Hostess Brands: Reports First Quarter 2023 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 months ended March 31, 2023.

«The strength of Hostess Brands’ business model and power of our brands enabled us to deliver another quarter of revenue and profit growth, while lapping very strong year-ago comparisons. As we continue to build a premier snacking company, Hostess Brands is focused on growing snacking occasions, and we believe that we have the right consumer insights, the right innovation pipeline and the right brand-building strategy in place to deliver long-term sustainable growth and shareholder value,» said Andy Callahan, President and Chief Executive Officer, and added, «We are maintaining its full-year net revenue, adjusted Ebitda, and adjusted EPS guidance, delivering above-algorithm profitable growth in 2023.»

First Quarter 2023 Financial Highlights versus Q1-2022

• Net revenue of USD 345.4 million increased 4.0 percent from the same period last year as 14.6 percent contribution from price/mix more than offset lower volume in the quarter.
• Gross profit increased 4.4 percent to USD 120.7 million, or 34.9 percent of net revenue, while on an adjusted basis, gross profit increased 4.6 percent to USD 121.1 million, or 35.1 percent of net revenue. Gross margin increased by 13 basis points, 20 basis points on an adjusted basis, from year-ago levels as favorable price/mix and productivity offset 13.7 percent inflation.
• Net income was USD 38.3 million, or USD 0.28 per diluted share, compared to USD 34.6 million, or USD 0.25 per diluted share, in the same period last year. Adjusted net income increased slightly to USD 38.2 million, resulting in USD 0.28 adjusted EPS as compared to USD 0.27 in the prior period.
• Adjusted Ebitda increased 3.9 percent to USD 80.4 million. Adjusted Ebitda margin remained flat at 23.3 percent.
• Cash and cash equivalents were USD 101.7 million as of March 31, 2023, resulting in a net leverage ratio of 3.0x.
• Capital expenditures were USD 24.4 million, including the build out of the new bakery in Arkadelphia, Arkansas.

Other Highlights

• Launched a variety of new innovation items during the quarter.
• The Company’s Sweet Baked Goods point-of-sale (POS) increased 0.5 percent for the quarter, 25.2 percent on a two-year stacked basis. Its share of the category decreased approximately 170 basis points to 20.3 percent.
• «Voortman» branded POS grew 10.1 percent, 39.1 percent, on a two-year stacked basis. Its share of the Cookie category declined approximately 10 basis points to 2.2 percent for the quarter.
• Repurchased USD 13.7 million shares year-to-date through March 31, 2023. The Hostess Brands Board approved a new USD 150 million share repurchase authorization.

Guidance and Outlook

The Company reaffirms the following expected consolidated financial results for the full year 2023:

• Net revenue growth of 4 percent to 6 percent
• Adjusted Ebitda of USD 315 million to USD 325 million, an increase of 7 percent to 10 percent from 2022
• Adjusted EPS of USD 1.08 to USD 1.13, an increase of 10 percent to 15 percent from 2022
• Weighted average diluted shares outstanding of approximately 135 million
• Capital expenditures of approximately USD 150 million to USD 170 million
• Income tax rate of approximately 27 percent