17% Organic Net Revenue Growth
Raises Full Year Sales Growth, Reaffirms
Full Year EBITDA and EPS Guidance
Hostess Brands, Inc. (NASDAQ: TWNK) (the “Company”, “we”, “our”)
today reported its financial results for the three and six months
ended June 30, 2022.
“Hostess Brands’ iconic brands, access to faster growing
snacking occasions, broad-based distribution footprint and
excellent execution continues to drive growth in a volatile
environment. During the second quarter, our top-line momentum
continued as we posted the 10th straight quarter of double-digit
growth. I am proud of our team’s timely actions to address the
ongoing supply-chain fragility and higher inflation which pressured
our margins in the quarter,” commented Andy Callahan, the Company’s
President and Chief Executive Officer.
He continued, “Our year-to-date results are tracking ahead of
our initial expectations and our long-term growth targets, enabling
us to raise our full-year net revenue guidance to at least 15%
growth while maintaining our full-year EBITDA and EPS
guidance.”
Second Quarter 2022 Financial Highlights1
- Net revenue of $340.5 million increased 16.8% from the same
period last year as higher prices and favorable product mix
accounted for 13.8% of the quarterly growth, with remaining growth
attributed to higher volumes.
- Gross profit increased 7.2% to $112.7 million, or 33.1% of net
revenues, while on an adjusted basis, gross profit increased 7.1%
to $112.8 million, or 33.1% of net revenue. As expected, second
quarter gross margins declined by 295 basis points, 299 basis
points on an adjusted basis, from year-ago levels as favorable
price/mix was more than offset by 20% inflation and inefficiencies
caused by supply-chain fragility.
- Net income was $30.5 million or $0.22 per diluted share, a
slight increase from the prior year period. Adjusted net income and
adjusted EPS of $30.5 million, and $0.22, respectively, decreased
modestly from the prior year period.
- Adjusted EBITDA increased 0.7% to $68.9 million. Adjusted
EBITDA margin of 20.2% declined from 23.5% in the prior year period
due to lower gross margins and higher operating expenses.
- Cash and cash equivalents and short-term investments were
$227.7 million, as of June 30, 2022, reflecting a net leverage
ratio of 3.0x.
- Capital expenditures increased to $41.9 million from $22.2
million in the prior-year period. The Company continues to expect
capital expenditures to be in the $120 - $140 million range in
2022.
- Raising full year 2022 net revenue guidance to at least 15%
growth, while maintaining full year adjusted EBITDA guidance
towards the higher end of $280 - $290 million and adjusted EPS
guidance of $0.93 - $0.98.
Other Highlights
- The Company’s Sweet Baked Goods point-of-sale (“POS”) increased
15.6%, maintaining its share of category dollar sales at
21.7%.
- Voortman® branded POS grew 25.0% and its share of the Cookie
category increased by 20 basis points driven in parts by the
ongoing momentum in the faster-growing sugar-free sub-segment.
- Full year inflation is currently expected to be in the high
teens for the full year, in-line with previous estimates.
- Repurchased $48.5 million of shares year-to-date, the majority
of which were under the previously announced $150 million share
repurchase program.
1This press release contains
certain non-GAAP financial measures, including adjusted gross
profit, adjusted gross profit margin, adjusted operating income,
adjusted EBITDA, adjusted EBITDA margin, adjusted net income,
adjusted net income margin and adjusted earnings per share (“EPS”).
Please refer to the schedules in the press release for
reconciliations of non-GAAP financial measures to the comparable
GAAP measure. Unless otherwise stated, all comparisons of financial
measures in this press release are to the second quarter of 2021.
All measures of market performance contained in this press release,
including point of sale and market share include all Company
branded products within the SBG or Cookie categories as reported by
Nielsen but do not include other products sold outside of those
categories. All market data in this press release refer to the
thirteen-week period ended July 2, 2022. The Company's leverage
ratio is net debt (total long-term debt less cash and short-term
investments) divided by the trailing twelve months adjusted
EBITDA.
Guidance and Outlook
The Company is raising its full year 2022
net revenue growth guidance:
Updated Guidance
Previous Guidance
Net revenue growth
At least 15%
At least 12%
Adjusted EBITDA
Towards the higher end of $280 -
$290 million
Towards the higher end of $280 -
$290 million
Adjusted EPS (diluted)
$0.93 - $0.98
$0.93 - $0.98
Capital expenditures
$120 - $140 million
(Including capacity
expansion)
$120 - $140 million
(Including capacity
expansion)
Effective tax rate
27.0%
27.0%
Weighted average shares outstanding
138.5 - 139.5 million
139.0 - 140.0 million
The Company provides guidance only on a non-generally accepted
accounting principles (non-GAAP) basis and does not provide a
reconciliation of the Company’s forward-looking financial
expectations to the most directly comparable GAAP financial measure
because of the inherent difficulty in forecasting and quantifying
certain amounts that are necessary for such reconciliation,
including adjustments that could be made for deferred taxes,
remeasurement of the tax receivable agreement, and other
non-operating gains or losses reflected in the Company’s
reconciliation of historic non-GAAP financial measures, the amount
of which could be material. Please refer to the Reconciliation of
Non-GAAP Financial Measures included in this press release for
further information about the use of these measures.
Second Quarter 2022 Compared to Second Quarter 2021
Net revenue was $340.5 million, an increase of 16.8%, or $49.0
million, from the prior-year period. Contribution from previously
taken pricing actions and product mix provided 13.8% of the growth,
while higher volumes accounted for 3.0% of the quarterly growth.
Compared to the same period last year, sweet baked goods net
revenue of $303.5 million increased 15.6% or $41.0 million, while
cookies net revenue of $37.0 million increased 27.6% or $8.0
million.
Gross profit was $112.7 million or 33.1% of net revenue,
compared to 36.1% for the same period last year. Gross margin
declined 295 basis points, 299 basis points on an adjusted basis,
as favorable price/mix and productivity benefits were more than
offset by inflation and inefficiencies caused by supply-chain
fragility. Adjusted gross profit increased 7.1% on pricing actions
and higher volume.
Operating income was $51.0 million, a decrease of 4.0% from the
prior-year period. Adjusted operating income of $51.7 million
decreased 4.6% from the same period last year, as higher gross
profit was offset by higher advertising expense, greater workforce
investments as well as higher depreciation and share-based
compensation expense.
Adjusted EBITDA of $68.9 million, or 20.2% of net revenue,
increased 0.7% from the same period last year as higher gross
profit was partially offset by higher operating expenses.
The Company’s effective tax rate was 27.0% compared to 28.2% in
the prior year. The current year effective tax rate, excluding
certain immaterial discrete items, was 27.2% compared to 27.3% in
the prior-year period.
Net income was $30.5 million, a slight increase from $29.8
million from the prior-year period. Adjusted net income of $30.5
million decreased 5.3% from the same period last year. Diluted EPS
was $0.22 compared to $0.21 in the prior-year period. Adjusted EPS
was $0.22 compared to $0.23 in the prior-year period due to the
changes in adjusted net income.
Operating cash flows for the six months ended June 30, 2022 were
$87.2 million, relatively unchanged as compared to $87.3 million
for the same period last year.
Conference Call and Webcast
The Company will host a conference call and webcast with an
accompanying presentation today, August 3, 2022 at 4:30 p.m. ET to
discuss the results for the second quarter. Investors interested in
participating in the live call can dial 877-451-6152 from the U.S.
and 201-389-0879 internationally. A telephone replay will be
available approximately two hours after the call concludes through
August 17, 2022, by dialing 844-512-2921 from the U.S., or
412-317-6671 internationally, and entering confirmation code
13730838. The simultaneous, live webcast and presentation will be
available on the Investor Relations section of the Company’s
website at www.hostessbrands.com. The webcast will be archived for
30 days.
About Hostess Brands, Inc.
Hostess Brands, Inc. (NASDAQ: TWNK) is a snacking powerhouse
with a portfolio of iconic brands and a mission to inspire moments
of joy by putting our heart into everything we do. Hostess Brands
is proud to make America’s No. 1 cupcake, mini donut and sugar-free
cookie brands. With annual sales exceeding $1.1 billion and
employing approximately 2,600 dedicated team members, Hostess
Brands produces new and classic snacks, including Hostess®
Donettes®, Twinkies®, CupCakes, Ding Dongs® and Zingers®, as well
as a variety of Voortman® cookies and wafers. For more information
about Hostess Brands please visit hostessbrands.com.
Forward-Looking Statements
This press release contains statements reflecting the Company’s
views about its future performance that constitute “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, that involve substantial risks and
uncertainties. Forward-looking statements are generally identified
through the inclusion of words such as “believes,” “expects,”
“intends,” “estimates,” “projects,” “anticipates,” “will,” “plan,”
“may,” “should,” or similar language. Statements addressing the
Company’s future operating performance and statements addressing
events and developments that the Company expects or anticipates
will occur are also considered as forward-looking statements. All
forward-looking statements included herein are made only as of the
date hereof. The Company undertakes no obligation to update any
forward-looking statement, whether as a result of new information,
future events, or otherwise.
These statements inherently involve risks and uncertainties that
could cause actual results to differ materially from those
anticipated in such forward-looking statements. These risks and
uncertainties include, but are not limited to, maintaining,
extending and expanding the Company’s reputation and brand image;
protecting intellectual property rights; leveraging the Company’s
brand value to compete against lower-priced alternative brands;
correctly predicting, identifying and interpreting changes in
consumer preferences and demand and offering new products to meet
those changes; operating in a highly competitive industry; the
continued ability to produce and successfully market products with
extended shelf life; the ability to pass cost increases on to our
customers; the ability to maintain or add additional shelf or
retail space for the Company’s products; our ability to identify or
complete strategic acquisitions, alliances, divestitures or joint
ventures; our ability to successfully integrate, achieve expected
synergies and manage our acquired businesses and brands; the
ability to drive revenue growth in key products or add products
that are faster-growing and more profitable; adverse impact or
disruption to our business caused by COVID-19 or future outbreaks
of highly infectious or contagious diseases; volatility in
commodity, energy, and other input prices and the ability to adjust
pricing to cover increased costs; significant changes in the
availability and pricing of transportation; dependence on major
customers; increased labor and employee related costs; strikes or
work stoppages; product liability claims, product recalls, or
regulatory enforcement actions; dependence on third parties for
significant services; unanticipated business disruptions;
geographic focus could make the Company particularly vulnerable to
economic and other events and trends in North America;
consolidation of retail customers; unsuccessful implementation of
business strategies to reduce costs; increased costs to comply with
governmental regulation; failures, unavailability, or disruptions
of the Company’s information technology systems; dependence on key
personnel or a highly skilled and diverse workforce; the Company’s
ability to finance indebtedness on terms favorable to the Company;
and other risks as set forth from time to time in the Company’s
Securities and Exchange Commission filings.
As a result of a number of known and unknown risks and
uncertainties, the Company’s actual results or performance may be
materially different from those expressed or implied by these
forward-looking statements. Risks and uncertainties are identified
and discussed in Item 1A-Risk Factors in the Company’s Annual
Report on Form 10-K for 2021. All subsequent written or oral
forward-looking statements attributable to us or persons acting on
the Company’s behalf are expressly qualified in their entirety by
these risk factors. The Company undertakes no obligation to update
any forward-looking statement, whether as a result of new
information, future events, or otherwise.
HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited, amounts in
thousands, except shares and per share data)
June 30, 2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents
$
206,831
$
249,159
Short-term investments
20,918
—
Accounts receivable, net
178,769
148,180
Inventories
60,809
52,813
Prepaids and other current assets
10,540
10,564
Total current assets
477,867
460,716
Property and equipment, net
359,444
335,305
Intangible assets, net
1,932,636
1,944,392
Goodwill
706,615
706,615
Other assets, net
52,645
19,283
Total assets
$
3,529,207
$
3,466,311
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Long-term debt and lease obligations
payable within one year
$
14,009
$
14,170
Tax receivable agreement payments payable
within one year
11,100
11,600
Accounts payable
84,147
68,104
Customer trade allowances
60,668
52,746
Accrued expenses and other current
liabilities
42,079
47,009
Total current liabilities
212,003
193,629
Long-term debt and lease obligations
1,092,797
1,099,975
Tax receivable agreement obligations
125,452
134,265
Deferred tax liability
336,587
317,847
Other long-term liabilities
1,635
1,605
Total liabilities
1,768,474
1,747,321
Class A common stock, $0.0001 par value,
200,000,000 shares authorized, 142,546,549 issued and
136,486,712
shares outstanding as of June 30, 2022 and
142,031,329 shares issued and 138,278,573 shares outstanding
as of December 31, 2021
14
14
Additional paid in capital
1,304,970
1,303,254
Accumulated other comprehensive income
(loss)
22,993
(506
)
Retained earnings
540,434
475,400
Treasury stock
(107,678
)
(59,172
)
Stockholders’ equity
1,760,733
1,718,990
Total liabilities and stockholders’
equity
$
3,529,207
$
3,466,311
HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited, amounts in
thousands, except shares and per share data)
Three Months Ended
Six Months Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Net revenue
$
340,472
$
291,485
$
672,523
$
556,906
Cost of goods sold
227,772
186,379
444,199
356,281
Gross profit
112,700
105,106
228,324
200,625
Operating costs and expenses:
Advertising and marketing
15,587
13,144
27,537
24,925
Selling
10,137
9,454
19,914
18,084
General and administrative
30,127
23,504
59,799
45,689
Amortization of customer relationships
5,878
5,878
11,756
11,756
Total operating costs and expenses
61,729
51,980
119,006
100,454
Operating income
50,971
53,126
109,318
100,171
Other expense (income):
Interest expense, net
9,741
9,954
19,407
19,971
Change in fair value of warrant
liabilities
—
531
—
455
Other expense (income)
(507
)
1,067
(71
)
1,430
Total other expense
9,234
11,552
19,336
21,856
Income before income taxes
41,737
41,574
89,982
78,315
Income tax expense
11,261
11,727
24,948
21,736
Net income
$
30,476
$
29,847
65,034
56,579
Earnings per Class A share:
Basic
$
0.22
$
0.23
$
0.47
$
0.43
Diluted
$
0.22
$
0.21
$
0.47
$
0.41
Weighted-average shares outstanding:
Basic
137,909,156
131,354,059
138,255,803
131,096,686
Diluted
138,958,242
138,925,489
139,263,303
138,026,854
HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited, amounts in
thousands)
Six Months Ended
June 30, 2022
June 30, 2021
Operating activities
Net income
$
65,034
$
56,579
Depreciation and amortization
27,951
25,223
Debt discount amortization
615
621
Change in fair value of warrant
liabilities
—
455
Unrealized foreign exchange losses
(gains)
(217
)
73
Non-cash lease expense
247
659
Share-based compensation
4,987
4,363
Deferred taxes
10,374
13,932
Change in operating assets and
liabilities:
Accounts receivable
(30,600
)
(23,194
)
Inventories
(7,996
)
(2,816
)
Prepaids and other current assets
(131
)
8,844
Accounts payable and accrued expenses
8,967
1,735
Customer trade allowances
7,934
827
Net cash provided by operating
activities
87,165
87,301
Investing activities
Purchases of property and equipment
(36,302
)
(20,051
)
Acquisition of short-term investments
(20,918
)
—
Acquisition and development of software
assets
(5,607
)
(2,129
)
Net cash used in investing activities
(62,827
)
(22,180
)
Financing activities
Repayments of long-term debt and lease
obligations
(5,584
)
(5,584
)
Repurchase of common stock
(48,506
)
(16,691
)
Tax payments related to issuance of shares
to employees
(5,512
)
(1,235
)
Cash received from exercise of options and
warrants
2,241
13,524
Payments on tax receivable agreement
(9,313
)
(9,270
)
Net cash provided by (used in) financing
activities
(66,674
)
(19,256
)
Effect of exchange rate changes on cash
and cash equivalents
8
(92
)
Net increase (decrease) in cash and
cash equivalents
(42,328
)
45,773
Cash and cash equivalents at beginning of
period
249,159
173,034
Cash and cash equivalents at end of
period
$
206,831
$
218,807
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest, net of amounts capitalized
$
18,599
$
19,451
Net taxes paid (refunded)
$
11,489
$
(1,506
)
Supplemental disclosure of non-cash
investing:
Accrued capital expenditures
$
6,358
$
5,046
HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
Adjusted gross profit, adjusted gross profit margin, adjusted
operating income, adjusted net income, adjusted net income margin,
adjusted EBITDA, adjusted EBITDA margin and adjusted EPS
collectively referred to as “Non-GAAP Financial Measures,” are
commonly used in the Company’s industry and should not be construed
as an alternative to net revenue, gross profit, operating income,
net income or earnings per share as indicators of operating
performance (as determined in accordance with GAAP). These Non-GAAP
Financial Measures may not be comparable to similarly titled
measures reported by other companies. The Company has included
these Non-GAAP Financial Measures because it believes the measures
provide management and investors with additional information to
measure the Company’s performance, estimate the Company’s value and
evaluate the Company's ability to service debt.
Non-GAAP Financial Measures are adjusted to exclude certain
items that affect comparability. The adjustments are itemized in
the tables below. You are encouraged to evaluate these adjustments
and the reason the Company considers them appropriate for
supplemental analysis. In evaluating adjustments, you should be
aware that in the future the Company may incur expenses that are
the same as or similar to some of the adjustments set forth below.
The presentation of Non-GAAP Financial Measures should not be
construed as an inference that future results will be unaffected by
unusual or recurring items.
The Company defines adjusted EBITDA as net income adjusted to
exclude (i) interest expense, net, (ii) depreciation and
amortization (iii) income taxes and (iv) share-based compensation,
as further adjusted to eliminate the impact of certain items that
the Company does not consider indicative of its ongoing operating
performance. Adjusted EBITDA has limitations as an analytical tool,
and you should not consider it in isolation, or as a substitute for
analysis of the Company’s results as reported under GAAP. For
example, adjusted EBITDA:
- does not reflect the Company’s capital expenditures, future
requirements for capital expenditures or contractual
commitments;
- does not reflect changes in, or cash requirements for, the
Company’s working capital needs;
- does not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments,
on the Company’s debt; and
- does not reflect payments related to income taxes or the tax
receivable agreement.
HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(Unaudited, amounts in
thousands, except percentages and per share data)
Three Months Ended June 30,
2022
Gross
Profit
Gross Margin
Operating Income
Net Income
Net Income Margin
Diluted EPS
GAAP Results
$
112,700
33.1
%
$
50,971
$
30,476
9.0
%
$
0.22
Non-GAAP adjustments:
Foreign currency remeasurement
—
—
—
(537
)
(0.2
)
—
Project consulting costs (1)
—
—
559
559
0.2
—
Other (2)
144
—
144
175
—
—
Discrete income tax expense
—
—
—
(80
)
—
—
Tax impact of adjustments
—
—
—
(53
)
—
—
Adjusted Non-GAAP results
$
112,844
33.1
%
$
51,674
30,540
9.0
$
0.22
Income tax
11,394
3.3
Interest expense
9,742
2.9
Depreciation and amortization
14,560
4.2
Share-based compensation
2,648
0.8
Adjusted EBITDA
$
68,884
20.2
%
(1) Project consulting costs are included
in general and administrative on the condensed consolidated
statement of operations.
(2) Costs related to certain corporate
initiatives, including $0.1 million of accelerated
depreciation.
Three Months Ended June 30,
2021
Gross
Profit
Gross Margin
Operating Income
Net Income
Net Income Margin
Diluted EPS
GAAP Results
$
105,106
36.1
%
$
53,126
$
29,847
10.2
%
$
0.21
Non-GAAP adjustments:
Foreign currency remeasurement
—
—
—
(52
)
—
—
Change in fair value of warrant
liabilities
—
—
—
531
0.2
—
Other (1)
158
—
1,066
2,184
0.6
0.02
Tax impact of adjustments
—
—
—
(329
)
(0.1
)
—
Adjusted Non-GAAP results
$
105,264
36.1
%
$
54,192
32,181
10.9
$
0.23
Income tax
12,056
4.3
Interest expense
9,954
3.4
Depreciation and amortization
12,532
4.3
Share-based compensation
1,640
0.6
Adjusted EBITDA
$
68,363
23.5
%
(1) Costs related to certain corporate
initiatives, of which $0.2 million is included in cost of goods
sold, $0.9 million is included in general and administrative
expenses and $1.1 million is included in other non-operating
expenses.
Six Months Ended June 30,
2022
Gross
Profit
Gross Margin
Operating
Income
Net Income
Net Income Margin
Diluted EPS
GAAP Results
$
228,324
34.0
%
$
109,318
$
65,034
9.7
%
$
0.47
Non-GAAP adjustments:
Foreign currency remeasurement
—
—
—
(220
)
—
—
Project consulting costs (1)
—
—
3,887
3,887
0.6
0.03
Other (2)
273
—
273
422
0.1
—
Discrete income tax expense
—
—
—
512
0.1
—
Tax impact of adjustments
—
—
—
(1,104
)
(0.2
)
(0.01
)
Adjusted Non-GAAP results
$
228,597
34.0
%
$
113,478
68,531
10.3
%
$
0.49
Income tax
25,540
3.8
Interest expense
19,407
2.9
Depreciation and amortization
27,857
4.1
Share-based compensation
4,987
0.7
Adjusted EBITDA
$
146,322
21.8
%
(1) Project consulting costs are included
in general and administrative on the condensed consolidated
statement of operations.
(2) Costs related to certain corporate
initiatives, including $0.1 million of accelerated
depreciation.
Six Months Ended June 30,
2021
Gross Profit
Gross
Margin
Operating
Income
Net Income
Net Income Margin
Diluted EPS
GAAP Results
$
200,625
36.0
%
$
100,171
$
56,579
10.2
%
$
0.41
Non-GAAP adjustments:
Foreign currency remeasurement
—
—
—
71
—
—
Change in fair-value of warrant
liabilities
—
—
—
455
0.1
—
Other (1)
158
0.1
1,066
2,422
0.4
0.02
Tax impact of adjustments
—
—
—
(428
)
(0.1
)
—
Adjusted Non-GAAP results
$
200,783
36.1
%
$
101,237
$
59,099
10.6
%
$
0.43
Income tax
22,164
4.0
Interest expense
19,970
3.6
Depreciation and amortization
25,223
4.5
Share-based compensation
4,363
0.8
Adjusted EBITDA
$
130,819
23.5
%
(1) Costs related to certain corporate
initiatives, of which $0.2 million is included in cost of goods
sold, $0.9 million is included in general and administrative
expenses and $1.3 million is included in other non-operating
expenses.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220803005906/en/
Investor Contact Amit Sharma asharma@hostessbrands.com
Media Contact Carly Schesel carly.schesel@clynch.com
Hostess Brands (NASDAQ:TWNK)
Historical Stock Chart
From Jun 2024 to Jul 2024
Hostess Brands (NASDAQ:TWNK)
Historical Stock Chart
From Jul 2023 to Jul 2024