Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Q2 2023 Earnings Presentation
42 slides from Conagra Brands's earnings presentation, Jan 5, 2023
Slide 1: FY23 Q2 Earnings Presentation
FY23 Q2 Earnings Presentation January 5, 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: Key Messages
Key Messages • Strong Q2 Results • Robust top-line driven by inflation-justified pricing and muted elasticities • Continued solid share performance • Excellent margin recovery in both gross and operating margins • Supply chain improving; more to come • Remain focused on strengthening the balance she
Slide 6: FY23 Q2 Results
FY23 Q2 Results Q2 Q2 vs. YA Organic Net Sales1 $3,322 +8.6% Adj. Gross Margin1 28.2% +310 bps Adj. Operating Margin1 17.0% +237 bps Adj. EPS1 $0.81 +26.6% 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP measure. 6
Slide 7: We Continued To Grow Sales and Gained Share
We Continued To Grow Sales and Gained Share Within Key Frozen & Snacks Strategic Domains Conagra Retail Sales Growth Conagra Weighted Share Growth (FY23 Q2, % Change) (FY23 Q2. Pt. Change) Total Conagra Frozen & Snacks +26.7% +0.8 pts +0.7 pts +10.6% +0.1 pts (0.2) pts % Chg. vs. YA % Chg. vs. 3YA P
Slide 8: Our 3-Year Performance is Fully Competitive Against Near-in Peers
Our 3-Year Performance is Fully Competitive Against Near-in Peers Performance vs. Peers (3-Year CAGR, 52 Weeks Ended November 19, 2022) Dollar Sales % Chg. vs. YA Unit Sales % Chg. vs. YA Competitor A +8.1% (0.2)% +7.1% Competitor A (0.8)% Competitor B +6.3% Competitor B (0.9)% Competitor C +6.1% Co
Slide 9: Strong Momentum in Frozen
Strong Momentum in Frozen Conagra Frozen Retail Sales (% Change vs. YA) Conagra Frozen Retail Sales 30.0% (Q2, % Change vs. YA) +27% +26% 25.0% Breakfast Sausage +26.8% +19% +20% 20.0% Single-Serve Meals +15% +10.2% 15.0% +9% Plant-Based Protein 10.0% +8% +5.6% +6% +6% +5% 5.0% Vegetables +5.0% 0.0%
Slide 10: Strong Momentum in Snacks
Strong Momentum in Snacks Conagra Snacks Retail Sales (% Change vs. YA) Conagra Snacks Retail Sales +41% (Q2, % Change vs. YA) +34% +35% MW Popcorn +34% +21.0% +29% Seeds +18.0% +14% Meat Snacks +13% +11% +11% +11% +14.6% Hot Cocoa +14.3% Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 % Change vs. YA 3-Yea
Slide 11: Staples Continued to Accelerate on a 1- and 3-Year Basis
Staples Continued to Accelerate on a 1- and 3-Year Basis Conagra Staples Retail Sales (% Change vs. YA) Conagra Staples Retail Sales (Q2, % Change vs. YA) +22% Pickles +11.4% +15% +10% Whipped Topping +8% +10.4% +10% +7% +5% Canned Tomatoes +5% +9.9% SS Dinners & Entrees (2)% +9.2% (3)% Q2 FY22 Q3 F
Slide 12: Consistent Elasticities Despite Pricing Acceleration
Consistent Elasticities Despite Pricing Acceleration Conagra Elasticities vs. Price per Unit (Rolling 52 Week Periods) Conagra Price per Unit % Change vs YA Conagra Price Elasticities +21.0% +0.7 +16.0% +15.3% +12.1% +0.5 Price per Unit % Change vs. YA +11.0% +9.7% +7.3% +0.3 Price Elasticities +6.1
Slide 13: Pricing Lag Phase Has Given Way to Margin Recovery Phase
Pricing Lag Phase Has Given Way to Margin Recovery Phase Net Sales & COGS per Unit % Change vs. Prior Year Net Sales per Unit COGS per Unit +20.0% Pre-Inflation Phase Price Lag Phase Margin Recovery Phase +16.0% +12.0% +8.0% +4.0% +0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY 21 FY 22 FY 23 13 Source: Inte
Slide 14: Q2 Adj. Gross Margins Near Pre-Covid Levels
Q2 Adj. Gross Margins1 Near Pre-Covid Levels Adj. Gross Margin Evolution FY20 through FY23 Q2 30.0% 29.0% 28.6% 28.1% 28.2% 28.0% 27.0% 26.0% 24.9% 25.0% 24.8% 24.0% FY20 FY21 FY22 FY23 Q1 FY23 Q2 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most
Slide 15: Supply Chain Improving; Continued Progress Expected in H2
Supply Chain Improving; Continued Progress Expected in H2 • Service metrics continue to improve • Productivity initiatives on track • Commodity price increases moderating • Increased availability driving improved materials inventory levels • Industry-wide challenges persist but improving 15
Slide 16: Raising Fiscal 2023 Guidance
Raising Fiscal 2023 Guidance Guidance Prior New 1 1 Organic Net Sales Growth (vs. FY22)1 +4% to +5% +7% to +8% Adj. Operating Margin1 ~15.0% 15.3% to 15.6% +1% to +5% +10% to +14% Adj. EPS1 Growth (vs. FY22) $2.38 to $2.48 $2.60 to $2.70 16 1. Forward-looking non-GAAP financial measure. See the appe
Slide 17: Summary
Summary • Strong H1 performance driven by inflation-justified pricing, muted elasticities, share gains in strategic domains, and supply chain progress • Raising FY23 Organic Net Sales, Adjusted Operating Margin and Adjusted EPS guidance • We hope to see you at our annual CAGNY kickoff dinner on Febr
Slide 18: Dave Marberger
Dave Marberger Executive Vice President and Chief Financial Officer 18
Slide 19: Performance Summary
Performance Summary Dollars in Millions, except per share data Increase/(Decrease) Q2 vs. YA Reported Net Sales $3,313 +8.3% Organic Net Sales1 Growth +8.6% Adj. Gross Profit1 933 +21.7% Adj. Gross Margin1 28.2% +310 bps A&P 79 (10.3)% A&P as % of NS 2.4% (4) bps Adj. SG&A1 291 (17.5)% Adj. SG&A1 as
Slide 20: Net Sales Bridge vs. Year Ago
Net Sales Bridge vs. Year Ago Q2 Drivers of Net Sales Change (% Change vs. YA) Organic Net Sales1: +8.6% +17.0% +8.3% (0.3)% (8.4)% Volume Price/Mix Foreign Total (incl. Retailer Exchange Conagra Investments) Brands 1. Non-GAAP financial measure. See the appendix for certain definitions and reconcil
Slide 21: Net Sales Summary By Segment
Net Sales Summary By Segment Dollars in Millions Increase/(Decrease) Net Sales 1 1 Reported Organic1 Q2 vs. YA vs. YA Grocery & Snacks $1,350 +6.8% +6.8% Refrigerated & Frozen 1,422 +10.5% +10.5% International 259 (1.3)% +2.1% Foodservice 283 +14.8% +14.8% Total Conagra Brands $3,313 +8.3% +8.6% 1.
Slide 22: Operating Margin Bridge
Operating Margin Bridge Q2 Adj. Operating Margin1 (% Change vs. YA) Adj. Gross Margin1: +310 bps vs. YA Productivity & Other COGS: +1.3% Market-Based Sourcing (2.9)% Q2 Market Inflation: (11)% 1 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most d
Slide 23: 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 Q2 vs. YA Q2 vs. YA Grocery & Snacks $341 +24.7% 25.3% +363 bps Refrigerated & Frozen 259 +37.1% 18.2% +353 bps International 37 (0.9)% 14.2% +7 bps Foodservice 29 +53.4%
Slide 24: Q2 Adjusted EPS Bridge
Q2 Adjusted EPS Bridge Drivers of Q2 Adjusted EPS1 vs. YA Op Profit +$0.19 vs YA1 1 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. 24
Slide 25: Q2 YTD Key Balance Sheet & Cash Flow Metrics
Q2 YTD Key Balance Sheet & Cash Flow Metrics November November (dollars in millions) 27, 2022 28, 2021 Debt $9,402 $9,384 Cash $40 $69 Ending Net Debt1 $9,362 $9,316 Net Leverage Ratio1 3.9x 4.3x (dollars in millions) YTD FY23 YTD FY22 Net Cash Flow from Operating Activities $298 $262 Capital Expend
Slide 26: Raising Fiscal 2023 Guidance
Raising Fiscal 2023 Guidance1,2 Guidance Prior New 1 1 Organic Net Sales1 Growth (vs. FY22) +4% to +5% +7% to +8% Adj. Operating Margin1 ~15.0% 15.3% to 15.6% +1% to +5% +10% to +14% Adj. EPS1 Growth (vs. FY22) $2.38 to $2.48 $2.60 to $2.70 1. Forward-looking non-GAAP financial measure. See the appe
Slide 27: Updated FY23 P&L Considerations and Assumptions
Updated FY23 P&L Considerations and Assumptions • ~10% for FY23, more weighted to H1 Inflation • Expecting inflation for full calendar year 2023 • Currently covered on ~82% of the portfolio • Targeted pricing actions accepted and effective in Q3 Pricing • Continue to monitor inflation and will price
Slide 28: Q&A
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Slide 29: Appendix
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Slide 30: 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 31: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 31
Slide 32: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 32
Slide 33: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (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 postretirement
Slide 34: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (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 postretirement
Slide 35: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (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 post
Slide 36: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (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 post
Slide 37: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Effective 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 Pensio
Slide 38: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 38
Slide 39: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 39
Slide 40: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 40
Slide 41: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 41
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