TWNK - Earnings call transcript Q4 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to Hostess Brands Inc. Fourth Quarter and Fiscal 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. to conference like host to now Mr. would turn over the your I Manvel. Chris Thank you.

begin. You may

Chris Mandeville

Good to and earnings afternoon welcome conference fiscal quarter call. XXXX and Hostess Brands' fourth

President investor will presentation remind www.hostessbrands.com. website. are updated available Joining that on The on today's now, being went include at press XXst, at an like for you release company's everyone to website are This afternoon Chief will Andy the discussion webcast a Hostess' and and access to By the CEO; today's would approximately have out Hostess Eastern earnings Callahan, and be number Financial me is this that Officer. and statements. call Time. call X:XX of a XXXX Hostess the replay available forward-looking on should period Purcell, Brian December Brands P.M. release ended

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

Andy Callahan

us appreciate Chris good and Thank We you you, joining afternoon. today.

by for daily health and the quarter reviewing for our The the impacted in and our XXXX occasion capped our we will efforts year to continue pandemic. and team momentum team a members environment rose have driven performance our in strong to is our fourth partners. values without again, and We brought extraordinary Hostess core to and In by changing COVID-XX. team customers, challenging impressive continue delivered Hostess once I such to inspiring our the to all not continue an uncertain give strong prioritize yet those best the of XXXX, retail could successful investors. our results, and Hostess, team the performance and is my well-positioned off Before which of resiliency Rooted well-being consumers, this into partners. and on XXXX. delivered

market of a drove ahead well-suited complementary insights XXXX better. for serving innovation innovation other repeat innovation convenience even a ahead, our platform strong Voortman long-term is foundation upon Hostess that key many XXXX gains look growth proof the revenue creating including and under schedule sharper three-year a strong we and model I'd rolling our reflect particularly XXth and our We XXXX which warehouse increase platform foundational like younger seamless by Before to some and behavior-based profitable groups, XXXX, support demographic as of accomplishments XX% serve of market beyond. consumers, for and in acquisition Behind strong and innovation and to growth. X.X% integration executed We growth, achieved XXXX the transition share innovation revenue future is our our notable in consecutive velocities. quarter capabilities, growth versus driven driven for in of in opportunities our in that the to by contribution performance channels and in budget, net a acquisitions. will slate yet provide increase more a profitable XXXX as and We

opportunities we for have focused consumer are growing see sub-segment where strong above-average on market growth. and snacking We leading positions

and only are are sustained few returns. positioned in long-term of a deliver to well growth how speak shareholder on many profitable we our these they While leading XXXX, to accomplishments

growth. Now, $XX.X revenue to Hostess X.X% driven the grew by lower growth to by financial brand. highlights label Sweet manufacturer This the from contributing value million private X.X% of sales. branded brand Voortman quarter. revenue million, the Goods increased Baked growth. and or was this Hostess $XX.X the category, Net by offset XX.X% partially Hostess revenue driven with point strong acquisition of grew sale X.X% planned ahead of

program in continued and These X% the share basis an advantaged gains growth declines distribution partner increased for Our channel single-serve puts the versus gains drive successful as position in channel share POS our helped points due profitable and XXX this our to model traffic to the C-store, grow advantaged quarter market COVID. us returns Hostess in C-store. by distribution helping to in

positive almost We growth the quarter. affinity. where made the footprint Over segment, gross we Hostess growth market leverages with higher-margin strong insights strong our accretive XXX in and relative points and course opportunities consumer which our of and faster-growing indulgent our focus remain are This usage key margin occasions. of decisions on and has paying to enhance focus consumer trends very slate to expand achieved consumer Hostess of in XXXX, portfolio and brand. about on new year, acquisition in snacking off of strategic the with a basis expanded our We actions and the the this continues margins penetrate Hostess' Voortman those position to innovation growing coming

in achieve differentiated drivers high-growth in of the as are significant to revenue market. Our ideas snacking category we of of the consistent of is our growth bring we and why ahead growth more one innovation subsegments development we confident can

our response slate. to XXXX We strong retail seeing innovation are

Hostess wafers in market of QX Stix, beginning and distribution the at the of are Voortman We that Muff'n several Super which have cookies including for Voortman's all Grain stores, items entered convenience well. building mega

will will generate with expect spring, we incremental two with our brand business. addition Crispy new cakes for Hostess expand this bundt and our growth In our that fantastic Mini we sub-brands

and advantage our branded Hostess strong Our this occasion. growing breakfast performance in in highlights focus

branded XXX XX.X%. to fourth breakfast balanced in forms Coffee XX.X% the Best daypart this several Baked share in of our meaningful business all, of points very Hostess breakfast grew the Muffins. Donettes, Honey basis Cakes, across quarter bringing growth Goods with Buns product was in Sweet and Our gains up

achieve revenue opportunities with headroom build C-store young that where to the see include look As consumer a in our growth We growth we for invigorating we we potential. to within believe of continuing In four household on growth, focused priorities growth for right key growth icons, to will we establishing universe. have growing drive clear subsegments families, significant innovation snacking distinct and growth penetration ahead, consumer positioning pipeline. years to key order come. there our we win is These faster-growing continue to outsized are growth groups as Voortman's this strategic optimize core for

Turning to efforts. our merchandising

of We with continue the programs a increase to execution time see offer year-over-year excellent performance our Valentine's as seasonal significant XXXX. we in in begin program our limited

also our executing are sales We convenience program our small single-serve in against partner an various format to enhancing including increase Hostess channel. the in effort initiatives

are greater from and In enable driving addition, mass multi-pack excess we retailers our DCs in changes that been purchase COVID. stressed are opportunities. grocery flow adapting have inventory displays impulse retailer our execution to large-format of already during demand our These out into donut and improved of and bagged

Regarding support or collect to the namely to this click retail growing our continue delivery. and business, targeted e-commerce, platforms we make grocery in e-commerce investments

up new support to and our market we in marketing in tests learn advertising We're and We continue to are investments Hostess our for XXXX brand Voortman conducting planning also drive innovation awareness our investment and to awareness. working scale that top-of-mind Hostess brand growth. our as increase

could of $XX continued million. our quarter basis to full XXXX XX warehouse Results contribution original well points above expansion have not Looking distribution gone Voortman consolidated to be EBITDA the forecast and to the our strong of EBITDA Voortman. million a to $XX better. margin related integration conversion of for and contributing The results year approximately model

are the merchandising. into into as distribution, expanded of channels, strong which blocks brand of increased stage penetration Voortman's XXXX next into We innovation, and to building depth growth, strengthen and has transition we new of eager move

to future the growth company's continue We are and revenue Voortman margin meaningfully confident in expansion will to XXXX. contribute

to months. in the responsibility past been we several and various executing corporate years, our coming ESG report ESG expect issue initiatives Over the have against first

As in a made, center from our recently removes we emissions miles the of new transition gas distribution millions our of have to advancements few our examples distribution network.

a better this in our implemented resulted lost decline recordable Additionally, total injury industry than time safety significantly rates and in are initiatives year newly rates, which benchmarks. with

the the pandemic. Our COVID ensuring year been been has to and the landscape are in to ever-changing respond have we navigating informed past to force due task over prepared we instrumental

diverse whole an and continue expanding on also career We focus including work. year our initiatives providing leadership to as improvements female XXXX inclusive achieved leadership bring the hires employees hires These self equality their or remain to our with that being diversity, development and past over of committed meaningful have encourages inclusion off our and trainings diverse. are opportunities culture efforts in over as in we paying to we XX% female to

these during our the Board, ESG Directors strong opportunities leadership and and oversight goal have supermajority and of the independence their Board a generally business. has reinforcing the our demonstrated taken declassifying importance material They expanding requirement continued diversity on voting On by front, risks the initiatives, governance the eliminating supporting Board and increasing the for of of commitment increasing focus of XXXX.

that revenue we and advancing into integrating to model versus further momentum to initiatives growth doing to and head just XX our in for our the ago leading beyond. initiatives and We peers. into as XXXX consistently XXXX at quartile grew are building months Day, are well-positioned at and committed We're sustainable beyond. margins our the our Over a culture continue ESG committed that top I Investor into

for the our XXXX sustainable, profitability. this long-term and tremendous operational how Hostess improvements confidence growth opportunities and and Our results ahead into translates reinforce in

early consumer depth the the As what double-digit us drove to achieve pleased we execution and for key drive the summary, year rose EBITDA and net original our to COVID below of strong the leveraging changes performance across with this We chain occasion, highly skilled also growth profit, to of year and very operationally deleveraging the our including consumer we to our and a of I accomplished in the In year. enabled heroes a accomplished hold our target all brands, agility in during strong and trying strong XXXX. the EPS. execution growth, continued team. Hostess record supply strength took revenue, disruptive proved to had successful the showcase financially gross insights and am metrics The behavior and demand while

term, forward The occasions right growth right shareholder first And value. strong right have and people, increased look another the to year delivering growing off have the a quarter Longer products of and successful to processes, we the the XXXX positions capabilities. good and is we of start. profitable in right

our enhance further value to opportunities acquisition accretive creation for look potential. strong to continue we addition, In

it turn I'll go Brian Now to of the the details results. quarter's through over to

Brian Purcell

Andy. Thanks

into primarily and and heading XXXX I XXXX contributed resiliency As revenue to year an driven confident was other This to in of strength Baked by expanded for for costs profit lower of achieved our step $XX.X Net million we first basis, the the margins an the this Gross data value business versus create from from margin Hostess, which of brand as to the $XXX for of strong of this than was the results I'm outstanding we Voortman, team fourth On back growth, Today, operating our $XX.X increased year by profitable net think during million to the primarily quarter, and due acquisition increase accretion and quarter. the gross XXXX look financials continue net of basis accruals revenue the due with value our quarter and Goods heading quarter I'm was they label at million, points, more revenue On beyond. efficiencies and million increase. XX.X%. XXX and by the was quarter shareholder adjusted ability and XX.X% offset I'll increased price/mix in and partially as million review Voortman X.X%, fourth very or and in as into growth an environment. private revenue. challenging team XXXX. operating by Sweet primarily the drive release, ever this about branded the fourth amazed my well Voortman. of quarter improved driven from $XX.X increased prior revenue Hostess addition profit $XX.X initiatives, business. adjusted timing basis gross adjusted gross afternoon's

Voortman and per XX.X% diluted the Net to $X.XX $X.XX throughout the year compared and XX.X% million that XXXX. $XX.X was effective in quarter as to million strong contributed $XX.X rate tax the EPS effective in accretion rate of performance. by from a occurred prior the from Our quarter. increase adjusted QX the of Voortman, higher driven increase Hostess. EPS quarter compared result for share, EBITDA increase year coming Adjusted branded income EBITDA core was which was revenue. Class the the EBITDA The last $XX.X Class was XX.X% $X.X primarily primarily share and for B tax balance net was for of of the is due the million million accretion in an was Adjusted with A exchanges contribution share per The addition or to Hostess $X.XX.

our we leverage and debt million ratio into X.X of $XXX of heading cash of ahead had which equivalents As with of target a and cash December million net XXXX. was times of XX, $XXX.X

Turning to for XXXX. our outlook

Hostess established the our growth and business. the key other we for core We strength integration share C-store market are the in of gains encouraged successful Voortman our foundation by channels brand, the have of strong with and

to X.X% $X.XX to expect of $XXX million growth X% share. expect We million per of adjusted topline and and between EPS be net revenue $XXX drive $X.XX with to to adjusted EBITDA

of million $XX million business growth acquisition from ahead with net approximately $XXX XXXX, which adjusted continued original approaching the outlook Our revenue of during strong and are includes expectations. EBITDA expected growth Voortman both the

feel flat, with to Voortman original margins expect $XX cover productivity $XX lap of inflation look the of we pricing will to XXXX the we hold expectation achieve and Importantly, we EBITDA million million Voortman initiatives. the QX to integration, benefit of business. for relatively confident our as the Absent we

rising addition We are by in our inflationary packaging sold, pressures transportation of cost costs, currently cost of driven anticipating commodity, and living normal on and increases. goods to benefits

of commodities year portion We end have minimize are headwinds. cost of managing actively significant the the locked a our future through in to and

which and multifaceted include improvement have productivity to pricing mix, industry approach these headwinds We a offset targeted initiatives.

EPS to adjusted $X.XX of We per $X.XX XXXX expect share.

the rate non-controlling and as final a the increase tax rates. the fourth effective result tax in is elimination XX%, approximately quarter estimated Our B the Class interest with the XXXX state of of in an reflects which of exchange shares higher

ahead we to generating value. remain committed look investing growth to As and shareholder XXXX for we

lap cash the XXXX, transition strategic costs increased Voortman we to incurred in early in to integrate available we our priorities. to expect flow As invest have

is cash. the investments organic We best to our disciplined that continue believe use in of our business drive to growth,

a in to We of has line the continued expenditures cake in million, support in $XX a expect investment $XX ROI years. high-margin the investment next XXXX million will range our to continued new capital growth. million $XX critical core business growth and which for our includes few This a strong enable

We With be four remain between the reduction cash flow buybacks, our absent a end a any turn represents and to strong target long-term we leverage three full of the leverage anticipate our maintaining times of committed XXXX year. times. acquisitions strategic in EBITDA to our during approximately by which almost and three XXXX, also or expected

November of expired warrants outstanding our XXXX. in disclosed, previously As

an Our of EPS. used share effective consistent diluted settlement methodology assumed for EPS and net reporting leverage with guide, current reflects

closing opportunities We value, comments. objectives we back to free EBITDA of are peers. turn in Andy remain that, call generate as top organic revenue shareholder us I cash net quartile the conversion our ahead our to the will excited of to margin flow the have for adjusted committed of growth, by long-term we and With delivering long-term

Andy Callahan

are come your in. flows, have and we landscape agility talent operational two, cash innovation; of went Thanks, Thankfully, that focus for outstanding the for our efficiency; activate stronger improving four, due I leveraging Brian Brian. Year. that, growing confident and our three, With flow and XXXX position and the the available to I have one excellence, our maniacal strong was innovation we remain capabilities; years many and year generate truly growth five, team cash one, five will market to our New With growing and cultivating the an than as come. pillars: in for and extraordinary through enter through out our we strategic shape year levers core; on consumer value to shareholders. strong and questions. available we

Operator

a with your time, from be proceed this question-and-answer question Our Please JPMorgan. Instructions] [Operator with will we comes At Goldman Ken session. first conducting question.

Ken Goldman

It share points wanted losses for those ask there? the doesn't XXX the a products? look like it Hi. your in in was tough channel forecast about Can happening a fourth quarter. what's comparison. us to with remind the to particularly over Thank It what's this you your share continue like in you. accelerate down just And mass looks losses recovery I and channel. basis

Andy Callahan

impacted unique say business question. COVID Yes. Ken every own for just channel, me let take the -- in broader. every you did thanks it When way. its

if it's things -- mostly in more growth. much to meaningful to be consumption chain, become look supply going our through And drive going continue more the several the steady mass One to more across adapt model, go the how ones to realigning different That we supply that going the across to I automated. related to frictionless. mentioned, as weeks, be we channel. warehouse, how true sight help chain realigning term. is our And of had able line of actually, we within going our to be assumptions definitely changes long And to have the the issues grow went through was and supply we've business made we really, our the to that, to really our and are in changes of one all good customer. of related at and merchandising there's time, approach chain your mix true we're profitable over businesses Over going and making to And that, it's our to a based mostly But merchandising QX. improvement and -- on it's last market. you

see we that, to related improving and about at versus really about several also that forward. And good the dollar then forward it up you the QX XXXX, going as category despite up overall feel good from per our we weeks is if as the Nielsen. improving, XX% but feel last consumption growth that, is through consumption you can look our move So it X%

about good feel how we across aligned all So we've about supply and good feel that, the channels. chains all

Ken Goldman

Okay.

is to is start in then first So all whenever it just building is Or helpful. losing share starting, we a models. wrapping be channel? should I don't what sense just I share? and expect -- wanted should up quarter our you that into that regaining we know less get that It of sort above of

Andy Callahan

don't Yes. share. you take don't can forecast but that continued any talk Well, we details -- certainly to I improvements. about, I anticipate consumption want we would But

Ken Goldman

I’ll Okay. there. let it you. go Thank

Andy Callahan

Thanks, Ken.

Operator

Our line of your with the proceed Please next Jefferies. question. question comes Dickerson Rob from with

Rob Dickerson

Great. much. Thanks so

Just kind it QX. which the you some the expect basis kind expand of like EBITDA still then maybe saying of XXXX, kind flattish XXX margin be somewhat question of a to had implied got of midpoint seems let's around that for once by you points. you margin call had But kind commentary at past

serve it basically forward. go like to Partially that QX be cost that sounds there margin tied but pricing. hold jump to So also also then, single you then But little sounds and said ways Voortman. basket, And effect has as you can higher that. maybe offset have are you could nice would it like a mix the a you

then about and you terms do mention that like pricing. be I that That's we of pretty we it. cost that get offset pricing in visibility what number as want year know thinking is on potentially don't to inflation, -- pricing the kind some progression additional And So, sounds on some feel number your of I good to of It cadence one. good. just how Thanks. should you two, color how margin how general of about should the

Brian Purcell

then Rob, can start and as I'll well. in Sure. chime Yes. Andy

guide, overall, question right, on you So at if look your margins. our

I think right. you're

should look QX bit And margin QX and a year. we is the sort piece. QX, pricing think have of If We'll about particularly the QX And a little definitely headwind think we was a QX we'll you you'll then way there's that have, because last rate the if also take have rate that holding -- more excluding the was a margins total, QX Voortman And what about And If of accretion half benefit about forward. think of little bit enacting half Voortman. think than back from at see see with single-serve of to run about carry to the that I going year, accretion what favorability Relative half. the of we'll probably we were about if see we're think expansion. the front overlap, we'll we're margins I half the the year, of Voortman, mix some accretion. lapping, run best be talking Voortman that particularly year flat, first a in the Voortman the of relatively we back to in there. in

to We carryover but pricing the pricing the in actions have front half, inflationary any in some offset help half more back pressures.

we So included broadly we approach in offsetting have got mix. got kind half inflation. multi-basket pricing. cadence think we've half how the we And and mix. kind about of component the that that's of should Voortman to We've was got And first second and of We've it. the that's have productivity

Rob Dickerson

quickly It that's innovation, Okay, still in forthcoming. obviously in great. coming the just then spring. sounds terms of like say the And new

time, same the well. the you of prepared sell-in remarks initial said done your in innovation at While has the

the volume I'm some should seems namely we Thank well. get the given it. ongoing is let's up innovation think some spring solid here again, be get hopefully call to I also that year? the of into sell-in slate as kind side, QX, trying progression pricing not old products. replacing should incremental side, the assumption we sense the to guess, like as it do would thinking the how as then, get you of That's line of distribution But through and just you. feel the the innovation picking about the continue be which on we it through So, versus top that we

Andy Callahan

there's The I headline we on lot side, lot innovation them, we think at of margins. and Hey, pretty the of is a agree have it thanks a the but it. I at Appreciate and channel, looked sells with in then planned. Brian's on And rates. it different well assessment opportunities, on Yes, Rob. depending

So feel most better in platforms all, it on by XXXX and our first these terrific We're the the consumers. -- the of agree. prepared a C-store about -- way. that I of lot have I Minis remarks. the year. our channel like through of innovation gets every It's think I made some behavior flowing grown, in It other Crispy ideas, and based for example, of innovation are I flowing slate would about platform through in of based timings with later. resets. That's

of the is within very in spring. and very which are through bit like are Minis, buns, channel. a extension Goods Voortman already out. of those some which baby pack within the tremendous scores Some about retailer into but more it. already channel mega just little consumer is the things ones the through has reception But Crispy flown excited The Sweet the going C-store C-store huge flowing platform our new a Baked

And ones channel in some in the going already early. and mostly C-store of are early

through and is on coming ones traditional back impact channels think of half So QX in the within and spring C-store I the more the some early.

Rob Dickerson

much. so you Thank Great. right. All

Andy Callahan

Yes. Rob. Thanks,

Operator

next Davidson. with proceed Our comes Brian Please question. from with question Holland D.A. your

Brian Holland

Yes. Thanks, good everyone. evening,

line question on the guide. So top maybe first

of where it's you maybe tighter. the you've provided. has now than been more is -- past maybe just above think of this years sort category specificity and certainly quantify the the that one, past I even been last and Maybe couple year bit a little language in So

to which algorithm I kind very X% So compares walk pair the then convenience some of past And not the could been slate you there. channel when in improvement the if thought considering innovation strong. would I'm you below like maybe maybe in process through some thought of And mass, easier And maybe that out behind with that getting be the just your growth, I'm had interested some here. the which process if of in takes X.X% on I'm the back years, to few kind certainly that. Voortman,

Andy Callahan

Brian, hey, Thanks Yes, the Andy. question. it’s for

a growth. Here's said, pegged top is level the We has headline. great we expect we've to consistently feel asked and continued done some most where of quarter Street us or the is what deeper over-delivered dive have at which category which we our in do of should X%, the in what than We've we people ourselves to and category. the revenue give We because than even X.X%. about better doing -- honestly looked consistently indication compete better somewhere we're the category. which we've category line this the is and the It's kind actually felt meaningfully

better XX of We're opportunities. realization This meaningfully revenue have difficult year's and in to that going time. potentially certainly We is -- going do this doing that to over one plan. over of than than we're do better this, my years more the to areas

these generate continue good at of positive it's we when look to to is and Not sure. that Is upside there have to that COVID, revenue. number? going we out revenue all we come indications As that be

in Those snacks going attracted learning feel and -- back. younger segments They're faster. They're how Our we've a -- pretty in are consumers. C-store home. around we consumers that it's best celebrate rituals we're up. we is uncertainty new like guide guess to better comfortable stay. continue that feel growing good comfortable with to given which We're to we'll are because Valentine's specific the the perform is Day, with indulgent coming occasions,

our XXX points that innovation and people it is above But was we thought more felt us move, to than were where been. process. could basis needed platform and they ever about historically scoring more we thinking higher Our it's and be incremental better thinking about

Brian Holland

about were COVID. all color C-stores, breakfast. appreciate Obviously, That's about points great. there just pressure thinking the Andy. some I about But then serve we single think And -- talked around than points you think certainly done been it sets has comps certainly categories compete tougher better for breakfast. again, the up But the I there. one of And in. industry-wide strong you've

is versus help this you and do better -- this is just to how of So question And obviously in and don't against? the executed against another breakfast categories? with was that index, way is at sense. just makes that's up of us what a of and I you Cloverhill are acquisition Hostess runway. and it pre- in its the brand huge a understand can think wondering about opportunity comping takes it. do -- post-COVID the time ask where if we me question, -- Where ask where question I'm where maybe you you're the to frame the you've Maybe the other the way puts a in core some forgive there help kind

Andy Callahan

our case. maturity And Hey, this Brian, time we faster sweet indulgent point-of-sale sweet which I growth. within capabilities. fueled it's indulgent AM do and subsegment, mentioned, meaningful snacking breakfast -- indulgent to faster up it is continued is and growing and starts mean a been as expect our was It grow to there's morning overall snacking. by we've has are curve the us sweet snacking We've I growing articulated breakfast, I grown XX.X%. even AM that the not continue. close billion ability runway and innovate as last view you than -- for some $X.X to subsegment to continue our

mega have in brands that We case.

right innovate are we very now. received. Donette Our even beyond, is can brand We well where

our Our innovation on is one -- be continues of Donette fire innovators. as to snack pack leading

So, way. around We started the approaching not where your view maturity. that we just getting it view piece as we're maturity thought we're at don't

Brian Holland

if could And deck, for I just -- Hostess share I'm here mean, looking like brand. appreciate that. there clarify, a in XX% think No Yes. you've overall the I is if your got I

Andy Callahan

Yes.

Brian Holland

today? your -- against comp we for breakfast something like item, your where for there share breakfast the can is that

Andy Callahan

the Oh, you that portfolio? than mature of your is mean, more rest

Brian Holland

share got you've Yes. XX%, X% if today you Baked of of I breakfast, XX%? XX% Goods broader share do overall like a have Sweet a guess,

Andy Callahan

Sweet breakfast segment Well, Baked our share the portfolio. about of of is over our last the Goods quarter share total the

overall category close But going consumer we Baked pretty Sweet such a From to So to if broader new I share. than ago the just We've fueling were standpoint -- continue three years we're said Donettes Goods. to started done at you at around innovation remember, good the share. look we grow when almost first the it a we're we dealing with job our breakfast. underdeveloped

beyond access Sweet we consumers' usage Baked just Goods. So

my continue to XX%, to opinion. So it's beyond grow going in

Brian Holland

Yes. continued color, success going on I all great the appreciate and forward. Kudos, here the work

Andy Callahan

a to if I'll trying share can do Yes. I don't a that. the addressable market where follow look have sub-segment, it's I I And at through, so billion -- know, relative I -- wasn't we $X.X can

little As as a follow-up, hunting well. that I you're think, bit a I because, know for

Brian Holland

Yes.

Of you. course, appreciate it. Thank

Andy Callahan

Yes. appreciate Thanks it. for

Operator

Bell Our Consumer Please question. with next with Ryan comes question Research. proceed Edge from your

Ryan Bell

Maybe and you Would respect bit for a more to able cadence to convenience something is within about with Voortman the that of there the the everyone. of Hey, channel? talk some little we be then, expansion few the it opportunity the something And kind overall the growth product? for in the next maybe where size of of going you terms benchmark over the compare years, for the the against of the of see just ACV opportunity? sort could

Andy Callahan

Yes.

-- appreciate here good question. Goods sweet within the Ryan mature Hi, a Headlines very So C-store. I category Baked is

our brought It's best-in-class being world-class in well program. is mega very received underneath Voortman program that We partner wafer C-store. early. Hostess Our

So it consumer proposition. still to test we the -- and velocity the needs but

will with this up first channel. the mega zero. get to distribution up gives as below within have still to Voortman that the opportunities will first that -- over have year. our XX%, the multiple we avenues the the long-term distribution that. but to opportunity Overall, at channel, So I'm wafers the grow. started we Voortman into XX% an we page, to C-store us we're trying at well It get do to in half get of look even

segments, So that you really there's a The its of consumer to wholesome And it's the done if just unique the, positioning of in first But and with growing want still along distinct whether has times you more me. it's I we've -- meaningful Voortman two wholesomeness cookies. the all, franchise would three growth or sugar-free broadly all consumer upside on think distribution. come of rate are times warehouse It the base. at total to that.

segment. merchandising food talking innovation. dollar. We're We're moving We're within We about and C-stores. points in just food. And opportunities within also the have we distribution XX have then opportunities then a the into the below

the multifaceted breadth. it's So,

And component broader years. you and the know for opportunity, a opportunity so just it Voortman is on although of it's one I over focus wafer mega a big

Ryan Bell

little maybe thoughts of wins had think demographic COVID that your exit was able And to I what among you some -- or some household of how talking as penetration trends a the about slide transitionals. and saw bit a That's about talk Would to Thanks. retain helpful. you some of across young you consumers be as about the we environment? rather

Andy Callahan

in of to the ability brand and new one and exciting segments things the our is the entire most affinity is we to attract penetrate compete which our about be able this of Yes, consumers. portfolio, our

And uncertainty up, we rituals went is re-association encouraging. of behavior I faster ago. Snacking's food a and XXX-year-old the new year to really brand around snacking. stick lot our COVID, to in brands. they the bring behaviors is continue. into behavior. to -- well higher across presentation mobile. what the that's And we they're of and has peers whether regenerates consumption. some is it have well. talked then is It's very not I'm snacking that growing broad-based consumers the to that behavior is we're have the rituals re-associations a As seeing than snacking of seeing going future why about reintroduction Halloween with in-home that overall they home, this, snacking confident predictor And attractiveness when expect go going now, snacking to is it's with because revitalizes younger and morning But doing and brand. not continue. opens consumer our we're as behavior BFY that's my been portfolio high, our high, know affinity that And increased the indulgent to and it that current of a economy snacking one there's was very or The that In-home I program and best consistently going snacking natural the really than Valentine

Ryan Bell

it me. That’s for

Andy Callahan

Ryan. Thanks

Operator

with with question Evercore. next Please comes from proceed Our Palmer your question. David

David Palmer

outlook XXXX. dig wanted profit gross gross into Thanks. just for I to margins

fourth was looking actually the your in mentioned positive. back a release on You quarter Mix that promotions were down.

productivity, lead wonder maybe I net about course You those frame bit a XXXX the some generally your gross little and guess Could which things of is a you -- then your more perhaps I could synergies headwind at framework productivity. in would and you Voortman's of just a margin how view. if about this Voortman commodities of mix, they the think be think have that promotions outlook for to comment on point and for you XXXX?

Brian Purcell

piece I think inflation. to And is year, and X.X in standpoint, about seeing points We've in in got other from of the seeing elsewhere. for we probably Sure. first the there is we're our inflation roughly The a with X.X of we're inflation if -- XXXX Brian. locked markets Yes, transport some line through David, our lot this is an inflation but guide. guess in companies commodities

So, as going some back and more offset carryover I mentioned this things particularly addition lap think The productivity half we're have you start accretion some weighted a to a going QX couple help in us mix We're half. in is favorability, year. working there's Voortman to I front the as single-serve the with inflation. pricing pricing from the actions we're to going with of performance, going have to be have towards the earlier, inflation of And piece. to for the we of and

thinking net-net that from mix we're But we're business put maybe to the as doing think Voortman I base work in pricing, and is some will But expand environment. So, overall, margins about in the a in accretion way productivity, with margin to good the based inflationary spot. offset us a looking we're that an standpoint. that not materially

David Palmer

that be just you your package, you I be would that Is follow-up because positive a surprised to imagine to I to positive that I which your trailing mix and see have bulk in the be to -- a that. presume was fourth would quarter. was on for you margin And profiles a mentioned into little to different thinking for would going mix XXXX. of single-serve more XXXX? expect the

Brian Purcell

Yes.

almost And QX. there's multi-pack was think you'll out cadence up XX% it's there there's slide investor slide of good if look XX. our And -- is see -- it you So the our quarterly in a breaks at multi-pack. single-serve in that actually pretty our versus I deck

In Our single-serve was we And start coming QX we in QX at multi-pack down X%. grew grew single-serve down. X.X%. about But we back also saw X.X%.

So pretty QX. if powerful is multi-pack look X.X% was Single-serve just X%. And at single-serve margin driver. up you up in a the

got trending brands. of It QX, mix page on prior the little us for here a detriment. we it's material net-net QX. of You gives private list for declines a but relative also Not expansion that got bit out in those quarters us two. value we're seeing favorability. What got you've where and mixed we and And our leveled the don't some little to in bit label a

David Palmer

Thanks. Great.

Operator

with Our comes your Please next with from question Bill Securities. Chappell question. Truist proceed

Bill Chappell

big of reopening? is more for in Andy, what's and of Thanks. schools kind or an and Or in putting forecast if your open your thought COVID we bit revenue of revenue kind back mean, not to to are Good if a up afternoon. COVID profitability? fully of I talk just the are of upside that there is you impact impact? a summer that this margins And mean little I about outlook. what your kind

Andy Callahan

Yes.

And to balancing. revenue revenue. I -- of slight question honest should the these be And you. different thanks ran some I'll single-serve about the when ways. Bill, came The it a hear have the earlier the may this with multi-pack for to scenarios lapping I'm going ran feel mentioned about good revenue optimistic. question. from very of mix scenario I We up. have forward. We -- the offset So to to be we a Good the you. a lot of seems

pricing. Hostess. believe moving C-store look of little got a of a C-store traffic on me in traffic here of the the you versus summer, provided us COVID at Anyway to got We scenarios numbers snacking, we better XX%. which there's January. changes multi-pack of the and greater position And in of and the still parts. So how at in bit but lunches, in-school I versus down will then a XX% it team a benefit -- The parents regardless January positive benchmark. We looked at down just scale. still multiple packing, data ran improvement forward. lot at and there's look whether a still some the There's We economy. home it's we we're is opening lunches it, profitable we're growth the in rituals drive in in-home C-store come back going it's my for in some

of the absolutely penetration if So believe better. a is and we're to C-store advantaged assume the it's stay do mobility hard it's with upside multi-pack -- forecast. the -- due especially to when whether but increases. I earlier, the earlier single-serve we lot I is think I that in we going behavior consumer to potentially assumed say there's It's positive. to believe difficult

to work earlier in I the But The It's potential. models and So feel ran like feel spot. bunch world. hard we prognosticate. in for we're a me has the don't opening a of economy current really good in scenarios

Bill Chappell

mean, to I business a manufacturing that talked some you change? a know -- more thinking permanently which inherited. it. way certainly could this the it's had doing that's that's make how if point. mix is No breakfast of to But benefit. helpful. your gauge at the more contract is the side of of Got decline about switching that you exit to so hard of Is the Yes, Chicago in branded there for any was you well to private opportunity the kind an and Bakery of us But there and of sales kind label I you about business?

Andy Callahan

Yes.

X at is look at the driving been look X.X -- growth we we're ago where improved way we've at years the our were our from So driving it -- we what's years, headline. and if and significantly you profitability,

price -- is paying if does off absolute efficiencies. or But it's the -- it and complexity margin, but it of or being that till that if some return work we'll role is that there for Now not exit operational business with potentially doesn't if either it's lower it. a said isn't cost that for we'll there disproportional, our

a pathway, or profitability contribute with fair to margin have inflation our at portfolio. needs a to it we So especially, coming that

have -- good label, but some we base. business serves very also We private consumer have is very it that good a

be and may declining. some realize to to of continue they it revenue. may it But, mix. price make it be drive efficiency to the then to for out to So opportunity and will flat we're move if continue There sure that -- we not,

because lower being We higher-margin label up true. will tied certainly business. absolutely growth, asset is a margin not compromise for an branded our private That's

Bill Chappell

color. Got it. the Thanks for

Operator

Our question Alwy from question. with next your with comes Deutsche Faiza Bank. proceed Please

Faiza Alwy

Yes. Hi. you. Thank

category to growth now you a rates time indulgent wanted correctly. Are that just level saying have people that snacking back X.X% that, at to of around effectively It comments the Or understanding in going more you COVID post-COVID, saying if XXXX as we X%, your accelerated? growth out forward? are and back spending the want home. go this is to the go to I it Andy, kind look XXXX and just seems and got So, category category normalized like I'm you to see more a and from category lift

Andy Callahan

of X.X%. three thanks to question. over the last which X% range, Let and the just The category the indulgent me we the of growth That's is category. more compete X% a on the that, snacking, subsegments the the sweet to of years for couple performance actual snacking and have versus in places just been go

During has that COVID, moved basis points. XXX up about

very of my to consumer And based are to to which believe, When that. more snacks We good. we some That's to continuing the around trend. We of true. what a of in on So even like X% our our in be products, going positive and if hear behave, some the absolutely I off and category, higher is of behavior happen indulgent opinion, across not perceptions others, than predict. behavior levels, very the especially consumers it's our than goes the see compete, still to consumer it higher snacking back what's what peers. range. but the it's in not difficult But just sweet afterwards, pre-pandemic and way comes it snacking It's subsegments is, are. lot sweet we hear

saw because our multi-pack at sales when up in XXXX, Now we QX, multi-pack difficult, our were it's have you as -- we XX%. look deck, our

us, to very in the that continue we're sweet relative XXXX. for shouldn't bring snacks. So some distract we believe going in look that sweet joy we in are forecast things can responsible revenue them, But, these of way a consumers overall, to lapping to that our moments

Faiza Alwy

a then, on just Okay, allocation. great. quick capital Understood. question And

going by the You're X to year. sort of saying around that of of at your end the low you're be end the leverage level times

what some if talk you're a about have for could be sort size acquisitions. that? its should lever how a what And might Can types share looking around Just beyond around that helpful. maybe there example? you also be Sort authorization It about? of, would do things we sounds of mentioned you X approaching comes at? up of, you acquisitions. be you've parameters like certain so, times, and Is capital repurchase put allocation first? thinking color more You that, Would you

Brian Purcell

Faiza, Sure, yes.

So that as about, you implies, a to of right, script close we talked our delever kind heard in or the guide acquisitions full turn. absent any buybacks, we'll

behind we So, Voortman costs first for of we to think more great have that about I the with that us, able all, of delever feel we're quickly. integration and cash use because that, the

our kind ability That's the great of feel to thing. we So first about deleverage.

We're about the business. In reinvesting priorities, our in in talk going allocation terms of we to our invest about upfront. which talked line, cake capital we

in growth year. to the back more come going and snacking our great It's in time going investment. that's million over the online of $XX a to it's be So for business half

investing in more we year a So increased put one warehouse Those us year. in where great two is are Donette impact another last has will any probably Edgerton of line we our and also of the capacity our business there happily in XXXX past terms examples. this beyond. that in our be invested which position. moved But good

feel gone And of business. rather. -- then capital shareholder trajectory that in So If the acquisitions love would. do been very could Voortman about our we The about. absolutely absolutely Voortman. like business acquisition. I security good like acquisition has talked strategic invest returning fantastic about. and the repurchases Acquisitions, We talked a we another business lastly, great growth integration has also deleverage we through we Voortman, through

also be example could the priorities that execute return we Voortman, we that investing an would. capital of shareholders. to terms I But talked about another delevering. And the it we able is in that's tool So another I on if announced we piece in line of Cake buybacks business. like to think said to

Faiza Alwy

it. Got so Thank you much.

Andy Callahan

Yes, the on yes. just M&A side. And

are to that. focused us to we very a have on able So able as be do we we believe Brian be cash mentioned, to to value and maniacally shareholder give high flexibility flow the unlocking

are the in platform execute a out have we call With and acquisition, grow we Voortman demonstrated can and do access assets we've what think it position that's what right that's niches. them we and profitably we opportunity certainly there You that Does focused we believe we that. that to Is there's be sustainably high doing. other return? believe that at shareholder that on we to for that. portfolio? snacking in scalable it. able we're We do way Can And And we fit a there our there's that, to have also a drive out the look the branded? synergies it believe assets we the

Faiza Alwy

Thank you.

Operator

question from next question. with comes your Our UBS. with proceed Andrew Please Wilson

Andrew Wilson

year some in C-store zero Yes. wanted Hi, of impressive back Could you talk channel. year. confidence in gains I in saw middle your evening. some to you there, on about guys. up? next Obviously, just Good look to the disruptions the despite the Hostess And channel those share differentiated the maybe gains to gains? on partnership just holding you share program as drive you how leverage that out gaining versus there opens those as back touch

Andy Callahan

have thanks business. the a Hey, C-store for Andrew are -- Yes. terrific we question. See we

true the despite is and able the for decline. and took -- and drive size I highly XX% our they pandemic. have C-store this focused. the and We customers care team are. We in we a across been within on I have don't stayed able been that focus -- in long-term. sales never team consumer to of trade loyal and we world-class consumers on board lost never consumers during We've the and because it We've industry barring our Never to share in wouldn't C-store traffic do insights what and anybody growth care

We continue to innovate.

to to out we're we've that's C-stores provide invest customers true the wall. continue our and had on as gains great going water insights coming overall channel a to that of continue that out higher in I pandemic, from We the platform and the well. a we share do as increases, service will believe

tons has team our put So able really upside. but to that in itself past continue of We're and not drive to growth, share. be I wouldn't modeling it of share to

Mega going in Stix great now there are constant. have wafers We going Muff'n innovations. Those in. for are

very So on bullish I total. feel just good. in really There's I'm C-store --

I amount well our of but short-term of long-term to grow is think huge more share lot time we'll to didn't over overall a a lap as a continue on of both modeled modeled mix as for the upside of us traffic line great which scenarios, Bill's we question water growth. higher share We as share We return model some at upside. more gains. the to

Andrew Wilson

Great. Thank you.

Operator

Our with question proceed with Scheuneman Rebecca Please Morningstar. from question. next comes your

Rebecca Scheuneman

for in. fitting thanks And me afternoon. Good

now. consumers? is you of driven extent And gaining new new at point see will to of Hostess reach think some Goods years already its and distribution potential? I ACV. has gains by by into brand for it's of that the Hostess are do Thanks. reaching Sweet shed much distribution, light distribution full XX% the what Baked how the been categories share brand some gains the several driven expanding the on Can that So category you

Andy Callahan

we're Yes. at three I I've years. a a a it's years smart And with of been pretty lot It's much -- our underneath ones, that the our getting one. that will to appreciate gets driven on to your distribution. been full doing been be investments driving that's question. Hostess good that This it of actually in and bringing e-commerce. valid far May. three incremental. bring increase one. we're We've by question to And I've similar our is velocities And for And prune XXXX on continuing every better mix and year. existing is best. fix SKUs more things the That innovation distribution test learn weren't platform to

So better, surface. with our better the data analytics our we're insights and scratching customers are are just

for those learn and continue will So increase then e-commerce, investments. our we example to investments on

reason investment speaking been been have modest model about growth continue to We why XXXX. out, that -- is to continue we relatively we'll do as good optimistic prove And grow. we've The distribution with that in that a that we're going that to able I'm give but to that's do with has and have to mine come with of me that within consumers continue penetration innovation grow we of increased younger the higher areas to insights going consumers, that forward. repeat confidence the able

So able that space the we grow. a into grow view just bringing provide that's continues haven't been communication. better growing and and we to products continued innovation. improving platform what's in universe sustained our really bake as then growth forward. lot understanding expanding and learning that's that asked goods. it trend a and direct-to-consumer innovations for that's growing huge as be category testing to from going And the can a been we to going we and We We We've us don't the consistency how snacking absolute through then much our to have view as optimize earlier someone and of

Rebecca Scheuneman

just And Okay. a share stores. expectations insights to I'd and your for club follow-up, of Great. some your as love Thanks.

your channel, the As the to quarters. some of hear of been sales I'd Thanks. that brand growth last channel? I just point Hostess had newer outlook love expected the maintained But expanded that into couple be would the as it. have distribution for declining

Andy Callahan

Yes.

you're look the of optically it as One and doesn't seeing strong why it -- is. really the reasons as

up we intentionally more disproportionately impacted meaningfully brand the The lower value of the look what our that that in double-digits, double-digits. club, coming pruned COVID you is If that offsetting is the sales seeing was the you're that's sales year. -- consumer. by at into had some Hostess That business value brand or for brand, they're

So the continue that we is forms Hostess we that some to new within double-digits -- you club are good what have in our and channel. growing impacting that expect as the XXXX. club. But ideas take brand should we're away is that is And

Rebecca Scheuneman

much. Okay, you great. Thank so

Andy Callahan

Yes.

you. Thank welcome. You’re

Operator

the time Andy comments. turn to for this closing it We I'd have question-and-answer of to Callahan reached At back session. like the end

Andy Callahan

value value And forward our and again. to your many against years and shareholder thanks shareholder everyone in we the you. drive as We're execution for excited hard for better and Thank participation to XXXX your in increase We're and Hostess. strong interest growth increasing look continue priorities our to a working Hostess Thanks we come. investors.

Operator

today's concludes This conference.

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

Hostess Brands (TWNK) 25 Feb 212020 Q4 Earnings call transcript