TWNK - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the Hostess First Quarter 2018 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host for today, Ms. Rachel Perkins. may you ma'am, you, begin. Thank

Rachel Perkins

the welcome Good this XXXX to afternoon Brands' XX, for Quarter at approximately Eastern Hostess Conference afternoon, the that Call. Time. out release access and Earnings have By First should March p.m. to now, went ended period X:XX earnings XXXX everyone

Hostess call remind received available and broadcast, a that will be not the on will number have being it's you include available to website of is Hostess' the would company's today's discussion forward-looking website. on If you release, at like www.hostessbrands.com. This a replay statements.

number The would earnings the to investors of measures to to update Please from perspective the most statements. full make these you refer the references will If obligation growth the factors trends release remember you its have non-GAAP The filings, business company's differ materially the discussion provide non-GAAP of a cause reconciliation measures. to results the as the well actual measures a statements. of to comparable as no these see SEC of or and forward-looking that measures. a included earnings financial undertakes with the recent GAAP these company most revise could Hostess' believes underlying in will company release on forward-looking financial useful company company's

Metropoulos. Now I will Brands' Dean turn to Chairman, over the call Executive Hostess

Dean Metropoulos

good Rachel, and afternoon, everyone. you, Thank

this new brings culture. company steering steward First, the and new our please Andy performance that urgency Andy perspectives great of and into confident well I'm Andy energy let to me our future. business sense welcome new very Callahan. very our will while CEO,

the A has well already team be they of and the have, fact, will little company Operations, addition, to great I'm industry-leading storied proud team I'm running delivered. in In landed the very that be performance. our about for into a Hostess this providing quarter. strong of continue future. new Stuart certain Daley, - performance leadership to Head has operational bit delivered our

annual are have We very are the guidance we results line with our with communicated. pleased which much in

and net net Cloverhill EBITDA losses, losses ahead acquisition, revenues total this million were Without of from XX.X% included through XX.X%. were a up XX.X%, Cloverhill. X.X%, Our some the EBITDA up excluding well or the revenue, category. was solid our $XX revenues was such

have we transportation, Cloverhill right, have by the lost pricing outsourcing the discontinuance our which we some in As increased company important business, of required communicated, Danish some Buns, in headwind, sales abrupt Honey Cinnamon and corrugated Roll resulted cost. and and

all of business and A and five co-packers ago. business we've operation Chicago. months vending are strongly breakfast, you last to this that included just and was which I this will our our Texas impact, second and ago, and the capabilities the in Big This Cloverhill impact business, of acquire products a about I that augment rapidly Service announced we half. we an transforming, one our Three two years back think excellent well to acquisition positioned announced summer. These known and Food operational we negative coming brands, looked in late business. well newly-acquired that in good Cloverhill, acquisition disappear to Chicago, are

operation of Chicago. a manufacturing outside included very addition, In nice

have already the business bakery. quarter, of While our Cloverhill major for margins weighed the turnaround challenged on we a this implemented

losing accretive was even, wonderfully and for profitable by be will bought we it be know, only the million future. soon significant it dollars, you breaking and $XX As as it into fall

for even of in $XX a million a which strong the $XX cleaning the Our after of with and operating million drove the end million, quarter $XX for the liability. cash cash continues quarter flow at flow acquisition million up cash balance to of be the paying $XXX

building will category the given much and about we've I'm our being Thank that, We highly know proud you will I would accretive. promotional quickly Service I you. feel Food we our we to company company pursue acquisition. aggressively detailed line of from confident our Andy? and with business it XXXX a within as strategically flow. focused business, we you viewed. as may then we I to shareholder financial future, of year the as I over capitalizing top think back feel paid be this. question. the I and vending quarter-to-quarter. to comments about Truly, been growth highly and innovation, find for make EBITDA strength over much. not for well outperforming about building the business, surprised ultimately culture, we about It's line not it review resourceful Cloverhill acquisition. how have will turn basis hungry much allayed they of our very continued and the for innovation, about what strategic fully comparisons and for how good then Andy, volume of and and that and throughout and valued comfortable should plans and multiple well very on in a newly-acquired organic The The the and our guidance on have XXXX Tom closeout our very With your in somewhat were by cash with of more share, year, excellent quite promise and a our the not be year our quarterly beyond. don't the And we a strong a accountable, year, I smartly prove merchandising believe XXx this year, feel As and we are have very concerns growth that timing is expand again line our projecting will we acquisitions, and accretive. few up strong breakfast expect market we

Andrew Callahan

earnings for call. am first and my I'm really this thrilled lead day Great. to company. everyone on my what to the we my the so company, believe this Thanks, and the with me host to into I with speaking to and third year on Dean, this opportunity on tremendous why potential I'm attracted great going be thanks have future. focus comments I long

Bill First off, Congratulations, and success And away. missed and Brands to would of a know team I continue Bill I achievement Hostess phone be Toler a as will I by bringing for and the to know his resource be has me. will like back company. he offered, he's Bill. only tremendous the generously for call trusted congratulate

why period really, the team, such in accomplished growth So team join everybody The quickly, did Really, so Hostess? company brand time, this much as The three - has and I Dean the I'm has. did I And reasons. the team the why real such of of hungry, the leading business a and short is to be action-oriented they're unlocking group. they're team, and talented. witnessed. mentioned, with as Unlocking a talented the humbled honored potential has starts the potential and potential of

really with for brand and share connection place the The is really has And to on par assets our and And from. growth going we with growth. create and our value that unlock this realize strong have is multiple Brands something, something to finally, saying team and be Hostess grow sharpen consumers paths, they and I'm closely potential. the this this working and to to many of potential special. a grow customers, Additionally, platform the and passion value with to is that's great our consumers emotional and Hostess Brands a

honored I'm getting of part So started, Hostess and is be just really to it.

enough So really to who's bring to going through and to I'm that's Tom turn you from the over that's me. called. going it results, you why

Thomas Peterson

a and financial This will data acquisition million our representing Andy. of bakery, first of $XXX.X performance top results the million, our other review now net revenue contributed for months $XX.X the increase line the quarter which quarter XXXX's release. today's driven million I quarter. first revenue Thanks, from of by $XXX.X million. the or for XX.X% results $XX.X two Cloverhill strong Net of revenue of were quarter was the from growth,

We our the also strong increased revenue, Sweet momentum had product the continued of from with XXXX X.X% excluding innovations. sales Chicago, which increased Goods net Baked segment in

period point-of-sale from X.X%. company's we points. March a for XX-week record XX.X% XX% additional of basis for up the The is period in was up Some relaunch. the also company our ended include retail XX.X%, where These was The top strength to XXX and X.X% for XX, revenue. share continue increased market Brands brands key at highlights the see point-of-sale Hostess share X XX-week net the XX-week Hostess the brands represent quarter since

up growth and XXX; the We Walmart, points. drive was food, XXX; Hostess continue XXX for channels. share C-store Brands up important up XX to points; basis basis most increased dollar share our and

revenue. generated of for margin continue $XX quarter. momentum, build product the Gross to million the revenue from New quarter net of $XX.X million for was XX.X% net in innovation XXXX. We gross profit of XXXX first adding

XXX for temporary and bakery, incurred from produced our points. which $X.X quarter the we million of expected, gross negative we As declines margin of basis acquisition profit the by Cloverhill margin decreased

As we we expect continue sooner. - positive we Chicago soften, expect can be the and Chicago year-end Bakery, and the negative to by margin transform or dilution to we EBITDA will

cost the we outsource to expect in to also branded savings repatriating with were see forced associated We Hostess that the items XXXX. summer immediately of

elevated noted decreased basis transportation margin have continue on to XXX be by we points. costs and previous As calls,

or SG&A This We $XX.X amortizing, of also or by in our margin tax XX.X% non-cash which were was the for bps. to including hour million reform, one-time of paid $XX.X attributable SG&A lapping quarter XXXX. revenue. in to dollars expense workers increase of compensation bonus to XXXX. issued increase expenses, related gross to a XX the primarily reduced million $X.X in XX.X% compares The March share-based revenue first of an million due for of awards

or bakery, of our $XX revenue. adjusted with our generated XX.X% EBITDA continued growth. EBITDA also in increase support revenue million attributed deployment the along EBITDA costs. in heightened to negative revenue transportation adjusted of decrease or of is to of $XX.X compared We gross of adjusted Chicago the We in profit The displays million XX.X% of

tax non-controlling part non-controlling tax to and rate, of the we And our $X.XX other Our a effective receivable agreement. expectations. impact first this current buy excluding XXXX, the effective of onetime out with was was to items, including of certain compared XXXX. the million our line entered as with We In which XX.X%. was the the quarter an transaction. savings EPS, Apollo's interest, the of tax XX.X%, Adjusted first recognized $XX.X under of gain, along interest, share to rate agreement the non-taxable for future income $X.XX gain this into quarter a per excludes allocated tax net in

cash continues strong flow cash flows to Our operating $XX.X for generation with of quarter the be million.

cash to Our debt in had CapEx and cash $XXX.X $XXX We Columbus, our equipment K support net Georgia. of million. $X.X was quarter and of new property million, mainly million for for equivalents client the installed and

XX, March Xx. of leverage was our As ratio

In our previously we reaffirming guidance. terms of are our outlook for XXXX, issued

Goods Baked average Sweet We the for the category year. grow expect revenue to well above

to continue also from to revenue We contributions to the million Cloverhill be bakery million year. $XX $XX the expect the for

EBITDA includes EBITDA is Our $XXX adjusted the million, million adjusted $XXX the which losses bakery. with associated expectation to short-term

EPS $X.XX an to adjusted the adjusted to XX% We $X.XX, expect in of X% increase or XXXX. from EPS of $X.XX of

effect rate the another partnership In for interest, solid believe income Our year given is XXXX well we are of XX%, for the summary, expected XXXX. positioned non-controlling purposes. tax approximately tax a we for in

I available and Andy your are Dean, questions. for Now

Operator

Instructions]. [Operator

question Our SunTrust. Bill with comes first from Chappell

William Chappell

bottom earlier, Just back-end. to to that less owning the of any picked faster, reiterated there the I of of to this couple hold lose seen range, understand And kind Is happening you did were then as side the just as your off it on I Cloverhill, kind is going I initial kind you back of the you sales, it maybe on expecting change a on up - customers understand, much you there after so kind seeing top couple both we sounds it sure from back months? a any drop you've see of and doesn't turnaround seeing as it - you're same but for then of are make the and side, chance months. mean cost outlook for you a year? like want line

Dean Metropoulos

within getting. are losses Tom in that, pretty just we we'd was cut scheduling, we those be so rationalizing expected take breaking week, half even. by And Andy. company I'll way, one, forth. and We've much losing the Number by significant SKUs, dollars. better the Bill, a and what

first are this brands Hostess quarter. takes lot August, where to it a this bring for when the the major automate with started Part surprises. That's that's what we and We delivery done plants through want we've expected. September. out equipment to difficulty, also quite times place we to profitable do were the There of we plan So no and fully the be Hostess. had in of last expect

We the coming mostly delivery this the range accretive a be major and we'll frankly, timing of of out anticipated. last think early talk wonderfully outside through year that. quarter But be expected longer - next acquisition that's question little will few highly And accretive. us feel It's we of for a upgrading that on year. breakeven a of lot to this And to of be certainly the equipment. within losses Again, a No in because I a to million, times. we I for think good weeks a the the automation strong than, really it's XXXX. but confident and significant the little the of $XXX round And was summer.

somewhat, part delayed year, of planning so with On highly may that confident again innovation the feel the we're quarter. year. for major doing But have that might - reasonably might a retailer we launches as some other we there's we hand, be just last not our flat a this second merchandising quarter,

William Chappell

next Got the product are the quarter, category seems in momentum business like the you it. - Q, to growth? of like restage the it Suzy feel does the and launches, terms category of And of of overall you seeing by have do core the category few to - then new that's we starts some largely of look is driven sustainable kind improved, this that's I the it's the as fits months? seem Or mean, over

Dean Metropoulos

said, the we type Tom, for well And do about above some year. we share. we gain can market that, growth talk do but as So for and a will see reasonable the you that X% category

Thomas Peterson

X% X.X%. it will be. it period, X% quarter, we is The the In down was X%. to the where Yes. last think category first was four-week up This

a better ending better, four period saw March the we was So up. XX prior the weeks and four-week weeks, little four

whereas little year, more some was getting we're it numbers last from we're better quarter a that down. So seeing confidence the

William Chappell

a And - Okay. this for year, me, for you that then freight any costs terms expect that? offset we is would to and in last of pricing incremental or headwind

Dean Metropoulos

talk our our Well, increases. not And it's in are some but model. achieving looking feel to guidance, about. again, we our some of have logistics seen back to distribution not have considerations assumed we price increases And a considerations, at confident that that, streamline about but early logistics price we we very cut might little

next know, you But do So overlapping we anticipating facing we headwinds. are those will by as September, Bill.

Operator

Farha Aslam Stephens. Our next question comes from with

Farha Aslam

Petites? ACV talk Could retail how on the about Bakery of market, the is now? Petites. is out that product that And the we What to Bakery rolling the rest of performance

Dean Metropoulos

Tom?

Thomas Peterson

Yes. launch reset short and in well. is retailers, the it's it well the it's in Walmart Petites in been Petites I out last received the have few as going speak, are at over going weeks, months. fully few September. you'll been the - Kroger, to out as going and It as Kroger's rolling And has and the some next see grocery, since - rolling major over ACV it's we is fully is out grocery distributed coming don't launch.

Farha Aslam

just innovation and key for year, of the the you timing that initiatives have? Okay. And this then

Thomas Peterson

Sure.

out We have of the Petites. to finish rollout

we We doughnuts which large large the the have were beginning at doughnuts out, year. we the doughnuts, out copacked brought that both have we the jumbo bringing that of

the to and They made with we'll internal We some new that the also large doughnuts, doughnuts. capability probably have to Cloverhill bakery. make transition

have loaf have working talked also cakes things haven't and fall yet. other then the some C-store have we on - some couple We and that items, we're we about we a in

Farha Aslam

we And back circle then Cloverhill. can just on

of loss you time were loss think what see? the of EBITDA. for When the $XX how $XX in will this you - think to a about million kind year, of at about you million looking acquisition I

Dean Metropoulos

you ahead that. with may go Tom,

But optimistic probably Tom. ahead, to be Tom, I'm going Although, more than go

Thomas Peterson

million. increase. million those few as through them some we breaking both $XX we be we as to a price done the also want holds. that make rationalization to $XX SKU vending at had we'll out all million. But sure we we customer holds, have channel the beat far, of to months we million SKU We definitely price We've we a over some that ahead. that challenges Yes, rationalization. We're significant SAP. Those through but do. we summer We need sure We'll did Dean we sure are I so automation integrate say if few that a we through are to to get the said, on get well and did have - we summer our ahead making going get sure $XX issues over We $XX make have - holding in do get increases and schedule the of to a think to into - making operational even.

Farha Aslam

Just at you on at is utilization where full expect? And capacity, the sale - Cloverhill? do what sales what capacity

Dean Metropoulos

in Go jump as I'll well. ahead, and Tom,

Thomas Peterson

Yes.

million year, estimates rationalization So and the in than probably higher maybe can to of some we are $XX do that. certain $XXX expecting this products. million $XX a which includes million, discontinuation little for range It of SKU

As one in more to point, pound it our the per up, and things up some revenue branded is branded revenue get we so can we Hostess of more more product out sales, price of - which get the capacity. same do want we our move gets

Operator

with Our David Capital RBC next comes question from Markets. Palmer

David Palmer

the are gross margins gross Chicago 'XX, excluding there? to the will you bakery excluding thinking - gross transfer - margin including, trend this regard With the How what year? and through the

Thomas Peterson

on So we are XX.X%.

have XX%. out take out tax take or extra Cloverhill the we you the reform, you and if been at would Chicago the If copacking cost, right

- below see just were slightly quarter. that's can So so you where last you we could

over of that more as get Chicago quarters. kind to the of dissipates as - through we we'll number a that, the up So year,

David Palmer

the with that, attribute directly point but fully, to of speak you lately, explain a that your way you think your or retailers what a there's treating your X% strength it if continue? will category in or could fairly acceleration are be Petites, Got that something it. lift lift to you regard to on in from and mix you the broad-based doesn't do results that giving looks a seems like lately, going two could that's And product

Thomas Peterson

of timing, X.X%, revenue, have whole Yes, the was X.X%. the up was it our quarter. cadence revenue, a for POS we good with quarters, quarter up organic some and very the of is did

So some have quarter. of that's timing. did good We a

it, categories, we we've is that in very going for four are and are Those about mass, and we've record food, that's that's our seeing - business. well talked man is or record dollar been We broad-based. have have either close our share channels And four broad-based C-store. to support some that seen going

David Palmer

Petites, there that associated with to that, launch will over was time? And regard with costs ease

Thomas Peterson

could Sorry, David? you repeat that,

David Palmer

Petites, in that with for continue the the should ACV? more there associated that With were launch accept the costs was gain as to continue ease cost you words, margin a through Or issue rollout other In do that, year? Sure. you some to quarter?

Thomas Peterson

on expect future, we it some pallets. couponing, be to revenue, a of and it's lot the it and an that it accretive it - on Yes, putting also We're do will through doing multipack, we trial, a have down are should initial product margin of but awareness rollback be in long-term lot a putting of coupon on when - Walmart. - goes item, which we're driving shippers we the in

Operator

Research. with question Our Edge Brian Holland comes from Consumer next

Brian Holland

drill here. the margin down component to Just on

than actually reported. on is delusion I what more the Chicago was model different. everybody's So from profit gross Bakery the had line

to that's that's could - I increasingly parse that out better be couple dilution. a level But $XX didn't confident, sounds reiterated, if curious million like maybe you you're of I hold $XX just - million number. don't did see the EBITDA that, things. going it anything to the - than of not you You I'm about

same you're thought higher So called you stay better on going you incremental whether QX. costs on one, but does the what-have-you the maybe business? co-packing core Chicago EBITDA out concerns, freight to do in And or the because the then than Bakery it's

is out, kind if you bakery, it, of that expanded Forgive but at of this, tied some you that just of me great. transitional ramping and parse to would could didn't I if on all be things those catch the

Dean Metropoulos

Tom?

Thomas Peterson

at a million the $XXX confidence we million. to we million the will But $XX are to Buns, and that our lapping our million find danishes are QX, overall, to now that to other still company's all shelf. got last stay we $XXX and we where $XXX in million of at co-manufacturer. going and as ability we acquisition to the Honey million we Those the when and make $XXX important And we're remember, thing manufacturers manufacturers lost At more on with. gaining in we're are still other we guidance Hostess items. was are back so in we're QX, standpoint, copacking had those to summer business, to with that's expensive, the that's better products are Yes. we're going $XX comfortable rolls, overall, branded cinnamon we the manufacturing which on were now Cloverhill those as do - items From than - go

others are Cloverhill as over quicker those be than in we'll those transitioning end items the summer, bakery. support it. can of We're by and transitioning have probably We packed then everything the the we'll bakery of the items, some

Brian Holland

Okay.

And dissipate of similar freight in over QX there magnitude. guess, weighed the so think the expect to is margin assume gross remain will generally year? of a you the you the course of as just about on or anything that think I balance the of, I that just we headwind year, improve kind

- QX bonuses is guess, wondering paid probably I thing. I the mean, employees So - I'm just out you worried a that to the just

kind you So started - you understand balance the could there's gross earlier? of us of takes just maybe on and as the over margin if get if puts maybe the year, on help you that

Thomas Peterson

take Sure. co-packing. out the XXX, take you Chicago you out Yes,

it to was tax The bonus The same or you take participate single with in Bakery through the will year. the plan. reform, are XX-ish all will XX. transitory quarter. are remain we then going about out employees move in, reform that Chicago a back As dissipate points, us tax Those that is basis

the they and see was so come going of being the not that And that are were quarter, for we last we're to the continue right here this business stay. optimization We but Dean XXX-odd those, take stays little margin. rest to some that, early levers really we quarter number they're to with to we have but the pull rest away, working transportation points, report, on to and - XX the participate now, effect. some and the This do QX, that kind articulate business. believe though it where worse basis But you of it's of it's time trans we're stay. a smaller it, there. they're is at may change, ideas now, take not working did may to on on it's they a little We too

Brian Holland

And improvement to were then saw that it's the at the time looking you think kind ask, brands if of unfair hire, some at for nice folks not back of of leading and Okay. at Andy, one your during last I your background who, your tenure. Tyson,

drivers was to Hostess. strong I attributable I value add one the certainly growth think been think certainly here some compelling that of of which what pipeline, at has of a innovation

level general you So just today, your that able space how do with thoughts any over just you, a to attractive think brand? about commentary exists leveraging I'm to were and about that what this still was you potential look here how out that kind just high maybe untapped you of maybe white Tyson at at at wondering, when

Andrew Callahan

of components. that. appreciate major Well, one I the it's

obviously team. I said, As joined, the reasons three there's I

potential unlock a really of team, and the of potential is business can't unlocking You the without the passionate group. this the

Hostess you back. X.X beginning. saw consumers this the about I extremely brand. have with team story just more resiliency no, the the I they So of enthusiasm for I I it's high. say but in bit days been of coming I've little and that more the emotion will by But that brand a learned the is connection the remarkable mean, have think nothing is it, as brand And a encouraged

to and of about grow value brand and create ways foundation I'm a growth looking when reimagining potential. about growth, very to So them that way and have consumers, able with passionate ideas really think creates bring through that's for I'm a it. brands enthusiastic provocative to new in I really equity you contemporary being

So - growth today, and as just and felt the I'm about and remember that that's been story. years do getting Jimmy I ago, We're in great it. [ph] getting same XX way started Dean optimistic a very I journey joining I

I lot am of highly it. it. very enthusiastic to and there, So realize to optimistic we're A be going about done optimistic work that but

Operator

King. question next Our comes Gallo Michael with from CL

Michael Gallo

I a partial wanted Obviously, dig Cloverhill. bit had quarter. only little to just in further a on I to

item, the and/or or month to is As is the equipment sequencing kind know what's you'll biggest automation the facility? losses transitioned second given you kind I you losses, getting look you it in of getting the the products, to what guess, I quarter, And you mentioned the better? you the do it be just have of still expect from into have full half. products back the cut the and that, to Would the in left sequentially a Hostess the more of standpoint of

Dean Metropoulos

upgrading think do a the I a pretty just be lot X within that, total. hundreds or weeks of when - Hostess most, we are X,XXX, There's that trying to disrepair. one, to employees close being behind close weeks, rebuild in of the the above. equipment and at us X, X, we equipment, the I We're breaking Number somewhat a should to losses has automation. of had acquired even. X,XXX that employees company a it's X,XXX of mean, was X,XXX in This down lot of significantly. it, of a the All lot lot We're few

said, in automate. be we opportunity quarter has equipment months. But August, deliveries And I as taken should and So automation to a us there's installation big opening last this September my in expect beneficiary. remarks,

coming together. all that So is of

were be the It Tom SKUs take reduce taken some does would reflect that true how we company. company in - efficiencies We interesting good taking that quality were very of as some see cost well be product. to a rationalize improve from as not co-packed just we make interesting costs how the that some the are and The we, have increases. again, increases profitable. previous understood knew lot We've process price SKUs to a It suggested, see will because to think I very we price not to to transition. product. price the Hostess or and we

think retailers. we proper business deserves the the So with do pricing

So in the we're we what much on pretty mark general, I with think expected.

said, business the pretty well. I As knew we

Michael Gallo

you on thoughts Bakery we talk what And progress from grocery a has question about expect perhaps, Dean. do well context, year? in there as the in think follow-up Helpful Bakery. hear experience his how Didn't the should and much that, coming In-Store then Andrew And you just too some segment? this about In-Store

Dean Metropoulos

answer new being that I months very I X.X two of well Well, him We He's with He's been running, much little a think a of aggressive and product group very ago. him. I'll like and months, about thinks landed - launching brought CEO the relaunching bit. team the line.

One sites things days. learned these of with the we the

And be to the you business, to be is probably a bought fairly lot offer got get we - varieties complicated more complicated. a to be able You to our little water, and toe a and a in to This got space. player it's fairly proven seasonals. small meaningful a

than complexity On been Frankly, on. got than the had some hand, will that. I it of do to geography better that do business again, hoped We've I surprised the quite it We'll that think we X%, a said, grow I continue as to its signed reasonably, bit. the grow sub. is business But X%, by the were other new more that would lot a expand is X%. going category.

artisan. of be We perhaps, retailored products, also the to redeveloped more that and thought Hostess some

We to category broader an there's is meaningful, offer profile a us to seasonal of continue look We better acquisition bigger much fairly a have much do stores. and the The if different. a to that's gives products. capability it appeal some product

want meaningful is as look we not we think the do EBITDA expected little mentioned. It's some We've but highly it, to make some, good, I as new issues do We it this more got - we'll will bought at But because meaningful business I but at we certainly continue our we are CEO looking to fragmented I and think way. more hard. of the we But of sector, a think very will well. since pretty by something than the okay. and

Operator

Bank. Our Deutsche next comes Dickerson with Rob from question

Robert Dickerson

So of questions, couple everybody's of which I prior driven. call follow-ups more guess, are kind business margin, to fairly it, a let's questions, just base

$XXX guess, relative frankly from some you're from rationalizing million growth bit improving there. kind margin I drive now profitability, is pressure $XXX power, also pressure, like, promotional though, of too, line that, of you're a pricing of of kind it about, much. like hearing margin more you you're EBITDA, SKUs, cetera There I've too little I be some like What I bit promo for saying, So seems maybe Walmart guess, of just I et might just first, kind your Bakery some there rollback, that number I'm of kind you margins. be want the helping a a but base around heard that's million don't foregoing more bit on these profitability. little you're to it volume, like want year maybe it's maybe on far that comfortable lot is seems CPG kind also little of so is to business, off more there's top you, by little mean I the hear mean, is bit thoughts activity a the be days is to even might in we Chicago all general have companies of to drag, with you the mean, a business little drive just though incremental And saying there two one. that's base probably number kind a less more that maybe what then

at So I'm we back all growth the just some see side you - on rate as want EBITDA of giving on of I EBITDA that that same really but focus kind just line's are great, margin the it, business Top your can't grow can? your such base margin revenues that piece. to

Thomas Peterson

new to companies invest we invest into invest all in the going to was market the aren't Yes, money, and products, SKU the come in platforms losing in other and QX a mentioned of Dean like doughnuts, Petites, that bakery like But continue Rob. year space. balancing continue which are growth we the Yet, we to about merchandising of get innovate, we grow But up putting to that that be want focus large of want, grow putting probably earlier. profitability. the are it's a quarter some white what good and we continue all all company, in cadence lowest of in our margins in think to the to strong long-term want the expect model go we are and we innovation, we good long-term get smooth, good we growth value the food there tools the put to the long-term growth, on quarters getting to and growth. new share, Bakery growth rationalization

that, of are those is the base and business end and cost than structure. what back margin of we'll Some on was kind lower of the core get the

Dean Metropoulos

maintaining just Innovation an to percent make to an and the And be that's product, little a Twinkies only forth. of a million always going a and challenging automated so a we exaggeration, cupcakes comment. highly it's hour, because Yes. bit of the same is margins

of some potential into products, different not As be volatile focused But products. EBITDA the the sometimes balanced margin and the as unique percentage quite innovation cash our more is could said, all get the and always is of but mix of type dollars, you about EBITDA somewhat the the growth it's on achieving I've of and or percentage, efficiency based we're on same. some same flow

Operator

Instructions]. [Operator

Kaufman with Pamela from Stanley. comes Morgan question next Our

Pamela Kaufman

reviews to category some what the at gross or share business Or core mentioned mainly you're I And the you for about went changed stores? to just pressure curious their in quarter? the strong gains related then managing Was extent in the some on that seeing of what on last that market promotional in your Walmart format guess, as driven contributed activity products, of of larger the your have shift the approach some margin point, is quarter? that particular, that Bakery Petites? to through they by in this I'm channel your they mix

Dean Metropoulos

certainly, so Walmart, of support going the you'll particular growth there. a market and share the adjusting be Walmart merchandising that slight volume They're to the to fall with see on the share. back market and one some help number quarter in this probably Well,

this So with will of does have partner move it that quarter. promotional we type retailers the you up this that and in an it down our impact has impact all case, the had and particular based mention, ones coming on on programs

In are terms our the superefficient. margin, of costs

cupcake Twinkie. So a it the the say, margin than serve margin mix versus of the a affected single single-serve, a the by the lower also impacts have have also In is issue. Twinkie, margin petite mix peanut margin, low The that than products or the slightly butter the multipack. the slightly is

but what the be Walmart, of a do, less So that's case it profile, mentioned, said, we singular on. business not of some In the and is the somewhat your so averages that so same and and yes, was timing offer what what activity. that's do, do of very that's of supportive. in you quarter opportunities. because one as of we would we somewhat out risk the I balance wider are complicated the to drive second And range models in promotional are At it time,

Operator

I like management time, closing would call turn the over to back to this for comments. At

Dean Metropoulos

very proud. very, interest. to company. very particularly we entrepreneurial So Again, This I'm is a want thank everybody agile, for their

acquisitions future, the remaining driving making focused and I on good you, stewards being our being both innovation. investment. focused as shareholder And well the we'll best We industry efficiencies stay of as companies will of assure right have in efficient on very the a and in one wonderful

in your you and communicating to much interest you. So with that, for we thank our all very and interest our

Operator

concludes today's This teleconference. you. Thank

thank time, participation. your your at You for may lines and disconnect you this

Dean Metropoulos

you. Thank

Hostess Brands (TWNK) 9 May 182018 Q1 Earnings call transcript