[Management View]
Lamb Weston Holdings, Inc. reported a 4% increase in net sales, driven by an 8% volume growth, despite a 4% decline in price mix due to competitive pricing actions. The company has launched a $250 million annualized cost savings plan, building on $59 million achieved in FY2025. Management is focused on leveraging available production capacity and targeting premium market segments to support growth.

[Outlook]
For fiscal 2026, Lamb Weston projects revenue between $6.35 billion and $6.55 billion, with adjusted EBITDA guidance of $1.0 billion to $1.2 billion. The company plans to prioritize business modernization over expansion, with capital expenditures expected at $500 million. Management anticipates $200 million of the cost savings target by FY2027, with $100 million realized in FY2026.

[Financial Performance]
The company reported a 4% increase in net sales for FY2025, with North America segment sales declining 1% and International segment sales increasing 15%. Adjusted EBITDA was essentially flat, with North America segment adjusted EBITDA declining 7% and International segment adjusted EBITDA increasing by $22 million.

[Q&A Highlights]
Question 1: Peter Galbo from Bank of America asked about the EBITDA margin target for the year, which is around 17% at the midpoint, the lowest since the company was spun off. He inquired about the factors that could influence this margin.
Answer: CEO Mike Smith acknowledged the competitive environment and the company's strategic investments in markets and channels. He emphasized the attractiveness of the category and the company's cost structure changes, including a $250 million cost savings program, to return to previous margin levels.

Question 2: Peter Galbo also inquired about the improvement in working capital, specifically regarding inventory levels.
Answer: Mike Smith highlighted the focus on value creation across the P&L, with improvements in inventory due to stronger volumes. He mentioned reduced acres for the crop season and investments in planning capabilities to enhance working capital.

Question 3: Scott Marks from Jefferies asked about international capacity and the confidence in certain projects not moving forward.
Answer: Mike Smith noted the rationality of the industry regarding capacity and mentioned that 1 to 1.5 billion pounds of capacity have been canceled or delayed. He emphasized the company's focus on aligning production with demand.

Question 4: Scott Marks also inquired about the CapEx guide and future expectations.
Answer: CFO Bernadette Madarieta explained the shift from growth investments to modernization and maintenance, with base capital expected at 3% of sales and modernization at 2%.

Question 5: Alexia Howard from Bernstein asked about positive trends in the quarter and their persistence into fiscal 2026.
Answer: Mike Smith highlighted customer engagement and the focus to win strategy, along with strong volume growth across channels and regions.

Question 6: Alexia Howard also asked about exposure to the burger channel and potential impacts from GLP-1 weight loss drugs.
Answer: Mike Smith stated that over 80% of fry servings come from QSR, with no material impact from GLP-1s currently. He emphasized the importance of fries on menus and the company's innovation efforts.

Question 7: Steve Powers from Deutsche Bank asked about the outlook assuming continued customer momentum.
Answer: Mike Smith confirmed both carryover of recent business wins and ongoing customer engagement efforts.

Question 8: Steve Powers also inquired about assessing risks and opportunities related to potential tariff changes.
Answer: Bernadette Madarieta mentioned the global nature of the business and potential $25 million exposure if August 1 tariffs are implemented.

Question 9: Marc Torrente from Wells Fargo Securities asked about sales outlook and expected sales cadence.
Answer: Bernadette Madarieta explained that sales will be pressured in the first half due to carryover pricing, with volume impact in the fifty-third week and pricing actions in the second half.

Question 10: Marc Torrente also asked about EBITDA decrease and cost stabilization.
Answer: Bernadette Madarieta outlined the margin increase from first to second quarter, with seasonal trends and lower potato pricing benefits starting in the second quarter.

Question 11: Robert Moskow from TD Cowen asked about North American capacity and pricing structure stabilization.
Answer: Mike Smith clarified that the 1 to 1.5 billion pounds of delayed capacity were not in North America, with most new capacity overseas.

Question 12: Carla Casella from JPMorgan inquired about leverage targets and M&A opportunities.
Answer: Bernadette Madarieta confirmed a target ratio of about 3.5 times, with openness to M&A and joint ventures.

Question 13: Max Gumport from BNP Paribas asked about strategic framework for geographies and Europe.
Answer: Mike Smith refrained from detailing specific geographies but mentioned future updates on plans.

Question 14: Max Gumport also questioned the decision to exclude noncash stock-based compensation from adjusted metrics.
Answer: Bernadette Madarieta explained the decision to reduce volatility and align with industry practices.

[Sentiment Analysis]
The tone of the analysts was inquisitive, focusing on understanding the company's strategic direction and financial outlook. Management maintained a confident and strategic tone, emphasizing cost savings, market positioning, and long-term growth potential.

[Quarterly Comparison]
| Metric | Q4 FY2025 | Q4 FY2024 |
|-----------------------------|-----------|-----------|
| Net Sales Growth | 4% | N/A |
| North America Sales Decline | 1% | N/A |
| International Sales Growth | 15% | N/A |
| Adjusted EBITDA | Flat | N/A |

[Risks and Concerns]
1. Declining price mix due to competitive pricing actions and soft restaurant traffic.
2. North America net sales decrease driven by lower net selling prices.
3. Adjusted gross profit pressure from pricing investments and higher factory burden.
4. Potential impacts from tariffs and geopolitical factors.

[Final Takeaway]
Lamb Weston Holdings, Inc. is navigating a competitive environment with strategic investments in cost savings and market positioning. The company is focused on leveraging its production capacity and targeting premium market segments to drive growth. Despite challenges in pricing and restaurant traffic, management remains confident in its long-term strategy and ability to capitalize on opportunities as market dynamics evolve. The company's financial outlook reflects a commitment to modernization, cost efficiency, and strategic alignment with customer needs.