TWNK - Earnings call transcript Q3 2021

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Operator

Good day, and welcome to the Hostess Brands, Inc.

Third Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to your host, Amit Sharma. Please go ahead.

Amit Sharma

good Quarter and XXXX and Hostess to Sarah, Third Brands' Earnings you, afternoon, welcome everyone, the Thank Conference Call.

today's By have published at on President ended September release webcast, me call will that Callahan, period Andy Joining was XXXX, Hostess for p.m. Time. The and the www.hostessbrands.com. investor CEO. to now, access should available on approximately XX, everyone available the earnings are is website company's Eastern press at updated website. replay X:XX Hostess call This and on the being is presentation be release Brands' and a brands' an

and and may believe to CEO. company's During forward-looking materially President statements, to forward-looking the this measures statements, list that call, the forward-looking from of these company full the measures and number of measures and a comparable obligations non-GAAP risks to detailed Andy found most A undertakes expectations these the information financial company I'll will of release our we The in of results Callahan, reconciliation will the in is assumptions that, SEC call provide uncertainties revise regarding course these the The make update and investors. included differ of today's including be earnings statements. turn performance. or references useful company's non-GAAP these to A release. the a number GAAP future in earnings the will make filings. no With management actual over can company's to

Andrew Callahan

afternoon, Good everyone. Amit. Thanks,

has in contributions filed We announced pursuing X-K to and and other Brian's and Purcell well opportunities. his in his Brian wish Hostess will you the CFO saw endeavors. As release afternoon, be the future press resignation appreciate him as this

and and this internal conduct interim will will been search who and to Accounting group for open are a in-market not discuss of have into very as as as on personnel Gernigin and the I we transition year. policy, execution team, an addressing new appointed CFO a the and serve strong questions accounting we to momentum be QX as financial has on to team, tremendous Mike and the as and a in CFO. strong finance the to results Chief We QX call, related the would address fortunate matters. have close like I Officer external not out any do

at by Turning the of least high-quality We branded to of grew sales to the from growth and consistent executional for COVID since snack margin to share onset I'd we the the gains the in it the X% X% up the outlook third the top-tier results. streak investing rest excellence to us year branded the suite of X navigating our quarters of is within while attractive category. returns. quarter, growth. That continuing Consolidated every our structure deliver large operating time, same are to the sustain indulgent environment portfolio At shareholder snack to successfully revenue net in in straight the QX financial performance discussion above XX.X% quarter. quarter excellent and a pandemic. an updated results highlights to followed Hostess agile and distribution in our questions. broad-based before propelling by like portfolio, third ongoing opening offering model underscore few is had quarter begin of momentum business a our our your

trends. point-of-sale to Turning

portfolio and we faster-growing the spot is consumer the of growth point-of-sale overall strong categories branded category XX.X% with and accelerated consumer Goods posted points in XX.X%, the retail by marketing advantage XX.X% the our portfolio market sales coming POS food posted demand. continued the cookie increasing advertising another ahead of POS to Hostess quarter, most well to growth quarter clearly faster led branded during strong portfolio, execution increased channels basis investments. improved gains and increased to sequentially in trends higher-margin, Our Hostess growth we as Voortman execution distribution, with grow demonstrating sweet Snacking of brand. strategically of measured pivot Sweet growth. than and continue Baked as share XXX Hostess of outstanding our Quarterly from

planned data. latest merchandising trip on We in trip and are Hostess XX-week basket and panel brand building all continue distribution size, frequency, expansion distribution, innovation. the progressing dollar in to growth, as make broader progress awareness the blocks channel the of is activating impactful Voortman key including Voortman deeper and building as Voortman per up, shown proven C-store model,

growth and trends C-Store from our home placed with from at both subsegments multipack the retail and portfolio our from With coming model of to home. POS both advantage distribution improved evolving consumer our take sales channel, broad-based third single-serve XX% quarter, posted double-digit positioned the is solid Hostess vaccination in rates. away snacking are of in Our and benefit highlighting that uniquely mobility offerings to single-serve the increased well

single-serve and increased sticky. our during in the the XX.X% sales In behavior point to quarter. the pandemic-driven At a convenience superior leveraged on fact, time, post basis as XXX gain during consumer execution channel share some quarter basis same stacked X-year appear to the capabilities POS changes be a our XX.X% we in

work snacking leading from remains at-home is to incremental occasions. instance, home For and elevated

spike. channel, share driven X-year benefiting grew key innovation on stack points top X-year the strong understanding are unlike dollar, a higher purchasing of Notably, large a multipack of we momentum XXX their behaviors. This beginning and opposed the drug consumers Similar in are in during deeper by signaling club of consolidated part food XX% rates XX.X% line evidenced pandemic. is gains as X-year stack capturing and this strong increased X-year are from donut and from of our share sales best basis our during C-Store peers, and the channels. business market the trends of grocery, repeat to our the by as our and net growth, sales many disproportionately sustained over by to demand quarter, XX.X% accelerating, we Our consumer since a bagged basis. the our strong momentum pandemic-driven comp quarter larger

fall limited programs offerings around during time or LTO quarter. Additionally, performed the back-to-school and our well

Our a success higher innovation Crispy contributions rate, measure of targeted and Bundts, the Stix. end reflecting our vitality from the our Baby Muff'n of is solid Minis new towards trending range, product of

Baked instance, top-growing For the our X Baby launches strong continues to category Bundts, quarter. in one of and Lemon a Bundts #X the were key on the Baby build during Baby Bundts innovation and start. Sweet Goods SKUs Cinnamon

Lemon with rates repeat trial is In #X of amongst Bundts velocity in up ahead to terms fact, branded and expectations. Baby SKUs already multipack Hostess of

with to Bundts Baby recent convenience in introduction of Minis. more the channel. momentum We expect this single-serve the strengthen Crispy even

build expectations. Stix are repeat Grains, distribution convenience Minis' exceeding has end channel multi-textured Wafers is to key Mega consumers a Our those front innovation Across building get new and rates expectations X-ounce line at with and will sold is been millennial introduction we incremental distribution steadily, and geared with solid for Voortman, towards continue packaging again. a in be for velocity our with offering trending initial the Super to store. brand. the of single-serve Gen Muff'n for in Crispy the consumers of and as achieving boost build consumer, while store Z the distribution the on-the-go distribution to attracting

our supporting advertising through and are We marketing incremental innovation support.

to has our retail quarter share more leading sustainable innovation to platforms, capabilities positioning to labor stable performance new ROI driving at gains. the us Our Switching enabled greater shelf engagement our to execution and despite sharpen analytics chain, and continue hold very better within high executional is invest which across margins extends data challenges product excellence in mindset, With campaign partners. supply and win to to our digital inflation. gears, last and strengthen our retail Live relatively our us our consumers Your Mostess both and we maniacal further launched

P&L began We and are and through across increasing taking and during These XXXX. flow provide QX actions will pricing actions benefit our the in base. quarter pricing into to customer our portfolio

We necessary. the to prepared environment are are actively additional monitoring as operating pricing take and

to retail for strong demand are despite our consumer experience higher brands We continuing prices.

fully and to early still reflect it's shelf customers continue prices. new our the by Although resets increase price to retail

are growth hiring challenging existing incremental commodity we we continue and training and Like to hedges. peers, we environment, our greater higher half facing and by overtime as leading to labor elevated inflationary costs second headwinds labor the as input, logistics a face purchases above our well made volume expenses. stronger-than-expected costs expected, As in driven as higher

long our in growth proud am production which I team which through investing we additional a Our agile challenges experience. the to volume execute structure well taking will expect the our term. over workforce on of we continued performed cost has exceedingly current labor environment supply and of tough our are and have market. capacity these strong impact chain, at high labor levels the has face extremely positive steps employment in and our mitigate and by to

portfolio, While manufacturing flexible constraints lower strong of the and and generate pressured continue have performance. our footprint mitigate chain been enablers our high indeed to to unprecedented platform and our labor cost key cost have availability supply ability maintain pressures, service distribution levels parts some of operating

to these initiatives. over management of productivity actions headwinds a We are and mitigate confident in our through combination higher ability revenue time prices,

in quarterly the financial revised our and turn I'll greater Now outlook results to detail.

by Year-to-date, a increase in by remarkably productivity addition favorable Third by showcasing and $XX.X XX.X% input higher quarter, year-to-date the in of volume, XX.X% than net $XXX strength sales million our growth consolidated gross consistent pricing cookies. due top XX.X% Baked more increased quarter revenues increased profit momentum, offset the quarter and was in net during Adjusted X.X% Goods, to in and X.X% million. for inflation. primarily The increased transportation of Goods and Baked which line XX.X% continued reflecting mix, adjusted increase to cost Sweet product as increased Sweet to cookies. in X%

of XX adjusted On were expected, XX.X% gross XX.X%. the flat Adjusted Sweet for was partially offset Goods higher by adjusted As margins increase first Voortman margins EBITDA year-to-date $XX.X offset momentum. modestly by XX.X% declined Year-to-date were due higher margin our by million, X line to quarters. actions. from gross the in points the to for at pricing to $XXX.X million as million and gross up profit, driven timing year gross the basis, essentially approximately EBITDA Baked quarter. a The spending quarter to by top support ago higher marketing increased adjusted advertising was $XX.X basis

reflects net effective of $XX.X period to which EPS per increased prior tax quarter year from prior share in with tax XXXX. fourth ago for the million in The of fully the of million prior driven Our XXX.X discrete from eliminated rate XXX.X X.Xx, $XXX.X versus the quarter quarter, was XX.X% of average the leverage adjusted of for we debt net the at X.Xx had ratio XX.X% year adjusted to year as XX.X% noncontrolling the cash from the diluted and year, million QX compared while end interest, diluted of the strong rate, a by XXXX, the income $XXX.X million operating At was of equivalents third increased EPS benefited quarter. our cash quarter million effective allocation in of outstanding shares Adjusted and down $X.XX period. XX.X% flows. the excluding cash items,

for outstanding total completed exchange shares. these third successfully $XX repurchased in of shares quarter. the the we million Separately, $XX our the warrants, expired issuance resulted million settlement X million quarter, total worth XX.X The of since the approximately of the a November for of During spent last of warrants. additional amendment the on an through of a update we our end cashless which of

our line third X% pleased performance, our performance guidance top to year year-to-date very net to XX%. full quarter are revenue X% X.X% with raising to We and our we growth are given from strong

inflation productivity adjusted share. year towards million to at labor, prices unchanged the inflation offset with relatively be $X.XX remain $XXX being mid-single-digit approaching higher to We of now back realized $XXX rising due to energy-related will to half and the per guidance gross full flat costs. higher costs, additional said, we XX% our initiatives commodity expect and Our believe margins. and $X.XX year full EPS in higher leading That range EBITDA end to freight, million and

from cashless previous outlook our an shares successful of tax settlement million, assumes includes consistent XX.X% of completion dilution with of effective guidance warrants. the of the and EPS our XXX average and outstanding rate Our outstanding

Our expect XXXX approximately to million guidance CapEx And unchanged to net given $XX be we million. debt by our remains leverage year-end. solid cash Xx flows, $XX our at year-to-date

shareholders. including remain executing returning priorities, a deleveraging, making committed XXXX, our we to capital strategic in against we full growth, acquisitions allocation almost delever As key to investing for and cash turn

remainder to outlook achieving top-tier So confident XXXX sustained the by conclude, we of environment. our of and in through increasingly remain beyond, challenging highlighted an operating updated growth

consumer brands tailwinds. Our have strong

dynamics pricing in We have good competitive the and category. on visibility

chain and that, while supply growth. your We With invest I'm throughout our offset savings to for are available sharpening to inflation revenue cost higher driving questions. the in management toolkit continuing

Operator

Morgan question our Pamela [Operator Instructions]. Stanley. Kaufman, And take from first we'll

Pamela Kaufman

gain formats, So both this if of you're down to to how category break share? growth? growth guess, channels given growth that terms strong are wanted then multipack Andy, about about line and you on quarter? How and growth saw the various pack thoughts single-serve I and sustainability outlook ability top you're views continue mobility could the thinking it your about get of what just thinking the to in your thinking I as in are continue how I And across you improves? guess, performance you then Hostess' on

Andrew Callahan

and to differentiate are grow that rate a the than at category in also states to headline in work and sit. the which in over -- time. snacking question, the I for those able Yes. appreciate greater in and feel our share Pam. are is greater that. about of really states long several And Thanks understanding are the and we've going done and top our in for invest the growth and do ability There problems need guess I term growing to growing been grow need And we're growth And over a they therefore, continue subsegments the good peers. we're snacking at greater our reasons to solve snacking that I sustainably with to than within competition. greater we're One -- to rate. subsegments quartile is of of of try food, is in lot a our to that leads We've which than consumer consumers' innovate that.

that. about So I good really feel

in We've building quality. We fundamentals. We've growth. in We've investing blocks invested category and been our we've in our been and understanding. mix have there, good innovating our invested of consumer

ability invest time. our I over about So feel really to good

down it. about If our you break it now pack forms, you've into talked the way

increasing good about increased like I or mobility Stix, consumers. category consumption shelf, of invested immediate feel fixing mix, we We've our stores, single-serve, in the Muff'n innovation Our -- during mentioned. we that bringing increasing with which pandemic, fundamentals,

areas, been of shift invested All fundamentals time about. more in typically at they've really in led consumer more multipack within within business, and which more mobility we've at comes bring servicing use when innovations. equals consumer which back, and of our both different and coming have consumers' a in then the snacking. we've because spending I've with that fundamentals we believe therefore, time home talked When there's to in consumer sticky basic the is in a And those the back in, look insights occasions they're those within -- those those customers investments Hostess you home

our said we're and the my So in innovation ramping that, seeing they good a to you different put I conclusion What bringing would together of and the Xx drive if when The our in quality, consumers remarks, Hostess suggest years. get what our repeat that us look states, model understanding over rate need data for results. able X I advantage and the the in try then the been when they is last Brands more advertising to is that's business. at up total final at help take marketing on we've it prepared category

a doing right, win lot And but just term, we're So the long that our that's in the and franchise, building not indicator are of good. good our we're within term. are repeat short a rates things it

sorry to long but a the that for lot was answer, question. So there

feel I is, about at. headline we're where the good So

Pamela Kaufman

needing take the list And you of pricing was about and magnitude over months? helpful. That you taken can that price to coming if increases pricing, more you've anticipate talk just the on the

Andrew Callahan

Yes.

the we the have haven't So in we quantified mode. but priced pricing,

balanced to price have margins look We we'll made. needed, approaching in prepared And the the more back with that the on of half, and the to Relative of and the a marketplace to be inflation, If bit said, and driven we've that be as our into you managing be margin mix. managing of over sustain time, our believe will toolbox. pricing our that on pricing look an benefit pricing that little able and at revenue do we was as some driving component our side we growth and at of see see -- our previous XX% full pricing first our look we to lot in toolbox moving we a as We'll growth, half, pricing, a was really by brands QX, productivity, revenue more that. investments at a and we're but of volume can increasing the our because the that I side. management

Operator

Next, with we'll JPMorgan. take Ken Goldman

Kenneth Goldman

me. for Two

Andy, little bit maybe some right industry a targets targets We're from environment. to M&A quick eager of bit, now getting that? steady a goes a anything and some Or it -- little you right changes. just are are First, any about potential Is urgency Are more little question is potential hearing speculation there the in from potential before bit every just kind a she that interest getting it's on targets you're sell hearing tax as or hearing now? terms side? their of across more

Andrew Callahan

and where Well, over time. We're sure in use our cash, see right we're that targets have where some the active we the but is of it least at although dramatic -- -- tremendously that's from seen -- of urgencies, are that happen has not that's like unusual. the to sit, now, a different monitoring I and for environment Ken, sit, it we rest there kind as of value Honestly, common always one talked making I continually. of creation opportunities from strategies about

ability good way the we've create the value. feel time We had, been where the the portfolio real invested don't about we've we've growth to to at, model about we have. M&A over that our the we we're able and our great transform it growth organic think with part capabilities and in ability, I need

So about we if it and to flow deleveraging. strong But and and doesn't have continue disciplined create investing have continue be happen, cash in it core use certainly look. optionality that generating business to a cash our We're value. to our good of we'll

Kenneth Goldman

I a But not XXXX wanted to talking wanted I get sense. a just pivot realize bit. then little yet. about to And you're

and quarter. little a taking in the flow more in of bit pricing pricing You're rather will first

and sense a also be heading Or of cost? your but get sort Just when have some trying think you off, going no in is first hey, the think as get here? but net over the it ball, rolling hedges of bit to about sort think worse little as about of a your pricing. as just you in crystal next worst Again, second get of one a half? to do over to more for, sense trying half gets for year, is has productivity you is the may better into the before it How worst pricing we about

Andrew Callahan

Yes.

we're we believe as but the we think 'XX. elevated see increasing we'll over for see and headline through, that elevated see a 'XX inflation to managing and at half cost feel QX and toolbox in in time. those expecting half. QX, will first we margins, good flow time, But I the the that pricing even saw will Over first is, about manage least We'll inflation move XXXX. we we're half benefit in we input of through into of be first the of guide not more yet that to that on elevated, we than ready that potentially also our certainly have

Operator

And next, Stephens. Bienvenu Ben with we'll take

Benjamin Bienvenu

the of ask just overall business. I want share to about the

like about be kind business. pre-bankruptcy, for growth your in we thought a think share about momentum of ton with think to as a have that I you looks what have the trajectory Have have made benchmark long-term goals the kind meaningfully the you move on pretty of And reasonable the of guys progress. you're business? expectation about is intermediate-term of you you it might if market that the a what through of velocity You think and

Andrew Callahan

business. look growth we with share we the at start and our When even see slowing. necessarily snacking don't look at than is the universe capabilities, our consumer, we investing broader and a our we Baked way Sweet I in which we in the just Goods define understanding Yes. consumer, growing compete

maybe So our at reasons or consumers things consumers the those within potentially And use we've of breakfast or morning. the those share looking capture one in able way the they're some of with that confections innovation benefits broader they to interchange in use products, activation was provides been categories. would that of and other that advertising our some

our that than we're more you model, availability, is agile if broad-based anybody XX% our with couple our XX%, So distribution. XX% category, available, distribution in which our about

service the the supply to we're So constraints able consumers unprecedented even during within chain.

to allows our whether that built consumer store it have within We we're the bring where us and them need to investing a model understand or it they then online.

ability believe think don't share target defined to I way that of Sweet opportunity limiting able to time, within because market. I So a beyond over to way the Baked defined we've Goods. be as grow as of continue it's our to our grow going

Benjamin Bienvenu

then In question as seeing it breakfast And relates the that innovation? making growth byproduct market you're of benefit tying think or Great. a products, you're as investments it channel of as more share, innovation gains which market share you in relates new the Okay. particularly do the side. biggest on to one maybe but to

Andrew Callahan

franchise, our obviously category. out are a our bring share X-ounce We because to Minis, a It's in actually channel. innovation are as times successful mentioned expands our incremental it Stix execution, to of get which of build version where the end I lot we define of We've have our with Crispy We've incremental -- like store. been consumer it's which convenience a attracting well. it's continued immediate broad-based. where and that an been I successful the front the also doing to consumption, Muff'n on the predominantly

on They nowadays. So is. different what we've are seen frankly, our their channels innovation across shop successful in omnichannel depending need multiple forms channels consumers because,

success the -- we at followed. get level, our the where been execution store has So it's

Operator

Instructions]. [Operator

Robert with Crédit take we'll Suisse. Next, Moskow

Robert Moskow

wanted of actually. I things, couple a know to

But think had a this can you're I about I you the is, want one first what And then address you for responsible productivity how challenges to give of how the office in give don't circumstances a can the of it's lastly, on to the projects Maybe you not know mass CFO channel, sense and kind us -- that that's resignation. a just CFO don't where it and have right update to summary for continuity main pricing to like as some big and now, year. little or So initiatives talk you've us is trying want the give the requires? that whether us you can maintain disruption?

Andrew Callahan

Yes. All right.

So in I progress mass let about one -- feel good take the first channel. our that's first. the me

have across channel. execution. by and true building some and of It that's grocery the of total, quality, in blocks our the invested consumer in the consumer understanding some and things shoots over green success starts investing like We time and understanding we've

good some shoots success. have of So we green

we for board, the and For are are across laying of always process plans partnerships. in those really Rob, XXXX, out the of kind

across each way is board, that's goal mutually our customers. sustainable, to the beneficial our and Our with of all the relationships of engagement. we create approach

done we've things. So

-- grocery. within including investment grocery. mass, investing Our in will which our is I'm in all over chain. including by our customers, across some on we will building our And we're happen across we channels, expanding, of distribution tops front-end that's all all of taking working across supply including And the believe when of including XXXX. that optimistic our mass, and successful servicing be during innovation time, our very doing We're the things of of some channels, tops that benchmark and challenging these we is

management I is -- this So very team related operate to collaborative. our CFO.

behaviors managing outcomes the a therefore, leadership and focused created of leadership smooth And collaborative a to it to from related -- transition, team, infrastructure We do is have to as an basic environment. able whenever bottom We as we meet and week operate of We've organizational and we them. financials. X on of have we that. because other every through doing capabilities, building are collaboration is X top a are it in team which a processes leadership very be to go

well. through I group. am the as team financials pretty the as and to typical that I CFO. that of obviously, We're and not go strength beat. confident Obviously, mentioned, external across beyond for But reporting everything we've So strength financials organization a touches the discipline the of miss he's treasury, CFO the responsible the built the a the that the going of collaboration position and

Operator

And we'll next question Bank. our Powers take Steve Deutsche with from

Steve Powers

And think can I Actually, what drag unpack think gross alluded quarter? in from with on down margin just we was a that it you the you said I said think Voortman. I you to being...

Andrew Callahan

XX Yes, I did. bps.

Steve Powers

And I price. of a you timing that think was said

is sudden, that becomes in and the a to that to So beyond? we all pricing Voortman that of a that be is, rolls guess neutral more accretive I should XQ drag -- question with a again? into and expect up Or does get trued

Andrew Callahan

was of timing about I on a QX. the was a but was had it's thing. too I basically, lag certainly Voortman. just great we some as costs, Yes, it It's of We feel the recovery back. would lot a through come mostly There of and bit little a more just some accretive on right still adjusting of to through. it QX it the be -- flow pricing. accretive expect productivity will

and it growth timing. investment timing Think a a about issue. long-term Voortman it our in business. We the feel as It's business timing. of think of the that proposition, So great in really as continued

Steve Powers

out are given how pricing as elasticity alluded assuming, so I everybody volume consumer, most contemplate elasticities just a to holding at just you up about from what seen quite come far, I well times roll of a planning Okay. elasticity But pricing, for we've as it the shape to guess the that before. you in puts you Perfect. burden just does a I are now, and wanted more thinking more And couple on more else I'm fiscal from right as for as guess and they your and look companies. you 'XX? standpoint. And are

Andrew Callahan

we're doesn't it at matter down or those we consumer home, the drivers continue around the what Yes. break of any And we or more forecast putting try it's we our is basic of seeing to right to whether pricing. Well, not, investments our dollars having business. behavior, now impact the to snacking best us, fundamentals and environment an model and activity more that's offsetting take, do every in

ability needs of resiliency able be it. the consumer So hitting to solve our to are

it, Now continue that we've to then to in, we able we're you're why be put the I of growth. invest in invested what do It's would the about that a position to given also But to the exactly balance you continue you that. think way the in right more stretch business. in good

You want consumer in build our time. the our to our the the strongest sure to continue make to foundation fundamentals pricing a with to able foundation you customers, be and have and innovation, engagement to invest business, our quality over build both including

good more certainly pricing, as So think positioned better in put it you puts as but or strain most. we're I than

Operator

Sharma conference to additional are turn or at Amit your closing over there And any I no would further host, like for to the this time. questions remarks. back

Andrew Callahan

everyone's appreciate Hostess. interest So participation in and I

time. we shareholder strong excited continue growth drive to priority execution and increase I As value mentioned, we the against as over are extremely our

Hostess we again thanks will team and deliver day. next it, who as for every So these you And appreciate great joining. there the thanks quarter. to see results out We well

Operator

appreciate that your Thank our participation. conclude and teleconference today. you, does We

disconnect. now may You

Hostess Brands (TWNK) 10 Nov 212021 Q3 Earnings call transcript