Good afternoon, everybody. David Palmer here. Evercore ISI, the consumer and retail conference, continues on day one. We're now into the afternoon with our friends at WK Kellogg, Gary Pilnick, CEO, and Dave McKinstray, CFO. Gary's been with the company for more than 23 years, holding numerous executive roles over that time, including Vice Chairman, and has had responsibilities in corporate development, venture capital, global legal function, before becoming the CEO of the new SpinCo in 2023. Dave has been with Kellogg for 15 years, holding both corporate and business finance roles, including CFO of the snacks unit, as well as planning for the entire North America business before moving into his current role. Thank you guys for joining us. We're excited to speak with you guys as we talk about the next chapter in WK Kellogg. Thanks for having us, David. Yeah, absolutely. Maybe just an opening question about, and maybe Gary, you want to lead off on this, what you're seeing in the business six months after the separation. How are things already different as a standalone company, and where are you on your journey to realizing the opportunities you envisioned for this company? It's a wonderful question. It's something we're actually very proud to talk about. And when we do describe where we are right now, because so many things are different, David, why don't we start with the logic for the spin? Because the logic when we first crafted this idea was that WK Kellogg Co, the North American cereal business, would be stronger as an independent company than it was when it was part of the much bigger Kellogg Company, which is actually a bit counterintuitive. But it was a deprioritized business, and now it's prioritized. We started with a 9% EBITDA margin that's starting to tick up. So we're starting to see the green shoots of the underlying logic. So when you think about what we're doing differently, it fits right into our priorities. Let me go step by step, if you don't mind. The first priority we have is driving an integrated commercial plan to win. As you zoom out, that's really about marketing and sales. The first thing we did was, and it's very different, before it was five different companies, we have now integrated each of those five into one company. Why that's so important, it's a great example of our Chief Growth Officer, Doug VanDeVelde. He now has the one team with the same collective goals. So we have R&D, data and analytics, marketing, harnessing all that energy against one business, not five separate businesses. To be clear, that was the right way to run this business pre-spin. This is the right way to run the business now. We're already seeing the impact of that. If you go to marketing, a couple of examples that have already happened, all about speed and agility, three different things. We did something with Crocs, a tremendous brand, paired with Tony and Toucan Sam. We went from idea to shelf very quickly, commercializing that with on-pack, with a promotion, and then in store. We also did something for the Michigan Wolverines, our hometown Michigan Wolverines. We went from idea to direct-to-consumer in a matter of days. And most recently, Special K, a new ad campaign called Special for a Reason. We did something with Molly Baz. If you haven't seen it, I recommend folks take a look at that. And what we're doing, it's really fresh. It tells you how quickly we're moving as a company, and that's in marketing. Then you go to sales. We have stood up our direct sales force that has the same scope and coverage that Kellogg had pre-spin. And Kellogg was known for its sales force. We've now stood that up. The difference, David, is before they'd walk in the store, the retail folks, and they got seven different categories in their bag. Now they've got the one. Now it's early days. These are some new stores, new managers. They're learning their trade with us. They're really building that muscle. Early days, but we're excited to see what that has for us going forward. A couple of things, and I promise I'll stop. But then you have modernized our supply chain. A lot of things have changed there. You've heard us talk in our public remarks about seeing some of those early returns on capacity. We did a pilot program in one of our plants where we asked our team: How do you drive more capacity out of your facility? And we talked about it at CAGNY. Meaningful capacity happened. That was something different for us. We also had something with waste. We made it enterprise-wide. Let's all get after waste for all the right reasons, and it's hitting our P&L as well. So things are happening in supply chain. And we think that underpins all of this: marketing, sales, supply chain. It is the culture that we have. Dave and I, we're part of the Kellogg Company culture for years. We're really proud of that. But we're different. Differentiated strategy, 3,000 people rather than 35,000, six plants, not 60. Everything is so much more personal, and we're able to do that. And we think that is actually the grease that's going to turn the flywheel. So those are several examples of what's happening differently in terms of where do we think we are in our path. We just finished up at the end of Q1, the first full quarter of our first full year. We're as excited today as we were when we first announced the idea of the value we could bring with a stable top line and expanding our margin by 500 basis points. We think there's meaningful value there, and we also believe we're on our path to get there. Dave, do you have anything that you want to add to that? No, I think Gary hit it quite well. I think the only small add that I would have is really as we get the flywheel, right, and the integration between supply chain, sales, marketing, and making sure that we have all the food. Remember, we went through some pretty significant supply disruptions, right, really between 2021 and 2023. So making sure we have the supply we're marketing against and our sales force is really executing day to day. And once you do all those three things, Gary mentioned the flywheel, we get that thing spun, and we feel really good about what we can do with the market. You know, David, I mean, I love that Dave McKinstray just said that. We talk about how frictionless it is with those big three functions: marketing, sales, and supply chain. We talk end-to-end, our ability to go from idea to shelf to pantry. We thought that was going to be a tailwind for us. And quite honestly, it's actually easier than we thought it was going to be. It's not easy, but with the leaders that we have and the way our functions operate, the ability to go from that idea to really execute, because we're the only priority. That's it. And they're all working together beautifully to figure out what's the very best thing for our business. That's great. Let's talk about sales for a second. Your 2024 organic sales guidance of -1% to +1% implies the second half organic sales of around flat to slightly positive, just to be at the midpoint of the annual guidance. Maybe you could touch on what do you think you need to do to achieve that? What's in the works? Yeah, it's a wonderful question. I talked a little bit about a little bit of that already when I talked about our strategy, because behind what we just said, we're literally transforming marketing, transforming sales, and transforming supply chain. That, again, is the logic of why the spin was important. We need a stable top line, and we drive that stable top line together with the margin expansion. That's where the value comes from. We talked about this publicly. We said we were going to assume for planning purposes, David, that the category would revert back to pre-COVID behavior, just for planning purposes. So far, that's what's happening in 2024. There's different types of environments that we're in. If you look longer term, shorter term, we feel good about where we are as a company. The thing for us is we're looking longer term for this business because we think as we keep our eye on the ball and we transform marketing with a new marketing model, we stand up that sales force and we invest in our supply chain, we know longer term, these are the right things for the business. We also know there's a tremendous amount of value that we can create for our stakeholders. So you contemplated this sort of cereal market environment with the guidance, and you expect progress from here based really upon the blocking and tackling of better focus, better execution in the marketplace. I mean, is there anything that you think that we should be looking for in the data that would reflect that execution that you're talking about? Yeah, I mean, what I'd be looking for, I start with, yes, we were saying for planning purposes, we were going to assume that the market would behave like it did pre-COVID from an overall category standpoint. That's what we're seeing right now, down 1% for the year as we speak. So when you think about what we're looking for, I do think when you're looking at our numbers longer term, it's going to be the top line. We're going to get there in a variety of different ways. You see what's happening in the market right now. We feel good about where we are with our promotion, the way we're driving the category. Promotion is good for this category. At CAGNY, we talked about how the cereal category gets some of the best lifts. The key thing for us in everything we do, be it promotion, be it innovation, be it anything else we're doing, we have to get the right returns. That's what we're focused on because we're the stewards of our stakeholders' capital. When we're investing, we've got to make sure we get the returns on the other end. At the end of the day, it's up to us to drive excitement, news, innovation. We know that's what happens. That's what needs to happen to drive this category. We need to bring excitement to our consumers, to our brands. Yeah. David, I might just add quickly to that. We talked about on our Q1 call, we think about our brands. We have a core six brands that we talk about. And we talked about growing share in four of those six core six brands. And we highlighted Frosted Flakes. We highlighted it for a reason. If you look at the large brands in cereal, Frosted Flakes is outpacing a lot of those large brands. Gary talked about transforming the new marketing model. Frosted Flakes was the place we started. Why? It's one of our biggest, most important, well-known brands. So that's where we started. And we're seeing those results early. Gary talked about how it was applied through the Crocs model and some of the things we've done to drive that type of results. One area you'd look at in the year to date would be Special K, right? Special K has been an area where we haven't performed maybe as well. And I think Gary talked about, hey, as a smaller company, our ability to lean into a new partnership in a very quick amount of time. Now it's early days, right? And we'll see how that goes. But one thing that I would highlight is our ability to respond to some of the things that we're seeing in market and do it pretty quickly. And so as we think about the back half, you know again, early days, we'll see how it plays through. But our ability to respond to what we're seeing quickly and execute, I think, is really goes back to the thesis of the spend. I think our perspective in looking at the data, we're waiting for your market share and your sales to reflect what seems to be an increase in merchandising and promotion. We're looking for those metrics. We've been a little bit surprised to see the market share continue to moderate. Private label seems to be a beneficiary out there in the category. What are your thoughts about that? And do you think there's maybe a delayed benefit from some of the promotional activity that you're seeing? What are your thoughts? A couple of things about that when you look at the data. I think it's a fair representation of what you're seeing. But you also have to look behind it. Like what's in the data? What happened year-over-year? It's important to be able to understand the overall picture. Plus, you also want to look longer term. But like you, we have our new sales force, the new marketing function, the way we're investing. I do think over time you're going to be seeing our top line stabilize. And we've actually shown that in some of our previous public statements about how it's been fairly stable for us. So that's how we're operating this. We need to operate this for the long term, make the right investments into our business. And longer term, as we're looking at this, we've talked about TDPs. We talked about display. We talked about the importance of innovation. It is not any one thing that drives this category, David. You have to get after all of it. And now that we're a prioritized business, we can get after all of it. We can make sure we have the right focus and make the right adjustments, the right investments to the business. So over that longer term, we feel good about where this is going. And we think our strategy is spot on with respect to our ability to drive significant value. From an internal perspective, I mean, do you think that we're going to be seeing a different level of promotion effectiveness in the coming months? Are we going to see anything different in terms of new product news and the pace of that? I'm just wondering about when you think about internal drivers vis-à-vis market share and the sales. Right now, I think we're looking at down maybe a couple percentage right now in Measured Channel. What do you think will be the biggest drivers to improvement over the next few months? Yeah, so a couple of things probably worth mentioning. First, a lot of our commentary is going back to after the first quarter, the financial performance. Really not updating anything there. I hope that's okay, David. But again, and pardon me if I'm repeating myself right now, but the way we look at this, we now, because we've integrated five different businesses, we have much better visibility into the business, the P&Ls from a brand perspective, from a customer perspective. We also need to be able to meet our consumer where they are with the right pack, at the right price, the right place. That's all the work that we're doing. And ultimately, that should all together come out the other end. So we're always focused on making sure we get the right return on our promotion. It's just, I would suggest it's hard to look at a shorter period of time to judge whether or not that's actually working or not. But we know what's not going to change is our focus to drive return, making sure we're designing the right promotion, and we're also executing it with that sales force that we talked about earlier. Yeah, maybe we could talk about that. You talked about a more integrated marketing function at CAGNY. Could you provide some examples of this in practice? Well, we talked about a couple of them before. We talked about just how quickly we're moving. But let's talk about the new marketing model for a second, because before we talked about Crocs, University of Michigan, the way we went from idea to execution, that is just one way that we're operating differently in the transformed marketing world. But the new marketing model is something that we're doing right now that is different than the past. If you close your eyes, David, and you went back in time, you can imagine where your investment went. Your investment primarily went to TV, print, things like that. Now, as we're in our new world, we've now integrated five separate businesses. We've actually integrated our agency model as well. So we're actually harnessing all that energy. And as we're developing the way we're reaching consumers, it can't just be on TV. It can't be print. It's got to be where they are. That means social. That means digital. That means streaming. That means omni. And what Doug VanDeVelde and team are doing is when we developed the new It's Great campaign for Frosted Flakes, we developed assets across all of those media. Now, the way you do that is you've got a 30-second spot that works primarily on TV, all the way down to a five-second spot that works elsewhere, and everything in between. That's the way we're reaching our consumers with our new marketing model. The other thing that's happening with R&D, innovation is under Doug as well. And you saw that in 2024, our innovation plan was different than 2023. And maybe 2025 will be different than 2024. But 2024 was really interesting for us because we did a couple of things. We launched two new brands, and we focused on our core. When we launched those two new brands, one was Mouth Off, zero added sugar, 22 grams of protein, three net carbs vegan. You can understand what that's doing. That's doing the heavy lifting, the job of bringing new consumers into our category. It won't be as the volumes won't be as big, but what will happen is it'll be more incremental because we're bringing new people in, new consumers in. We did it with Extra as well. That's a granola. Every time people eat it, they love it. We got to get it into more people's mouths. We're already making some adjustments there. But what you can't do in our category is ignore your core. That's where so much of your business is. And we've done a lot of work in Frosted Flakes. 2023's best innovation was Strawberry Milkshake Frosted Flakes. We took that, and that's in Canada now. And then we expanded, if you will, our milkshake franchise to include Chocolate Milkshake in the U.S.. So a couple of things there. You can see that we're also innovating on the core, but you're seeing how we're operating between the U.S. and Canada. So those are some of the things, the new marketing model, the way we're getting after innovation. Those are the things that we're doing within the marketing function at WK Kellogg. You think second half of 2024, more of a pace on innovation than even the first half, 2025 more than 2024? Do you feel like the innovation is going to continue to ramp? The innovation will continue to drive this category. We felt good about our innovation plan this year. More is coming in the second half. That typically happens where you have a larger launch in the first half of the year and then more launches in the second half of the year. You should expect that to continue in 2024. And then 2025, we're excited about what our innovation plan looks like. We've been through it as a team. It's actually the first innovation plan that was created while we were an independent company. So you can absolutely continue to look to WK Kellogg Co to drive the innovation of this category, to bring excitement and news to our consumers. Anything going on in packaging before I move on? Multi-pack, convenient packs, anything that you want to highlight there? Yeah, I think what I would highlight, and Dave, jump in if you'd like. Sorry if I'm taking over the mic, David McKinstray. But we talked at CAGNY, and maybe it was after our first quarter earnings, about the various different pack sizes that we can create as a business. It's also part of where the investment is going to go when we talk about modernizing our supply chain. Talked earlier about the right price, the right pack, the right place. We need to have that agility in our business, David, to meet the consumer where they want to be at the price point they want to be. Being a convenience, being a giant, and everything in between, that's what we need to be able to do. We feel good about our ability to do that even more so going forward with the investment we're going to be making in our supply chain. Yeah. And David, I'd just add, Gary hit on it. As we think about pack, it's really getting the right assortment on shelf and making sure that we have the right size at the right price across all of our different channels and customers. Because remember, you have different consumers that are shopping different channels and looking for different things. And you have to make sure that you have the right pack at the right price that plays within that ecosystem. So one of the big things that we're doing is focusing on getting that assortment across our customers right and making sure that we have it. And that's one of the ways we'll drive TDPs going forward. It doesn't happen overnight. Again, that's one area where maybe Frosted Flakes might be a little bit out in front of some of our other brands. But those are some of the things that we're doing. As you think about those underlying or secondary metrics like TDPs, merchandising, those are the things that will drive that. It doesn't happen overnight, but we're working those things as we go into the future as well. I'd love to shift over to supply chain. You have supply chain modernization plans. I know you have some milestones internally that you're looking for. Has anything really changed about the timetable and the scope of work versus what you outlined at your analyst day? I'm glad you asked the question, David. In fact, what I would say is at analyst day, which was last August, we talked about investing $450 million-$500 million of capital. That would be the centerpiece of our program to drive 500 basis points of expansion from 9%-14%. And we said timing-wise, we'd be exiting 2026 at that run rate. None of that has changed. We keep moving forward with that. The planning continues. In fact, you've seen some of those green shoots, the early returns, if you will. We talked about the capacity, service, and waste, the improvements we've had there. We've also talked about consolidating the network, which gives you a sense of what we're trying to do. Before, three different plants were producing a certain platform. Now it's two different plants because that's where it was most efficient. We've also announced our ability to get after what we call High-Performing Work Systems because it does come down to people. We announced that last December. We talked about it during our Q4 call about implementing that type of system because that's the system that's in place in our most efficient plants. All that has been going on. Going forward, we're excited about the further investment that we're going to be able to do. That's where we are right now with the overall plan. We feel quite good about the progress that we're making. One of the key things about this is when you're working on a project like this, our confidence builds because we've been working on it for some time. That's how you really drive risk out of a program. Because we were all announced as a leadership team, David, in September of 2022. One of the very first things we did was we created a strategy. The centerpiece of it was modernizing our supply chain. Then we built our team. Then we created our balance sheet to afford our ability to make this type of investment. We did it with internal experts, external experts. That's why we feel so good about our ability going forward to execute on this plan. Because that's what you need. You need discipline and execution. So the plan on track based on what you were just talking about before. And we look forward going forward to provide more information into the future. What do you think are the biggest risks to you getting to your targets? Yeah, I guess what we would say is risks are for us to manage, David. Because we've been in the planning phases as long as we've been and the way our ability to now go execute with the discipline that we have in the team, it's now up to us to execute. Anything this size in any business would have risks to it. It's now because of the way we're operating right now and the way we have our milestones, our deliverables, the metrics that we're measuring as a team, and it's my leadership team that's managing all of this, we feel good about our ability to execute. You certainly are doing some very good things on gross margins. Last quarter, I think they were up 240 basis points to over 29%. Could you maybe give us a sense of the build-up on that, maybe the biggest chunks of that 240 basis points? Then do you have good line of sight as to ongoing gross margin expansion into the second half of the year in spite of the fact that we're seeing some increased promotional activity? Hey, Dave, why did it turn over to you, but as a preliminary comment, when Dave and I have talked about our margin expansion program of 500 basis points, what we both like to say is it's a mile marker, not a destination, because we think there's more to be done in this business. In fact, when we identified 14%, that seemed to be the average of the peers we were looking at that we would compare ourselves to and our desire, we believe our aspiration is going to be to be better than that. So we think there's more there. But Dave, how about I turn it over to you for the gross margin question? Yeah, and I think, David, as you look at it, I'm going to start back at the 9%, right? And we said the 500 basis points would largely come from gross margin. And that's really what we're seeing play out. A couple of things, Gary's mentioned most of them, right? So we talked about in our Q1 call, our waste reduction, right? And I think that's the focus that the standalone company has. Modernization is a part of that because we've got to do better planning, right? We got to make sure that we have the right raw pack materials that are then making it to shelf. That's how you eliminate waste. And that's exactly what we've done. So Gary talked about that. He talked about our high-performing work systems. So just making that incremental efficiency out of your plant, that throws off dollars. The other thing he spoke about was we talked back at Kellogg about some of the things we did at one of our plants to really unlock some capacity. Again, what does that do? It's because you're more efficient that you unlock that capacity. That's where dollars come from. The other thing that we've talked about is consolidating the network. We went from three lines on shred that make our Mini-Wheats platform down to two, right? So again, you take out that one line, that's cost that comes out. So all of those things have been contributors to the margin expansion that we've talked about over the last, call it six months. And so in relatively short order, we're seeing those proof points from this modernization. It's not all just a big bang. Now, as we think about that going forward, David, a couple of things to keep in mind, right? So Q2, we've got a big headwind coming at us because we've talked about an insurance recoupment of $16 million that's in our base last year. So if you think about that 9%, that's helped by an insurance recoupment that sits in gross margin, sits in cost of goods sold. So we have that as a headwind. So if you look year-on-year, we're going to have a hard time copying that $16 million in one quarter. But if you think about then the actual margin expansion, it's actually more if you strip away that, call it one-time item. So one thing to keep in mind is that as the year progresses, it's not going to be exactly what we saw in Q1. There's some of that dynamic there. As we go forward, what our guidance says is basically we'll be 9.8% EBITDA as we end this year. Again, you can expect that to be gross margin driven. As we go forward to 2025, what we talked about is probably a similar level of expansion in 2025 to what we see in 2024. And then we'd see that outsized margin expansion as we exit 2026. As we get the $450 million-$500 million invested, we start realizing the return of it. And that's what drives the last leg of the margin expansion into the end of 2026. So that's kind of how we're thinking about it, David, and how you can think about the timing of progression. Now, that actually, we had some questions. We had two questions from listeners here asking when will we hear more detail about how you will achieve the 500 basis points news on plants and whatnot. Any comment on that? You've touched on it a little bit, but any comment? What David and I have both said is each time we speak publicly, we are going to be providing updates. You can expect an update one way or another during our next quarterly earnings call. Got it. It's interesting, there is going to be a gap in terms of spending money to save money, as you laid out, David, and that timing would be kind of coming into late 2026, with the 2027 year being the payoff on that part of the plan. I guess that also addresses part of that. How does your goal on EBITDA margins change if organic sales are down 1% or 2% instead of stable? I mean, how much does that throw the plan off? Yeah, David? Yeah, I think a couple of things, David. Back to Gary's lead-in. We looked at this category back pre-pandemic levels. Frankly, we saw it seeing the category be down 1%-2% pre-pandemic. As we've laid down the model going forward, that's what our assumption is, right? So the numbers that you laid out, we've assumed the category returns to that. Now, we're building plans and we're looking at opportunities. Gary mentioned ROIs on promotion as a place that we're focusing. We're looking at ways that we can drive a better outcome than that. But as you think about it, I think we've taken the approach of being prudent on the top line, right, and saying: H ey, this is a category with a recent history. This was, of course, pre-WK Kellogg as a standalone company. So before we unleashed the new marketing model and the sales force. But you take those things, take that prudent approach going forward and say: H ey, there's a big value creation thesis, even with the numbers that you laid out, because that's what sits in our model, right? So we believe that we've taken a prudent approach to it. And now it's incumbent on us to drive our future if we can drive the category and our business ahead of that. So we touched on the necessary CapEx. We just talked about the outcome on free cash flow. I think you're expecting to be slightly negative this year on free cash flow. And that's before the dividend and any spend on modernization. Could you just give a sense of what your peak leverage is going to be? What's this journey with the balance sheet that we're going to be on over the next couple of years? Yeah, yeah, David. And we talked back in August, we talked about two big one-time, if you will, spend buckets. There's a stand-up unplug, and that's going to be capital and some one-time costs in the P&L. Then there's the modernization investment that we talked about. And so what you're going to see largely this year that's driving that slightly negative is that investment in standing up the business, right? And then as we move forward, you'll see a little bit of that go into 2025, lesser degree than we saw in 2024, but you'll see a little bit of that go into 2025. And then you'll see a step up in the modernization investment in 2025, right, from 2024 levels. And so as you think about the absolute peak of leverage, we've said all along that we will plan to peak right around 3x EBITDA, debt to EBITDA. That hasn't changed. We're still expecting to be right around the 3x debt to EBITDA. Our timing may be a little bit towards the end of 2025, a little bit later towards the end of 2025. And that goes back to Gary talked about planning the business and just sharpening our pencil as we plan this out and got to some of the next level of planning within the modernization program. So from a directional standpoint, not a lot has changed. Still 3x, still probably in that 2025 year, but no big changes from there, David. At the end of this, once we get past this bulge of investment, what sort of free cash flow conversion do you think you'll have at that point, I guess, of EBITDA? Yeah, so we're roughly 100% of net income on a base business, right? And so that's how we think about it. Now, you have to add some of these one-time things in the short term on it, but we would expect once we're past that, we get to the margin expansion, we're able to continue to convert it roughly that 100% of net income. So it will be a very cash-accretive business that will be throwing off good free cash flows. Can you just remind us of your dividend policy? Yeah, so right now, our dividend is $0.16 a quarter. I think we're slated here to pay what will be our second or third. David, they're all blending together on me. But on Friday, I think we pay another dividend. We haven't said anything beyond that as far as are we going to increase it? And that's one thing that we're continuously doing is evaluating our capital structure, how we're allocating our capital, making sure we're balancing the highest return opportunities to our share owners. So that hasn't changed too much. And we'll keep evaluating that and keep you in the loop as we go forward. David, thank you for that. Gary, thank you as well for joining us here today. It was a great discussion. Thanks, everybody, for joining us. We'll look forward to getting more of your questions.