Amplify Snack Brands: Reports Q3-2016 Financial Results

Austin / TX. (betr) Amplify Snack Brands Inc., a leading marketer and manufacturer of branded better-for-you snack food products, reported financial results for the three and nine months ended September 30.

Three Months Ended September 30, 2016 Highlights

• Net sales were 68.0 million USD, up 48.1 percent year-over-year
• Gross profit was 32.3 million USD, representing 47.6 percent of net sales
• GAAP net income was 1.6 million USD, or 0.02 USD per fully diluted share
• Non-GAAP adjusted net income was 9.0 million USD, or 0.12 USD per fully diluted share
• Adjusted Ebitda was 20.1 million USD, representing 29.6 percent of net sales

Nine Months Ended September 30, 2016 Highlights

• Net sales were 182.2 million USD, up 32.5 percent year-over-year
• Gross profit was 93.3 million USD, representing 51.2 percent of net sales
• GAAP net income was 18.8 million USD, or 0.25 USD per fully diluted share
• Non-GAAP adjusted net income was 30.4 million USD, or 0.40 USD per fully diluted share
• Adjusted Ebitda was 61.4 million USD, representing 33.7 percent of net sales

«We are very pleased to have completed the Tyrrells acquisition in the third quarter. Through this transaction, we diversified our better-for-you snack food offerings, expanded our geographic presence, and gained a highly-talented international team as well as in-house manufacturing capabilities», commented Tom Ennis, Amplify’s President and Chief Executive Officer. «Strong brand sales gains continued in the quarter, despite a more challenging market backdrop, and we experienced certain transitory operational execution issues that impacted our results. Amplify is now a much stronger and more diversified company, and we’ve proactively taken steps to sharpen execution going forward. We remain very excited about the significant potential we have to leverage our newly expanded portfolio of terrific better-for-you brands to drive continued sales growth, profitability and value for our shareholders».

Three Months Ended September 30, 2016

Net sales increased 48.1 percent to 68.0 million USD compared to 45.9 million USD for the three months ended September 30, 2015. The increase in net sales reflects solid growth of the SkinnyPop brand, new distribution of the Paqui brand, and the addition of the Oatmega brand. In addition, the Tyrrells international portfolio of brands which the Company acquired on September 2, 2016 contributed 8.6 million USD to net sales in the third quarter. The impact of foreign currency exchange on net sales and earnings in the quarter was immaterial based on the inclusion of Tyrrells results for a partial month of the three months ended September 30, 2016.

Gross profit was 32.3 million USD, or 47.6 percent of net sales, compared to 25.7 million USD, or 55.9 percent of net sales for the three months ended September 30, 2015. The decrease in gross margin percentage for the three months ended September 30, 2016 was primarily due to a higher level of trade promotional activity, a shift in mix of brand and customer sales, including the addition of Tyrrells, and a delay in timing of planned cost savings. The Tyrrells gross margin was 27.1 percent for the three months ended September 30, 2016.

GAAP SG+A was 24.9 million USD compared to 21.2 million USD for the third quarter ended September 30, 2015. GAAP net income was 1.6 million USD, or 0.02 USD per fully diluted share, compared to a net loss of 3.0 million USD, or a loss of 0.04 USD per fully diluted share, for the three months ended September 30, 2015. Adjusted net income, which is a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, was 9.0 million USD, or 0.12 USD per fully diluted share, based on 75.6 million diluted shares outstanding, compared to adjusted net income of 9.2 million USD for the three months ended September 30, 2015, or 0.12 USD per fully diluted share, based on 75.0 million diluted shares outstanding.

Adjusted Ebitda, which is a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 11.0 percent to 20.1 million USD from 18.1 million USD for the three months ended September 30, 2015, primarily reflecting higher net sales and gross profit, partially offset by higher Adjusted SG+A. Adjusted SG+A, which is a non-GAAP financial measure used by the Company that makes certain adjustments to SG+A calculated under GAAP, was 12.7 million USD, compared to Adjusted SG+A of 7.6 million USD for the three months ended September 30, 2015. The increase in Adjusted SG+A was primarily driven by increased consumer marketing activities to drive brand awareness and customer trial, new costs associated with a full quarter contribution from Oatmega and a partial month contribution of Tyrrells, as well as investments in infrastructure and personnel. As a percentage of net sales, Adjusted Ebitda was 29.6 percent compared to 39.4 percent in the three months ended September 30, 2015.

Nine Months Ended September 30, 2016

Net sales for the nine months ended September 30, 2016 increased 32.5 percent to 182.2 million USD, compared to 137.5 million USD during the nine months ended September 30, 2015. The increase in net sales reflects solid growth of the SkinnyPop brand, new distribution of the Paqui and Oatmega brands, and the addition of the Tyrrells international portfolio of brands which the Company acquired on September 2, 2016.

GAAP net income increased 13.3 million USD to 18.8 million USD, or 0.25 USD per fully diluted share, compared to net income of 5.5 million USD, or 0.07 USD per fully diluted share, for the nine months ended September 30, 2015. Adjusted net income, which is a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, was 30.4 million USD, or 0.40 USD per fully diluted share, based on 75.1 million diluted shares outstanding, compared to adjusted net income of 28.1 million USD for the nine months ended September 30, 2015, or 0.38 USD per fully diluted share, based on 74.7 million USD diluted shares outstanding.

Adjusted Ebitda, a non-GAAP financial measure, increased 9.3 percent to 61.4 million USD from 56.1 million USD for the nine months ended September 30, 2015. Adjusted Ebitda as a percentage of net sales for the nine months ended September 30, 2016 was 33.7 percent, compared to 40.8 percent for the nine months ended September 30, 2015.

Balance Sheet and Cash Flow

As of September 30, 2016, the Company had cash and cash equivalents of 17.2 million USD and net availability under its 50 million USD revolving line of credit of 44.5 million USD. Net debt, as defined under the Company’s credit facility, represents outstanding indebtedness less cash and cash equivalents, was 596.2 million USD as of September 30, 2016, compared to 182.5 million USD as of December 31, 2015. The increase was primarily attributable to the acquisition of the Tyrrells portfolio of international brands during the nine months ended September 30, 2016. Amplify’s leverage ratio as calculated under the Company’s credit facility increased to 5.8x trailing twelve month Ebitda at September 30, 2016, up from 2.6x at June 30, 2016. The Company remains committed to reducing its long-term net leverage to under 4.5x via organic growth, cost reduction initiatives, and subsequent free cash generation.

Outlook

The Company is updating its full year 2016 outlook to reflect its year-to-date performance, the September 2, 2016 completion of the Tyrrells acquisition, and its view of the remainder of the year. For the full year 2016 the Company now expects to report:

• Net sales of 268 million USD to 272 million USD
• Adjusted Ebitda of 84 million USD to 86 million USD
• Adjusted EPS of 0.49 USD to 0.51 USD
• The outlook assumes an estimated foreign currency exchange rate in the fourth quarter of 1.24 USD:GBP.

The Company has not reconciled its expected Adjusted Ebitda to net income or Adjusted EPS to earnings per share under «Outlook» because it has not finalized calculations for several factors necessary to provide the reconciliations, including net income, interest expense and income tax expense. In addition, certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time.