Greetings, and welcome to Kraft Heinz Company first quarter 2026 earnings conference call. At this time, all participants are on a listen-only mode. A question- and- answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Anne- Marie Megela. Thank you. You may begin. Thank you. Thank you all for joining us today. Welcome to the Q&A session for our first quarter 2026 business update. During today's call, we may make forward-looking statements regarding our expectations for the future. These statements are based on how we see things today. Actual results may differ materially due to risk and uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release and our most recent SEC filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures. Please refer to today's earnings release and the non-GAAP information available on our website for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Joining me today to answer your questions is our Chief Executive Officer, Steve Cahillane, and our Chief Financial Officer, Andre Maciel. Operator, please open the call for the first question. Thank you. At this time, we'll be conducting a question- and- answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Peter Galbo with Bank of America. Your line is now live. Hey, good morning, everybody. Thanks for the questions. Steve, I was actually hoping to start with Hold, Win, and Win Big. Just comparing kind of what you said at CAGNY a few months ago to what you're presenting today, at least in the slides. I think there's been a few shifts of some of the platforms and or sub-platforms between kind of the different categories. I was hoping you could kind of touch on the decision to make some of those changes. Kind of as a part B to that question, just whether that signals anything in terms of how you're viewing potential asset sales of different platforms. Yeah. Thanks for the question, Peter. You know, as I said in the outset, you know, we reserve the right to continue to get smarter, that's what we've done is we've made some of these changes. A couple of examples. You know, we did downgrade our frozen from Win Big to Hold, and we think that's based on what the category is showing us, what our real opportunities are and really confronting, you know, the facts as they stand, and being realistic about them. Equally, we look at hydration. We moved that from Win to Win Big. We see strong category growth. We really like our brands in this space. We really like Capri Sun, its ability to go from, you know, following the cohort that's young and aging with them with our new Hydration Platform that's coming out now. We see a real opportunity to win big there based on our brands and our place in the category. Equally, we've moved cheese from hold to win. We like the margins there. We like our brands. We like our opportunities. Those are some of the changes that we've made. I think they're all positive, and they point to, you know, the fact that we're continuing to look at our portfolio, challenge our portfolio, invest in our portfolio, and look for those areas where we can grow. Great. Thank you for that. Andre, maybe just as a follow-up, I know the guidance is largely unchanged after what was a, you know, probably a better than expected Q1. You called out some timing factors. Maybe just you can expand a little bit on your prepared remarks from the commentary around Q2, and how you kind of view the evolving inflation outlook. I know you bumped that up a little bit today. Thanks very much, guys. Sure. Good morning, Peter. Thanks for the question. Look, we expect second quarter to have top line between -3% and -5%. This is a consequence of the Easter shift that we have explained a few times. Combined with we still anticipate and expect the SNAP to be a 100 basis points headwind in the year, starting in the second quarter. There is nothing that we have seen so far that indicates otherwise. We do expect to continue to see the market share improving like we observed in Q1, but given softness in the category, we still expect this to be a headwind in the second quarter. This will be all partially offset by continuous improvement in away-from-home business worldwide and in emerging markets. When it comes to inflation, we initially guided the year to be approximately 4%. In fact, our number implied in the outlook was a little lower than that. We are now seeing, mainly because of the conflict, inflation around energy and resins spiking up. We are well hedged in energy for the year. Resins, we are hedged through mid Q3. We do expect if situation remains the same, there's still a lot of volatility out there which can get better or even worse. We do anticipate in the third quarter to start to suffer the impact from that inflation. Great. Thanks so much. I will pass it on. Our next question comes from Steve Powers with Deutsche Bank. Your line is now live. Great. Thanks. Good morning, everybody. You know, Steve, if we just look at the improvement you started to show, you know, through and exiting the first quarter, I guess, as you dig into it, are you able to parse out, you know, where there is, you know, more meaningful, true underlying progress that you think can really, you know, is momentum you can build on versus maybe some transitory impacts, just areas where Easter timing or weather or what have you, flattered the quarter? Just is there a way to parse out what's most promising versus maybe where we should just kind of temper our thinking a bit? Yeah, Steve, definitely we benefited from Easter shift. There's no question about that. The winter storms caused some pantry loading, no doubt about that. Underlying that, we've seen real improvement in our share trajectory and performance. As we said in the prepared remarks, the total business last year held or gained share in only 21%. In the first quarter, that moved to 35%, and in March, that moved all the way up to 58%. If you look at our Taste Elevation, where we were investing earlier last year, that moved from 24% holding or gaining share last year all the way to 81% in the first quarter of 2026 and exited March at 87%. That's really a function of the investments that we've made, the product improvements that we've made, the distribution that we've, you know, been able to hold or gain based on the activities that were put in place. The totality of the business and, you know, the good start to the quarter, I think can also be attributed to the fact that for the last at least 60 days, this organization has been maniacally focused on growth and execution. Pausing the split freed up lots of resources, as we said it would, and we turned our attention and the attention of this entire organization to get off to a strong start, and that's exactly what we did. We're being very realistic about what flattered the quarter, as you said, but we also see the underlying strength that's building. That's important because that's where we're gonna continue to invest, and the vast majority of our $600 million is still dry powder that is being deployed as we speak from now through the rest of the year. We're holding guidance, but we're very encouraged by the start to the year, and we plan on continuing our maniacal focus against our consumer and our customer and execution. And to complement a little bit- Very clear. with the numbers. Last year, we started the year losing 90 basis points of market share, mix adjusted, which was really the bottom the last 10 years. We as you started to step up investment in the second half, we're able to exit last year losing 50-60 basis points of market share. Now year to date, we are at 30 basis points. That is, I think, definitely a good improvement happening right now, led by Taste Elevation, but also by hydration, as Steve mentioned, and desserts. These places where you have step-up investments in marketing, in renovating the product are starting to show some signs of payoff. Great. Thank you. Andre, while I have you, just on free cash flow, obviously a strong quarter, but some working capital, you know, and marketing accrual timing benefits. Obviously you've maintained the free cash flow outlook for the year. As you think about the balance of year, you know, 2Q through 4Q, anything to call out in terms of, you know, timing of year to go free cash flow? Look, our cash flow remains very strong. I think all the changes we have done to incentives a couple years ago, we have now the organization focused on really being disciplined in deploying CapEx and managing working capital better. We're seeing that translated again in the first quarter. Because of the step-up in investments, happening in the second half, we should expect cash flow, potentially to go down in the second half of the year. I mean, that's anticipated. We exited the year, exited the quarter with a very strong cash on hand. You will see us now in the second quarter, paying down debt. The debt is maturing now in Q2, and we are strongly considering anticipating paying back part of the debt that is maturing next year. We have $1.9 billion next year again. We are considering anticipating a portion of that as well. There are a couple other things we are doing in terms of managing better our debt tower, which will allow us to reduce interest expense. I think it's a good position that we put ourselves in and allow us even to invest $600 million in the business and still generate strong cash flow. Yes. Okay. Very good. Thank you so much. Our next question comes from Michael Lavery with Piper Sandler. Your line is now live. Thank you. Good morning. Just curious how to think about the pricing environment. You've obviously started the year with plans that include price adjustments, and it looks like there's early signs of in this quarter that where they look like they're in place already. That's working. Then there's, of course, shifts in the input cost environment. Does that do anything to change how you think about your plans or how kind of fluid and dynamic would your pricing expectations be? Yeah, thanks, Michael. I'd say the pricing environment can be best characterized as very rational. You know, we've come through this inflationary cycle, which was obviously unprecedented. The consumer is under a lot of pressure, our focus is very much on value, creating value and affordability. We have looked at opportunities to adjust pricing where we think it's gone a little too far, and you're seeing some results in that. We'll always look at the input cost environment and say our first line of defense is productivity. We're really looking to ramp up our productivity and have, you know, a top-notch productivity year this year because it's really needed because the consumer can only absorb so much price. We'll be looking at productivity. Ideally, you know, business like ours would take about half of input cost in inflation in price and then the rest in productivity. If we can do better than that, this is the year to do it because the consumer is under a tremendous amount of pressure. You know, we look at it as very much our goal to be affordable and be there for our consumers in an environment like this. Yeah. I think to complement what Steve said, in the guidance for the year, we have contemplated initially that would price only 20% of the inflation. Okay, this was already anticipated. And to Steve's point, we are relying on another strong year of productivity. We started Q1 strong again, above 4% of COGS and we do expect to maintain that pace. That's very helpful. Related to that, I just wanted to follow up on, I think it's slide eight, you flagged a simplified operating model as part of the turnaround for the U.S. and I guess we want to make sure we understand, kind of, what that means and it has been, although right there it might be referring to the Simplot but how much opportunity is there to simplify the operating model. I guess part of the question is through the lens of history knowing that cost-cutting can obviously go too far. How should we think about what opportunities there are and maybe the risks and how you think about that approach? Yeah, we made a terrific hire in bringing Nicolas Amaya to run our North American business and he has been hard at work looking at the operating model as have we all and we see real opportunities to have stonger accountabilities, stronger empowerment at the people who are running the business. We also see big opportunities to supplement our commercial activities, our commercial people. We've been doing a lot of that, hiring people in sales and marketing. But really, where the focus is on the consumer, on the customer and very strong objectives that are aligned around our business objectives. The chief one is growing organic sales and improving market share performance. So simplifying everything that we do in service of the consumer and the customer and our goal to drive profitable volume-led value market share. Very helpful. Thank you. Our next question comes from Chris Carey with Wells Fargo. Your line is now live. Hi. Thank you everybody for the question. If you just, you know, think about the back half acceleration in top-line that you're embedding for the year, can you just unpack that a little bit across the most meaningful drivers, you know, as they pertain to the lapping of Indonesia, the step-up that you're expecting from investments, and the subsequent improvement in market share that you're expecting, perhaps some of this acceleration in Western Europe with pricing. Can you give us just a sense of, you know, how to think about the complexion of the major contributors to the back half improvement that you would expect in the top-line? Thanks. Yeah, Chris, I'll start and Andre can help with more details in the numbers. We're not really calling for an acceleration. You know, we got off to a very good start, and we're being prudent about the way we think about the rest of the year. Of course, we'd always like to overdeliver on our top-line goals. Definitely would like to overdeliver on our market share objectives. We're being prudent in the way we think about the rest of the year and not embedding, you know, the first quarter overdelivery into our guidance for the top line. In terms of the building blocks, you mentioned Indonesia, that's certainly a contributor. In the first quarter, for example, Indonesia alone was a 70 basis points headwind to top-line growth. We do expect that all to go away in the second half as we lap all the adjustments we have made in the business. Market share in the U.S. as we step up the investment should see an improvement versus where we are today. Similarly, we feel good about our European plans. Everything that we're doing behind Heinz, there is a lot of step-up investments as well as part of the $600 million that is going against Heinz in Europe. We're going to see that also helping improve performance over that. Away from home, even though there is still overall softness in the category, we are now seeing signs of market share improvement in the U.S., which is quite encouraging, especially in the sauces portfolio. I think all of those factors should allow us to see the step up. There will be a balanced contribution across those levers. Okay. Thank you. It's been touched on a bit, just as you think about the inflation exposure in Q4, obviously, this is going to imply bigger exit rates going to 2027. Michael kind of, you know, touched on this a bit, what does the toolkit look like for you to work through sustained higher inflation environment. Obviously, there's a pricing discussion, productivity, you know, sustaining relatively high levels. Would you look at, you know, maybe harvesting some of the investments that you've made at SG&A to protect the bottom line going to 2027? Obviously, this is a fluid environment, inflation can certainly change, you know, can you just give us a bit more insight on how you'd be planning from a cost offset perspective if we kind of look out 18 months? Thanks so much. Yeah, Chris, we wouldn't look at our investments, the $600 million and otherwise as a way to protect profit. In fact, we're looking at opportunities to even invest more as we see good returns against those investments and good outcomes in terms of the top line. We'll protect that and in fact even lean into it. As we said earlier, the first line of defense is always gonna be productivity. You know, it's unknown what the fourth quarter and 2027 will bring. It could be that the whole environment moves towards needing to take more price. I mean, we can't predict what the outcome will be in the Middle East and how that will, you know, affect, it's gonna be something that affects the entire environment. You know, we would be looking to, you know, go with that. Again, first line of defense is productivity, investing in our brands and driving a good top-line outcome, is what we'd be looking at. Okay. Thank you. Our next question comes from Thomas Palmer with JPMorgan. Your line is now live. Good morning. Thanks for the question. Maybe could just start on the marketing side. You noted the 37% increase in the first quarter on a YoY basis, also the plans for 5.5% spend, maybe any framing on where that level of increase in the first quarter kind of takes you relative to that annualized percent of sales. When we think about the magnitude of the increase, are there any timing considerations such as kind of having that earlier Easter impacting how that marketing spend flowed through? Last, any detail on kind of where that spend has really been focused, and if you're seeing, when we look at the share improvements, disproportionate spend in kind of the areas that have inflected the most. Thanks. As we said in our prepared remarks, we do expect marketing for the year to be at least 5.5% of revenue. Steve mentioned, we have been looking very close on how our performance is shaping up, and if things end up better than we anticipated, we will be willing to lean in more on the investments, marketing being one of the key drivers. The reason why we see 37% in the first quarter, you might remember last year, we step up market investment in the second half of last year. you have this effect of now we have, in a certain way, a easy comp on the marketing front. YoY, we're gonna see that gradually reducing that impact because of the step up in the second half. Overall in the year, we do expect at least 20% of increase. In terms of where this money is going, we have been prioritizing our win big categories. There is a disproportionate amount started last year that went against sauces, cream cheese, mac and cheese, hydration. The reality is we do have the opportunity to step up marketing across the whole portfolio. We have been gradually stepping up the investments across different parts of the business to different extents, but we do believe that will be helpful to the whole portfolio. Thank you for that. On the SNAP side, you've noticed expected headwinds, especially ramping this quarter. I know it's still early in the quarter. Are you already seeing signs of this incremental impact as we think about the second quarter? Just to confirm, there was not really impact in the first quarter? I know it wasn't a call-out. Thanks. We definitely see an impact from the SNAP already happening in February and March. If you look SNAP transactions, they are already down in line, if not even a little more than expected. On the other hand, we saw strength in the non-SNAP households, which helped to offset that in the first quarter. It's hard to predict at this point if that strength that we saw in the non-SNAP households will hold into remainder of the year. What we are anticipating is that we're gonna start to see that SNAP household impact more pronounced into sell out year to go. That's why we have been calling for a 100 basis points headwind. Obviously, they're not sitting on the problem, right? We do expect that. We have been expecting that for a while. That's why part of the price investments that we have deployed in the $600 million were put against opening price points. Because this part of the consumer base is definitely under a lot of pressure. Understood. Thank you. Our next question comes from Megan Clapp with Morgan Stanley. Your line is now live. Hi, good morning. Thanks so much. Maybe to pick up on Tom's first question on the marketing investments and Steve, some of the comments you've made. You know, clearly you're seeing some benefits from things that were done kind of prior to you making this new plan. And Steve, I think you mentioned $600 million is still dry powder. As you see the improvements you've made in the first quarter and then some of the areas you highlighted, you know, meats in particular where there's still opportunity. Can you just talk about whether anything you've seen so far has changed how you're thinking about concentrating some of those investments, you know, particularly as, you know, we've talked about a lot the macro continues to shift and, you know, perhaps the cost inflation outlet gets more challenging as we go into the back half. Thanks. Megan, what we've seen is good returns on the investments that we've made, and that's where we're leaning in. If you look at some of the exciting things that we have going on right now, you can follow our investment against those. For example, Power Mac & Cheese, which just came out in April, too early to see any sellout data, but the sell-in was outstanding. 35,000 accounts right now as we speak. I think that's a function of the commitment that we made to increase our investment substantially led to better distribution, and we're gonna be investing against it. We anticipate a good launch there. We've got in our varieties business, a nice shapes innovation that we're investing in. The Capri Sun Hydrate that we mentioned earlier, I think a big opportunity to continue the momentum that was built last year on Capri Sun and new distribution and new doors there, so investing against that. We've got a Lunchables renovation, which is coming next month. We'll be investing against that. We've seen good turnaround in Lunchables, which started at the end of last year. We've got, you know, things in the back half of the year like Philadelphia Lactose Free, which is, as we mentioned in the, in the prepared remarks, we think a big opportunity given the number of people who suffer from lactose intolerance in the U.S. and a great innovation there that we'll be investing against. You know, the brands where we think we have a real right to win, we'll be investing in. You mentioned meats, you know, where we have things that we need to turn around. Clearly, we need to make some investments there. You know, we don't like leaky buckets, and we're gonna look to plug those at the same time as we lean against our biggest and best opportunities. Great. Thank you. Andre, maybe just a quick follow-up on the gross margin performance. You know, still down in the quarter, significantly better than, you know, I think what you were expecting, certainly what the Street was modeling. Understand there was probably some, you know, fixed cost leverage benefits there just on the top line. Anything else in the quarter just in terms of, you know, the upside maybe versus your expectations to call out? Thanks. Sure. There is about 40-50 basis points of gains in the quarter that are non-recurring. Portion of that is selling excess byproducts. We don't expect that to be repeated year to go. There is a small contribution from we expected to do a maintenance in a certain factory and then have to move a production to a co-packer temporarily. We decided to move that to later in the summer, that's like a phasing thing. Cheese commodity came a little better than what we anticipated. We did see the peak in inflation that we expected across most of the commodities, including coffee and meats, but we had those other upsides that help in the quarter. That's why we are maintaining also our expectation for the year of a headwind of 25 - 75 basis points. Perfect. Thank you. All right. Operator, we have time for one more question. Okay. Our last question comes from Scott Marks with Jefferies. Your line is now live. Hey, good morning. Thanks so much for squeezing me in here. In the interest of time, I'll just ask one. I'm wondering if you can give us a lay of the land in terms of the away from home environment. I know you called out some pressures in the U.S. business, have certainly some clear paths to growth there. I'm just wondering if you can kind of help us understand what's happening both in the U.S. and abroad, and how you think about the improvements within that part of the business. Thanks. Yeah, Scott. I'd say from a macro perspective, away from home is, you know, under a fair amount of pressure based on the macroeconomic environment, both in this country and around the world. Having said that, we see tremendous opportunities for us in away from home based on the strength of our brands, and the opportunities in front of us, and this is one of the areas we're investing in. We see away from home as a strategic outlet. We see it as a strategic opportunity for us. We like the momentum that we're building early this year, and we see a lot of opportunities both in this country, and especially around the world to continue to gain share in away from home. You know, we've got one of the greatest away from home brands in Heinz, and we can do a lot more in leaning into Heinz, and not just in ketchup. You know, Heinz has been successful in mayonnaise and other spreads as well. Big opportunities for us to continue to leverage our brands, especially Heinz, as we think about the away from home opportunity. Appreciate it. We'll leave it there. Thanks very much. We have reached the end of the question -and- answer session, and this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.