Greetings, ladies and gentlemen, and welcome to the Campbell Soup Company Fourth Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Rebecca Gardy, Chief Investor Relations Officer. Please go ahead.

Good morning, and welcome to Campbell's fourth quarter fiscal 2024 earnings conference call. I'm Rebecca Gardy, Chief Investor Relations Officer at Campbell's. And joining me today are Mark Clouse, Chief Executive Officer; and Carrie Anderson, Chief Financial Officer. Today's remarks have been prerecorded. Once we conclude the prepared remarks, we will transition to a live webcast Q&A session. The slide deck and today's earnings press release have been posted to the Investor Relations section on our website, campbellsoupcompany.com. Following the conclusion of the Q&A session, a replay of the webcast will be available at the same location, followed by a transcript of the call within 24 hours. On our call today, we will make forward-looking statements, which reflect our current expectations. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risk. Please refer to Slide 3 of our presentation or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in the forward-looking statements. Because we use non-GAAP measures, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of our presentation. Slide 4 outlines today's agenda. Mark will provide insights into our fourth quarter and full year performance, as well as our in-market performance by division. Carrie will then discuss the financial results of the fourth quarter and full year fiscal '24 in more detail and outline our guidance for the full fiscal year 2025, which we provided this morning. As a reminder, we completed the acquisition of Sovos Brands on March 12th, and as such, the full fiscal year 2024 financial results include a partial year contribution from Sovos Brands. And with that, I'm pleased to turn the call over to Mark.

Thanks, Rebecca. Good morning, everyone, and thank you for joining our fourth quarter fiscal '24 earnings call. In Q4, we continued to successfully navigate the evolving consumer landscape and delivered solid results, including sequential volume improvement across both divisions, a second consecutive quarter of double-digit year-over-year adjusted EBIT growth and adjusted EPS growth, underpinned by sequentially improving margins on both businesses. It also marks the end of a dynamic year, during which we drove significant progress against our strategic plan. In addition, we continued to see momentum on the Sovos Brands business and advanced the integration of the best growth story in food into our Meals & Beverages business. In-market performance was still mixed, but improved for both divisions, with substantial volume-driven progress on Meals & Beverages and sequential improvement on Snacks. While the Snacks category recovery is unfolding at a somewhat slower pace than we'd like, it continues progressing in the right direction. Finally, we also introduced fiscal '25 guidance today, which reflects our expectation of steady progress and incorporates an appropriate level of pragmatism as we continue to navigate the recovery of Snacks in the first half of the year. Carrie will provide more details in a moment. While we remain vigilant as we head into fiscal '25, we have also never been more confident in the strength and long-term trajectory of our business. We remain steadfast in our view that consumer behavior will continue to normalize, and that we are uniquely positioned to deliver sustained and dependable growth with one of the best portfolios in all of food. We look forward to sharing more of this story at our Investor Day on September 10 in New York. Turning to Slide 7, organic net sales in the fourth quarter declined 1% compared to the prior year. As we…

Thanks, Mark, and good morning, everyone. I'll begin with an overview of our fourth quarter, including continued strong performance from the Sovos Brands acquisition. Fourth quarter reported net sales were up 11%, driven by the contribution from Sovos. Organic net sales, excluding the impact of acquisitions, divestitures, and currency, decreased 1% compared to the prior year to $2 billion. Importantly, as Mark mentioned earlier, we continued to show sequential volume improvement, moving into positive territory. Similar to third quarter, both adjusted EBIT and adjusted earnings per share increased double digits in Q4, with expansion in both adjusted gross margin and adjusted EBIT margin. Adjusted EBIT increased 36%, primarily due to higher adjusted gross profit from the contribution of Sovos and base business performance. Adjusted EPS increased 26% to $0.63, with the impact of the acquisition approximately neutral in the quarter, which, as Mark mentioned, continued to exceed our expectations. Turning to Slide 23, on a full year basis, net sales were up 3%, including 4.5 months of sales contribution from the Sovos acquisition. Organic net sales decreased 1% compared to the prior year, with unfavorable volume and mix partially offset by the benefit of net price realization. Our organic full year net sales result was in line with the low end of our guidance range, and we have now delivered two consecutive quarters of stable or growing year-over-year volume and mix. Full year adjusted EBIT increased 6%, driven by higher adjusted gross profit from the contribution of the acquisition and base business performance. Adjusted EBIT margin improved 50 basis points, driven primarily by an increase in adjusted gross margin. Full year adjusted EPS increased 3% to $3.08, with the impact of the acquisition approximately neutral during the fiscal year. Moving to Slide 24, organic net sales declined slightly in the…

[Operator Instructions] Your first question comes from the line of Andrew Lazar from Barclays. Your line is open.

Great. Good morning, everybody.

Hi, Andrew.

Hi, there. Mark, I'm sure there will be plenty of questions on Snacks. So maybe I'd like to focus a bit on Meals & Beverages to start.

Okay.

Organic sales rose 1%, right? 2% gain in volume. So, momentum clearly improving here even without Sovos being in the base. So I was hoping you could talk just a bit more about sort of the key drivers here and, I guess, more importantly, the sustainability, right, of these improved results, especially in the context of the industry supply in broth coming back later this calendar year.

Yes. So I think the first thing I just would say is that when you think about the consumer landscape that we're in right now, it's a good time to be in these categories. Meals & Beverages fit very well in a world where consumers are eating more in-home as we continue to see those numbers extremely high, the behavior of cooking and driving value and affordability along with convenience. We really couldn't have a better fitting set of brands for that. And I think that underpins a lot of the reasons why growth is continuing. I do think it's important, though, that for a lot of investors I -- that I've spoken to, I think one of the big questions was, are you going to be able to get volume in the right direction on soup without mortgaging, if you will, the margin? And I think this was a great quarter to demonstrate that. And even if you look into the latest four weeks as we go into Q1, the momentum on that business is really fairly broad-scaled, fairly universal across all of our segments, a little bit more work to do on ready-to-serve. I think that will -- we continue to see consumers kind of choosing based on what the priority of the season is, and so, I do expect ready-to-serve and Chunky to have a stronger first half of the year. But the reality is, those businesses are in strong footing. On share, there's no doubt that the broth dynamic with private label is helping, and we're seeing significant growth in broth and we have now for a couple of quarters. But I think what's interesting is, even if I account for the fact that we're a bit higher-priced than private label in the dollar growth of…

Got it. And then maybe just super briefly, because I know we have a lot to get through, just you've been very steadfast for a long time now in the broader industry kind of recovering is a more of a when, not if. It's obviously been longer than most would have expected. I think a lot of investors are still maybe somewhat more skeptical in this recovery just because we haven't seen it really in a really perceptible way in the data, broadly speaking, not just Campbell-specific. Maybe just really briefly, just your -- the rationale behind your belief in that…

Yes. I know a lot of doom and gloom. I just don't -- I'm not seeing it in the numbers, right? If anything, I know we'll talk about Snacks, I'm sure, at a moment. But even where I had some pressure on Snacks, it was far more share-driven than category-driven. A lot of the categories we're participating in, 75% of them are back to growth. Now, is Snacks all the way back to the historical growth level that I'm anxious for it to be at? No, not overall. But you had Kettle potato chips in the quarter was up 7%, you had pretzels up 4%. Our organic and natural tortillas were up 5%, cookies a little bit less, but still positive. And total snacking, even total salty was up 1%. And I think the underlying metrics that I look at to determine what to expect coming forward continue to point to me to normalization. I mean, I always try to remind us that on the Campbell's business and Campbell Snacks right now, we're still cycling a near double-digit growth, I think 9% a year ago on total Snacks, 9.5% on the power brand. So yes, I think there's been a little bit longer runway for this than I would have liked, but I really don't see the -- any indication from the data other than a little bit of a walk back on consumer confidence, which again -- and I don't want to diminish how tough it is for a lot of consumers that are out there, but I feel like we've cycled enough of this that we're beginning to see the normalization. Again, you got soup up 6% in the latest four weeks, pasta sauce continues to grow, salsa is growing, really, most of the core businesses for us. So, as I said, Andrew, last quarter and continue to believe a lot of this matters about where you are, right? If you're in certain categories, I'm sure it still looks like recoveries are ways away, but I do think this is not going to be a linear journey, as we've said before. And I'm happy that many of our categories are probably a little bit on the upper edge of that curve and recovering. And even in a somewhat depressed recovery for snacking, our subsegments are doing quite well. Now, we've got some share and some new entrants into a couple of different categories we need to address, but I'd rather have that fight than a structural concern around the growth of the category.

Thank you.

Your next question comes from the line of Ken Goldman from JPMorgan. Your line is open.

Hi, thank you. I wanted to ask about Snacks. Mark, I appreciate that it's not so much promo that's acting as a headwind as much as competition from new entrants.

Yes.

But I'm curious, isn't this also a bit of a worry? And the reason I'm asking is, you're attacking the problem with innovation and marketing, it's great to see. But this is a problem across a number of food categories that we're seeing, which is that challenger brands are taking share and intensifying. And yes, but I would rather have competition via innovation than discounting, sure. But I guess, maybe you could walk us through your confidence...

Yes.

-- that your actions will be enough to offset this trend?

Yes. So, it's a great question, Ken. I think the -- and I certainly wouldn't want to make this sound as if we're not extremely focused and really viewing this as an important area to focus on as we get into '25. But the way I look at this is, as I go across the places where we're experiencing the pressure -- and it's really in salty, right? So you have a new entrant in pretzels, you have a new entrant in Kettle and you have a new entrant in what I'd call better-for-you tortilla. All of those are a concern, as you say. But as we look at what we have relative to the brands in the portfolio, so I look at pretzels and I say, okay, that one's been there for a while. I've got three brands that live in pretzels, right? I have Snyder's of Hanover, I have Snack Factory, and I've actually got Goldfish that plays a surprising large role in Pretzel. I've got all three brands that I can bring to bear in the defense with innovation. And you're going to see when we get to Investor Day a -- by the way, for all three of these, we're going to really unpack for you the full kind of attack plan on how we see going after it, because it is important for us to do it. But that's an example of where I feel like the tools we've got. Now, if I'm completely honest, I do think we need to have more marketing support in the plan to support the innovation we're driving, and you see that in our outlook and our guidance as we go into next year. I think on Kettle, I would say it's a little bit more of a me-too…

And if I can just -- thank you for that, ask a very quick follow-up, you mentioned that certain parts of your guidance or maybe guidance in general is prudent. I won't go into that, but I did want to ask a specific question, which is that does your guidance assume a reversal in broth share next year? In other words, are you assuming that...

It does.

-- your broth share goes down?

It does.

It does? Okay. Thank you.

Yes. In the second half of the year, we're anticipating kind of a normalization of share as -- now, having said that, we're going to fight like heck to keep all those households with Swanson. But I think from a prudent standpoint, we've seen a little bit of this normalization before, historically speaking, and so, we're using that as our kind of guideline for what the plan. And then I know the team's aggressively going after beating that.

Thanks, Mark.

Thanks, Ken.

Your next question comes from the line of Peter Galbo from Bank of America. Your line is open.

Hi, guys, good morning.

Hi, Peter.

Mark, maybe if we can actually hone in a bit more on Snacks? I mean, your largest competitor has obviously talked about also just pressure that they're seeing, particularly in unseasoned or more plain potato chips, as well as tortilla chips. And just kind of the interaction you're seeing amongst late July kettle and Cape Cod? And then maybe as a part B to that question, those three brands in particular, at least when I think about them, tend to be a bigger presence maybe in club channels. And just, is there a store format difference that you're noticing between club and maybe...

Yes.

-- some of the smaller format stores, would be helpful.

Yes. So there's definitely a bit more of bifurcation between what I would call the more mainstream segments and then what I would call the more elevated segments. So, for example, in Q4, I think potato chips as an overall subsegment grew by about 3%, which is not horrible, but about 3% and, arguably, with a bit more trade-down pressure and a little bit more promotional focus. We do have [Jay Cod], which is our -- we call them our Allied brands. They're Jays potato chips. So we see a little bit of that in a very, very small part of our business. But in the main power brand area, all of those are operating in a more elevated space. And those seem to have been, one, recovering much faster as they do tend to index to a little bit more middle to upper-middle and higher-income households, which have been a fair degree more resilient. So I think where you are playing on that front, it does tend to be more driven by who's bringing the innovation, who's bringing the right marketing. Obviously, promotion plays a very important role and I'm not diminishing that. But at the end of the day, the fight is quite different at those elevated segments than it is in what I'd call the more lower and mainstream segments where we do see it a little bit more fight on price. We do see a little bit more traction in private label. Probably, the category where we have a little bit more of that analog is on pretzels, where our base pretzel is -- we see a little bit more pressure there. But even there, I think Snyder's plays at a somewhat elevated level to that, and that helps our business or our portfolio, I think, playing a little more constructive of a way.

Okay. No, that's helpful. And maybe just as a follow-up to Ken's question, just to clarify on the organic sales guidance for the year, the first quarter being flat, I'm assuming then we should kind of see a step-down potentially in org sales kind of through the middle parts of the year, and then again maybe that ramp-up just as you hit the 53rd week in 4Q, which I think you're including in the organic sales guidance. So, maybe if you could just clarify that? Thanks very much.

Yes. So, 53rd week is not in organic sales.

Reported, but not in the organic.

Right. And maybe, Carrie, talk a little bit about the phasing of the year, but we do not see like a Q2 significant drop-off.

No. And certainly as we think about second quarter, you got your benefit of your holiday season and a lot of our innovation starts to launch there. So, I would say that you need to take in that -- into consideration. And then as you move into the second half, I think the categories are still going to be healthy. So I still think you'll see that sequential improvement in category half, but what you are going to need to take into consideration, as Mark talked about on M&B, is the cycling of the broth, as our share normalizes in broth. So, you want to make sure that you're rep -- you're putting that into your model.

Yes, I think one of the ways to think about this is at the time that you're cycling a little bit of a broth headwind, I'm also expecting the Snacks business to be returning a bit more to normality as far as categories. So, I would plot your course for the year as a little bit more of a gradual improvement as we get into the second quarter and beyond, and then perhaps a little bit of a swap of who's kind of leading...

Yes.

-- the drive, but in essence, kind of getting both businesses into what I would call a more normal trajectory.

Thank you.

Your next question comes from the line of Michael Lavery from Piper Sandler. Your line is open.

Thank you. Good morning

Hi, Mike.

Just to come back to the consumer thinking a little bit and maybe just trying to understand how you've balanced some risks. I know on some of the macro teams across the street, there's a soft landing versus recession debate, and I'll leave all that to them. But it does seem like there's a bias towards some risk as opposed to improvement. And I know you said you're looking at the data, but to some extent, that can also be trailing more than leading. So, just curious maybe how you think about how you'd be positioned in a recession. And if -- or if one comes, and who even knows, of course, what that might look like exactly, but would you expect to benefit from switches to more food at home, or you've got a -- now, especially with Sovos, a bit of a premium and some attractive value options for consumers' balance in your portfolio. How do you expect that to net out? Maybe just think about how you've kind of covered those bases?

Yes. So the first thing I would say is, I think that although you hear a perhaps more bullish tone on the consumer landscape than maybe some others or even a bit contrarian to some of the points of view out there, more broadly speaking, I would tell you that we plan the year in a way where we're not expecting some radical, accelerated recovery. In fact, I would say that we're expecting a relatively slow bounce-back as it relates to snacking, a more kind of normalized Meals & Beverage and then a bit of a flip, as I said, in the back half, where you'll see some headwinds from broth and perhaps a bit more normalized Meals & Beverage category and a more modest recovery on Snacks. You see that in the 0% to 2% range. How do I feel if that environment gets a bit worse? I think there's two things that help me kind of calibrate the plan. The first is, it certainly would not suggest that what we're going to be cycling is the same kind of outsized growth and upside that we saw as we were cycling pricing in a variety of other positive, if you will, growth drivers, where your baseline is a relatively muted baseline. So let's imagine this hangs around a little longer than we would expect, I think, is not going to be perhaps as dramatic as the step-down that we saw after cycling two years or three years of just incredibly outsized growth. I think the second thing that I would point to is, I do think this is a good time to have a portfolio like ours, where you've got a variety of different -- not an endless, but a variety of different categories that really do match as…

That's great color. And then I'll just wrap up with a clarification, because I want to come back to the 53rd week. I had thought that I understood it and I think your answer just a second ago confused me. Because in the release, you say the benefit of the 53rd week is included in the fiscal '25 guidance below and is estimated to be worth approximately 2 points of growth to both reported and organic net sales and adjusted EBIT, along with $0.06 to EPS. In the EPS and organic growth numbers, how do we -- where is the 53rd week? And do we…

Yes. Just to clarify, in the organic growth, the benefit of the 53rd week has been removed.

But in the EBIT and in the EPS…

It is in there.

It is in there.

Right. It's just in the organic net sales growth, Michael, that it's been -- that is…

Yes, we don't normally extract an organic EBITDA...

That's correct.

-- or EPS.

Okay. Thanks so much.

Your next question comes from the line of Jim Salera from Stephens. Your line is open.

Hi, guys, good morning. Thanks for taking our question. Mark, I wanted to drill down on something you said earlier, talking about innovation in elevated segments and Snacks, which would speak to focus from your peers on middle to higher-income consumer. But then you also mentioned Rao's has seen growth across all income segments, and that's despite being a premium product. Do you think that's reflective of consumer trade-down from food away from home? So, no matter what they're spending money on, if it's a brand like Rao's, they're still saving money compared to restaurants, or are there particular categories that consumers are willing to pay more for if the quality delivers right and they'll cut back elsewhere in their shop?

Yes. So, I would say, almost -- yes, you covered the what's in front of that. I absolutely see Rao's -- and I use this analogy a lot from prior life. I remember launching DiGiorno pizza many, many years ago. And the reality was -- is that although that, at the time, seemed like an incredibly expensive frozen pizza, as the frame of reference was expanded to include delivery, pizza had all of a sudden became a great value. I think that is very similar to the dynamic of Rao's, where you have this incredible quality that arguably at a much lower rate than a DoorDash order that is a mediocre Italian meal that you're paying $30, $40 for, paying $8 to $9 for a jar of Rao's and, hopefully, a couple more for a package of Rao's pasta, you're having a terrific Italian meal at-home. It's incredibly convenient and it is a better value. And I think that is why you are seeing Rao's experience growth across all of the economic sectors. And I think, to your point, maybe -- it's certainly true on Rao's, but I'd say also true on snacking is, you may be rationalizing some of your spend and the amount that you were buying on Snacks, but you also may decide that as I do that, I want to make sure that what I'm buying is something that I'm going to really enjoy. It might be a little bit more permissible, a little cleaner label. And so, what we've seen is this dynamic where some of the higher-end subsegments are more elevated, as we would describe them, to be more resilient. Now, it's not as prolific as Rao's extending into the lower income, but certainly, as we think about mid-income and high-income categories like Kettle potato chips and more natural organic tortilla chips have -- as a category have held up very well in both of those.

That's great. And maybe if I could just sneak in one final question on that. How does that...

Sure.

-- dynamic inform some of the marketing spend that you guys are going to be putting in in 2025, as we expect kind of a return to that 9% to 10% marketing and selling? Where is that incremental going to be put?

Yes. So I think as I said earlier, I do not want to diminish how tough it is out there for a lot of consumers. So I think you will continue to see value-centric communication and messaging in many categories. And even on our more premium, it may be a little bit more about value in a different way, right? I mean, again, I think higher price does not preclude one from creating tremendous value. So I think you will see that continue to be part of it. But I also think, as you think about where we're seeing pressure from new entrants or me-too products that are putting some share pressure on businesses, I think what you're going to see is what you should see from us, which is really leading the consumer thinking and bringing new to the world flavors, forms, products, while continuing to market against what makes our brands like Kettle and Cape Cod in late July so unique and differentiated. So I think maybe, whereas this year, we went a little bit more all-in on value. I think what you're going to see us as we move into '25 is balancing that a bit between value, but also really in building -- getting back to, I think, a more focused effort on driving the equity and the news and innovation behind the brands. Because in the long run, in those elevated segments, that's going to determine winning, right? I mean, yes, a new product coming into the category puts some near-term pressure on. But as we cycle that distribution, I think we'll get a better impression of how we've done on ensuring that we really drive the equity in the news.

Ladies and gentlemen, we have reached the end of our question-and-answer session. And this does conclude today's conference call. Thank you for your participation. You may now disconnect.