Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Q2 2024 Earnings Presentation
41 slides from Conagra Brands's earnings presentation, Jan 4, 2024
Slide 1: FY24 Q2 Earnings Presentation
FY24 Q2 Earnings Presentation January 4, 2024 1
Slide 2: Today’s Presenters
Today’s Presenters Bayle Ellis 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: Q2 Headlines
Q2 Headlines • Top line volume progress despite challenging macro environment: o Consumer behavior shifts persisted and pressured volume and mix o Targeted investments in Frozen generated strong lifts and share gains o Net result was a clear improvement in volume trend • Solid margins and EPS alongs
Slide 6: While Consumer Behavior Shifts Persisted in Q2…
While Consumer Behavior Shifts Persisted in Q2… Limited discretionary purchases Actively reducing household inventories More hands-on prep, less convenience More meals-for-many, fewer meals-for-one More use of leftovers, less waste 6
Slide 7: …Targeted Investments in Frozen Generated Strong Lifts
…Targeted Investments in Frozen Generated Strong Lifts Quality Merchandising Promotion Lift Frozen Single-Serve Meals +60% Prior Lifts Q2 Lifts Quality Merchandising Lift is % Increase in Units by Merch, Feature and/or Display Promoted Single-Serve Meals includes Banquet Pot Pies, Marie Callender’s
Slide 8: …and Record Shares in Q2 That Built Upon Last Year’s Gains
…and Record Shares in Q2 That Built Upon Last Year’s Gains Conagra Frozen Single-Serve Meals Unit Share of Category +120.0% 54.0% Enhanced Merchandising +100.0% 52.0% 50.8% 50.0% 49.5% +80.0% 49.0% +1.7 pts +0.5 pts 47.9% vs. YA vs. YA +0.4 pts 48.0% vs. YA +60.0% NC 46.0% vs. YA +40.0% 44.0% +20.0%
Slide 9: Net, the Consumer is Responding and Volume Progress is Underway
Net, the Consumer is Responding and Volume Progress is Underway Refrigerated and Frozen Grocery and Snacks Total Domestic Retail YOY Volume Change YOY Volume Change YOY Volume Change (3.3)% (3.7)% (3.5)% (4.4)% (5.5)% (7.0)% (9.8)% (8.1)% (10.5)% (11.5)% (10.0)% (9.9)% Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY2
Slide 10: Continued Momentum in International and Foodservice
Continued Momentum in International and Foodservice International Foodservice Q2 ONS1: +5.6% Q2 ONS1: +4.3% YTD ONS1 +6.8% YTD ONS1 +4.7% 1. Organic Net Sales is a non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP measure. 1
Slide 11: Q2 Results Reflect Solid Margin and EPS Performance…
Q2 Results Reflect Solid Margin and EPS Performance… Q2 Q2 vs. YA Organic Net Sales1 $3,202 (3.4)% Adj. Gross Margin1 26.9% (129) bps Adj. Operating Margin1 15.9% (108) bps Adj. EPS1 $0.71 (12.3)% 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most
Slide 12: … and Strong Free Cash Flow
… and Strong Free Cash Flow Free Cash Flow1 Net Leverage Ratio1 (Dollars in Millions) $641 3.90x 3.55x $109 H1 FY23 H1 FY24 Q2 FY23 Q2 FY24 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP measure. 12
Slide 13: Robust H2 Investment Profile: Advertising
Robust H2 Investment Profile: Advertising Birds Eye Healthy Choice Slim Jim / WWE TM & © WWE. All rights reserved. 13
Slide 14: Robust H2 Investment Profile: Innovation
Robust H2 Investment Profile: Innovation The Wendy’s name and design and Cameo design are registered trademarks of Quality Is Our Recipe, LLC, used with permission; Frank’s RedHot® is a registered trademark of French’s Food Company, LLC, licensed to Conagra G&S (PF), LLC; The Buffalo Wild Wings mark
Slide 15: Robust H2 Investment Profile: Merchandising
Robust H2 Investment Profile: Merchandising Higher Quality Reinvest in Supply Feature and Constrained Items Display 15
Slide 16: Updating Fiscal 2024 Guidance
Updating Fiscal 2024 Guidance 1 1 Guidance OLD NEW Organic Net Sales1 Growth (vs. FY23) ~+1% (1)% to (2)% Adj. Operating Margin1 16.0% to 16.5% ~15.6% Adj. EPS1 $2.70 to $2.75 $2.60 to $2.65 1. Forward-looking non-GAAP financial measure. See the appendix for more information. 16
Slide 17: Dave Marberger
Dave Marberger Executive Vice President and Chief Financial Officer 17
Slide 18: Performance Summary
Performance Summary Dollars in Millions, except per share data Increase/(Decrease) Q2 vs. YA Reported Net Sales $3,208 (3.2)% Organic Net Sales1 Growth (3.4)% Adj. Gross Profit1 862 (7.6)% Adj. Gross Margin1 26.9% (129) bps A&P 73 (8.0)% A&P as % of NS 2.3% (12) bps Adj. SG&A1 279 (4.1)% Adj. SG&A1
Slide 19: Net Sales Bridge vs. Year Ago
Net Sales Bridge vs. Year Ago Q2 Drivers of Net Sales Change (% Change vs. YA) Organic Net Sales1: (3.4)% +0.2% (0.5)% (2.9)% (3.2)% 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 20: Net Sales by Segment
Net Sales by Segment Dollars in Millions Increase/(Decrease) Net Sales 1 1 Reported Organic1 Q2 vs. YA vs. YA Grocery & Snacks $1,295 (4.1)% (4.1)% Refrigerated & Frozen 1,339 (5.8)% (5.8)% International 280 +8.1% +5.6% Foodservice 295 +4.3% +4.3% Total Conagra Brands $3,208 (3.2)% (3.4)% 1. Non-GAA
Slide 21: Operating Margin Bridge
Operating Margin Bridge Q2 Adj. Operating Margin1 (% Change vs. YA) Adj. Gross Margin1: (129) bps vs. YA Productivity: +2.1% Absorption: (1.1%) 1 2 1. Non-GAAP financial measure. See the appendix for certain definitions and reconciliations to the most directly comparable GAAP measure. 2. COGS Inflat
Slide 22: 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 Q2 vs. YA Q2 vs. YA Grocery & Snacks $282 (17.3)% 21.8% (348) bps Refrigerated & Frozen 222 (14.2)% 16.6% (162) bps International 41 +10.3% 14.5% +30 bps Foodservice 35
Slide 23: Q2 Adjusted EPS Bridge
Q2 Adjusted EPS1 Bridge Drivers of Q2 Adjusted EPS1 vs. YA Adj. Op Profit1 $(0.08) 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. 23
Slide 24: Strong Free Cash Flow Enabled Debt Paydown in Q2
Strong Free Cash Flow Enabled Debt Paydown in Q2 Free Cash Flow1 Net Leverage Ratio1 (Dollars in Millions) $641 3.90x 3.55x $109 H1 FY23 H1 FY24 Q2 FY23 Q2 FY24 • H1 Free Cash Flow1 Conversion ~97% • Debt repayment of more than $500mm in latest 12 months ending Q2 • Continued debt reduction expected
Slide 25: Updating Fiscal 2024 Guidance
Updating Fiscal 2024 Guidance 1 1 Guidance OLD NEW Organic Net Sales1 Growth (vs. FY23) ~+1% (1)% to (2)% Adj. Operating Margin1 16.0% to 16.5% ~15.6% Adj. EPS1 $2.70 to $2.75 $2.60 to $2.65 1. Forward-looking non-GAAP financial measure. See the appendix for more information. 25
Slide 26: Updated FY24 P&L Assumptions
Updated FY24 P&L Assumptions Inflation • ~3% for FY24 net inflation* • Gross Productivity Savings of ~$300M Supply Chain • Capex of ~$450M • Interest Expense of ~$440M; no Pension income Below Line Items • Adj. Tax Rate1 ~24% • Ardent Mills contribution ~$170M • Net leverage ratio1 of ~3.55x by FYE;
Slide 27: Q&A
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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 Q2 FY24 Organic Net Sales by Segment YOY Change
Reconciliation of Q2 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 Q2 FY24 Adj. Operating Profit by Segment
Reconciliation of Q2 FY24 Adj. Operating Profit by Segment – YOY Change (in millions) 32
Slide 33: Reconciliation of Q2 FY24 Adj. Operating Profit by Segment Cont.
Reconciliation of Q2 FY24 Adj. Operating Profit by Segment – YOY Change Cont. (in millions) 33
Slide 34: Reconciliation of Q2 FY24 Adj. Gross Margin, Profit, SG&A, Net Income, EPS
Reconciliation of Q2 FY24 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change (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, ne
Slide 35: Reconciliation of Q2 FY24 Adj. Gross Margin, Profit, SG&A, Net Income, EPS Cont.
Reconciliation of Q2 FY24 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change Cont. (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expen
Slide 36: Reconciliation of YTD FY24 Adj. Gross Margin, Profit, SG&A, Net Income, EPS
Reconciliation of YTD FY24 Adj. Gross Margin, Adj. Gross Profit, Adj. SG&A, Adj. Net Income, and Adj. EPS – YOY Change Cont. (in millions) 1. Operating profit is derived from taking Income from continuing operations before income taxes and equity method investment earnings, adding back Interest expe
Slide 37: Reconciliation of YTD FY24 Free Cash Flow and Net Debt
Reconciliation of YTD FY24 Free Cash Flow and Net Debt – YOY Change (in millions) 37
Slide 38: Reconciliation of Q2 FY24 Net Leverage Ratio
Reconciliation of Q2 FY24 Net Leverage Ratio (in millions) 1. As of November 26, 2023 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 Q2 FY23 Net Leverage Ratio
Reconciliation of Q2 FY23 Net Leverage Ratio (in millions) 1. As of November 27, 2022 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 40: Reconciliation of Q2 FY24 EBITDA
Reconciliation of Q2 FY24 EBITDA (in millions) 1. Excludes comparability items related to depreciation. 40
Slide 41: Reconciliation of FY24 YTD EBITDA
Reconciliation of FY24 YTD EBITDA (in millions) 1. Excludes comparability items related to depreciation. 41