Welcome to Post Holdings’ Third Quarter 2022 Earnings Conference Call and Webcast. Hosting the call today are Rob Vitale, President and Chief Executive Officer, and Jeff Zadoks, Chief Financial Officer. Today’s call is being recorded and will be available for replay beginning at 12:00 p.m. Eastern Time. The dial-in number is 800-839-5679, and no pass code is required. It is now my pleasure to turn the floor over to Matt Mainer, Investor Relations of Post Holdings, for introductions. You may begin.

Thanks. Good morning and thank you for joining us today for Post’s Third Quarter Fiscal ‘22 Earnings Call. With me today are Rob Vitale, our President and CEO; and Jeff Zadoks, our CFO. Rob and Jeff will begin with prepared remarks. And afterwards, we will have a brief question-and-answer session. The press release that supports these remarks is posted on our website in both the Investor Relations and the SEC filings sections at postholdings.com. In addition, the release is available on the SEC’s website. Before we continue, I’d 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. As a reminder, this call is being recorded and an audio replay will be available on our website. And finally, 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, Matt, and thank you all for joining us. Post had a successful quarter. We are building momentum for the final quarter of the year and into next year. This is despite some lingering problems in our supply chains as well as historical levels of inflation. I am going to begin with some comments about margins. First, we have largely managed to offset the impact of inflation with pricing. Input costs remain volatile and we anticipate additional inflation and additional pricing. We are confident in our ability to deliver the needed pricing. Percentage margins declined year-over-year primarily resulting from the mechanics of our grain-based pricing model in foodservice as well as a mix shift in our overall business portfolio. Within foodservice, EBITDA per pound grew nicely and is now on par with pre-pandemic levels. EBITDA per pound is our primary KPI rather than percentage margin as the latter fluctuates with the direction of pass-through pricing. The mix shift results from acquisitions that contribute on average lower margins, a shift to value within cereal and the increase in foodservice as a percentage of total Post revenue. Each of these are margin dilutive. They are each attractively profit accretive. As mentioned, we do continue to see elevated costs in our supply chain. With respect to our supply chains, the bad news is that they remain under stress. The good news is they continue to improve, albeit not in a straight line. We started the year expecting the basket of problems that fall under the umbrella of supply chain challenges to rapidly improve as the end of pandemic-driven stimulus increased workforce participation. But the problem is both more nuanced and more blunt. There appear to be more structural changes in the workforce that require creative solutions and productivity initiatives. Meanwhile, there are more glaring disruptions and geopolitical relationships that have long-lasting impacts on where we source. As a result, we expect supply chain improvement to be more steady and gradual, ultimately leading to better volumes as reliability improves and expanding margins as controllable cost management and productivity improvements. The North American cereal business continues to benefit from consumption strength in key brands like Fruity Pebbles and Honey Bunches of Oats as well as strength in private label and value. Our branded share reached 20%, and total private label reached 6.7%. Recall, we are by far the largest provider of private label ready-to-eat cereal. The recent innovation, most specifically Premier Protein cereal, has also been quite well received. Foodservice effectively navigated the impact of avian influenza. We had predicted that by Q4, we would reach our pre-pandemic profit level. We will likely exceed that level and look to enter 2023 with momentum. Our risk to maintaining that momentum throughout the year is largely a function of continuing to improve our supply chain. We are still not fulfilling customer orders at an acceptable level. On the other hand, our Refrigerated Retail platform was hurt by avian influenza as cost increases could not be passed through quickly enough. However, the business made great strides year-over-year. Recall that last year, our supply chain limitations left us unable to build inventory ahead of the key holiday season. We have expanded our capacity with third-party manufacturers, and we are fully prepared for the upcoming season. Leveraging third-party manufacturers comes with some margin pressure, and we expect that to reverse as we use internal capacity to support the growth of the franchise. This quarter, our side dish products grew volume over 10%. We expect attractive long-term growth as supply chain improvement enables us to reengage more aggressively in marketing the brand. Weetabix keeps progressing despite a challenging consumer marketplace. The UK inflation rate has run ahead of the U.S. with particularly meaningful increases in core products like food and energy. Weetabix has been able to maintain sales and margins. It does appear that we will enter 2023 facing currency headwinds related to Weetabix. As you all know, the capital markets have been volatile. We believe this plays to our strengths, an example being our recently completed bond tender that Jeff will discuss in more detail. We continue to aggressively pursue M&A and in the last 2 years, we have completed 6 tuck-in acquisitions. We expect the volatile markets to lead to larger opportunities. Obviously, we can’t predict that any will convert to acquisitions. We will remain disciplined on price regardless of market dynamics. Meanwhile, we continue to explore combinations for the SPAC. The weak IPO market has made execution more challenging. Here, too, we will remain highly disciplined in our efforts. We continue to believe in the elegance of the structure, but if the market timing is bad, we will not force an outcome. While we continue to focus on M&A, our capital allocation landscape is broader. In addition to the bond tender, Jeff will provide details on share buybacks. And lastly, recall that Post owns 19.4 million shares of BellRing Brands, which we expect to monetize within the next 6 months. Before turning the call over to Jeff, I want to reiterate how encouraged I am with the sequential and year-over-year progression of our business during 2022. We see good cause for optimism entering 2023 as well as longer-term opportunities in both volume and margin as we continue to make progress on our supply chains. With that, I will turn the call over to Jeff.

Thanks, Rob, and good morning everyone. Third-quarter consolidated net sales were $1.5 billion, and adjusted EBITDA was $251 million. Net sales increased 22% and benefited from approximately $63 million of incremental sales from recent acquisitions, pricing actions in each segment, and volume demand recovery in the foodservice segment. Internal and external labor shortages and supply chain disruptions continued this quarter, causing our per unit product costs to remain elevated. Customer order fulfillment rates improved but were still well below optimal levels. Turning to our segments and starting with Post Consumer Brands. Net sales and volumes increased 23% and 14%, respectively. Excluding the benefit from the private label cereal acquisition, net sales and volumes grew 16% and 7%, respectively. Branded and legacy private label cereal average net pricing increased 8.8%, driven by pricing actions, partially offset by unfavorable product mix. Pebbles and Bunches of Oats, MOM bags, Peter Pan, and legacy private label cereal drove the volume increase. Adjusted EBITDA decreased 1.3% versus the prior year, primarily driven by costs related to ongoing supply chain challenges and increased employee incentive costs. Weetabix net sales increased 1% despite a significantly stronger U.S. dollar against the British pound, which caused a foreign currency translation headwind of nearly 1,100 basis points. Net sales benefited from the significant list price increases and sales from recently acquired UFIT brand. These benefits were offset by unfavorable mix reflecting growth in private label products. Excluding the benefit from the UFIT acquisition, volumes declined 6% as growth from private label distribution gains and new products was not enough to offset declines in other products. Recall the prior year period benefited from COVID-driven at-home consumption. Supply chain disruptions, most notably in packaging, transportation availability, and equipment reliability, continue to suppress volumes and pressure segment profit. Segment adjusted EBITDA was 2% lower than the prior year, primarily because of the aforementioned foreign currency translation headwind. The foodservice business saw net sales and volume growth of 33% and 6%, respectively, lifted by distribution gains and higher away-from-home demand. Revenue growth continued to outpace volume growth as revenue reflects the impacts of pricing actions and the effect of our commodity cost pass-through pricing model. Although we saw year-over-year growth this quarter, total segment volumes remained below pre-pandemic levels. Adjusted EBITDA grew 45%, benefiting from volume recovery and improved average net pricing, which combined mitigated the impact of higher costs to produce. Refrigerated Retail net sales increased 12%, while volumes decreased 3%. Excluding the Egg Beaters and Almark acquisitions and the divested Willamette Egg Farms business, net sales and volumes increased 10% and 2%, respectively. Pricing actions drove increases in average net pricing across all products. Side dish and sausage volumes grew 10% and 4%, respectively, while volumes in other product categories declined. Retail egg product volumes, in particular, declined from supply reduction from the impact of avian influenza. Adjusted EBITDA decreased to $30 million and was pressured significantly by dairy costs and costs due to avian influenza, higher manufacturing costs, and increased freight. Moving to capital markets transactions. In the third quarter, we purchased approximately 1.9 million of our shares at an average price of $76.43 per share. Year-to-date, we have repurchased approximately 3.8 million of our shares. Through the end of the third quarter, we completed a modified Dutch Auction to purchase approximately $140 million in principal amount of our 4.625% senior notes due April 2030 and approximately $382 million in principal amount of our 4.5% senior notes due September 2031. We paid $450 million for these notes, reflecting a $72 million discount to par. Net leverage at the end of the third quarter, as measured by our credit facility, was approximately 6.2x. On this basis, we expect to reduce leverage by approximately half a turn once we fully execute the intended debt-for-equity exchange of our retained ownership of 19.4 million shares of BellRing. With that, I’d like to turn the call back to the operator for questions.

And our first question will come from Andrew Lazar with Barclays.

Good morning, Rob and Jeff.

Good morning, Andrew. Hey, Andrew, we are only taking multiple choices, Mark.

Yes, exactly, I will keep that in mind. First off, just with PCB, obviously, organic growth in the quarter, very strong and ahead of the category growth rate. So, just trying to get a sense of the sustainability of this and the key drivers, I guess what are you seeing on trade-down and elasticities and things of that nature?

Well, obviously, pricing is a big component, but we’re also seeing good volume growth across our value portfolio with additional distribution in our MOM franchise as well as gains in private label. So we’ve been talking about this eventual turn for some time, and it feels like it’s here, stable, and potentially building some momentum. So it feels like that’s an opportunity from a consumer trade-down perspective and a customer perspective. So it feels pretty encouraging right now. Now the inhibitor, of course, is supply chain execution because we could do more if we had more effective throughput.

And then I know it’s a bit early to discuss sort of detailed guidance for next fiscal year. I think previously, though, it seemed like we could basically take the second half run rate of this year, annualize that and then maybe add a little bit to get to sort of a preliminary look at what ‘23 could sort of look like. I guess any reason to think dramatically differently at this point one way or the other, just discrete things that we sort of know about that we should be aware of on that front?

There is no reason to believe different than you articulated, but the hesitation that I would have would be we have not gone through our planning and we want to make sure where we need to be on inventory and productive capacity, which we obviously have just done and anticipate doing in the second half of the year. So I think the swing factor is where do we get our supply chains as we enter ‘23 and then move into and end ‘23. But I would say your basic premise is certainly intact.

Alright. Thanks so much.

Thank you.

Thank you. Our next question will come from Chris Growe with Stifel.

Hi, good morning.

Good morning.

Good morning. I’d like to start first, if I could, with the Foodservice division, and the profit came through at a very nice rate in the quarter. And I guess I’m just curious around to what degree – or if you denote how much of this is like avian flu benefit? And then you made a comment about maybe having a little better run rate out of ‘22 for Foodservice, just to get a sense of like what you’re thinking there in terms of the benefit to profitability, I guess, from the pricing initiatives and this recovery in volume.

Yes. The avian influenza benefit was roughly $10 million in the quarter coming out of our ingredient segment. And if you go back to where we had expected to see the second half shape, our EBITDA expectation was about 48-52 third quarter to fourth quarter, and the effect of that is going to make it more like 50-50. So, we will keep that benefit and probably grow from there. There is very limited impact in the fourth quarter. We see stabilizing pricing, very effective work within our organization to get inflation passed through as well as decent demand despite some potential consumer weakness.

Okay. That’s encouraging. And then one area that was kind of different from what I had expected, especially given some of the dialogue last quarter, Refrigerated Retail division. And it sounds like you had a relatively optimistic or bullish outlook on the business, and certainly, side dish volumes are very strong, but the EBITDA has been challenged. And so I guess avian flu one of the – kind of the higher egg prices is one of the issues there? Is that kind of being mitigated now? And I guess were there any other factors around the supply chains you are aware of in terms of understanding the margin for that business and the EBITDA recovery we hope for there?

Yes. We would say a handful of things. One is I think the estimates were a bit on the high side and not reflective of the third quarter, fourth quarter delta. So, from our perspective, from an internal estimate perspective, there was a bit of a miss, but it was almost entirely attributable to avian influenza costs being incurred at Refrigerated Retail from our foodservice business. So, an internal transfer. In terms of the overall margin structure, I commented in my prepared remarks that as we seek to fix our supply chain, we have leveraged more third parties, and that has a temporary cost or a temporary percentage cost as we will now circle back and use internal capacity to support growth. We don’t want to abandon the contract manufacturers. We think they are a vital part of our ongoing supply chain and great partners. So, we are bringing down our internal absorption temporarily, and we will now rebuild it. The other aspect, of course, is that we focus a lot on side dishes because that’s the real gem of the franchise, but that segment also contains our sausage business, which has more commodity volatility tied to sow pricing. We have done a nice job of bringing some more sophisticated pricing mechanisms to that market, but it is still a market that has some margin volatility, albeit it’s a small piece of the total business, but it can magnify some of the market volatility within that segment.

Okay. Thank you and I appreciate it.

Thanks Chris. Next question?

And our next question will come from David Palmer with Evercore ISI.

Thanks. I guess a question going as we look into the first part of fiscal ‘23. I am wondering how you are feeling about pricing net of commodities across the business. And then if you can break it out, thinking about supply chain friction cost that you might have incurred last year that maybe would be getting a little bit better by then.

Well, I would expect by the time we get to the beginning of ‘23, we would have priced knowing inflation. So, we would now be dealing prospectively with what changes from here. And who knows what that will be, but I think what we have demonstrated is an ability to price what comes at us with ingredient input inflation. With respect to supply chain progress, I am largely going to echo what I said in my prepared remarks, is that rather than it being a binary event that we are solved, it’s going to be a more gradual process of grinding it out quarter-to-quarter. And we think there is a fairly substantial margin opportunity as we do improve overall execution, both upstream and downstream. But we are not in a position yet to quantify it, having not completed our planning process for ‘23.

And then specifically on – that’s helpful. And with regard to the Post Consumer Brands business, you mentioned that there were some compensation impacts as well as supply chain. Can you just sort of quantify – I would have expected a little bit better margins given the volumes that you are having there, but maybe you can give us a sense as to why – what was driving the magnitude of the margin headwinds given the strong volume?. And I will pass it on.

Well, a couple of things. Mix is a big component of the PCB volume because as we shift from the branded to more private label and value, while again, it’s profit accretive, it is margin dilutive. And then we had some incentive lack of comparability. I think in the third quarter of last year, we didn’t achieve some of our incentive targets, and in the third quarter of this year, they were achieved. So, it was just a comparability issue.

Thank you.

Thanks, Dave.

Our next question will come from Jason English with Goldman Sachs.

Good morning folks.

Good morning Jason.

We have been talking supply chain challenges, I think every quarter for a very long time here. It actually predates COVID as with consumer and refrigerated business. And you said today, like some of these challenges appear to be labor in nature where you see like structural changes to the workforce, suggesting that you need to evolve your supply chain. So, can you give us a bit more color around this? Can you give us a bit more size of the prize in terms of like what you are leaving on the table today because your inability to have everything humming, so we can contextualize what the fixes could bring to your P&L? And lastly, can you touch on what it’s all going to cost? Should we expect a surge in CapEx as you look to go in and maybe modernize or move equipment around or change where production is, whatever the solutions that requires?

I am going to do that a little bit in reverse order. I think we are not going to require a surge in CapEx, but we may have a materially different mix of our CapEx from trying to be a bit more experimental to being very focused on asset reliability, maintenance, more – shift some of that mix from what has historically been a combination of growth and maintenance to a couple of years where we are highly focused on maintenance and asset reliability. With respect to the comments about workforce, what I would say is, we have all heard this term the Great Resignation. We had our share – participation and what it – the net result is that we have a generally less experienced workforce. So, as you have less experienced workforce, you have the indirect costs that can experience and can create, and it doesn’t require major overhauls in cost. What it requires is more diligent training and development activities. And then longer term, I think we then have the question of how do you think about productivity initiatives, which could tie back to your capital question. Is that answering your question?

It’s not in a satisfactory way. But yes, some, I mean I am hungry for details. I get it. Like I want a lot of meat on the phone. I appreciate that it’s a really loaded question, and it’s probably not appropriate for the call, but I appreciate the effort. And I look forward to having more conversations on it going forward.

Ladies and gentlemen, this does conclude the question-and-answer portion of today’s call. I would now like to formally close the call, and we thank you for your participation. You may disconnect at any time.