TreeHouse(US:THS)2021-11-08 18:45Financial Data and Key Metrics Changes - Third quarter revenue reached $1.1 billion, reflecting a 5.3% increase year-over-year, with organic revenue growth of 1.7% driven by a 3% pricing increase [11][18] - Adjusted EBITDA for the third quarter was $109 million, with an adjusted EBITDA margin of 9.9%, down 320 basis points due to inflation, labor, and supply chain disruptions [11][18] - Adjusted diluted EPS for the third quarter was $0.46, within the previously communicated guidance range [11] Business Line Data and Key Metrics Changes - Revenue from the Snacking & Beverage segment grew by 2%, with 1.1% attributed to volume and mix, and the remainder from pricing and foreign exchange [18] - The Pasta acquisition contributed 5.2 points to net sales growth, with organic sales growth nearly at 2% [18] - The food-away-from-home channel is expected to return to 2019 levels in early 2022, indicating a recovery in that segment [18] Market Data and Key Metrics Changes - Demand for private label products has strengthened, with unmet demand estimated at $40 million due to supply chain constraints [14][18] - The unmeasured retail channel, including key retailers in the value club and online space, drove growth of 6% in the quarter, contrasting with a 2% decline in measured channels [19] Company Strategy and Development Direction - The company is exploring strategic alternatives, including the potential sale of the company or divesting a significant portion of the meal prep business to focus on higher growth snacking and beverage segments [5][6] - Management emphasizes the importance of maintaining strong customer relationships and investing in customer service during challenging times, believing that these investments will pay off in the long term [10][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that the current inflationary environment and supply chain disruptions are temporary and expects to recover costs through pricing actions [10][27] - The company anticipates that demand for its products will continue to strengthen, although there will be limitations on fulfilling that demand due to ongoing supply chain issues [16][23] Other Important Information - The company has reduced its full-year revenue guidance to between $4.2 billion and $4.325 billion, down from previous estimates [23][24] - Free cash flow guidance has been lowered to at least $100 million, reflecting conscious decisions to build inventory amid rising costs [24] Q&A Session Summary Question: Can you elaborate on the strengthening demand for private label? - Management noted that macro data indicates improving private label share gains, and the company is performing well in its top categories, suggesting a recovery in private label demand [36] Question: How should we think about 2022 EBIT expectations? - Management refrained from providing specific guidance for 2022 but indicated that they believe the company will be in a better position to take advantage of recovery once supply chain issues normalize [38] Question: What is the impact of supply chain disruptions on EBIT? - Management estimated that supply chain disruptions have a $60 million impact on EBIT this year, but they believe these challenges are transitory [40][28] Question: How does the company ensure that strengthened customer relationships will matter post-normalization? - Management highlighted that the current environment has led to longer-term agreements and price transparency, which they believe will strengthen customer relationships moving forward [48] Question: What is the significance of scale for a private label supplier? - Management stated that scale is important, but the focus is on serving customers well in specific categories, and they believe there are alternatives that will not hinder their strategy [52]