Post Holdings, Inc. ($POST)

Welcome to the Post Holdings Second Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] I would now like to turn the call over to Daniel O'Rourke, Investor Relations for Post.

Good morning. Thank you for joining us today for Post's second quarter fiscal 2026 earnings question-and-answer session. I'm joined this morning by Rob Vitale, our Chairman and CEO; Nico Catoggio, our COO; and Matt Mainer, our CFO and Treasurer. 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 and written management remarks that support today's call are posted on our website in the Investors section. This call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. We hope you had a chance to review our management remarks. The key highlights are that our diversified portfolio had strong performance in Q2 and delivered adjusted EBITDA above expectations. However, given new headwinds from the conflict in the Middle East, we maintained our previous adjusted EBITDA guidance. Meanwhile, we continued aggressive share repurchases. And fiscal year-to-date, we have reduced our share count by 15%. Finally, our strong cash flow, liquidity and credit metrics continue to afford us significant flexibility for opportunistic capital allocation. With that, I'll briefly turn the call over to Matt.

Thanks, Daniel. Setting aside the business performance, I'm sure you all saw our announcement yesterday on our CEO succession plans. First of all, on behalf of our whole team, congratulations to Nico. Really well deserved. You've done a fantastic job leading PCB, and we are confident that will translate to more of the same as you transition into leading Post. So Rob, we have all learned from the best and truly appreciate your leadership over the past 12 years. As much as Rob is respected by so many on this phone call, it is even more so within the walls of our company. With that, I will turn the call over to the operator for Q&A.

[Operator Instructions] Our first question comes from Andrew Lazar with Barclays.

Rob, congratulations to you on a terrific run as CEO, and glad you're staying on as Chairman. And all I can say is I think many other packaged food names would benefit mightily from taking a page from your operating and capital allocation playbook. And Nico, congratulations to you on being named CEO. Maybe to start. Yes, sure. Just a question maybe on pricing for the industry and Post. I mean, I realize there is still quite a bit of uncertainty, but should the industry face another round of more significant inflation, do you think pricing could be one of the levers used this time around given consumers have been kind of already pushing back on price points where they are today and some are actually lowering prices with less than stellar results thus far. I'm just curious on your view on that and how does Post sort of think about that?

Thanks, Andrew. What I would say is it depends on where inflation falls. If it is in the low single digit, I think we'll see more of CPGs trying to absorb that within their P&L, and that could be in the form of maybe lower promotional intensity. If it is more than that, we will probably see more targeted pricing.

And then maybe just on pet food. I'm trying to get a sense of what our expectations should be going forward in pet because I think this quarter is -- the current quarter, I believe, is when the restage really happens in earnest in the marketplace. And how do you think about turning a brand around in a subcategory of dry dog food that's sort of struggling a bit right now relative to some other parts of pet?

Yes. So let me -- so on pet, I think about it in kind of 3 big buckets. One is a bit out of our control that is the category has been slower than what we anticipated and especially dry dog food. 60% of our portfolio is dry dog food. As we shared in our remarks, that was 4% down in pounds. So that's about 20% of our, call it, gap to the category. The rest, you can think about it half-on-half in 2 buckets. One is what we shared on 9Lives. 9Lives is we raised prices on 1/3 of the brand that is more functional. As we raise prices, we saw higher elasticities than what we anticipated. And we lost inclusion in a couple of retailers. That, in our mind, is fairly straightforward. It's if you remember, less than a year ago, we were having the same conversation about Gravy Train. We raised prices. Remember that these brands have lower margins, and that's why we do what we do, and we focus on profit. We remember Gravy Train. We raised prices. We saw the same elasticities. We fixed that with [ rollbacks ] in the short-term. And now we fixed it with price pack architecture and that brand in one of our largest retailers is growing at 40% in pounds now. So we see it as the same playbook, right? We tried price points elasticity was a bit higher. We can solve it in the short-term with rollbacks. And then longer-term, call it, a couple of quarters from now, we should fix it with price pack architecture. So it's fairly straightforward. And then the third bucket is Nutrish. We are in early stages of the relaunch, and that will take probably the entire Q3 to actually fully hit the market. So it's happening. It's flowing in. But it's still especially in the food channel, taking a bit longer to be fully reflected on shelf. That one, if you remember, we commented on that one, it's a full relaunch. So new positioning, new packaging and new price points. What we feel encouraged about is where it's been fully relaunched, one of our largest retailers, we are already seeing sequential improvement week after week. And the last week of April, we already saw the brand flat to last year in a category that is again declining. So that's a positive. But it's still early on, and we probably need a couple more months. So by Q4, we should actually start seeing the category kind of showing at least flat to slight growth versus a year ago. That's how we think about that.

Our next question comes from Matt Smith with Stifel.

You had another strong EBITDA and cash flow performance in the quarter and the guidance reiteration referenced caution around new cost pressure and uncertainty. Are there specific areas of the business where you're seeing these higher costs? And are you seeing an impact from a more cautious consumer? Or is the uncertainty more focused on the cost side?

I think directly, we're seeing the cost impact, Matt, really around fuel charges and surcharges. We've got some coverage or hedges in place, but this is exposure beyond those coverages. And just given the dramatic increase in diesel, that flows through to -- across the company, especially in North America. So that's really the key driver.

Just a follow-up. The cash flow performance has been strong and supported the share repurchases today while holding leverage flat. You called out the strong liquidity position Post maintain. How would you characterize the M&A environment? Are you seeing an increase in asset availability? Do you think seller expectations are reasonable? And has there been an impact to deal flow from Middle East disruption and uncertainty.

Yes. I think it continues to be a bit of more of the same. You certainly have some assets, some private investments that are -- haven't come to market yet. And I think that's a nod to just where public multiples are and where our clearing price might be. So there's still some potential transactions sitting on the sidelines. That aside, we continue to see some of our larger competitors talk about maybe separating portions of their portfolio. We've seen it happen already in a couple of cases in the last year. I think those are larger, more transformational transactions. Again, we look at everything, but something we would evaluate. And then I think it's a bit of a barbell then you have the smaller tuck-ins that are available that are for us more synergistic, obviously, easier to digest. But I think the backdrop for us is really where our share price is trading and implied multiple. And again, we laid that out in the prepared remarks, and that's really our benchmark or our comparison. It continues to be a high bar, but we continue to look at all that's out there.

Our next question comes from David Palmer with Evercore ISI.

Congratulations on your career so far, Rob, and all the value creation back to you, Nico. I want to ask a first question on Foodservice profitability. Clearly, there's been -- there was a moment of a lot of trade into higher-margin value eggs. Those eggs prices were higher and egg prices have come down, and it's been a darn good profitability run here. I'm wondering how you're thinking about profitability evolution going forward, maybe rising sort of a mid-cycle profitability rising from here as you see some of your accounts doing better lately? In other words, I'm trying to figure out if $125 million a quarter is really going to be the right run rate into fiscal '27 or if you see upside to that? And I have a follow-up.

So we still see that as the run rate. Again, in the quarter, there were so many puts and takes between lapping HPAI supply constraints and pricing and cost in excess of pricing last year. But our supply and demand remain in balance. So we -- while we don't provide guidance segment by segment, we see us going back to our run rate.

Got it. And then similar to the previous question on pet, I just want to get a sense on cereal of your confidence in getting what I think would be your goal of a low single-digit decline rate just to really have that pull its own weight. So cereal has been rough. What is the confidence in getting to that? And what's the outlook there?

Yes. So let me start with the category. The category, as we shared in the remarks, has been better compared to where we were a year ago. So for the quarter, the category was down 3% in pounds. And if you have a look at April, it's 2.5% down. So it is improving. It's still not kind of where it was pre-pandemic, but it's getting there. So that's the category. Our portfolio, you have seen some of the -- we are extremely pleased with where we are. So Q2 was another quarter where we were still working through the transition of assortment, especially in the food channel to actually better prepared or have a higher return on promotional spend. Because of that, our promotional spend was down a bit versus prior year and still we were the largest -- the only large player that actually held flat dollar market share year-over-year. So we feel really good about our portfolio, and we feel good about the improvement in the category.

Our next question comes from Thomas Palmer with JPMorgan.

I'd like to echo my congratulations to both of you, and I appreciate all the help, Rob, as I've ramped on Post. I wanted to maybe follow up on David's question on the Foodservice business, just some of the egg dynamics. Obviously, in the quarter, falling egg prices seem to be a tailwind for earnings, especially based on some of the disclosures about input costs. But I did want to ask one on kind of the prospect of either lowering prices in your view here or whether you are seeing any maybe shift by customers given how cheap whole eggs are to kind of shifting in the direction of the more labor-intensive side of starting with whole eggs instead of buying prepared eggs products. Just want to make sure that neither of those is something we should be looking out for.

Sure. So in terms of the switching, I think that's obviously a risk we evaluate. But honestly, given the value proposition and what we found, especially in the larger operators is once they switch to our value-added products, are able to take that labor out of their system and they see the benefits of the consistency, food safety, other things of the product, it's quite sticky. I'd say that maybe the risk is around some of the smaller independent operators, which is a much smaller component of our business, where they have a little more flexibility in the back of the house to make that switch. But again, I think, by and large, the majority of the portfolio sees that change is quite sticky.

Okay. And I wanted to ask on Weetabix -- just the commentary about the license and how maybe that reported sales were a bit worse than underlying consumption trends for the broader business. How big is kind of the license impact that we should be thinking about? And to what extent is 2Q reflective of the kind of the full magnitude we should be thinking about in the quarters that follow?

Sure. So in terms of what that was, that was related to Oreo O's licensing agreement that we have. And I believe we have another quarter before we fully lap that going away. But in terms of just when we think about from a volume standpoint, looking out the balance of the year, we would expect better year-over-year performance as we lap that in the second half. I mean I think as a reminder, we've seen the category come back to more flat, which is historically the right spot or what we've seen out of cereal in the U.K. And Weetabix continues to have -- when I say Weetabix, the yellow box product, in particular, has some very strong momentum behind it and continues to outperform. So I think as we lap the Oreo O's and that comes away as we get into Q3, we would expect you start to see better performance overall out of our portfolio with that.

Our next question comes from Scott Marks with Jefferies.

And again, congrats to Nico and Rob. I wanted to touch on Weetabix off the back of Tom's question there, just more so on the profitability side. Obviously, margins on that business are still significantly below what they had been. So just wondering if you can help us understand the path back towards that 30% level and how we should be thinking about opportunities within that business?

Sure. So Scott, I think, first of all, just a reminder, UFIT continues to grow nicely within the portfolio. It's a co-man business. But as it grows in sales, it's much larger -- I'm sorry, lower margin business given the co-man nature of it. So I think that's realistically taking the top off of reaching 30%, which is a good thing because we're still growing profit dollars. But in terms of just sequential improvement from where we're at now, we were able to execute some network optimization at the end of March and close a facility on the private label side, given our Deeside acquisition a couple of years ago. That was part of that plan. We were able to execute it, and that will lead to better profitability in the second half. So we would expect, as you look at EBITDA margins, sequential improvement that's noticeable in Q3 and Q4 relative to the first half.

Okay. Appreciate the thoughts there. And then just maybe shifting over to refrigerated retail. Obviously, very strong volume performance in the quarter. I know you called out a little bit of Easter timing benefit. Just wondering if you can help us understand kind of the magnitude of benefit there? And how we should be thinking about run rate for that business kind of in the back half?

Sure. So we saw the pretty significant lift in dinner sides or sides for the business, 12% growth. The biggest driver certainly was Easter, and we see that as you look historically when Easter falls, it's a big lift. So I'd say that's a majority of that year-over-year movement given Easter was in Q3 last year, it was in Q2 this year. But the other contributor was certainly the new private label products that we've rolled out at the beginning of the fiscal year. Those continue to do well. Arguably, they probably had a little Easter momentum behind them as well, but those are really the 2 drivers. So obviously, Easter will fall away, but we'll be left with continued lapping of private label introduction until we get through the end of the year.

Scott, I would add that there was some underlying volume growth for our branded portfolio. It's just, of course, it's the 12%. I mean if you have 2, it's call it 1/3, 1/3, 1/3 between underlying volume growth, private label and Easter, give or take.

Our next question comes from Marc Torrente with Wells Fargo Securities.

Rob and Nico, congratulations as well. I guess just first on the incremental cost impact from energy that you are expecting. Has that started to flow through the P&L yet? Is it more of a ramping dynamic through the back half? And when would you decide to take pricing action if needed? And how quickly could that provide some offset?

Sure. So we certainly are seeing the impacts as we got to the end of Q2 and into the beginning of Q3 here. So pretty consistent, I would say, depending on the level of hedges we had in place through the balance of the year, but I think you can think of it about as a pretty average run rate, assuming the war extends to the end of the fiscal year, which is what's in our base assumption. And then in terms of...

Pricing. So I -- so that one is business by business. But for the most part, right now, we are assuming that we'll absorb that through the P&L. If this extends beyond this fiscal year, we will probably then consider about pricing. But again, it really depends on where inflation falls. I mean, right now, we're seeing it in fuel and a little bit in packaging. If these things actually get worse, we will have to think about pricing, and it's probably going to be in the new fiscal year. But again, way too early to say.

Understood. And then maybe just an update on the performance of 8th Avenue since holding in the business. What was the contribution in the quarter since I guess this was the first quarter of just having the ongoing business? And then how is the integration and synergy capture progressing?

Yes. So the underlying business performance is in line with the deal model. So we are pleased with puts and takes and kind of some categories slightly better, some categories slightly worse, but for the most part, it's in line with the deal model. So we feel really good. And then the integration is going extremely well. Synergies are a bit ahead of the plan. So -- and we should be hitting run rate towards the end of this fiscal as we anticipated. But we feel really good about the combination of both, right? So the team stay focused, no distractions. And so it's -- the business is performing, and we are probably overdelivering on the synergies.

Our next question comes from John Baumgartner with Mizuho Securities.

Maybe first off, just to Rob, really fun ride for the past decade. And just many thanks for all your insights and interactions over the years. It was really a great learning experience. So thank you and all the best in your future endeavors. Yes, Nico, congrats on the opportunity as well. Thank you both so much. First off, relating to the ready-to-drink protein shakes, you understand this category very well. You made the capital commitment to the manufacturing facility. So I'm curious, first, your perspective on the sustainability of category growth and your participation as a manufacturer, just given the influx of new brands coming in, how do you think about the competitive environment through a manufacturer's lens? And second, given the derating of public equities in RTD and maybe that also goes for private assets as well, how do you think about reengaging in RTD as a brand owner again? I mean presumably, it's growth accretive, free cash accretive, you get synergies from repatriating volume as a vertical operator. How do you think about your position in that category right now going forward?

Yes. I mean I think that we have to be careful about questions that we answer from a perspective of BellRing. I think it's entirely appropriate to answer questions from a -- as a manage maker, but not as a brand opener. So I'll let you talk about the...

Yes. Again, I think in terms of the shake business, I think we continue to see opportunities there to grow with BellRing. We're a key supplier of theirs. We've gotten our house in better order in terms of just volume on the shake side. So I think we're feeling better about that business. We've talked about just some higher costs that we're trying to work through in terms of higher than anticipated around just the manufacturing process and some of the costs we're absorbing. But on the volume side, we're seeing better performance, and there's certainly demand for the volume that we are pulling through on the BellRing side.

And then my follow-up, we're seeing some pockets of the industry where foodservice brands are making some really nice inroads in terms of market share growth in retail grocery and making that channel crossover, soup, French fries, mashed potatoes, you have the presence to Bob Evans already. I'm curious, given how tough volume growth is for a lot of these traditional retail brands, how do you think about leveraging your manufacturing assets to maybe expand Bob Evans into new categories or license other foodservice brands to enter additional categories within your meals orientation. Just have you considered that as a means of growth potentially in leveraging your assets at all?

I think you said it right. It's -- that's a lot of what the Bob Evans business is, right? So -- and it does leverage a lot of the assets for Michael Foods. Kind of expanding to other categories, I think that's the Bob Evans team, like any of our teams assess that all the time and it depends on kind of what they see as their ability to win in the category and returns. But I would actually highlight that the Bob Evans team is essentially -- the Bob Evans business is essentially that business that leverages the Michael Foods assets.

And we'll go next to Carla Casella with JPMorgan.

You talked a bit about private brand today. And I'm just -- it's raising the question. How much of your business today is private brand? And sort of which category -- where are you the highest as a percentage of the segment? And is there more opportunity there? And I guess as a follow-on, is that a margin opportunity as well?

So Post consumer brands is where we have the -- probably the -- actually the largest private label brand and the highest in terms of percentage of the total business and it's around 20% of the business is private label. If I understood your question is like where is -- kind of what is our position? We have a very strong position in cereal, granola and Peanut butter. We are a smaller player in private label in pet, we are more of a premium private label player in pet. And in terms of opportunities, we see opportunities in all those categories. And in general, in all categories that we play in, we will always consider how to leverage the branded and private label portfolio, right? So...

Okay. But it sounds like you're growing more on the refrigerated side. And is there -- and I'm wondering if there's any private label in with Weetabix in Europe?

There is private label and Weetabix, yes, and that has been the case for years now. We are growing faster in refrigerated because essentially, we make the decision of actually reengaging with the private label business in that category. So it's going from essentially nothing. And so we see it as an opportunity -- ongoing opportunity. For now, it's targeted on fewer retailers, but it's an opportunity there as well.

Okay. Is the opportunity similar to where you are in consumer brands? Like do you see those categories get to 20% private brand?

It's difficult to say. I mean, we don't -- I think it is higher than 20%.

Yes. Weetabix is -- from a category standpoint, private label is much larger in the U.K. than the U.S., obviously, a much smaller market, but our share is in line with the category in terms of branded versus private label. So private label is north of 40% for us over there. But -- so I think in line -- I don't know if there's a lot of opportunities there. We feel really good about having the alternative price points just like we do in Post consumer brands. And we think that gives us a competitive advantage and inroads with retailers, both on the branded side and with that private label presence.

Okay. And can I just ask one quick finance question. You've done a lot of share buybacks. You've done a bunch of refinancing lately. How much cash should we model in that you need to keep on the books just to run the business?

Sure. We generally think about it, call it, $150 million of just cash on the balance sheet for working capital purposes. And just given our Weetabix office as well as international, that's about the right level of cash just needed for daily operations.

This does conclude today's question-and-answer session as well as Post Holdings Second Quarter 2026 Earnings Conference Call and Webcast. Please disconnect your line at this time, and have a wonderful day.