Good morning and welcome to the Conagra Brands Third Quarter Fiscal 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Matthew Neisius, Senior Director of Investor Relations for Conagra Brands. Please go ahead. Good morning, everyone, and thank you for joining us today. Once again, I'm joined this morning by Sean Connolly, our CEO, and David Marberger, our CFO. We may be making some forward-looking statements and discussing non-GAAP financial measures during this session. Please see our earnings release, prepared remarks, presentation materials, and filings with the SEC, which can be found in the Investor Relations section of our website for more information, including descriptions of our risk factors, GAAP to non-GAAP reconciliations, and information on our comparability items. I'll now ask the operator to introduce the first question. The first question will come from Andrew Lazar with Barclays. Please go ahead. Great. Thanks so much. Appreciate it. I guess, Sean, I realize there's still one quarter to go in the fiscal year. Macro dynamics make for, obviously, a super challenging environment in which to forecast. I think, at CAGNI, you mentioned a few items as it related to fiscal 2026, including the higher brand spending already being in the base for next year, 4% of cost of goods is productivity, and a 53rd week with the wild card, I think, being where inflation lands. I was hoping, I guess, you could at least bring us through your thoughts, even at high level, on how we think about next year at this stage, knowing much is still subject to change. I guess I ask this in the context of some other sort of fiscal year reporters having already indicated not to expect much growth next fiscal year due to the need for greater reinvestment. Yet in Conagra's case, as you pointed out in the prepared remarks, consumption trends have been steadily improving. Thanks a lot. Okay. Good morning, Andrew. Let me try my best to answer that. As you know, we do not provide fiscal year guidance for any forthcoming year until a Q4 call that precedes it. That will not officially happen until July. Given the macro environment you cited, this year is extraordinarily dynamic. We will definitely take advantage of the time between now and then to see where the dust settles on a number of these external things we are monitoring. That said, you are already equipped with some of the puts and takes. Number one, consumer pull for our products remains strong, and a lot of the spend, as you pointed out, is in the base. Number two, inventories are being rebuilt, but some of the higher costs associated with recent supply chain constraints will linger into Q1. Three, we do not expect a Hebrew National repeat in Q1. We do not expect this year's second half supply constraints to repeat in H2 next year. However, and this is the big but, we are still monitoring inflation, tariffs, consumer sentiment, and the need for pricing. Overall, it is too early to give you an outlook at this juncture. Okay. Yep. Understood. If you could go into a little more detail on the differential or the gap between shipments and consumption in the grocery space, just because that was the area where there was the biggest differential and frankly came in below what I think many had modeled versus obviously refrigerated and frozen. Thanks so much. Yeah. Let me hit on that. The prepared remarks were really focused on the gap between shipments and consumption that's tied to the supply constraints, which is really a frozen concept. What you're seeing in the grocery and snacks concept is a bit different, which is in grocery and snacks this year, more seasonal holiday, what I'll call seasonal slash holiday shipments fell into Q2 versus last year where more fell into Q3 because holidays were later this year. If you look at the six-month pattern in grocery and snacks, it's pretty normal. There's nothing out of the ordinary there. Overall, the quarter came out for us very consistent with what we laid out for folks when we spoke about it in CAGNI. That includes grocery and snacks where there's just some shipment timing where some of the holiday slash seasonal shipments were a little bit different quarter by quarter this year versus last year. Overall, consumption at the company level remains strong, and that's what we've been focused on. That's really what you're seeing there. Got it. Thank you. The next question will come from Ken Goldman with JPMorgan. Please go ahead. Just on the subject of grocery and snacks, I appreciate that certain elements of that business, including meat snacks, are sold maybe a little more heavily in convenience stores than traditional packaged food. I'm just wondering, some of the data that we're getting on C-stores is not ideal right now. I'm just curious if that had any kind of impact versus your prior expectations on any of your products and maybe the overall grocery and snacks segment this quarter. Yeah. Good question, Ken. Let me try to demystify that for you a little bit. First of all, overall, Q3 unfolded in a manner that was very consistent with what we updated everybody on when we were at CAGNI. That includes grocery and snacks. The thing you're noticing in grocery and snacks, as Andrew just pointed out, is that gap between shipments and consumption, consumption overall at the company level and at G&S in general remained pretty strong. There was a gap, and it was really the way shipments fell last year versus this year. Last year, more was in Q3. This year, more was in Q2. That is it. In terms of consumption overall for our company, as you saw in the prepared remarks, consumption remains incredibly strong, which is really terrific to see. Now, if you asked me to dig within the strong overall consumption, where are there spots that are weaker? Certainly, on a channel perspective, C-store as a channel can have its challenges when the consumer gets stretched. We have not been immune to that this year, nor have our competitors. There is some channel shifting going on. C-store relative to its normal performance is a bit weaker. That is certainly impacting our portfolio. As you can see in the total scanner data, we tend to make that up in other channels. Our total consumption remains incredibly strong. The only other thing I will point you to is that within parts of the dollar channel, and not every competitor or every retailer within the dollar channel is performing equally. There are some spots that are, I will just say, that are weaker than others. We have had some of that, and actually, it is some non-measured that shows up in shipments, but not material at all on an overall consumption basis for the company, which you saw was strong. Great. I'll pass it on. Thanks, Sean. The next question will come from Leah Jordan with Goldman Sachs. Please go ahead. Good morning. Thank you for taking my question. I know it's a little early still for 2026 guidance, as you pointed out, but I just wanted to see if you could comment on your confidence in hitting your leverage target of three times by the end of next year. I guess, what are the key risks you see at this point, and how do you think about the contributions from debt paydown versus just an acceleration in the business? Yeah, Leah, this is Dave. Yeah. As you saw in Q3, we're really pleased with our cash flow performance. Our free cash flow conversion is 125%. We've paid down $500,000,000 of debt in the last 12 months. We expect the cash flow to continue to be strong and continue to pay down debt. We will update kind of where we are with the three times leverage target by the end of next year when we give guidance for July. Obviously, that's impacted by earnings in the denominator. We'll see where we are there. The cash flow is strong. We expect it to continue to be strong. Our priority with that cash flow is to pay down debt. That will continue. We'll see where we are with that leverage target when we give guidance in July for fiscal 2026. Great. Thank you. That's helpful. Just as we're kind of talking about cash flow, it looks like you lowered your CapEx guidance for this year by about $40 million. Just seeing if you could provide more detail on what was removed or delayed from the budget. Really, does this mean that we should anticipate a higher than normal CapEx next year? Just maybe while we're on the topic, and given we've had these recent plan issues, maybe have you changed how you think about maintenance CapEx at all? Thank you. Yeah. Yes, the update in capital for this year is all timing. Just in terms of the cash impact of capital, more of that is shifting into next fiscal year. We'll give a specific guidance number on CapEx next year, but you could expect that that will bounce back up to kind of levels where we started this year. That's not unusual with projects that you have; timing can slip. That's just simply timing. It's not a result of us kind of cutting anything or doing anything. In terms of maintenance capital, we have a very robust process for allocating maintenance capital and making sure that all of our operations have capital that they need to keep the operations running and be efficient. In situations that we've had with our chicken operation, when we find things, we prioritize fixing the root issues. In this case, we're going through a full modernization of that plant. We are estimating that we will be done that by August. We always prioritize maintenance capital, and that's no different than the way we've always handled it. Yeah. Just to add a little more color on the maintenance capital piece, we are in the midst of a multi-year effort to kind of modernize our supply chain. Ale Eboli, our Chief Supply Chain Officer, laid that program out at CAGNI a little over a year ago. We have made tremendous investments in maintenance capital to modernize our facility, including planned major capital investments in the frozen facility that makes our work in process chicken. As I pointed out at CAGNI, we did not quite get all the way to implementing that project because we ran into some quality and consistency issues before we got started. We have had to deal with that a little bit earlier than we expected. It is coming at a cost. It obviously disrupted our service. I just want to emphasize that the investment plans have been in flight on the modernization of our network for multiple years now and remain robust. Great. Thank you. The next question will come from Tom Palmer with Citi. Please go ahead. Good morning. Thanks for the question. I guess just to start off, I wanted to ask on the fourth quarter, you noted the persistence of higher inflation, which seems to maybe be a little bit incremental to 4Q. It sounds like tariffs, at least the way you were able to comment on, are not a big swing item, but they probably do not help. At least relative to consensus estimates, sales came in a bit light. You also reiterated your annual outlook. Are there incremental maybe tailwinds to be thinking about when we look towards 4Q that drive that inflection? Thank you. Yeah. I'll make one comment and flip it to Dave. As I mentioned earlier to Andrew and Ken, Q3 unfolded in a manner largely consistent with what we expected when we spoke to investors at CAGNI. Given that, there's obviously not a lot of contemplation to changing kind of what we anticipate in Q4. I think the big thing that we have to do, and I understand everybody on this call today is really eager to get some perspective on how is next year going to unfold. We got to see where the dust settles on these external factors because that is the biggest variable we are dealing with right now. We've already been dealing with inflation that really has not abated. We've had record inflation over the last few years. We've still been in higher inflation this year than we expected when we went into the year. Now we're looking at potential factors that could exacerbate that and what are the follow-on actions that we're going to have to take. It's too early to tell, obviously, how the dust is going to settle there, but that's going to be a factor for us. Things are moving around quite a bit. There are things like vegetables that we import from Mexico that at one point we thought maybe that would be an issue. Maybe there's an exemption there, but then maybe there are other things that become an issue. Things are moving around not only on a weekly or daily basis, but on an hourly basis right now. We've got to see where all the dust settles on that so we can really pin down next year to the best of our abilities and give you the guidance that is going to be as helpful as we can give. Dave, anything you want to add? Yeah. Just, Tom, real quick, just the building blocks for our Q4. We expect consumption to continue to be strong and through Q4. We expect our shipment volumes to improve versus Q3. As we improve our service levels, we are improving our service levels on Birds Eye and our frozen meals with chicken. Expect improvement in gross margins in Q4 versus Q3 because remember, in Q3, we were negatively impacted by the supply disruptions and the disruption to our operations. Absorption in this quarter, negative absorption was very high. Just some of the one-time costs we had because when you shut down an operation, it does hit your cost. We do expect improvement in Q4 versus Q3. You saw that we had a trade estimate true-up in Q3. We do not expect trade to have as much of an impact on margin in Q4 versus Q3. Our SG&A will be favorable in Q4 versus the prior year. They are really the key building blocks. Okay. Thank you for that. Just on the, I guess, import question with tariffs, you noted the veggies from Mexico. Are there other major items we should be thinking about that you traditionally import? And then beyond just, I guess, raw materials, are there finished goods sold in the U.S. that are sourced overseas? Thank you. Yeah. I'll just give you a little commentary on that. We buy, obviously, a lot of stuff that goes into our products. Much of it is sourced in the U.S. But when we cannot find a supply in the U.S., think Chipotle and avocados, things like that, we will source it elsewhere. I mentioned vegetables out of Mexico. We buy a lot of tin plate steel for our cans outside the U.S. because something like 75% of the tin plate steel lines in the U.S. have been eliminated since 2018, leaving manufacturers in a position where they have no choice but to source these things overseas. We kind of fall into that camp. Things are moving. Yesterday, I might have thought there could be an issue with vegetables coming in from Mexico, and maybe that's not going to be an issue. We'll see. Today, maybe there is an issue on things like palm oil that was not on the radar as squarely yesterday. Things are moving around. I'm not going to give you a definitive list right now because of the volatility of the situation. As you know, running a business, you have to be able to have some stability in your assumptions. Right now, the assumptions that we're making are moving around a bit. We're tracking them by the minute. As soon as we kind of see the dust settle, we'll rack it all up, give you our outlook, and that'll be when we're in a position to give you the best guide for the coming year. Anything you'd add to that, Dave? Yeah. No. Our manufacturing, what we sell in the U.S., is really manufactured in the U.S. As Sean said, what we're looking at is our materials and materials that we would have to bring in from outside of the U.S. just because they're not available in the U.S. Great. Thanks, guys. I know it's a very evolving situation, so appreciate the color. The next question will come from Chris Carey with Wells Fargo. Please go ahead. Hey, guys. Quick follow-up on Q4 and then a little bit of a follow-up on the broader macro backdrop. Just in Q4, you'd said that the shipments would come at a higher cost, but you also expect gross margins to improve in the quarter in Q4 relative to Q3. What's kind of the gap there? Is it better productivity, the incremental pricing on protein? Can you maybe just help a little bit more context there? Yeah, Chris. As I mentioned, we have pretty negative absorption, which has impacted our cost in Q3, which will get better in Q4. Also, the incremental costs we're incurring with third-party co-mans to get our inventories back, we've actually started incurring in Q3. That will continue in Q4, but it's consistent. It's not incremental to Q3. That will continue through Q1 of fiscal 2026, using the third-party co-man. Okay. This is a slightly unfair question, but just following up on the prior line of thinking. When you think about the uncertainty in the current environment going into fiscal 2026, how much of that is associated with the top line, the consumer response to this environment relative to your cost structure? I do not know if there is a way to kind of parse that out, but clearly, there is a consumption angle to this, and there is also the kind of tariff and cost angle. I wonder if there is any way to frame the relative impact of either at this point. I won't comment on next year, Chris, but let me give some perspective on this year and kind of what our stance has been for the last year. Obviously, management teams are always trying to simultaneously drive acceleration of growth and gross margin expansion. In normal times, we want them both, and we want them both right now. About a little over a year ago, we said, "Look, they may not come in at the same time. If you've got to prioritize getting volume back to growth versus continued gross margin expansion, how do you prioritize?" We said, "We're going to plant the flag and say returning volume to growth is the most important thing for the long-term value creation of the company. We have to keep the relationship between the consumer and our brands. We made the investment to do that, and we've seen very strong connectivity between the consumer and our brands. Obviously, that has pressured gross margins for us and for the industry. Now, as we start to think about what's coming next year, I think we're in for another year where we're going to have our hands full in terms of continuing to drive growth and continuing to drive margin expansion. That's what we're going to do between now and July when we guide is say, "What's the strongest plan we can put together on both metrics? Okay. All right. Thanks a lot. The next question will come from Yasmeen Deswande with Bank of America. Please go ahead. Morning, everyone. Thanks for the question. Dave, I just have a question for you and just specifically on cost inflation. In your prepared remarks, you mentioned taking pricing in Hebrew National to offset protein inflation. And I believe there was a comment made previously on the expectation of deflation on crop-based inputs. I guess at this point, is the expectation for fiscal 2026 to be higher than fiscal 2025 year to date? Do you just have any updated thoughts there? Thanks. Yeah. As we mentioned, we're not going to give any insight on fiscal 2026 until our July call. There's a lot of things moving around right now, candidly. You saw for the quarter, our inflation came in around 4%, which is where we expected it to be. We had guided for that for the full year. Right now, we're just looking, as Sean said, looking at all the dynamics and kind of the impact that it may have, and then we'll update further in July. I'm not going to comment any more on inflation for next year. I think the big thing to take away is that it's still 4%. We've had record inflation over the last few years, and there were some folks that thought things would go backwards. That has not happened. In this quarter, we're still looking at 4%. Some of the external things that we're talking about are incremental above and beyond that if the baseline doesn't move. That is what we've got to see shake out. Obviously, if we have to deal with some of these external factors, we're going to have a number of levers available to us that we typically push on. We'll look at our productivity programs and can we squeeze more out of that. We'll look at alternative suppliers. Can we get a better price elsewhere? We'll look at pricing. Everything is on the table. Okay. Great. Thank you. I just have a quick follow-up, and it's more of a clarifying question off of Andrew's question earlier. The gap in grocery and snacks, some of that is unfavorable mix. Some of that is trade spend. Is the remaining of that mix, is it just Swiss Miss? What other products was that that kind of drove that delta? I think you just hit on pretty much all of it. I mean, the gap between shipments and consumption in grocery and snacks, I already hit that pretty hard. That was really just the way shipments fell last year, more of them in Q3 than this year, more of them in Q2. That's really it. You understand the trade adjustment. Anything else, Dave? Yeah. No. We talked about Swiss Miss. The consumption was really strong in Q3. When you look at consumption versus shipments, that's just the seasonality of that business, right? You ship it, and then the consumption, and it really depends on the weather and when people want to buy it. Those shipments went in Q2. We and retailers thought more consumption would have occurred in Q2. The weather did not cooperate, but it did come in Q3. I always say winter always comes. It came in Q3, and it just pushed more of the gap. It was one of the contributing factors between the gap between shipments and consumption as it fell in the third quarter. Yeah. Okay. Thanks, guys. The next question will come from Alexia Howard with Bernstein. Please go ahead. Good morning, everyone. Hi, Alexia. Morning. A couple of quick questions. First of all, can you comment on any recent changes in the state of the consumer and behaviors that are shifting? We've been hearing from others that things might have deteriorated in the last eight weeks or so. I know you mentioned C stores. Yes, any comments about shifts? You know, Alexia, we've been talking about these behavior shifts for about two years now where you've got stretched household balance sheets. You've had value-seeking behavior, people seeking trade-offs. That has been in place, and it's been everything from the beginning around things like more useful leftovers, things like that. That has been with us. We invested to kind of overcome some of those challenges. Obviously, you've seen tremendous responsiveness, especially in our frozen business since we started making those investments. I think it's really more of just a continuation of a challenged consumer balance sheet where they are stretched. We have been incentivizing them with good innovation and some low-discount, high-quality promotions to drive consumption. You can see it in our numbers. They're being very discerning. I anticipate that's going to continue. If we see prices in food or elsewhere go up further, I think you're going to see more trade-down behaviors. I think it'll be the typical stuff. I think the first thing you'll see is discretionary purchases will weaken, food service trends will weaken, and then within at-home eating, I think you'll see a lot of that value-seeking behavior. We are very well positioned to compete in that environment. As we pointed out at CAGNI, frozen foods are doing quite well right now, and obviously, we're the world's biggest frozen company. Within snacking, importantly, we're very protein-centric and healthy, permissible snacking. We have one of the stronger snack portfolios right now, and that's helping us navigate some of these challenging consumer times as well. Thank you. As a follow-up, I know you've got a lot on your plate right now with everything going on, but there seems to be a lot of activity at the state level to introduce bans or labeling requirements on certain additives. That seems to be bubbling up in a lot of different states now. Is that going to be a major burden headache for you, or is it going to be fairly straightforward to accommodate all of that? Alexia, you are now hitting on why when I talk about the things we're monitoring externally, it's plural. It's not one thing. It's not tariffs. It's a variety of things. Add it to the list of external factors we're monitoring. The good news for the Conagra portfolio in regard of that one in particular is, as I pointed out at CAGNI, some number materially over 90% of our portfolio doesn't have any synthetic dyes or food coloring in our products. It's really not a big deal for us, but we do have to monitor it because state-by-state legislation is very difficult for manufacturers to deal with. We'd rather have a federal singular voice on this so we can adapt and be as agile as we can. When you're dealing with state-level legislation, it makes it more challenging for manufacturers to have to try to tailor stuff to individual states. With respect to food dyes and colors in general, we do not have a lot of it in our portfolio. It is not a material concern. Yeah. Thank you very much. I'll pass it on. The next question will come from Megan Clapp with Morgan Stanley. Please go ahead. Hi, good morning. Thanks so much. Maybe just a quick follow-up on 4Q. I think the guide maybe implies org sales somewhere around flattish. It looks like consumption, which makes sense just given the supply chain challenges, has trended a bit lower in the most recent period. As you talked about volumes improving, you're going to get a shipment benefit from the restock of retail inventory. Maybe can you just help us unpack the underlying expectation as it relates to consumptions in the context of flattish shipments in the fourth quarter? That would be helpful. Thank you. I think the way to think about the shape of consumption is when you have supply constraints, as long as the underlying consumer pull remains strong, consumption will remain strong until your inventory position weakens. Obviously, because we've had limited inventory, the inventory position has begun to weaken. That'll lead to out-of-stocks on the shelf, and that will start to show up as weakness in consumption. Unlike what you're seeing from some companies on the consumption line right now, I think investors don't need to have a lot of anxiety if you see that weakness in our consumption because it will not be connected to weakened consumer pull. It'll really be about weakened supply and inventory levels. That too will pass because we have invested now to rebuild those inventories, but that'll be the shape of the curve. Consumption will be strong until our inventory position weakens. Then it'll weaken for a little bit, and then it'll rebound. You already hit the shipment flow and how that works. Yeah. There is a Q4 impact because of the timing of the Easter holiday. You are seeing some negative consumption now because Easter was earlier last year than this year. We expect continued strength in consumption for Q4 like we have seen. Got it. That's helpful. Thanks. Maybe just a couple of housekeeping items. I don't think I saw an updated guide for leverage for this year. Is it still, I think, 3.55 is what you told us at CAGNI, or is it maybe a bit better given the lower CapEx guide? The second would just be on equity method earnings. I think they were a bit better in the quarter, at least for what consensus was modeling. Is that just timing? Is 150 kind of still the right number for the year? Yeah. We've held both of those for the year. We haven't changed. Okay. Thank you. Yeah. The next question will come from Max Gumport with BNP Paribas. Please go ahead. Hey, thanks for the question. Your snack volumes are up 4% in 3Q, which stands in contrast to what we're seeing for the industry. Really, we're seeing snacking categories under pressure. I realize your total snack performance was helped by weather as it relates to the Swiss Miss business, but it still looks like your volume growth came from several of your key brands. I was hoping you could provide a bit more color on what you're seeing in snacking with regard to the broader industry weakness and what you think is helping your business outperform. Thanks very much. Sure. For those who are tuning into this call who did not tune into CAGNI, I would direct you to Bob Nolan's presentation on the future of frozen and the future of snacking because it was chock-full of interesting insights on both of those businesses. With respect to snacking, it's a fascinating time because snacking is an enormous, I don't know, $80 billion-plus industry in the U.S. Historically, a lot of that volume in snacking is in traditional chips. There is a movement afoot in snacking right now toward healthier snacking, away from carbs, and more toward protein and protein-dense snacking. That's effectively our business. Our business is highly concentrated in protein and fiber. Between meat snacks and popcorn, you've got two very on-trend businesses, not to mention our seeds business, which is sometimes overlooked but is a phenomenal, very profitable business. We happen to have a lot of horses that are in the right subcategories right now, and they're doing pretty well. Part of the strong number that you just referenced, Max, was Swiss Miss being particularly high. I would not get overly excited about that. That is timing because obviously, Swiss Miss was down last quarter because of the weather. The underlying performance in our snacks business relative to the broader space that you're pointing out remains very strong. I would attribute it to the right subcategories and the right brands. Just a quick public service announcement on our new acquisition of FATTY Smoked Meat Sticks. Our FATTY business is now fully integrated. It is doing extremely well. It is getting incredible resonance with our retail customers. If you have not eaten a FATTY meat stick yet, I encourage you not just to eat one, but eat it side by side versus some of the other new players on the market. I think you'll see that we win the taste test hands down. Great. Thanks very much. I'll leave it there. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Neisius for any closing remarks. Please go ahead, sir. Thank you, Chuck, and thank you all for joining us today. Please reach out to Investor Relations with any additional questions. Have a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.