POST HOLDINGS, INC. 2026 Q3 Earnings Call

Thank you. Good morning. Thank you all for joining us today for Post third quarter fiscal 2026 earnings question and answer session. I am joined this morning by Nico Catoggio, our COO. Rob is unable to join us today as he is feeling under the weather, and Daniel is actually with his wife, who is going into labor. Before I turn this call to Nico, though, I want to remind you that this call is being recorded, and an audio replay will be available on our website at postholdings.com. During today's call, we 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 those 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. With that, I will turn the call over to Nico.

Thank you, Matt. Good morning. Thanks, everyone, for joining us today. Our third quarter results were slightly ahead of expectations, driven by stronger than anticipated performance in food service. We are maintaining the midpoint of our fiscal 2026 adjusted EBITDA guidance while narrowing the range. From a capital allocation standpoint, we repurchased 4% of our outstanding shares, bringing our total fiscal year to date reduction to approximately 17% while maintaining leverage within our target range. Looking ahead, we believe it's important to provide early context for fiscal 2027. After adjusting our fiscal 2026 outlook for approximately $80 million of items affecting comparability, we enter fiscal 2027 with a comparable adjusted EBITDA base of approximately $1.48 billion. While our fiscal 2027 budget remains under development, our preliminary outlook is for adjusted EBITDA that is relatively consistent with this level.

Despite normalizing food service earnings, the absence of divested businesses, anticipated inflation, and ongoing volume pressure, we currently expect targeted pricing actions, cost savings, and food service margin rate growth to support fiscal 2027 underlying EBITDA generally flat related to the comparable adjusted EBITDA base of approximately $1.48 billion that I mentioned before. With that, operator, please open the line for Q&A.

Sure. I can take that one, Andrew.

Okay. Really, it's consistent with how we've always thought about capital allocation when it comes to M&A versus debt reduction, and that's less a function of a leverage number and really more a function of what we're seeing in interest rates and refinancing impacts.

While we don't have a bond maturity for four years, we factor in the cash flow impacts of refinancing that debt now at higher rates and what would that do to free cash flow. As we see rates continue to rise from a refinancing standpoint, that just weighs more heavily to say, "Hey, we've got to start allocating more capital to debt reduction to make sure we're bringing down debt, so as we get to refinancing, we're not seeing a deterioration of our free cash flow." Again, we'll still maintain the ability to buy back shares opportunistically.

It's just in the current interest rate environment, certainly going to be at a slower pace than the last couple of years. I think on the counter, if we see rates somehow return and we're back in a 5% refinancing rate, then our view would change, but that's certainly the big driver and the primary lens how we look at it. Relative to the M&A point, I think another angle we view is where's a comfortable leverage level we could take leverage to and where's a comfortable starting point. That gets us to a similar spot. Hey, mid-fours is somewhere we're comfortable for, but we wouldn't want to see that number rise because that would deteriorate some of the flexibility for cash M&A. I think that's where the preliminary outlook for next year is more of a consideration.

Again, I'd say consistent with how we've always viewed it.

Thanks, Andrew. It's a good question. Let me start again up. We are constantly assessing those opportunities across every business and in particular PCB. Before I get to pet, and I will answer that one, we also just made the decision to shut down two peanut butter plants. That's, again, to your point, is exactly the same playbook that we used in cereal. That's as we integrated the 8th Avenue business, and we streamlined that business and exited some business that we were literally losing money. We saw the opportunity to shut down two plants. That's in the works. That's going to impact FY 2028. Order of magnitude is similar to what you saw in cereal in the past. That's on peanut butter. On pet, it's a good question.