B&G Foods, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Quarter Four Results: Fourth quarter net sales were $551.6 million, adjusted EBITDA $86.1 million. Base business net sales ex-Crisco decreased 0.4% vs prior year. Spices & Flavor Solutions had 5% net sales growth. Margins improved: adjusted gross profit percentage 22.2% (vs 21.9% prior year), adjusted EBITDA % of net sales 15.6% (vs 15% prior year).
• Fiscal Year '24 Performance: Base business net sales declined 3.3% vs fiscal year '23; adjusted EBITDA down 7.1% vs fiscal year '23, but down 2% ex-Green Giant U.S. shelf stable divestiture and foreign currency impacts. Green Giant U.S. shelf stable divestiture impacted results.
• Portfolio Shaping: Committed to reshaping portfolio to sharpen focus, simplify, improve margins/cash flow. Finalizing strategic review of frozen and remaining canned veg businesses for possible divestiture. Green Giant may not fit with B&G's focus/capabilities due to frozen portfolio constraints.
• Fiscal 2025 Guidance: Projected net sales range $1.89B-$1.95B, adjusted EBITDA $290M-$300M, adjusted EPS $0.65-$0.75. Expect net sales benefit from 53rd week in fiscal 2025. Interest, depreciation, amortization, tax, and CapEx guidance provided.

Segment Performance

• Specialty: Net sales decreased to $216.7 million in the fourth quarter of 2024 from $227.3 million in the prior year, a -4.6% change. Segment adjusted EBITDA increased by $2.7 million (4.8%).
• Meals: Net sales decreased to $122.9 million in Q4 2024 from $125.3 million in the prior year, a -1.9% change. Meals segment adjusted EBITDA increased slightly.
• Frozen & Vegetables: Excluding the Green Giant U.S. shelf-stable divestiture impact, net sales were down $2.5 million (-2.2%) in Q4 2024 compared to the prior year. Segment adjusted EBITDA decreased by $4.7 million. Approximately $3.5 million of the decline was due to foreign currency impact, $1.5 million from increased pack costs, and $0.625 million from investments in trade.
• Spices & Flavor Solutions: Net sales increased to $101.8 million in Q4 2024 from $97 million in the prior year, a +5% change. Segment adjusted EBITDA increased by $0.6 million (2.5%), driven by increased volumes and improved net pricing/mix, offset by raw material cost increases.

Guidance

• Fiscal 2025 net sales expected to be in the range of $1.89 billion to $1.95 billion.
• Adjusted EBITDA projected to be in the range of $290 million to $300 million, with adjusted EBITDA as a percentage of net sales remaining approximately 15% to 15.5%.
• Adjusted diluted earnings per share expected to be in the range of $0.65 to $0.75.
• Full year 2025 guidance includes interest expense $147.5M-$152.5M, depreciation $47.5M-$52.5M, amortization $20M-$22M, effective tax rate 26%-27%, and CapEx $35M-$40M.

Risks

• Foreign Currency: Unfavorable U.S. dollar-Mexican peso exchange rate impacted costs in prior years, though easing, but inventory carrying costs may delay benefits.
• Inflation: Elevated costs in categories like black pepper, garlic, olive oil expected to remain in 2025, posing margin pressure.
• Political Uncertainty: Tariffs and other political events (e.g., Mexican tariffs) could impact operations and costs, with uncertainty around their materiality.
• Consumer Behavior: Changes in SNAP program benefits or broader consumer spending shifts could affect sales, especially in margin-sensitive segments.

Q: Curious what the impairment charge on Green Giant frozen either implies or doesn't imply about sort of the value, I guess, potential suitors may ascribe to the business now that you've been -- kind of put it under strategic review.

A: Yeah. It's really driven by accounting, Andrew, and business performance as opposed to us highlighting what we think the expected value in a potential sale would be. We were carrying the value of this at something north of $600 million at some point, which obviously, we're probably not going to achieve that in the sale.

Q: Just wanted to follow up on some of the top line momentum. You said a couple of times, even in the response to Andrew's question, how it's probably mostly just a question of consumers adjusting. But a lot of the elevated prices have been in the market for a while. There's been at the grocery level and across all food, something close to modest volume declines for over two years now. What drives that?

A: I mean, I think what we're looking at is what are we lapping? Like, when do we see the consumption trends, when do we start lapping the negative consumption trends last year? Because we really saw it more pronounced -- and I'm talking about dollars. I'm not actually looking at unit volume because obviously, unit volumes, when the prices first went up, we had a little bit of decline in unit volumes. But I think then there was a delayed reaction from the consumer about how they continue to react to those. So I'm looking at when do we have consumption trends begin to go negative, and we lapped those a year ago period. We didn't actually have that in January. And January and December, our consumption trends a year ago were relatively stable. So we're just looking at that pattern and seeing when do we hit it to determine when we think we might have more stabilization on the top line.

Q: I was wondering if you could comment on free cash flow in 2024? Like I didn't hear it, and I don't think the cash flow statement is out yet. So how did you end up for the year? And how should we think about 2025?

A: So you actually can find the cash from operations on Page 13 of our press release. We don't have the full statement, but we do have the line item. And we had -- yes. We probably had a -- if you look just in the fourth quarter, pretty comparable to what we did in last year's fourth quarter. 2023, our cash from operations were turbocharged because we brought inventory down so much. '24 wasn't going to replicate that. 2025 isn't going to replicate that. I'd like to think 2025 could be comparable to '24, maybe a little bit better.