TreeHouse(THS) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Results Q2 2024 Performance Highlights TreeHouse Foods surpassed Q2 2024 profit guidance with net sales of $788.5 million and adjusted EBITDA of $70.6 million, despite a net loss Q2 2024 Key Financial Metrics | Metric | Value | Guidance/Note | | :--- | :--- | :--- | | Net Sales | $788.5 million | Above mid-point of $770-$800M guidance | | Net Loss from Continuing Operations | $(16.7) million | - | | Adjusted EBITDA | $70.6 million | Exceeded guidance of $55-$65M | | Share Repurchases | ~$45 million | - | - The CEO highlighted sequentially improved net sales trends and profit exceeding guidance, attributing the performance to progress in converting sales opportunities and executing supply chain initiatives[2] - Management emphasized the strong performance of private brands, which gained unit share against national brands, and expressed confidence in delivering profitable volume growth starting in Q3[2] Financial Performance Analysis Q2 2024 net sales decreased by 1.9%, leading to a $16.7 million net loss, primarily due to a $19.3 million impairment charge Change in Net Sales Components (Q2 2024 vs Q2 2023) | Component | Change (%) | | :--- | :--- | | Pricing | (3.0)% | | Volume/mix excluding acquisitions | (1.1)% | | Volume/mix from broth facility restoration | (0.9)% | | Total change in organic net sales | (5.0)% | | Volume/mix from business acquisitions | 3.2% | | Total change in net sales | (1.9)% | - Gross profit as a percentage of net sales decreased by 0.3 percentage points to 16.3%, mainly due to costs from the restoration of a broth facility, though adjusted gross profit margin increased by 0.6 percentage points to 17.2%[5] - Total operating expenses increased by $29.4 million, primarily due to a $19.3 million non-cash impairment charge from the decision to exit the Ready-to-drink beverages business[5] - Adjusted EBITDA decreased by $5.7 million to $70.6 million, attributed to personnel and capability investments and broth facility restoration costs, partially offset by supply chain savings[7] Cash Flow and Share Repurchases Net cash used in operating activities increased to $71.8 million in H1 2024, while the company repurchased 1.3 million shares for $44.8 million in Q2 - Net cash used in operating activities from continuing operations increased by $25.2 million in the first six months of 2024 compared to the same period in 2023, primarily due to a decrease in cash flows from the Receivables Sales Program[8] - The company repurchased approximately 1.3 million shares for $44.8 million in Q2 2024, with $78.0 million still available under the share repurchase authorization at quarter-end[8] 2024 Outlook Full Year 2024 Guidance TreeHouse reaffirmed full-year 2024 net sales guidance of $3.43 to $3.50 billion and free cash flow of at least $130 million, narrowing adjusted EBITDA to $360 to $380 million Full Year 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Net Sales | $3.43 to $3.50 billion (0% to 2% YoY growth) | | Adjusted EBITDA | $360 to $380 million (Narrowed) | | Net Interest Expense | $56 to $62 million | | Capital Expenditures | ~$145 million | | Free Cash Flow | At least $130 million | - The company expects sequential improvement in Adjusted EBITDA as the year progresses, driven by new distribution wins, cost savings initiatives, normalized service in the Broth business, and incremental pricing on cocoa[9] Third Quarter 2024 Guidance For Q3 2024, TreeHouse anticipates net sales between $865 million and $895 million and Adjusted EBITDA between $98 million and $108 million Third Quarter 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Net Sales | $865 to $895 million | | Adjusted EBITDA | $98 to $108 million | - For Q3, organic volume and mix are expected to be up low-single digits, while pricing is expected to be approximately flat[10] Financial Statements Condensed Consolidated Balance Sheets As of June 30, 2024, total assets decreased to $3.91 billion from $4.11 billion, driven by a reduction in cash from $320.3 million to $105.8 million Balance Sheet Summary (in millions) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $105.8 | $320.3 | | Total current assets | $928.3 | $1,054.8 | | Total assets | $3,905.0 | $4,106.6 | | Total current liabilities | $645.7 | $704.3 | | Total liabilities | $2,354.9 | $2,441.8 | | Total stockholders' equity | $1,550.1 | $1,664.8 | Condensed Consolidated Statements of Operations The company reported a Q2 2024 net loss from continuing operations of $16.7 million, a significant downturn from prior year's net income Q2 Statement of Operations (in millions, except per share data) | Account | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net sales | $788.5 | $803.5 | | Gross profit | $128.3 | $133.2 | | Operating (loss) income | $(4.0) | $30.3 | | Net (loss) income from continuing operations | $(16.7) | $22.4 | | Diluted EPS from continuing operations | $(0.32) | $0.39 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $71.8 million in H1 2024, resulting in a $214.5 million net decrease in cash and equivalents Cash Flow Summary - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities - continuing | $(71.8) | $(46.6) | | Net cash used in investing activities - continuing | $(49.7) | $(156.5) | | Net cash (used in) provided by financing activities - continuing | $(92.9) | $193.2 | | Net decrease in cash and cash equivalents | $(214.5) | $(26.1) | Non-GAAP Reconciliations and Definitions Non-GAAP Measure Definitions The company uses non-GAAP measures like Organic Net Sales, Adjusted EBITDA, and Free Cash Flow to provide insights into underlying business performance - Organic Net Sales is defined as net sales excluding the impacts of business acquisitions, divestitures, and foreign currency to allow for meaningful period-over-period comparisons[17] - Adjusted EBITDA excludes items that management believes significantly affect the assessment of earnings results between periods, such as facility restoration costs, restructuring programs, acquisition costs, and asset impairments[17] - Free Cash Flow is defined as net cash from operating activities less capital expenditures, which management considers an important measure of liquidity available for investment and debt repayment[20] Reconciliation of Net Income to Adjusted EBITDA Q2 2024 Adjusted EBITDA was $70.6 million, derived from a GAAP net loss of $16.7 million, with major adjustments including a $19.3 million impairment charge Reconciliation of Net (Loss) Income to Adjusted EBITDA (in millions) | Line Item | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net (loss) income from continuing operations (GAAP) | $(16.7) | $22.4 | | Depreciation and amortization | $36.2 | $34.6 | | EBITDA from continuing operations (Non-GAAP) | $30.8 | $74.4 | | Impairment | $19.3 | - | | Growth, reinvestment, restructuring programs | $11.5 | $8.9 | | Broth facility restoration and product recall costs | $7.5 | - | | Adjusted EBITDA from continuing operations (Non-GAAP) | $70.6 | $76.3 | - A non-cash impairment charge of $19.3 million was recognized in Q2 2024 due to forecasted losses and the decision to exit the Ready-to-drink beverages business[26] - The company incurred $7.5 million in Q2 2024 for costs related to a voluntary recall and restoration of its broth facility in Cambridge, Maryland[27] Reconciliation of Other Non-GAAP Measures Q2 2024 adjusted (Non-GAAP) net income from continuing operations was $15.0 million (or $0.29 per diluted share), a significant adjustment from the GAAP net loss Q2 2024 GAAP to Non-GAAP Reconciliation (in millions) | Metric | As Reported (GAAP) | As Adjusted (Non-GAAP) | | :--- | :--- | :--- | | Gross Profit | $128.3 | $136.0 | | Operating (Loss) Income | $(4.0) | $36.2 | | Net (Loss) Income from Continuing Operations | $(16.7) | $15.0 | Q2 2024 Diluted EPS Reconciliation | Metric | Value | | :--- | :--- | | Diluted EPS from continuing operations (GAAP) | $(0.32) | | Adjusted Diluted EPS from continuing operations (Non-GAAP) | $0.29 |