Welcome to the Post Holdings Second Quarter 2025 Earnings Conference Call and Webcast. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] I would now like to turn the call over to Daniel O'Rourke, Investor Relations for Post.

Good morning, and thank you for joining us today for Post’s second quarter fiscal 2025 earnings call. I'm joined this morning by Rob Vitale, our President and CEO; Jeff Zadoks, our COO; and Matt Mainer, our CFO and Treasurer. Rob, Jeff and Matt will make prepared remarks, and afterwards, we'll answer your questions. The press release that supports these remarks is posted on both the investors and the SEC filings portions of our website and is also available on the SEC's website. As a reminder, this call is being recorded, and an audio replay will be available on our website at postholdings.com. Before we continue, I would like to remind you that this call will contain forward-looking statements which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. This call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Rob.

Thank you, Daniel. Good morning, all. I'm going to make some thematic comments, and Jeff and Matt will take you through the quarter. First, we performed well in a difficult environment. I expect that to continue. Second, trade policy and regulations continue to grab headlines. We will manage those as they develop. Third, consumer sentiment is weak. We expect we will need to focus on demand drivers and flawless supply chain execution. First and last, uncertainty in the capital markets complicates M&A valuations. With that, I will turn the call over to Jeff and Matt, who will take you through the quarter. Jeff?

Thanks, Rob, and good morning, everyone. Given the volatile macro backdrop and challenges associated with Avian influenza, we are especially pleased with our Q2 results. Our Foodservice team did a fantastic job navigating incredibly difficult egg markets as they prioritize customer supply while at the same time, mitigating some of the expected net cost impact. Meanwhile, our retail businesses offset volume pressures with cost control and supply chain execution. As a reminder, last quarter, we guided that Q2 would be down $30 million to $50 million compared to Q1 as a result of Avian influenza cost ahead of pricing impacts on Foodservice. Actual Q2 Foodservice adjusted EBITDA was approximately $20 million lower than Q1 as $30 million of costs ahead of pricing impact was partially offset by manufacturing and supply chain performance improvements. Setting aside the temporary impact of Avian influenza, underlying business trends versus last year remain encouraging despite a backdrop of poor foodservice foot traffic. Our selling proposition continues to prove out as our mix of higher value-added egg products grew once again. Looking to the balance of the fiscal year, additional Avian influenza pricing became effective starting in April, and our flock repopulation is on track. Assuming no additional outbreaks in our network, we expect to balance our egg sourcing and demand by Q4, and we continue to expect we will recover the unfavorable cost ahead of pricing impact we saw in Q2 during the remainder of fiscal '25. Moving on to Post Consumer Brands. We had a solid quarter while navigating volume declines in both grocery and pet. In grocery, our cost structure continued to benefit from last September's plant closure. However, the cereal category declines accelerated to down 3.7% with our branded portfolio slightly behind at down 4.5%. Category declines continue to pressure our manufacturing…

Thanks, Jeff, and good morning, everyone. Second quarter consolidated net sales were $2 billion and adjusted EBITDA was $347 million, sales decreased 2% as lower overall volumes in our retail businesses were partially offset by elevated Avian influenza-driven price in foodservice and volume growth in shakes. Turning to our segments. Post Consumer Brands net sales decreased 7%, driven by lower volumes in both cereal and pet. Cereal volumes decreased 6%, primarily due to category dynamics. Pet volumes decreased 5% as we continue to lap reductions in lower-margin business and Gravy Train pricing elasticities along with lower consumption, particularly in Nutrish. As expected, these pressures were partially offset by customer inventory recovery deloading last quarter due to our TSA cutover. Segment adjusted EBITDA increased 2% versus prior year as we benefited from improved cost reform for both grocery and pet. Foodservice net sales increased 10% and volumes increased 3%. Revenue reflects elevated AV influenza driven pricing and higher shake sales. Excluding shakes, volumes were down by 1% driven by HPAI dynamics impacting eggs and lower customer foot traffic impacting both egg and potatoes. Adjusted EBITDA decreased 6%, driven by Avian influenza cost ahead of pricing, partially offset by improved manufacturing and supply chain performance. Refrigerated Retail net sales decreased 7% and volumes decreased 5%. Volumes across all products were affected by the timing of Easter, which was in Q2 last year. Egg volumes were impacted further by limited availability due to Avian influenza. Segment adjusted EBITDA decreased 14% driven primarily by lower volumes and costs ahead of price on eggs and sauce. Weetabix net sales decreased 5% versus the prior year. Foreign currency represented a headwind of 70 basis points. Volumes decreased 7%, driven by lower promotions due to our Q1 ERP conversion, non-core product discontinuations and elasticities related to pricing…

The floor is now open for question. [Operator Instructions] Our first question is coming from Andrew Lazar with Barclays. Please go ahead.

Post has already raised several times its view on the structural run rate it expects from the Foodservice unit and looks at the underlying segment EBITDA, again, sort of excluding the cost ahead of pricing piece was again above that level. Is the long-term run rate here now even higher than you thought previously? Or are there other reasons why maybe it came in so much better than we and some others had modeled this quarter?

Andrew, I think it's hard to completely parse out Avian influenza, but I think your comment that I indicated 126 relative to the 105 we've talked about in the past. I think in reality, it's somewhere between those two numbers. We need a couple of quarters of normalcy, get the Avian influenza behind us and back in balance in terms of our supply and demand and then we can make a better call on what that run rate is, but clearly higher than $105 million.

And then in the quarter, it looks like you were able to maintain pretty solid margins in PCB despite the volume declines you saw in ready-to-eat and pet. I guess, would your expectation be that the recent announcements you made around the incremental asset optimization moves in cereal, should allow you to maintain strong profitability in this segment going forward, even if sort of cereal category volume trends remain as challenged as what we saw this past quarter?

So, Andrew, I -- clearly, that's the objective is to do our best to manage our cost to maintain the profitability -- if we're seeing 4% or 5% year-on-year declines, that's going to be challenging. Our expectation would be in the medium term, at least that, that would start to temper and that we would get back to 1% to 2% down, probably not in the second half of this year, but longer term. So, if we can get the category to more of that historic decline, we think that those actions would enable us to maintain our margins along with the normal cost out activities that we would do on a regular basis.

And your next question comes from the line of David Palmer with Evercore ISI. Please go ahead.

So just building on that line of questioning from Andrew. I'm thinking about PCB for fiscal '26 and how you're generally thinking about the setup there. Clearly, you have the plant closures and the tailwinds continuing there. And then the big two with pet and cereal, and I can imagine that cereal might be a back-weighted situation or one that just slowly gets better in your thinking and maybe that's offset maybe some of the things that you've been talking about, the drags ending in the co-man agreements and the improvements in Nutrish, and maybe you'd be thinking about that pet business perhaps offsetting cereal next year, but -- so rough strokes and how are you thinking about the your businesses within PCB and your ability to have at least a little bit of EBITDA growth from PCB next year?

I think you laid it out exactly how we're thinking about it. This year has been a transition year for Pet. So, we had to get off the TSA with Smucker. We had to do some of the heavy lifting on the brand relaunch for Nutrish. And obviously, we expect that those activities will bear some fruit into next year and would enable us to offset some of the headwinds that we're seeing in the cereal business. At the same time, we're going to do what we can on the cereal side to manage our costs, look to innovation and renovation to drive some volume even if the category continues to be challenged. So, the combination of those things, we think, will enable us to mitigate the headwinds we're seeing to the best of our ability.

And our next question comes from the line of Ken Goldman with JPMorgan. Please go ahead.

On PCB, the price/mix downturn this quarter, I'm just wondering if you could elaborate a little bit on the key drivers there and how we might think about that line item ahead for the rest of the year?

Yes. I think as I talked about second half PCB down over first half, it's going to offset some of the pricing recovery we have in Foodservice. And our expectation in the near term as the category remains where it's at for the balance of the fiscal year, which will put some pressure on cereal year-over-year for sure. Again, we've seen in terms of a mix standpoint this past quarter, we saw customers shift to larger pack sizes, which hurts mix a little bit. I think for right now, we're kind of holding firm to what we saw in Q2 for the balance of the year.

All right. And then just as we get closer to the debt maturities for 8th Avenue, do you have any updated thoughts on the potential optionality of that business and maybe post potential role within that?

Well, we have a lot of confidence on the -- in the business operations itself. Obviously, we have to resolve the near-term maturities, and we will have a resolution one way or the other fairly soon.

And our next question comes from the line of Michael Lavery with Piper Sandler. Please go ahead.

Just was looking to get a little better sense of how to think about some of the savings from the cereal plant closures you just announced. And we can get a little bit of an idea of the timing just that it's the end of the calendar year. But are there potential offsets? Or how -- any maybe magnitude you can give or just how to think about the impact from that?

Yes. I think we called out about a $20 million annualized benefit from the plant closures. Does that happen? Those are on track for the end of the calendar year. So, you would get 3/4 of that next fiscal year. I think if the category slows down to a more normalized down 1% to 2%. That's going to be in line with what we're seeing on the volume decline impact versus the cost savings of the plant shutdown. I think the challenge is the category doesn't slow down, then we've got some more optimization to do and we have some more levers we can pull.

And I guess maybe specifically, I was trying to get at how much that's net or gross relative to things like operating deleverage or just the lost volume piece. Is that just the gross piece from the facility savings? Or does it kind of bundle it all together?

That would be the gross savings. So, to the extent that there's incremental deleveraging beyond that, that would be an offset.

Yes. And to be fair, we are in the early stages of our planning for FY '26. So, we don't want to run our plan and expose it until we're ready.

No. Fair enough. And just on the pet piece of the business, if you have a consumer that's getting more cautious, I know you have a few brands positioned differently, but -- how much can you characterize the benefit from trade down? Would that generally be a net positive? How do you think about just the impact from those share moves, if you get a more stretched or cautious consumer overall?

Yes, there's a meaningful shift down that would tend to favor us because we -- a large number of our brands tend to be on value side of the equation. We do have some brands that play in the more premium side as well, but we tend to be up and down the value chain with a skew towards the lower -- or excuse me, lower price point products, particularly in dog, dry dog food.

And wouldn't it be fair to characterize it similar to cereal, where obviously you could lose some share on the branded side but more than make up for it with what you gain on the low end?

Well, that depends on a lot of variables. I mean, clearly, in cereal, we have a much higher percentage of the low end of the value chain, given our position in private label as well as bag cereal. Our position in pet on the low end is not nearly the same market share that we have in cereal.

And our next question comes from the line of John Baumgartner with Mizuho Securities. Please go ahead.

I wanted to come back to Refrigerated Retail and the Bob Evans, the side dishes. I think expansion opportunities have been one of the aspirations there over the years, and we've seen some innovation here and there and some emphasis -- and the emphasis on different segments. And I think in general, we've seen some encouraging volume signs at retail in the last couple of quarters. Wondering, if you could speak at this point to what you're seeing in the category expectations for distribution expansion over the next 12 months in terms of what your supply chain allows returns on recent efforts and innovation? Just kind of broader thoughts on expectations for retail going forward.

Yes. So clearly, the PPI acquisition gives us capacity due to a number of things that maybe we couldn't have done before. We've also improved our capacity through internal improvements in our own plants that we've owned even prior to the PPI acquisition. So, we've got -- you've been with us a long time. So, you remember the years when we had to stop preparing certain products because we couldn't meet customer demand. Those days are behind us. So now we can play more offense than we have in the past. What we're seeing in the category is there's a trade down that's occurring with private label, which is a phenomenon that has not been an issue in that category years ago. What we saw years ago was that private label really didn't have the quality and it would come in and out, but it never really stuck this time around. We're seeing that private label has better quality and it's taking some demand away from products like ours. So, with the new capacity that we have available, it enables us to think about how we look at other categories. Does it make sense to play in private label? Does it make sense to play up and down the value chain while continuing to maintain our significant market share in the Bob Evans brand. In terms of innovation or renovation in that brand, we put a lot of that on hold given the issues that we had through COVID and even prior to COVID with our capacity utilization now with the availability of capacity we can begin to do more of that, which we would expect to do in the latter half of this year and into next year.

Okay. And then to come back to PCB and some of the cereal category headwinds, I mean, I think you had seen this about a decade ago where birth rates were down. You had some shift to up two products. I think back then, it was frozen breakfast and restaurants. Now you could argue it's more protein shakes. So, the macro headwinds we've seen these cycles before. And I'm curious, if you put that to the side, do you see anything else fundamentally having changed, whether it's post inflation price points for the category whether it's a broader shift towards protein that's stickier this time around? I guess is there anything in the environment that's maybe more structurally changed that would sort of change how you grow the category, your aspirations for the category, your ability to kind of circle the wagons on the value price point?

So, there's certainly some impact on GLP-1s in the demand and I think there will be some lapping that has to occur in the next 6 to 18 months. So that's the one difference in the next -- in the prior decade that we didn't have.

[Operator Instructions] And your next question comes from the line of Scott Marks with Jefferies. Please go ahead.

First one I wanted to ask about is we've heard from some of your competitors recently notably in cereal about more so increasing promotional activity to drive value for consumers. And I don't think I heard that mentioned kind of in your prepared remarks, more so around innovation and renovation. So just wondering, if you can share any color on your thoughts on kind of the trade spend piece.

So, our view of the category, cereal we're talking about is that the promotional activities are what we would call normal levels. Certainly, go through ebbs and flows in a given year or a given time period within a year where one producer might be promoting more than others not and vice versa in subsequent periods. So, we haven't seen anything that we would consider to be out of the ordinary for any significant stretch of time. Our personal approach is to continue to do the types of programs that drive value. So, we have seen that promotion's sake does not generate the return in volume that you give up in price. So, you have to find the sweet spot that works for your products and works for your profitability and the plan that we have now and going forward.

Got it. And then last one for me. I know it's still early in the acquisition of PDI, but just wondering if you can share any color on initial learnings or insights that you have from that and how you plan on leveraging that?

Yes. It is early. I think the thing I would say is that there are some synergies that we probably didn't realize are there that in the longer or medium to long term, and that will be there. Probably, the other learning is that the initial integration -- we had some upset in our employee population there. That was probably a little bit more significant than we thought going in. So, the ramp up that we're going to see is going to be slower than perhaps we initially expected. But it's going to fit well into our network. It's going to provide us opportunities, like I mentioned before, to think about that category in a different way compared to the way we've had it about it based on some constraints we've had before we acquired it.

And your next question comes from the line of Marc Torrente with Wells Fargo. Please go ahead.

I guess just first, grocery in general, category volumes remain under pressure. A lot of that's consumer pressure that we're seeing out there. But thinking more in terms of relative performance, who are you seeing outperforming? Is it more value in private label? Is it smaller players? And then since quarter end, have you seen any sequential improvement in any of your category trends?

So, the first part of your question, I think it's a real dichotomy. There's take cereal category as an example. You see some of the more premium organic natural marketed as healthier for you, but fairly expensive -- not fairly, really expensive price points doing well in the category while the overall category is not performing well. So, I think what we're seeing consumers is there's a pocket of consumers that are spending for what they perceive as better for them and are willing to pay essentially whatever necessary to get that type of product. And then you've got other consumers who are cutting back significantly and deloading their pantries and buying less frequently, which is affecting the expandable demand that we see in more normal times with cereal where people have products in their pantry and they tend to eat it when it's available. What we're seeing is that they're just deloading their pantries because they don't have the money to go and free stock. And then -- I'm sorry, I zoned out on the second part of your question?

Yes. Just any sequential improvement since quarter end in any of your categories?

Yes. The -- is not a great improvement, but the worst months for cereal were February and March, a little bit of improvement in April, but we're clearly not ready to claim victory in that regard.

Okay. And then just an update on the RTD shake manufacturing ramp. Shakes were called out as the driver of positive foodservice volumes. Did you make better progress during the quarter than you expected? And is your outlook for the contribution there is still consistent with prior?

Keep in mind that the baseline comparison was essentially zero for shakes, so compared to last year, any production would have been an improvement. We are seeing improvement sequentially. It's slower than what we would like it to be, but it is trending in a favorable direction, but it is still not a material contributor to profit at the current levels. So, we would expect the continued ramp up again, maybe a little bit slower than we had hoped when we communicated this six, nine months ago. But in the long run, we still see the same finish line in terms of where that profitability can take us.

And your next question comes from the line of Carla Casella with JPMorgan. Please go ahead.

One follow-up from Ken's question about 8th Avenue. What are the options there? And is there a scenario where you buy and reconsolidate that business?

Well, I think I would start with recalling that we wrote this to zero, two or three years ago. With that, we consider it like a new investment opportunity with which we have a great deal of prayer experience and knowledge. Beyond that, I'm not going to comment on the various iterations of opportunities that could exist for the Company.

Thank you. This concludes today's Post Holdings Second Quarter 2025 Earnings Conference Call and Webcast. Please disconnect your line at this time, and have a wonderful day.