Participants

Karen Duke; Investor Relations; WK Kellogg

Gary Pilnick; CEO; WK Kellogg

Dave McKinstray; CFO; WK Kellogg

Ken Goldman; Analyst; JP Morgan

Peter Galbo; Analyst; Bank of America

Andrew Lazar; Analyst; Barclays

David Palmer; Analyst; Evercore ISI

Robert Moskow; Analyst; TD Securities

Rob Dickerson; Analyst; Jefferies

Presentation

Operator

Good morning. Thank you for attending today's WK Kellogg co Q3 earnings call. My name is Tanya, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your toes phone keypad. Not surpass the conference over to your host, Karen Duke Vice President of Finance and Investor Relations. You may proceed.

Karen Duke

Thank you, operator. Good morning and thank you for joining us today for a review of our third quarter results. I'm joined this morning by Gary Pilnick, our Chairman and Chief Executive Officer, and Dave McKinstray, our Chief Financial Officer. Slide 2 shows our forward-looking statements disclaimer. As you are aware, certain statements made today such as projections for the Company's future performance are forward-looking statements. Actual results could differ materially from those projected.
For further information concerning factors that could cause these results to differ, please refer to the factors listed on the disclaimer slide as well as those in our SEC filings, including the risk factors action. As we discuss our results today, unless noted as reported, will be referencing, the respective non-GAAP financial measure, which is just for certain items, included in our GAAP results for periods prior to the spin-off, results are presented on a stand-alone adjusted basis for periods after the spin-off results are presented on and refer to on an adjusted basis and compare to our 2023 stand-alone adjusted results. You can find definitions of each non-GAAP measure and GAAP to non-GAAP reconciliation within our earnings release and in the appendix. Thanks to the presentation. I will now turn the call over to Gary.

Gary Pilnick

Thanks, Karen, and good morning, everyone. Thank you for joining our third quarter call for today. I will discuss our financial results and guidance in market performance as well as her back have commercial divisions. I'll then turn the call over to our Chief Financial Officer, Drew McKinstray, who will provide additional detail on our Q3 performance and outlook for the year. We'll close off the call with time for Q&A. Let's start by looking at slide 3. It's fair to say that the business is performing largely as we expected. For the quarter, net sales increased 0.7 volume price realization.
Last quarter, we told you we expect a stronger second half sales performance due to improvements in our commercial execution and the lapping of the challenging environment that emerged in Q3 of 2023. Indeed, our sales trajectory did improve and was driven by quality commercial programming, better back-to-school activation, continued strength in Canada and improved performance in non-measured channels, and our supply chain performance is improving as our team content used to deliver better levels of customer service, allowing retailers to replenish inventory to more normal levels, which positively impacted our shipments are top line performance, along with continued operational focus and discipline led to another quarter of gross margin expansion. For the quarter, we had achieved gross margin of 29.4%, a 90 basis point increase versus last year.
This performance benefited EBITDA, which grew 27.5% in the quarter versus prior year. Overall, we are pleased with how the team is executing on our ability to deliver on our financial commitments in this challenging environment. Our Q3 results puts us in a position today to reaffirm our 2024 net sales guidance and raise our full year guidance range on EBITDA, which is now expected to grow 5% to 6%. Let's turn to Slide 4 to discuss category trends and our performance. The US cereal category. Dollar sales as measured by Nielsen XAOC. declined 1.4% in the quarter with volume declining low single digits. Both sales and volume improved compared to last quarter. Shopping patterns for the quarter continue to lean towards value focus, retailers and channels, club and dollar, again to a positive dollar consumption growth.
This quarter both were up approximately 3%, driven by mix of increased display activity and TDPs. Interestingly, while consumers display value-seeking behavior, the granola and premium segments of serial will continue to deliver strong growth, each solid double digit dollar consumption growth to positive volume and positive price mix, demonstrating the breadth of affordability and overall value cereal delivers. Year to date, dollar consumption for the category is down 1.2%. The category has performed in line with our planning assumptions and is providing the stable backdrop to execute our strategy in the U.S., our consumption performance, measured by Nielsen XA, you'll see improved sequentially to down 1.8% in the quarter due to increased merchandising with key customers and successful seasonal activations, which I'll talk more about in a moment.
We continue to maintain our share position at 27.6%, which improved modestly versus last quarter. We saw share gains during the back-to-school period of August through early September on our participating brands, which we'll discuss in more detail our volume in the quarter. We also saw sequential improvement in line with expectations and unit volume term positive, driven by our PPA strategy, which focuses on ensuring remediating the consumer with the right product and the right channel. In Canada. Our team delivered another solid quarter and outperform the market, benefiting from quality back to school execution and new product introductions.
This is a good example of how our increase integration and the new ways of working at WK. where there is fast and effective sharing of ideas across the business. For the year, Canada has increased their market leading position of 110 basis points to 38.8%. Additionally, our Caribbean team is executing well and reach of 40% market share during the quarter. While the Caribbean is a smaller market for us, the team's accomplishment is certainly noteworthy. On page 5, you can see the performance of are you s portfolio. As we said last quarter, our portfolio performance is more easily understood. If you look at it in three groups are core six, the next core and natural and organic. As a reminder, our core six represents approximately 70% of our sales and includes our six largest brands, which are shown on this slide.
The next quarter contains iconic brands like cornflakes, Corn Pops and Apple Jack's and represents approximately 15% of our sales. And finally, Kashi and Bear Naked makeup, our natural and organic group. In the quarter, five of our core six brands grew or maintained share. This group continues to benefit from the performance of Frosted Flakes and Raisin Bran, which remain to have the fastest growing brands in the category. That said, we continue our work to improve the trajectory of Special K, which are consistent with its recent performance, was down 40 basis points of share in the quarter. While it will take time for the brand to perform to our expectations.
The team has a more complete commercial plan for 2025, and we are already getting started with the launch of our new special for a reason campaign, excluding Special K, our core six was up 30 basis points of share in Q2 three and is up 20 base points of share year to date. Moving to our next core Corn Pops and Apple. Jack's were key brands during our back-to-school activation and delivered positive dollar consumption in the quarter. In fact, when you look year to date, corn pumps and cornflakes have gained 10 basis points of share, benefiting from improved supply. Finally, we are natural and organic group is showing signs of sequential improvement as we're starting to see the positive impact of innovation in our retail sales execution.
Bear Naked had improved supply in the quarter and so on nearly flat dollar consumption, along with positive unit volume, affirming that when the brand is unchanged. Shelf it performs. We spoke to you about improving supply last quarter and we are pleased with a meaningful improvement in market continuing to build momentum in the growing and I know segment is a big opportunity for WK. year to date, the majority of our brands have held or gained share with many growing meaningfully ahead of the category. This performance, driven by improved supply and maturing commercial and sales execution gives us the confidence in our portfolio and our strategy. Now let's look at our back-to-school activity on slide 6. Back-to-school is an important time of year for serial parents are transitioning to a new routine centered around the morning and looking for our brands to help get the day started right, we are pleased with our first back to school programming as an independent company. Our teams designed commercial activations with the needs of parents in mind, ensuring we show up for consumers and feature and on display, our end to end approach included three elements.
First, our new marketing model ran multi-brand campaigns for in-store and digital shoppers, highlighting our back-to-school brands and what we call our feeding reading promotion, which includes free children's books with the purchase of our products. Next, during the key weeks of back-to-school, our retail sales force brought this idea to life in store through increased display with key retailers, which drove increased dollar and unit share. And finally, this was enabled by improved supply improvements in overall equipment effectiveness, which we referred to as OE. and customer service, are allowing us to return to full commercial programming and execute successfully in store during this meaningful time of year. We believe this is helping us build trust with our retailers.
On the Q2 call, we spoke about our back half Avation and tapping into seasonal excitement. On Slide 7, let's take a look at how we brought these ID Wednesday, a spinoff of the Adams family story and the most watched show ever on Netflix seasonal offerings play an important role in the category. And Halloween is one of the largest seasonal activations for serial offerings such as Wednesday, drive category engagement and have become a part of how consumers connect to the holiday. Add to that, these types of purchases are 70% incremental to everyday items and most often bought on impulse. So it's critical to have the right display in the third quarter, Wednesday was the highest velocity innovation item in the category and had the highest percentage of sales from display.
Clearly delivering with shoppers are looking for. This is a great example of how we can drive demand when we we bring a differentiated offering to the market and deliver value to our consumer. Let's turn to Slide 8 and look at our supply performance, which makes all of our commercial activations possible. We have consistently spoken to you about investing in and enhancing our supply chain. We know that improved product supply is a key enabler of our integrated commercial plan, and we saw that play out this quarter. Our team delivered a meaningful increase in service levels in Q3 when compared to 2023, driven by optimize planning and improved OE.
This near term performance is an example of the type of impact on our focus and engagement can deliver while at the same time, we're progressing our longer term, T.J. priorities. As a reminder, last quarter, we provided more details about our supply chain modernization journey, the plan for our capital investment and network consolidation to drive longer-term sustainable advantage in our business. Supply chain is the foundation of many consumer product companies, and it key strategic priority is strengthening our foundation so we can build into the future will look forward to providing further updates as we advanced the strategic priority. I will now pass the call over to Dave.

Dave McKinstray

Thank you, Gary. Before reviewing our results, I'd like to highlight that our GAAP results this quarter include charges related to our supply chain modernization initiative. Quantification of the business, portfolio realignment and restructuring costs that have been incurred through the third quarter are included in the appendix of our presentation. In our earnings release, please send the past due to the spin. Our quarterly results and future 2024 results are based on a comparison to our 2023 stand-alone adjusted results, which exclude inter-company sales and royalty arrangements with Telenor Nova that's not to leave.
This provides invest doctors with increased transparency and improves comparability across periods. Further detail of these non-GAAP measures and reconciliations to the most directly comparable GAAP measure has been provided in today's press release and the appendix of this presentation. Now looking at our results on Slide 10. Net sales for the third quarter were $689 million, a 0.7% increase versus the prior year period.
Net sales growth was driven by price realization of 1.8%, offset by volume declines of 1.1%. Volume trend improved versus the second quarter due to strong back-to-school and seasonal execution and benefited from the improved customer service levels that Gary talked about a moment ago. Stepping back in Q3 2023, we experienced supply disruptions on certain brands within our portfolio. This led to a draw down on retailer inventory. This year, we returned to more normal levels of supply, which had a twofold impact on our Q3 results. First, it enables improved commercial activation, which you see in our end market results. And second, it allows retailers to maintain more normal levels of inventory, which improved our shipments in the quarter versus last year. Additionally, our sales in Canada non-measured channels continue to trend positively. Ebitda for the third quarter was 65 million, a 27.5% increase versus the prior year quarter, which was driven by top-line performance and continued operational discipline.
Turning to our year to date results net sales were down 0.9% versus the prior year period. Despite the ongoing challenging consumer environment, our sales performance is in line with our full year guidance. Year to date EBITDA $217 million increased 5.3% versus the prior year period, driven primarily by improved operational efficiencies. Turning to slide 11, I will now focus on our operational highlights. Gross margin for the third quarter was 29.4%, 90 basis point increase versus the prior year, which resulted from continued cost discipline and operational efficiency improvements. Ebitda margin. Q. three was 9.5%, a 200 basis point increase versus last year, driven by gross margin improvement in the timing of brand building spend. We remain focused on identifying and investing in high ROI initiatives, which we believe is reflected in our results. Looking out our below-the-line items. Interest expense in Q3 was $7 million in other income was negative 2 million. Overall, it was another solid quarter for WK., which we believe puts us firmly on track to achieve our financial guidance. For the full year, we delivered top line growth driven by sequential volume improvement while our revenue growth management initiatives generated positive price mix. Operationally, the team did a great job executing back to school, and we saw strong performance across the majority of our brands. Let's turn to Slide 12. The cover our cash flow and balance sheet. Year to date, cash flow from operations was 98 million and year to date, capital expenditures were 96 million, which includes investments in our supply chain and standing up our own infrastructure as we progress towards exiting our transition services agreements.
Additionally year to date, we page 41 million in dividends to shareowners. Turning to the balance sheet, we ended the third quarter with 489 million of debt and cash equivalents of $47 million, resulting in net debt of $442 million, a decrease of 5 million versus last quarter. This decrease was a result of core working capital favorability in the quarter. Our leverage ratio, measured by net debt to trailing 12 month EBITDA is currently 1.6 times. Consistent with what we've said previously, we continue to expect free cash flow for 2024 to be approximately negative 50 million, and we expect to exit 2024 with a proxy net leverage of 1.8 times as we accelerate spend associated with our supply chain initiative in Q4 of this year. As a reminder, we have fully secured debt commitments to fund our supply chain modernization investments and continue to expect leverage to peak at approximately three times in 2026. Our strong base business. Cash flow, which converts at a very high percentage from net income, along with our available debt capacity, provides sufficient patient capital to execute our strategic initiatives as we create significant long-term value. Let's turn to Slide 13 to discuss our guidance.
Today, we're reaffirming our 2024 net sales guidance, which we continue to expect to be at the lower end of a range of down 1% to up 1% versus as prior year. Additionally, given our strong year-to-date profit delivery, we are raising our 2020 for EBITDA guidance. We now expect 20 to 24 EBITDA growth to be between 5% and 6%, up from our prior guidance range of 3% to 5%. As a reminder, in Q4, we expect to lap some onetime costs within net sales that we estimate to be worth approximately a point of growth within the quarter. Q4 also tends to be a lower sales quarter as retailers shift display towards general merchandise for the holiday season. In summary, we're proud of our team and our ability to execute our strategy and deliver financial results in line with our expectations. I'll now turn the call back over to Gary.

Gary Pilnick

Thanks, Dave. As we close, I'd like to pause and acknowledge two key milestones that took place this quarter with our team, our communities and our retail partners. First, we celebrate our two. It has been a remarkable journey filled with several firsts for this iconic 118 year old startup. I could not be more proud of our team across the WK. organization and how they're transforming this business. And our second milestone demonstrate who we are as a company Mission Tiger is our signature sustainable business program, our very own Tony, the Tiger is on a mission to support middle school sports by funding programs to supply new equipment, improved facilities, expand access and more. He does this in partnership with our local retailers and communities. Since launching in 2019, we have reached more than 3,000 schools nationwide and created almost 2 million sports and play experiences from middle scores. And in Q3, Tony reached another significant milestone is now invested in schools in all 50 states by supporting middle school sports. W.k. Kellogg Co is helping to build stronger communities and would Frosted Flakes being one of the fastest growing brands and serial. It's a great example of how doing good is also good for business. It has been a year since we became an independent company, and we are pleased with the results we have delivered were equally pleased with how we're delivering those results. With that, I'll now open the call to Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Ken Goldman with JPMorgan.

Ken Goldman

Good morning, Ken. It's a little early hit-driven from pipe, but just curious, are there any early directional tailwinds headwinds we should be considering for next year? Any outlook you might have on the cadence of the top and bottom lines? And I guess most importantly and I realize again, visibility is a little challenged right now, but guidance calls for flattish top line growth 24 through 26. You're not quite going to get there. I think this year is there as you see things now, just given some of your opportunities and offset maybe by macro challenges, are you going to be aiming for kind of flat top line growth next year?

Gary Pilnick

Thanks for the question. Can I use my voice part? Pardon me? I think what we've started as we're pleased with where we're delivering today. And for 2024, you heard today that we're reaffirming guidance for our top line and actually raising guidance with respect to EBITDA. It is early. You said that in the beginning of your question, but let me tell you what we're thinking about as we think about going forward, Howard, I think what the outlook you can consider is growth for next year being largely consistent with how we're growing this year. When we think about tailwinds for the organization, we're delivering these results of this year. It's our 1st year as an independent company. While we're transforming our business and unplugging, it's a challenging environment as well next year, those capabilities will continue to mature. We like the planning that we're doing as a company store, pleased about the way we're executing, which gives us that much more confidence for next year.
But I think largely you can see our growth next year being consistent with this year as well. But again, we appreciate you're saying it's early will come back in February with more detail, Ken. Okay.

Ken Goldman

Thank you for that. And then quickly on the category. And I'm talking larger sort of breakfast category here because we're seeing certainly some shifts on when you guys are doing a great job with obviously a lot of your brands. But just from a macro level, we're seeing some shifts more toward beverages and other some alternatives to serial still in the broader breakfast. I also just curious, how do you see the competitive landscape just expanding beyond cereal on how rational or some competitors being in there?

Gary Pilnick

Yes. A couple of things about that. When we think about the category, the way we would describe that Canada is providing us the backdrop where it needs to deliver overall broad value proposition. Take a look at cereal. I know you asked about other categories, but if you just take a look at cereal, large durable category, we talked about that before TDPs or holding in displays look good as well. There's growth in the premium side of things. So when we look at the category, we think in this particular environment, we like to how it's holding up in particular, look at units as well. Now one thing that we look at it is when we think about our category, we have believe we have folks coming into our category consumers coming into our category. When we look at PPA., one of the things we're finding is there are consumers were coming in maybe lapsed consumers, new consumers coming into serial. So when we look at this category, we like what we're seeing right now. It provides as well, what we need to deliver on our model. And going forward, we see that continuing as well into 2025. Again, we do believe the challenging environment will persist. Both. We like what we're seeing right now.

Ken Goldman

Great. Thank you.

Gary Pilnick

Thank you, Ken.

Operator

Peter Galbo with Bank of America.

Peter Galbo

Hey, guys, good morning. Morning, Darren, I'm Dave in your comments and Gary, in your comments at the beginning, I think you mentioned all the factors in terms of contract in Canada that were helping drive some of the positive variance in volume this quarter. I think you did also mention that there's a little bit of a retailer inventory build benefit that was in the quarter. So just hoping you could kind of dimension that for us. And I'm assuming that doesn't continue into 4Q, but just wanted to make sure.

Gary Pilnick

Yes, Peter. So just to reiterate what I said a little bit is recall this time last year, we had a we had a supply chain challenge. And what that led to was a fairly not insignificant drawdown in retailer inventory. So we do because we weren't supplying product over the last year. I think the slide in the presentation really detailed the improvement that we've seen versus last year and we trended better. So we did it and build inventory this quarter. We are rather consistent on inventory levels from the end of Q2 to the end of Q3. But really it was a difference of lapping a draw because of that service. I said we had last year. So that was the benefit we saw. As you think about it, you're right, we don't expect that to carry on. Of course, it's kind of a one-time thing. But I think as you look at our Q4 numbers, we anticipate the underlying business to continue to perform. We've also mentioned that there is a one-time benefit investment we had in Q4 of last year. That will play into net sales. So those two items will get us back into the guidance range that we had on net sales.

Peter Galbo

Got it. Okay. No, that's That's super helpful. And maybe just to follow up on Ken's question, you know, it's similar rates of growth for 25. I think his team seems reasonable, at least at this point. Just any early read on on any of the other items, whether that's inflation rate for next year, if you kind of have an early read or anything below the line would be helpful. Thanks very much.

Dave McKinstray

Yes, we'll come back with full details on all the below-the-line items, everything else on in February, I would say a couple of things. You know, Gary, Metro threats from an overall inflation deflation or inflation deflation will get into some of those details later on. So expect us to come back in February with all that detail.

Peter Galbo

Thanks very much.
Andrew Lazar with Barclays.

Andrew Lazar

Morning, Gary and Dave.
Good morning. Morning, Frank.
Special case, the one big brand of those sort of the core six that Regency and you talked about is kind of what's holding back sort of the share of both of those brands and the others, I think collectively are gaining a little bit of share. So I was hoping you could you talk about just more commercial activation and whatnot, and you're happy with the plans you have going forward. But it's a big brand and it's one that I know it has been a struggle for really a bunch of years now. I guess maybe if you could just add a little bit more color around the plan there. Maybe what's what's perhaps different or that's getting you sort of a little more confident that, that brand from a share standpoint can start to stabilize a bit more?

Gary Pilnick

Yes, I think that's very fair. Andrew, do you make the point that five or six core brands are growing faster or at the category rate to a special case, down 40 bps, that has been was down 40 bps in Q2 as well. So we would say it's stabilizing, but it's not performing where we would expect the brand to perform. So let me give you a couple of little bit of detail that I think would be helpful, George, with we do think 25 will be different. We feel good about the complete activation plan we have. We then start let's look at 2024 to begin with. First. There's some mechanical issues that will be lapping. There were skewed goals. We also changed distribution with upkeep promotion with one of our retailers move that does make the brand we know responds to display to feature to promotion to innovation. And we were pretty light in 2024. As you compare to 2023. We feel better about that for next year as well. The other thing you're pushing on I think it's a very fair thing is the strategic piece of it. We like where this brand is. It is at the intersection of taste and health. It's well positioned for consumers. The key is how do we get to those consumers, And we're not standing still. We've already started with that. When we think about Special K, it provides offerings that match a variety of consumer needs. The key is how do you communicate that effectively to your consumers, So a couple of things. We've already started with a new campaign. We've talked about special for a reason. You can understand why we're doing that because Special K, especially for the different reasons, consumers are low, looking for early reads would say we're getting some positive feedback on that, but that's already in market. But that's the key thing we have to do that. That's the right messaging. We've got to use our new marketing muscle to reach our consumers. So what I just described was mechanical issues that we're hoping are behind us execution. We hope to Jill perform even better. And strategically, the team is on it already. So not performing where we would hope or expect and the team is moving forward and we feel better about 2025.

Andrew Lazar

Thank you for that. And then you've talked in recent the recent calls about and you mentioned it again today, consumers trading down to some of the smaller sizes that you're allowed to include maybe more of the serial product in their basket size and whatnot. I'm curious how your supply chain is set up to handle that type of flexibility that's needed for maybe smaller package sizes and also the profitability picture looks like on some of those smaller sizes that might be might be a higher price per ounce, right? But the smaller overall unit price, what that means for margins, if anything? Thanks so much.

Gary Pilnick

No, thank you. And we talk to you about months ago. And you're right. When you look at the public data, we talked about what's happening with units and you saw it units were actually growing in Q three. Big part of that is our PPA in our PPA does a variety of different things. It expand your portfolio offerings. So we we have folks coming in to get better price per pound, a lower sticker price and everything in between. And we really like the work that the team is doing very, very hard to execute and the team has done it brilliantly. Now you asked about maybe smaller units. We're set up well to do that because we're growing in this space are supply light chain is all over it. That's what we're working on right now. And we like the economics as well. If I can leave it there, I hope you don't mind, but we like the economics across the portfolio that we're doing in PBA. And for us, what we like about PPA is it good for the category is good for our consumers for a variety of reasons to find the right pack in the right channel. And also it's good for our business as well.

Andrew Lazar

Thank you.

Operator

David Palmer with Evercore ISI.

David Palmer

Thanks. Good morning. I want to ask a clarification on the earlier answer. I think there's to Ken's question about line. It is, as I mean, roughly minus 1%. Is that what you meant there.

Gary Pilnick

And so I think I'm going to go back to the other thing Ken gave us, which is it's early. So we're looking more at a higher level. If you don't mind, David will come back in February or just say, generally speaking, the growth rate you talked about before about what the algorithm looks like. I think you can expect something similar to that. I hope it's okay. If we leave it there now we'll come back and give you more in February.

David Palmer

Yes, fair. Fair enough. I just am wondering how you're thinking about maybe puts and takes because if you keep multiyear trends, the same comparisons do ease into the first quarter. You could credibly argue that the multiyear remaining the same to get you to positive organic sales in that first quarter. So I was going to ask you if that maybe what some offsets to that might be in your has your thinking about the big picture? Maybe you can answer to that.

Gary Pilnick

I think what I would say, as you heard us earlier, talked about the complete commercial plan for 25. We feel good about that as well. And I think we might leave it there only because we'll talk more about 25. When we get to February, we'll be able to give you a lot more detail. But the very least, we're happy to say we feel good about the growth rates going forward. The algorithm that we're on. And I think what you're hearing is a level of confidence from us because what we are seeing in side the organization is the ability to execute, drive the business are run our playbook as well as transforming our three key commercial commercial functional capabilities as well as executing on our strategic priorities. We're doing all of that delivering our commitments. So David, I think that's why you're hearing a level confidence for us here.

David Palmer

I mean, if I could just squeeze one last one. I would just say ask maybe about the category from that, that trade up well in this group of brands. I mean, you have Kashi and Bear Naked. You said that there's some healing going on there. Special Cape remains a bit of a work in progress. And those are some of sort of the wellness brands that you've partly that feel like wellness in this category. It's been sort of an elusive news and trade-up driver for the category for a while now, what are your thoughts about wellness within the category and the best messaging they can do to sort of drive some of your premium brands going into 2025 banks?

Gary Pilnick

We agree with you it stinks. Nrg would be we like this space. The space is doing well. Granola and premium are growing volume and dollar. So you're right, this is something that has emerged in our category, which is interesting because of the bifurcation of value-seeking, but also premium granola growing. I think you have it right that we've got brands that can play here. We've been talking a little bit about Bear Naked over the last year. We like to say it's under new management under our Chief Growth Officer, Doug band of LV. And if you take a look at what's happening in the public data, it's starting to turn. It was largely flat in Q3. What we said there is when it's on shelf, it performs we need to execute behind that brand with for that brand and means supply chain, how do we get reliable supply Our team is on that is improving. So I think you have it right This is a place that we play before. We can play even better. And we think there's real opportunity here in the natural organic segment for WK. as well as the category, by the way.

David Palmer

Thanks very much.
Max (unidentified) with BNP Pampa.

I take for the question. I wanted to ask another question on the cereal category. You can generally encouraged by the underlying data that you're seeing. And particularly if you look at that on a unit basis by you want to ask just given on a volume basis and sales basis, the categories. And that's not all that different from what we're seeing for other U.S. food categories. But I do feel like we're seeing this shift by the consumer to value. It seems like an environment and that should be quite supportive for for serial on given its at price per meal insights on. That's why you think we're not seeing better performance from the cereal category investment. I mean, you have a consumer that is shifting to that yet?

Gary Pilnick

So I think that's a fair question. Max index in. We might turn that around a little bit saying it's performing the way it's performing down about a point in this challenging environment. But we agree with you. We think there would be tailwinds for this category. If there are value-seeking consumers, we said earlier, there are some consumers that are coming back to the category, given the PPA work that we are doing. The other thing to consider is the PPA work that we've done. It's certainly impacting us and it should impact us because it's kind of an impact on volume that's also going to have an impact on the category given the position we have in the category as well. But I think you're right, I think in this environment, cereal should benefit from that book. It is a tricky environment out there. The way we look at it is despite the fact that it's our 1st year, despite that, we have this tricky environment and we're able to deliver on our commitments, reaffirming guidance for the top line raising for EBITDA as well. When you piece that together, we're pleased that the category is providing that backdrop for us that we can deliver on the value that we want to deliver to our stakeholders. But I think your instincts are quite good there.

Great. Thanks very much believe, attack.

Operator

Robert Moskow with TD Securities.

Gary Pilnick

Hi, Rob,

Robert Moskow

just wanted to ask about. Hi, Gary. I hope your voice makes it to this last question. I had zero module cost. Yes. Okay. It is better for Dave anyway, can you talk about like your inflationary headwinds this year to the extent there were any grains? Why I imagine would have been down. I can't remember if you if you could give us a number, but I wanted to ask what is it this year? What do you think it could look like next year? Do you see any change? And how would you think about pricing in these in that environment?

Gary Pilnick

Yes. Hey, Rob. So I think a couple of things. one, we haven't gone back and quantified it. But what we've said in his holds true, what you've seen kind of stabilization in 2024 at these higher levels, you're absolutely right in a portfolio level, you're absolutely right. You can see the corn market, the wind market, we market, those have come down and we benefited from that. Now. I think on the flip side of that, though, there were other commodities specific to 2024 for the remainder inflationary. And so I'll give you a couple of sugar rice, things like that, that it's been relatively stabilization of the house as we move forward. You know that base of where corn and wheat are is largely playing through is we think about 2025. There's some other puts and takes within the port folio as we think about it. But you know, there's been some stickiness to the inflation that we saw over the last two to three years. And so we're thinking about it more towards the stabilization at the elevated levels.

Robert Moskow

Okay. And maybe a lot of other companies are talking about labor inflation being a factor. Is that is labor inflation in your numbers for 24? And would it would you expect it to be again in 25? Do you have visibility there?

Dave McKinstray

Yes, Rob, as I spoke about it and I spoke at the portfolio level, I was including all hard costs, right? So I think about any puts and takes the benefit on commodities and the other pressures. We have a net number of the stabilization at the high. So what that naturally brings you to if you have some benefit on some commodities, you may have some pressure elsewhere. And that's what I mean that by some of these elevated costs that we saw over the last couple of years are remaining in place.

Robert Moskow

Got it. Okay.

Operator

Rob Dickerson with Jefferies.

Gary Pilnick

Morning, Rob.

Rob Dickerson

Great. Thanks so much. More of a funny question about them. But in general active activation plan for next year. I don't think that throwaway right low. While I respect your your core brand is that have been a real bright for some time. So you think there could be some innovation dynamic that could be assessed with category share, at least than I do look at that when they box right on the slide on, it doesn't really feel like that's an innovation kind of with a pre-existing brand, right? It's a it's a totally different marketed product with Wednesday, all that different from the different components within the product that's kind of away from those core brands. So I'm just curious, like should we expect to see that, let's say, like more Wednesdays coming from report because the category even there may be, I feel better? Sure. Volumes are still down, at least in tracked channels of the big retailers. It was the category that was in secular decline to locate kind of pre-COVID. Volumes have also declined for like over two years now there's still declining. So like I'm just curious, like maybe there's an innovation left that could occur even within the broader category and maybe they're just needs to be more Wednesdays that makes sense in Europe were?

Gary Pilnick

100% with you on the power of innovation team and the importance of innovation in this category? We might say to you, it's an and and let me just take you through that. If you look at the public at the two fastest growing brands in this cereal category, Frosted Flakes and Raisin Bran, and they're two of the original brands that you go back in time there, although that I am these brands have been around for a while and they are big project like this is our biggest brand in. It's our fastest growing brand. Now to your very point that doesn't just happen. It happens when you the right messaging, the right promotion, the right times, but the right innovation. So we have a milkshake franchise that we use in process lettings with strawberry in chocolate used in the US and Canada. And that is really driven the top line for that brand. Raisin Bran is a little bit different. We actually then launched trusted brand. So as part of the range of brand family and you can just imagine what else we could do with that. Now I do think your point about Wednesday, seasonals importance in and out excitement news, that is also something else that as a branded player, we like do we want to do. The key thing is we need to make sure we have a reliable supply chain that allows us to do that, and then we get to match it up with our marketing team as well as our direct sales force. So I think you're right, but we would say it's planned. So we love this property. As we said, it's the most watch Netflix show all-time at the packaging is beautiful. But I would say the execution on cross of Lakes' Raisin Bran and other things. I think we do that in combination to drive our business, but importantly drive the category.

Rob Dickerson

Okay. Okay. Fair enough. And then I guess, you know, we just kind of step back, we think about the broader category and the potential promotional needs within the category, let's say, to further incentivize the consumer buys strapped consumer, maybe by a little bit more cereal by more units. Do you feel like the promotional environment is becoming increasingly more competitive or no, could we be kind of experiencing a category such that maybe there isn't really a need to promote more right such that, you know, kind of overall maybe we could improve the overall profit pool? The category, so to speak, everyone kind of plays nicely on the commercial for Hut. Thank you.

Gary Pilnick

Rob is a good question. When we think about this, when we take a look at what's happening in the marketplace, we always look backwards when we compare previous activities where we are now, and we're largely at historic norms right now, we go back to 2019 because that's the clean period before COVID hit us. But what we're seeing is we're largely at those levels as we look backwards. And we're not seeing anything particularly unusual. Our numbers are up, but that's because of what we're lapping. We were not in our front foot in terms of supply. Now we're able to act to activate more in the market. So will our numbers are up again? I think we're getting back largely in 2019 levels. Now when we think about the category and thinking about promotion will bite promotion, we think it's good for the category. When Dave talks about the as we've talked about return because it's a balance of volume, it's about it's a balance of price amount of profitability. It's all those things. And when you get that right, that drives the category that drives our our business as well. So we think that's a healthy part of the category. And we like how we're doing. And if you look at Q2 three, that gives you an example of when we're executing our playbook well with the right level of promotion, the right innovation, the right sales force, right activation during back-to-school. So we like that promotions because the way we do with the way Dave leave that in the organization.

Rob Dickerson

Super. Thank you so much.

Operator

Thank you. They are currently no further questions queued at this time. I will now turn it back over to get to Pilnick for closing remarks.

Gary Pilnick

Thank you, everybody, for joining our call today. I trust you can see that our business is building momentum and delivering positive results. We look forward to sharing our Q4 results with you in February. Thanks so much for joining us.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect your line.