Executive Summary

Q2 delivered broad beats: adjusted net sales $801.4M and adjusted EBITDA $73.3M both exceeded the upper end of guidance; GAAP net loss improved to $(2.9)M; gross margin expanded to 17.4% on insurance recoveries and supply chain savings .
Versus S&P Global consensus, THS beat on revenue ($798.0M vs $788.1M*), adjusted EBITDA ($73.3M vs $65.9M*), and adjusted diluted EPS ($0.17 vs $0.12*) .
FY25 outlook: maintained adjusted EBITDA ($345–$375M) and FCF (≥$130M) while raising adjusted net sales to $3.360–$3.415B on commodity pricing; Q3 guide calls for flat sales at midpoint and $90–$110M adjusted EBITDA .
Narrative: pricing and Harris Tea accretion offset volume/mix headwinds from margin management, softer consumptions trends, and griddle recall impacts; hedging mark-to-market and higher interest expense weighed on GAAP EPS .

What Went Well and What Went Wrong

What Went Well
- “Adjusted net sales and adjusted EBITDA both exceeded the upper-end of our guidance range,” underscoring execution on the margin-improvement plan (CEO) .
- Gross margin rose to 17.4% YoY (16.3% prior year), aided by $13.1M recall insurance recoveries, Harris Tea margin accretion, and supply chain savings .
- Operations contribution: supply chain cost savings (+$10.6M YoY to adjusted EBITDA) and SG&A/cost reductions (+$2.9M YoY) (CFO) .
What Went Wrong
- Volume/mix declined on planned margin management, softer category consumption, griddle recall service impacts, and the RTD exit; pricing offsets drove net sales +1.2% YoY .
- Total other expense increased to $32.9M (vs $16.9M YoY) on unfavorable mark-to-market for coffee/interest-rate swaps (+$16.2M) and higher interest expense (+$6.6M), pressuring GAAP results .
- Adjusted diluted EPS of $0.17 declined vs $0.29 in Q2’24 despite EBITDA growth, reflecting below-the-line headwinds .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025 Actual	Q2 2025 Consensus*
Net Sales ($USD Millions)	$788.5	$792.0	$798.0	$788.1*
Adjusted Net Sales ($USD Millions)	$789.9	$796.0	$801.4	—
Gross Margin (%)	16.3%	14.5%	17.4%	—
Adjusted Gross Margin (%)	17.2%	15.6%	16.6%	—
Adjusted EBITDA ($USD Millions)	$70.6	$57.5	$73.3	$65.9*
Adjusted EBITDA Margin (%)	8.9%	7.2%	9.1%	—
GAAP Diluted EPS ($)	$(0.32)	$(0.63)	$(0.06)	—
Adjusted Diluted EPS ($)	$0.29	$0.03	$0.17	$0.12*

Results vs guidance (Q2 2025):

Metric	Q2 Guidance (from Q1)	Q2 Actual	Outcome
Adjusted Net Sales ($USD Millions)	$785–$800	$801.4	Above high-end
Adjusted EBITDA ($USD Millions)	$61–$71	$73.3	Above high-end

Net sales YoY change drivers (Q2 2025):

Driver	Three Months YoY Impact
Margin management	(2.6)%
Consumption/other	(2.4)%
Griddle recall service impacts	(1.2)%
Volume/mix	(6.2)%
Business acquisition (Harris Tea)	+4.5%
Pricing	+4.2%
Business exit (RTD)	(1.0)%
Product recall returns	(0.2)%
Foreign currency	(0.1)%
Total change in net sales	+1.2%
Total change in adjusted net sales	+1.4%

Cash flow KPIs (Year-to-Date through Q2):

Metric	H1 2025	H1 2024
Net Cash Used in Operating Activities ($USD Millions)	$(100.7)	$(71.8)
Free Cash Flow ($USD Millions)	$(149.9)	$(121.5)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Net Sales	FY 2025	$3.340–$3.400B	$3.360–$3.415B	Raised
Adjusted EBITDA	FY 2025	$345–$375M	$345–$375M	Maintained
Free Cash Flow	FY 2025	≥$130M	≥$130M	Maintained
Net Interest Expense	FY 2025	$80–$90M	$80–$90M	Maintained
Capital Expenditures	FY 2025	~ $125M	~ $125M	Maintained
Adjusted Net Sales	Q3 2025	—	$840–$870M	New
Adjusted EBITDA	Q3 2025	—	$90–$110M	New

Earnings Call Themes & Trends

Topic	Q4 2024 (Q-2)	Q1 2025 (Q-1)	Q2 2025 (Current)	Trend
Supply chain and service	Sequential improvement and savings progress despite recalls	Griddle facility production restored; execution improving	Service levels strong; efficiencies contributing to EBITDA	Improving
Margin management	Prioritized gross profit dollars; outlined plan	Reiterated plan; executing to drive profitability	Ongoing actions impacting volume/mix; focus on mix and cash flow	Ongoing
Promotional intensity & private label share	Private brands resilience highlighted	—	Promotions below pre-pandemic; retailers still supporting private label	Stable to slightly higher promos
Commodities & tariffs (coffee/cocoa)	—	—	Coffee/cocoa/oils inflation; passing pricing; Brazil tariff risk discussed	Inflationary; monitored
Category/product performance	Pretzels/cookies strength cited	—	Coffee demand strong; broth service recovery ahead of soup season	Improving in key categories
Network optimization/footprint	—	—	Closing two plants (pickles/cookies) to right-size network (CEO)	Streamlining

Management Commentary

“We posted another quarter of strong results, including adjusted net sales and adjusted EBITDA that both exceeded the upper-end of our guidance range… We continue to make progress against our goals - driving margin improvement and cash flow growth through improved execution.” — Steve Oakland, CEO .
“Adjusted net sales were up 1.4% YoY… adjusted EBITDA of $73.3M, up ~4% YoY; operations and supply chain delivered a $10.6M benefit vs prior year.” — Patrick O’Donnell, CFO .
“We strengthened our margin management function, allocating capacity to the most attractive mix… we recently made the decision to close two plants to right size our network within our pickles and cookies businesses.” — CEO .
“We are reiterating adjusted EBITDA of $345–$375M and free cash flow of at least $130M for 2025.” — CFO .

Q&A Highlights

Competitive landscape and price gaps: Management emphasized commodity-driven pricing parity per unit with brands; private label shelf price gaps remain healthy and share held/gained in most top categories (Barclays) .
Inorganic growth focus: Depth/capability additions (e.g., Harris Tea) accelerate positioning in targeted categories; disciplined capital allocation continues (Barclays) .
Innovation stance: Private label as fast follower; focus on scalable trends (seasoned pretzels, cold brew/brew-over-ice coffee, bone broth) .
Coffee and tariffs: Strong ground coffee demand; Brazil tariff risk monitored with hedging and formulation options; private label may benefit from price points .
Outlook cadence: Q3 organic volume/mix down HSD due to margin management; griddle recovery benefits more in Q4; promotional noise contemplated .

Estimates Context

Q2 vs S&P Global consensus: Revenue $798.0M vs $788.1M*; adjusted EBITDA $73.3M vs $65.9M*; adjusted diluted EPS $0.17 vs $0.12* — all beats .
Q3 setup: Guidance midpoint ~$855M adjusted net sales and $100M adjusted EBITDA broadly aligns with consensus revenue ~$852.1M* and EBITDA ~$98.8M* .
Implication: Upward estimate revisions to near-term EBITDA/adjusted EPS are likely given Q2 beats and reiterated FY EBITDA/FCF, though management’s flat sales guide and promotional risk may temper revenue upward revisions .
Values retrieved from S&P Global.*

Key Takeaways for Investors

Quality of beat: Q2 exceeded both guidance and consensus on revenue, adjusted EBITDA, and adjusted EPS; gross margin expanded on insurance recoveries and ongoing supply chain savings .
Mix shift continues: Proactive margin management and softer consumption keep volume/mix negative; pricing and Harris Tea accretion offset on sales and margins .
Below-the-line headwinds: Non-cash hedge mark-to-market and higher interest expense remain a GAAP EPS drag; watch commodity volatility (coffee, oils) .
H2 cadence: Q3 flat sales midpoint with HSD organic volume/mix decline; larger griddle recovery and seasonal lift expected in Q4 (management indicated Q4 “significantly different”) .
FY guardrails intact: EBITDA ($345–$375M) and FCF (≥$130M) reiterated; adjusted net sales range modestly raised on commodity pricing .
Cash/wc timing: H1 operating cash flow and FCF negative on working capital and recall timing; management still targets ≥$130M FCF for FY25 .
Positioning: Private brands still advantaged as retailers invest; THS focusing capacity on higher-margin mix and rightsizing footprint (plant closures) to drive operating leverage when category growth normalizes .

Appendix: Additional Detail

Drivers of Q2 performance (management explanations)

Net sales +1.2% YoY primarily from Harris Tea acquisition, commodity-inflation recovery pricing, and distribution gains; partially offset by volume/mix headwinds from margin management, macro consumption, griddle recall service impacts, and RTD exit .
Gross margin up to 17.4% from 16.3% on $13.1M insurance recoveries, Harris Tea accretion, and supply chain savings; partially offset by commodity inflation and fixed-cost deleverage .
Other expense increased on mark-to-market swings (coffee and interest-rate swaps) and higher interest from increased revolver borrowings, partially offset by favorable FX .

Non-GAAP adjustments/Q2 reconciliation highlights

Adjusted diluted EPS $0.17 vs GAAP $(0.06) driven by mark-to-market, restructuring, acquisition/divestiture, FX remeasurement, recall costs/insurance, and taxes on adjusting items .
Adjusted EBITDA $73.3M vs $70.6M YoY; margin 9.1% vs 8.9% YoY .

Forward outlook details

FY25: adjusted net sales $3.360–$3.415B (pricing low-single-digit benefit; volume/mix down ~1% with Harris Tea offset by RTD exit, margin actions, and griddle one-time); adjusted EBITDA $345–$375M; FCF ≥$130M; net interest $80–$90M; capex ~$125M .
Q3: adjusted net sales $840–$870M (pricing ~+4%; organic volume/mix down HSD), adjusted EBITDA $90–$110M .

S&P Global consensus values are indicated with an asterisk and were retrieved from S&P Global.*

TreeHouse Foods, Inc. (THS)·Q2 2025 Earnings Summary