Stéfan Descheemaeker - Chief Executive Officer Samy Zekhout - Chief Financial Officer Taposh Bari - Investor Relations

Good day, and welcome to the Nomad Foods, First Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Taposh Bari. Please go ahead.

Thanks Amanda. Thank you all for joining us to review our first quarter 2019 earnings results. With me on the call today are our Chief Executive Officer, Stéfan Descheemaeker; and Chief Financial Officer, Samy Zekhout. Before we begin I would like to draw your attention to the disclaimer on slide two of our presentation. This conference call may make forward-looking statements that are based on our view of the company's prospects at this time. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and this slide in our investor presentation, which includes cautionary language. We'll also be discussing non-IFRS financial measures during the call today. These non-IFRS financial measures should not be considered a replacement for, and should be read together with IFRS results. Users can find the IFRS to non-IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within this presentation represents adjusted figures for 2018 and 2019. All adjusted figures have been adjusted for exceptional acquisition-related, share-based payment and related expenses as well as non-cash foreign exchange gains or losses, and all comments from hereon will refer to those adjusted numbers. And finally, users should be aware that 2019 figures have been presented in accordance with IFRS 16, which is the new standard for leases. As such, certain financial measures should not be directly comparable – may not be directly comparable to 2018 figures. That being said, we have disclosed the impact of this change in the press release where the impact on comparability has been deemed material. With that, I'll hand the call over to Stéfan. Stéfan Descheemaeker: Thank you, Taposh, and thank you all for joining…

Thank you, Stéfan, and thank you all for your participation on the call today. Turning to slide six, I will provide more detail in our key first quarter operating metrics, beginning with revenues which increased 15% to EUR 618 million, driven by 0.9% organic revenue growth and 13 percentage points – 13.8 percentage points from the acquisition of Aunt Bessie's and Goodfella's. Gross margin was 30.9%, declining 90 basis points year-on-year. Base business gross margin expanded 60 basis points driven by volume mix and price and promotions, which more than offset COGS inflation. Acquisition mix negatively impacted gross margin by 150 basis points. As we had anticipated, first quarter base business gross margin was affected by two timing factors unique to Q1 versus the rest of the year. First, we realized the full benefit of price increases, but only a partial impact from raw material inflation in the first quarter. This will normalize beginning in Q2. Second, the shift of Easter and related promotion moved from Q1 into Q2 given the timing of the holiday versus the prior year. Moving down to the rest of the P&L, adjusted operating expenses increased 9% year-over-year, primarily due to the inclusion of acquisitions. As a percentage of revenue, adjusted operating expenses improved to 13.8% from 14.5% in the prior year, reflecting acquisition synergies, expense discipline and phasing. First quarter adjusted operating expenses were approximately EUR 5 million lower than we originally expected due to the timing of some media activities moving into subsequent quarters. Within operating expenses A&P increased 6% and indirect expenses increased 11%. Adjusted EBITDA was EUR 122 million and as expected, included the EUR 4 million benefit related to IFRS 16, the new standard on lease accounting effective this year. Excluding these benefits, adjusted EBITDA grew a healthy 14% versus…

Thank you. [Operator Instructions] And we'll take our first question from Jon Tanwanteng with CJS Securities.

Good morning gentlemen. Thank you for taking my questions and excellent quarter. Stéfan Descheemaeker: Good morning.

Good morning.

Morning. Could you tell us of the guidance that you've provided in the EBITDA includes all the IFRS benefits this quarter moving forward?

Yes, it does.

Okay, and how much is that expected to be over the next several quarters? Stéfan Descheemaeker: It's EUR 15 million for the year.

Okay, great thank you. And then can you give us an update on the use of proceeds from your recent equity raise? Is it purely for M&A or are there other uses and investments that you're planning? Any color would be helpful.

We may be – I think have been raising, I mean, the equity I mean and now sitting on EUR 753 million in cash, and we intend to use that to, let's say invest in deals to come and we will be selecting those deals on the basis of the financial return that they will deliver.

Okay, great. And could you also just comment on the IPO of Beyond Burger [ph] here in the U.S. and if you're pre-approaching products, it can capitalize on the same trends and the consumers that are driving beyond an impossible and similar vegan products. Stéfan Descheemaeker: Jon, it's an excellent question. It was to not let than notice obviously. EUR 88 million of revenue with the EUR 3.8 billion, which is close to our market cap by the way, so that's an interesting note. Aside from that you know, I think what we see in the fundamentals of planned protein, and the planned protein is definitely there to stay, to grow and we want to be part of this and we're starting with two very interesting launches. One is PEASE in the Nordics, and we're doing very well. Great feedback from the consumers and from the retailers, and we're just launching right now Green Cuisine in the U.K., so we're very well accepted by the trade. Obviously, more to come in terms of – or obviously the tiding this summer and more fundamentally, more to come also in terms of SKUs. So we're starting obviously with the limited assortments and then as time goes by we will obviously expand the range. It's absolutely it's a very important category for us and not limited to the Nordics and to the U.K. It's going to go way beyond. Then time will tell how it’s going to impact our market cap, but at least business-wise, it makes a lot of sense.

Great, thanks for the color guys.

We'll take our next question from Robert Moskow with Crédit Suisse.

Hi, a few questions. Can you give a little more detail on why the EUR 5 million in media shifted into second quarter? I thought on the last call you were pretty specific about the timing of it and I just want to know the circumstances. Second, we use Nielsen to track your market share data; that's probably not perfect and last year you had some pretty significant gains versus private label across several categories. Those market share gains seem to slow in the first quarter. I think in your commentary you said that you are growing, the category is growing, but can you talk a little bit about your market share in the first quarter?

Yes, Robert, actually the first question on media, its EUR 5 million. So it's partly driven by the fact that we have been seeing some shifts in campaigns, which is primarily driven by the fact that Goodfella has moved from the affiliate march towards [inaudible] and that has been contributing to mostly to the shift from Q1 into Q2.

Okay, the market share? Stéfan Descheemaeker: The market share at this stage is flat. So within a good industry at this stage you know it's flat and as we know obviously it's – we've been through a major price increase, which is fundamental and then as we said, we're going to see – at this stage we're moving according to plan, so that's what's expected. In the coming weeks and months we will see whether it's moving as we said in terms of price elasticity. So far so good because we also know that it takes some time to be fully reflected and understood by the consumers. But at this stage with that kind of price increase we think that's the flat performance is a good performance.

Is the intention to now start increasing on vegetables as well as fish or not, and how would that affect your pricing kind of ramp-up for the year? Stéfan Descheemaeker: Let's put it this way Robert. Fish was – I mean we've been through a very, very significant cost increase that we've been able to – that we really understood, let's say starting, let's say H2 last year and so we've organized ourselves I think very well. I think the countries have taken the challenge very, very well and ultimately it's been – obviously it's already difficult, but it's been reasonably well received by the trade. In the veg it's a bit different. We don't see the same thing and it's more category by category, I would put it that way. PEASE for example, what we've seen is we see that all PEASE are declining for the first quarter for a very simple reason. We had a very poor harvest and so why would we promote for example? It doesn't make any sense when you are supply constrained and so we did – we made the right things, we did the right thing with PEASE. So in terms of price increase for the future, again fish is – was I would say unprecedented, but it was big, and we don't see the same thing happening in veg at this stage.

My last question; on Goodfella's, you said you shifted the media by a month. I thought I had picked up that there was some reconfiguration of Goodfella's product line. I don't know if it's packaging or product or what. Is there anything to that or is Goodfella's kind of on track? Stéfan Descheemaeker: Goodfella's is definitely on track. I don't think you should read too much into one month, which was March as a combination of many different things, but we're not changing our flywheel. In other words, what we said from the start with the Goodfella's, we're going to first improve the quality; we're going to improve the packaging; we're coming with a new campaign, that's exactly what I mentioned with The Godmother and obviously Made with Respect, and it's really starting now. So sometimes it’s switched by one – by a few weeks which is anyway if we're not ready, we're not ready. I think we're very pleased with what we're seeing right now and PEASE for us is doing well.

Okay, great. Thank you. Stéfan Descheemaeker: You’re welcome.

[Operator Instructions] And we'll take our next question from Bill Chappell with SunTrust.

Thanks, good morning. A - Stéfan Descheemaeker: Good morning.

I may have missed it, did you quantify what the Easter shift was and is that expected to be fully picked back up in this next quarter?

Yes, we did mention the fact that it was going to be around 1.5%.

And that's what you expected kind of all along?

Yes, the shift between Q1 and Q2 in sales growth.

Okay, and then in terms of just the overall category, I mean you say it's healthy, it's growing. Is there any way to kind of quantify it's accelerating over the past two, three quarters, and are there others driving that growth? Is it consumers driving that growth or is it just really you and kind of being back and innovating and advertising behind it that's driving that growth? Stéfan Descheemaeker: Well, at this stage, I wouldn't say that there's an acceleration. I think it's been very consistent in terms of low single digits of growth and by the way, that's an algorithm. As we said obviously, it's our job to invest growth in the category and then that's one vision obviously in the long term to see this algorithm improving in terms of quality and quantity, but that's going to take a bit of time. And back to market share by the way, I forgot to mention that on an MAT basis we are increasing our share. So that's a combination. No surprise in terms of summary, it is no surprise in terms of category; and second, a flat short term, but also on MAT basis you'll increase market share despite price increases.

Got it. But you're seeing volumes continue to improve, I guess not just on pricing? Stéfan Descheemaeker: As we said you know the first quarter which was expected, we've seen obviously some volume reduction, which is a combination of PPA and obviously of initial reaction from the consumer in terms of price, but we see that’s obviously going down over time and very fast. And we obviously – I forgot to mention, which is also a big thing, which is the famous 1.5% coming from Easter.

And then last one for me, we've actually heard from – that you're coming from Coke and Pepsi and others that there was some inventory management around the Brexit noise. I know it's not a huge – there's a lot of local market manufacturing, but was there any kind of impact to your business inter-quarter from that?

No, we had mentioned the fact that we are going to be prepared for the [inaudible], the line originally, so we just had about a EUR 15 million impact from an inventory standpoint, and that’s why we are going to decrease over the months to come. Stéfan Descheemaeker: And obviously we see what October tells us you know. It's obviously that we may have to come up with the ramp-up again. So that's – life is full of surprises.

Yes, it keeps it interesting. Thanks so much. A - Stéfan Descheemaeker: Yeah, you’re welcome.

At this time, there are no further questions. I'd like to turn the conference back over to CEO, Stéfan for any additional or closing remarks. Stéfan Descheemaeker: Okay, thank you operator and thank you for joining us on the call today to review our first quarter results. The year is off to a good, strong start with Q1 representing our ninth consecutive quarter of organic revenue growth despite the Easter shift. We're very much on pace to deliver another year of growth against our algorithm and to have a well-capitalized balance sheet ready to be deployed. With that, thank you for your participation and I look forward to updating you on our progress where we next report second quarter results in August.

This concludes today's call. Thank you for your participation. You may now disconnect.