Hostess Brands: Reports Second Quarter 2022 Results

Lenexa / KS. (twnk) Hostess Brands Inc., one of the largest manufacturers and marketers of sweet baked goods in the United States including «Twinkies», «Ding Dongs», «Ho Hos», «Donettes» and a variety of new and classic treats, 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 percent growth while maintaining our full-year Ebitda and EPS guidance.»

Second Quarter 2022 Financial Highlights

• Net revenue of USD 340.5 million increased 16.8 percent from the same period last year as higher prices and favorable product mix accounted for 13.8 percent of the quarterly growth, with remaining growth attributed to higher volumes.
• Gross profit increased 7.2 percent to USD 112.7 million, or 33.1 percent of net revenues, while on an adjusted basis, gross profit increased 7.1 percent to USD 112.8 million, or 33.1 percent 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 percent inflation and inefficiencies caused by supply-chain fragility.
• Net income was USD 30.5 million or USD 0.22 per diluted share, a slight increase from the prior year period. Adjusted net income and adjusted EPS of USD 30.5 million, and USD 0.22, respectively, decreased modestly from the prior year period.
• Adjusted Ebitda increased 0.7 percent to USD 68.9 million. Adjusted Ebitda margin of 20.2 percent declined from 23.5 percent in the prior year period due to lower gross margins and higher operating expenses.
• Cash and cash equivalents and short-term investments were USD 227.7 million, as of June 30, 2022, reflecting a net leverage ratio of 3.0x.
• Capital expenditures increased to USD 41.9 million from USD 22.2 million in the prior-year period. The Company continues to expect capital expenditures to be in the USD 120 – USD 140 million range in 2022.
• Raising full year 2022 net revenue guidance to at least 15 percent growth, while maintaining full year adjusted Ebitda guidance towards the higher end of USD 280 – USD 290 million and adjusted EPS guidance of USD 0.93 – USD 0.98.

Other Highlights

• The Company’s Sweet Baked Goods point-of-sale («POS») increased 15.6 percent, maintaining its share of category dollar sales at 21.7 percent.
• Voortman® branded POS grew 25.0 percent 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 USD 48.5 million of shares year-to-date, the majority of which were under the previously announced USD 150 million share repurchase program.