Welcome to Sovos Brands' First Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A brief 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. It is now my pleasure to introduce your host, Josh Levine, VP, Investor Relations. Please go ahead. Good afternoon, and thank you for joining us on Sovos Brands' First Quarter 2023 Earnings Conference Call. On the call today are Todd Lachman, President and Chief Executive Officer, and Chris Hall, Chief Financial Officer. By now, everyone should have access to the earnings release for the period ended April 1st, 2023, that went out this afternoon at approximately 4:00 P.M. Eastern Time. The press release, as well as supplemental slides, can be found on the company's website at ir.sovosbrands.com, and shortly after the conclusion of today's call, a webcast will also be archived and available for replay. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it, and as such, does include risks and uncertainties. If you refer to the company's earnings release, as well as its most recent SEC filings, you will see a discussion of factors that could cause Sovos Brands' actual results to differ materially from these forward-looking statements. Please remember the company undertakes no obligation to update or revise these forward-looking statements in the future. We will make a number of references to non-GAAP financial measures. We believe that these measures provide investors with useful perspective on the underlying growth trends of the business and have included in our earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. Please note that all consumption data cited on today's call refers to dollar consumption on a total MULO basis as of the 13-week period ended April 2nd, 2023, and growth versus the prior- year comparable period, unless otherwise noted. Lastly, to avoid any confusion, for discussions pertaining to first quarter results and full fiscal 2023 guidance and growth expectations, organic net sales growth is calculated as net sales growth adjusted for acquisitions, divestitures in the 53rd week in 2022. With that, I will now pass it to Todd. Thanks, Josh. I will begin with a discussion of the exceptional performance we delivered this quarter, and that we continue to expect in future quarters, before turning it over to Chris to provide greater detail on our results and updated 2023 outlook. When we spoke to you in our last earnings call, we said that Q1 was off to a strong start, building on the robust fourth quarter. Today's results reflect sector-leading, volume-driven net sales and profit growth with meaningful margin expansion as a result of excellent operational execution. We have generated very strong momentum in the Rao's mega brand, which we expect to continue through the second quarter and balance of the year. Given our robust Q1 results and the continued momentum in our business, we are raising our guidance for net sales and adjusted EBITDA. Robust trends for the Rao's brand continued in Q1. Rao's grew net sales 38%, surpassing $600 million on an LTM basis. For the first time ever, achieved the number one dollar share in the food channel. The primary driver of this growth was the substantial gain in household penetration, up 120 basis points versus Q4 for the total franchise and up nearly 100 basis points for sauce. These gains represented the largest quarterly increase in household penetration in the last three years. Benefiting from robust distribution growth, which was up 22% for sauce in the quarter, as well as higher brand awareness that was driven by a substantial increase in marketing. Recall that awareness grew 10 full percentage points to 58% in 2022. As a result, dollar consumption for the Rao's franchise grew 26% in the quarter. In sauce, we grew dollar consumption 22%, with units up 16%, both well ahead of the category. We also delivered sustained growth in frozen entrees, soup, and pasta, with combined retail dollars up 46% in the quarter, with each of these Rao's businesses growing distribution, household penetration, and dollars well ahead of their respective categories, resulting in market share gains. As we show on Slide 8, we have made considerable progress over the last few years developing these highly incremental businesses. Our non-sauce Rao's branded products now accounting for nearly 20% of trailing 52-week measured retail sales. Our most recent non-sauce launch into frozen pizza, although still in the early stages, is delivering in line with our expectations, and we are excited about the retailer and consumer interest we have received thus far. Importantly, we continue to see massive white space for the Rao's franchise and Rao's sauce in particular. While we did experience the largest quarterly household penetration gains in three years on Rao's sauce, our household penetration is still less than half the level of several competitors. Unit share is below 7%, awareness of 58% is well below the greater than 90% levels for peers. The brand remains highly under-penetrated and under-shared in each of its non-sauce businesses. With many more at-home eating occasions today than prior to COVID, and traffic trends at restaurants remaining under pressure from cautious consumers, we see a long runway to provide many more consumers the opportunity to enjoy a restaurant-quality meal at home with their family. Turning to noosa, the brand grew net sales 8% in the quarter, driven by strong performance in non-measured channels. Our core 8 oz offering grew dollar consumption 9%, outperforming the category on a unit basis and benefiting from distribution and velocity. We continue to invest meaningfully in the brand, highlighting its taste leadership and strengthening our assortment to drive higher trial and consumption. We're building a pipeline of delicious innovation, most notably in core spoonable yogurt, to capitalize on the brand's leadership and indulgence and appeal across all day parts. Michael Angelo's net sales were down 6% in the quarter, with the launch of sauce partially offsetting the proactive decision to exit certain lower-margin frozen SKUs. We continue to drive growth in frozen with key grocery retail partners and are gaining distribution in new channels. Our total frozen entrees business, inclusive of Michael Angelo's and Rao's, grew net sales 10% in the quarter, with consumption up 11%, which was ahead of the category. With healthy inventories, significantly better service, and increased brand investments, we are growing distribution and velocity in our Sovos Brands' frozen business and remain confident there is a long runway ahead for growth. Broadly speaking, our increased investments in marketing, R&D, selling, and supply chain are driving robust sales and profit results for our company. In marketing and R&D, we increased our growth investments a combined 27% in the quarter, following a high- single-digit increase last year. For example, our new advertising campaign for Rao's, called The Deliciousness of Slow, highlights key points of what makes Rao's sauce so unique, including high-quality fresh ingredients and the slow-simmered open kettle cooking process that results in our thick, delicious, one-of-a-kind sauce. We're leveraging a roster of celebrity fans and influencers who showcase the many ways they use Rao's products in their kitchens to their millions of followers. In R&D, we're leveraging our new innovation center of excellence in Austin, Texas, to continue delivering delicious innovation and new products across the portfolio. In sales, we're adding more resources in customer-facing roles, we're strengthening our net revenue management capabilities, we're investing in data to enable better decisions. In our supply chain, our investments in talent and capabilities are really paying off. I want to commend the team on their performance in the quarter, helping to deliver over 200 basis points of gross margin expansion and 30% Adjusted EBITDA growth. Our inventories are healthy with service for sauce and yogurt consistently above target, and service for frozen is in a significantly better position than this time of year ago. In addition, our team is doing an excellent job proactively managing our input costs, and we are successfully delivering on a wide range of productivity initiatives within the four walls of our factories. We see our supply chain capabilities as an important enabler in sustaining our volume-led growth. In summary, we are very proud of our first quarter performance. We are executing well across the organization and investing in the business to drive continued household penetration gains. In fact, with household penetration for Sovos Brands now in excess of 25%, over one-quarter of all households in the U.S. have a Sovos Brands product in their kitchen. To reiterate, given the strong momentum in our business, we are raising our full-year guidance. We will continue to invest in brand building, talent, and capabilities to support our sector-leading volume-led growth. We'll take the right actions to support profitable growth for our business in the quarters and years ahead. Chris Hall will now discuss the details of our first quarter and our updated guidance for 2023. Thank you, Todd. Good afternoon, everyone. First quarter total net sales, $252.8 million, a $42.9 million or 20.4% increase over the prior- year period. On an organic basis, growth of 26.7% was driven by 15.6% volume and 11.1% price. For the quarter, Rao's increased total net sales 37.7%, exceeding our expectations with continued robust growth across all categories and channels. We are adding distribution and driving improved velocities across nearly all of our categories. Our sauce business in particular led our growth with performance in market accelerating across the quarter as a result of the big distribution and household penetration gains Todd spoke about earlier. noosa had a good quarter, up 8.2% year-over-year, with growth driven primarily by non-measured channels. We successfully implemented a list price increase in February, which will provide a tailwind to the balance of the year. Michael Angelo's declined 5.6% primarily as a result of exiting certain channel-specific lower-margin SKUs. Total frozen entrees, including Rao's and Michael Angelo's, grew net sales 10.1%. Adjusted gross profit of $71.1 million increased $16.6 million or 30.4% year-over-year, driven primarily by double-digit growth from volume and pricing. Adjusted gross margins were 28.1% for the quarter, up 210 basis points versus the prior year period. Margin expansion was a result of pricing and productivity as well as favorable mix driven by higher sauce growth. We also began to see favorability for certain key items in our raw material and packaging costs as prices moderated more quickly than we had previously expected. As Todd noted earlier, we are very pleased with the progress we've made in operations and supply chain following the successful implementation of automation projects, particularly in our frozen entree plant, value engineering on our packaging, and other process and cost initiatives, including greatly improved operating systems. Along with these projects, we are confident that our pipeline of yet to be implemented initiatives, such as optimizing our logistics network, enhancing partnerships with key suppliers, and leveraging our increased scale, will help us take costs out, improve our margins, and free up capacity for further volume-led growth. Adjusted operating expenses of $38 million increased $8.4 million or 28.3% over the prior- year period. This included a 26.9% increase in growth-oriented investments such as marketing and R&D, as well as increased support for our talent and capabilities. Adjusted EBITDA of $36 million increased $8.3 million or 30.2% year-over-year. Adjusted EBITDA margins were 14.2%, up 100 basis points versus the prior- year period. Net income for the quarter was $7.8 million or $0.08 per diluted share, compared to net income of $4.1 million or $0.04 per diluted share in the prior- year period. Adjusted net income was $18.1 million and Adjusted EPS was $0.18 per diluted share, compared to adjusted net income of $13.8 million or $0.14 per diluted share in Q1 2022. At the end of the first quarter, cash and cash equivalents were $153.6 million, and total debt was $482.7 million. Our net leverage finished the quarter at 2.6x trailing 12 months Adjusted EBITDA compared to nearly 4x post-IPO, which was just 18 months ago. We continue to believe that a strong cash position gives us a lot of flexibility to invest in our business. Turning to our 2023 outlook, we are increasing our guidance for net sales and Adjusted EBITDA. This primarily reflects our expectation for stronger performance from Rao's than we previously assumed, given the robust Q1 performance and our increased visibility to the balance of the year. For net sales, we are now guiding to a range of $935 million-$955 million, which implies full year organic net sales growth of 14%-17%. We expect volume to continue to be the primary driver of growth, led by higher household penetration as a result of Rao's distribution gains and continued velocity performance. We also continue to expect that elasticities will normalize, albeit at a slower pace than we previously anticipated. For Adjusted EBITDA, we are now guiding to a range of $136 million-$141 million or 13%-18% growth. The increase to our guidance largely reflects the flow-through from higher expected net sales. We continue to expect moderate gross margin expansion for the full year with the benefit of pricing and productivity fully offsetting mid-single-digit inflation. We remain committed to investing to support our long-term growth plans. Our updated outlook incorporates high teens growth for combined marketing and R&D as we seek to capitalize on the massive white space opportunity ahead of us. From a phasing perspective, we continue to expect volume-led, double-digit organic net sales growth in both halves of the year, with growth in the remaining quarters expected to be consistently in the low- double digit to mid-teens range. We expect Q1 growth margins to be the lowest of the year, with improved levels over the balance of 2023 as we move out of the heaviest promotional quarter for this year. For Adjusted EBITDA, we continue to assume growth and margin expansion will be stronger in the first half. Finally, given the strong Q1 performance, we now expect the first half to account for a slightly higher percentage of full-year Adjusted EBITDA than we previously assumed. For a summary of these and other annual guidance items, please see Slide 14 in our earnings slide deck posted on our investor relations website. I will now hand it back to Todd for some final remarks. Thanks, Chris. We are excited by how the year has begun. We have a tenacious, highly talented, and energetic team that is executing well. The Rao's brand is firing on all cylinders, adding households through distribution and awareness gains, and rapidly progressing on its path to $1 billion of annual net sales and beyond. With strong operational performance, we are expanding our margins and driving bottom-line growth, helping to maximize shareholder value. With that, Chris and I are now available to take your questions. Operator? Thank you. We will now be conducting a question-and-answer session. If you would 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 would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment please while we pull for questions. Our first question comes from Ken Goldman with JP Morgan. Please go ahead. Hi. Thank you. Two from me. My first one is, you mentioned that Rao's, the non-sauce business of Rao's, I think is now nearly 20% of your measured retail takeaway. Correct me if I'm wrong on that. You also talked about how pizza is in line with your expectations. Could you maybe add a little bit of color, or just an update really on how the other businesses are doing, you know, be it soup or pasta or, you know, whatever you think is worth discussing? I'm just trying to get a sense for how each of them is progressing versus your expectations. Awesome. Hey, Ken. How you doing? It's Todd. Hey, Todd. Hey. On the non-sauce businesses, you're right, 20%. We have some detail on that in the slides, but we couldn't be more pleased. If you take total non-sauce IRI, last 52 weeks, $130 million of retail sales up 46% year-on-year. CAGR since 2020, 60% for that combined entity. These businesses, Ken, have been in market for a while. We launched soup four years ago. It's now the number five dollar share. Number one or number two fastest-growing soup brand over this time period, meaning we've either been the fastest or the second fastest-growing 13-week period after 13-week period. We're shipping some new items now with more items to come at the end of the year. We're very, very pleased. Even the LTM, dollar sales up 20% year-on-year versus a flat category. Just TDP is up 7%, velocity up 12%, with a 2% dollar share. Pasta launched actually about six months before soup. We're in our fifth year now. We're the number six brand. Grew more than 50% in 2022, we only have a 1.3% share. Last 13 weeks, the number it's bizarre even to say, up 73% year-on-year, 50 basis points, up 50 bps in share, continue to build distribution with velocities also improving. We also have some new items, shipping more items to, you know, to come. Distribution up 14% versus distribution in the category up 1%. Velocity up a very strong 52%. In frozen, our Rao's frozen business up 46% in dollars versus 6% for the category. Distribution up 33%, velocity up 10%. you know, if you look at those three businesses, 20%, that share of total is growing, although, you know, sauce is growing robustly as, you know, as well. Pizza, you know, the area to highlight with pizza is that, you know, it's early, you know, in the very early stages. That said, initial sell-in is going according to plan. Commitments continue to build. We're generating very strong interest from across the accounts. As we've discussed, we expect distribution to build as the year progresses. Remain confident that our entry into this very large $7 billion frozen pizza category can be a very meaningful contributor to the brand in the years ahead, which will, you know, lead to further volume growth, you know, for the business. I know this wasn't one of your questions, Ken, but I'll just sort of conclude in highlighting, you know, yes, our results were up a very strong 27% in the quarter, but 16% volume versus down -5.2% for the peer average. If you look at the last 12 months, our volume up 13% versus volume down 4% for the peer average. Yes, our growth is high, but highly differentiated in the fact that it's volume-led when many of our peers are declining in volume and offsetting that with price. Got it. Thank you for that. Quick follow-up. I think your previous guidance was for volume to be up high single digits, and then inflation to be up mid-single digits. You know, I guess in light of the new top line guidance, and your comment about, you know, maybe some costs mitigating a little bit faster than you had expected. Are those ranges rather, still the proper ones to think about? Hey, Ken, this is Chris. On volume, that's really what has driven us to take up our guidance. Pricing, pretty much the same range we had anticipated for the year, mid-single digits. We're now in the kinda low- double-digit range for volume, and that should be fairly consistent across the year. Pricing, of course, falls off across the year versus the pricing we saw flow through in Q1. Pricing as well as inflation are both mid-single digits across the year. Again, it's really the volume that's driving the upside to our prior guidance. Thanks. I'll let it go there. Thank you. Next question comes from Peter Galbo with Bank of America. Please go ahead. Hey, Chris, Todd. Thank you guys for taking the question. You bet. Hey, Peter. Hey, you know, mine are pretty quick. Just curious around, you know, the sales guidance. Obviously you raised kinda by more than the beat relative to consensus on the quarter. You know, Todd, I think you talked, you know, at length about some of the factors that are driving that, and it's probably unique within packaged food. Just curious, fielding a few questions, if any of that, you know, raise as well is like a load-in factor for pizza, just as you roll that out more nationally, if there's any way to dimension that, just would like a clarification there. Sure. You know, none of that is driven by a loading factor in regards to, you know, our guidance, et cetera. I mean, really, I mean, you know, as you recall from the last quarter, I mean, I stated, you know, we were beginning, you know, really strong out of the gates as we began Q1, you know, following a very strong 2022 and Q4. Momentum, honestly, even stronger than expected. What are some of those highlights? I mean, first, we knew household penetration would increase. We did not expect it to be the largest household increase in household penetration in the last three years, up 240 basis points year ago on total and 110 basis points, you know, on sauce. The key driver there is just very healthy distribution gains, up 22% year-over-year TDPs, with more than one quarter of our top 20 accounts growing TDP double digits, you know, for a brand this size. The total Rao's franchise is $618 million LTM, and it's highlighted in our slides. This is the Rao's brand, $618 million LTM up 40% year-on-year. You know, we look at distribution. We talked last call about awareness going from 48% to 58%. We don't get awareness on a quarterly basis, but given our investment levels, we certainly expect that to continue to increase, and it's about getting the brand into more households. You know, we are only in sauce, you know, less than 13% of households. Volume-led growth, number one in the food channel, non-sauce business is up 46%. The increase year on year profit growth inclusive of 27% marketing and R&D spend, et cetera, et cetera. I highlight these to say that this has nothing to do with any one-time shipments, any pipeline fill. It's due to the momentum of the business, notably the very strong household penetration gains on sauce and on the balance of the Rao's franchise. Got it. Thanks for that, Todd. Then, Chris, just maybe a two-parter that should be relatively easy. I think you said, you know, the Adjusted EBITDA percentage in the first half or second half would be higher versus, you know, previously. I think previously you had like a 47/ 53 split. Just wanted to confirm if that was both the prior split versus the new one. Secondly, if we can just revisit the topic of debt pay down, you know, just given, you know, where rates are in borrowing on the term loan. Thanks very much, guys. Yeah, no, you bet. Yeah, as we talked at our last call, we mentioned 47% first half EBITDA based on the strength of Q1. Again, primarily top line driven for the reasons that Todd just gave us. Also good on gross margin expansion over 200 points above, you know, our expectations where it would come in. Productivity kicked in. We've got our automation up and running now down in our Austin plant. We're really delivering cost savings. Pricing was very strong for the quarter, very strong gross margin quarter led to a higher EBITDA. We're more, you know, it's not a dramatic shift in the phasing of EBITDA, but more like 48%- 48.5% H1 now is where what we're seeing. Again, that, you know, that assumes all of the things that we know today on inflation, which we mentioned a mid-single- digit number, higher in the first half, lower in the back half, but still both halves in basically mid-single digits. Pricing stronger in the first half as we overlap the actions from last year, plus some actions that we took in Q1 of this year. That, that's our EBITDA phasing. On cash, you know, we're very pleased with the cash we continue to generate. We're very pleased with the strength of the balance sheet. The cash that we have taken, you know, we're holding onto that for now. We've talked in the past about our uses of cash, which are primarily to reinvest in the business, either to drive top line or to drive productivity. We don't, you know, we don't anticipate paying just any dividends. Therefore, we really use that cash to give us optionality moving forward. That optionality could be, again, reinvesting in the business, could be for M&A down the road if there was an opportunity, but that optionality is very important to us. I mentioned last time, I'll just reiterate, we are earning a nice return on the cash that we're hanging on to. That will continue to be our strategy for now. We will de-lever on a net net debt basis. You know, we'll just see, what happens here over the next several months and what happens with interest rates, and then we'll decide how to optimize that cash. Awesome. Very helpful. Thanks, guys. You bet. Thanks, Peter. Next question comes from Jon Andersen with William Blair. Please go ahead. Hey, good afternoon, guys. Congrats on a great quarter. Hey, thanks, Jon. Yeah. I wanted to just come back to the mix of Rao's, the total franchise now nearly 20% non-sauce. You know, how do you see that evolving both near term and longer term? Do you think that non-sauce portion of the business becomes a bigger part of the franchise in the next year, three years? What are some of the margin implications of that mix overall? Are you seeing, you know, through your automation efforts and productivity efforts, the ability to kinda lift the margin structure of the non-sauce business? Because I know the sauce business is particularly strong. Thank you. Hey, Jon. Sure. Let's talk about the, you know, we sort of have publicly talked about it in several of the other calls. You know, when we talk about Rao's to $1 billion, we've talked about non-sauce being about 20% today. You know, I'd say roughly, when we get to a $1 billion sooner than later, think of non-sauce roughly 30%, sauce roughly 70%. We've sort of talked about that before. Non-sauce will be a larger percentage, but most importantly, sauce, 70% of the business. I'll just highlight again, you know, why that is. I mean, you've got household penetration of sauce at 13% versus, three, you know, two to three key peers above 30%. You've got unit share of sauce less than 7%, you've got the other two leading players with dollar share of 16%, unit share of 16% and 18%, respectively. You know, we're the number two dollar share in MULO. We are the number one dollar share for Q1 in food, we're number seven in unit share. It shows you the opportunities. Awareness, 58% versus there's five brands in sauce that have awareness above 90%. The distribution, we've talked about just average number of items of barely 14 versus several peers above 20. That just shows you of why sauce is gonna continue to be the key driver. I highlighted some of the opportunities and just the penetration. I mean, less than 3% on our non-sauce categories share, 2% or less, et cetera, on those other businesses. we've got very, very strong upside on both. you know, that's why I continue to emphasize that our number one priority is driving Rao's to $1 billion, you know, as quickly as possible. I'll pass it to Chris in regards to your margin question, Jon. Yeah. Thanks, Todd. As we could create new products, you know, we engineer those P&Ls to be at our, you know, at their overall company average on the gross margin line. We may be investing more early on in trade and slotting and things like that, but as the items seed in the marketplace, you know, we anticipate those margins getting up to that company average. We are investing money, as we've spoken of, at our plant in Austin to more fully automate that plant. That's where all our frozen, whether it's Michael Angelo's or Rao's, is produced. We're really starting to see now the impact of that and the cost savings, the efficiencies of those lines. As we scale up the businesses, let's take pizza, for example, as that continues to grow, you know, we will get the advantage on pricing as it does grow in scale. You know, we may launch a product at a lower margin. As we enter new TAMs, you know, the incrementality is such that it enables us to do that. You know, we're getting new space, new sections of the store, new shoppers. We'll take a little trade-off in the early days of incrementality, and then that margin will build up to the company average or better as we progress. Very helpful. One quick follow-up. You mentioned that obviously the volume growth has been terrific, above plan and kind of a driver of the guidance raise for the year. You know, where are you from a capacity standpoint? I know you've added some capacity, I believe, in Alma. It sounds like automation is helping you. Do you have any pinch points with respect to capacity, or do you feel like the operations and the supply chain are set to kind of support the growth that you foresee with kind of normal CapEx levels over the next 12- 18 months? Thanks. Sure. Yeah. Thanks, Jon. We I would say minimal pinch points, you know, across, you know, in our largest businesses. Let's just talk, you know, total sauce. I'll just compare it because in Q1 of last year, we did have pinch points, less because of like more supply constraints. If you recall, there was a fire at our dry pasta supplier that we used for frozen and a glass shortage due to the war, you know, war in Ukraine, et cetera. There's a variety of aspects we talked about in our Q1 and Q2 calls. If we just take, you know, our fill rates as a measure of. You know, we have basically, I mean, we're at or above target on our sauce business, up 14 full percentage points service Q1 versus Q1 year ago. On our total frozen business, up 30 full percentage points. This Q1 this year versus Q1 last year, it's a business that we had mentioned that we had some, you know, when I say capacity, it's more around supply constraints that caused capacity issues that led to some service degradation. You know, we have a best-in-class supply team, and we're constantly making sure that we're tenacious and nimble around ensuring that we have the right ingredients and packaging, et cetera. We've got a variety of capacity initiatives and productivity in the factories that we run for yogurt and, you know, and frozen. You're always gonna have some pinch points here and there on the business. To me, that's all part of running a business that's growing as rapidly as ours. Right now, as I said in the prepared remarks, that we are, you know, at or above target on our sauce and yogurt business and significantly better than a year ago and approaching target on our frozen business for Sovos. I'll just add to that, you know, with Alma opening up for the sauce business, with other additions that are made both in our co-packers, Italy facility, as well as Alma, we have ample growth available to us on the sauce business. Even down in Alma, we currently operating with 10 kettles. We have the infrastructure there to double that quickly to 20 kettles. Over time, the facility has room that we can expand even further by just adding additional kettles. We're in really good shape for the type of growth we've been seeing on the sauce business and at 30% plus. We're well, you know, good amount of capacity on the noosa business as well at our plant in Colorado. Sounds great. Okay. Thanks, Jon. Thanks, Jon. Next question comes from Matt Smith with Stifel. Please go ahead. Hi, good afternoon. Thank you for taking the question. Hey, Matt. Matt. I wanted to ask first about the impact from your latest round of pricing that went into effect in February. Was that just the noosa business or was there or do you expect additional pricing in the Rao's brand? The pricing actions to date have had very little impact on your volume performance and don't seem to be impacting household penetration gains. Are you seeing anything in the market with your latest round of pricing that indicates elasticities are picking up, or does the outlook calling for softening of elasticity really just reflect a degree of caution given the environment? Matt, thank you for that. Our pricing actions that we've taken over 2022 into Q1 of 2023 basically took two rounds of pricing on across every category, every brand. The latest being in February, a roughly 8%-10% pricing on noosa, depending on the SKU, and on our frozen portfolio. Those hit the marketplace in February. At this point, we have adequate pricing in the marketplace for the inflation that we are anticipating. We're pleased with where our pricing is. We're very pleased with elasticities, which have continued to be better than historical and better than what we had modeled, especially on the Rao's business. That's a function of distribution gains, household gains, awareness gains. We're getting lots of new buyers into that category, driving great volume growth. The pricing has been, you know, well accepted by our retailers as well as our consumers. A little more elasticity on the, on the yogurt front, where we did put our second round of pricing in in February. Across our first round of pricing, we also took up the depth of our promotions and tried to raise our actual sort of price points where our competitors really maintained existing prices when on deal. We've seen a little bit of unit fall off there. Now we're going back, we're fine-tuning that. We will be returning, we have been to some of our more, you know, more effective, volume-driving noosa promotions, and that's in the marketplace now, and we're seeing a positive impact from that. We do not anticipate further pricing at this point. We're always prepared to in the, you know, if the conditions warrant. We're pleased our promotional strategies have been consistent across the year. The same promotion, you know, we were roughly 40% on deal, for instance, in the sauce category and have been consistently over time, that we successfully raised the depth of those promotions again, which is helping us drive through the 11% pricing that we saw in Q1. That will drop as we move across the year with the overlap of the action we took in 2022. The key message is, you know, no further pricing anticipated and no real changes to our promotional strategy or cadence. Matt. Hey, how you doing? This is Todd. Is just to highlight the idiosyncratic nature of, you know, Rao's as it relates to elasticity. I gotta admit, idiosyncratic is not the word I use that often, but now use quite frequently when we talk about Rao's. The point being that, when you have the household penetration that we do, which is very low. Let's just take sauce, 13%. You've got 87% of households that have not purchased Rao's sauce. At any given moment, and you increase household penetration at the slope and rate that we are, you know, in the sauce aisle, at the same time, you could have a consumer that potentially, "Oh, you know what?". I'm not gonna buy Rao's sauce today because of the price." At the same time, a new consumer is gonna be, "Wow, I haven't purchased Rao's in the past year or maybe I've never purchased Rao's. I'm gonna purchase it." You know, it's an element that I believe is unique. I think it'll continue to be a tailwind for us as we go forward. I know a variety of in the analyst community have talked about it, I do think it helps sort of insulate us in an inelastic fashion as to the new households that are continually coming into the franchise. When it's your first time, you're therefore by definition inelastic because you haven't purchased the brand before, regardless of what Rao's category you're purchasing into. Thank you for that. Maybe just as a follow-up then, maybe a better measure to understand the impact of pricing would be your view of the ultimate, you know, achievable household penetration for Rao's. Is that impacted by the degree of pricing you've had to take? Or perhaps you're seeing a lower buy rate from some of these newer households folding into the brand, or lower repeat rate reflecting the higher price point. Hey, Matt, I think you know my voice by now. It's Todd Lachman. You know, a couple things. Let me just hit your first point. You know, I think we don't really think of the ceiling on household penetration necessarily as it relates to as it relates to pricing per se, just because price gaps have stayed relatively consistent, kinda like pre, post, et cetera. You know, we kind of If you think of the market leaders, the mainstream market leaders, of which we're 3x more expensive of and, you know, you've got, you know, I'm talking the other peers that are in the top three, you know, they're above 30%. I think realistically, we're probably not gonna make it to 30%. I think it's totally, I mean, we have our sights on 20% household penetration for sauce, at least. You know, we're at 13% today. I mean, that's a massive increase in share, going from 13% to 20% as we think about it. You know, that 12.9% sauce penetration is, you know, right now we're about a $16 share, et cetera. That's, that's point number one. Point number two, we actually, Rao's, if you look over the past several years, we've had a significant increase in two-plus buying households. We have the strongest repeat in the category. We have the, you know, very significant growth in households that buy, you know, 2x or more, et cetera. The last thing I'll talk about, I've mentioned this before, we measure every quarter, sort of a nine-box grid when we look at three different generational cohorts. You know, Gen Z, Millennials at one end, Boomers and seniors at the other end. We look at lower, middle, upper class, we're consistently the only brand that is growing in households, percent of households buying in all nine boxes. Lower income households contributed to 23% of Rao's total sauce growth in the last, you know, quarter. We're, regardless of price, we're showing growth across all income cohorts and growing robustly in the lower and middle income cohorts. The last point I will highlight, I think I've talked about this before. I mean, if you go into the store now, while I know that Rao's is 3x mainstream, we know that it's dramatically different sauce, right? It's whole tomatoes, slow simmered, simple, high quality ingredients versus, you know, paste, sugar, water, and dehydrated onions and canola oil in a jar. People see it, they recognize the difference. If you look at the price of Rao's right now and you walk a store, this is last 13 weeks average prices of top selling items. You know, one of the top selling hot sauces that is very familiar, I'm not gonna say the name, is more 12 oz bottle more expensive than Rao's. A variety of the leading brands of cereal, more expensive than Rao's 24 oz. A leading 36 oz, several salad dressings, more expensive than Rao's. You know, in the end, I know I've talked before about feeding your family for $15 or less. I think a very relevant comparison is walk the store and look at the cost of a variety of items, and, you know, given the inflation in the store, Rao's sauce compares very, very favorably to a host of commonly purchased items in the food store. That's great context, thank you for that. I'll pass it on. Got it. Next question comes from Cody Ross with UBS. Please go ahead. Good afternoon. Thank you for taking our question. I just want to discuss your Rao's performance because it continues to outperform our expectations. Can you just discuss how it performed relative to your expectation? It sounds like it's higher. Where is the brand exceeding your expectation? What's driving that? Is it the distribution gains? It sounds like you knew some of that from last quarter. Is it the buy rate? If you can just shed some light, and then I have a follow-up. Sure. Hey, Cody, it's Todd. Yeah. Yeah. I mean, honestly, the household penetration gains significantly greater than expected. Largest, we didn't expect at this point in time, you know, given the size of the household penetration, even though we're under-penetrated, did not expect the largest quarterly increase in household penetration in the last three years. Household penetration is one. What's driving that, I mean, one, you know, is the distribution gains. You know, we knew coming into the quarter that we had new distribution, 22% growth in TDPs, greater than we had expected, you know, at the, you know, at the time when it all the pieces kind of came together. That's robust. You know, I think we'll see when we look back awareness gains that we've grew a full 10 percentage points last year. You know, we're continuing to invest very heavily in the business. Total marketing and R&D was up 27% year-on- year, you know, off of a strong base. You know, we are investing heavily, and the majority of that goes to Rao's, secondarily noosa. I think those are some areas when you look at distribution growth, you look at awareness. Velocity, as we look at, you know, the sauce business, you know, is doing quite well when, you know, it's often difficult to keep velocity at a good level when you increase distribution as robustly as we are. Then as I talked about previously, I mean, we've got the soup business growing. This is a fifth year in soup, growing 20%, category flat. Pasta, fifth year, growing 73%, category 11%. Frozen, up 46%, a category of 6%. You know, we were expecting a strong quarter, but it's stronger than we had expected. I'd say secondly, there was, you know, some strong growth in unmeasured channels. If you look at the difference of our net sales growth versus IRI, I think 38% versus like 26%-ish. Part of that is unmeasured channels, and that's not just one-time pops. That's some really solid distribution, permanent distribution gains that we garnered in the second half of the year in unmeasured customers that's paying dividends for us in Q1 and will pay dividends throughout the year. Those are just some highlights. That's super helpful. I just wanna talk about your capital allocation in M&A. You've done a great job delevering the balance sheet, and it's terrific to see your goal that you're on track to reach 2.5x leverage by the end of the year. As you think about capital allocation in M&A, would you look for M&A in separate categories, adjacent categories, or could it be a case where you look within your existing categories and perhaps other smaller players within either sauce or yogurt that have come on the scene and are starting to do well? I'll leave it there. Thank you. Yeah. Thanks. Yeah, look, I mean, I think as Chris — I'll really highlight honestly right now, and Chris Hall sort of touched on it, you know, Cody, but just to sharpen it. I mean, our number one focus is driving Rao's to $1 billion and beyond. As we have learned and seen as we launched into dry pasta and soup, and how well that they are doing in market, you know, we could acquire a one of a kind soup brand, but we would rather launch Rao's into the soup category. We could acquire a one of a kind frozen pizza brand. There are some really nice, highly differentiated niche brands that are under-penetrated that we could expand, but we would rather launch Rao's into that segment. I think right now, you know, the focus for our, you know, use of cash, et cetera, is to reinvest back in the business to drive the Rao's franchise primarily, noosa secondarily. That said, we are constantly fertilizing our list of potential opportunities, you know, in the food area. I think I've mentioned before that, you know, clearly categories that are adjacent to some of ours now, whether that's, you know, the, you know, around the aisles that we're in now, et cetera, you know, would, you know, potentially be attractive. Right now, honestly, our number one priority is driving Rao's, you know, to $1 billion and beyond. We're focused now on the pizza launch. More new category launches to come that we can talk on future calls, not at this time. You know, that's what we're looking to leverage our, you know, kind of capital for is again to extend this Rao's brand that is connecting very, very well with consumers, both from a brand equity standpoint and product standpoint, you know, in 2023 and the years to come. Sorry, I think, can we get the next question, please? A reminder, if you would like to ask a question, please press star one on your telephone keypad. Next question comes from Michael Lavery with Piper Sandler. Please go ahead. Thank you. Good afternoon. Hey, Michael. Can you just touch on the second quarter a little bit more and especially with just volumes, sales and volumes in particular so strong in the first quarter, should we be mindful of maybe any pull forward or any unmeasured channel, moves that might be a part of that we should just keep in mind as we think about modeling, particularly up on the top line? Yes, I sure will. This is Chris. One difference moving forward is pricing. If you recall, Michael, last year, we really had very minimal pricing in the first quarter, and overlapped that this year with, I think it was 11% pricing. That will fall off in Q2, and for the back half of the year. We've had good, robust double-digit pricing in Q2 of last year. That's one big change. Now, we're still very excited, you know, low mid double-digit growth across all the quarters for the balance of the year is what we're projecting. Still very solid growth. It won't have the pricing in it. It'll be more volume driven starting in Q2 and for the balance of the year. We all said this already last year, where in Q1 of last year, shipments or net sales was well below consumption. In Q2 of last year, that reversed. In this year, in Q1, our net sales was higher than consumption. That will probably reverse back here in Q2. On a two-year basis, they're totally in line. Okay. Yeah, last year in Q1, we had some, you know, some spotty service outages. That, that really gave Q1 a boost. Again, this kind of mid- double-digit growth balance of the year starting in Q2 with less pricing, you know, is where we see ourselves landing. That reversal from 1Q to 2Q happening again looked likely, so that's good to make sure to be aware of. Can you just give an update on the Michael Angelo's sauce launch in terms of distribution? I think it went into 1 retailer at first. Is that heading anywhere a little bit more broadly? Sure. Hey, Michael, it's Todd. You know, it's really it's just one retailer now, and both, you know, I will highlight both the exclusive, you know, retailer that we're in now, you know, and ourselves, Sovos Brands, pleased with the results. We're outperforming a variety of other similarly priced items. Although early, and a national rollout is still something we're assessing, we're pleased with the performance right now, and we're beginning to expand, you know, our launch into other select retailers for shipment in the second half. Right now, both ourselves and the retailer are very pleased. You know, honestly, I think as I've talked on previous calls, Michael, we see an opportunity, honestly to take a larger share of the overall category with two brands at very different price levels. They're both great-tasting, kettle-cooked, slow-simmered sauces, you know, but they're very different from each other. Cook time, type of tomatoes that we use, some of the ingredients, et cetera. Figure that there's an opportunity, you know, for that Michael Angelo's equity to play, you know, at a price point significantly below Rao's, but above, you know, that of mainstream brands, you know, at a price that justifies the quality, which is dramatically different than, you know, mainstream paste-based sauce. Okay, that's great. Just a last quick housekeeping one. I apologize if I just missed this, but I know you said that Rao's sauce is now it's the number one dollar share. Did you say what that share is? Apologies if I just didn't catch it. Yeah. That's the number one dollar share in the food channel. That's, you know, that's essentially, it, 17% dollar share in the food channel. We're number two in total MULO, but in the food channel, we are number one, dollar share in the food channel, Rao's sauce. It's a 17% share you said? That's a 17% share. That's great. Thanks so much. Thank you, Michael. There are no further questions at this time. I would like to turn the floor back over to Todd Lachman for closing comments. Awesome. Hey, thanks again for joining us and showing an interest in our story. We look forward to engaging with many of you in the coming weeks. Please feel to reach out to Josh for follow-up discussions. Until then, have a great evening and take care. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.