Executive Summary

Q3 2024 revenue was $689M (down 0.4% y/y; up vs Q2), with adjusted gross margin expanding to 29.4% (+90 bps y/y) and adjusted EBITDA of $65M (up from $55M in Q3’23; margin 9.5%) as supply, back‑to‑school activation, and disciplined spending drove profitability .
WK Kellogg raised FY24 adjusted EBITDA growth guidance to 5%–6% (from 3%–5%) and lifted the implied EBITDA dollars to $271–$273M; adjusted net sales growth outlook maintained at the low end of (1%) to +1% range—key positive catalyst for sentiment into year‑end .
GAAP diluted EPS was $(0.13) vs $0.49 y/y, driven by $42M in restructuring and supply chain modernization costs; adjusted EPS was $0.31 vs $0.33 y/y, reflecting operating discipline and timing of brand building spend .
Cash discipline continues: YTD free cash flow was $2M (capex $96M) with net debt of $442M (1.6x TTM EBITDA); management reiterated FY24 FCF of ~$(50)M and exit leverage ~1.8x, with leverage peaking ~3x in 2026 to fund supply chain modernization .
Board declared a $0.16/share dividend (payable Dec 13, 2024), reinforcing a balanced capital allocation framework amid strategic reinvestment .

What Went Well and What Went Wrong

What Went Well

Gross margin expansion and EBITDA growth: Adjusted gross margin rose to 29.4% (+90 bps y/y) and adjusted EBITDA increased to $65M, with margin at 9.5% (+150–200 bps y/y depending on comparator), driven by operational efficiency and timing of brand investment .
Commercial execution and supply: Back‑to‑school programming, displays and improved supply (higher OEE and service) supported shipments; CEO: “Our supply chain performance is improving… allowing retailers to replenish inventory to more normal levels, which positively impacted our shipments” .
Portfolio traction in key brands/regions: U.S. share held ~27.6% with sequential improvement; Canada increased share 110 bps to 38.8% and Caribbean reached ~40% share, signaling healthy regional fundamentals .

What Went Wrong

GAAP profitability impacted by restructuring: Q3 reported net loss $(11)M and diluted EPS $(0.13) driven by $42M in restructuring and related costs tied to supply chain modernization .
Volume softness remains: Volume declined 1.1% in the quarter despite improved execution; U.S. category dollars decreased ~1.4%, and Special K underperformed (‑40 bps share), indicating ongoing demand and mix headwinds in parts of the portfolio .
Sequential profit pressure: Adjusted EBITDA of $65M in Q3 was below Q2’s $78M and margin fell to 9.5% from 11.6% (reflecting seasonality and spend timing), even as y/y profitability improved .

Financial Results

Sequential Performance (Q1 → Q3 2024)

Metric	Q1 2024	Q2 2024	Q3 2024
Net Sales ($USD Millions)	$707	$672	$689
Diluted EPS ($)	$0.37	$0.36	$(0.13)
Reported Gross Margin (%)	28.7%	29.1%	28.1%
Adjusted Gross Margin (%)	29.2%	30.0%	29.4%
Adjusted EBITDA ($USD Millions)	$75	$78	$65
Adjusted EBITDA Margin (%)	10.6% demol)	11.6%	9.5%

Note: Q1 margin presented as standalone adjusted EBITDA margin per company’s non‑GAAP framework; comparable to “adjusted EBITDA margin” in later quarters .

Year-over-Year (Q3 2023 vs Q3 2024)

Metric	Q3 2023	Q3 2024
Reported Net Sales ($USD Millions)	$692	$689
Diluted EPS ($)	$0.49	$(0.13)
Adjusted EPS ($)	$0.33	$0.31
Adjusted Gross Margin (%)	28.5%	29.4%
Adjusted EBITDA ($USD Millions)	$55	$65
Adjusted EBITDA Margin (%)	8.0%	9.5%
Reported Net Income Margin (%)	6.0%	(1.6)%

Key drivers: Price/mix +1.8% and volume −1.1% in Q3, with better supply and back‑to‑school execution supporting shipments; EBITDA improved on gross margin expansion and disciplined spend timing .

KPIs and Balance Sheet

KPI (Quarter unless noted)	Q3 2024
Price/Mix (%)	+1.8%
Volume (%)	−1.1%
U.S. Cereal Category Dollars (Nielsen xAOC)	−1.4% y/y
U.S. Market Share	27.6%
Canada Market Share	38.8%
Net Debt ($USD Millions)	$442
Free Cash Flow YTD ($USD Millions)	$2
Capex YTD ($USD Millions)	$96
Interest Expense (Q3, $USD Millions)	$7
Dividend Declared	$0.16/share (Dec 13 pay date)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Net Sales Growth	FY 2024	(1.0)% to +1.0%	At lower end of (1.0)% to +1.0%	Maintained (lower end)
Adjusted EBITDA Growth	FY 2024	3.0% to 5.0%	5.0% to 6.0%	Raised
Adjusted EBITDA ($)	FY 2024	$265–$270M	$271–$273M	Raised
Interest Expense ($)	FY 2024	$35–$40M	$30–$35M	Lower
Depreciation & Amortization ($)	FY 2024	$75–$85M	$75–$80M	Tightened (lowers high end)
Estimated Return on Pension Assets ($)	FY 2024	$45–$50M	$45–$50M	Maintained
Separation Costs ($)	FY 2024	$30–$35M	$30–$35M	Maintained
Free Cash Flow	FY 2024	—	≈ $(50)M (management commentary)	New disclosure
Exit Leverage	FY 2024	—	≈ 1.8x (peaking ≈3x in 2026)	New disclosure
Dividend	Ongoing	—	$0.16/share declared Oct 31, 2024	New action

Management also flagged Q4 seasonality (retailer displays shift to general merchandise) and lapping ~1 point of one-time net sales benefit from Q4’23 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Supply chain modernization	Announced $450–$500M program; Omaha closure (by end‑2026), Memphis scaling; restructuring charges expected ($230–$270M through 2027) .	Service and OEE improved; restructuring charges of $42M in Q3; plan progressing; EBITDA guidance raised despite charges .	Improving execution; investment ramp continues.
Commercial execution/seasonality	Q2: Back‑half activation planned; B2S focus .	Strong back‑to‑school execution; Wednesday Halloween innovation highest velocity item; displays critical to demand .	Momentum building in seasonal/activation.
Pricing/mix & PPA	Q1: Price/mix +6.3% with elasticities; volume −7.0% . Q2: Price/mix +2.1%, volume −4.8% .	Q3 price/mix +1.8%, volume −1.1%; PPA driving unit recovery; smaller pack economics attractive .	Elasticities moderating; volume trend improving.
Category backdrop	Noted tough environment; reaffirmed guidance .	US category dollars −1.4%; value channels growing; premium/granola also strong; share ~27.6% .	Stable to slightly improving.
Brand performance (Special K)	Underperformance acknowledged; plans in progress [—].	Special K −40 bps share; 2025 plan (campaign “Special for a Reason,” more activation) .	Work‑in‑progress; 2025 inflection targeted.
Inflation/costs	Stabilizing at higher levels; commodity puts/takes [—].	Corn/wheat relief offset by sugar/rice; net stabilization at elevated costs; labor included in overall cost picture .	Mixed commodities; disciplined spend.
Capital structure & FCF	Early in year; dividends initiated in 2024 [—].	FY24 FCF ~$(50)M; exit leverage ~1.8x; peak ~3x in 2026 with secured funding for modernization .	Manageable leverage path alongside capex.

Management Commentary

“Our top line performance, along with continued operational focus and discipline led to another quarter of gross margin expansion… EBITDA… grew 27.5% in the quarter versus prior year.” (CEO) .
“We delivered top line growth driven by sequential volume improvement… EBITDA margin in Q3 was 9.5%… driven by gross margin improvement and the timing of brand building spend.” (CFO) .
“Our team delivered a meaningful increase in service levels in Q3… driven by optimized planning and improved OEE.” (CEO) .
On Special K: “Not performing where we would expect… mechanical issues will largely be gone in 2025… new campaign ‘Special for a Reason’… better execution next year.” (CEO) .

Q&A Highlights

2025 outlook: Management suggested 2025 growth rates could be broadly consistent with 2024, with details to come in February; confidence supported by execution progress and maturing capabilities .
Inventory and shipments: Q3 benefited from lapping prior‑year inventory draw from supply issues; inventory levels were consistent from Q2 to Q3; effect will not carry into Q4 .
Inflation and pricing: Commodity relief in corn/wheat offset by sugar/rice inflation; overall costs stabilized at higher levels; labor inflation included in net cost view; pricing decisions balance ROI and category health .
PPA and pack architecture: Smaller packs and broader portfolio offerings are a lever for unit growth and consumer value; economics on smaller sizes remain attractive given execution and channel fit .
Innovation and promotions: Seasonal “Wednesday” SKU delivered top velocity with high display mix; promotional levels broadly back to 2019 norms; WK emphasizes disciplined, ROI‑positive promotion .

Estimates Context

Wall Street consensus (S&P Global) for Q3 2024 EPS and revenue was unavailable at the time of request due to data limits; as a result, beat/miss versus consensus cannot be assessed here. Management’s raise to FY24 adjusted EBITDA growth (now 5%–6%) and EBITDA dollars ($271–$273M) anchors positive estimate revision potential near term .
Where estimates are not provided above, no comparison to S&P Global consensus is made due to unavailability at time of analysis.

Key Takeaways for Investors

Raised FY24 adjusted EBITDA growth and dollars is a clear positive catalyst into year‑end; focus shifts to Q4 execution and 2025 outlook update in February .
Underlying trajectory improving: volume declines eased to −1.1% with better supply, back‑to‑school activation, and display execution; watch sustainability into Q4’s seasonally lower cereal period .
Margin story intact despite sequential dip: y/y gross margin and EBITDA improvements reflect operational discipline; expect continued noise from restructuring as modernization accelerates .
Capital deployment balanced: dividend in place ($0.16/share) while funding modernization; leverage manageable at ~1.6x now, ~1.8x exit 2024, peaking ~3x in 2026 with secured debt .
Brand priorities: Core brands (Frosted Flakes, Raisin Bran) performing; Special K remediation and Natural & Organic (Bear Naked) execution are watch‑items for 2025 share gains .
Monitor commodity mix (sugar/rice) and promotional environment normalization; pricing/mix likely to moderate further as elasticities stabilize at elevated cost levels .

Additional References

Q3 2024 8‑K and press release, including full financial statements and non‑GAAP reconciliations .
Q3 2024 earnings call transcript (prepared remarks and Q&A) .
Q2 2024 8‑K and press release (supply chain plan details and prior guidance) .
Q1 2024 8‑K and press release (baseline pricing/volume dynamics) .
Dividend announcement (Oct 31, 2024) .

WK Kellogg Co (KLG)·Q3 2024 Earnings Summary