Q4 2023 Reynolds Consumer Products Inc Earnings Call

Operator: Greetings and welcome to the Reynolds Consumer Products, Inc., fourth quarter, 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Reynolds Consumer products, Inc. Fourth quarter 2023 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press.

Operator: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Mark Swartzberg, Vice President of Investor Relations. Thank you, sir.

Star Zero on your telephone keypad as a reminder, this conference is being recorded its now my pleasure to introduce your host Mark Schwartzberg, Vice President of Investor Relations. Thank you Sir you may begin.

Mark David Swartzberg: You may begin. Thank you, operator. Good morning, everyone.

Mark David Swartzberg: Thank you operator, good morning, everyone and thank you for joining us on Reynolds consumer products fourth quarter and fiscal year 2023 earnings conference call.

Mark David Swartzberg: And thank you for joining us on Reynolds Consumer Products' fourth quarter and fiscal year 2023 earnings conference call. Please note that this call is being recorded and webcast on the investor relations section of our corporate website at ReynoldsCnsrProducts.com. Our earnings press release and accompanying presentation slides are also available. Also with me on the call today are Lance Mitchell, our President and Chief Executive Officer, and Scott Huckins, our Chief Financial Officer. Lance will review our accomplishments in 2023, our priorities for 2024, and our commercial performance by business, followed by Scott, who will review our results, our guidance, and our capital allocation priorities. Following prepared remarks, we will open the call to your questions. Before we begin, I would like to provide a couple of reminders. First, this morning's discussion may contain forward-looking statements based on current expectations and beliefs. These statements are subject to risks, uncertainties, and changes in circumstances that could cause actual results and outcomes to differ materially from those described today.

Please note that this call is being recorded and webcast on the Investor Relations section of our corporate website at Reynolds consumer products Dot com are.

Mark David Swartzberg: Our earnings press release and accompanying presentation slides are also available.

Mark David Swartzberg: With me on the call today are Lance Mitchell, our President and Chief Executive Officer, and Scott Huckins, Our Chief Financial Officer.

Mark David Swartzberg: Nancy will review our accomplishments in 2023, our priorities for 2024, and our commercial performance by business, followed by Scott, who will review our results our guide and our capital allocation priorities.

Speaker Change: Following prepared remarks, we will open the call for your questions before we begin I would like to provide a couple of reminders first.

Speaker Change: Mornings discussion may contain forward looking statements based on current expectations and beliefs. These statements are subject to risks uncertainties and changes in circumstances that could cause actual results and outcomes to differ materially from those described today. Please.

Mark David Swartzberg: Please refer to our risk factors section in our SEC filings, including in our annual report on Form 10-K and our quarterly reports on Form 10-Q. Please note that the company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after the call. Second, 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-K, copies of which can be found on the investor relations section of our website.

Speaker Change: Please refer to our risk factors section in our SEC filings, including in our annual report on Form 10-K, and our quarterly reports on Form 10-Q.

Speaker Change: Please note that the company does not intend to update or alter these forward looking statements to reflect events or circumstances arising after the call.

Second 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-K.

Speaker Change: Copies of which can be found on the Investor Relations section of our website now I'd like to turn the call over to Lance.

Lance Mitchell: Thank you, Mark, and good morning, everyone. I'm extremely proud of all our team accomplished in 2020. We finished very strong in our most important quarter, with record profit, significant margin expansion, and record cash flow in Q4. Throughout 2023, we grew share in our largest categories, including household oil and waste pack. We exceeded our target of 20% of sales from products launched in the past three years. We restored operational stability and returned the Reynolds cooking business to historical earnest.

Lance Mitchell: Thank you Mark and good morning, everyone.

Lance Mitchell: I'm extremely proud of all of our team accomplished in 2023.

Lance Mitchell: We finished very strong in our most important quarter.

Lance Mitchell: Record profit significant margin expansion and record cash flow in Q4.

Lance Mitchell: Throughout 2023, we grew share in our largest categories, including castle oil and waste bags.

Lance Mitchell: Exceeded our target of 20% of sales from products launched in the.

Lance Mitchell: The past three years.

Lance Mitchell: We restored operational stability and returns Reynolds cooking business historical earnings.

Lance Mitchell: Our execution across the company was strong, each of our businesses delivering double-digit profit growth. We outperformed our earnings guide, increasing adjusted EBITDA and EPS by double digits, and we increased financial flexibility. Reducing leverage to less than three times adjusted EBITDA, and you're in. As strong as our company is, volume is under pressure across consumer statements. Although unemployment rates are relatively low, and inflation is moderating, however, household savings are down, credit card debt is at record highs, and wages have not kept pace with food and energy inflation, consumers continue to contend with challenging economic pressures.

Lance Mitchell: Our execution across the company with strong.

Lance Mitchell: Each of our businesses delivering double digit profit growth.

Lance Mitchell: We outperformed our earnings guidance.

Lance Mitchell: Adjusted EBITDA and EPS double digits.

Lance Mitchell: And we increased financial flexibility.

Lance Mitchell: Reducing leverage to less than three times adjusted EBITDA at year end.

As strong as our company is volume is under pressure across consumer staples unemployment.

Lance Mitchell: Unemployment rates are relatively low inflation is moderating however.

Lance Mitchell: Savings are down.

Lance Mitchell: Current debt is at record highs and wages have not kept pace with food and energy inflation consumers.

Lance Mitchell: Consumers continue to contend with challenging economic pressures.

Lance Mitchell: As a result... Our categories volumes were down 4% in 2020; household formation, and other drivers of long-term growth that drive category consumption are being more than offset by reduced consumer spending. What does that mean for RCP? First, this means our integrated natural brand and store brand business model remains a competitive advantage. Secondly, that our entire organization is focused on driving volume at or above category, expanding margins, and maintaining discipline on cost. In 2024, we will invest in impactful advertising and actively manage price, tax sizes, and promotions to meet our retailer partner and consumers' needs for the right combination of value and performance. We will continue to innovate with new sustainable solutions and other new products to further differentiate our offerings in our categories to protect and grow our share.

Lance Mitchell: As a result.

Lance Mitchell: Our categories volumes were down 4% in 2023.

Household formation and other drivers of long term growth drive category consumption are being more than offset by reduced consumer spending.

Lance Mitchell: So what does that mean for RCP.

Lance Mitchell: First this means our integrated national brand and store brand business model remains a competitive advantage.

Lance Mitchell: Secondly, then our entire organization is focused on driving volume at or above the category growth expanding margins and maintaining discipline on costs.

In 2024, we will invest an impactful advertising and actively manage price pack sizes and promotions to meet our retailer partner and consumers needs for the right combination of value and performance.

Lance Mitchell: We will continue to innovate with new sustainable solutions and other new products to further differentiate our offerings and our categories to protect and grow our share.

Lance Mitchell: We will continue to optimize our retail product portfolio to drive improved profitability, and we will drive productivity and other revolution cost savings across our business, providing additional margin growth. I'll now review our performance and outlooks by business. The Reynolds Cooking and Baking team has executed consistently on the recovery plan we introduced to you a year ago, and I'm pleased to report that operational stability has been restored.

Lance Mitchell: We will continue to optimize our retail product portfolio to drive improved profitability.

Lance Mitchell: And we will drive productivity and other revolution cost savings across our business, providing additional margin growth.

Lance Mitchell: I will now review, our performance and outlook by business.

The Reynolds cooking and baking team has executed consistently on our recovery plan, we introduced to you a year ago.

Lance Mitchell: I'm pleased to report that operational stability has been restored.

Lance Mitchell: We've achieved historical levels of earnings. Reynolds RAP gained three points of share in 2023, and new product innovations are expanding distribution and driving growth. I'm very proud of the Reynolds cooking and baking team and how the broader organization rallied behind the recovery plan. And I'm equally pleased with our plans to continue investing in our categories to drive volume and margin in 2020. Reynolds recently surpassed the $1 billion mark at retail.

Lance Mitchell: We achieved historical levels of earnings.

Lance Mitchell: Reynolds wrap gained three points of share in 2023.

And new product innovations are expanding distribution and driving growth.

Lance Mitchell: I am very proud of the Reynolds cooking and baking team and how the broader organization rallied behind the recovery plan.

Lance Mitchell: And I'm equally pleased with our plans to continue investing in our categories to drive volume and margin in 2024.

Lance Mitchell: Reynolds recently surpassed the $1 billion Mark at retail.

Lance Mitchell: We plan to build on that momentum by adapting and executing proven features, displays, and promotions to meet consumers' needs for value, making additional modifications to price and pack combinations across Canada, and continuing to monitor and make refinements to pricing, evaluating price gaps, and thresholds by channel. We plan to drive additional volume from expanded distribution of new products in addition to increasing distribution of more established syphilis products, and will continue to recruit millennials and Gen Z consumers to our products and categories. We recently launched the Reynolds Chef's Kiss advertising campaign nationally across digital and traditional media outlets.

Lance Mitchell: We plan to build on that momentum by adapting and executing proven features displays and promotions to meet consumers' needs for value.

Lance Mitchell: Making additional modifications to price pack combinations across channels and.

Lance Mitchell: We are continuing to monitor and make refinements to pricing evaluating price gaps and thresholds by channel.

Lance Mitchell: Plan to drive additional volume from expanded distribution of new products. In addition to increasing distribution of more established high velocity products.

Lance Mitchell: We will continue to recruit millennials and Gen Z consumers to our products and categories.

Lance Mitchell: We recently launched the Reynolds chefs just advertising campaign nationally across digital and traditional media outlets chefs kiss targets young adults, who want to put more lack of experience in the kitchen.

Lance Mitchell: Chef's Kiss targets young adults who want to cook more but lack experience in the kitchen, demonstrating how Reynolds products make meal prep, cooking, and cleanup easier and better. We plan to drive additional margins through ongoing work to optimize our retail product portfolio and the implementation of new cost-savings programs. The hefty and Presto waste bag and storage businesses both achieved a strong recovery of earnings in 2023. We were happy to gain share of WasteBags at an increasing rate as the year progressed, delivering nearly a point of share growth in the third and fourth quarters. We expanded and launched high impact product innovations, including Hefty Fabuloso, which continues to grow and eclipsed $160 million in annual retail sales for the year, and numerous other products, including Hefty Ultrastrong, made with 50% post-consumer recycled materials, and Hefty Press to close food banks.

Lance Mitchell: Demonstrating how reynolds products make meal prep cooking and cleanup easier and better.

Lance Mitchell: And we plan to drive additional margin.

Lance Mitchell: Through ongoing work to optimize our retail product portfolio and the implementation of new Revolution cost savings programs.

Lance Mitchell: Our ft, and Presto waste bags and storage businesses, both achieved strong recovery of earnings in 2023.

Lance Mitchell: <unk> gained share of waste bags in an increasing rate as the year progressed, delivering nearly a point of share growth in the third and fourth quarter.

Lance Mitchell: We expanded and launched high impact product innovations, including <unk>, which continues to grow and are close to $160 million in annual retail sales for the year.

Lance Mitchell: Emirates other products, including <unk> ultra strong with 50% post consumer recycled materials and ft press to close feedbacks.

Lance Mitchell: We continue to lead the store brand food segment with strong product innovation, including bio-based sandwich bags made with 20% plant and ocean material. And in store brand waste bags, we partnered with our retail partners to launch new sizes and new, We increase profitability through ongoing work to optimize our retail product portfolio in both businesses, and we've mentioned advertising and trade support for our Retail Product Portfolio. Our plans for driving volume and expanding waste and storage margins in 2024 include continued investment in advertising and trade to protect and drive brand share, as well as further distribution gains for Hefty Fabuloso as existing scents acquire additional shelf space and new scents are added. Launch and expansion of other new products, including Hefty Press-to-Close Food Bags, which are decomposable press-to-close food bags, and Hefty Recovered Bags made with Coastal Collective Plastics.

We continue to lead the store brand foods segment with strong product innovation, including Biobased sandwich bags made with 20% plant in ocean materials.

Lance Mitchell: And in store brand waste bags, we partnered with our retail partners to launch new sizes and new <unk> with.

Lance Mitchell: We increased profitability through ongoing work to optimize our retail product portfolio in both businesses.

Lance Mitchell: And we invested in advertising and trade support.

Lance Mitchell: For our retail product portfolio.

Lance Mitchell: Our plan for driving volume and expanding waist and storage margins in 2024 conclude continue.

Lance Mitchell: Continued investment in advertising and trade to protect and drive brand share.

Lance Mitchell: Further distribution gains for hefty value low so as existing acquire additional shelf space and new sensor added launch and expansion of other new products, including Cathy Preston closed food bags empty composed to bolt press to close food bags.

Lance Mitchell: <unk> recovered bags made with coastal collective plastics.

Lance Mitchell: New and expanded distribution of store brand stretch and hold waste bags, slider, and half gallon food bags, and compostable sandwich wrappers. Continued optimization of our Hefti and Storbringer product portfolios, and additional revolution in cost savings in both businesses. Turning now to our Disposable Tableware segment, we've been very effective restoring tableware profitability. During our Q3 earnings release, I provided an update on the volume softness we were experiencing in certain tableware categories, and while we had a plan, I said it would take multiple quarters to see sustained improvement.

Lance Mitchell: New and expanded distribution of store brand stretch of old waste bags slider in half gallon food bags and proposed <unk> sandwich bags.

Continued optimization of our hefty and store, bringing product portfolios and additional revolution cost savings in both businesses.

Lance Mitchell: Turning now to our disposable tableware segment, we've been very effective restoring tableware profitability. During our Q3 earnings release I provided an update on the volume softness we were experiencing in certain <unk> categories.

Lance Mitchell: And while we had a plan I said it would take multiple quarters to see sustained improvement.

Lance Mitchell: I'm encouraged by the moderation of declines in the fourth quarter, and I'm confident that the plans we're implementing will drive further improvements in 2024 and over the long term. As we noted in our earnings release, improved holiday-related features, displays, and promotions were effective in offsetting continued elasticity pressure in the fourth quarter, and we increased the advertising and had the party cops and disposable dishes reminding consumers we'll do the dishes. And we're modifying trade plans to manage price points to key thresholds on certain packs in select channels. We're introducing new multi-packs of cups and plates at lower opening price points.

Lance Mitchell: <unk> by the moderation of declines in the fourth quarter and I am confident that the plans. We are implementing will drive further improvements in 2024 and over the long term.

Lance Mitchell: As we noted in our earnings release improved holiday related features displays and promotions were effective in offsetting continued elasticity pressure in the fourth quarter.

And we increased the advertising a hefty party constant disposable dishes.

Lance Mitchell: Mining consumers will do the dishes.

And we're modifying trade plans to manage price points to key thresholds on certain packs in select channels.

Lance Mitchell: We're introducing new multi packs of cups and plates at lower opening price points, we are expanding distribution of select high velocity products, and we are introducing and expanding distribution with sustainable solutions and other new products, including <unk>.

Lance Mitchell: We are expanding distribution of select high-velocity products, and we are introducing and expanding distribution of sustainable solutions and other new products, including Hefty Zoo Pals, Hefty EcoSave bolded fiber plates and cutlery, Hefty compostable printed paper plates, and new cups and plates with designs and colors to help celebrate and entertain during important holiday periods. I will close by reiterating that we have been very effective in supporting our categories and driving share growth while increasing earnings and financial flexibility in a challenging macroeconomic environment. Our team is implementing proven and comprehensive programs to deliver an even stronger 2024 and sustained growth into the future. Before I turn the call over to Scott, I'd like to close by highlighting that we've been very successful in completing our well-planned CFO transition. Scott has come up to speed quickly, and our finance team has clear priorities to support our plans for 2024 and beyond. Scott, it's over to you. Thank you, Lance. Good morning, everyone.

Lance Mitchell: The eco seybold fight replacement cutlery.

Lance Mitchell: FTE compostable printed paper plates, and new cups, and plates with designs and colors to help celebrate and entertained during the important holiday periods.

Lance Mitchell: I'll close by reiterating that we have been very effective supporting our categories and driving share growth, while increasing earnings and financial flexibility in a challenging macroeconomic environment.

Lance Mitchell: Our team is implementing proven and comprehensive programs to deliver an even stronger 2024 and sustained growth into the future.

Lance Mitchell: Before I turn the call over to Scott I'd like to close by highlighting and we've been very successful completing our well planned CFO transition.

Lance Mitchell: Scott has come up to speed quickly and our finance team has clear priorities to support our plans for 2024 and beyond.

Scott Huckins: Scott overview.

Scott Huckins: Thank you Lance good morning, everyone.

Scott Huckins: Before we dive in, I'd like to offer a few observations about Reynolds from my first 100. First, the Reynolds business is a very durable, sustainable earnings platform from which to build. Second, our integrated national and store brand offerings provide a strong source of competitive advantage. Third, we have run late to deliver earnings growth from the existing business portfolio over time. Fourth, I've been fortunate to have had a very thorough and thoughtful onboarding process that allowed me to get up to speed quickly.

Scott Huckins: Before we dive in I'd like to offer a few observations about Reynolds for my first 100 days.

Scott Huckins: First the rentals business is a very durable sustainable earnings platform from which to build upon.

Scott Huckins: Second our integrated National and store brand offerings provide a strong source of competitive advantage.

Scott Huckins: Third we have run linked to deliver earnings growth from the existing business portfolio overtime.

Scott Huckins: I've been fortunate to have had a very thorough and thoughtful onboarding process, allowing me to get up to speed quickly.

Scott Huckins: And fifth, I have found the leadership team to be very talented, collaborative, and supportive. As a result, I'm very pleased to be at Reynolds, and I look forward to working with all of you in the quarters and years to come. Now, turning to our results. As Lance said, we accomplished a lot in 2023 in a challenging macro environment, increasing share in our largest categories including household foil and waste bags, outperforming our earnings guides delivering double-digit earnings growth in the quarter and the year, strong execution across the entire company, with each of our businesses delivering double-digit earnings growth, free cash flows, through profit improvement, and very strong working capital management, including a nearly $200 million reduction of and significantly increasing financial flexibility by reducing leverage by more than one turn of adjusted EBITDA from 3.8 times in 2022 to 2.7 times in 2026.

Scott Huckins: Fifth.

Scott Huckins: The leadership team to be very talented collaborative and supportive.

Scott Huckins: As a result, I'm very pleased to be at rental and I look forward to working with all of you in the quarters and years to come.

Scott Huckins: Now turning to our results.

As Lance said, we accomplished a lot in 2023 and a challenging macro environment.

Scott Huckins: Increasing share in our largest categories, including household soil and waste bags.

Scott Huckins: Outperforming our earnings guidance, delivering double digit earnings growth in the quarter and the year.

Scott Huckins: Strong execution across the entire company with each of our businesses delivering double digit earnings growth.

Scott Huckins: Generating record free cash flows the profit improvement and very strong working capital management, including nearly 200 million dollar reduction of inventory.

Scott Huckins: And significantly increasing financial flexibility by reducing leverage by more than one turn of adjusted EBITDA.

Scott Huckins: From three eight times in 2022 to two seven times in 2023.

Scott Huckins: You should expect us to continue down this path in 2020, driving retail volume at or above the category's performance, delivering earnings growth by investing in our categories and product innovation, optimizing our retail product network, driving productivity, disciplined cost management, and unlocking additional operational cost savings, and continuing to increase financial flexibility by reducing leverage toward the top of our target range of 2 to 2.5 times adjusted EBITDA by euro. Now I would like to review our 2023 and fourth quarter results in more detail before turning to our guide. For the year, retail net revenues were $3,559,000,000, surpassing 2022 retail net revenues by 10 million. This increase was more than offset by a $71 million decrease in low-margin, non-retail net revenues, resulting in a $61 million decline in consolidated net revenues. Our shared means were significant.

Scott Huckins: You should expect us to continue down this path in 2024.

Scott Huckins: Driving retail volume at or above the categories performance.

Scott Huckins: Delivering earnings growth by investing in our categories and product innovation.

Scott Huckins: Optimizing our retail product mix.

Scott Huckins: Driving productivity disciplined cost management and unlocking additional resolution cost savings.

Scott Huckins: And continuing to increase financial flexibility by reducing leverage towards the top of our target range of two to two five times adjusted EBITDA by year end.

Scott Huckins: Now I would like to review, our 2023 and fourth quarter results in more detail before turning to our guide.

Scott Huckins: For the year retail net revenues were $3 billion $559 million surpassing.

Scott Huckins: Surpassing 2022 retail net revenues by $10 million.

Scott Huckins: This increase was more than offset by a $71 million decrease in low margin non retail net revenues.

Salting and a $61 million decline in consolidated net revenues for the year.

Scott Huckins: Our share gains were significant.

Scott Huckins: Demonstrating a 2% decline in retail volume compared to a weighted average category decline of 4%, adjusted EBITDA increased $90 million or 16% to $636 million, reflecting over 250 basis points of margin expansion. This was driven by executing the Reynolds cooking and baking recovery plan, ongoing work to optimize the retail product portfolio, lower operational costs, and previously implemented price inaction, partially offset by higher SG&A, which included an increased investment in advertising. Free cash flow of $540 million, which increased $449 million versus the prior year, driven by earnings growth and a nearly $200 million reduction of inventory. As a result of our successful focus on cash flow, we paid down $262 million of debt, driving the significant increase in financial flexibility that I mentioned, and adjusted earnings per share from $1.42 per share, up 11% from $1.28 per share in 2020.

Scott Huckins: Demonstrated by a 2% decline in retail volume compared to our weighted average category decline of 4% for the year.

Scott Huckins: Adjusted EBITDA increased $90 million or 16% to $636 million, reflecting over 250 basis points of margin expansion.

Scott Huckins: This was driven by executing the Reynolds cooking and baking recovery plan.

Scott Huckins: Ongoing work to optimize the retail product portfolio.

Scott Huckins: <unk> operational costs and previously implemented pricing actions, partially offset by higher SG&A, which included an increased investment in advertising.

Scott Huckins: Free cash flow of $540 million, which increased $449 million versus the prior year.

Scott Huckins: Driven by earnings growth and a nearly $200 million reduction of inventory.

Scott Huckins: As a result of our successful focus on cash flow, we paid down $262 million of debt driving a significant increase in financial flexibility that I mentioned.

Scott Huckins: And adjusted earnings per share.

Scott Huckins: <unk> 42 per share up 11% from $1 28 per share in 2022.

Scott Huckins: Now turning to the results of the fourth quarter, we delivered in-line revenues. Ian Shearer grew earnings at the high end of our guide and continued to increase financial. Retail Net Revenues were $972 million. 42 million below retail net revenues in the fourth quarter of 2022, driven primarily by lower tableware volume, as well as the optimization of our retail product portfolio. As Lance mentioned, tableware volume improves sequentially, responding well to improved holiday-related promotion. We continue to outperform our categories in the fourth quarter. Retail volume decreased 3% compared to a weighted average category decline of 4%, demonstrating the strength of our brands and advantages of our integrated business model.

Scott Huckins: Now turning to the results for the fourth quarter, we delivered inline revenues.

Scott Huckins: Sure.

Scott Huckins: Grew earnings at the high end of our guide and continue to increase financial flexibility.

Retail net revenues were $972 million.

Scott Huckins: $42 million below retail net revenues in the fourth quarter of 2022.

Scott Huckins: Driven primarily by lower table, where volume as well as the optimization of our retail product portfolio as.

Scott Huckins: As Lance mentioned cable or volume improved sequentially, responding well to improved holiday related promotions.

Scott Huckins: We continue to outperform our categories in the fourth quarter.

Scott Huckins: Retail volume decreased 3% compared to a weighted average category decline of 4% evidenced the strength of our brands and advantages of our integrated business model.

Scott Huckins: Low-margin, non-retail net revenues declined $40 million, as expected, driven by lower demand from industrial customers. However, adjusted EBITDA increased $38 million, or 19%, to $238 million, reflecting over 500 basis points of margin expansion. This was driven by executing the Reynolds Cooking and Baking Recovery Plan. Increased optimization of the retail product portfolio and lower operational costs, partially offset by higher SG&A, which included increased investment in advertising, free cash flow of $194 million, driven by earnings growth and an over $50 million reduction in eminence. $150 million of voluntary principal payments were made during the quarter, and adjusted earnings per share of $0.65 a share, up 23% from $0.53 per share in the fourth quarter of 2022.

Scott Huckins: Low margin non retail net revenues declined $40 million as expected driven by lower demand from industrial customers.

Scott Huckins: Adjusted EBITDA increased $38 million or 19% to $278 million, reflecting of our 500 basis points of margin expansion.

Scott Huckins: This was driven by executing the Reynolds cooking and baking recovery plan increase.

Scott Huckins: Increased optimization of the retail product portfolio and lower operational costs, partially offset by higher SG&A, which included increased investment in advertising.

Scott Huckins: Free cash flow of $194 million.

Scott Huckins: Driven by earnings growth and an over $50 million reduction of inventory.

Scott Huckins: $150 million of voluntary principal payments are made during the quarter.

Scott Huckins: And adjusted earnings per share were <unk> 65, a share up 23% from 53 per share in the fourth quarter of 2022.

Scott Huckins: Turning to our 2024 guide, as I mentioned, our financial objectives are simple. One, protect and grow, and share. 2.

Speaker Change: Turning to our 2024 guide as I mentioned, our financial objectives are simple and clear.

One protect and grow share.

Speaker Change: To drive earnings growth and three continue to increase financial flexibility.

Scott Huckins: Drive earnings growth, and 3. Continue to increase financial flexibility. We guide net revenues in the range of $3,530,000,000 to $3,640,000,000 for the year, compared to net revenues of $3,756,000,000 in 2020. Most of the decrease was approximately three percentage points, expected from declines in our non-retail business and further optimization of our retail product portfolio.

Speaker Change: We guide net revenues in the range of $3 billion $530 million to $3 billion $640 million for the year compared to net revenues of $3.756 billion in 2023.

Speaker Change: Most of the decrease or approximately three percentage points is expected from declines in our non retail business and further optimization of our retail product portfolio.

Scott Huckins: As a reminder, our non-retail business is reported in our Reynolds Cooking and Baking business and is low margin and subject to different demand dynamics than our retail business. According to Circana, our categories are projected to be down 2% on average for the year in 2024. We plan to perform, at or better than these categories, at a rate of minus 2 to plus 1. Pricing is forecasted to be a headwind of 1%, which includes certain contractual pastimes. We plan to support our categories and product portfolio by investing in advertising, trade, and product innovation. We plan to grow earnings by protecting and growing here, continuing to optimize our retail product portfolio, driving productivity, maintaining cost discipline, and unlocking additional restructuring costs, resulting in adjusted EBITDA in a range of $660 million to $680 million.

Speaker Change: As a reminder, our non retail business as reported in our Reynolds cooking and baking business and is low margin and subject to different demand dynamics in our retail business.

Speaker Change: According to us or cannot our categories are projected to be down 2% on average for the year in 2024.

Speaker Change: We plan to perform at or better than these categories.

Speaker Change: The rate of minus two to plus 1%.

Speaker Change: Pricing is forecasted to be a headwind of 1% which includes certain contractual pass throughs.

Speaker Change: We plan to support our categories and product portfolio by investing in advertising trade and product innovation.

Speaker Change: We plan to grow earnings by protecting and growing share.

Speaker Change: Continuing to optimize our retail product portfolio.

Speaker Change: Driving productivity.

Speaker Change: Maintaining cost discipline and unlocking additional resolution cost savings.

Speaker Change: Resulted in adjusted EBITDA in a range of $660 million to $680 million for the year.

Scott Huckins: And, we forecast earnings per share of $1.57 to $1.65 for the year, driven by adjusted EBITDA growth and last year's significant improvement in leverage, resulting in lower interest. Other considerations for the year consist of the following. Commodities are expected to be more stable than in recent years. SG&A is forecasted to be unchanged to slightly down compared to SG&A in 2023. Depreciation and amortization is estimated at $120 million for the year. Interest expense is estimated at $100 million for the year, and our estimated effective tax rate is 24 and a half percent. Turning the pages.

Speaker Change: And we forecast earnings per share of $1 57 to $1 65 for the year driven by adjusted EBITDA growth and last year's significant improvement in leverage resulting in lower interest expense.

Speaker Change: Other considerations for the year consist of the following.

Speaker Change: Commodities are expected to be more stable than in recent years.

Speaker Change: SG&A is forecasted to be unchanged to slightly down compared to SG&A in 2023.

Speaker Change: Depreciation and amortization is estimated at $120 million for the year.

Speaker Change: Interest expense is estimated at 100 billion for the year.

Speaker Change: And our estimated effective tax rate is 24.5%.

Speaker Change: Turning to phasing.

Scott Huckins: In the first quarter, we expect net revenues in a range of $795 million to $820 million versus first quarter 2023 net revenues of $874 million, consisting of a 4.5 points headwind from lower non-retail volume in further optimization of the retail product portfolio, a 4.5 to a 1.5 point headwind from retail volume at or better than category volume, which we expect to improve as the year progresses, and Unchanged Price. We expect Adjusted EBITDA in a range of $115 to $120 million, representing a significant increase over first quarter 2023 Adjusted EBITDA and an entry per share of 21 to 23 cents per share.

Speaker Change: In the first quarter we.

Speaker Change: We expect net revenues in a range of 795.

Speaker Change: $820 million versus first quarter 2023, net revenues of $874 million consisting of.

Speaker Change: The four five point headwind from lower non retail volume and further optimization of the retail product portfolio.

Speaker Change: A four and a half to a one five point headwind from retail volume at or better than category volumes, which we expect to improve as the year progresses.

Speaker Change: And unchanged pricing.

Speaker Change: We expect adjusted EBITDA in a range of $115 million to $120 million, representing a significant increase over first quarter 2023 adjusted EBITDA.

Speaker Change: And earnings per share of 21 to <unk> 23 per share in.

Scott Huckins: In addition, it is worth noting that in 2023, with one of our businesses executing a recovery plan, quarterly contribution of earnings was not representative of our historical phasing of earnings. We see quarterly contribution of earnings looking a lot more like historical levels in 2020. Returning to cash flow and capital allocation, our top priority is to continue increasing financial flexibility by paying down debt. We estimate free cash flow of over $300 million this year.

Speaker Change: In addition, it is worth noting that in 2023 with one of our businesses executing our recovery plan quarterly.

Speaker Change: Quarterly contribution of earnings was not representative of our historical phasing of earnings.

Speaker Change: We see quarterly phasing of earnings looking a lot more like historical levels in 2024.

Speaker Change: Turning to cash flow and capital allocation, our top priority is to continue increasing financial flexibility by paying down debt.

Speaker Change: We estimate free cash flow of over $300 million this year.

Scott Huckins: Remember, we are comparing last year's nearly $200 million reduction in inventory and that we will be below the upper end of the target leverage of 2 to 2.5 times adjusted EBITDA by year-end. Our 2023 results put us on track to cut our annual interest expense by approximately $20 million in 2024. And as you know, every dollar of debt paid down generates a roughly 7% return. Remember, as we noted in November, our term loan is a floating rate. We have hedged approximately 60% of the floating rate, affording us the flexibility to deliver without penalty, while providing protection and predictability in this volatile interest rate environment, and our capital allocation priorities remain unchanged. One

Speaker Change: Remember, we're comping last year's nearly $200 million reduction of inventory.

Speaker Change: And that we will be below the upper end of target leverage of two to two five times adjusted EBITDA by year end.

Speaker Change: Our 2023 results put us on track to cut annual interest expense by approximately $20 million in 2024.

Speaker Change: And as you know every dollar of debt Paydown generates a roughly 7% return.

Speaker Change: Remember too as we noted in November our term loan has a floating rate facility.

Speaker Change: We have hedged approximately 60% of the floating rate risk.

Speaker Change: <unk> 40, <unk>, the flexibility to delever without penalty, while providing protection and predictability in this volatile interest rate environment.

Speaker Change: And our capital allocation priorities remain unchanged one.

Scott Huckins: Invest in Organic Growth, Automation, and Other Revolution Cost Savings to return cash to shareholders by maintaining our current dividend and achieving leverage of two to two and a half times adjusted EBITDA, and three, pursue both acquisitions consistent with our marketplace position in core companies. Before I turn the call over to your questions, I want to say that we had a very strong year in 2023.

Speaker Change: Invest in organic growth.

Speaker Change: Automation and other revolution cost savings.

Speaker Change: Returning cash to shareholders by maintaining our current dividend and achieving leverage of two to two five times adjusted EBITDA.

Speaker Change: And three pursue bolt on acquisitions.

Speaker Change: With our marketplace position and core competencies.

Speaker Change: Okay.

Speaker Change: Before I turn the call over to your questions.

Speaker Change: We had a very strong year in 2023, and I am pleased with our high degree of visibility into 2024 earnings, noting that we planned for a stronger contribution in the first half as we return to our historical phasing of earnings.

Operator: And I am pleased with our high degree of visibility into 2024 earnings, noting that we plan for a stronger contribution in the first half as we return to our historical approach of. Our financial flexibility is increasing, and we have the opportunities, commercial strength, and programs to drive earnings growth over the long term. Finally and importantly, I'd like to remind everyone that we are hosting an Investor Day in New York on March 9th, our business unit presidents. Lance and I look forward to speaking in more detail about our strategies to create value by driving organic and inorganic growth. With that, let's turn to your questions. Operator?

Speaker Change: Our financial flexibility is increasing and we have the opportunities commercial strength and programs to drive earnings growth over the long term.

Speaker Change: Finally, and importantly, I would like to remind everyone that we're hosting an investor day in New York on March 19th or.

Speaker Change: Our business unit presidents.

Speaker Change: And I look forward to speaking in more detail about our strategy is to create value by driving organic and inorganic growth.

Speaker Change: With that let's turn to your questions operator.

Operator: Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question... You may press star 2 if you'd like to remove your question from the... For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.

Speaker Change: Thank you at this time well be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is another question queue. You May press star two if you'd like to remove your question from Nokia for participants using speaker equipment. It may be necessary to pick up your handset.

Speaker Change: So for question Mr. Archie.

Rob Ottenstein: Finally, we... I ask you to keep to one question and one follow-up and invite you to rejoin the... Our first question comes from the line of Rob Ottenstein with Evercore ISI. Please proceed with your question. Great, thank you very much and congratulations on a real solid year. Two questions, please. First, your non-retail revenue guide seems to be the big difference between consensus revenue estimates and actual revenue. Is that right?

Archie: Finally, we.

Archie: Ask you to keep to one question and one follow up and invite you to rejoin the queue.

Archie: Our first question comes from the line of Rob Stone.

Rob Stone: With Evercore ISI. Please proceed with your question.

Rob Stone: Great. Thank you very much and congratulations on a a real solid year.

Rob Stone: Two questions. Please.

Rob Stone: First your your non retail revenue guide seems to be the big difference.

Between consensus revenue.

Rob Stone: Estimates.

Rob Stone: Is that right and what's driving the declines of that business. So that's the first question and then second can you give us some details in terms of the cost savings programs for 2024, what areas, you're you're attacking and perhaps dimensionalize that a little bit more thank you.

Rob Ottenstein: And what's driving the decline in that business? So that's the first question. And then, second, can you give us some details in terms of the cost savings programs for 2024? What you know, areas you're attacking, and perhaps, you know, dimensionalize that a little bit more.

Scott Huckins: Thank you. Good morning, Scott. Thanks for the question. So, on the first topic, I think your conclusion is correct about non-retail revenues. Maybe just to reset.

Speaker Change: Good morning, Scott. Thanks for the question. So on the first topic I think inclusion is correct around non retail revenues, maybe just to reset.

Scott Huckins: On the third quarter earnings call in November, the company commented that we expected a pretty sharp decline in non-retail revenue in the fourth quarter, and that's exactly what manifested itself. We went on to say that that run rate of non-retail revenue in the fourth quarter would probably be a pretty good proxy for what we would expect to see in 2024. I think it's probably worth reminding you that the margin profile of that revenue stream is fairly low, as evidenced by the results that you would have seen, both in dollar and margin form, in the P&L in the fourth quarter. In terms of cost savings, I think if you work through the implied margin rates in the guide, it's about a 200 basis point improvement in 2024 versus 2023. So again, a good contribution from the Revolution program is behind that. In terms of the topics or categories of focus, manufacturing would be on that list.

Speaker Change: On the third quarter earnings call in November the company commented that we expected a pretty sharp.

Speaker Change: Decline in non retail revenue in the fourth quarter, and that's exactly what manifested itself.

Speaker Change: We went on to say that that run rate of non retail revenue in the fourth quarter would probably be a pretty good proxy for what we would expect to see in 2024.

It's probably worth reminding the margin profile of that revenue stream is fairly low as evidenced by the results that you would've seen both in dollar and margin form in the P&L in the fourth.

Speaker Change: During the quarter.

Speaker Change: In terms of the cost savings I think if you work through the implied margin rates in the guide it's about a 200 basis point improvement 2024 versus 2023. So again a good contribution from the Revolution program is behind that in terms of.

Speaker Change: The topics or categories of focus manufacturing would be on that list I think many companies coming out of Covid are getting back in the business of really focusing on manufacturing efficiencies and a new normal and number two would be across supply chain costs, both inbound and outbound receipt of materials.

Scott Huckins: I think many companies coming out of COVID are getting back in the business of really focusing on manufacturing efficiencies in a new normal. And number two would be across supply chain costs, both inbound and outbound receipt of material. Can you give us a range of an actual absolute number on the cost-saving side? I think you can really see it in the differential in EBITDA, to keep it simple. That's probably the best proxy rather than go through a really detailed reconciliation.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Can you give us a range of Ah, but actual absolute number on the cost savings side.

Speaker Change: Yeah.

Speaker Change: I think you could see it really in the differential in an EBITDA is to keep it simple.

Speaker Change: That's probably the best proxy rather than go through a really detailed actions a reconciliation that's probably the easiest way to think about it.

Scott Huckins: That's probably the easiest way to think. All right. Thank you. Thank you. Our next question comes from the line of Lauren Lieberman with Barclays. Please proceed with your question. Great, thanks.

Speaker Change: Alright, thank you.

Speaker Change: Thank you. Our next question comes from the line of Lauren Lieberman with Barclays. Please proceed with your question.

Lauren Rae Lieberman: Great. Thanks.

Lauren Rae Lieberman: So there were two threads of language that struck me as pretty interesting this morning. One was, both in the release and during the call, the mentions about portfolio rationalization on the retail side. A lot of discussion around velocity.

Lauren Rae Lieberman: So to kind of.

Lauren Rae Lieberman: Threads of languages checking me is pretty interesting. This morning, one wise, both on the release and through the call.

Lauren Rae Lieberman: You mentioned about portfolio rationalization on the retail side.

Lauren Rae Lieberman: A lot of discussion around velocity.

Lauren Rae Lieberman: And then, Scott, you mentioned that one of your observations was the runway for growth with the existing product portfolio. So it sounds like there's almost like a new lens through which the team is looking at the business and evaluating the kind of strategies. Not to front run the investor day, but I was wondering if you could maybe talk a little bit about the genesis of this conversation around portfolio optimization. How significant are we talking about? Is it around the edges skews, but kind of what happened to make this opportunity clear that it's getting so much airtime today? Thanks. Hi Lauren, this is Lance.

Lauren Rae Lieberman: And then Scott you mentioned that one of your observations as the runway for growth with the existing product portfolio.

Lauren Rae Lieberman: It sounds like there's almost like a new lens through which the team is looking at the business and evaluating the kind of the strategy.

Lauren Rae Lieberman: Not to front run the Investor day, but I was wondering if you could maybe talk a little bit about the Genesis of this conversation around portfolio optimization, how significant are we talking is it around.

Lauren Rae Lieberman: Around the edges, skus, but kind of what happened to.

Lauren Rae Lieberman: To meet this opportunity clear.

Lauren Rae Lieberman: Sure.

Speaker Change: It's getting so much of your time today.

Speaker Change: Hi, Laurie this is lance. Thank you for your question regarding the.

Lance Mitchell: Thank you for your question. Regarding retail product portfolio optimization, it's really not anything new. I would say it's we re-engage in that post-COVID because during the COVID timeframe, we were more focused on supply, manufacturing, and supply chain challenges, ensuring that we were providing our retail partners and our consumers with adequate supply. We've since matured into where we are now, where we're evaluating each product and ensuring the velocities and the product profitability are enough to ensure sustained presence on the show. And in those cases where it's not, we've made decisions to rationalize the skews in the product. To be clear, this is around the tail.

Lance Mitchell: Retail product portfolio optimization, it's really not anything new I would say, it's we re engaged in that post COVID-19 because during the COVID-19 time frame.

Lance Mitchell: We were more focused on supply manufacturing supply chain challenges, ensuring that we were providing our retail partners and our consumers with adequate supply.

We've since matured into where we are now where we're evaluating each product and ensuring the velocities and the product profitability.

Lance Mitchell: Is enough to ensure sustained presence on the shelf.

Lance Mitchell: And in those cases, where it's not we've we've made decisions to rationalize the skus with product lines to be clear. This is around the tail.

Lance Mitchell: This is around the edges for your questions. This is not a significant change in the product portfolio, but rather just continuous evaluation as we did before COVID to ensure that we've got the right products and the right velocity. Okay, great. And then, thank you. If I could do just one more, which is just around commodities. I know it's tough to know what and how you buy, etc.

Lance Mitchell: This is around the edges for your your question. This is not a significant change in the product portfolio, but rather just continuous.

Lance Mitchell: Evaluation is we did previous to Covid to ensure that we've got the right products and the right velocities.

Okay, Great and then thank you if I could do just one more.

Lance Mitchell: It was just around the <unk>.

Lance Mitchell: Commodities I you know.

Lance Mitchell: I know, it's tough to know what and how you buy et cetera, but just curious I would've thought there might have been more upside.

Lance Mitchell: But just curious; I would have thought there might have been more upside in 24 from commodities. So I'd be kind of curious to get your thoughts on why it seems to be a bit more muted. Well, commodities have, for the most part, stabilized, but I will point out, for example, polyethylene, which is used in waste bags and food bags, primarily product lines, increased 9 cents a pound in 2023 and recently increased another 5 cents a pound in 2024. So it's stable compared to the last couple of years, but it is still on an upward trajectory, as is inflation of other inputs, including labor costs Utility costs. So those costs continue to increase, and we're managing from a cost management standpoint to ensure margin improvement. Okay, great. All right. Thank you. I'll pass it on.

Lance Mitchell: In the in 'twenty four from commodities. So just kind of curious to get your thoughts on why it seems to be a bit more muted.

Speaker Change: Well commodities have.

Speaker Change: For the most part stabilized, but I will point out for example, polyethylene which is used in a ways.

Speaker Change: Waste bags food bags, primarily product lines increased nine a pound in 2023 and recently increased another five pounds in 2024.

Speaker Change: So it's stable compared to the last couple of years, but it is still on an upward trajectory as it is inflation of other inputs, including labor costs utility costs.

Speaker Change: So those costs continue to increase the work, we're managing from a cost management standpoint to ensure margin improvement.

Speaker Change: Okay, Great Alright, Thank you I'll pass it on.

Lance Mitchell: Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star 1 on your telephone key. Our next question comes from the line of Mark Astrachan with CFL.

Speaker Change: Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Mark Astrachan with Stifel. Please proceed with your question.

Mark Stiefel Astrachan: Please proceed with your question. Yeah, thanks morning, everyone. I wanted to go back to the innovation commentary and, just sort of in retrospect, ask you about how you think about cannibalization versus incrementality of innovation. You talk about the contribution to total growth from innovation. There's been a lot of innovation. I don't know how it compares to pre-IPO levels, but it certainly seems like a lot over the last year or so. So how is that in relative terms of expectations and historical levels? And as you think about the innovation going into 24, sort of the same question, and then I've got a follow-up.

Mark Stiefel Astrachan: Yeah. Thanks, good morning, everyone.

Mark Stiefel Astrachan: I wanted to go back to.

Mark Stiefel Astrachan: The innovation commentary and just sort of.

Mark Stiefel Astrachan: In retrospect.

Mark Stiefel Astrachan: Asked about how you think about cannibalization versus increments Audi of innovation can you talk about the contribution to growth from innovation.

Mark Stiefel Astrachan: There's been a lot of innovation and I don't know how it compares to pre IPO levels, but the certainty of it a lot over the last year or so.

Mark Stiefel Astrachan: How is that in 'twenty, three relative to expectations and historical levels and as you think about the innovation going into 'twenty or sort of the same question and then I've got a follow up thank you.

Lance Mitchell: Thank you. Thank you. You know, in 2023, we did exceed our target of 20% of products introduced within the last three years, from a revenue standpoint, contributing to our share gains in multiple categories. In 2024, as I mentioned in the prepared remarks, we've had recent introductions like Efti Fabuloso with NuSense, Efti Press-to-Close Food Bags, which are gaining distribution in our largest categories, and recent introductions like Reynolds Kitchen Air Fryer Liners and Butcher Paper to build in our adjacent categories.

Speaker Change: Sure Mark Thank you.

Speaker Change: In 2023, we did exceed our target of 20%.

Speaker Change: <unk> introduced within the last three years.

Speaker Change: From a revenue standpoint, contributing to our shape share gains in multiple categories in.

Speaker Change: In 2024, as I mentioned in the prepared remarks.

Speaker Change: We've had recent introductions like <unk>.

Speaker Change: Ft Fabulous, so with new sense. After you press the closed food bags, which are gaining distribution in our largest categories.

Speaker Change: And recent reductions like Reynolds kitchen ear for airliners Butcher paper to build in our Adjacencies.

Lance Mitchell: So entirely new products are increasing usage among Gen Zs, Millennials, and all consumers, including hefty compostable Presta-Close food bags, hefty recovery bags with coastal plastics, and hefty party cups with 100% post-consumer recycled material. They do cannibalize existing products, so we take that into account, but it's the product life cycle of all products to ensure that we're continually reinventing ourselves to ensure continued growth and growing faster than the category, which we demonstrated in 2023 and we're going to do again in 2020. I got it.

Speaker Change: So entirely new products increased usage among gen Z millennials and all consumers, including hefty proposal press the closed food bags hefty recover.

Speaker Change: Bags with coastal.

Speaker Change: Plastics, and hefty party cups, with 100% post consumer recycled materials.

They do cannibalize existing products, so we take that into account.

Speaker Change: It's the product lifecycle wall products to ensure that we're continually reinventing ourselves to ensure continued growth and growing faster than the category, which we demonstrated in 2023 and we're going to do again in 2024.

Speaker Change: Got it okay. Thank you and then maybe bigger bigger picture sort of question in retrospect and kind of on a year end result, which is.

Mark Stiefel Astrachan: Okay. Thank you. And then maybe a bigger, bigger picture answer to a question in retrospect and kind of on a year-end result, which is, sustainability and impact on business. I guess I asked in the context of some of your product categories being maybe a little less sustainable than some others, thinking like plastic wrap versus alternatives. Obviously, you made an acquisition of Atacama a few months ago, and so that was partly with the idea of creating a bit more of a sustainability edge relative to what you could develop.

Speaker Change: Sustainability and impact on the business I guess I ask in the context of.

Speaker Change: Some of your product categories, being maybe a little less sustainable and some other thinking like plastic wrap versus alternative obviously, you made an acquisition about a comma.

Speaker Change: Few months ago, and so that was partly with this idea of creating a bit more of a sustainability relative to what you could develop so yes.

Mark Stiefel Astrachan: So I guess if you could kind of give a state of the union, so to speak, in how you think about your consumers, especially if you talk about younger consumers and household formation, trying to drive incrementality of usage, who may be more focused on things like that relative to older households and older consumers, and sort of how does it all fit together? What was the impact of 23 on the business? And kind of how do you think about that in the context of the business plan over the next three to five years? Thank you, Mark. We have stated in our ESG scorecard and goals that we will have a sustainable alternative for all of our products by 2025.

Speaker Change: You can kind of give it.

Speaker Change: State of the Union so to speak in how you think about your consumers, especially if you talk about younger consumers.

Speaker Change: In household formation and trying to drive incremental usage.

Speaker Change: Who may be more focused on.

Speaker Change: Things like that relative to older households, and older consumers and sort of how does it all fit together what was the impact in 'twenty three out of the business and kind of how do you think about that in the context of the business plan over the next three to five years.

Speaker Change: Thank you Mark.

Speaker Change: We have stated in our ESG scorecard intervals that we will have a.

Speaker Change: Sustainable alternative for all of our products by 2025.

Lance Mitchell: And I'm proud to say that we're well on our way to accomplishing that goal. We have over 90% of our products have a sustainable product solution. For example, think of the hundred percent recycled aluminum foil in the Reynolds wrap family of products. Think about the fact we have unbleached compostable parchment paper in our parchment paper.

Speaker Change: And I'm proud to say that we're well on our way to accomplishing that goal. We are over 90% of our products have a sustainable product solutions for example think of a 100% recycled.

Speaker Change: Aluminum foil and the Reynolds wrap.

Speaker Change: Family of products.

Speaker Change: Think about the fact, we have unbleached.

Speaker Change: <unk> posted a partial paper and our partial paper line.

Lance Mitchell: And it goes on. You know, we've got post-consumer recycled plastics in our waste bags. We have compostable food bags.

Speaker Change: And it goes on.

Speaker Change: Post consumer recycled plastics in our waste bags, we got can postal food bags. So across the line. We are focused on developing sustainable product solutions to reach all generations. It's not just gen Z and millennials that are seeking.

Lance Mitchell: So across the line, we are focused on developing sustainable product solutions to reach all generations. It's not just Gen Z and millennials that are seeking those opportunities. It's all of our consumers, and we're focused on developing a wide range of products to meet their requirements. From a product development standpoint, the other thing we're focused on and the reason we made that acquisition is to look at narrowing the price cost gap between the sustainable solutions and the more traditional products so that we can, for example, provide 100% recycled post-consumer hardy cups at a near price point to our existing price. I got it.

Speaker Change: Those opportunities, it's all of our consumers and we're focused on developing a wide range of products to meet their requirements.

Speaker Change: From a product development standpoint, the other thing we're focused on and the reason we made that acquisition is to look at narrowing the price cost gap between the sustainable solutions in a more traditional products. So that we can for example provide a 100% recycled post consumer.

Speaker Change: Hardy Cup.

At a near price point to our existing product line.

Mark Stiefel Astrachan: Okay. Thank you. Thank you. Our next question comes from the line of Brian McNamara with Canaccord Genuity. Hey, good morning, guys. Thanks for taking the questions. I have one for Scott.

Speaker Change: Got it okay. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Brian Mcnamara with Canaccord Genuity. Please proceed with your question.

Brian McNamara: Hey, good morning, guys. Thanks for taking the question I have one for Scott I'm curious what has surprised you. After your first 100 days about the organization I'm, assuming when you were higher you had some baseline level of expectation I'm curious what has deviated maybe both good and bad relative to your initial thoughts. Thanks.

Brian McNamara: I'm curious, what has surprised you after your first 100 days about the organization? I'm assuming when you were hired, you had some baseline level of expectation. I'm curious, what has deviated, maybe both good and bad, relative to your initial thoughts? Thanks. Good morning.

Scott Huckins: Hi, Good morning. Thank you, it's a great question.

Scott Huckins: Thank you. It's a great question. I would say there are probably two themes in the comments.

Speaker Change: I would say probably two two themes of comments.

Scott Huckins: The most noteworthy to me is that we all read about and hear about the revolution near and dear to, you know, the CFO's heart. And what I hadn't fully appreciated was how vibrant and part of the fabric of the company top to bottom that is, meaning just an ongoing daily focus of trying to drive profit into the business. It's even more prominent, frankly, than I had expected.

Scott Huckins: The most noteworthy to me is we all read about and hear about revolution near and Dear to CFO as hard.

Scott Huckins: What I hadn't fully appreciated is how vibrant and part of the fabric of the company top to bottom that as meaning just an ongoing daily focus of trying to drive profit into the business.

Scott Huckins: Even more prominent frankly than I had expected.

Scott Huckins: The second would be more qualitative, which I tried to foreshadow in my prepared remarks. It's a super collaborative team, very used to working through problems together as a team in a room. And what I think that that does is it creates alignment and clarity of priorities. And not all organizations, I think, enjoy that.

Scott Huckins: The second would be more on the qualitative which is I tried to foreshadow with my prepared remarks, it's a.

Super collaborative team very used to working through problems together as a team in a room and what I think that that does is it creates alignment and clarity of priorities and not all organizations I think enjoy that so those are probably the two that would stick out to me, but I appreciate the question.

Scott Huckins: So those are probably the two that would stick out to me, but I appreciate the question. Just a quick housekeeping follow-up. Did you guys agree on a gross profit dollar number, or if not, how should we think about that over the course of the year? Thanks. Another good question.

Scott Huckins: Yeah.

Scott Huckins: And just a quick housekeeping follow up did you guys guide to a gross profit dollar number or how should we if not how should we think about that over the course of the year.

Scott Huckins: <unk>.

Scott Huckins: We did not, but I think if you work your way through the elements that I shared for revenue and EBITDA with the color offered for the balance of the P&L, I think you'll be able to squeeze margin. I think I gave you a hint about a roughly 200 basis point lift. So hopefully, with that, you've got a pretty good idea of how to model gross profit and gross profit margin. Great. Thanks a lot.

Speaker Change: Another good question, we did not but I think if you work your way through the elements that I had shared for revenue and EBITDA with a color offered through the balance of the P&L I think you'd be able to squeeze our margin and I think I gave you a hint about are roughly 200 basis point lift so hopefully with that you've got a pretty good idea.

Speaker Change: I've had a model gross profit and gross profit margin.

Speaker Change: Great. Thanks, a lot best of luck.

Brian McNamara: Best of luck. Thank you. Thank you. Our next question comes from the line of Andrea Teixeira with JP Morgan. Thank you, operator, and good morning, everyone, and welcome, Scott.

Speaker Change: Thank you.

Yes.

Speaker Change: Thank you. Our next question comes from the line of Andrea to say that with J P. Morgan. Please proceed with your question.

Andrea: Thank you operator, and good morning, everyone and welcome Scott. My question is on the state of the consumer and how to think about the like for like pricing compare to the mix headwinds unless you spoke about.

Andrea Teixeira: My question is about the state of the consumer and how to think about the like-for-like pricing compared to the mixed headwinds, Lance, you spoke about. I was just trying to understand your revenue guidance and also the margin outlook, which I believe came below the street for 2024. I think we all understood the exit from some of these non-retail contracts we spoke about last quarter, but it seems that the core consumer business remains more pressured than feared, even after lapping the declines in tableware. So can you see how much of your expected sales decline can come from perhaps price rollbacks or if it's mostly mixed, and how to think about the phasing of tableware? And should we see tableware stabilizing?

Andrea: I was just trying to understand your revenue guide.

Andrea: Guidance and also the margin outlook, which I believe came below the street for 2024, I think we all understood. The exit from some of those known retail contracts, we spoke about last quarter.

Andrea: But it seems that the core course, Soma business remains more pressure than feared even after lapping the declines in tableware. So can you.

Andrea: Bridge, how much of your expected sales decline can come from perhaps price rollbacks or if it's mostly mix and how to think about the phasing of tableware.

Andrea: Should we see <unk> stabilizing.

Andrea: Andrea Thank you I'll answer the first part of that question and ask Scott to then jump in and provide some of the the number details regarding the state of the consumer.

Lance Mitchell: Andrea, thank you. I'll answer the first part of that question and ask Scott to then jump in and provide some of the numbers details regarding the state of the consumer. And I did try to frame that a bit in my prepared remarks. While the overall economy is experiencing lower rates of unemployment, it's steady at 4%, and, you know, we have.

Andrea: I did try to frame that a bit in my prepared remarks, while the overall economy is experiencing lower rates of unemployment is steady at 4%.

Lance Mitchell: We've seen that in our labor at our plants and slowing rates of inflation. We continue to see consumers in our categories are under pressure with less savings and more debt, particularly in credit cards, up 30%. Credit card debt is up 30% from 2020. So, you know, we have always relied on outside data for evaluating our forecasts for CANA, before that IRI, Nielsen, et cetera.

Scott Huckins: We've seen that in our labor at our plants and slowing rates of inflation.

Scott Huckins: We continue to see the consumers and our categories are under pressure with less savings and more debt, particularly in credit cards up 30% credit.

Scott Huckins: Credit card debts up 30% from 2020.

Scott Huckins: So we have always relied on outside data for evaluating our forecasts are keying up before that IRI Nielsen et cetera, and this is the first year, we've seen a negative forecast for our category.

Lance Mitchell: And this is the first year we've seen a negative forecast for our category. Now, forecasts are forecasts. They're not necessarily always accurate, but we've used that to inform this forecast and our guide.

Scott Huckins: Now.

Scott Huckins: Forecast or forecast they are not necessarily always accurate, but we use.

Scott Huckins: Use that to inform R.

Our forecast in our guide.

Scott Huckins: If the consumer is not under as much pressure, we expect to outperform the categories under any circumstance for all the reasons we outlined in the prepared remarks and our answers to the question. So, consumers are under pressure. You've seen what's going on in the staples market. We're doing better than the category, and I'll turn it over to Scott to talk about the specifics of how we've framed that in the guide. You bet! So, I think again, is to reset the macro of the guide we expect to start with a full year 1% pricing headwind, three points or three percent of Hedwin and revenue from our non-retail business supplemented by product portfolio rationalization and pick it up where lens left off. We expect our retail business to be in a range of down two, which would be consistent with the category, to a range of positive 1% back to outperformance.

Scott Huckins: If the consumer is not as under much pressure, we expect to outperform the categories under any circumstance through all the reasons that we outlined in the prepared remarks, and our answers to the questions here today.

Scott Huckins: So.

Scott Huckins: Consumers under pressure, you've seen what's going on to staples market, we're doing better than the category and I'll turn it over to Scott to talk about the specifics of how we've framed up the guidance.

Scott Huckins: Bet. So so I think again is to reset.

Scott Huckins: The macro.

Scott Huckins: Of the guide we expect first I'll start with the full year.

Scott Huckins: 1% pricing headwind.

Scott Huckins: Three points or 3% of headwind in revenue from our non retail business supplemented by.

Scott Huckins: Product portfolio rationalization and pick it up where it lands left off.

Scott Huckins: We expect our retail business to be in a range of down two which would be consistent with the category.

Scott Huckins: To a range of positive 1% back to outperformance I think you also asked a bit about phasing.

Scott Huckins: I think you also asked a bit about phasing, and I think there were two elements to your question. The first was around non-retail. As I shared earlier, I think we expect that to look fairly rateable through the year, meaning, again, picking up on that Q4 run rate as we commented on, and then last one was on tableware. We saw, you know, a decent buffering in Q4 of performance relative to our outlook we shared in Q3, but I think it'll take some time as we work our way through the year for all of those programs. Okay, so how much of that? That's super helpful.

Speaker Change: And I think there were two elements of your question. The first was around non retail.

Speaker Change: As I shared earlier.

Speaker Change: We expect that to look fairly ratable through the year, meaning again picking up on that Q4 run rate as we commented on.

Speaker Change: And then the last one was on on tableware, we saw.

Speaker Change: A decent buffer in Q4 of performance relative to our outlook, we shared in Q3, but I think it will take some time as we work our way through the year for all of those programs.

Speaker Change: <unk>.

Speaker Change: Okay.

Speaker Change: Okay. So how much of that's super helpful. I understand the components of guidance and I appreciate the way to put that in writing. It. This morning, but when you think about the pricing of the retail business is that youre seeing some of the mix effects of consumer down trade and we've seen that or you are rolling back.

Scott Huckins: I understand the components of guidance and I appreciate where you put that in writing and this morning, but when you think about the pricing of the retail business, are you seeing some of the mixed effects of consumer downtrade within that, or are you rolling back some of that pricing? I think that's the key question for all of us. Are you seeing the pressure to roll back, or are you seeing just consumers down-trading within your portfolio into private labor? into your own private lives?

Speaker Change: Some of this pricing.

Speaker Change: I think that's what the key question for all of US are you seeing the pressure to roll back or are you seeing just consumers down trading within your portfolio into private label.

Speaker Change: Hey, Joe on private label.

Lance Mitchell: Andrea, we're seeing some trading down into private label within the categories, as you know, and I said in my prepared remark. That's one of the benefits of our business model of brands and store brands. We have a high share in both, and so we participate in both sides of that equation.

Joe: We're seeing some trading down into private label within the categories. As you know and I said in my prepared remarks.

Joe: What are the benefits of our our business model brands and store brands, we have a high share in both and so we.

Joe: We participate both sides of that equation.

Lance Mitchell: But the vast majority of the change is just because people are not spending as much in the categories. It's not a question of trade-down; it's a question of... using less during this challenging period of economic macroeconomics. From a pricing standpoint, I think Scott was very clear about the fact that we don't see a lot of change in pricing. We are returning to historical levels on promotions, and that is factored into our. Okay, thank you very much. Thank you. Once again, as a reminder, if you'd like to join the question queue, please press star one. Our next question is a follow-up from the line of Rob Ottensee with Evercore ISI. Please proceed with your question. Great.

Joe: But the vast majority of the change is just.

Joe: Consumers are not spending as much in the categories. It's not a question of trade down it's a question of.

Joe: Using less during this challenging.

Period of economic macroeconomic challenges.

Joe: From a pricing standpoint, I think Scott was very clear about the fact that we don't see a lot of change in pricing.

Joe: Returning to historical levels on promotions and that is factored into our guide.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you once again as a reminder, if you'd like to join the question queue. Please press Star one. Our next question is a follow up from the line of Rob <unk> with Evercore ISI. Please proceed with your question.

Rob Ottenstein: Two questions, just kind of following on from Andrea's question. I think, you know, the pricing could come down, right? If, you know, on private label, there's a pass through of lower commodity costs. That's one way.

Rob Stone: Great two questions just kind of following on on <unk> question I think.

Rob Stone:

Rob Stone: The pricing could come down right. If you go on private label there is a pass through of lower commodity costs that that's one way so to what extent is that actionable or part of this and then you mentioned.

Rob Ottenstein: So, you know, to what extent is that actionable or part of this? And then, you mentioned, promos coming back to more historical levels. Can you just put that in the context of the competitive dynamic on branded products? You noted that you're gaining market share, which is terrific. I think what we'd all like to better understand is, you know, are the market share gains in any way tied to your promotion more than competition? And you know, we obviously see the scanner data, but we don't see, you know, what's online.

Rob Stone:

Rob Stone: Promos coming back to more historical levels.

Rob Stone: Can you just put that in the context of the competitive dynamic on branded products. You noted that youre gaining market share, which is terrific I think what we'd all like to better understand is you know.

Rob Stone: So is the is the market share gains in any way tied to your promoting more than the competition and we obviously see the scanner data, but we don't see you know what's online so maybe when you are.

Rob Ottenstein: So maybe when you address the question, give it a little bit of a sense of what's going on online as well, to get a fuller picture. Thank you, Robert. You have got a couple of questions in there.

Speaker Change: Address the question and give it a little bit of a sense of what's going on on our online as well to get a fuller picture. Thank you.

Speaker Change: Thank you Robert you got a couple of questions in there the first regarding commodity costs and if they come down will they be passed on starting with private label.

Lance Mitchell: The first concern commodity costs, and if they come down, will they be passed on, you know, starting with private label? First of all, as I indicated in an earlier answer, commodity costs have stabilized, but some have gone up. Some have gone down modestly, but other inflow costs have also increased.

Speaker Change: First of all if I indicated in an earlier answer commodity cost has stabilized, but some have gone up.

Speaker Change: Some have gone down modestly, but other input costs have also increased so.

Lance Mitchell: We have not seen a lot of changes in price as a result and don't expect to see significant changes in price. But, of course, we're always agile and will react accordingly if things change in the category. From a promotion standpoint, you know, I would suggest and state that the reason that we're gaining share is primarily innovation and advertising. The combination of those two is the main reason that we've gained share. The products are differentiated, and we've got advertising campaigns that are working very effectively. You'll see in the K that we increased our advertising spend to nearly $80 million, which is significant, and we expect to continue at that level as we go into 2024.

Speaker Change: We have not seen a lot of changes in price as a result, and don't expect to see significant changes in price, but of course, we're always agile and react accordingly.

Speaker Change: Things change in the categories.

Speaker Change: From a promotion standpoint.

Speaker Change: I would suggest.

Speaker Change: State that the reason that we're gaining share is primarily innovation and.

Speaker Change: On advertising.

Speaker Change: The combination of those two is the main reason that we've we've gained share.

Speaker Change: The products are differentiated and we've got an advertising campaigns that are working very effectively.

Speaker Change: You'll see it in the K, we entered we increased our advertising spend to nearly $80 million, which is significant and we expect to continue at that level as we go into 2024.

Speaker Change: Thank you.

Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Mitchell for any final comments.

Lance Mitchell: Thank you. Thank you, operator. And thank you everyone for your questions and for your continuing interest in our business. Scott and I and the entire RCP leadership team owe an enormous debt of gratitude to the 6,000 people responsible for the success of our business. I'm confident our team will continue to advance our plans to create long-term value for our stakeholders. We look forward to seeing you in New York on March 19th for our investment. Thank you. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Mitchell: Thank you operator, and thank you everyone for your questions and for your continuing interest in our business.

Mitchell: Scott and I and the entire RCP leadership team.

Speaker Change: And then norm as debt of gratitude to the 6000 people responsible for the success of our business.

Mr. Mitchell: I'm confident our team will continue to advance our plans to create long term value for our stakeholders.

Mr. Mitchell: We look forward to seeing you in New York on March 19th for our Investor Day. Thank you.

Speaker Change: Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.