TreeHouse Foods, Inc. (NYSE:THS) Q2 2023 Earnings Call Transcript

Matthew Smith: Maybe a follow-up for Pat. When we think about the impact of the expiring TSAs and the incremental drag on EBITDA in the fourth quarter, is that something that will carry on into next year as you put cost savings programs into place to offset that stranded overhead?

Patrick O’Donnell: I think there’s a little uncertainty for us. That timing, it’s our expectation – and we put that out there to help you model in terms of how we were thinking about the year. And so, we’ll take action. It’ll take us a few months to go implement that. Do we think there’ll be significant impacts overall to our profit from exiting the TSA? We don’t. But it may take us a little bit of time just depending upon when in the fourth quarter. We exit, and so we’ll get back to you as we get through Q3 earnings because we’ll have better line of sight at that point. But at this point, we don’t see significant impacts from the TSA.

Steven Oakland: Given the complexity of taking a business the size we sold off of our systems and putting them on theirs, setting that date on a pin is really hard to do. So once we have a better line of sight to the exact timing. When you do your models, we want you to know that we expect both strong sales and strong margins in the fourth quarter. And there’ll be a little bit of drag, and we want you to understand that’ll probably hit our SG&A line in the quarter, assuming that, in fact, that’s when it happens. And that’s what we assume right now. And that’s what we budgeted, frankly, all year.

Operator: Your next question comes from Bill Chappell with Truist.

William Chappell: [Technical Difficulty] for Q2 volumes. Did you give [Technical Difficulty] volume?

Steven Oakland: Bill, you’re breaking up. What I heard you ask, hopefully I’m correct here is, did we give any color on what drove the volume in Q2?

William Chappell: Correct.

Patrick O’Donnell: I’d probably chunk that into a couple of pieces we tried to cover. I think, one, we saw – like others have experienced, we’ve seen overall consumption down just a little bit. And I would say the other bigger impact would be the timing challenge that we talked about where we felt the pipeline up a little bit in Q1, and that obviously impacted Q2 sales, which we anticipated when we guided. And then thirdly, we did exit some lower margin business that we’ve talked about. And so, this quarter is sort of the last quarter where we’ll lap some of those exits and distribution losses that we talked about. So we see a line of sight towards more volume growth in the second half of the year, starting in Q3.

William Chappell: I guess I’m trying to understand how much of it was decline in consumption versus the other two parts.

Steven Oakland: I think it’s kind of hard to say. We had a full channel when we ended first quarter, given how strong our service was and how strong their order pattern was. And then, the categories being down a point or two. I think our categories were down 1 to 2 points in consumption for the – if you look at the measured data. So somewhere in the middle of those two things was the bulk of it.

William Chappell: As a follow-up to that, just trying to understand, do you think that’s more of a year-over-year in terms of mobility trend or are you seeing something in certain categories that is the change?