Greetings and welcome to the Reynolds Consumer Products, Incorporated Third Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Swartzberg, Vice President of Investor Relations. Thank you, sir. You may begin.

Thank you, Operator. Good morning and thank you for joining us for Reynolds Consumer Products third quarter earnings conference call. Please note that this call is being webcast on the Investor Relations section of our corporate site. Our earnings press release and presentation slides are also available. With me on the call today are Lance Mitchell, our President and Chief Executive Officer; Scott Huckins, our Chief Financial Officer; and Nathan Lowe, Senior Vice President and Head of Financial Planning and Analysis. Following prepared remarks, we will open the call for a brief question-and-answer session. Before we begin, I would like to remind you that this morning's discussion will contain forward-looking statements which are subject to risks, uncertainties, and changes in circumstances that could cause actual results and outcomes to differ materially from those described today. Please refer to the Risk Factors section in our SEC filings. The company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after the call. During today's call, we will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these GAAP to non-GAAP financial measures are available in our earnings press release, investor presentation deck, and Form 10-Q which can be found on the Investor Relations section of our site. Now, I'd like to turn the call over to Lance.

Thank you, Mark, and good morning, everyone. Our business is performing well, and we are investing in new products, new business wins, and new cost-saving opportunities to drive sustained, long-term profitable growth. Turning to the quarter, demand in our categories improved modestly compared to first half performance. Our retail volume was unchanged and in line with our categories after adjusting for product portfolio optimization and shipment timing as we covered on the Q2 call. We commercialized innovation across our categories, expanded our innovation pipeline, and drove increased awareness among younger consumers. We identified and delivered further Reyvolution cost savings, and we demonstrated the value of our diversified business and product portfolio, delivering revenue and earnings in line with our expectations, while continuing work to drive improved revenues and profitability in our seasonal business. Before reviewing each of our businesses, I want to remind you of some of the factors positioning RCP for sustained and attractive long-term growth. Our products are well known, affordable, and convenient; we are effectively leveraging our business model to drive our categories and develop new business in partnership with our retail customers. We are successfully introducing new products to drive share; and as I mentioned, our pipeline is only getting stronger, including an expanding range of affordable, sustainable solutions. We're commercializing scientific advances and consumer insights acquired through sustained investment in R&D, including last year's purchase of Atacama Manufacturing. And we're reducing operational costs and identifying significant additional Reyvolution cost savings, providing additional resources for earnings growth. Our tableware business unit is a focus for many of you, as it is for us; so I'll speak to that first. The tableware business unit reported volume and earnings decline, primarily driven by lower foam plate volume and increased promotional spending. These decreases were largely driven by recent legislative changes in several states, consumer shifting towards more sustainable offerings, and a reduction of retailers foam plate inventories. Volume for the rest of our tableware business was up modestly and continued to outperform its categories, further demonstrating the effectiveness of the price pack architecture and promotional strategies that we initiated at the beginning of the year. We expect home trends to remain a headwind only in the near term and have a record of successfully responding to buying declines within our tableware business. As we reviewed earlier this year at our Investor Day, we fully offset a double-digit home volume decline between 2019 and 2023, with growth of auto-disposable tableware products over that period. A number of factors underlie our confidence in our ability to continue building upon our success and repositioning our tableware business for growth. We offer a wide range of branded and store-brand sustainable solutions, not only in plates, but across disposable tableware. And we've been expanding our new product pipeline, emphasizing not only sustainability, but also other drivers including function, fun, and affordability. And we're commercializing scientific advancements and consumer insights through investments in R&D. Our third quarter results highlight pressure on a portion of our tableware portfolio, but this business has excellent potential as we've demonstrated by effectively managing product lifecycles, and our new product pipeline and capabilities are strong. The Reynolds Cooking & Baking business delivered another solid quarter, and the outlook remains strong. Reynolds Wrap gained additional share in household foil. Reynolds Kitchens Parchment continued to grow reflecting strong innovation and significant distribution gains. We recently received new findings on several years of increased and targeted work to build brand equity with younger consumers, and I'm pleased to report that unaided awareness of Reynolds household foil and Reynolds Kitchens Parchment amongst millennials and Gen Z has grown strong double digits since 2021. In the area of operations, we are building on operational reliability and consistency and implementing new programs to achieve increased production efficiencies. Turning to Hefty Waste & Storage and Presto, our recent storage business continues to perform well in a quarter, and the outlook for these businesses is soft. Recent waste bag share trends can be difficult to interpret due to a competitor's cyber incident last year, but the data is clear. Equity share of waste bags is above 2022 levels, and the Hefty Waste & Storage business unit delivered record quarterly revenue in the third quarter. In food bags, where we have built a majority share position in store brand and food bags, the volume of the store brands grew 2% in the quarter. And in the area of product innovation, our new waste bags achieved $200 million in annual sales in a quarter. Standing on this stage, we are rolling out new eco-friendly products that have tested well with younger consumers and will launch nationally early next year. Hefty Presto closed food bags to continue to build awareness of loyalty as a more affordable brand food bag, and is also rolling out nationally in partnership with major retailers next year. In Waste, improved bags categories continue to benefit from our expanding range of sustainable solutions. Before turning the call over to Scott, I want to note the devastation that so many in the southeast are experiencing from Hurricane Milton and Helene. Reynolds Consumer Products continues to support relief efforts by donating empty trash bags and tableware products to the American Red Cross, who distributes these products to families recovering from these hurricanes and other disasters. Please join us in supporting the American Red Cross online. As I said in my opening remarks, our business is performing well overall, and we're investing in our categories, product innovation, new business endeavors, and significant incremental Reyvolution cost savings to drive sustained and attractive long-term growth. Scott, over to you.

Thank you, Lance. Good morning, everyone. We delivered on the financial priorities we set at the start of 2024, again, in the third quarter driving our categories, earnings, and cash flow, while also reducing leverage and increasing financial flexibility. Our Q3 results were in line with our expectations coming into the quarter, with the exception of non-retail revenues that exceeded our expectations by approximately $10 million. As a reminder, we estimated $15 million of revenues were pulled forward into Q2 from Q3 as contemplated in our guide. Total revenues of $910 million in the third quarter were at the upper end of our guidance, and consisted of $856 million in retail revenues and $54 million of non-retail revenues. Third quarter adjusted EBITDA increased $6 million to $171 million, driven by lower operational and SG&A costs, partially offset by lower revenues. Earnings per share were $0.41, up 11% from the third quarter of 2023, reflecting EBITDA growth and lower interest expense from paying down debt. Cash conversion remains strong, with free cash flow of $93 million for the quarter. As a result of our strong profitability and balance sheet discipline, we continue to reduce net debt leverage now at 2.3 times trailing 12-month adjusted EBITDA as of Q3. We made an additional $50 million voluntary principal payment subsequent to the quarter-end, which makes this our third pre-payment of the year totaling $150 million year-to-date. Before turning to our year-to-date results and guidance, I want to provide you with additional detail on tableware. As Lance said, tableware’s third quarter revenues were driven by lower foam plate volume and lower pricing resulting from increased promotion. However, the volume of other disposable tableware categories continued to respond well to our price pack architecture initiatives, increasing modestly and outperforming its categories by nearly one point. Tableware profits declined by an amount similar to the revenue decline, driven by lower revenue and increases in operational costs. We expect foam plate volumes to remain an increased headwind for a period of time due to legislative and consumption changes in several states. However, as Lance also pointed out, this business has great potential as we have a clear record of successfully repositioning tableware for growth, and we are doing the work to build on our success in offsetting declines in a portion of our portfolio. For the year-to-date Q3 results, retail revenues were $2.544 billion while low-margin non-retail revenues decreased to $131 million. Adjusted EBITDA of $465 million increased $67 million from the year-ago period, driven by higher manufacturing output and lower operational costs, partially offset by lower net revenues and increased advertising investments. Earnings per share were $1.10, up 43% from $0.77 in the same period of 2023, driven by higher adjusted EBITDA and lower interest expense. As a reminder, we had a non-recurring tax benefit in the second quarter of $0.05 per share. Now, turning to our guidance. To reflect the stronger than expected third-quarter non-retail revenues, we are slightly increasing our full year 2024 net revenue outlook to a range of $3.620 billion to $3.660 billion compared to revenue of $3.756 billion in 2023. As part of this guide, we continue to expect a one-point reduction from pricing which includes certain contractual pass-throughs. We expect a minus 0.5 point to a plus 1.0 point impact from retail volume, which is unchanged at the midpoint and in line with or better than our categories. This tightens the range by 100 basis points compared with our prior guide. We now expect a combined 2.0 point headwind from our non-retail business and the optimization of our retail product portfolio, slightly stronger than our prior outlook. We plan to continue leading our categories and performing at or better than our categories. We are raising our full year adjusted EBITDA guidance range to $673 million to $683 million, representing a 7% increase over $636 million in 2023. And we anticipate our full year 2024 earnings per share to be within the range of $1.66 to $1.70 per share. Other considerations incorporated into our full year 2024 forecast are as follows; increased rates for certain commodities, which, in the case of aluminum and key resins, are now priced 10% to 15% above January 2024 levels. SG&A is expected to remain materially unchanged compared to SG&A in 2023. Our depreciation and amortization assumption is approximately $125 million. Interest expense continues to be estimated at approximately $100 million. And our estimated full year effective tax rate remains just over 22%, which includes the one-time tax benefit of $0.05 per share in the second quarter. Turning to the fourth quarter; we expect Q4 net revenue in the range of $945 million to $985 million versus $1.007 billion in the fourth quarter of 2023. The assumptions include a 2.0 point reduction due to pricing, a 1.0 point reduction to a 3.0 point increase from retail volume, reflecting sequentially improving retail volume and a 3.0 point reduction attributed to non-retail volume and the optimization of the retail product portfolio. We forecast fourth quarter adjusted EBITDA in a range of $208 million to $218 million, net income to be in the range of $117 million to $125 million, and earnings per share in a range of $0.56 to $0.60. As we said when reporting first and second quarter results, we expect the quarterly contribution of EBITDA to return to historical averages in 2024. As a reminder, we anticipate an approximately $10 million increase in combined costs to negatively impact our fourth quarter results, reflecting the flow-through of aluminum purchased during the second quarter and premiums paid for cooking bags as we transition to in-sourcing this product offering. In terms of capital allocation, our priorities are unchanged, and we continue to drive cash flow and plan to invest in strategic opportunities. As you may have seen, we extended and upsized our revolving credit facility earlier this month to better align with companies that have similarly strong credit characteristics. We replaced an undrawn $250 million revolving credit facility with an undrawn $700 million revolving credit facility maturing in October 2029. Our term loan facility under the credit agreement continues to mature in February 2027, and we are actively monitoring market conditions for a potential refinancing of this facility based on our strong cash flow profile and improved credit metrics. Our program of debt reduction translates into further declines in quarterly interest expense, assuming no change to interest rates, while also increasing our ability to invest in attractive organic and inorganic opportunities to drive earnings growth and returns on invested capital. In closing, as Lance mentioned, our business model remains a competitive advantage. Our product portfolio and business are diversified, and we are doing the work to build on our history of successfully repositioning tableware for growth. We are driving our categories and investing in an expanding range of new products. We are adding new programs to our strong pipeline of Reyvolution cost savings, and we are driving cash flow and strengthening our balance sheet, providing us with additional resources and flexibility to drive attractive long-term growth and value creation. With that, I will turn the call back over to Lance.

Thank you, Scott. I am pleased to announce the next step in the history of leadership of RCP. As you can see from this morning's press release, Scott will succeed me as President and Chief Executive Officer of Reynolds Consumer Products, and Nathan Lowe, currently Head of Financial Planning and Analysis, will succeed Scott as Chief Financial Officer. Both changes are effective January 1, 2025, and I will continue in an advisory role until the planned transition of responsibilities to Scott and Nathan is complete. I'm extremely proud of all that we have achieved since I joined Reynolds Consumer Products as President and CEO 14 years ago, when we formed our company through a combination of acquisitions. We've accomplished a lot over this period, successfully prioritizing safety, developing and implementing our business model of category leadership by providing brand and store brands which have proven to be a competitive advantage, expanding our new product pipeline, making our category stronger while also driving share, consistently delivering Reyvolution cost savings, while also identifying and unlocking significant additional savings opportunities. And most importantly, building a culture of collaboration, diversity, listening, and teamwork that is creative, hardworking, and committed to winning every day in close partnership with our retail customers. As I said, this announcement is part of a planned transition, and now is the right time for its implementation. Our business is strong and performing very well, on track to deliver its second-best year of earnings since going public, a period including 2020 which was excessively strong because of the pandemic. Succession planning is an area of strength for RCP, and Scott and Nathan are highly qualified for these roles. I'm pleased that so many of you have gotten to know Scott since his joining RCP, and that you've interacted with Nathan leading up to and since our listing as a publicly traded company. I look forward to working with each of you in the coming months, and I'm confident in seamless transitions. This will be my last quarterly earnings call as President and CEO of RCP. It's been a pleasure working with so many of you since our IPO in 2020. A sincere thank you to the 6,000 RCP employees that have made the last 14 years rewarding, both professionally and personally. A thank you to all of our retail partners; you have challenged us each day to be a better, stronger supplier to you and consumers. And thank you to all of you that call into these quarterly earnings releases; as you know, we take time in preparing for these meetings, and we appreciate you taking the time to listen and for your interest in RCP. So the leadership changes are scheduled to take effect January 1, 2025. We would ask that you direct your questions to Scott and me during this call. Operator, over to you for questions.

We’ll now be conducting a question-and-answer session. And our first question will be coming from the line of Nik Modi with RBC Capital Markets.

Yes, thank you. Good morning, everyone. And Lance, Scott, Nathan, congratulations. And specifically to you, Lance, congratulations on doubling the average tenure of a CEO; it has been a pleasure working with you. I would like to understand how you are thinking about the holiday season, which is a very important period for the company? Could you elaborate on the interplay between the overall economic conditions and the shift from out-of-home to at-home consumption? Thank you.

Thank you, Nik, and thank you for that comment. I am well aware of the fact that I extended the tenure of an average CEO, and I'm ready to retire. The state of the consumer remains challenged, but as we talked about during the Q2 earnings call, we have the plans, promotions, and new product innovations in place for a strong holiday season. We're confident in our guidance that we just announced and from our retail partners’ confidence in our holiday season. So, what we're seeing so far is very positive, but as you can guess, we do get early insights on what the holiday season looks like, and it's positive for 2024.

Our next question is from the line of Andrea Teixeira with JPMorgan.

Lance, it was a pleasure interacting with you, and thank you for educating us since the IPO. Wishing you a great new chapter in your life; and also congratulations to Scott and Nathan. My question is regarding the down trade we have been seeing. I believe that your RGM is at play here, with your private label offerings and price points supporting that. Can you help us parse out that impact and see if there are any additional shifts anticipated, and if you believe we are nearing the end of this price point transition? Additionally, regarding tableware, you've been open about the foam issue, right? Could you provide a bit of a timeframe on how much of your tableware's performance is dependent upon foam, and how you plan to get ahead of that before potential promotional impacts? Thank you.

I'll start, and I'll let Scott elaborate. First, regarding the down trade and private label; private label category shares are back to 2019 levels. Year-over-year, private label share is up in some categories and down in others; and we're effectively responding to these changes. Our business model is a competitive advantage by managing both brands and store brands. These categories are highly penetrated by private label already, so we don't see significant shifts occurring year-over-year between brands and private label. On tableware, the foam trend is one we have been monitoring since 2019, as we indicated in the prepared remarks. We have very specific plans in product development and continue work across the portfolio to ensure growth of the overall tableware business. Scott?

I would just add that, in terms of the foam category, the tableware broadly tells a tale of two portfolios. The foam category is declining, so focusing resources on costs in our execution in that category makes sense. However, we have a lot of innovation, growth, and outperformance in the comparative categories away from foam; again, our focus will be on resourcing and investing for that growth.

That's helpful. How much of the total foam products are still within your tableware sales?

We don't share SKU level details due to competitive sensitivity; I will say it's the minority of the portfolio, but that's about as specific as I can go.

Okay, that’s fair. Thank you, both.

Our next question comes from the line of Mark Astrachan with Stifel.

It’s still early for 2025 planning, but how are you approaching consumer demand? You have mentioned that holiday retail volumes have accelerated through 2024, so could you share your thoughts on consumer behavior as we head into 2025? The second part relates to commodities; aluminum has moved up significantly, more than many had expected. How might you handle this if prices stay elevated? Will you need to increase pricing, or can you offset those costs in other ways?

I'll take the category and consumer question. We are seeing a bit of improvement in category volumes in Q3 versus our first half, though we had the additional pressure of foam plates. It indicates that the category price and volume have come into better balance compared to the start of the year, with the shift to at-home consumption providing a modest tailwind for our categories. Our Q4 guidance assumes improvement from the Q3 forecast, and retail adjusted volume for shipment timing and portfolio optimization has improved compared to first half performance. Overall, we're seeing modest improvement across most of our categories quarter-to-quarter.

Good morning. Regarding commodities, especially aluminum, we have seen escalation; we don't see a fundamental supply and demand imbalance, and we'll see if this is transitory or if it will stick for a period of time. We manage commodity prices through hedging tools and work with vendors to establish semi-annual price structures to maintain control over costs. Additionally, we continue our focus on Reyvolution savings to offset headwinds and maintain our pricing strategy while taking into account price gaps and elasticity.

That’s helpful. Regarding the credit facility upsizing, what are your thoughts on its potential use, especially considering the lower leverage on your balance sheet? Might this change your approach to transformative M&A? Or are you satisfied with your current categories?

Regarding the revolver, we carefully considered the marketplace for companies of similar size and profitability. The conclusion is that sizing for the revolver aligns with a typical EBITDA threshold, and extending the maturity for five years was also a priority. On the leverage front, we're pleased with our cash flow profile and have consistently stated all year long to expect north of $300 million of free cash flow, which outlines our plans for capital allocation. We are focused on organic investments, potential M&A opportunities, and returns of capital to shareholders, all competing for capital on a returns basis.

Our next question is from Jim Abbott with Barclays.

I wanted to discuss the recent Canadian tariffs on Chinese aluminum. While your Canada business is relatively small, I'm interested in the competitive impacts of those tariffs. Additionally, if we continue to see tariffs become more prevalent post-election, what might that mean for the broader competitive environment in the U.S.?

Firstly, the Canadian tariff on aluminum has a minimal impact on Reynolds Consumer Products. However, the tariff environment is something we will closely monitor in the coming months as it evolves. We have experienced managing through challenges historically and will continue to do so.

Could you expand on the legislation affecting foam plates and whether there are similar risks in other categories?

Yes. Some states and localities have enacted bans on the sale of foam products, predominantly in the West and Northeast. These are areas where foam usage is lower, while it remains unaffected in the Midwest where usage is more prevalent.

Our next question is from Robert Ottenstein with Evercore.

Lance, you’ll be missed, and congratulations to Scott and Nathan. I'd like to focus on the waste bag business. A recent analysis shows some potential share loss in your waste bag segment, while competitors may have increased promotions. What are your thoughts on the current competitive environment? Also, could you discuss higher resin prices and their potential impacts on your P&L and how you plan to address those?

Thanks, Robert. Our waste bag business is performing well. The Hefty Waste & Storage business unit achieved record quarterly revenue in the third quarter, with our share above 2022 levels. We believe there are statistical anomalies occurring in the numbers at this time due to comparison periods. Our strategy and investments in brand equity and innovation have positioned us well for continued success. Overall, our total points of distribution have also increased for Hefty Waste bags.

Regarding resin pricing, changes in these underlying prices typically affect the P&L within about 3 to 4 months. We have accounted for this in our Q4 guidance, and our focus remains on Reyvolution savings to offset these headwinds.

Our next questions come from Peter Grom with UBS.

Lance, Scott, Nathan, congratulations. Good to see you all. I have a question about category trends considering the shipment timing and dynamics this quarter. Can you highlight where you experienced stronger performance as well as areas that faced challenges? Following up on a previous question about your Q4 guidance range, it appears to be quite wide regarding retail volumes. Could you clarify the assumptions that would influence your forecast on the higher versus lower end?

As mentioned in our prepared remarks and previous Q&A, our category growth rates have been sequentially improving but vary depending on specific categories. We see a range of growth rates similar to those of other household categories. Overall, we are experiencing improvement quarter by quarter despite consumer pressures.

To address your question about the pacing of our guidance, we expect underlying retail volumes will remain flat for the full year accounting for product optimization. We see slight improvements sequentially in Q4 compared to Q3 as we aim for a bit of growth in retail volume.

Our next question is from Brian McNamara with Canaccord Genuity.

Given the ongoing trend of weaker restaurant traffic and more meals consumed at home, I expected stronger retail volumes in Reynolds Cooking & Baking. I understand you anticipate further category improvement in Q4, but were there any other dynamics influencing the quarter's performance?

One factor impacting Q3 results was the estimated $15 million of retail volumes pulled forward from Q2 into Q3, which relates to retailer promotion timing. This played a significant role in influencing Q3 performance.

I did mention that we are seeing a modest increase in at-home consumption, which will also contribute positively to our Q4 outlook.

Understood. Back in March at Investor Day, the company expressed a belief that its categories would return to low single-digit volume growth next year, with expectations to outperform. Does this view still hold true, especially with the management transition on the horizon?

You're correct in noting that the long-term algorithm is low single-digit growth. Currently, we're not ready to provide specific guidance for 2025, but we uphold our view on underlying category growth for the algorithm.

Thank you. We have reached the end of our question-and-answer session, and I will turn the floor back to Lance Mitchell for closing remarks.

I will close by thanking everyone for their time and interest in our company. As mentioned earlier, we invest considerable effort into preparing for these calls, and we appreciate the time you take to engage with us. As this is my last earnings call, it is bittersweet, and I want to extend my gratitude for your involvement with RCP, and thank you for listening today.

This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.