Thank you, Norma, and good morning, everyone. I hope you all have the opportunity to review our earnings release, listen to our prepared remarks, and view the slide presentation that were all posted yesterday evening on our Investor Relations website. After today's Q&A session, we will also post an audio replay of this call. Please note that in this Q&A session, we may make forward-looking statements about the company's performance. Although we believe these statements to be reasonable, they are subject to risks and uncertainties that could cause actual results to differ materially. In addition to what you hear in these remarks, important factors relating to Flowers Foods' business are fully detailed in our SEC filings. We will also provide non-GAAP financial measures for which disclosures and reconciliations are provided in the earnings release and at the end of the slide presentation on our website. Joining me today are Ryals McMullian, Chairman, CEO and President; and Steve Kinsey, our CFO. Ryals, I'll turn it over to you.

Great. Thanks, J.T. Good morning, everybody. Thanks for joining the call today. I'm very pleased with the strong quarterly results. Our performance recovered after a slow start to the year, helped by the competitive strength of our leading brands, despite strategic pricing initiatives designed to mitigate inflationary pressures. Volume trends in our branded retail business did improve, and that may be an early indication that consumer demand is migrating back to pre-inflationary levels. That top-line strength translated into improved margins and earnings, which is reflected in our updated 2023 guidance. Private label products gained share, but that growth appears to be moderating. So, we remain confident that the trend towards premiumization, driven by our investments in innovation and marketing, will win out over the longer term. I'm excited about our prospects, and I've really never been more confident in our ability to grow shareholder value over time. So, Norma, with that, we are ready to open up for questions.

Thanks. Good morning.

Hi, Bill.

I guess, can we start a little bit more commentary on Canyon? I didn't fully understand kind of what happened to have the deterioration of, I guess, market share and margins over the past few months. I'm just trying to understand how that improves going forward. It seemed like Canyon had a pretty strong trajectory for the past few years. And I just didn't know if that's more of a sign of we're hitting a plateau or if there's something else that I don't fully understand.

Yes, I'd be happy to. I would describe it as temporary. A lot of it has to do with capacity. It's somewhat of a good problem to have because Canyon has been on a solid growth path, but we became a bit constrained. We've made some adjustments to Canyon's portfolio and invested more in the Canyon Bakery to increase capacity. That's being addressed and will come online in the second half. We also have plans to boost growth. Additionally, there is a channel shift happening that isn't reflected in the syndicated data. So, what you're seeing doesn't fully represent the reality. I still categorize this as temporary, and we will get back on track. Canyon has a great future ahead.

Got it. Thank you. And then this is the second or third time you put in your commentary kind of a thought of moving into tangential categories through M&A. And at the same point, I think you've talked about rolling out Dave's Killer Bread bars sometime in '24. I didn't know if those kind of coupled if you'd like to have greater expertise in the snack bar or tangential category before expanding that kind of nationwide, or any kind of update on how that's going would be great. Thanks.

The rollout is going really well. So, those initial three SKUs of bars build are in the middle of a nationwide rollout right now. So, I think we noted in the pre-recorded commentary that we're in about 12,000 stores. We'll be in more than 13,000 by year-end, and we'll actually slightly be ahead of our own expectations for that rollout. For 2024, there are three new SKUs of bars coming out that are higher protein based. They're the amped-up protein bars, really great products. They've been in test market for a while. They've done extremely well in test market. And I think most promising is they're proving to be incremental to the original three SKUs. So, I think we're touching a different consumer segment with that higher protein offering. And then, of course, behind that, we've got the snack bites, those are still in tests. Those will be coming a little bit later. And then a whole pipeline of innovation even behind that. So, we're really excited about what we're building from an innovation standpoint with Dave's.

From an M&A perspective, does that make the bars category more appealing as you transition away from just traditional bread and work on developing expertise and establishing a national presence for the brand?

Yes, it could. I mean, it would definitely depend on the brand and what that brand brings to the consumer. I mean, it is a crowded category. So, we want to be careful that we're investing in the right segments of that category. But, yeah, there are definitely opportunities out there we'd be interested in.

Great. Thanks so much.

Thanks, Bill.

Hi. Good morning.

Hey, Mitch.

Hey, I have a couple of questions. First, you talked a lot in your script about private label and mentioned that you're seeing some improved trends, but you're still cautious and unsure about the future. I'm wondering if you're noticing a positive shift or a return to branded products, especially in August, and what indicators you might be looking for to see movement in either direction.

Certainly. Private label gained market share this quarter, but its growth is slowing. Towards the end of the quarter, we observed the lowest growth in private label for the year. It's important to highlight that the private label trend is more pronounced in mass retail than in grocery stores, where it actually lost share. There's been a shift as consumers look for bargains in mass channels like club and dollar stores. The gains in private label are primarily focused on traditional products with minimal differentiation. It lost share in most other categories, especially those with more differentiation like breakfast items and rolls. There is still a trend towards premium products, and while consumers are searching for good deals, we're seeing an overall positive trend for our branded business. Additionally, Dave's Killer Bread had a strong quarter, with a 7% increase in units. This is particularly encouraging given its premium status. Notably, about 20% of Dave's shoppers are from low-income households, and those shoppers had previously been declining. However, they are now returning, contributing to unit growth in the second quarter and creating a positive outlook for the year. We also saw increased penetration among higher-income households, further supporting our confidence in improving consumer health. That said, we want to see this trend continue into the third quarter before making definitive conclusions. Early signs are definitely promising.

Thank you. Regarding your foodservice in the other category, how much pricing is still available? First, are you experiencing any pushback on pricing so far? Additionally, as volumes decrease, what impact does that have on your gross margins?

Sure. We have secured the necessary pricing for the year. Some contractual business will still come in gradually, but I believe most of it is completed. Overall, people understand the inflationary environment, and we were able to achieve the pricing we aimed for. Regarding volume, the decreases are primarily due to declines in foodservice and cake segments, and much of this is intentional as we are moving away from lower-margin business. On the cake side, we are focusing on our branded products, which is affecting volumes. Sequentially, we expect an improvement in cake volumes; this quarter has already shown a significant improvement as we are starting to move past the significant SKU ramp we implemented last year. Additionally, we faced disruptions from one of our cold storage suppliers, which affected our volume performance during the quarter.

Okay. Last question. You mentioned shifting some of your bakery sales responsibilities from the sales leadership to the supply chain leadership, which has led to improved efficiency in the bakery and enhanced sales. I'm curious about the influence of local sales leadership at each bakery, especially given your large national customer base. Also, has there been any reduction in sales personnel with more representatives out in the field?

Well, I'll answer your last question first. No, not from a material standpoint. Obviously, there's always a little bit of attrition in turnover. But I think the more important pieces of your questions are, yeah, it does have an effect at the local level, yes. A lot of national accounts now. Grocers have consolidated. We all know that. But the area sales director can have a major impact at the local store level, helping to sell in that additional display, for example. Those types of executional elements are critical. And I would point to that reorganization as one of the reasons we've performed so well in the quarter. As you know, this is the big summer buns season. We had our best buns season ever. We achieved our highest buns share in the quarter. I think those are all proof points that the organizational restructure is working. Mitch, it's really a matter of focus, having our sales folks be able to focus only on sales, what they do best, and then similarly on the supply chain side, having that expertise solely focus on running those bakeries as efficiently as possible. And to your point, we've seen improvements on both fronts.

Okay. All right. Thank you very much for the questions.

Thanks, Mitch.

Hey, guys. Good morning. Congrats on the great quarter.

Thank you, Connor. Appreciate it.

I wanted to follow up on some of Mitch's questions. You noted that private label share gains have moderated in the quarter, primarily within the traditional loaf segment. I am curious about how much of this is influenced by a shift toward the buns segment or more differentiated products during the summer months. Additionally, is there any concern that consumers are temporarily moving to different segments of the category where private label has less share?

Actually, we've been seeing that trend for some time. If you go back quite a few quarters, I think we talked about that pretty heavily that even within the category, we were seeing shifts more towards specialty premium, more towards breads, buns and rolls, more towards breakfast items, all of which tend to have a higher level of differentiation and are certainly more premium products as well. So, for example, our Nature's Own Perfectly Crafted Brioche buns have done extremely well. That's a differentiated item from just a standard white bun. The Dave's Killer Bread, bagels, English muffins, et cetera, even the buns with Dave's have done really well, as well as that broader specialty premium category. So I think it's a trend we've been seeing for a while, somewhat disrupted by the inflationary environment, because obviously we've talked a lot about trade down and households economizing. But I think over the longer pull, I think that trend remains in place. One of the things that we're focused on here is how can we bring more differentiation to that traditional loaf category? It is still our largest segment. So, it's very important from performance, from a cash flow standpoint, all of it. So, what can we do to further differentiate those mainline Nature's Own items? Is it from a quality standpoint, a packaging standpoint, different flavors, et cetera? So that's something that we're focused on here.

Perfect. And then just back to SKU rationalizations a little bit as well. So that was the volume headwind again in the quarter, obviously. And I guess, I was just wondering, was a headwind driven mostly by compares from prior rationalizations or were there more SKUs actually eliminated during the quarter? And I mean, I know you mentioned the impact is expected to lessen the second half, but I guess just trying to get a sense for if there are a lot more SKUs potentially on the chopping block or if you're pretty much all finished?

I'm going to divide that into two parts. On the cake side, we are mostly finished. At the beginning of the year, we indicated that volume declines would start to slow as we progressed into the latter half of the year, and we saw that trend in the second quarter. While there will always be some ongoing SKU rationalization, the bulk of that process is largely complete after the last couple of years. On the foodservice side, the situation is different because we still need to rationalize some of the lower-margin business gradually. This won't happen all at once, as some of it is under contract, which impacts our timing. We exited some more late in the quarter, but that wasn't the main reason for the volume decline in the second quarter. Instead, previous rationalizations and disruptions with the cold storage operator played a larger role. In summary, regarding foodservice, we are not finished yet, but the changes will be spread over several years. Our intention is to remain in the foodservice sector since we value it. The focus is on exiting lower-margin business, improving margins in foodservice, and more importantly, shifting capacity and production to branded retail.

All right. Great. Thanks for the color as always.

Okay. Thank you, Connor.

Hi, guys. Thanks for taking our question.

Good morning.

You mentioned in your prepared remarks that the branded side is stabilizing. Is there anything you can do in the short term to boost that, possibly through advertising or promotions? Do you believe there's a way to support it and help the brand move in the right direction and gain market share?

Yes, I'm glad someone asked about promotions. To answer your question, we are actively working to enhance our marketing efforts. In the last quarter, our marketing spend increased, and you can expect this commitment to continue. From a promotional perspective, we did engage in some additional promotions, but I wouldn’t categorize it as significantly impactful. Overall, while promotions in the category have increased slightly, they are still below historic or even pre-pandemic levels. The interesting observation is that even when we run promotions, the extra units sold aren't particularly appealing, so we must be careful about when we launch promotions to ensure a good return on investment. There are certainly some effective promotions, but this reflects something about consumer behavior. If a product is on promotion and does not result in the usual sales boost, it indicates that consumers are only purchasing what they need, showing that they are still trying to manage their household budgets. It will be interesting to see how these trends evolve. However, the category hasn’t become overly promotional yet, and when promotions do occur, we aren't seeing the incremental sales lift that we used to see.

That's helpful. Could you elaborate on the balance between promotions and marketing, given that you mentioned an increase in marketing efforts? Which of these factors enhances consumer engagement, particularly with less differentiated branded products? Is it more effective to offer a lower price or to increase visibility or airtime to keep the brand at the forefront of consumer minds?

Yes, I think both are important, serving slightly different purposes. Promotions can be very effective in encouraging trial. For instance, with our bar launch, we're using ads and promotions to attract new consumers. Marketing can also play a role in this, but I view it as being just as much about retention as it is about acquiring new customers. Thus, the combination of both is crucial depending on your goals. In a more commoditized market, promotions might historically be a bit more effective, even considering my previous points. However, the key for our portfolio of brands is to continue driving differentiation and using both promotions and marketing to attract consumers.

Great. That's very helpful. I'll pass it along.

Thanks, Jim.

Great. Thank you, Norma. I just want to thank everybody for taking time today and joining us for questions. We really appreciate your interest in our company. And as always, we look forward to speaking with you next quarter. Everybody, take care.

Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.