Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Q3 2023 Earnings Presentation
50 slides from Conagra Brands's earnings presentation, Apr 5, 2023
Slide 1: FY23 Q3 Earnings Presentation
FY23 Q3 Earnings Presentation April 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 • Second consecutive quarter of strong gross margin recovery • Continued strong pricing execution; elasticities remain muted and consistent • Unit volume performance continued to lead peers vs. stable, pre- pandemic baseline; fundamentals in-line with expectations • Continued progress o
Slide 6: FY23 Q3 and YTD Results
FY23 Q3 and YTD Results YTD Q3 vs. YTD Q3 FY23 YA FY23 vs. YA Organic Net Sales1 $3,091 +6.1% $9,322 +8.1% Adj. Gross Margin1 28.1% +409 bps 27.1% +230 bps Adj. Operating Margin1 16.9% +321 bps 15.9% +178 bps Adj. EPS1 $0.76 +31.0% $2.15 +25.7% 1. Non-GAAP financial measure. See the appendix for cer
Slide 7: Strong Adj. Gross Margin Recovery
Strong Adj. Gross Margin1 Recovery Adj. Gross Margin1 Evolution FY20 through FY23 Q3 30.0% 29.0% 28.6% 28.1% 28.2% 28.1% 28.0% 27.0% 26.0% 24.9% 25.0% 24.8% 24.0% FY20 FY21 FY22 FY23 Q1 FY23 Q2 FY23 Q3 7 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to t
Slide 8: Adj. Gross Margin Recovery Outpacing Majority of Near-In-Peers
Adj. Gross Margin1 Recovery Outpacing Majority of Near-In-Peers Adj. Gross Margin1 Performance vs. Peers CY Q4 2022 vs. CY Q4 2019 Change (bps) Competitor C +2 bps (34) bps Competitor A (205) bps Competitor E (266) bps Competitor D (366) bps Competitor B (479) bps 1. Non-GAAP financial measure. See
Slide 9: Elasticities Remained Consistent Despite Continued Pricing Acceleration
Elasticities Remained Consistent Despite Continued Pricing Acceleration Conagra Elasticities vs. Price per Unit (Rolling 52 Week Periods) Conagra Price per Unit % Change vs. YA Conagra Price Elasticities +21.0% +0.0 +17.6% +16.0% +15.3% (0.1) +12.1% Price per Unit % Change vs. YA +11.0% (0.2) +8.7%
Slide 10: Elasticities Continue To Outpace Majority of Near-In Peers
Elasticities Continue To Outpace Majority of Near-In Peers Conagra Elasticities vs. Near-In Peer Set (Rolling 52 Week Periods) Conagra Competitor A Competitor B Competitor C Competitor D Competitor E (0.3) (0.45) (0.54) (0.59) (0.65) (0.8) (0.80) (1.3) (1.52) (1.8) (2.3) Q1 FY21 Q2 FY21 Q3 FY21 Q4 F
Slide 11: Perspective on Q3 Retail Sales Growth
Perspective on Q3 Retail Sales Growth Conagra Retail Sales Growth (FY23 Q3, % Change) +24.7% • Complex comparisons vs. near-in peers • Continued pruning of low-quality volume +5.5% • More meaningful manufacturing disruptions than anticipated % Chg. vs. YA % Chg. vs. 3YA Source: IRI POS, Total US MUL
Slide 12: Our 3-Year Performance Remains Fully Competitive Against Near-in Peers
Our 3-Year Performance Remains Fully Competitive Against Near-in Peers; Unchanged Since Q2 Performance vs. Peers (52 Weeks Ended February 25, 2023) Dollar Sales 3-Year CAGR Unit Sales 3-Year CAGR Competitor A +9.2% (1.0)% +7.8% Competitor C (1.2)% Competitor B +7.1% Competitor A (1.3)% Competitor C
Slide 13: Our 3-Year Performance in the Quarter Remained In-Line With Near-in Peers
Our 3-Year Performance in the Quarter Remained In-Line With Near-in Peers Performance vs. Peers (13 Weeks Ended February 25, 2023) Dollar Sales 3-Year CAGR Unit Sales 3-Year CAGR Competitor A +10.0% (1.5)% +8.4% Competitor C (1.5)% Competitor B +8.2% Competitor B (1.5)% Competitor C +7.4% Competitor
Slide 14: Solid Results in Frozen
Solid Results in Frozen Conagra Frozen Retail Sales (Growth Rates) Conagra Frozen Retail Sales +27% (Q3, % Change vs. YA) +26% +23% Breakfast Sausage +19.9% +20% +19% Single-Serve Meals +6.0% +9% Desserts +8% +5.5% +6% +5% +4% Multi-Serve Meals +3.3% Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 % Change
Slide 15: Growth in Key Snack Categories
Growth in Key Snack Categories Conagra Snacks Retail Sales (Growth Rates) Conagra Snacks Retail Sales +41% (Q3, % Change vs. YA) +39% +35% Seeds +34% +34% +22.6% Baking Mixes +10.6% +14% MW Popcorn +13% +11% +11% +10.6% +7% Meat Snacks +6.0% Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 % Change vs. YA 3-
Slide 16: Staples Growth Trajectory Continued Despite Manufacturing Challenges
Staples Growth Trajectory Continued Despite Manufacturing Challenges Conagra Staples Retail Sales (Growth Rates) Conagra Staples Retail Sales +22% (Q3, % Change vs. YA) +20% Whipped Topping +18.5% +16% Salad Dressing +10% +10% +11.8% +7% +8% +7% +5% Pickles +10.0% Syrup (2)% +5.4% Q3 FY22 Q4 FY22 Q1
Slide 17: Supply Chain Progress Continues; Still Not Normalized
Supply Chain Progress Continues; Still Not Normalized • Service metrics improved to ~93% • Productivity initiatives on track • Inflation moderating as anticipated • Recovering as expected from discrete events • Industry-wide challenges persist but continue to improve 17
Slide 18: Updating Fiscal 2023 Guidance
Updating Fiscal 2023 Guidance Guidance Prior New 1 1 Organic Net Sales1 Growth (vs. FY22) +7% to +8% +7% to +7.5% Adj. Operating Margin1 15.3% to 15.6% 15.5% to 15.6% Adj. EPS1 $2.60 to $2.70 $2.70 to $2.75 18 1. Forward-looking non-GAAP financial measure. See the appendix for more information.
Slide 19: Dave Marberger
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 $3,087 +5.9% Organic Net Sales1 Growth +6.1% Adj. Gross Profit1 869 +23.9% Adj. Gross Margin1 28.1% +409 bps A&P 81 23.9% A&P as % of NS 2.6% 38 bps Adj. SG&A1 266 12.4% Adj. SG&A1 as % of
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: +6.1% +15.1% +5.9% (0.2)% (9.0)% 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 22: Net Sales Summary By Segment
Net Sales Summary By Segment Dollars in Millions Increase/(Decrease) Net Sales 1 1 Reported Organic1 Q3 vs. YA vs. YA Grocery & Snacks $1,244 +3.7% +3.7% Refrigerated & Frozen 1,308 +5.6% +5.6% International 260 +7.7% +9.5% Foodservice 275 +17.3% +17.3% Total Conagra Brands $3,087 +5.9% +6.1% 1. Non
Slide 23: Operating Margin Bridge
Operating Margin Bridge Q3 Adj. Operating Margin1 (% Change vs. YA) Adj. Gross Margin1: +409 bps vs. YA Productivity & Other COGS: +1.8% Market-Based Sourcing (2.8)% Q3 Market Inflation: (8)% 1 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most di
Slide 24: 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 $257 +8.0% 20.7% +82 bps Refrigerated & Frozen 271 +53.8% 20.7% +650 bps International 37 +23.9% 14.3% +188 bps Foodservice 25 +69.7%
Slide 25: Q3 Adjusted EPS Bridge
Q3 Adjusted EPS Bridge Drivers of Q3 Adjusted EPS1 vs. YA Op Profit +$0.20 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. 25
Slide 26: Q3 YTD Key Balance Sheet & Cash Flow Metrics
Q3 YTD Key Balance Sheet & Cash Flow Metrics February February (dollars in millions) 26, 2023 27, 2022 Debt $9,256 $9,158 Cash $71 $80 Ending Net Debt1 $9,185 $9,079 Net Leverage Ratio1 3.65x 4.2x (dollars in millions) YTD FY23 YTD FY22 Net Cash Flow from Operating Activities $703 $753 Capital Expen
Slide 27: Updating Fiscal 2023 Guidance
Updating Fiscal 2023 Guidance Guidance Prior New 1 1 Organic Net Sales1 Growth (vs. FY22) +7% to +8% +7% to +7.5% Adj. Operating Margin1 15.3% to 15.6% 15.5% to 15.6% Adj. EPS1 $2.60 to $2.70 $2.70 to $2.75 1. Forward-looking non-GAAP financial measure. See the appendix for more information. 27
Slide 28: Updated FY23 P&L Considerations and Assumptions
Updated FY23 P&L Considerations and Assumptions • ~10% for FY23 Inflation • Expecting inflation for full calendar year 2023 Net Leverage Ratio1 • Net Leverage Ratio1 at year-end expected to be ~3.65x • Capex ~$370MM Other • Interest Expense of ~$410M and Pension Income of ~$25M • Adjusted Income Tax
Slide 29: Q&A
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Slide 30: Appendix
<b VY wbx CONAGRA “BRANDS -° Appendix
Slide 31: 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 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) 33
Slide 34: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 34
Slide 35: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 35
Slide 36: 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 37: 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 38: 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 39: 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 40: 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 41: 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 42: 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 43: 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 44: 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 45: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 45
Slide 46: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 46
Slide 47: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 47
Slide 48: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 48
Slide 49: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) 49
Slide 50: Conagra Brands
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