Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Q2 FY2020 Earnings Presentation
58 slides from Conagra Brands's earnings presentation, Dec 19, 2019
Slide 1: FY20 Q2 Earnings Presentation
FY20 Q2 Earnings Presentation December 19, 2019
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: Fiscal 2020 On-Track Through H1
Fiscal 2020 On-Track Through H1 • All segments posted organic net sales growth in Q2 • All key initiatives on-track: • Frozen and snacks showed continued momentum • Hunt’s Tomatoes and Chef Boyardee improved • Playbook on key Legacy Pinnacle brands working • Delivered on integration, synergies, and
Slide 6: Agenda
Agenda Total Conagra Update Segment Update 6
Slide 7: Agenda
Agenda Total Conagra Update Segment Update 7
Slide 8: Solid Q2 Organic Net Sales Growth
Solid Q2 Organic Net Sales Growth Q2 Drivers of Net Sales Change (% Change vs. YA) +18.3% +17.1% Organic Net Sales1 +1.6% Price/Mix +0.6% +1.8% +1.0% (0.4)% (1.2)% Total Impact of Increase in Retailer Investments (1.5)% Volume Price/Mix Increase in Increase in Acq's & Div's Total (excl. increase Ret
Slide 9: Top-Line Strengthening
Top-Line Strengthening Organic Net Sales Growth1 (% Change vs. YA) +0.1% YTD +1.6% +1.0% to +1.5% +0.2% (1.7)% FY19 Q1 Q2 FY20 FY20 FY20 Guidance Range 2 Note: Organic net sales growth is non-GAAP. See the end of this presentation for a reconciliation of this measure to the most directly comparable
Slide 10: Innovation Continued to Perform Well; FY20 Launches Already Larger than FY19's
Innovation Continued to Perform Well; FY20 Launches Already Larger than FY19’s Retail Dollar Sales From Innovation FY19 Launches Continue to Grow FY20 Launches Larger Than FY19 (Retail Sales from FY19 Innovation) Launches in Comparable Periods +75% +38% FY19 Launches FY19 Launches FY19 Launches FY20
Slide 11: Margins Expanded
Margins Expanded YTD Adjusted Operating Margin1 +16.5% +16.2% H1 H1 FY19 FY20 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. 1. Adjusted operating margin excludes equity method i
Slide 12: Continued Progress on Integration, Synergies, and De-Leveraging
Continued Progress on Integration, Synergies, and De-Leveraging • Exited legacy Pinnacle corporate facilities Integration • SAP plant conversion progressing as planned • $42 million in Q2, $112 million since closing through the end Synergy capture of Q2 • Now see additional upside: $305 million vs.
Slide 13: Agenda
Agenda Total Conagra Update Segment Update 13
Slide 14: Q2 Organic Net Sales Growth in All Segments
Q2 Organic Net Sales Growth in All Segments Dollars in Millions Increase/(Decrease) Net Sales Reported1 Organic 1 Q2 vs. YA vs. YA1 Grocery & Snacks $1,143 +14.2% +0.9% Refrigerated & Frozen 1,168 +28.8% +2.4% International 234 +7.3% +1.8% Foodservice 276 +6.8% +0.8% Total Conagra Brands $2,821 +18.
Slide 15: Total Conagra Frozen Portfolio Returned to Growth in Q2
Total Conagra Frozen Portfolio Returned to Growth in Q2, Led by Legacy Conagra Total Conagra Brands Frozen Legacy Conagra Brands Frozen Total Retail Sales Total Retail Sales (% Change vs. YA) (% Change vs. YA) +4.2% +3.0% +2.9% +2.5% +2.1% +1.9% +0.4% +0.3% (0.2)% (0.2)% Q2 FY19 Q3 FY19 Q4 FY19 Q1 F
Slide 16: Greater Share of Shelf Has Led to Greater Share of Retail Sales in Frozen Meals
Greater Share of Shelf Has Led to Greater Share of Retail Sales in Frozen Meals Total Conagra Frozen Meals Total Conagra Frozen Meals Retail Distribution Share Retail Sales Share (Share Point Change vs. YA) (Share Point Change vs. YA) +1.3 +1.2 +1.0 +0.6 +0.3 +0.0 Q4 FY19 Q1 FY20 Q2 FY20 Q4 FY19 Q1
Slide 17: Continued Category Leading Growth in Frozen Single Serve Meals
Continued Category Leading Growth in Frozen Single Serve Meals Total Conagra Frozen Frozen Single Serve Meals Retail Sales Single Serve Meals Retail Sales (Q2 % Change vs. YA) (% Change vs. YA) Conagra Playbook Working +17.0% +15.7% +13% +7% +9.3% +6.6% +5% +5.9% +4.3% +4.7% Playbook Opportunities Q
Slide 18: Birds Eye Distribution Trends Improved Behind Innovation Launches
Birds Eye Distribution Trends Improved Behind Innovation Launches Total Birds Eye Retail Sales (% Change vs. YA) 2% 0% (2)% Sales (4)% (6)% (8)% (10)% (12)% Distribution (14)% Source: IRI Market Advantage, POS, % Change vs. YA, Dates indicate the end of four- or five-week periods, MULO+C, IRI Syndic
Slide 19: Birds Eye Has Gained Share among Branded Players
Birds Eye Has Gained Share among Branded Players Bird’s Eye Frozen Vegetable Branded Retail Sales Share (Share Point Change vs. YA) +0.5 +0.2 +0.0 H2 H1 Q2 FY19 FY20 FY20 Source: IRI Syndicated Market Advantage, POS, Dollar Share Point Change of Branded Frozen Vegetables ex (Potatoes/Hash Browns/Fri
Slide 20: Gardein Q2 Sales Performance Accelerated after Capacity Expansion
Gardein Q2 Sales Performance Accelerated after Capacity Expansion Has Come Online Gardein Quarterly Retail Sales (% Change vs. YA) New Capacity Came Online +16.2% +7.2% +1.8% +1.3% +1.5% Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Source: IRI Syndicated Data, POS, % Change vs. YA, Fiscal Quarters, MULO+
Slide 21: Frozen Innovation Will Continue to Contribute to H2 Sales Growth
Frozen Innovation Will Continue to Contribute to H2 Sales Growth Note: Product and/or packaging under development; subject to change. 21
Slide 22: Impact of Birds Eye Innovation Expected to Accelerate in H2
Impact of Birds Eye Innovation Expected to Accelerate in H2 FY20 H1 Launches Continue to Build Spiralized Launches in H2 Distribution, Trial, and Repeat Note: Product and/or packaging under development; subject to change. 22
Slide 23: Snacks Continued to Grow Across All Segments
Snacks Continued to Grow Across All Segments and Accelerated on a 2-Year Basis Legacy Conagra Snacks Total Retail Sales (% Change vs. YA) +10.4% Meat Snacks +7.4% +7.8% +7.2% +6.1% +5.9% Sweet Treats +5.0% +5.2% +7.3% Seeds +5.9% Popcorn Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 +0.6% % Change vs. YA
Slide 24: Innovation Launched at NACS in October Expected to Support H2 Momentum
Innovation Launched at NACS in October Expected to Support H2 Momentum Note: FANTA is a trademark of The Coca-Cola Company. © The Coca-Cola Company. All Rights Reserved. 24
Slide 25: Making Progress on Duncan Hines
Making Progress on Duncan Hines Modernized Packaging Gained Share Innovation Continues in H2 (Retail Sales Share Point Change vs. YA) +0.3 +0.2 +0.2 +0.1 +0.1 (0.0) (0.0) (0.0) (0.1) L52 Weeks L13 Weeks L5 Weeks Duncan Hines Brownie Mix Duncan Hines Classic Cake Mix Duncan Hines Signature Cake Mix S
Slide 26: In Grocery, Hunt's Tomatoes and Chef Boyardee Both Improved Sequentially
In Grocery, Hunt’s Tomatoes and Chef Boyardee Both Improved Sequentially and Are On-Track Hunt’s Canned Tomatoes Retail Sales Chef Boyardee Shelf Stable Meals Retail Sales (% Change vs. YA) (% Change vs. YA) +0.7% (4.5)% (6.7)% (6.7)% (8.9)% (10.8)% Q4 FY19 Q1 FY20 Q2 FY20 Q4 FY19 Q1 FY20 Q2 FY20 So
Slide 27: In Grocery, Wish-Bone Is Stable
In Grocery, Wish-Bone Is Stable Wish-Bone Sales (% Change vs. YA) 5% 0% (5)% (10)% (15)% (20)% (25)% (30)% Source: IRI Market Advantage, POS, % Change vs. YA, Dates indicate the end of four- or five-week periods, MULO+C, IRI Syndicated Database 27
Slide 28: In Grocery, Introducing Healthy Choice Power Dressing in H2
In Grocery, Introducing Healthy Choice Power Dressing in H2 • Vegetable based for creamy texture • Good Fat: Sunflower oil • Flavorful: unique spice combinations • Non-dairy options, No soy ingredients • Reduced calorie: 30-45 calories/serving Note: Product and/or packaging under development; subjec
Slide 29: Solid Performance in International and Foodservice
Solid Performance in International and Foodservice • Continued strong frozen performance in Canada International • Snacks distribution gains in Mexico • Strong sales performance in Gardein, Udi’s, and snacks Foodservice • Operating margin continues to show good year-over-year improvement 29
Slide 30: Fiscal 2020 On-Track Through H1
Fiscal 2020 On-Track Through H1 • Good progress through H1 • On-track with our plan • Continued confidence in fiscal 2020 guidance, updating primarily for recent portfolio adjustments 30
Slide 31: Dave Marberger
Dave Marberger Executive Vice President and Chief Financial Officer
Slide 32: Performance Summary
Performance Summary Dollars in Millions, except per share data Increase/(Decrease) Q2 vs. YA Reported Net Sales $2,821 +18.3% Organic Net Sales1 +1.6% Adj. Gross Profit 804 +14.1% Adj. Gross Margin 28.5% (105) bps A&P 61 (12.5)% A&P as % of NS 2.2% (76) bps Adj. SG&A 260 +19.6% Adj. SG&A as % of NS
Slide 33: Net Sales Bridge vs. Year Ago
Net Sales Bridge vs. Year Ago Q2 Drivers of Net Sales Change (% Change vs. YA) +18.3% +17.1% Organic Net Sales1 +1.6% Price/Mix +0.6% +1.8% +1.0% (0.4)% (1.2)% Total Impact of Increase in Retailer Investments (1.5)% Volume Price/Mix Increase in Increase in Acq's & Div's Total (excl. increase Retaile
Slide 34: Net Sales Summary by Segment
Net Sales Summary by Segment Dollars in Millions Increase/(Decrease) Net Sales Reported1 Organic 1 Q2 vs. YA vs. YA1 Grocery & Snacks $1,143 +14.2% +0.9% Refrigerated & Frozen 1,168 +28.8% +2.4% International 234 +7.3% +1.8% Foodservice 276 +6.8% +0.8% Total Conagra Brands $2,821 +18.3% +1.6% Note:
Slide 35: Operating Margin Bridge
Operating Margin Bridge Q2 Adj. Operating Margin1 (% Change vs. YA) Gross Margin: (105) 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 36: Synergy Capture Trending Favorably
Synergy Capture Trending Favorably FY20 Synergy Target Total Synergy Target Cumulative Synergies (Cumulative Synergies Since Through FY22 Captured Close Through End of FY20) ~$180 $305 $42 $112 $285 Additional $20mm to be $71 reinvested $215 ~$160 Synergies Incremental Total cumulative Prior Current
Slide 37: Q2 Segment Adjusted Operating Profit & Margin Summary
Q2 Segment Adjusted Operating Profit & Margin Summary Dollars in Millions Increase/(Decrease) Adj. Op. Profit1 Adj. Op. Margin1 1 1 Q2 vs. YA Q2 vs. YA Grocery & Snacks $273 +16.7% 23.9% +52 bps Refrigerated & Frozen 216 +29.6% 18.5% +11 bps International 27 (8.3)% 11.3% (193) bps Foodservice 38 +11
Slide 38: Q2 Adjusted EPS Bridge
Q2 Adjusted EPS Bridge Drivers of Q2 Adjusted Diluted EPS from Continuing Operations vs. YA Note: “Adjusted” financial measures are non-GAAP. See the end of this presentation for a reconciliation of these measures to the most directly comparable GAAP measures. 38
Slide 39: Key Balance Sheet & Cash Flow Metrics
Key Balance Sheet & Cash Flow Metrics Quarterly Net Debt1 Balances Free Cash Flow ($ in millions) ($ in millions) $11,121 $10,845 $244 $10,441 $10,465 $10,278 $117 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 FY19 YTD FY20 YTD Note: Net debt and free cash flow are non-GAAP. See the end of this presentati
Slide 40: Updating FY20 Guidance Primarily for Portfolio Adjustments
Updating FY20 Guidance Primarily for Portfolio Adjustments Metric (All Metrics Include a 53rd Week Prior Fiscal 2020 Updated Fiscal 2020 Except Organic Net Sales Growth)1 Guidance2 Guidance2 Organic Net Sales Growth3 +1.0% to +1.5% +1.0% to +1.5% Reported Net Sales Growth +13.5% to +14.0% +12.4% to
Slide 41: Come Hungry to CAGNY
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Slide 42: Q&A
<b VY wbx CONAGRA “BRANDS -° Q&A
Slide 43: Appendix
<b VY wbx CONAGRA “BRANDS -° Appendix
Slide 44: 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 Q2 FY20 Snacks & Frozen International Foodservice Brands Net Sales $ 1,142.5 $ 1,168.3 $ 234.3 $ 275.7 $ 2,820.8 Impact of foreign exchange — — 1.2 — 1.2 Net sales from acq
Slide 45: 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 Q2 FY20 YTD Snacks & Frozen International Foodservice Brands Net Sales $ 2,120.1 $ 2,127.4 $ 438.7 $ 525.3 $ 5,211.5 Impact of foreign exchange — — 2.6 — 2.6 Net sales from
Slide 46: 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 Q2 FY20 & Snacks & Frozen International Foodservice Expense Brands Operating Profit $ 263.7 $ 187.4 $ 26.4 $ 38.3 $ (87.7 ) $ 428.1 Restructuring plans 19.2 1.2 0.2
Slide 47: 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 Q2 FY20 YTD & Snacks & Frozen International Foodservice Expense Brands Operating Profit $ 415.4 $ 343.0 $ 51.2 $ 69.4 $ (187.2 ) $ 691.8 Restructuring plans 38.3 1.
Slide 48: 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 49: 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 50: 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 attributable to to Conagra administrative Operat
Slide 51: 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 52: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q2 FY20 Q2 FY19 % Change Interest expense, net $ 121.4 $ 80.6 50.5 % Acquisitions and divestitures — (6.3 ) Adjusted interest expense, net $ 121.4 $ 74.3 63.3 % Q2 FY20 YTD Q2 FY19 YTD % Change Interest expens
Slide 53: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q2 FY20 Q2 FY19 % Change Net income attributable to Conagra Brands, Inc. $ 260.5 $ 131.6 98.0 % Less: Loss from discontinued operations, net of tax — (1.9 ) Add Back: Income tax expense 84.1 22.4 Income tax ex
Slide 54: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q2 FY20 YTD Q2 FY19 YTD % Change Net income attributable to Conagra Brands, Inc. $ 434.3 $ 309.8 40.2 % Less: Loss from discontinued operations, net of tax — (1.9 ) Add Back: Income tax expense 72.6 79.8 Incom
Slide 55: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) November 24, 2019 November 25, 2018 Net cash flows from operating activities - continuing operations $ 427.5 $ 250.7 Additions to property, plant and equipment (183.7 ) (133.3 ) Free cash flow $ 243.8 $ 117.4
Slide 56: 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 Q1 FY20 Snacks & Frozen International Foodservice Brands Net Sales $ 977.6 $ 959.1 $ 204.4 $ 249.6 $ 2,390.7 Impact of foreign exchange — — 1.4 — 1.4 Net sales from acquire
Slide 57: 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 FY19 Snacks & Frozen International Foodservice Brands Net Sales $ 3,923.6 $ 3,735.4 $ 864.4 $ 1,015.0 $ 9,538.4 Impact of foreign exchange — — 30.2 — 30.2 Net sales from ac
Slide 58: Conagra Brands
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