Good day and welcome to the B&G Foods First Quarter 2025 Earnings Call. Today's call, which is being recorded, is scheduled to last about one hour, including remarks by B&G Foods management and the question-and-answer session. I would now like to turn the call over to AJ Schwabe, Senior Associate, Corporate Strategy and Business Development for B&G Foods. AJ?

Good afternoon and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer; and Bruce Wacha, our Chief Financial Officer. You can access detailed financial information on the quarter in the earnings release we issued today, which is available at the Investor Relations section of bgfoods.com. Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We refer you to B&G Foods' most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial condition. B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We will also be making references on today's call to the non-GAAP financial measures, adjusted EBITDA, segment adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage, base business net sales and segment adjusted expenses. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights, and his thoughts concerning the outlook for the remainder of fiscal 2025. Bruce will then discuss our financial results for the first quarter 2025 and our revised guidance for fiscal 2025. I would now like to turn the call over to Casey.

Good afternoon. Thank you AJ and thank you all for joining us today for our first quarter 2025 earnings call. Today, I will cover an overview of first quarter results and the key drivers, Bruce will cover more specific financial results, an outlook for the remainder of fiscal year 2025, actions to improve performance and EBITDA delivery, and an update on our portfolio reshaping efforts. Q1 results. The first quarter results reflect the challenging environment in the packaged foods industry at the start of 2025, after relatively solid performance in the fourth quarter of 2024. Net sales in quarter one 2025 were down minus 10.5%, driven by a major decline in January of almost 20% versus last year. Net sales trends improved throughout the quarter and continued to improve in April and early May. Adjusted EBITDA was down $15.9 million to a large extent reflecting the lower net sales in the quarter and increased cost and investment in the Green Giant U.S. business. Some of the key drivers of first quarter performance were consumption trends. Like other packaged food center store peers, B&G Foods consumption trends have not yet stabilized following the high inflation and consumer reaction over the past couple years. Across measured and unmeasured channels, our consumption was approximately minus 6% in the quarter one period. We expect the trends will improve in the back half as we lap negative comps from the middle of last year. The trends are also starting to improve with April consumption minus 2% to 3% across the portfolio. Retailer inventories. During January and February, B&G Foods significantly under shipped consumption across major retailers. Many retailers reduced weeks of supply by almost two weeks and cleared remaining fall merchandising stock more rapidly than in previous years. We estimate the net sales impact was…

Thank you, Casey, Good afternoon everyone. Thank you for joining us today. As you can see, despite a reasonably strong finish to 2024, we had a very challenging start to 2025. For the first quarter of 2025 we generated $425.4 million in net sales, $59.1 million in adjusted EBITDA, 13.9% adjusted EBITDA as a percentage of net sales and $0.04 in adjusted diluted earnings per share. The cadence of our year start deserves more context than usual regarding our monthly net sales performance as compared to the prior year periods. January and February were especially challenging with February showing improvement versus January. We experienced a similar, retailer destocking phenomenon that many in the industry peers have reported at the start of the year. During this period, we undershipped versus our consumption in retail track channels. March demonstrated progress despite the Easter holiday shift to April, with net sales down approximately 5%. As an encouraging preview of what may lie be ahead, April has begun to show signs of the stabilization we've anticipated with net sales down only 2%. This improvement was driven in part by strong performance from Green Giant in both the frozen and shelf-stable categories. Overall, net sales for the first quarter of 2025 decreased by $49.8 million or 10.5% to $425.4 million from $475.2 million for the first quarter of 2024. Base business net sales, which for this quarter largely match our net sales, decreased by $49.9 million or 10.5% in the first quarter of 2025 compared to the first quarter of 2024. $42.4 million or 8.9 percentage points of the decline in base business net sales was driven by lower volumes. $5.5 million or 1.2 percentage points of the decline was driven by a decrease in net pricing and the impact of product mix, and approximately…

Thank you, Bruce. To close, B&G Foods continues to remain laser focused on the critical priorities. Improving the base business net sales trends of our core business to the long-term objective of plus 1%, reshaping the portfolio for future growth, stability, higher margins and cash flows, as well as structuring key platforms for future acquisition growth and reducing leverage below 5.5x through divestitures and excess cash flow to facilitate strategic acquisitions. This concludes our remarks. And now we would like to begin the Q&A portion of our call. Operator?

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Michael Lavery with Piper Sandler. Please go ahead.

Thank you. Good afternoon.

Hey Michael.

Just back on some of the tariff considerations. Can you give us a sense just for maybe how that impacts your potential sale of frozen? Is it essentially put it on hold till there’s better clarity there? What are some of the maybe ripple effects? And if the reciprocal tariffs kick in that are on pause – if the pause tariffs of any kind could come through is there any concerns with things like what that could mean for debt covenants or – I mean, some of the ways we can do the math, the magnitude can get a little big. Help us just understand maybe how you’re contingency planning and thinking about that.

Yes. So part one, we don’t typically comment on any ongoing M&A discussions. Obviously we’ve made it clear the business unit’s under strategic review. From a tariff perspective at least with regards to that business everything Green Giant world is compliant under USMCA from a manufacturing in Mexico and moving to the U.S. our Canadian business for Green Giant at least, is almost entirely made in Canada, and so there's no real impacts there. Obviously, like everybody else, we're watching the news and trying to do as best as we can to understand what the implications are and when these negotiations are finished.

And so just to follow-up, if they were reinstated or instated, and you end up facing the tariffs that are paused, but that you could identify, can you give a sense of what magnitude that is? Have you been able to put a number on it? Or help us understand what that could look like?

Yes, I don't think most people could put a number on it, because they change every day. We're watching like everybody else. Certainly, we would look at different parts of our business and have an understanding of what the competitive set looks like. But it's hard to predict where tariffs are going to go right now.

As we talked in the script, in our comments, that the largest potential risk is in our Spices business coming from China, Southeast Asia, Vietnam, et cetera. That's the biggest risk. Those are – some of those are on pause. China is obviously in negotiation, so those are the ones we just can't predict. What is the final rate in China? We don't know. It was as high as 150% at one point. Now it's come down. So the risk is significant. But we're confident that negotiations will continue and that the things on pause will be negotiated as well. We know there's a lot of progress in Vietnam, et cetera. So I mean honestly, from a Mexico standpoint, we're not that worried, because it appears that as long as you're NAFTA or USMCA compliant, that we should be fine going forward. And so I don't think that will have any major impact on our Green Giant business.

And the other thing to keep in mind with our Spice business is virtually everybody that buys the products that we manufacture in spice, whether it's garlic or black pepper, they're buying from the same regions. And so that would be kind of an industry phenomenon rather than a unique B&G sourcing phenomenon.

Okay, that's helpful color. I'll pass it on. Thanks.

Thank you.

Our next question comes from Robert Moskow with TD Cowen. Please go ahead.

Hi, Rob.

Hi, good afternoon. So, the stock reaction today was more dramatic than I expected. And I'm just wondering if it's – if it has led to any kind of discussions internally about accelerating your portfolio changes or accelerating cost reduction programs. I know it's only 12 hours of reaction, but wanted to get your reaction, please.

Honestly, we were already accelerating. I mean, this isn't news to us today. We were already looking at how do we accelerate our portfolio shaping efforts and we've been working pretty diligently on that. Obviously, I can't comment on it, but that's been a major focus for us to make the changes in the portfolio that we think are necessary for the long-term. And what I talked today about, the cost reduction efforts, $10 million this year, run rate of $15 million to $20 million, we've been working on that for a few months now to get those implemented this year. And we've got – we were already trying to drive those pretty fast and hard. So, today gives me more conviction that we've got to move those things as fast as possible. But we were already doing that. We were already pushing the accelerator on both those efforts pretty hard.

Okay. And maybe…

And then I guess the other – the only other thing I would say, Rob, is that the other piece of this is as we reshape the portfolio, we will take some pretty significant actions to right size our cost structure as we divest businesses. So that's another effort that's in – that's being planned. That's probably part of a larger restructuring.

Got it. And I wanted to try to drill down to the negative 2% you called out in April as a consumption trend. Is that a clean number? Or are there any Easter elements that make it maybe stronger because of the later Easter?

Yes. I think there's maybe a little bit of Easter help in that number, but I think even the underlying number before Easter benefits is improving versus what we're seeing in the early part of the first quarter and then towards the end of last year in the fourth quarter. So we are seeing some improvement in that trend. It's gradual and I don’t – we really didn't expect a significant change because we don't lap the sort of the negative comps till the middle of the year. We weren't really expecting a lot of change, but it's encouraging to us that we're seeing a little bit of light in the consumption trends, but we need to see more. We need to see it continue.

Okay. Can I ask one more? The $50 million of inventory deload, did the vast majority of that happen in January or was it kind of spread out…

I think I said $15 million, one-five, just to make it clear.

$15 million, sorry.

One-five, one-five, yes. That I would say most of that occurred in January at the end of the month and some of it in February.

Okay. Thanks a lot.

But we saw our volumes kind of our shipments pretty low in the very end of the month in January.

Got it. Okay. Thanks so much.

Yes. Thanks, Rob.

The next question comes from Scott Marks with Jefferies. Please go ahead.

Hey, good afternoon, guys. Thanks so much for taking our questions. The first thing I wanted to ask about is this retailer inventory reduction. Is there any expectation of recouping some of that lost volume, whether it's during the Easter period or later in the year?

I don't think so. I think this was a permanent reduction. We typically see some of this reduction from the fall period happen more gradually than it did this year. We could see maybe some smoothing out of that effect this year. But I mean our assumption right now is that they've taken the weeks down and 80% of that will stick as they try and operate more efficiently and operate with lower inventories, just like we're doing. So, I mean, it was a little bit of a surprise to us in terms of what had happened and how much they took out. But I think our operating assumption right now is that they're trying to be more efficient and we need to kind of plan that those inventory reductions are largely permanent or they will operate with more weeks of supply and maybe some of it will come back, but just a small portion.

Got it. And then I think there was also a comment that you made in the prepared remarks about kind of fully lapping this changing consumer behavior at some point. I think we kind of heard thoughts from others around the industry that this would have happened a bit sooner after the initial kind of inflationary shock from a couple years ago. So I'm just curious if you can kind of speak to maybe what kind of gives you that confidence that that can happen? Because I think more recently we've heard about some declining consumer sentiment from some of your peers. So just trying to gauge how you're thinking about the consumer right now, and when maybe some of those behaviors will shift back? Thanks.

Yes, I don't think there's a point in time where we lap everything, all consumer behavior. I think it's been a – it's kind of, it will be a gradual process, but what we see in our own brands and categories, and obviously our categories operate differently, particularly Crisco with prices moving up and down quite a bit. We believe that we're lapping the larger negative comps in our business and categories in the middle of this year, so call it the start of the third quarter, and that we're looking at that and saying is that kind of a demarcation when we begin to see less negative comps because we're already lapping the first round of consumer behavior changes and everything else. So we're going to watch this pretty closely. It's encouraging to me, we're seeing a little bit of signs in our recent weeks that maybe we've – maybe that some of the declines will begin to lessen, but it's that simple. It's like looking at kind of the year-over-year trends and when do we hit those points where we saw some significant declines. But I don't think it's a point in time, I think it's phased in terms of different categories and when people reacted to the different price points and when prices actually changed in different categories.

Got it. Thanks for the thoughts. I'll pass it on.

Yes.

Our next question comes from William Reuter with Bank of America. Please go ahead.

Hey Bill.

Hi. Good afternoon. I've got just a couple of questions. The first on your ABL, are there any constraints on your ability to borrow the full amount based upon the credit agreement covenants or do you have access to the entirety of it?

So it's actually not an ABL, it's a cash flow revolver.

Sorry, yes, I said that wrong.

So if you think about sort of the way those two work, the ABL, we're going to be limited by what's our inventory, et cetera. Here we've got some covenants, but we also are less reliant on our revolver today than we were in the past around working capital following the sale of the Green Giant can business. So we'll still have some swings around the holidays, but not nearly as big. And then separately, really that revolver was sized for acquisition, so I wouldn't anticipate fully drawing on that revolver unless we were buying something.

Okay, can you share what's available today?

I mean, it's a couple of hundred million dollars drawn at the $475 million revolver.

Right. Okay. And then with regard to the timing of the late January reduction of inventory, I think a lot of retailers reset their shelves [ph] around that period of time. Were there any shelf-based losses as part of those resets?

Actually, retailers reset shelves kind of on a phased approach by category across the year. There's not a lot of – we don't really see a specific point in time that they do multiple categories. So, it was really around how are they managing their weeks of supply. There are some resets, one or two in our categories in March, but I don't think that was really the impact. It was making some decisions to pull down inventories on categories and run with lower level supply and maybe even take out seasonal merchandising from the fall, seasonal inventory faster than you typically see.

Yes, as Casey said, our commentary is more around destocking rather than reset, which impacted us.

Yes.

Got it. And then just lastly, the decision to promote a little bit more. I mean was that decision based upon either retailers that were going to reduce your shelf space or maybe that given these elevated promotions that you've gained more? Can you talk a little bit about the decision to make the promotions that clearly hit EBITDA in the quarter?

I mean, it's largely in the Green Giant frozen business. And number one, I think we determined that we needed to get sharper price points and promotions to be competitive in the category because we saw other people promoting and being more aggressive. And so we decided to respond to be able to do that. And we also felt that we needed to make sure that our volumes were moving more quickly and our velocities were increasing and we saw that happen. So this was really a decision to make sure that we're competitive, make sure that our business was healthy. And as I said, it was a short-term decision in that period of time that now we've kind of pulled back on some of those trade investments. But I'm encouraged that our actual our business on the U.S. frozen net sales was up positive in April after we pulled back on the trade investment. So some of that was Easter merchandising. But we've continued to see good trends on that business. But we made a short-term decision to get competitive against some pretty aggressive promotion activity. And we suffered a little bit in the fourth quarter probably by not responding aggressively enough. And we did that in the first quarter. And as I said, I'm encouraged by the trends as we pull back that trade investment that our business is healthy.

Got it. All right, that's all very helpful. Thank you.

Thanks, Bill.

Thank you. [Operator Instructions] Our next question comes from Karru Martinson with Jefferies. Please go ahead.

Hi. Thanks for taking my question. This is Bastiana [ph] on for Karru on the frozen and vegetable segment, what will be the run rate for promo moving forward? And with the pressures that you've seen in Green Giant, has that brand's performance influenced how you and your potential suitors are looking at valuation?

So again, from an M&A standpoint, we wouldn't comment on that as far as promotional run rate. As Casey said, we leaned in a little bit harder in the first quarter just given the challenging backdrop from a category standpoint. We think that we had really good performance from a top line in response to that, particularly in March and April. But we don't necessarily disclose our promotional rates or cadence on a go forward basis.

I think we will resume more normal kind of trade promotion spending rates for the remainder of the year. This was investment we put in to be competitive, but we're feeling like right now our plans are competitive.

Thank you. This concludes our question-and-answer session and our conference. Thank you for attending today's presentation. You may now disconnect