Earnings call transcript Q1 2023

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Operator

Greetings, ladies and gentlemen, and welcome to the Hostess Brands First Quarter of 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is my pleasure to introduce your host, Amit Sharma, Vice President of Investor Relations.

You may begin, sir.

Amit Sharma

Good afternoon, and welcome to Hostess Brands First Quarter 2023 Earnings Conference Call.

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

we forward-looking differ undertake will filings. be and assumptions During of and the Actual materially expectations no of revise and regarding forward-looking and release company's number these results course of from may obligation make to this statements, SEC can statements. these or update uncertainties forward-looking found these statements, a earnings our list call, performance. in the today's A detailed management future in risks including

non-GAAP the a that President the included GAAP the call our investors. in and make number measures will turn Callahan, will useful these to CEO. over of most With earnings to reconciliation the to release. references of non-GAAP information Andy financial provide will measures comparable A to that, believe I we is Management measures full

Andy Callahan

long-term Travis Good a of detailed another comments drivers, will strong I quarterly a I offer begin review will then financial growth provide our our highlights a quarter of of performance. on and will afternoon. few Today, yet few with more results.

another comparisons. before We discussion delivered our net to of up opening outlook strong XXXX and will year questions. lapping a strong profit year very ago with we quarter close full growth revenue started as of while

above the high reaffirming confident year, guide towards execute we remainder to our algo of look in growth in a at XXXX. as are And profit continue We revenue and level. we the

by we for a revenue Net XX% in X% quarter. few growth to quarter. the year ago the Now as lapped highlights increased

by growth mix, strong As ago higher expected, offset the as volumes lapped in net was which volume we lower price year driven revenue quarterly quarter.

a dynamic strong our environment. reminder, in chain results benefited supply year execution ago As from our extremely a

are as a of premier our top disciplined and model, We growth company sustainability with strategy, and proud focused proving capabilities line a go-to-market build consistent snacking advanced execution. we a the of pure-play new

point-of-sale increased up X-year and quarter a stacked Our X.X% during dollars basis. XX.X% Sweet Baked the on

Hostess was the choices. due sheet quarter a carryover sticky, year's large as impact last expected, the including indulgent to to driver continue Long-term pricing a snacking of consumption balance pricing snacks remains growth increase of during adopt to their As behavior to for sweet snacking and consumers continue trends, approach actions.

drive including to recently the investments to the Voortman in to be innovation awareness. basis, sugar quarter, rebranded Turning for growth our as XX% segment. fueled cookie ongoing subsegment strong a zero On faster-growing the brand. increased Voortman the Voortman Zero and Voortman's position in XX% Sugar our leading stack POS increased XX% by POS continues X-year brand

discipline execution X Our the supply during drove across enabled X% last the nearly EBITDA the continued a on quarterly first and CAGR focus over chain of XX.X% adjusted and years. growth quarter

quarter increased over in X years. EPS CAGR Adjusted and last the the an nearly also by X% XX.X%

us to XXXX. volume key XXXX enabling our guidance half to line growth well first deliver in profit above The and growth reaffirm second and positioned all remain stronger few half year, expectations, in my second line are the with year in results the full were we our the points. of confidence even quarter top for Underpinning a

second distortion multiple year-ago with dissipate this the growth actions, by pricing last muting the which the caused execution, half. combined quarter in year's of First, impact volume will strong are

pricing the strong our more majority increased of impact QX. year-on-year in particularly advertising positive of we innovation the lineup, in our as evident and become merchandising support, lap Second, will

detail. in drivers these Let's discuss little more a

Our sustained of profitable growth. our driver be a prolific innovation insight-driven and continues to

in we Goods once again the drove Baby over were the Packs, by category Family we 'XX Xx quarter, in the retail our the in Bouncers,Â , innovator XX In share sales Sweet fair first Bundts, most contribution. weeks. Baked innovation #X and Led the the last with for absolute category

product of to our attractive fully our category advance unlock capabilities to and development Hostess to access potential growth. brands the new iconic to snacking overall drive continue We and occasions

Our in XXXX Hostess by Kazbars, what innovation a headlined March. which is wow, And shipping started late start.

to and transformed have a into product with in of caramel best, wrapped the X moist strong indulgent few Hostess customer chocolate to first and very weeks Initial what layers Candy excellent bar addressable and takeaway truly we $XX does high-quality Kazbars, iconic With And chocolate, what in a support. have feedback layered bringing retail does best, snack or an market. distribution while it snack taken been bar tell, our the been multi-textured merchandising has encouraging. of form. cake fudge Hostess consumer gooey it's early unique broader billion cake very Again, with Crunch too and

lineup. Kazbars exciting indeed but is not alone it's an in our innovation,

chocolate zero appeal of the Under and Bundts in we work sugar-free under Hostess great products products consumer and Voortman our as to quarter, introduced sugar a broaden the rebranded we Kazbars, Baby we old-fashioned these wider to demographic. to and to wafer brand, line addition In first brand. Donettes interest cookie the the

also We during flavors sugar of mini quarter. X launched X wafers the

quarter. innovation packaging launched we this Additionally,

open includes feature. All resale now an Voortman and of our cookie packaging easy

satisfaction. driving reseal consumer higher delighter This be overall intent capability new feature is consumer and and sure a pull-tab open purchase to

We through to support as well strategic core innovation our marketing are advertising. continuing our and as

consumers digital hurdle it's do media, advertising and ROI e-commerce mind digital a retail highly on Hostess who driving not and focused products. XXX% efficient video, media, is currently of effective social and at top buy highly key high for Our awareness,

sustained about continue icons confident see on baked parents foundation, are getting and remainder of well us And and our brands build national for core they drive our after growth flavors. and Hostess year what love to makes well initiatives support advertising true now this campaign stronger servicing as is continued the look as our certainly at continue over us growing plans our most while as With remind our cakes year, to I our great-tasting distinctive, lastly, solid what our as category. that the our millennial customer customers the I'm focus will and year. time to partnerships I We our as and expanding of investing this in high-quality

a ahead, formats. more cadence look retailer we activities we all As merchandising of expect across historical with strong support

our We end, and additional of driver including snacking temporary points at a permanent within key are which the to also gaining stores, drive multiple of displays portfolio. front availability impulse-driven is

on quality. grow, and As to continue we efficiency, we agility, focus safety

the significant build-out advancing and remains talented workforce in fourth dedicated the new execute in across Our supply improvements our Arkadelphia, our come Arkansas quarter. track and at expected high to bakery levels, agenda. driving The is on chain continues of to online productivity

We way remain focused the long over right on term. growing the

our responsibility initiatives sharing progresswith on forward the progress great making June. this are and of our release in to report corporate look responsibility annual We corporate

we work associated the Alliance NAMI, nonprofit national to continue National the workplace. to with in and on illness the mental our programming In support partner with mental health health stigma eliminate addition, Mental help

continue health partners. our highlighting support Month, employees just benefits week, of Mental we our program of Health NAMI both At anxiety, to through our with to joy In as hosted last manage Directors. strategic Awareness it will an session to ways resources number an NAMI discuss responsibility our important our Brands, each our mental all a we of hearts we goals and of Hostess key the about incredible objectives our putting is of we executive direct Board oversight Attaining inspire moments component into other team, from corporate has of care of by do. everything and and

and start to our solid summary, on am full I guidance of EPS our strong our reaffirm to the record revenue, with EBITDA pleased net track In delivering enabling building us while year, results. year

growth believe the pipeline, snacking consumer right best the right executing priorities strategic are have right the build our I and building we a brand on team and to and shareholder We innovation long-term premier deliver value. strategy insights, the to sustainable company,

me to the turn to Travis financial greater over With in outlook that, let our go results it and reaffirmed detail. through quarterly

Travis Leonard

to a year's results. we for Price/mix the by mix. by of declined while strong I as the primarily Brands growth Thanks, top in growth, revenue quarterly $XXX.X Organic solid delivered lacked first benefited the quarter. of of start by million, results volume our favorable last line another XX.X% and financial to X% speak I'm to the increased actions Andy. net review we with to driven Hostess quarter mix as XX.X% quarter volume price from the team. ago will pricing contributed impact carryover proud year

of Our net total Sweet X.X%. which portfolio net X% Switching XX% during grew trends. the our retail revenue revenue, portfolio across consistent for cookie growth rate the sales while accounts nearly quarter, Baked grew to as was goods,

both while increased lapping period our sale Nielsen measured increased by by X.X% in the year's XX.X% Sweet period April point goods growth. for ending strong of POS cookies X, Baked last the XX-week Our

even sales As were Sweet a momentum stack by at the and basis, X-year growth our subsegment. Sugar our goods up in continued the XX.X% Andy Zero was XX.X%, stronger quarter driven in on mentioned, Baked Voortman

cookie X, points to remain XX Voortman points growth enabled the XX.X%, XXX of share ended while declined Baked ability to In dollar by committed our our sustainable XXXX, declined over strategies, which weeks the basis time. our by basis We share have of X category April goods category grow share to Sweet to the X.X%.

is well As retail shipments, grew growth of as expected to you due as in can our our channels net normalize quarter of revenue over this to takeaway see, which time. our ahead nontrack timing

while quarter, lapped offerings the ago our during both X.X% as XX% by increased declined period. multipack in over POS single-serve X%, growth the year Our by

rest the the P&L. to Moving of

X.X% by chain and $XXX.X supply which million of profit gross Adjusted increased benefits, including driven inflation. productivity quarter, favorable offset the price/mix more higher than costs, in by

period. margin the fourth of points by essentially during to the million While at remained $XX.X EBITDA quarter, the margin XX.X% the the driven was ago XX.X% Adjusted flat from quarter, by inflation at increased adjusted elevated moderated for in basis first year XX sequentially higher profit. improved EBITDA Adjusted X.X% quarter. from it gross XX.X% by quarter, gross

higher planned by SG&A, including in investments, quarter our increase core due support higher by $XX.X and expense. Advertising the and expenses, marketing operating compensation spend portfolio. innovation adjusted our increased and and X.X% million marketing XX.X% and advertising both to depreciation to increased to the share-based in Our

prior tax compensation. effective contribution net and Adjusted outlook the excluding full period by income items, the was compared the was depreciation rate, prior the from year. discrete of flat share-based year line million offset quarter with consistent Our higher the for as year higher for in relatively $XX.X as our to remained and with XX.X%, EBITDA quarter XX% largely

shares per of largely average due of of Adjusted by had we ratio $X.XX equivalents cash with million end debt X.X%, to of million debt cash $XXX.X of share earnings and net lower net leverage outstanding. At $XXX.X and the a increased quarter, Xx. the

repurchases. returning continues opportunistically to through Our shareholders include cash capital deployment to strategy share

During the quarter, previously our shares we repurchased $XX.X $XXX of program. under share million million announced repurchase

program, authorization program. repurchase replaced share million $XXX new the a approved existing which recently Directors of Board Our

Turning to our outlook for year. the

our line year. start the are solid our we to and top reaffirming the year, full Given for bottom guidance

price We to X% expect driven by flat full net the continue X%, for of revenue mix volume relatively with year. to growth primarily

As quarter. a the in tend the of reminder, business, the to given than be first our volume and higher quarters third and seasonality revenue second

of dissipate, deliver to impact and the XXXX's of year. expect $X.XX and to XXXX, to the innovation share. of of during of million become half our growth we adjusted continue the we actions will per $XXX more EPS profit second EBITDA As million We to pricing adjusted $XXX merchandising and expect above $X.XX we algo the in benefits pronounced confident remain

our adjusted adjusted EPS outlook XX% adjusted Our XX% algo. and growth, year long-term XX% and X% implies to full EBITDA EBITDA above to EPS both growth

We first continue half. in for greater single-digit full headwinds to the with the expect year high inflation

for are fully first for commodities for XX% and our half full the We covered covered the year. market-traded nearly

remain fully the relatively primarily impact our and for gross Arkadelphia as the impact expect to margin of margins which recovering gross productivity $X to our which over bakery are revenue of of flat approximately considers to back year. the and the We full are management continue million half start-up We growth the one-time leverage costs, time expected year, we committed initiatives.

to our advertising continue expect both revenue discussed, growth. to be we previously our to anticipate advertising higher Including and increase continue our which expenses we XXXX. these faster to full supporting innovation marketing investments, and core than operating investments, XXXX in and we flat compared with relatively to marketing will are year as As committed

including to $XXX million bakery, also to remains capital which elevated to We our quarter. $XXX begin on million, Arkadelphia in in track expect in the investments the production of in remain expenditures continue to new range the XXXX fourth

strong of capital generation record track our to expenditures our return to expect to flow We in as cash to begin normalize historical free XXXX levels.

am Xx company. leverage cash be growth below ability proud the at it will to comments. build With that, XXXX. of operating to I as strong any premier our flow a Given to Andy end we we of absent pure-play and for to our M&A, snacking turn continue I attractive anticipate continue closing ratio to our back long-term deliver team's

Andy Callahan

thanking our execute at I'm Travis. I confident talented put team outgo again, to that, and the to would our deliver their like strong do they profitable Thanks, who everything Brands continue another sustained Hostess it leading team's of to shareholder open we'll track into and generating hearts Once a results close value. above record ability questions. by of to growth high level. year continue and profits With and with up congratulating of

Operator

first The of Goldman Instructions] question comes Ken J.P. [Operator from Morgan.

Ken Goldman

whether I've track that an product mentioned to was CAGNY of And that my be I announced there would announce of second Kazbars. a weren't that lost mentioned little you innovation up to time. been to Andy, a you or wanted has on follow you still ready I think it's launch that. at announced. question a whether additional bit be that over at then

happen said right now? mention I I they're versus is missed did also, may you a have you expectations you Bouncers but to this great think how for start. and quite what your overall. well performing Obviously, going innovation

Andy Callahan

Let our out mentioned, is I to the talk first have we your for then all second, what about 'XX now but innovation me one part, for of remember I don't and I apologize. get most there. I'll the exactly lineup.

We have Fashioned-Donettes. Old

the for it expect Packs easy to well. the lighter. for resell we sugar at the brand, We feature is dissatisfier zero unique have really largest added which rebranded be Voortman the space, last which year, that really and extremely and our Family Voortman in cookies, launched open end continue that of do on We've a we to product

expanding So dissatisfied. it and

We launched chocolate also a Baby Bundts.

really referring I the So to, I feel lineup. lineup. but what about I good apologize about the I good feel was

trial. great last seeing and of we've very initially, And holiday we're specific incremental and about to Bouncers, great it's is highly with that category. lot Now, we trial And in to seeing a talked our especially response quarter parents. the ahead and It's good we're received well. a distribution, had acceptance build we need season a what millennial

those have tried are well, very customers seeing who that Our and repeat good.

as the incrementality trial because repeat curve trier. very of narrower customers, maybe mostly So the from our because slope targeted, products generally are the encouraged seeing is of we initial by little a of some its other we're it than the our but the of and

Kazbars, now broader we talked that off extremely start Now Kazbars intuitive is so really an and strong about has to and appeal. it

presence strong has And really a you space, was I really think used to cake our which quality, the are shelf I truly anybody up when in that and consumers. it So very against snack form intuitive innovative consumers an it's bringing it's put in put gotten indulgent about off its extremely to to think start.

is starting the Now repeat as not to And too in Bouncers. we're We're are. see of what Kazbars and tell. to phase. we dual as also enthusiastic are it's early Customers merchandising

is good to has the mention leading record our we more in track We having spot. and it because our meaningfully fair prepared remarks delivered both Bouncers 'XX, So there contributed share. than was innovation, did continued I it think out the really twice them in

expect we continue. measure pipeline We already vitality that and time. about over to our talked I full

perfect, but competition innovation. our vitality our many, targets. we're and be not to hit than going them continue We'll and our to insights, on I our than expect the We're be capabilities. our more all to brands, given going more

Ken Goldman

the XX% previously. that year on you that very that I XX% to high just target? said -- think of still Is target, end quickly, toward So vitality this

Andy Callahan

Yes.

Operator

comes of Rob question Jefferies. next Dickerson The from

Rob Dickerson

on much. year, X% had guidance. that the just flat year. reiterated to still the It's price be said you comment a for to volumes X% quick a top-line question I essentially Thanks think the mostly But had Great. mix. expect then I so you for you'd

and get then to through, kind just into So QX. of guess, QX kind as think we cadence price/mix of that especially in I

volumes of there goes back nicely with up get up still of that go Because you and high kind we in And it's to the the your quick an could just then QX? on once be is flat of pricing volumes. flat end double maybe did math, not to QX digit that pricing hard in like half? then Like kind the hit guide if expectation

Andy Callahan

Yes.

back models. go you're and feel -- good so the sight you our numbers. drivers good we've I that of if -- on the right about So of growth. line our the And underlying with pretty about -- headlines to been

headline the have which on seen, as we off we're be and it in here QX, will QX, tapers move QX. we've mix it's that pricing and 'XX. you gone recall, So multiple is, the and in through that dissipates lapping specifically QX, highest if The pricing all by through just price we

last in through you our year was pricing in action QX. If market the flowing the remember, in 'XX

So the pretty the seeing, impact mentioned up away mix our remarks, of Travis step half, plans, then volume you'll in top about. our start back of benefit merchandising the which price as his line innovation, the as to much top the feel moves our I rises and in advertising good really of prepared

merchandise. timing, customers QX growth will planograms, a to We due top-line distortion of at still to, sight looking uncertain with have drive and when price when we of more period given and this some the a admittedly, some which of line revenue we're do is the plans is lot versus mix. of transition sometimes the growth

that good reaffirming mentioned prepared That Does said in the what about our exactly you QX, always remarks. I we case but in feel Rob? was help, what and

Rob Dickerson

some like, promotional for in kind half and spend, of half through especially the No. the of Thanks back of Or kind And it as quarter of incremental broadly, of trade view your you period, push back-to-school year, coming. a and marketing. as marketing? sounds brand just in is as promotional of could then spend you the more be Perfect forthcoming like quickly it. that back get just terms a back there answer. the I'm sounds kind do That's It bit you plans of for trade clearly, kind support allocated incremental curious, year? Yeah. the of about little some there kind think lot.

Andy Callahan

measure spend all advertising is time. digital. support, ROI, which So the adapted We we XXX% consumer the

see will and are higher You primarily periods. elevated QX which in QX, category-driven

expect coming but in, we Kazbars see our you us that to Related the as that seeing to traditional for some price business. You'll to includes across expect core We go to -- historical, And necessarily also expect we back not but holidays we're really at. points in lapping things, expect we're June, we're will can which some support start merchandising, help don't mentioned. those the not going higher you level. cadence to historical -- back of we that

always like them. especially line So innovation expect partnerships more They historical. to year. the of given the feel our the that getting, I driving support last would we're we they're merchandising I sight incrementality the have weren't driving And with customers, with see about of that cadence with I the we're the good

So we good about I Also continues. feel plans, that. One our our merchandising e-commerce thing. within about talked last

focus and on continue to availability the store. focus continue on we We to within our e-commerce,

single-serve which there. with a about talented we permanent gaining, feel [indiscernible] talked team the distribution our and nice sales I are job as really good especially doing initiative, previous an really calls business, on previous on features we’re our

both and So driving help merchandising all up to merchandising advertising adds that of growth. historical and more to

Operator

question comes Stanley. Pamela from next of Kaufman The Morgan

Pamela Kaufman

-- within channels? serve And guess the growth you within talk that versus in multipacks that seems looking POS you about store slides? growth channel slower observing it and highlighted then relatively the your data, convenience you the do you've seen stronger you're across attribute in to versus Can mass. just grocery single I what What

So you what share seeing helpful. would any you're be color can on

Andy Callahan

Yes.

snacking of of come indulgent indulgent years for long-term multipack I -- across snacking, and all consumers think of that into consumer. is our trends have the around to go. the and on headline been on our the call continues plans confidence going the that They've in and our snacks the underpinning strength call single-serve number today the growth

not don't multipack we single I that. expect good and channels up, step Unfortunately, down. I expect pace well to as the Related it coming to distortion as at stepped and serve. talked that a equally. it it COVID, every impact about of did to During business out grow specific

of little true more that's we also the impacted in some than single multipack a So and channels, serve. higher than was our benefited bit others,

level. distortion Pam the is think you double-click you at did what through not I same So coming as the

that in also numbers. put see that the Now you stack perspective, in

up on Now we TDPs specific initiatives don't Rob know come single asked. Rob's that serve -- just I the have in mentioned as on

about expand to I So strength in points business, which for and continued very is availability that ability feel our single-store our continue good store of to strong.

the in category. lead high-impulse category and We a it's

our So it last that's two-year to to up is a stack multipack good year, QX, XX%. XX.X%. position And And was in be.

we're kind that. of lapping So

So of of both businesses. I strength our a underlying think most answer. within the very Feel the portfolio. that's about good point single-serve strong is Obviously,

Pamela Kaufman

Obviously, relative And just last two-year can the back large And kind that gaining -- recent competitor over over year. you months. is down market last share has guess, but up, you you're to category. on has still then a been comment landscape of share come a I the observing have basis, within from the what your on competitive

share your the coming about over quarters? thinking you are shake how competitive market landscape the where and can So out

Andy Callahan

Yes.

distortion, So that happen of I in to half. to we the related out back expect believe, the getting

more our snacking forecast to business. Now bit been good difficult models a mostly business. category, have Hostess $XX forecasts our because It's pretty the consumption we Brands within little billion the and the access for forecasting

can that forecast then grow to it's share. we availability So difficult and

that exactly being you're right. said, with Now

gained we see to X go look you deck we 'XX you our prepared posted, to at that points. If share almost investor you'll 'XX, if

to result to that I given share I’m because forecast have X.X to as up I’m what that. of do our that done timing confident don’t and the continue half, years we move given what some category-growing basically for expect, our us move up, share likely in, But given we strategies, of continue grow we five points over growth are start move of just the we I and reasons so. driving we’re which a disproportionate normal our confident that back growing because getting think to the back And Pam, previous in expect given in time. to us category half. of would or share strategies amount we as strategies, as back we’ll What invested would to were the giving And mentioned. I and back I is the which of we’re cadence We record, just track

Operator

The next question comes from Steve Powers of Deutsche Bank.

Steve Powers

I And the about then you just sales to through I that largest maybe this digits the deviation single X% looking up from of what be high we been only And -- it's it's did builds pretty distortion. But about year-over-year trends the on just over were if stark and the talking year just down customer have noticed sequentially a to with right. from some your appear Q math seeing. year

dynamic So just that's about offer that through you and see color trend to wanted the there's if how to expected could additional any I year.

Andy Callahan

all customers our largest I customers. feel our Yeah. about great and of

seeing little You're an that. anomaly channels, businesses was a that's -- in certain some we bit had showing reset that because

expect all growth. And of at largest our I we're I really year. our channels. expect continue good programs our forward support and of actually If as across move really our all we you to look business retail across the see that good, are would channels, experiencing of

Steve Powers

in I of comments bit you're to early through seeing that But quarter the about Rob, I'm on helpful little as think guess data for the what POS second against we year that's the bit comments and negative and here some again, get then marry both clear. but talking the on a maybe the quarter. of with company -- we're And the that little dipped trying your building total a a the I bit were some

the is guess, a for reported Or to growth improvement quarter I low of through will point the So year-over-year as company the is there a balanced more in likely in better sales think why second up and with it reason hold fair second year? the half?

Andy Callahan

Yeah.

maybe is little And kind well, like you're in -- QX see quarter. transition of bit what going moving will certainly, and out through we the as confidence think a is more a that the QX, I think a QX get as the beginning distortion we I bit to green I talking we're transition about. in of little good go pricing to of QX shoots have that half that through. look back

So we're innovation decelerating lap And execution there a of our really there's that move back as and the into half. level is on stuff. high we that pricing

So we'll And see stacks of kind momentum go as that the quarter. that through demonstrate through. the move will we two-year

Steve Powers

exit rate you XQ for really the -- key So the kind point is where of on

Andy Callahan

Yeah.

Okay.

of look as you think that quarter. at I end the the

Steve Powers

very Thanks much.

Andy Callahan

Yep. And that’s in all contemplated our forecast.

Operator

The comes next question of from Cody UBS. Ross

Cody Ross

Just clarification a question. quick

was I goods think cookies? I it do later come correct? of And a timing And expect was quarter. that shipments the have in you a benefit or to benefit sweet b, a there that year? it baked you in Was mentioned is can And a here this it? then was A, that follow-up. you elaborate out then how of much

Andy Callahan

Yes.

see in was there what the There net POS the a to -- and we're to just what versus So could -- if a some you map you the our communicated data, we map and referring we in was did. gap as like you data there. of sales --

that. a have other that our So business do we programs of want on as to address going of ship channel here. doesn't some nontracked about. think programmatic as necessarily There's couple things We

We business. have some export

got places. things in different We other

to deal our from factor business, isn't but a impact have quarter the quarter. a timing of which inventory, more when it, definitely sometimes for some that's a especially We huge Easter that little of as does So choppy. going it bit is we have

some wanted QX. highlight come of just to as out So those of factors we we

so yes, in early things, impact all our in there we and really but they're guide. -- minor full-year to about be things some Now feel may QX other good other some

Cody Ross

will out this to XQ. just of come be And clear,

You said the beginning part.

Andy Callahan

they time, even out. all Over

there part, usually since They're non other. things of most be as could always programmatic. that's life, to for tied That's shelf time life -- more programmatic. the usually and that not each our the shelf true for given track they're close case longer So could given little bit they're not some therefore, the a our and

Cody Ross

bit I talk expectations. margin then And just want Great. little a gross to about your

year. of flat gross for remarks, the margin I the part you think prepared mentioned

You Arkadelphia up related were will headwind XX a in there be first had -- $X half. in you back quarter, basis the points to million the but

on where the more and margin What going math to Can speak, However, conservative. expand you do near gross as And there's year? is my do forward? that, at the were continue expectations in for philosophically, you're of it. we that you're envelope roughly margin Because tempering how be future? then the you ceiling you suggests may gross a still margin think back your about think pre-COVID, above gross

Travis Leonard

Hey.

Let your is last -- Travis take the question. Leonard. for me this Thanks

Let XXXX, little question has it peers. me about think be will XXX how a gross our you compression last bit been margins. margin think points. let over set our little And than philosophically been and me margins your our our in helpful. gross Since years, look then less margin compression two our among of one the the basis talk bit context, we lowest has if at a And first take last I of

an darn in growing inflationary and pretty our environment our peers unprecedented to our margins well. we're relative So business maintaining

and are and our decisions the Now we And the start we we some we we kind back sure about and work of proposition. as about giving long-term margin first, growth. driving times, as focused I you've make, that value this right and we consumer talk that that about think of margins, about several we we're the heard on of make Andy think think sustainable with implications

and our talked and we we QX marketplace will all we've absolutely have as we XX% believe in XX% QX earlier. that, did business, year price and of the press we last in and inflation in So when the XX.X% in of QX last got year, to we've

Now have about for and as when management it them, do we we we from when our XX.X%, inflation think which margins one managing saw you we Pricing about driving quarter. we think talked about and of margin a fuel is execute investments, this toolkit. XX%,

A&M management our initiatives by think fuel to within decisions and expense committed initiatives when us which, going allow time margins our time, the growth. we way, absolutely growth That's margin margin drive But toolkit. we long-term about over recovering not what's But will will we we leverage our the make continued in over sustainable to, short-term innovation. revenue productivity to that are our of recovery and at investments and

we how around philosophy -- about our that's think margins. that's So our

specifically, very as our year, to that this is relates it feel we feel guy. Now responsible a -- gross margin we guide

my there's remarks, prepared high in stated I single-digit inflation. As

expect We inflation. single-digit high

the starting well, You we in as by said new as bakery. saw are QX. XX.X% I a way, And

will a back the be So is we're inclusive $X that of million new half. which bakery, in cost onetime of starting

So time. margin we a this gross guide feel that is response very flat the at

Operator

you. next of comes Thank question The from Chappel Truist. Bill

Unidentified Analyst

Hey, guys. Bill. on This is for Donald

color the Just area? a you Thank contribution pace some margin Kazbars any quick from Could had if any, give innovation. you. in that on on competition, and question

Andy Callahan

was I'm first margin the sorry. What cut one, -- that margin was the contribution?

Unidentified Analyst

Margin your new Yeah. and contributions innovation. from Kazbars

Andy Callahan

total. in innovations New

and of it's Because a upfront there's start-up you're right through So little of our time. well, other -- over we Travis but little things. think will our all a a sometimes you or to innovation But drive trial disproportionately you to all, have that, get I away, cost we of portfolio, some within usually better in what bit have innovation, is margin of have them. always average early that always a our to line getting growth not and on as and to cost, invest our we always have first too sight there philosophy launch philosophy I innovation

related And that question. volume part can we specifically, -- So are you -- that of Donald, where Kazbars sourcing again, that ask I'm or sorry, was asking the to were you first then

Unidentified Analyst

area, Yes. I if was to in pertaining Kazbars. was competition particularly just that No, faced there any asking

Andy Callahan

the Well, feel things -- of case. about that is yes. good one really I Competition,

anybody. off to of underneath up and against all, R&D hats than life. First and our bring and team a all them, believe, call them Sherry it innovations leads there's We I'll do and them cake, to produce Pete, that's these who to anybody out better I put

There's that of life it over making but really We time a for that the people it. is shelf living. of it compare we of lot try spend good. quality sure can a You lot do

I hats So to off team. feel that

cake. that $XX indulgence are bar we're love used in addressable cake to a form we're the universally They And and bring and form. bringing specifically, billion they to tasting a conference consumers We But them to together great want the market be layers that recent and has like had to at with been when really given they accepted back response investor and it try it, honest the you, they it. able universally the everything.

So indulgence afternoon just it. for it consumers taps are especially around looking into that broader space around -- where

able a that they're it cake unique. to in to and to add we're is And given really fact the it's really used form that

to broadly. think from. we why do make to what's pool may more it that's that's we once of to. it purchase going but in to why in where volume of a going We so think what house And sometimes. category, drive cause consistently business, in a they use source it we're question time the going it's we our when to they get decisions them over really live are share is lot the willing about consumers we That's And it's sustainably or the -- how

-- actually other snacking. fairly not across consumers brands. we it's multiple some to It's when across make So where comes categories like categories it binary choices

and So we broader it put format in really feel to form consumers market. that our good into ability respond in indulgent take tap this, an a that to really about

Operator

reached to Thank the you. I session. for remarks. of Callahan now would the the Andy over and have to Ladies gentlemen, turn end question-and-answer like call back we posing

Andy Callahan

our placed plan, souls hearts confidence everyone, our so you our Thank in stakeholders. we of we to much, joy will team for execute all the for of to moments and you’ve and continue more put and thanks, our as and inspire Great.

interest. Appreciate a So thanks lot. your

we’ll quarter, keep will see hard and next working for you We everybody.

Operator

for Thank gentlemen, your sir. may Ladies you, today's you Thank concludes now conference. attending, you disconnect and and lines. this

Hostess Brands (TWNK) 9 May 232023 Q1 Earnings call transcript