Group 1 - WK Kellogg's shares increased by over 50% following reports of a potential acquisition by Ferrero for approximately $3 billion [1] - Ferrero, known for its hazelnut chocolates, may finalize the acquisition of WK Kellogg as soon as this week [1] - WK Kellogg, which produces popular cereals like Froot Loops and Frosted Flakes, became a standalone company in 2023 after spinning off from Kellanova, which now includes snack brands like Pringles and Cheez-It [2]

Group 1 - W.K. Kellogg's shares increased by 10% following its addition to multiple Russell indexes, which led to significant share acquisition by these indexes [1] - The inclusion of Kellogg in these indexes suggests it may be viewed as an intriguing value stock [2] - Kellogg has transitioned into a pure-play cereal company after spinning off from Kellanova in 2023, focusing on brands like Kashi and Froot Loops [3] Group 2 - Kellogg is making progress in separating from Kellanova, allowing it to focus on marketing its cereal products [5] - The company is targeting health-conscious consumers by emphasizing cereals with simplified ingredients that provide protein and fiber [5] - Kellogg currently offers a dividend yield of 3.7%, positioning itself as a potential steady passive income investment [6] Group 3 - The company is implementing its own enterprise resource planning system and is on track to separate its distribution by mid-2025 [7] - Kellogg is stabilizing its margins as it modernizes its supply chain [7]

Group 1: WK Kellogg Company Overview - WK Kellogg (KLG) shares increased by 7% to close at $17.05, supported by strong trading volume, contrasting with a 0.3% loss over the past four weeks [1] - The rise in shares is attributed to optimism regarding the company's strategic transformation, including cost-reduction efforts, brand revitalization, and enhanced pricing power [1] - The company's focus on improving margins and stabilizing volumes is boosting investor confidence [1] Group 2: Earnings Expectations - WK Kellogg is expected to report quarterly earnings of $0.38 per share, reflecting a year-over-year increase of 5.6%, while revenues are projected to be $657.22 million, a decrease of 2.2% from the previous year [2] - The consensus EPS estimate for WK Kellogg has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [3] Group 3: Industry Context - WK Kellogg holds a Zacks Rank of 3 (Hold) within the Consumer Products - Staples industry [4] - BRC Inc. (BRCC), another company in the same industry, saw a 15.3% increase in its stock price, closing at $1.51, despite a -23.4% return over the past month [4] - BRC Inc.'s consensus EPS estimate has remained unchanged at -$0.03, representing a 200% decline compared to the previous year's EPS, and it currently holds a Zacks Rank of 5 (Strong Sell) [5]

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[Part I – Financial Information](index=3&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) This section provides a comprehensive overview of the company's financial performance, condition, and cash flows, along with management's analysis and disclosures on market risks and internal controls [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the quarter ended March 29, 2025, highlighting decreased net sales and net income, and a slight increase in total assets [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) This subsection provides key financial data from the consolidated balance sheet, income statement, and cash flow statement for the specified periods Consolidated Balance Sheet Highlights (As of March 29, 2025) | Account | March 29, 2025 (M) | December 28, 2024 (M) | | :--- | :--- | :--- | | **Total Current Assets** | $652 | $619 | | **Total Assets** | $2,016 | $1,962 | | **Total Current Liabilities** | $836 | $841 | | **Total Liabilities** | $1,689 | $1,645 | | **Total Equity** | $327 | $317 | Consolidated Statement of Income (Quarter Ended) | Account | March 29, 2025 (M) | March 30, 2024 (M) | Change | | :--- | :--- | :--- | :--- | | Net sales | $663 | $707 | -6.2% | | Operating profit | $20 | $46 | -56.5% | | Net income | $18 | $33 | -45.5% | | Diluted EPS | $0.20 | $0.37 | -45.9% | Consolidated Statement of Cash Flows (Quarter Ended) | Activity | March 29, 2025 (M) | March 30, 2024 (M) | | :--- | :--- | :--- | | Net cash from operating activities | $(2) | $10 | | Net cash used in investing activities | $(60) | $(9) | | Net cash from financing activities | $49 | $(19) | | **Decrease in cash and cash equivalents** | **$(13)** | **$(18)** | [Notes to Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies and specific financial statement items, including the company's spin-off, restructuring plan, debt, and derivative use - The company was spun off from Kellanova on October 2, 2023, and has entered into several agreements governing the separation of assets, liabilities, and ongoing services[22](index=22&type=chunk)[23](index=23&type=chunk) - A restructuring plan to modernize the supply chain, including closing the Omaha plant and scaling back the Memphis facility, is expected to result in **$230-$270 million** in pre-tax charges through 2027, with **$14 million** recorded in Q1 2025[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - In Q1 2025, the company borrowed an additional **$50 million** under its delayed draw term loan, bringing total borrowings to **$597 million**[50](index=50&type=chunk) - The company operates as a single reportable segment engaged in the manufacturing, marketing, and sales of cereal products in North America[63](index=63&type=chunk) [Management's Discussion and Analysis (MD&A)](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a challenging quarter marked by a 6.2% decline in reported net sales, a 45% drop in net income, and negative free cash flow due to supply chain modernization [Results of Operations](index=20&type=section&id=Results%20of%20Operations) For Q1 2025, reported net sales decreased 6.2% to $663 million, driven by an 8.6% volume drop, while net income fell 45% and Adjusted EBITDA decreased 4% Net Sales Performance (Q1 2025 vs Q1 2024) | Metric | Value | | :--- | :--- | | Reported Net Sales Growth | (6.2)% | | Organic Net Sales Growth | (5.6)% | | Volume (tonnage) | (8.6)% | | Pricing/mix | 3.0% | Profitability (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (M) | Q1 2024 (M) | Change | | :--- | :--- | :--- | :--- | | Reported Net Income | $18 | $33 | -45% | | Adjusted EBITDA | $72 | $75 | -4% | Gross Margin Performance (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change (pts) | | :--- | :--- | :--- | :--- | | Reported Gross Margin | 28.5% | 28.7% | (0.2) | | Adjusted Gross Margin | 29.4% | 29.2% | 0.2 | - Selling, general and administrative (SG&A) expense remained relatively flat at **$155 million**, as a decrease in advertising was offset by incremental separation costs for IT infrastructure[99](index=99&type=chunk) [Restructuring](index=23&type=section&id=Restructuring) The company is proceeding with its supply chain modernization plan, recording $14 million in Q1 2025 restructuring charges, with total estimated pre-tax charges of $230-$270 million - The company recorded **$14 million** in restructuring charges for the quarter ended March 29, 2025, related to its supply chain modernization plan[104](index=104&type=chunk) - The total expected cumulative pre-tax charges from the restructuring are estimated to be between **$230 million** and **$270 million**, to be incurred through 2027[103](index=103&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20capital%20resources) The company's liquidity is supported by its Credit Facility, but Q1 2025 saw negative free cash flow of $62 million due to increased capital spending on restructuring Free Cash Flow (Quarter Ended) | Metric | March 29, 2025 (M) | March 30, 2024 (M) | | :--- | :--- | :--- | | Net cash provided by operating activities | $(2) | $10 | | Additions to properties | $(60) | $(9) | | **Free cash flow** | **$(62)** | **$1** | - During Q1 2025, the company borrowed an additional **$50 million** pursuant to the delayed draw term loan available under its Credit Facility[105](index=105&type=chunk) - Net cash used in investing activities increased to **$60 million** from **$9 million** in the prior year quarter, due to incremental capital spending on the supply chain optimization project[112](index=112&type=chunk) - The Board of Directors declared a dividend of **$0.165 per share** in May 2025[114](index=114&type=chunk) [Market Risk Disclosures](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company confirms no material changes in market risk exposures during Q1 2025, continuing to use derivatives for interest rate, foreign currency, and commodity price management - There have been no material changes in the Company's market risk during the first quarter of 2025[124](index=124&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 29, 2025, with a new ERP system implementation modifying the internal control environment - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[125](index=125&type=chunk) - During the quarter, the company implemented a new ERP system, which modified the internal control environment over financial reporting[126](index=126&type=chunk) [Part II – Other Information](index=28&type=section&id=PART%20II%20%E2%80%94%20Other%20Information) This section covers legal proceedings, updates on risk factors, and other general information including director and officer trading plans and filed exhibits [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no current legal proceedings expected to have a material adverse effect on its financial condition or results of operations - The company is not currently involved in any legal proceedings that it believes will result in a material adverse effect on its financial condition or operations[129](index=129&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) The company states there have been no material changes to its risk factors from those disclosed in its 2024 Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the 2024 Annual Report[130](index=130&type=chunk) [Other Information & Exhibits](index=28&type=section&id=Item%205.%20Other%20Information%20%26%20Item%206.%20Exhibits) This section notes no Rule 10b5-1 trading plan adoptions or terminations by directors or officers during the quarter, and lists filed exhibits - During the most recent fiscal quarter, no directors or officers adopted or terminated any Rule 10b5-1 trading arrangements[131](index=131&type=chunk)

Financial Data and Key Metrics Changes - The company has adjusted its top line estimate for the year, reflecting a demand outlook that aligns with category dynamics and consumer behavior [14][15] - Gross margin contraction is expected in the second quarter, with a stabilization anticipated in the back half of the year [16][40] Business Line Data and Key Metrics Changes - The company is experiencing a rapid acceleration in consumer interest in health and wellness brands within the ready-to-eat cereal category, indicating a positive trend for the business [7][12] - The Kashi relaunch and campaigns across mainstream brands are part of the strategy to capitalize on this trend [9][12] Market Data and Key Metrics Changes - In the U.S., there has been a sequential improvement of about 80 basis points in both sales and volume, indicating a stable backdrop for executing the company's strategy [20][21] - The company is focusing on a stable top line growth of minus 1% to plus 1%, which is essential for delivering long-term margin growth [22] Company Strategy and Development Direction - The company is committed to a strategic reallocation of investments to enhance returns and align with consumer preferences, particularly in health and wellness [28][30] - The long-term guidance includes a target of 500 basis points of EBITDA margin expansion by the end of 2026, primarily through gross margin improvements [42][47] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges in the current operating environment but expresses confidence in the strategic priorities and actions being taken to drive business value [65] - The company believes that the current consumer sentiment, focusing on value and health, presents a long-term tailwind for the cereal category [54] Other Important Information - The company is enhancing its marketing strategies and product offerings, including a multi-brand fiber campaign and the relaunch of Special K products [58][59] - There is an ongoing effort to optimize the cost structure and enhance efficiencies in distribution and manufacturing [48][49] Q&A Session Summary Question: What drove the recent acceleration in consumer interest in health and wellness brands? - Management believes the acceleration is a continuation of a trend, driven by consumer focus on value and health, and they are prepared to capitalize on this [11][12] Question: What is the expected gross margin contraction in the second quarter? - Management indicated that the largest impact will be in Q2 as they adjust their manufacturing plan, with expectations for stabilization in the back half of the year [15][16] Question: How does the company define a stable backdrop for sales growth? - The company sees the current category performance as consistent with planning assumptions, allowing for stable top line growth in the range of minus 1% to plus 1% [20][22] Question: How confident is the company in returning to market share performance in line with the category? - Management stated that improvements will be sequential throughout the year, with distribution gains and strategic investments expected to contribute positively [33][35] Question: What is the plan for Special K to stabilize its performance? - Management is focusing on stronger health claims and product relaunches to leverage the brand's health credentials and respond to consumer trends [56][58] Question: How will the company respond to emerging protein-forward brands? - Management indicated a dual approach of enhancing existing brand marketing while also considering acquisitions of smaller brands [60][62]

WK Kellogg (KLG) came out with quarterly earnings of $0.20 per share, missing the Zacks Consensus Estimate of $0.41 per share. This compares to earnings of $0.37 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -51.22%. A quarter ago, it was expected that this company would post earnings of $0.25 per share when it actually produced earnings of $0.42, delivering a surprise of 68%.Over the last four quarters, the company has surp ...

Financial Data and Key Metrics Changes - The company adjusted its top-line estimate for the year, reflecting a demand outlook aligned with category dynamics and consumer behavior [13][20] - Gross margin contraction is expected in the second quarter, with a stabilization anticipated in the back half of the year [15][38] Business Line Data and Key Metrics Changes - The company noted a rapid acceleration in consumer interest in health and wellness brands within the ready-to-eat cereal category, indicating a shift in consumer sentiment towards value and nutrition [6][10] - The Kashi relaunch and campaigns across mainstream brands are part of the strategy to capitalize on this trend [8][11] Market Data and Key Metrics Changes - In the U.S., there was a sequential improvement of about 80 basis points in both sales and volume, indicating a stable backdrop for executing the company's strategy [19][20] - The company is experiencing a shift in the category, with a focus on health and wellness, which is expected to drive future growth [52] Company Strategy and Development Direction - The company aims for 500 basis points of EBITDA margin expansion by the end of 2026, primarily through gross margin improvements [40][46] - Strategic investments are being reallocated to enhance returns and align with consumer preferences, particularly in health and wellness [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term prospects of the cereal category, despite short-term pressures, emphasizing the importance of adapting to consumer trends [52][64] - The company is optimistic about the Special K brand, planning stronger health-focused marketing and product relaunches [56][62] Other Important Information - The company is focusing on optimizing its cost structure and enhancing efficiencies in distribution and manufacturing [46][48] - There is an ongoing restructuring of the supply chain, which is on schedule and budget, contributing to future profitability [44][51] Q&A Session Summary Question: What drove the recent acceleration in consumer interest in health and wellness brands? - Management noted that the acceleration has been observed for some time and is seen as a positive trend for the category, with preparations already in place to address this shift [10][11] Question: What is the expected gross margin contraction in Q2? - Management indicated that Q2 will see the largest impact from adjustments to the manufacturing plan, with expectations for stabilization in the back half of the year [15][38] Question: How does the company define a stable backdrop for sales growth? - The company described a stable top line with expected growth in the range of minus 1% to plus 1%, aligning with current category performance [20][21] Question: How confident is the company in returning to category performance? - Management stated that improvements will be sequential throughout the year, with distribution gains and strategic investments expected to contribute positively [31][33] Question: What is the plan for the Special K brand? - Management confirmed a renewed focus on health credentials for Special K, with upcoming marketing campaigns and product launches aimed at revitalizing the brand [56][62] Question: How will the company respond to emerging protein-forward brands? - Management indicated a dual approach of enhancing existing brands while also considering potential acquisitions of smaller brands [59][62]

Q1 2025 EARNINGS May 6, 2025 Forward-Looking Statements This presentation contains a number of forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include predictions of future results or activities and may contain the words "expect," "believe," "will," "can," "anticipate," "estimate," "project," "should," "would," or words or phrases of similar meaning. You are cautioned not to rely on these forward- ...

Financial Performance - Reported net sales for Q1 2025 were $663 million, a decrease of 6.2% year-over-year[5] - Organic net sales decreased by 5.6% year-over-year, driven by reduced retailer inventory and weaker consumption trends[5] - Reported net income was $18 million, reflecting a 45.5% decline year-over-year due to restructuring costs related to supply chain modernization[6] - Adjusted EBITDA for Q1 2025 was $72 million, a decrease of 4.0% year-over-year[6] - Net income for the year-to-date period ended March 29, 2025, was $18 million, a decrease of 45.5% compared to $33 million for the same period in 2024[26] - Adjusted EBITDA for the quarter ended March 29, 2025, was $72 million, compared to $75 million for the same quarter in 2024, indicating a decrease of 4%[35] Guidance and Projections - The company has lowered its 2025 organic net sales growth guidance to a range of (2.0)% to (3.0)% from a previous estimate of ~(1.0)%[3] - Adjusted EBITDA growth guidance for 2025 has been revised to flat to (2.0)% from the prior range of 4.0% to 6.0%[3] - Projected adjusted EBITDA for the full year 2025 is estimated to be between $270 million and $275 million[10] Costs and Expenses - Restructuring costs in Q1 2025 amounted to $14 million, contributing to the decline in operating profit[25] - The company incurred $14 million in separation costs related to the Spin-Off for the quarter ended March 29, 2025[39] Cash Flow and Debt - Free cash flow for the year-to-date period was $(62) million, down from $1 million in the same period last year[26] - Net debt rose to $570 million as of March 29, 2025, compared to $495 million at the end of 2024[37] - Cash and cash equivalents decreased to $27 million at the end of the period, down from $40 million at the beginning of the period[27] Sales Composition - Price/mix increased by 3.0% in Q1 2025, while volume decreased by 8.6%[5] - Organic net sales decreased by 5.6% year-over-year, with a volume decline of 8.6% and a pricing/mix increase of 3.0%[28] Assets - Total assets increased to $2,016 million as of March 29, 2025, up from $1,962 million at the end of 2024[27] Tariffs Impact - The company anticipates a modest impact from tariffs on raw materials sourced outside North America[9]