Post Holdings (POST) Q1 2026 earnings call transcript

I'd now like to turn the call over to Daniel O'Rourke, Investor Relations for POST. Please go ahead. Good morning. Thank you for joining us today for POST's first quarter fiscal 2026 earnings question and answer session. This call is being recorded and an audio replay will be available on our website at postholdings. com. During today's call, we may make 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. The press release that supports today's call is posted on both the quarterly results and the SEC filings section of our website under the investors section, and is available on the SEC's website.

This call will discuss certain non-GAAP measures. For reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. I'm joined this morning by Rob Vitale, our President and CEO, Nico Catojio, our COO, and Matt Maynor, our CFO and Treasurer. We're doing things a little differently this quarter as we posted management remarks last night in the investors section of our website.

Our rationale for this change is to give you additional time to digest our commentary in advance of this call. In addition, given our M&A activity, our convertible debt structure, and the magnitude of recent share repurchases, we wanted to bridge our enterprise value calculation, which is furnished as an appendix to our posted remarks.

I hope you've had a chance to review this document. The key highlights are that fiscal 26 is off to a great start as we deliver Q1 adjusted EBITDA well above expectations. This operating performance coupled with an update to our food service normalized run rate allowed us to significantly increase our guidance. We have continued aggressive share repurchases so far this year, and our strong operating performance, along with our Q1 sale of the 8th Avenue pasta business, has allowed us to hold net leverage flat.

And from this position, we continue to maintain significant flexibility for opportunistic capital allocation. With that, I'll turn the call back over to the operator to open up Q&A.

Well, I think that that is certainly changing as the multiples change. Whether it's exactly where it needs to be yet or now, I think is in the eye of the field. But I think as that multiples come down, M&A becomes a much more interesting measure.

Well, now we see it as that. I mean, if you see, it is very recent, so there's a significant change in trajectory that happened in November, December, and that coincides with SNAP. So we see it as an outcome of changes in SNAP and trade-down from other categories to cereal. Not only cereal, remember we now have a significant presence in peanut butter. Peanut butter also improved in the same period. So for now, we see it as trade-down. We need to see what happens in the next few months. We need a few more months to actually have the confidence that it's a change in the category.

Yeah, Matt, I'd say the balance of the portfolio is pretty similar to our initial outlook. Obviously, we make adjustments and tweaks here and there when we think about the totality of the portfolio and our guidance, but there's nothing material. I'll always call out.

Sure. So definitely, obviously, some favorability when you think about year-over-year relative to some impacts from avian influenza last fiscal year, and also in the current year, as we talked about and started in Q4, we were getting customer inventories reloaded, got that completed this quarter. So a couple transitory benefits that fall away as we think about sequential movement into Q2.

I think we see the balance of the year more in line with both from a mixed standpoint and just overall egg growth, more in line with historical and how we think about the business, which is a 3% to 4% growth rate with a mixed benefit, you know, getting us to our algorithm.

I would say it hasn't changed our strategy. I think what you saw in the first quarter was a reduction in our promotional spend because we are adjusting our assortment in channels that are more promotional-driven to increase our efficiency. And as we adjusted the assortment on Shell, we decided to promote less, just to avoid disruptions. Longer term, we don't see a change in our strategy. I think we will continuously assess opportunities to invest, and if we see a return, we will go for it. But I don't see a material change in our strategy.

I think we are also investing in the same areas. I think we are all doing that. I mean, protein, fiber, granola, so you will see a lot more of that from us, for sure.

And some of that is actually coming to the market now, as you speak. But M&A, I think it's always the same. I would say that it hasn't really changed our M&A strategy. We continue to be opportunistic when we have the opportunity to be so. So, you know, we are not looking at a particular category or a, you know, a map in a particular segment of our business.

Sure. I think when you think about refrigerated retail, Q1 is by far their highest quarter given the amount of holiday benefit we have there. We still have Easter, which is in early April, so that full benefit will lie in Q2, but there's definitely a step down just from seasonality in that business. That's probably the biggest offset, and then we typically, across the portfolio, food service is an exception, given how hard we are running our plants. We usually have some holiday shutdown that will put a little negative pressure on Q2 just across the portfolio as we have the deleveraging impact is realized. But I say those are the two things that really offset that benefit and we not expecting a massive benefit for food service when you think about selling through that inventory but it will be elevated relative to what we think in Q3 and Q4 Okay thank you for that And then just on the RTD Shakes plan does your kind of key customers slower growth have any bearing on your plans to ramp it And maybe an update on kind of how that ramp is going Thank you Yeah, starting with the ramp, we continue to make progress on the actual volume output.

I think we still admittedly have challenges around the cost and the efficiency of that production, so still not at our run rate. And so I think continue to work on that. I think we're trying to balance, obviously, as we talk about food service, it's a $500 million business that's showing really nice strength and growth and don't want to overemphasize the shake business. So we're putting the right amount of attention there and trying to balance that. But we'll see how that plays out. I don't think there's really, when we think about the category and the longer-term opportunity, I don't see any concerns there. There is more trying to get where we want to be in terms of our run rate and profitability, and then we'll think about expansion after that.

Yeah, so again, I think it's, I mean, we're back to the value proposition of the business. I think we feel good about that run rate and the stickiness of it, and as we think, you know, that's a run rate for this year that's got some level of embedded growth in it, but as you think to next year, I think we feel good about our ability to grow off of that just because of the same dynamics of the business and what we're seeing in terms of our value proposition, helping operators take labor out of their system. Those are all, you know, in the right spot and make economic sense for operators, and there's still a nice runway when you think about converting folks from shell eggs over into value-added eggs.

So really the same dynamics we've seen for quite a few years. We're just back to a more normalized supply and demand dynamic.

I think we mentioned in the remarks, in C-DL, our volume was a bit behind the category driven by lower promotional spend. And that's essentially that's the gap. And some adjustments in assortment that take a bit of pounds out of our business. As we mentioned in the remarks, what we see as very positive, our dollar market share was flat year over year, and that's what we want. And then in pet, our volume was a bit behind the carry, mostly driven by nutrition.

And then the difference between consumption measured and our shipments was also our private-level business. We're lapping some distribution losses in our private-level pet business. So, I may have said it wrong, I apologize.

Yes, yes. Thanks for the question. It is pet-driven. We mentioned in the remarks, we tested price points mostly on Nutrish in select retailers, and those are the price points that we will target in the relaunch. So that is a headwind in terms of price mix. It is all pet.

Were you talking about total at EBITDA margin, John?

We will, as we relaunch the brand, we will hit those price points with a change in price pack architecture. So the price per pound should improve.

Sure. So, a good early start for private label. I'd say playing out as we expected. We've got that in two customers, really two offerings, mashed potatoes and mac and cheese. We continue to see a nice pipeline of opportunities to expand that business But for this year it providing you know definitely some growth on our dinner sides and I say adding to price points some of what we've seen at PCB. Having that alternative, especially in that category, we think will be really beneficial long-term and uses some of the excess capacity we have across the network. So there's a leverage benefit as well.

Certainly, we're focused on protein and options to add protein to our sides, and then also, you know, we've done some testing with Wunderlush, which is a different product for us a couple years ago. We're starting to see some success there, albeit small within the club channel. But again, I think we are giving some thought to adding some protein as well to some of those dinner side dishes.

Yep. So now that we've got inventory levels rebalanced, I would say, going forward, our supply is matched up with demand. So we become agnostic to egg prices, and then it's to your point back to a pass-through model. So there is a pass-through that's basically on a 90-day lag. So there can be a little bit of timing, but we don't see over the course of a year any significant volatility from that model historically.

I think our portfolio is pretty well balanced with the guidelines. So, you know, we are obviously going to consider the nutrient, but also the price from an M&A perspective. So I would say once we get closer to where the values are, we'll have a position on how the pyramid implicates us.

On the category, we probably wouldn't see any major changes in the recent trends. The recent trends, as you said, is dog has been softer compared to cat, the cat segment. And that is driven by some changes, whether it's urbanization and all those trends that are driving the cat segment. So we don't see material changes. In terms of our business, as you rightly said, it's sequentially getting better. A lot of that is, as we mentioned, nutrition and gravy train improvements driven by price points that we tested. And our expectation is as we relaunch those runs, it should help the brands.

That's our expectation. But as you said, it will give us confidence that the business is sequentially getting better. Volume is sequentially getting better.

The thing we mentioned in prior quarters, the benefits from the plans that we shut down should mostly hit our P&L starting in Q3. So Q3 and Q4 will see the benefits. And then after that, we will have to be very selective in what we do. I mean, there are not obvious opportunities to streamline our portfolio. It could be a line here and there, but no plans.