Good morning, and welcome to the J.M. Smucker Company's fiscal 2024 first quarter earnings conference question and answer session. This conference call is being recorded, and all participants are in listen-only mode. Please limit yourselves to two questions and re-queue if you have additional questions. I'll now turn the conference call over to Aaron Broholm, Vice President, Investor Relations. Please go ahead, sir. Good morning, and thank you for joining our fiscal 2024 first quarter earnings question and answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session. During today's call, we may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, we use non-GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release. Participating on this call are Mark Smucker, Chair of the Board, President, and Chief Executive Officer, and Tucker Marshall, Chief Financial Officer. We will now open up the call for questions. Operator, please queue up the first question. Thank you. The question and answer session will begin at this time. If you're using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star one on your telephone keypad. If you wish to withdraw your question, please press star two. For operator assistance, please press star zero. As a reminder, please limit yourselves to two questions during the Q&A session. Should you have additional questions, you may re-queue, and the company will take questions as time allows. Once again, that's star one to be placed in the question queue. Our first question is coming from Andrew Lazar from Barclays. Your line is now live. Great. Thanks so much. Good morning, everybody. Morning. Just to start off, Mark, on the last earnings call, I think you mentioned that if we strip out Jif contract manufacturing and divestiture impacts, company expected about 4% organic sales growth, three points of which were expected to be volume on sort of a truly underlying basis for the full year. I'm curious if this is broadly where you still see it today, and if so, you know, maybe why the company is not necessarily seeing the same sort of volume weakness the industry seems to be dealing with currently and as other sort of peer companies have discussed. Andrew, good morning. This is Tucker. You are correct. As you begin to break down our 9% comparable growth guidance, that 4% does have three points of volume mix growth, largely driven by Uncrustables, coffee, Milk-Bone, and Meow Mix, and then the one point of pricing, as you have noted. Yeah, Andrew, it's Mark. Thanks for the question. I think, you know, as you look at our categories, we are in the right categories, which are resilient ones. And as we continue to share our story, you know, we've gotten way more focused. We participate in categories that are growing, and we participate across the breadth of those categories, all the while still investing in our brand. So we actually had, as you saw, a very good quarter of both sales and volume growth, and we expect the momentum to continue, you know, as we continue to invest, as we continue to execute with excellence. And I could cite multiple areas. I mean, just peanut butter as an example of an affordable protein continuing to grow, getting Jif back into its number one share position. Milk-Bone, as an example, where you've got products that span value to premium, really meeting the consumer where they need. And then last, but of course, not least, Uncrustables continues to be a strong growth engine for the company. So just very pleased with the results this quarter and our outlook for the future. Got it. Thank you for that. And then just lastly, pet sales growth was a bit below what we'd modeled. I guess I'm curious, how did it compare to your expectations? And if sales were a bit slower, I guess, what's driving the weakness, and was it contract manufacturing related or something else? Thank you. Andrew, we continue to see positive momentum in our pet portfolio, and any shortfall to expectations for the quarter would be attributable to the co-manufacturing agreement. As we noted on our prepared remarks, we have revised our outlook for co-manufacturing for the full year to be $160 million, which is a $25 million decline than what we expected coming into the year, and that would have been the driver for the quarter. Got it. And just, what would drive the decline in the co-man sales? Thank you. Yeah. It would be what Post Holdings would need from their production standpoint as we support relocating products between manufacturing facility and supporting volumes. So it would just be what their expectation is and their network. Got it. Thank you. Thank you. Next question is coming from Peter Galbo from Bank of America. Your line is now live. Hey, good morning, guys. Morning. Maybe we could just start. I think there's a bit of confusion this morning, just around your reported comparable sales growth number, Tucker, Mark, of the 21%, and then I believe on slide four of the supplement, it shows closer to 16. So I just wanted to be able to bridge that for folks and maybe, Tucker, if you could just help. I think in the press release you actually have- ... the GAAP to non-GAAP reconciliation at the 21. So if we can talk through those, as well as just where that comes in relative to what your expectations were, I think, for the quarter of the +20%, that you had put out last quarter. Thanks. Peter, good morning. We delivered our quarter in line with our expectations, and let me break this down for you. On a reported basis, we were down 4%, but as you isolate the impact of the pet food divestiture on a comparable sales basis, we would be up 21%. Embedded in that 21% is 11 points of Jif growth or restoration, primarily due to lapping the peanut butter recall. The second component would be the required co-manufacturing agreement or growth of three points. That leaves base business growth of six and half points for the quarter, and within that six and half points, we saw approximately two and half from a volume mix standpoint and four points from net pricing. Okay. And, and just on the 16, sorry, that's on slide four, Tucker, just again, between that versus the 21 that you printed. Just trying to understand the delta. Yeah, it's, it's the math associated with the divestiture impact on a reported basis year-over-year. Got it. Okay. That, that's helpful. And, and then, Mark, you know, I think in, in your prepared comments, you spoke a bit about, you know, a re-acceleration or a planned re-acceleration in Uncrustables growth from, from the quarter. Can you just kind of speak through the cadence of, of some of that over the course of the year, and, and maybe just what we might be seeing, you know, from a tracked standpoint versus untracked as you push into some other channels like Canada? Yeah, sure. Peter, it's first of all, we're really pleased with the Uncrustables growth. Keep in mind that we had we're lapping a really strong Q1 last year, as well as we had a very strong prior quarter, which happened as a result of us really getting completely off allocation. So the momentum on Uncrustables is actually really strong, and we expect growth to you know, continue to be around that 20-ish% for the full year. And what's driving it is, of course, some expansion into new channels. I mean, Canada is so far very, very relatively small, but great customer acceptance there. Some other expansion into away from home. But I think probably most notably is the fact that we have just a lot of runway on household penetration. If you look in my prepared remarks, just talking about, you know, peanut butter and jams and jellies being, you know, 3x the household penetration of Uncrustables, so there's plenty of runway there. And we're turning on advertising and other in-store activations that are really, for the first time, gonna start driving demand and pulling through the network. So just very positive on Uncrustables still and expect to, you know, hit around $800 million for the year in sales. Great. Thanks very much, guys. Thank you. Next question is coming from Ken Goldman from JP Morgan. Your line is now live. Hi, thank you. Just following up on your commentary that for the second quarter, like-for-like sales should be up mid-single digits and EPS up low single. Just as we think about modeling the quarter, are there any unusual tailwinds or headwinds to consider? I guess, you know, how do we think about the specific cadence of your contract sales on pet in the quarter? Are there any lingering benefits from lapping the Jif recall that may bleed into 2Q? Just wanted to get a sense of, you know, anything we should think about just as we're modeling as precisely as we can. Ken, good morning. As you think about the second quarter, just reinforcing mid-single-digit top line, and that's, you know, squarely in mid-single digits, low single-digit bottom line. The first component that I would just acknowledge is that we did have a $0.16 overdelivery in the first quarter, which was largely SD&A driven, so the predominance of those expenses will begin to come back in the second quarter and then throughout the remainder of the fiscal year. Then as you think through the balance of the portfolio, continued momentum of spreads with some Jif recovery coming into the second quarter, momentum on Uncrustables, the coffee category will continue to perform. In the pet segment, there's risk, the co-manufacturing sales, you probably could just make a little bit more equally across the second and third quarters with a slight slowdown in the fourth. Got it. That's helpful. Thank you. And then, just to follow up on your comment about SD&A, you know, you previously guided, I think, to roughly even expense on that line item each quarter this year. Obviously, 1Q came in light. As we think about the next few quarters, should each of them be roughly the same? I guess it's around $355 million implied, or there will be... You know, might there be a little bit more lumpiness as they sometimes say? I'm just verifying, but I think your assumption is fair around the $3.55 over the next three quarters. ... Should we just model that in evenly, barring any other information? Correct. Thanks, Tucker. You're welcome. Thank you. Next question is coming from Matt Smith from Stifel. Your line is now live. Hey, good morning. Morning. I wanted to ask about the pricing and inflation dynamic in U.S. consumer foods. I believe you said that on an underlying basis, pricing continued to lag inflation. So can you talk about the outlook there and when you expect that dynamic to inflect and your pricing to more than offset current inflation? Yeah, I think, Matt, we are seeing pricing offset current inflation in our consumer foods business. I think generally across our entire business, you know, pricing is relatively stable. We would consider ourselves still in an inflationary environment. We have had some-- we've sharpened our price points on coffee and passed some of that through to customers and consumers, and so that will help coffee in our future quarters as well. But generally speaking, whether it's consumer or the business in total, we have recovered inflation. Okay. And then you mentioned coffee, lower coffee prices passing on to the consumer. Are there other areas of the business, maybe not directly commodity related, where you're seeing competitors, already lowering their pricing, not necessarily related to the underlying commodity, things getting a little more competitive, perhaps? Yeah, yeah, that's a pretty short answer is generally, no. We have not seen significant deflation across the industry. Okay, thank you for that. I'll pass it on. Thank you. Thank you. Next question is coming from Pamela Kaufman from Morgan Stanley. Your line is now live. Hi, good morning. Morning. Just wanted to dig into the coffee outlook a bit more. Can you talk about your strategy for coffee pricing this year, given the favorability in coffee costs, and how to think about the outlook for promotions versus potential list price changes? And I guess, generally, what are your expectations for segment growth, and how should we think about pricing versus volumes for the balance of the year? Pam, maybe I'll start, and Tucker probably has a comment here. I, you know, we did see some a little bit of relief in the commodity, and that's what drove us to sharpen our price points in a few of our coffee brands. That had really took place in this month, so that will start to impact and help the business going forward. You know, I just a reminder that as we manage price, we really try to be prudent. We do feel that it's important to pass along both increases and decreases, but we do do that with multiple levers. Sometimes it's list price, sometimes it's trade or just getting a little bit more surgical on pricing, and that's really what we've done here. So we do expect that to support the coffee business going forward. But beyond what I shared, we probably cannot speculate on any future movements at this time. Great, thank you. Then just on the pet segment, can you talk a bit about what you're seeing in the consumer behavior in the pet category? We've heard from some of your competitors that consumers are exhibiting increasing demand elasticity and some trade down in pets, particularly when it comes to treating. Obviously, Milk-Bone sales were still strong in the quarter, so just curious to hear what you're seeing in the dynamics in the category. Yeah, sure. I mean, what I can speak to is largely pet snacks, specifically dog snacks. We did have a strong quarter on Milk-Bone and did see some good growth there. Part of the reason that we continue to have good growth is, as I've said before, the brand plays in that entire range of value, from premium to more value-oriented or mainstream products. We have seen a little bit of a shift to more of this, you know, the standard Milk-Bone biscuit, if you will. Our premium offerings continue to do well, but there may have been just a little bit of shift there. And then with as we've improved our supply chain on Meow Mix and gotten the original blend item back into sort of the number one volume position, that also would speak to the fact that our mainstream consumers are continuing to buy that product. So we feel very good about where our total pet portfolio plays at this point. Thank you. Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from Rob Dickerson from Jefferies. Your line is now live. Great, thanks so much. Tucker, just first question for you. You know, in the prepared remarks, you talk about the derivative instruments for the Post shares that are being divested, and it sounds like that cash inflow comes in Q3. And it seems like kind of where your leverage is now, then with your incremental cash coming in, you could potentially be at two times net or lower, maybe by the end of the fiscal year. That's- ... you know, by far the lowest you've been in, like, almost 10 years, I think. So, you know, I'm just curious kind of how you're thinking, you know, about potential incremental capital deployment. I realize, right, you buy back stock, increase the dividend, but, you know, once you're hitting two times or less, seems like there could be, you know, incremental appetite, let's say, for acquisition. So just curious how you're thinking about that. Thanks. Rob, it's Mark. You know, yeah, we feel very good about our balance sheet right now, and obviously, this has been our intent all along. As you know, we have, you know, over the last couple of years, been really focused in terms of refining our portfolio. It does not mean that we're not interested in acquisitions. We remain very interested, and as you know, the industry, as a whole, has been somewhat quiet on the M&A front, but it's not for, you know, lack of investigating and looking, keeping lines in the water. So, we hope that M&A will continue, or acquisition specifically, will continue to play an important part of our growth story over time. All right, super. I'll pass it on. Thanks so much, Mark. Thank you. Next question is coming from Jason English from Goldman Sachs. Your line is now live. Hey, good morning, folks. Thanks for slotting me in. Good morning. Congrats on a strong start to the year. Thank you. A couple of questions for you. So the SD&A favorability looks like it was really corporate expense related. What drove it, and why shouldn't we take that to the bank and assume it's gonna be lower for the remainder of the year? Jason, we saw some favorability within SD&A, on the marketing line of some of our distribution and operations support lines, and then also within our traditional corporate functions of administrative support. And really, what we have made the decision to do is to continue to support our brand. So we have some incremental marketing that we're contemplating, in the next three quarters, and also some of the expenses were timing related, and so those are coming back in the second quarter. So we are not seeing SD&A favorability at this point in our fiscal year, despite having seen it in our first quarter. So I assume the timing was that corporate line, 'cause distribution is distribution, marketing, that looks like it's timing, right? 'Cause you're holding the full year. Within corporate, what, what was the timing benefit this quarter? 'Cause it was chunky. It was like, your corporate was much lower than we expected. Yeah, just it had to do with various corporate items around, accruals, incentives, timing of spend through various projects, so on and so forth. Okay. That, that's helpful. Thank you. And then turning back to some of the segments. Looking at coffee, the price was weaker than we expected, and it sounds like it's going to get even a little more, it sounds like it's gonna turn deflationary based on the comments you made around the investment just this month. A, is that right? B, do you expect the segment to still post organic growth if price is deflating, given there's really no volume growth in the industry, it actually looks like it's contracting? And sorry, three-part question. In light of the price investment, should we view a return to low thirties even margins, as out of reach for this year? So, Jason, maybe breaking this down. On a year-over-year basis, coffee should be flat to slightly down, just due to deflation in the underlying green coffee. We are expecting a level of volume momentum for the portfolio on a year-over-year basis. We do see gross profit margin improvement year-over-year, as you have noted. And from a segment profit standpoint, we are spending back some of that gross profit improvement in the form of marketing and investments in liquid coffee and sustainability. And so we would expect the segment profit margin to sort of be in the high 20s. Helpful. Thank you so much. I'll pass it on. Thank you. Thank you. Next question today is coming from Max Gumport, from BNP Paribas. Your line is now live. Hey, thanks for the question. With regard to gross margin, you took up your full year guidance. It sounds like it was due to incremental cost favorability. I was wondering if you could give us any color on some of the drivers of that favorability you're seeing, and what the sources of the change were, and how that might impact your assumptions around cadence for the next three quarters as well. Thank you. Max, good morning. You know, as you noted, we came into our fiscal year with a gross profit margin guidance of 36.5%-37%. You know, we have now guided to a 37% outlook for the balance of the year. So on average, we've come up about 25 basis points. What gave us conviction in doing that was just seeing some cost favorability within total cost of goods sold in areas where, you know, you have a level of commodities, you have a level of transportation, you may have some in the manufacturing and distribution environment, but it's not significant. It's just some level of cost improvement. You know, as we think about the outlook for the balance of the year, that gross profit margin will improve in each of the next three quarters in order to get you to the 37% outlook for the full year, and it'll be pretty consistent over Q2, three, and four. Thanks. Turning back to the commentary on trade down and pet, we've also been hearing- ... some chatter about this dynamic and seeing it in the data as well. I'm curious what you think is driving this increased value-seeking behavior, and how long you think it can persist? Thank you. Max, it's Mark. I won't speculate on how long. You know, I do think, you know, as we have refined our portfolio to fit our strategy, obviously, pet snacks is really our crown jewel there. And I answered a little bit of that question earlier. You know, keep in mind that we all, as pet owners, feed our pets, obviously, pet food. Pet snacks are a little bit more discretionary, but nonetheless, keep in mind that consumers oftentimes treat their pets better than their children. And so, we do believe that the pet snacks and our, particularly our dog snacks portfolio, will continue to perform as we continue to meet the needs of consumers wherever they may be at, from value to premium. So we just, we really feel good about where our portfolio is positioned there. Thank you. I'll leave it there. Thank you. Next question is coming from Steve Powers from Deutsche Bank. Your line is now live. Yes. Hey, good morning. Thank you. Just a question on, as it relates to free cash flow. You know, given that you've raised your outlook $0.25, which implies, I mean, if that's if that is a cash EPS increase, I would expect a little bit of flow through maybe $25 million or so to free cash flow that we don't seem to be seeing. So maybe just talk about what's driving that. Thank you. Steve, we are seeing some incremental cash taxes as we had a strong finish to our last fiscal year, and as we continue to look through certain activities through this fiscal year. And that has really been the driver of the change of why we didn't excuse me, raise our free cash flow guidance. Okay. Okay, very good. Thank you. Thank you. Next question is coming from Robert Moskow from TD Cowen. Your line is now live. Uh- Robert, perhaps your phone is on mute, Robert. Robert, if you can hear us, we can hear you. Can you hear me better now? There you go. Sorry about that. Go ahead. Can you hear me better? Yeah, Rob, welcome back. Okay. Yeah, slow start, for sure. In the prepared remarks, you said that Meow Mix continues, the demand continues to exceed your capacity, and you're beginning to replenish inventory. What, what's the plan for improving your capacity for Meow Mix? You say in the second quarter that you... It looks like you're gonna grow above consumption in the second quarter. What are you doing at the plants to stretch your capacity to make that happen? Rob, it's Mark. You know, we're already in process, of course, on those efforts, and it's all around productivity and making sure that the plants themselves are operating at their highest capacity. There's some nominal capital investments to make sure that the equipment is running as best it can. And so it's really, it's fundamentally around those types of things. And we do expect the improvement to continue through the second quarter and support the demand. Okay. Any unusual impact in the back half of the year? Will this be an easy comparison in the back half, or will it be kind of like normal ship to consumption? It should be normal. Okay. Great. Thank you. Thank you. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments. Thank you. Thank you all for your time today, for joining the call. We are really pleased with the positive start to our fiscal year. And of course, as we always say, our results were really made possible by our outstanding employees. So I'd like to just take a moment to thank them for their hard work and dedication to the company. We hope that many of you will be able to join us in Boston at the Barclays conference next week. A live webcast of our presentation on September 5th at 12:45 P.M. can also be accessed from our investor relations website. So I hope to see you all there in person or virtually. Thank you. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.