Good morning, and welcome to the J.M. Smucker Company's fiscal 2024 second quarter earnings question and answer session. This conference 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 second 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 smucker.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 a handset before pressing any numbers. Should you have a question, please press star one on your telephone. 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. Our first question today is coming from Andrew Lazar from Barclays. Your line is now live. Great. Thanks so much. Good morning, everybody. Good morning. I guess first off, part of, I think, the company's initial 8.5%-9.5% comparable sales growth target for fiscal 2024, I think, was inclusive of what we'd consider sort of true underlying organic growth of 4% with 3 points of volume growth. Pricing came in a bit higher than we'd thought this quarter, and volume perhaps a bit lower. So curious if the 4% is still sort of your expectation and if the contribution from volume is still the same around 3 points of that. Andrew, good morning. Underpinning our comparable net sales growth of 8.5%-9%, after isolating the co-manufacturing volume and the Jif peanut butter product recall, we are still anticipating 4 points of top-line growth, and within that 4 points is 3 points of volume mix and 1 point of price. Great. Thanks for that. And then, I think you said you're expecting Hostess sales this fiscal year of about $650 million. Obviously, if one just annualizes that, it's $1.3 billion, and we know that's below the $1.5 billion that you initially talked about. But my sense is there are a number of puts and takes to consider and that it's kind of an oversimplification just to annualize the $650 million. So I was hoping you could go into that a little bit and give us a sense of what the puts and takes are, so we have a sense of what you see as the sort of the true, let's call it, annualized sales outlook for this business right now. So, Andrew, the $650 million reflects calendarizing the Hostess performance on the Smucker fiscal year. The second component is, it reflects the time of ownership since the transaction closing, and so there is one week of lost sales in the six-month period. We approximate that to be about $25 million. And then also, we are assuming the business in a bit of a seasonality or a period of low across October, November, December and January, as you think about the holiday season, the holiday bake, and then also as you think about New Year's resolutions. So I think you would want to account for that in your annualization. And then lastly, there's a few transitory dynamics that the company is working through. One, it just relates to competition, and competition's return to supply on shelf. And two is some dynamics with the customer around getting product from the back of store onto shelf. And so those will restore here in the coming months and will also support the annualization. But as we've noted in our prepared remarks, we are committed to the top-line growth of 4% for this portfolio, and we do see growth in fiscal 2025 and accretion from the bottom-line standpoint as well. Thank you. Next question is coming from Ken Goldman from JPMorgan. Your line is now live. Hi, thank you. Just to follow up on the comment that was just made about competition, just so I understand a little bit more clearly, you know, that competitor, I assume we're talking about McKee. You know, they've been back on shelf for over a year now. Their supply chain issues, we're lapping the recovery there. So I'm just curious a little bit why this would be new or something that would be cited as sort of a... I guess, a non-recurring headwind. And it also doesn't really go away, I assume. It's going - something that's gonna be there for a while. So just kind of wanted to make sure I understood that comment a little bit. Ken, it's Mark. So, in your question, I think one thing where you're right is we are lapping some of that, and we were aware of some of those issues as we obviously took on the business. So, you know, we don't have a ton of concern there. We're ultimately extremely excited about this business. We think that it is a perfect fit at a very good time for our company, as we have, you know, completely reshaped our portfolio, gotten exceptionally focused on the brands and the categories that really matter and are gonna drive growth, along with the capabilities that we have been building. So it is a little bit of timing. And, you know, if you think about the Hostess business and what it brings to the table, again, a leading brand in a growing category, we've got some very strong capabilities that we have built. They've got some great capabilities in innovation and C-store, and so we just are very optimistic about the combination of these businesses, the complementary nature of the capabilities, and our ability to continue to grow the business, and the expectation that it will be accretive in our next fiscal year. Okay, thank you for that. Then, can you walk us through a little bit of, sort of how you see the cadence of gross margin for the rest of the year? Obviously, we can kind of back into the implied profit. You know, you had your, your-- I think in six years on an adjusted basis, you talked about pricing, lower coffee costs, and volume mix that helped. But your guidance implies that it'll be a little bit lower in the back half, which also, I think, suggests that maybe some of what helped Q2 was somewhat non-recurring. So just curious, is that the right way to think about it? And if so, you know, which of those benefits to Q2 might fade a little bit, or am I thinking about that the wrong way? Our guidance for the full year is 37.25 for gross margin. What we saw was a very strong second quarter, where we came in about 38.7%. As we think about the third and the fourth quarters, the third quarter will be a bit softer than where we landed in the second quarter, and then we'll be a bit stronger in our fourth quarter in order to get you to our current outlook for gross profit for the full year. Thank you. Next question is coming from Robert Moskow from TD Cowen. Your line is now live. Hi, thanks, and good morning. Morning. Good morning. Hey, I wanted to know about the profit contribution that you've forecasted for Hostess for the rest of the fiscal year, $120 million. Is that? It does look lower than what, you know, consensus estimates were for Hostess prior to the deal. And I wanted to know, given that you've lowered the sales, have you also had to lower the profit expectation? And does that include any kind of plans for reinvestment or just doing something to kinda get the sales growth re-accelerating so you head into fiscal 2025 in good shape? So, Rob, the outlook for segment profit for the sweet baked snacks is approximately $150 million of segment profit contribution, or about $1.11 from an EPS standpoint. Yes, we did soften that based on top line, but we expect that to restore as we move forward beyond this fiscal year. There are, a few opening balance sheet items incorporated in there that offer about $0.05 impact to segment profit, and we continue to support the Hostess organization with reinvestment in the business in order to support the brand growth and development. Okay. Is there anything in particular that the team came prepared for the next six months to accelerate the performance? Like, you've gotten to see their business plans now. What in particular are they doing to improve the execution with that one customer, and then maybe introduce new products to accelerate sales? Rob, it's Mark. You know, first of all, where there was maybe a bit of a hiccup on the customer side, the teams have largely worked through that. And so as we approach our next fiscal, we would expect that issue to abate and are very confident there. As I mentioned in my earlier comments, where we continue to be very excited about the business is just from a macro standpoint, the consumer continues to snack, right? And there are, you know, consumers are eating at more times a day. Often, one of those snacks is a sweet snack. So that supports, you know, obviously, the Hostess business, but it also supports things even like Uncrustables and coffee, where folks may choose a sweet coffee beverage at some point in the afternoon. So we're very confident in the consumer environment around snacking. But specifically to Hostess, where they have a lot of great capabilities is their cadence of innovation. They have the ability to be very agile in terms of the way they approach different times of the year, sometimes seasonals, their abilities around net revenue optimization, and the way they merchandise products. So those capabilities are, in part, what drove us to have Dan as a leader over both Hostess and Pet, because those are things that are similar to our pet snacks business, the merchandising, the NRO, and the innovation cycles. So we feel very confident in those capabilities. And we also like, of course, their expertise in C-store, which over time will benefit the broader Smucker portfolio. So just great complementary fit at a time when our base business is performing exceptionally well. And so just, again, feeling very confident about the way this deal has come together. Thank you. Next question today is coming from Peter Galbo from Bank of America. Your line is now live. Hey, guys. Good morning. Thanks for taking the question. Sure. Thanks, Peter. Tucker, in the detail you gave around kind of the Twinkie impact for the rest of the year, the one thing I didn't notice was just, did you clarify what you thought purchase accounting was gonna be to kind of the gross margin, maybe at least in the third quarter? I don't know if that carries forward, but anything you can do to help us there. So within the $0.40 impact associated with the acquisition, $0.05 of it is associated with opening balance sheet items, which predominantly is the step up in inventory. So that should give you a sense of the impact from a gross margin standpoint. Okay, got it. And then maybe more just, you know, bigger picture question. I think if you kinda back out the impact of the supplier termination in coffee, you know, your margins in the quarter would have been north of 30%, for that business. And just curious, you know, with the lower coffee costs flowing through, just any direction you can give us on how you're thinking about coffee segment margins, kind of on the go forward here for the rest of the year? So Peter, you are correct. In our second quarter, the segment profit margin would have been closer to 30% without the $39 million termination of a supplier agreement. As you think about the balance of the year, we will continue to see a little bit softer third quarter gross margin, just as we lap some of the green coffee costs year-over-year, and then we will see a stronger fourth quarter, to finish the fiscal year. Thank you. Next question today is coming from Matt Smith from Stifel. Your line is now live. Hi, good morning. I wanted to ask a question- Good morning. about the updated guidance range. At the midpoint, it's down about $0.20, but that includes the $0.40 in initial dilution from the Hostess acquisition. So can you talk about the drivers of the outperformance on the base business? I know there was some timing differences in SD&A between the first quarter and second quarter. Are you now at a point where SD&A, your level of investment, it should be fairly consistent with your prior expectations in the second half of the year? Yeah. So as we came into our second quarter, the midpoint of our guidance range was $9.65. And we had approximately a $0.10 over delivery in our second quarter, which was largely a result of improved gross profit margins, along with some other SD&A favorability, and we've locked that $0.10 into the guidance range. In the back half, we also see an additional $0.10, again, largely driven by the improvement and our outlook for our gross profit margin, that enabled us to capture another $0.10. So absent the impact of the dilution associated with the Hostess acquisition, the midpoint of the guidance range is $9.85, which demonstrates 10 points of growth year-over-year. Thank you for that, Tucker. If I could ask a follow-up as it relates to the coffee business. You've been making investments in liquid coffee. Do you have a timeline when we could start to see that benefit? And is that a top-line benefit, or is that more of a margin capture with you currently using outside manufacturers for some of your liquid coffee products? Matt, it's Mark. It's predominantly a sales component. And keep in mind, this is something that we're gonna be working on over time, and time, I mean, you know, over a year-plus time period. And so we have begun that journey. We have a venture team that is very engaged in the liquid coffee space, both with some of our smaller Bustelo single-serve options, but more recently with some multi-serve, shelf-stable Dunkin' cold brew items that you can find in the normal coffee aisle. So we're at the early days of our liquid coffee journey, acknowledge that it is an important journey, and that we will continue to expand our offerings in liquid, which include later in the fiscal year, some offerings in the Bustelo. So, you know, it is going to be modest contribution in the near to medium term, but we are committed to that journey, and we'll continue to look to ways to expand our liquid coffee presence across the entire grocery space. Thank you. Our next question today is coming from Jason English, from Goldman Sachs. Your line is now live. Hey, good morning, folks. Thanks for slotting me in. Congrats on the fourth quarter. Good morning. Thank you. I'm gonna... Yeah, you're welcome. Sticking on coffee, what type of supplier agreement did you terminate and why? It was related to a packaging supplier, Jason. ... Okay, so nothing related to like the RTD or the innovation stuff? No, nothing related to Keurig, which we have a fantastic relationship with Keurig. It's strictly around roast and ground packaging. Got it. Okay. And your coffee portfolio has performed pretty well in the last couple of years. You've had good momentum. In that context, I'm surprised by the leadership transition. So can you talk about what's driving the choice to put new leadership on top of the business and what you expect the new leadership to do differently? Yeah, sure. You know, as you know, these types of things go, first of all, I'm incredibly proud of this leadership team. I could not be more pleased with the work that they have done. I'm really pleased that we've been able to maintain some strong leadership from Hostess. Really, you know, looking forward to working with Dan and welcome many other leaders from the Hostess organization. Also, just wanna recognize Joe's contributions to the coffee space have been fantastic. And so as we transition, Rob will be coming in and managing the coffee business. He's done a great job on our pet business, and so just looking forward to his contributions. I think he'll add some nice insights to the liquid space and looking forward to driving that there. And then the other thing I would just highlight is oftentimes, you know, we have had a few individuals leave the organization to move on to larger career opportunities. I think that really speaks to the caliber of our leaders and the fact that we've done a great job preparing them for what comes next. Thank you. Next question is coming from Rob Dickerson from Jefferies. Your line is now live. Great. Thanks so much. Maybe a question for you, Tucker, just around the EPS accretion commentary for next year. I mean, clearly, the transaction is supposed to be accretive from time of announcement, I guess, for fiscal 25. But is that—I'm just curious, when you talk to accretion in 25, is that accretion off of the 24 base at Hostess? So then if we were to have grown that, let's say, at the algorithm, it would have been higher than the base or the algorithm on top of that, which is, I guess, accretive. Or are you just kind of speaking generally saying, you know, it will be adding some incremental positive earnings on top of now an adjusted base in 24? So not really sure what it means, so I'm just trying to get any color I can, thanks. Yeah, Rob, the way that we're thinking about it is if you isolated this fiscal year's impact of the Hostess acquisition, which we've approximated to be $0.40 dilution, and you looked at base Smucker, we would anticipate a level of EPS growth for base Smucker year-over-year. Then we would anticipate Hostess also contributing a level of accretion to the company as well. Hopefully that gives you some context. What gives us reason to believe in the Hostess accretion for next year is a full year of ownership as we see business growth and delivery, as we begin to realize our synergy outlook, and as we think about the impact of paying down debt and therefore reducing some interest expense. Right. Fair enough. All right, that's helpful. And then, I think, Mark, you had a line in the prepared remarks, around best-in-class marketing and then also potentially stepping up some investment across multiple platforms. As we think through, you know, Q3, Q4, just this year, should we be expecting kind of that, you know, uptick in, let's call it SD&A, more so than the promotional side as we get through the year? Or, you know, is there some potential for kind of this balance of, you know, increased SD&A on top of maybe some incremental promotional activity given the competitive backdrop? Thanks. Yeah, Rob, thanks for the question. First of all, promotional activity, just one quick comment there, is generally normal, right? It's sort of as expected, business as usual, and our categories are performing generally as we would expect from a promotional environment standpoint. On a marketing and advertising standpoint, we do expect our marketing spend to be up in the remaining 2 quarters of the year. And we have been very pleased with the performance of our marketing efforts. One notable one is that we just launched for the first time in over a decade our Uncrustables advertising, which actually launched during Monday Night Football a couple weeks ago between the Eagles and the Chiefs. And so that has been a fantastic launch, and we expect it to continue to drive awareness for Uncrustables, which surprisingly, not every consumer has heard about or tried Uncrustables. So we believe that's gonna help continue to drive demand and household penetration. So just one quick example there that we're real excited about. Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments. I just wanna thank you all for your, your time this morning. We had another fantastic quarter and just really pleased with the base business and the timing of, of us absorbing this new fantastic business, which is Hostess. It's really been an exciting couple months, busy couple months, but none of it would be possible without the outstanding Smucker and Hostess employees. And really just want to thank them for their continued hard work and dedication to, to their company and your company, and looking forward to continuing to create great shareholder value for you, our investors. Have a great holiday season, and thank you for listening. 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.