Good morning and welcome again to the Evercore ISI Consumer and Retail Conference, day one. We're really excited to have Kellanova, Steve Cahillane, join us today. Steve has been with Kellogg's since late 2017, and since then there's been a lot of change at the company. I'm just going over this. They exited DSD late that same year, the sale of cookies, harmonizing of box sizes and cereal. They acquired and entered Nigeria. There was COVID and, of course, the spinoff of cereal as WK Kellogg. Steve, now leading Kellanova as they embark on a journey as primarily a snack company with a global reach. I'm happy to speak with you, Steve, as there's plenty of investor interest in the company and the stock. As a reminder to everybody, there's a question button on your screen. Feel free to lob in a question, and we'll try to get to that towards the end. Steve, thank you again. David, thanks for having me. It's exhilarating to hear you list all the things that we've been up to the last seven years. We have clearly created a new business for us, and I'm excited to talk to your group about that today. Yeah, no, thank you. And let's talk about some of the long-term targets. You've targeted three to five organic sales for this new company, five to seven operating income growth, 7%-9% EPS growth. This sort of growth would put Kellanova in the premium staple set. And so it's not something we see from all of the food names. And of course, the valuation of that premium staple set is higher than where Kellanova is today, which of course creates the opportunity. So could you perhaps kick us off with a comment about why you think this sort of growth is reasonable for the new co and what risks you may see? Yeah, I think it's very reasonable. And if you think back to our August investor day, that's when we did raise our guidance very purposefully. And then we came out of the fourth quarter, which is the first quarter of Kellanova, and we delivered against that. The first quarter of this year, we again delivered against it. So if you think about our portfolio, we're now essentially 60% snacks. We feel that ought to grow mid-single digits. We're about 10% noodles, which has been a double-digit grower and continues to look like a double-digit grower. Our international cereal business, 20% of our business, a lot of that is international markets. You know, that's a mid-single digit grower. Our frozen business should be a small portion of our portfolio, but a low single-digit grower. So we think we've got the robustness in the portfolio to really drive that. If I take a look at the brands inside that, the top five brands drive 50% of the sales. And they're highly differentiated. They're brands that define the categories they're in. You think about Pringles, Cheez-It, Rice Krispies, Pop-Tarts, Eggo, all terrific brands with, like I said, you know they define the categories they're in. And then to get to the middle of the P&L, if you think about our OP and our OP margin progression, that's also been good. And so we said we're going to be a faster growing company with higher margins, and we're doing just that. And we're very pleased about our gross margin progression. We indicated confidence at the end of the first quarter that that will continue. And that flows through to a nice EPS growth in line with our algorithm, which you put it all together and you get a nice TSR equation. To your point, right now, I don't think the market is valuing us in the way that other companies with that same similar algorithm are performing. But our goal is to do exactly what we said we would do and more. That's what we're embarking on. That's great. That's a great overview. Maybe we can start with the North America business, which is about half of sales. How is the segment in North America operating differently since the spin last year? David, I don't think you can overestimate the value of the focus that our team in North America is getting with the absence of the North American cereal business. And the North American cereal business, by the way, I think is set up for success, but that's for them to talk about. But for us, really focusing on snacks and frozen and particularly snacks has made a meaningful difference. And if you think about the way we're showing up differently, I mean, just think about some of the marketing executions that have led the way to good commercial executions at retail, starting with the Super Bowl and our seventh or eighth Pringles commercial and activation for Super Bowl, highly successful, followed by the Pop-Tarts Bowl, which was the best commercial activation that I personally have ever seen. We're talking about 6 billion impressions based on a college football bowl. So Pop-Tarts stole the day, followed by the Cheez-It Bowl and then Unfrosted. Jerry Seinfeld doesn't make many movies about brands, but he made one about the Pop-Tart. And we turned that into massive display activation in stores. So it gets back to those differentiated brands and the way that North America is showing up and their ability to focus on meaningful consumer moments, I think is exciting. And it's really only just the beginning. I know this year was going to be a big year for improving the U.S. sales trends with a ramp in that merchandising and innovation. Could you talk about your progress there? Yeah, we're making good progress. We talk very openly about being conservative last year when we were still dealing with bottlenecks and shortages, the post-COVID challenges that we all faced. We were perhaps more conservative than our peer set. And that led to less innovation and less commercial activation. This year, we aim to turn that around. So we've turned it around in terms of displays, and we're turning it, as we speak, turning it around more with the quality of those displays, which you put feature display, quality display all together with good consumer ideas, consumer activations like the ones that I just mentioned, and you start to see a meaningful improvement. You heard me talk in the last quarter about our confidence in a return to volume growth in North America. That's clearly born of those types of things. Better TPDs, better innovation hitting the marketplace, more quality displays. As I look at the back half of the year, I remain as confident, if not more confident, than when we had our first quarter earnings release. I definitely would love to just double-click on the U.S. Recently, just looking at some of the scanner data, it looks like we're down in the mid-ones sales in the measured channels. The pricing's flattish. So the volume's still down in that mid-ones. Why is that the case that we're down right now? And when should we expect retail sales to turn positive as we're looking at this data? Yeah, I think a lot of it is you have to obviously look at what we're lapping. And you think about the pricing, just look at the promotional activity. It's up, but it's not anything alarming. It's basically approaching pre-COVID levels, but it looks more accelerated than that because of what we're lapping, which was a dearth of that activity. And so as I think about the elasticities, and I mentioned this several times publicly, when you take 30% pricing in such a concentrated period of time, and the first, call it 24 months of that or 20 months of that, is little or no elasticity, it's bound to happen. And when you vacate two, three price points in that period of time, it's a shock to the consumer. The consumer is just now, I think, starting to come to grips with new retail price points, coming to grips with the whole inflationary cycle that they've been through. You look at some of the consumer metrics, and they're starting to improve. Consumer sentiment's getting better. Wage growth for a while now has been better than inflation. Put all those things together, and we look at the U.S. consumer, and we look at the back half of the year. And of course, they're lapping and have now lapped the lack of federal stimulus payments and the resumption of paying student loans. All those types of things that have been well understood and talked about are kind of in the rearview mirror now. As we look at the back half of the year, it gives us every reason for confidence, certainly for our own business, but I think also for the sector overall. One of the beautiful things about having a more streamlined company is we can focus on some of your big brands, these power brands in snacking. Pringles, measured channels, trends have been heartening. They look like they're very solid, up 6% and 3% in the last four and 12 weeks. Cheez-It still down 3%-5%. Could you talk about that brand and the plans to improve that? I would imagine that might get the most improved award this year for you. Yeah, and I think it will. You think about, again, what we're lapping. We had Cheez-It Snap'd, Cheez-It Puff'd, a lot of display activation when they were newer brands. And we didn't replicate that. And so that's on us. But we have more innovation coming in the back half of the year for Cheez-It. You look at our core Cheez-It business, still very healthy. We look at our brand scores, the brand sentiment among consumers, very, very strong. So we don't have a brand problem. We really had an execution problem in terms of what we were bringing to market for the very reasons that I mentioned. It was more pronounced in Cheez-It and Rice Krispies Treats, to be honest with you, than our other brands. And you're seeing that in the softness in both of those brands. But again, as I look at the back half of the year, I have every confidence in the plans that we have in place, including innovation, more innovation, and more quality display activity coming to market. You mentioned Rice Krispies Treats. Those sales are down more, more like 10% in recent periods. How's the setup for that different in the timing for that for the second half? Yeah, I hate to sound like a broken record, but it really is the same. It's the same issue. It's the same what we're lapping and what we didn't do and now what we are doing. One example for Rice Krispies Treats in terms of innovation, we've got a peanut butter chocolate Rice Krispies Treats, which is just hitting the market right now. It's our furthest penetration into confection and that confection occasion. And we're very excited about its early take. It's too early to see repeat data, but we know the consumer loves it. The product is absolutely exceptional. And so we're back into driving those TPDs through quality innovation. We'll drive quality display activity based on that. And again, same thing with the consumer scores, very, very high. And so it's up to us to execute the way that we know we can and in fact have great confidence that we will on both of those brands going forward. Looking at the region that low- to single-digit to mid-single-digit organic growth and mid-single-digit operating income growth target, how would distribution growth and maybe the channels breakdown contribute to the sales outlook? Yeah, I mean, TPDs clearly have, and again, back to innovation and driving the type of innovation that we have historically driven is a big part of it. It drives quality at the shelf and quality on the floor. So that's a big part of it. Household penetration, big part of it, making sure we grow that. And a lot of that comes through innovation and the interruption of the consumer flow with that quality display activity on the floor. And then having quality commercial ideas, like I talked about, the Pop-Tarts and Cheez-It Bowl, and now going into summer with lots of activation around sports and music. It's all those things combined, the playbook that we know very well and we know we can execute to have a better market share performance going forward and to get more than our fair share on the shelf and on the floor. You've done well in Europe. In spite of the fact that you've had that mid-single digit drag from Russia, the sales have been growing. Can you discuss the prospects for the region? I mean, there's a lot of concern around the European consumer. Are you seeing any of those headwinds emerge in the business? Yeah, so couldn't be more proud of our European team. Seven years of organic growth. Not too many consumer goods companies can talk about a track record like that. And they've done it extremely well. And they've done it by focusing on the portfolio. We've got a nice stable cereal business that provides ballast and a base. They know their role. Their role is to be the scale player and provide kind of just stability, not to be the high grower. And then we layer Pringles on top of that. And Pringles has been our growth engine. I mean, then we look at geographically, we think about Central and Eastern Europe as really kind of emerging markets for us. And Pringles has done exceptionally well. And we're selling every can that we can make in Pringles. We added a new line in Kutno, Poland. Pringles continues to be a great grower for us. Then we look at our portable hold, what we call portable wholesome snacks in Europe and Rice Krispies Treats, which are Rice Krispies Squares there, which has been a terrific growth driver for us as well. It's the portfolio, both from a product portfolio and a geographic portfolio that the team has managed exceptionally well to continue to drive that type of reliable growth. As we look forward, we see more of the same. Oftentimes, we think about cereal as being relatively stable, maybe up a little bit, and snacks being up mid-single digits. It felt like that was sort of the pace in the first quarter with organic sales for snacks up 4% in Europe and cereal up 1%. Is this a type of environment that that sort of relative growth will hold, or do you see there being an environment where snacking could have an even better year and maybe cereal has some headwinds that it has to deal with with the consumer? Yeah, you know those things can move around over time. Snacks should grow mid-single digit without a doubt. We still see that based on the share opportunities that we have, the distribution opportunities that we have, the countries that I talked about, like Central and Eastern Europe, continuing to grow. But even in our big markets like the U.K., where we're launching Cheez-It in the back half of this year, we're very excited about that. So we see lots of opportunity to drive that type of algorithm, which is snacking mid-single digit and stable cereal. And some years, it will do better than that, for sure. I feel like this could be a good year for Pringles in Europe, especially since that brand has always seemed to have a bit of a sport-type tie and the Olympics coming. Is this going to be an above-average activation summer for you in Europe? You know the thing we have going with Pringles this summer is we've got great activation around football. Football returning to kind of a summertime event is important. Then you've got the Paris Olympics, which you talked about, which is going to drive a lot of consumer activation for us around the games. It'll be a big summer in Europe, for sure. We aim to capitalize on that through our activation with sports. We've got something called Cúl Camps in Ireland, which is all about football. We've got great activations with some of the best Premier League clubs, which will drive, again, quality displays in those European football cities. So we're very excited about the opportunities for Pringles this year. You mentioned the distribution opportunity for Cheez-It in Europe. Zooming back a bit, what could that business be in Europe? How big is the distribution now? How incremental can that be to that region? Yeah, it's going to be entirely incremental. We're going to start relatively small in terms of one country. So we'll start in the U.K. in the back half of this year. So we have not started yet. But the customer excitement is palpable. And I've seen all the activations. I've seen all the plans. I'm excited for it. And as we think about next year, rolling out to new countries next year, we're not talking about exactly what those are yet, but we're in active conversations with retail. And the customer excitement, as I said, is real and genuine. And so they see it as an incremental opportunity for snacking. We see it as a brand that's highly differentiated. We've got great product developed for the consumer, the European consumer palate. And so it's kind of the next generation of snacking growth for us in Europe. There are plans to optimize the cereal network and portfolio. Could you maybe provide an update about how that's going? Yeah, so what we announced was exactly as you said, a rationalization of our cereal footprint. We went into consultation with our plant workers in Manchester, our Manchester plant. We've successfully concluded that consultation. And the people, I think, just showed their integrity and their quality and worked to a conclusion with the company that was a win-win. A number of those employees will transfer to our Wales facility. A number will take early retirement. So it's really a good outcome for the company and for the people. It will lead to the closure of the Manchester plant, which will lead to much higher capacity utilization at our two remaining cereal plants. So it's a high return activity for us. It's part of the margin. Our gross margin is one of our planks. This is an important element for the European team to drive margins over the course of the next couple of years. I know that we also got a question from someone here on emerging markets and in Africa in particular. So let's touch on emerging markets. The first quarter organic sales growth was 15% in this business. 30% of your sales is EM, so very large and fast-growing business. We estimate low single-digit sales growth, excluding Africa, though, in that quarter. So maybe let's dig into the parts a little bit. Why wasn't growth even stronger, excluding Africa, this last quarter? Can you provide a state of the union of maybe key markets and your prospects the rest of the year? Yeah, so I think emerging markets are always volatile, right? I think about our performance over the last seven years has been excellent in emerging markets despite volatility. We've managed the portfolio of countries and the portfolio of brands very well. Elasticities hit us in the Middle East without a doubt. We were waiting for that to happen. You mentioned Africa. We can get to that as well. When I look at the performance overall from Latin America through to our Asian business, despite the volatility, despite the inflation, despite the disruptions, and despite what we're seeing in the Middle East right now in terms of horrible conflicts going on, the business continues to deliver and deliver for us. A lot of that is driven by our cereal business in emerging markets, which continues to perform very well. Our activation around Pringles, putting capacity in Brazil has made a meaningful difference in our ability to grow Pringles in Brazil. We're adding another plant in Thailand. We're full in Malaysia, where we've got a plant for the last, I guess, six years now. And so Pringles continues to be a real engine of growth for us throughout our emerging markets. There's actually an interesting question here about Africa. Tolaram announced the acquisition of Guinness Nigeria from Diageo this morning. Does this roll into your joint venture with Tolaram, Tolaram Africa Foods Limited? How will this aid in your JV performance moving forward? Does it provide any benefits to you in the region? Any comment on that? Yeah, what I'd say is Tolaram has been a partner of ours for a number of years now. They've been doing business in West Africa, Nigeria, Ghana for the last 50 years now. So they are an exceptional partner to have. And you understand well the joint ventures that we have with them, including Dufil, which manufactures Indomie noodles and others, our Tolaram, Kellogg Tolaram joint venture, which manufactures snacks as well as our cereals, and then our Multipro distribution business, which is the moat that we have around Africa. And it is a significant competitive advantage for us. Tolaram has tremendous capability. And they purchased the majority of the Nigerian Guinness business. The minority will still be publicly traded. We are not involved in that particular investment. But I think what it does is it further establishes Tolaram as the player in consumer goods in Nigeria. Having the player as your partner in any emerging market is absolutely an added benefit. We see it as a net positive for their business. Since it's a net positive for their business and they're our partner, we see it as a positive for us as well. Obviously, there's a lot of pricing in Africa this last quarter. How is the consumer responding to that pricing? How should we think about elasticity going forward in that region? Yeah, so we've talked. I mean, you're going to see elasticity. You're going to see it hit the volumes. I can point you to a New York Times article on Nigeria this morning. Nigeria is a tough environment right now. The consumer has had tremendous inflation and pricing at the same time that they've had oil subsidies removed, which is a real support system for them. Let the currency float, which has obviously created tremendous pressure on the currency. So in the short term, there's lots and lots of challenges. We've got that in our forecast. We've talked about elasticities and rising elasticities. But we're in this country for the long term. We talk about a population of 200 million. It's an incredibly young, vibrant, and entrepreneurial population. It is a challenging moment and time for the citizens of the country right now. But we have every confidence in the long-term outlook for Nigeria and haven't wavered on that. Again, we've got such a competitive advantage and such a rock-solid business that we'll come through this challenging time stronger. Yeah, Latin America's sales were very strong. Cereal up 10%. Snacks are offsetting that somewhat. Could you talk about the two big categories, maybe key markets in Latin America? Yeah, so Latin American business, like our European business, has been on a long-term track record of growth and good growth. And again, balancing the geographies and the portfolio in an effective way. And cereal has been, we don't really get asked anymore. But early days, we got asked, so why did you keep your international cereal business? And you only need to point to the Latin American business and the Mexico business, where you're at an all-time market share high, at I think it's about 68% market share and still growing nicely. That's a good business to have. That is a really good business to have and a good margin business. Our snacks business, as I mentioned, led by Pringles, has lots of growth opportunities. Again, I mentioned the plant in Parati in the south of Brazil, adding the Pringles lines there and filling up those Pringles lines. We broke ground on new capacity in Querétaro, Mexico, for more Pringles capacity. So for us, it's really about getting the right capacity installed in Mexico, which will service northern Latin America for the long term. And if you think about our Pringles business in Mexico right now, a way to think about that is we service that out of Jackson, Tennessee. And it's really the tail. It's what we have remaining in capacity. So it's not always the right pack size. It's not always the ideal flavor. We have to have certainly minimum order quantities. And so it's not customized in the way that we would like it customized for the Mexican consumer. When we install that capacity early next year, it will be for that market. So it will be the flavors, the pack sizes, the magic price points, entering price points that are important to get the right coinage for the Mexican consumer. As we look at the long term, the medium term, indeed, for our snacking business, very, very optimistic about that in Mexico and Latin America because we'll have the right capacity installed in the north of Latin America and the south of Latin America. You talked about high single-digit organic sales growth for the emerging markets. My perception is that AMEA was going to be above average within that. But maybe if we could talk about not just regionally where you see above-average growth, but where you see more distribution opportunity around the emerging markets over the next few years. Yeah, so I think a number of areas. I mentioned Pringles a couple of times, but the opportunity to grow Pringles distribution is extremely high. And it is in Latin America, for sure, based on the capacity that I just spoke about. So that's a big opportunity. And when we add the additional capacity in Thailand, we've been at capacity in Asia. And so we haven't been actively growing distribution. Now, the growth that you're seeing is really velocity increases based on where we have it. When we install that new capacity, it opens up a whole new opportunity for us to grow those TPDs. So that's probably opportunity number one. You look at our noodles business in Africa. We spoke about the obviously successful business we have in Nigeria. We launched in Egypt five years ago based on growing distribution and growing velocities in Egypt. We're now the number one noodles player with Kellogg's Noodles in Egypt, excuse me, in South Africa. That was South Africa. In Egypt, we're the number two player based on the same growth in distribution sampling under the Kellogg's Noodles brand. We've just launched in Saudi Arabia, which is a good noodles market. You think about all that opportunity is really growing distribution because we're starting with a nascent business. South Africa is really the kind of poster child for entering a market. With the quality of the product and knowing that we have a superior product for the consumer, we have the right price. That doesn't mean a lower price. It means the right price for the market, the right packaging. We have the right manufacturing know-how based on our learnings in Nigeria. We have the Kellogg's brand on the noodles, which is a beloved brand in Africa, a trusted brand, an aspirational brand, a Western brand. All those things combined make a very compelling consumer proposition for us in Africa. So we see years of growth ahead of us for noodles in Africa. It's a great opportunity for us. Yeah, given the balance of growth, if you're going to do that high single-digit organic sales growth, what sort of operating margin expansion do you think is realistic to go alongside that growth? You know, we've talked a lot in the past around the margin opportunity that we have in emerging markets. And what you see really is the opportunity to grow scale. So there's nothing structural in our emerging markets that prohibits us from having the same margin in our emerging markets as we do in our developed markets. And when you look at markets like Mexico, you see that because we've got scale. When you look at where Brazil was and where it is now, you see the same thing. It's growing margin as we add scale. India, you look at the same thing. So all of our emerging markets are on this continuum that we see as we add scale, the margin grows. And so it's just a classic example of we've installed the infrastructure. We've put the sales team in place. We just need to grow into the infrastructure. As we continue to do that, our margin expands. When we get to the right scale, we'll have margins, operating margins that approach or sometimes even surpass the developed markets because the gross margin performance is what we always aim to make sure is exactly where it needs to be. As we scale up, we get the operating margins flowing through. Thanks for that. Let's stay on the margins a little bit. Your gross margin target or outlook for 2024 is 35%+. Certainly being helped by supply chain recovery. It seems like we're doing pretty well in pricing the commodities and the TSA agreement. Is 35% a good starting point for the future, building upon that? Or could there be some volatility as the TSA contract ends? I think we have loads of confidence that we're going to manage the TSA appropriately. We've done that. We've got two, not manufacturing, we have two distribution facilities that we've rolled off to WK Kellogg Co already without a hitch. We've been able to manage our way through that. We've got a terrific plan. As we think about, you mentioned supply chain, our supply chain performance this year has been exceptional. Our fill rates are on time in full, is back to and better than pre-COVID. A lot of the costs that we talked about around bottlenecks and shortages have fallen off. We've been able to enjoy the benefits of having a much more efficient, effective supply chain. As we continue to invest in our supply chain and digitize our supply chain, we see lots of opportunity there, without a doubt. Again, mentioning the emerging markets and growing scale there continues to be an opportunity more on the operating margin side than the gross margin side. All that mixed together, we have; you've heard us speak very confidently about our margin and our margin forecasts. We remain steadfast in that being an important strategic plan for us. We remain very confident that we've got the plans to deliver. Can you remind us, marketing is a percentage of sales today? What is the target? Where do you see that going as part of the plan? Yeah, so we only announce that at the end of every year in terms of advertising. But what you're seeing is our total A&P spend in the first quarter was up substantially. And that was exactly as we had planned. We talked about that continuing to be up substantially. And that's based on really getting back to the, at the beginning of the conversation, we talked about getting back to the commercial activation. And that's supported with the right level of marketing spend. And so we like where we are. We don't think we need to make substantial increases above what we've already announced and what you've seen. And we believe it'll drive the type of top-line momentum that we're seeing and the type of algorithmic performance that we talked about. How about uses of cash? It could be M&A, buyback of stock. We talked about the valuation of the shares today seems to be that we put a share repurchase on the table. Could you talk about priorities there? Yeah, so our priorities remain the same. We're investment grade, and we will maintain our investment grade. That's extremely important. Our dividend is sacrosanct. We kept that whole as we spun off WK Kellogg Co. They took a portion of the dividend. We took our portion. We are higher than we would normally be in terms of payout ratio. So we'll grow our dividend, but we'll grow it slower than earnings so we can bring that payout ratio closer to the 50% where we're historically comfortable at being. Our leverage ratios are very low comparatively to where we've been historically. And so all that said, we love our organic growth opportunity. And any M&A opportunity will be compared against the organic growth opportunities that we have. We could definitely see opportunistic bolt-on M&A acquisitions in emerging markets and snacking if we see an asset that we like and will be very disciplined buyers. Same thing with opportunistic share buybacks. All those things are in the mix. I'd prioritize them in just that way. The priorities around categories and geographies for M&A would be? Yeah, what you've seen us. So snacking, emerging markets, and maybe even those two combined are areas that we're certainly interested in. That makes a lot of sense. And it takes us right to the end here. Steve, great conversation. Thank you very much. And John, I heard you around there somewhere too. Thank you as well. I really appreciate your time today. Super. Thanks for having us, David. Thanks, everybody. Appreciate it. Thank you.