generate strong free cash flow and cash-on-hand, above original plan, i
Slide 32: Q4 Perspective
Q4 Perspective • Overall, unable to forecast Q4 due to the wide range of potential outcomes from COVID-19 • Retail Businesses • Q4 to-date, Refrigerated & Frozen and Grocery & Snacks domestic retail shipments have accelerated; ~ +50% vs. YA which is similar to consumption data • Mixed International
Slide 33: Updated Fiscal 2020 Guidance
Updated Fiscal 2020 Guidance1 Now Expect to Exceed Prior Full-Year Guidance For Total-Company Sales and Profit Metrics, Assuming the End-To-End Supply Chain Continues to Operate Effectively Metric (All Metrics Include a 53rd Week Prior Fiscal 2020 Guidance1 Updated Fiscal 2020 Guidance1 Except Organ
Slide 34: Q&A
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Slide 35: Appendix
<b VY wbx CONAGRA “BRANDS -° Appendix
Slide 36: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Grocery & Refrigerated Total Conagra Q3 FY20 Snacks & Frozen International Foodservice Brands Net Sales $ 1,022.9 $ 1,076.8 $ 220.9 $ 234.4 $ 2,555.0 Impact of foreign exchange — — (3.2 ) — (3.2 ) Net sales fr
Slide 37: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Grocery & Refrigerated Total Conagra Q3 FY20 YTD Snacks & Frozen International Foodservice Brands Net Sales $ 3,143.0 $ 3,204.2 $ 659.6 $ 759.7 $ 7,766.5 Impact of foreign exchange — — (0.6 ) — (0.6 ) Net sale
Slide 38: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Total Grocery Refrigerated Corporate Conagra Q3 FY20 & Snacks & Frozen International Foodservice Expense Brands Operating Profit $ 199.4 $ 190.7 $ 22.3 $ 27.2 $ (75.1 ) $ 364.5 Restructuring plans 10.9 10.5 —
Slide 39: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Total Grocery Refrigerated Corporate Conagra Q3 FY20 YTD & Snacks & Frozen International Foodservice Expense Brands Operating Profit $ 614.8 $ 533.7 $ 73.5 $ 96.6 $ (262.3 ) $ 1,056.3 Restructuring plans 49.2
Slide 40: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Diluted EPS from income Income from from continuing continuing operations Selling, operations before Net income attributable general and income taxes and Income Income attributable to to Conagra administrative
Slide 41: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Diluted EPS from income Income from from continuing continuing operations Selling, operations before Net income attributable general and income taxes and attributable to to Conagra administrative Operating equ
Slide 42: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Diluted EPS from income Income from from continuing continuing operations Diluted EPS from Selling, operations before Net income income attributable general and income Income taxes and from Income Income attri
Slide 43: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Diluted EPS from income Income from from continuing continuing operations Selling, operations before Net income attributable general and income taxes and attributable to to Conagra administrative Operating equ
Slide 44: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q3 FY20 YTD Q3 FY19 YTD % Change Interest expense, net $ 361.8 $ 260.5 38.9 % Acquisitions and divestitures — (11.9 ) Adjusted interest expense, net $ 361.8 $ 248.6 45.6 % Q3 FY20 Q3 FY19 % Change Equity metho
Slide 45: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Notes payable $ 0.9 $ — $ 1.0 $ 56.0 $ 0.5 $ 0.8 Current installments of long-term debt 17.2 19.9 20.6 150.1 1,173.8 923.8 Senior long-term debt, excluding curre
Slide 46: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q3 FY20 LTM3 Net Debt $ 9,919.3 Net income attributable to Conagra Brands, Inc. $ 765.2 Add Back: Income tax expense 213.3 Income tax expense attributable to noncontrolling interests 0.5 Interest expense, net
Slide 47: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q3 FY20 Q3 FY19 % Change Net income attributable to Conagra Brands, Inc. $ 204.4 $ 242.0 (15.6 )% Add Back: Income tax expense 68.9 67.2 Income tax expense attributable to noncontrolling interests (0.2 ) (0.2
Slide 48: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q3 FY20 YTD Q3 FY19 YTD % Change Net income attributable to Conagra Brands, Inc. $ 638.7 $ 551.8 15.7 % Less: Loss from discontinued operations, net of tax — (1.9 ) Add Back: Income tax expense 141.5 147.0 Inc
Slide 49: Conagra Brands
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