Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to Hostess Brands Incorporated Second Quarter 2023 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 is being recorded.

It is now my pleasure to turn the conference over to your host, Amit Sharma. you. Thank

begin. may You

Amit Sharma

welcome Brands' and earnings quarter conference call. to afternoon, second Hostess XXXX Good

today's Andy Officer. call President on me Joining is and Leonard, and Callahan, Travis Chief Financial CEO; Brands' Hostess

the will This By should Hostess' are replay ended XX, and press available p.m. that now, XXXX, available release call website our webcast, website. X:XX for published a approximately Time. have to on June at everyone was is Eastern on the being earnings be access and period hostessbrands.com. release at The presentation investor

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

we financial a make reconciliation number will included that the A non-GAAP investors. to of release. Management provide most to these full measures earnings measures of non-GAAP useful in GAAP is the to information measures believe comparable references the will

Andy With the turn I over our call that, and President CEO. to will Callahan,

Andy Callahan

and for everyone, thank Good afternoon, joining us you today.

our for thanking a quarter financial our review discuss and detailed our well by the for of the I'll Hostess drivers highlights Travis growth second delivering second performance, then more begin a quarterly hardworking provide of our with Brands start me few us team half of Let results. outlook attractive key will of year. organization and half a and dedicated members positioning across good the first

outlook our of We up your will year a to full close before with opening higher discussion questions.

EBITDA and while top strong long-term EPS with of targets and growth our raise quarter higher expectations, maintaining adjusted our operating growth year line our results another enabling outlook. are which well-above us delivered both to margins, profit double-digit We full

was as X.X% carryover volume increased for the the driven higher lapping growth and the decline ago the by we highlights Net by year in quarter. few of growth. quarter by a the Net year for to offset ago second impact pricing lap price/mix Now revenue revenue to quarter. XX.X% of due the expected

volume in we said, seeing step-up confidence positive in in a merchandising favorable shelf trend a July That versus half year volume support strong providing programming, improved expectations. quarter. in for the trends accelerated behind of second This are shipments our the and prior resets where back-to-school customer meaningful our additional

and by Goods Our stack up Sweet were basis. two-year dollars Baked a XX.X% X.X% on point-of-sale quarter the during up

XX.X%, the Zero strong and cookies penetration. X.X% the we and including increasing ongoing Turning as On with Voortman brand. increased increased Zero to on Voortman to POS and investment in wafers. Sugar continue our our Voortman for rebranded faster-growing subsegment basis, stacked the cookie by Voortman POS Sugar two-year quarter in XX.X% a leading the to recently brand position capitalize drive innovation awareness and growth

double-digits focus gross our along operational meaningful trends profit increase retail both EBITDA strong EPS grew execution our our margin. quarter and as of with on continued in and highlighted Second strength and quarterly by business the a year-over-year

rates In refinanced of revolving to proud our during team's successfully very loan markets. facility the very and achieve quarter term addition, and we credit are attractive ability the our in current

financial refinancing our objectives business strength We execute and and flexibility us shareholder is confidence returns. to investors' additional the to extend with strategic revolver on expense, our a to to testament in of future to believe significant performance. impact minimal continue gaining debt new liquidity through maturity underlying the the ability provides operating our drive strong our The interest our successful while strong

our long-term higher EPS X% adjusted margins we points X% of while $XXX gross our $X.XX last XX end range to delivering end be basis our $XXX XX per year profit million and We growth. to above to results, year half EBITDA adjusted of at our remains $X.XX growth. unchanged to first than full range expect strong million towards top to the higher the now Given now algorithm line guidance expect the share higher towards

I Hostess never am built investments strong as foundation company capabilities. with occasions, I innovation, sustainability believe snacking of foundation growing favorable on premier a to proud pure-play the growth, expandable been the consumption executional continue stronger. of growing and Brands category-leading our and has in the categories of of positioning we focused snacking

on another to economic our savory options of me seeking when the above snacking growth the talk including they drivers the preferences line number of traditional of in mindful detail, snacks they environment. XXXX. sweet continues are a me to occasions and range the rewarding in strong remains about of as from to increase throughout what The on deliver resilient snack adopt year wide sustainable to sweet, key growth decisions top consumers adjust even profit indulgent. Consumer to Let for day from and current out ability in a more growth a balance as approach provide confidence to snacking and making from few which sheet algorithm to increasingly

We retail we these the continue where our $XX has more a with than addressable portfolio sales our strong more indications right have win. in believe market and a billion important, strategy refine understanding of focus of fastest-growing occasions on of to and to deep an five

innovation continues share. access the category share Our in occasions. a with relative number enabler overall to in our to XXXX to baked goods these both sweet market be Hostess X.X and and strategy prolific innovation times was attractive of key dollars our innovator XXXX one over of

performance the and started both to shipping of our overindex innovation by late with continues in QX. second highly quarter, in the Hostess driven continue encouraging Initial launch Kazbars, velocities to line with high be in on which expectations. trending We distribution

excitement Baby and Kazbars innovations and high receiving with of launches. recently from as Bundts among is highly XXXX category. positive our in initial from innovation at support to such some successful in levels of track the and also news consumers Sweet continue category of and is feedback to Kazbars praise Goods highest other all our strong getting launched on category-expanding retailer is the the bringing build our as we partners record Baked standout

as Baby In cakes packs sugar-free, the Bundts. our to brands our iconic deliver family Chocolate generating our and Hostess terrific. we rebranded support with velocities, first profitably packs retail and repeat and are Hostess to and demographic we are wafer product to family Initial its the purchases cookie customers. extending a value Voortman introduced Old Brand to Fashioned-Donettes perceptions. sugar, incrementality With results other and Bundts from strong Baby Kazbars, appeal are we wider along Brands half, customers, and including consumer expanding under increasing taste coffee lines high zero

high portfolio core We continue innovation our support ROI well advertising. and as marketing to as through

national was June, Kazbars. quarter quarter a Second we retail nearly social launched Kazbars XX% In driving e-commerce A&M campaign our spend video, focused as shifted we media, behind some up digital awareness on media. late of for the second to digital and planned through

We share that a critical to of key A&M are increase investments the snacking. growth parents overall brand believe continue component and attract Hostess to of to our millennial strategy and

key bring category, retail I As growth, the innovation with our to excitement partnerships growth believe we been and stronger. customers, to has never continue

and and the greater availability off. is to throughout permanent Our multi-tiered drive additional win store displays temporary beginning approach pay to

overall and rate than TDPs category. faster merchandising at additional opportunities We gaining are the getting a

shelf customers front-end leading changes very which our and favorable space distribution resets portfolio. us, impulse-driven our Recent are attractive large for of to is many for planogram and snacking additional

retailers. and the initiatives our of During timing growth of the varied customer quarter, second across the impact

to have initiatives these on sales a half. expect We second in our bigger the impact

our confidence volume Our half shipments expectations. reinforcing are in July, our in up meaningfully second

Though activity noise, the am will is drive growth. promotion pricing flow-through creating confident some merchandising timing I our competitor and that year-to-go and and of merchandising short-term

promotion the below back year last levels reminder, a in As of half levels. historical were

stronger our second planned, and program historical activities half. more frequency the As to include a a return back-to-school in

and We and we'll continue competitive landscape this dynamic our monitor programming to needed in adjust environment. as events the

these trade working. further value more We efficient are for continue make refine our to good to evidence initial RGM and strengthen programs our optimize overall spending consumers our and our attractive seeing proposition and toolkit

becomes to volume-driven innovation, higher As as I I a the confident level. team's evident in half, our at from we executing growth as distortion last am last very we competitive dynamic advertising year's multiple fully the lap retail execution actions support, ability volume impact our strong the deliver pricing more second environment. execution and look year's are strong high caused in and by to strong

to addition, In significant our the dedicated raise is our to improvements guidance. driving us supply our enable and and across EBITDA EPS chain agenda and productivity talented advancing workforce

growing the way At right Brands the remain we focused long-term. Hostess on over

in which our is reaffirms our good of initiatives including executive our in live are our commitments work. report an Directors. and Board to most communities important stakeholders with responsibility the We corporate responsibility recent component goals oversight late our progress key released making objectives responsibility strategic our of corporate which of team corporate our from tangible direct and June, Attaining we on

In half first with summary our I performance. pleased am

enabling While the our full strong we to guidance. are growth, EPS environment us and consumer confident adjusted half remains second raise of year dynamic EBITDA

partnerships our execution topline strong and volume customer year to Our full fundamentals expectations of our growth supports enable guidance. reaffirm us and second half

execute to growth sustainable our and long-term on shareholder to deliver continue and priorities We strategic value. well-positioned are

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

Travis Leonard

offset from quarter topline increased results. review net to Organic favorable Thanks to price $XXX.X growth, X.X% primarily Andy. the X.X% price million, quarterly lower I second revenue net volume. will revenue net by partially we contributed decline a mix start the our Price/mix driven for realization. benefited a from with as XX.X% by of

after declined growth XX% growth cookie Sweet which total to revenue Goods for net ago. was in Baked X.X% sales X.X% portfolio growth trends. revenue, Switching nearly year our XX.X% retail our net by while portfolio, accounts Our driven a by of lapping the

XX-week Nielsen lapping by increased the point of ending for cookie Goods Our of increased July sale Sweet in while the Baked last both US year's period by period our measured X.X% point X.X% growth. sale strong Xst,

up driven and the the Voortman retail Zero even On two-year in stack XX.X% basis quarter by continued our XX.X%, were stronger growth subsegment. Baked was a momentum Sweet in Goods Sugar our sales at

ended Xst, In declined July XXXX Goods the the category XX Baked basis dollar sales share our of Sweet to XX points XX.X%. weeks by

category was share relatively Voortman's cookie at of While X.X%. flat the

to grow with a us our foundation capabilities we to market growth time. share can confidence category have continue strong which right strategy over provide We the drive the

normalize revenue this well channels growth Our we expect as to our shipments retail our in of of quarter which was timing net growth growth due takeaway to time. non-track over as ahead

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

than million normalizing supply realization, profit price the offset favorable last the high of increased to volume. we net by XX.X% the and Adjusted more year inflation chain rest benefits Moving experienced gross lower single-digit of P&L. and driven productivity versus which by $XXX.X fragility

of Adjusted driven the ago gross higher XXX XX.X% basis improved points increased Adjusted by the basis quarter by XX.X% from to EBITDA by million to gross margin profit. quarter. primarily XX.X% year EBITDA Adjusted period. increased points margin the by XXX for in $XX.X

the by to the marketing quarter XX.X% lower by Our to Advertising advertising partially XX.X% $XX.X adjusted $XX.X to support spend core costs. planned marketing operating to due our both and increase G&A in our in increased million by expenses increased offset and and portfolio. innovation investments million

driven full line increased rate prior the net effective for $XX.X compared with consistent largely for of higher quarter income year period in the outlook the Adjusted was tax XX.X% our to excluding XX.X% XX% year with as quarter EBITDA. the discrete Our items million and by prior year.

net Adjusted $X.XX $XXX.X quarter, lower of and debt At million ratio a by average cash driven current X.X earnings times. net equivalents shares leverage $XX.X in end with XX.X% and the had the quarter debt share outstanding. the profitability we of and cash of higher of of million per increased

purchase capital returning aggregate to shareholders for we deployment of to repurchases. Our opportunistic shares $XX.X capital share price million. repurchased Year-to-date continues strategy include through an

Andy as we refinanced mentioned the Additionally, credit quarter first during second lien agreement. our

ratings our recently capacity extends new revolving increased the The the our category most loans the for issued of agreement priced our credit loan which of term of and maturity favorably facility. represents one

swaps. rate interest existing our maintained also have We

sheet our result, a step was we this business. refinancing. a stability management the expected to our as believe in impact interest structure and effective We minimal is capital of continue there continue the rate As balance to following drive the provides disciplined and growth critical

year. outlook our to Turning the for

end results and the to top-line our EPS second our previous raising we guidance and reaffirming towards of full year our first guidance and half EBITDA higher guidance the our are half, Given visibility ranges.

revenue year to unchanged. growth of X% outlook Our full X% net remains

realization. price to However, stronger is volume expected expect we year slightly be to of net flat, which previous relatively down now relative full be by offset to expectations

As our largely second unchanged. volume Andy mentioned half expectations remain

second expected initiatives bigger the trends a second as impact are impact Our some event. to key a growth shipment meaningful had in the our volume of lower-than-expected retailers on quarter which our in step-up and customer have a July by sequentially in evidenced back-to-school half ahead

continued innovation, end our the pricing million the we algorithm of addition, in of the our of now range higher investments, and range our EPS per the share of towards contributions lapping deployment expect end benefit adjusted million of above $XXX In our to and A&M prior expect year. half EBITDA to from higher our long-term year We $XXX $X.XX the $X.XX delivering profit growth. category-leading towards adjusted back brand-building significant

year, XX by half prior $X million XX to of now the startup, approximately revenue and be the expect the we year from headwinds our points contribution Given strong basis Arkadelphia are management bakery margin the onetime. expected in over including initiatives of improve first full gross anticipated growth to to which productivity

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

Consistent our with strategy fully our market-traded for forward-buying the year. covered are commodities

to margin recovery. Our to which be productivity as we initiatives continue of a fuel driver key our refer

for initiatives pipeline to provide stronger drive while to margin expansion supporting line a of growth have top to efficiencies growth. our We profit drive "fuel"

anticipate growth. we discussed, faster innovation previously advertising which higher and both investments, to and As will with than are we supporting committed revenue marketing our increase to continue our core

G&A our XXXX, be operating expect in leverage. driving lower We positive year full to cost

in million, Arkadelphia of are which our fourth bakery, the the in to begin capital range on $XXX remains expected to XXXX track new quarter. be million investments expenditures production in including still to the $XXX

combined We expect begins growth. record of continued CapEx to free with strong to track return flow XXXX profit as normalize generation our our cash in to

at our flow team's continue ratio Given we I our leverage and to snacking as times M&A, of XXXX. cash build am the premier attractive a of below operating absent ability three be company. end anticipate we any growth to to our deliver proud strong pure-play long-term to continue

With will it that, comments. to back turn I for Andy closing

Andy Callahan

thanking talented continue I Thanks, put at level. and by congratulating a Hostess again, Once into Travis. would do they hearts everything close their and who to high to like Brands execute team, the

profits another year of record well our and algorithm results deliver sustained We shareholder are to generating positioned strong with continue profitable and growth of above leading track value.

questions. are With ready that, your we for

Operator

with a from comes AT time, Instructions] will we with [Operator first Stephens. your question-and-answer Our proceed Pleaes this conducting question. you. session. Thank question be Jim Salera

Unidentified Analyst

This Jonathan for afternoon. on is good Hey, Jim.

Andy Callahan

you Jonathan up little Hey, can a speak bit?

Unidentified Analyst

better? Yeah. Is that

Andy Callahan

Yes.

Unidentified Analyst

Perfect. Kazbar a provide color great? Thanks. has bit response what be would Yes retailers? on Any could from the in-store talk that rollout, little more you been could Thanks. displays you maybe the about on

Andy Callahan

In convenience in-store feel our and our stepping We all half Yeah. we in back good. in display feel really channels. about good up both of general,

another growth this the of enthusiasm iteration behind the customer about good is strong. that we our back our is activate So never move we we Innovation extremely was half The Kazbars into that long-term strength feel the of as program. through with base time. strategy. as business stopped We've that.

of was in. as mentioned and prepared expectations We remarks our So my are I that's distribution them. just the as high good And one we very Voortman rebranded velocities at our in are is went of support and that. another Zero of Baby extremely business Bundts. Sugar Donettes. there. had velocities is our The and are well iteration Old We well portfolio Kazbars extremely line Chocolate had performing We performing Fashioned

which consumers extremely important and about snacking big in able well we that is sets part you our baking the them compete, addressable for innovate, to a understanding snacking. going innovation the of attributes the universe As total. expand to goods looking $XX in are for because continue. performing market of a think billion consumers very therefore And in is into baked be consideration is That's in give attributes ability to those broader

good designed that well. market strategy is are very working Kazbars to could strategies capture of that work and Our a is and that example

Unidentified Analyst

are of other Great. headwinds from the for demand the there Is Thank or discuss primarily play? some elasticity impacting dynamics are follow-up, part at much. so it cookie pricing, Thanks. you And of the the maybe that could you portfolio? then

Andy Callahan

category category an in about have -- a X.X Cookie category. continues Well, -- we the category. strong very billion performs to business well a perform We're our We're in It's the $X Cookie overall our Cookie in Voortman at has position on which Zero sugar our we that greater X%. subsegment XX% stack business at grew of is a And growing Sugar growth. rate the reduced basis a two-year nearly quarter, this in share.

feel position we So our within good really Voortman. about

awareness. drive We continue to

category to to within is It's important We the enhancing continue is drive. and partner customers very with strong. that

And so I about feel Voortman. good

health other but actively business continue strong Cookie pricing. is portfolio, we have we large the There of the the some we've as into obviously that to things underlying grow through a total category. are some Voortman extremely managed Now moved billion

Unidentified Analyst

you pass Great. so on. Thank much. I’ll it

Andy Callahan

Jonathan. Thanks,

Operator

proceed from JPMorgan. your Please Our question. next question Ken with Goldman is with

Ken Goldman

much. Hi. Thanks so

curious, your shelf you on at versus looking how Just are consumption trends your expectations.

mouth that's in wouldn't put great share, shipments your retaking doing have to that main taking still be you July. might trying mentioned I terms your market -- are words share got. least that the I on-shelf at that's perhaps I sense You at I'm And really least think or you'd matters. But share in competitor into of by hope just what guess be now not

demand? the I'm things to make about want in in correctly sure thinking that just of scheme I So of end terms

Andy Callahan

Ken, from to good Yeah. hear you.

how Let about share shelf. the feel that. there's and how we two me the parts we're -- others the to at is do One working

our So the At level, we're in happens together our separately Baked in category our of through maybe and most resets of with I'll spring. bit. macro Goods them in a for I'll customer of program coming them put the each both a them mostly take up year partnership Sweet little

of good the at feel we really there If about coming data there. you look out

out increased come this there. we permanent shelf shelf a has the of share as of is Our

the be we did very and As mentioned remarks, expect the well they've to some timing that customers actually are those greater. impacts We in prepared performing of we early. some see of executed

overall have we category the investments in advertising Some But innovation, partnerships support of the our our our our around insights support and with that via and our in them our quality. bring around their lagged. continued growth increasing enthusiasm of support customers, enthusiasm them

I And share partnerships business of stronger. increasing been merchandising. their So our that customers' the broad-based our the our channels this across strength think and support never has see is of we of from with

the So would the more but impactful back strong. timing it's half that in of very we believe be

comment to your on share, related Now absolutely.

a we're see you I've spirit bringing up we But and really able know the share experience Baked important can more up share share get a I I is the therefore, -- and lot of pie. in As in positive And categories Sweet the always user that time see in high ability category. $XX mentioned percentage testament and dollars see which a to want don't period before it potentially understand sharper grow and dollars and interchangeable base, we to that the to is pricing fact bakings negative. and of a indulgent I like in of here. of But the of is you because of pie Goods to grow it the snacking was grew than to strength and, baking you always that a compete it really category billion overall within than total

in it undermine growing category. on continue doesn't important not it's strategies grow, play and partnerships quality So not able don't it which we We're negative, important, in our going number We're to with We're [ph]. be ROI our over of. high advertising to one continue but be is believe our We to TBs the to in will to ability we're staying the and to but top it's to underlying customers, that time. of well to share like going we're our going and it invest in this see be invest -- innovation.

of expect position half we're communicate well do we grow, that, deliver which we're we itself. So share we to as our to back take care continue if to share to a do want will yes positioned over good we we it. think in believe time, And we but

Ken Goldman

I’ll on. pass Thank it you.

Andy Callahan

Ken. Thanks

Travis Leonard

Thanks Ken.

Operator

is question. Dickerson proceed Rob Our Jefferies. with next your with from question Please

Rob Dickerson

relative Great. I Thanks a In a I so you July, terms question mean, the to you're are very much. price/mix explicitly. clearly have material. half volume. in really I just strong. expect staying guess, pretty Shipments of around back

times also I second I I you was think volumes half. were than say higher weaker that in you heard of pricing in improvement a the But little the then expected. back said had a thought, maybe bit you maybe slightly originally couple quarter

So but some around getting think this incremental through like provide two half sounds color, to to back it up is price/mix flattish really the accelerate. willing year guy? if Like nicely we're to you're on if the where still slightly like is quarters this maybe maybe of think volume positively we should average, accelerate, we get that volumes

So to just some meaningful That's it. means. get what trying on definition

Andy Callahan

Yeah.

on back half. So as you the held know to we

in Just quarter couple happening were a executions -- second on of the large resets were the category the at from. second on the quarter. that we supply things in were Hostess, category benefited when disruptions off happening -- We lot chain a the TDP was that's related happening. of a part coming There but customer the clarity to

was difficult that forecast. So to

feel with are our we customers and seeing in move July, partnerships, strong good we But positive shipments our into back about back-to-school. as we the

do -- to back-to-school, we by very see which as Rob, good to support important category. very will this expect the you know is We see

a comments. back-to-school, August So we believe it be to and leads time And well. lot our the look quarter. the We right, given forecast the the didn't spirit as that as those, a indications and about customers was we July are always good exactly feel do but have transition therefore, that's at lineup are shipments well was QX to which of that dynamic the impacts difficult of get which a a the the behind we lot shipments of in it, us, going of

different through it. July. ways depending But on do pricing did -- was we filtered last Related in through announced to that in our price/mix, QX, in

to some putting the innovation And QX, but So the that should the we in, growth be the benefit TDPs, the that QX. in, of putting step merchandising from on relying we the in get doing it when we're we're be programs advertising. see benefit share passed the we're incremental we'll of and the up continued will price/mix enhanced in

we the those Did through up, that back into as lined half. help are the All move with color? of

Rob Dickerson

QX. Good gross Yes. little And to just of promotional pressure not kind XX like which like onetime it one it then, margin enough. And higher guide I Is basis of Arkadelphia follow because I of of facility. question preopening mean the guess half to a me, more up, down I see costs, we This right? on compression kind that's new the cadence clearly year-over-year. year, kind is, the implies sounds a margin, forward quarter just of the of essentially flat those mostly isn't points half, bit sure XX it's excuse that's it in expenses, costs mean of think that, of maybe core might like think dynamic of because in back of just more if the driven are sounds the right? back I by kind then of

Travis Leonard

right. that's Yes, Yes.

one Andy, can as So chime and let me in well. this take

So a couple of things.

program, particularly first our growth with revenue really from are we our outlined the fuel and we've our also productivity pleased, seen from I half So management. that that in

pleased are benefits really and So capabilities through. as we've these coming see building to are a been there reminder, are that

driving confidence we Arkadelphia the full first do as in increasing bakery. to what's truly our for to points. half, received the have in alluded And margin our to half, our back the it's year you the in And we that that XX basis expectation XX benefit

come on it's online time -- is track. again, QX. It's to that So in on

there is my turn the it back is remarks, Andy expense to onetime in to... prepared in $X as that in out And I'll nature. said half. I So million

Andy Callahan

right Arkadelphia we're on utilize capacity to right excited time. working We're And away. about it. That's getting additional coming

Rob Dickerson

Thank you. Perfect.

Operator

with question. question Please next proceed is Stanley. Our Pamela with from Kaufman Morgan your

Pamela Kaufman

Hi, good evening.

Andy Callahan

Pam. Hi,

Travis Leonard

Pam Hi,

Pamela Kaufman

to second expectations slightly in does volumes that half? question. clarify for wanted year, I down follow-up just still your to Rob's to down I volumes have be on are that a the this assume

Andy Callahan

No, we've the Matter And timing half with not. of distortion guide. out that expected the the of learned what as a keeps we've the we it that lot gone we we of the saw, most the transition the believe during of we've where the did fact, half QX. – the see we've the and the second that for we what we in for most does we through -- consumer, QX some made do part, the close that really lapping given volume changes impacted in in originally to that back we enhancements saw part change was half back program, made – majority that made our the our of

So we're at it. looking that's the way

Pamela Kaufman

your full in you guidance. there's quarter very line the end Okay. growth? getting and be higher year That's promotional this then confidence your performance And behind reinvestment the up stepping or support are How either gross of helpful. strong obviously margin into that thinking to business seems of about to top driving marketing some

Andy Callahan

that. on stay we Well Yes.

years our done very a And consistent and and business job. the As of we've to we've long-term five-plus been the over I growth ability continue. have nice sustainable

back a growth. If take at and two-year our you look step

with Our line revenue which on the CAGR top is snacking. X%, indulgent side in is

So the right distortion we're and That's in seeing with is real. line stock them.

think I Pam. on report as I well your that saw

a in went at for protected And we – up margins shorter this category probably versus a inflation so our others. last year as more very timeframe well

we're So that. a for spot in good

taking offers can we data that. of we've balancing and versus our we some though, promotions, so the long-term You a RGM invested so enhanced one program in but sharpen year point sharper bring that how we're We've ago we we incremental good frequency the where are customers. including to of thinking – are we on so back can the some in up half on have our

partner our increasing effectiveness, increase activity display at the back that half. looking the in want and we enhance to programs where We're overlays those they digital

all give pricing that to customer in be high driven of off going distortion off and So QX. we're those are helping to the as come bleeding by we the us fuel the of

the of equation our guide. that part are those of incorporated All into are

Pamela Kaufman

Thank more you. just And one That's question. helpful.

has quarters movement of think I benefit the in ahead from easier think last data. growth or compares benefit the was your couple a we've of inventory untracked there what channels. reported sales And I seen in been also some from scanner

it quarter a was gap. This narrower

that the if channels. any versus just performance influencing differences in untracked there's wondering if So tracked and you're seeing and anything

Andy Callahan

No.

I see We and Most higher are does it know coming – of like of I there about quarter-to-quarter. availability generally vary variation our into the back this things business. expect and talked I good including some non-track There do from on we normalizes. of within benefits non-track from the Baked have channel. a Sweet a year be little the it track quarter-to-quarter. think Goods bit over the does this of too non-tracked on our calls from we this strength the And little lot to you it breadth program channels. a and time the some some some of of of time wouldn't Ben much is But a read we

Pamela Kaufman

Got you. it. Thank

Andy Callahan

Thanks, Pam.

Operator

proceed Ross from is Cody with UBS. question with question. your next Please Our

Cody Ross

I are back question, the just around how Thanks to go want taking Goldman's question. you. for Hey, competitive our environment. to Ken

most and Do And of getting were to point, the them little on a competitive you share consider albeit your expect more you your you competitors competitors what up guys seen ago. back are at think, where year? about or the promotional the promotional how losses, some do have your of years are talked you market protect rational? of stance are the some this and above, call half You in you you acting looking to share environment? At two ratcheting would that

Andy Callahan

supply Donettes. yes, forecast. believe I the Yes. for want competitive. say What to have true to continue compete certainly take are I quality we very year ways the they competition single-serve in we to such consumer. we'll true family which for our That's prepared We and at the a win. true when about do fine, we is difficult position back the bag we're well are want, and as value want that. in continue services true would do disruption to think introduced we business. due Certainly the in going they chain our we're our serious. time our but innovation And -- to rationales and when that, coming other multipacks. That price the category, we to relative is the over aggressively the a look competition for and do expand -- QX. for the That's on large was we into to they packs would that ago also doing at very And call I business, some them give it's on say value difficult we The we It's our true to it's that want when and said for

appear becoming the So, we of year. short being price consumers more said, half sensitive with do the term, acknowledge to the the that in back

good the that everybody the see we in the do frequency, in the of the sharpening points the have base we're on display for half, we and right categories. impulse back of of that's them out the the we're So we lapping there increase one based sensitivity highest price add the a for reminder kind in are. But making that price where price sure

our expect is up at enthusiasm year our ago. least and we for shipper customers So our versus a program

We be benefit. expect all to

compete, today are continuing our half. for do but Pam them to we that in toolbox are current we've a and environment. to take And we meeting of to our term have back think they importantly what we’re lot we in the asked, success keep the -- done long-term short our short in consumers our But making and more strategies to customers the the similar do sure business. the delivering So where for the going term, both that drive I

Cody Ross

industry any then this heard the inventory some working perspective? Broadly as you. food Are to to their little Thank you retailers manage discuss decide packaged a one question. in effort us? capital? well an last Can levels inventory just some for peers, in the as upstream that you speaking in seeing we've lower And are retail seeing from bit from you. a What Got players. you

Andy Callahan

part largest has short Baked the life. -- Sweet let of The Goods, our me category Goods Yes. Sweet talk part largest Baked relatively about shelf

to So, turns for a the the not large shelf get manage part, the and us because by it days it for we supply. the time impact them of lot much inventory for there's doesn't manage room of as when we most

large business really the inventory So our our business. factor a Voortman business it's larger to thing. a majority major our our say business it's But bigger most a is Voortman has part -- that meant I of not a of the a little for part for has business. for bit But was When shelf not our life. part

Cody Ross

on. Thank pass you. it I’ll

Operator

from proceed Bank. question. your is question with Please Deutsche next Powers Steve with Our

Steve Powers

Thanks everybody.

that the on picking discussion promotion just So up.

depth I prepared used a to in historical the environment on returning and half. the levels that levels, less or not to frequency going and on or normalize that promotional little just back of we the I to the we compare cadence kind remarks think perspective in of think you Is your but I'd basis, historical equally promotion. that forward sense? less frequency word back a expect equal half -- historical if do to promotion for in a makes going historical how depth or you on historical slightly cadence of guess, love return historical a if also breadth deep

Andy Callahan

Yes.

there's focused on that but price merchandising -- It's when here. we're going from also couple on There's a price of think about a point point. question. very driving things we So terrific display

matter. So them both of

customers tools cetera. LTOs We that have to et be do to with able displays on partnership our with with

successful merchandising tools related programs. have we So, sure we making do to multiple have

frequency, remarks We was higher level benefit it the in to in We've points that -- where some price promoted that believe already -- a times the to to to back we frequency the of of frequency too that we that's Related the that reduced QX. the of Last going event and we back the we took the in half get mostly longer-term the prepared a half, that higher year, raised in promote high. and a amount in raised. we're out where entire during referred half adjusted my was frankly the an but front I season. there's

frequency Additionally, by more we're historical. to getting the adding back

as a our this going -- wasn't a ago, category context. customer competitor any the In the QX, experienced when put were to merchandising were year going service all give Now to in due when support. the we we disruption already were we because there. extremely up the in remember our well. customers. much getting that the did wasn't add We all that to running it were partneredness. We We in They -- were

our points more right? It's that So as the we points is inflation to sustainable. cadence we and the the times. and at price back wasn't And so we're going of not coming top merchandising sharper on back additional price believe needed pre adding that at that depth required were

the what them we're just So believe not we We're spending is sustainable to that level. back. getting

Steve Powers

Yes. helpful. then maybe And for Travis. Okay. That's

gross productivity achieved for on quarter is talked sort growth further RGM guiding margin benefits it were Is that the you as layer second to time the guess, positive drivers kind top revenue in that you are carried expecting? and you room forward, are or benefits already what I I'm or productivity able of you're of to You we being incremental on? further momentum you -- do about there goes of -- what curious or the what's incremental in forward, management. achieve the extrapolated see principally guidance

Travis Leonard

these linchpins to investment I program way a think as with be are margins well Think business our you term, driving the this going into to think Yes. our is management margin as longer will growth acceleration of time. really about an productivity tell modest And but about into expansion year the pull fuel about force -- as you as over initiatives of and key our revenue continued it. our

Andy Callahan

industry the that for But has position context maturity company. investors, thing, long a proven I'd proven our good strategies. of is, efficiency very of my as made. We're invest improvement the add this team of because history in a of pipeline proud in there's fuel experience That a our industry call our that's to that I'm runway and will in programs we only early to accepted the into let's continue for for The to at put stages this work. continuous progress margins the us to this drive drive growth has will it

the And so that. early at we're of stages

as well RGM initiatives. So in productivity both I think that a there's as our runway in for good

Steve Powers

Very clear. Thanks again.

Andy Callahan

Thanks Steve

Operator

proceed next question TD with your from Our Robert is question. Cowen. Maffeo with Please

Andy Callahan

Rob. Hi Welcome back.

Unidentified Analyst

good. feels Yeah, pretty

Andy Callahan

Good.

Unidentified Analyst

I quickly sentiment decisions have question patterns here, guess today historical my your but on consumer should one data that data to go, moving on really based and ever make deep more patterns and rapidly. promos marketers the still is really hand your than on are how the just changing right is

data promotions. that probably look really these find historical need and right at the that price you can't point for You

do to with that? the back move So price of have? year? data able of for how confidence adapt faster points Like, to you've do how you because continually you you got the are that And that you half right know the right the analytics now

Andy Callahan

certainly And doing been certainly, sharper Well, we we tools you aren't the than today certainly for I've year right. XX And and better. every have we as years. more this get did. data sit here

far adjusted agility, in tell at even with we Because the we've or specifically implied, back consumer response will I what too to takeaway. this our program half year have we what moved in we be first we're looked in you the I history seeing our if customer bad that the that needed. the a on just sensitivity the of with some at pricing enhanced as based both to would

So to value we're That all trying to our get that looking right business. the to us sustainably at going sure the the make price consumer. we that to is drive of time providing and for and both

So we're with everybody else. say but I'm probably we're better anybody tools we use not -- going to than any else, those

were seeing having all better Rob. is maybe look at and year the being of maybe even more a our half the even of I they consumer the that What the now right be strength time, a I looking ago. But What back that agile sensitive we're customer partnerships. more to as think may we we're is price --

we're think I we sharpen position as the right as adding that I to the price puts they're said, at level points off coming a We're frequency. pricing. the make well, the and sure us

of think consumer. doing are address that's things well. a the can that packs sensitivity Family I to all. that There's, lot

process. real-time a it's So

Unidentified Analyst

is or quarter quarters when think you that assume for for fourth could Okay. forecasting, can both volume growth? volume just turns be the do positive I And positive, you

Andy Callahan

to need to close be we Well, expect and to quarters as QX. I we positive positive in then -- both said,

the back-to-school we and -- a customers to of good programming July our shipments we enthusiasm and that. see future as So a expect early in strong or

Unidentified Analyst

you. Thank Great.

Operator

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

David Palmer

Hi. question… Good I a have evening.

Andy Callahan

David. Hi

David Palmer

and and hey. Hey, competitive …With chase profitability not going was change, the fact too guidance volume that that that regard -- pricing and the to related that to for that sacrifice is Hostess activity to promotional volume just volume? much

Andy Callahan

second there a going Well, of was quarter dynamics lot the yes, around. in

are of Some forecasting. those

was it coming competitor back. the timing Some of of our

in consumer the some was execution changes the it retailer component and of the the of GDP. of Some

adjusted us it programs forecast. way it was the time didn't a over David. was adjust for talk it to It So difficult time real those we half. we the into as when back came out you saw We

because through sustainable We're to it balance. whole long-term sure and making and continue protect going growth are to the balance back driving well it that I are important portfolio keep have of very margins. we growth in believe short-term -- continue both We the again invest to won't to for the manage through go we

real-time was factors and bit believe below QX we we're expected the which to adjusted for we've those where for set a up back we half. So little

David Palmer

happening or you non-DSD little getting bit unknown you a surprised competitors. you're that yourselves there's like I'd Baked coming be there's a Sweet Yes. on categories this a really the in your you I'm about that your that's do the have for a to candy around happen in and of competitors what's maybe what's that your full even But of how because you're almost love up for in the in by not work Goods possible example some here, need maybe chocolate lot a and like handle maybe might -- are that. learn that DSD of of more an or education is and even know programming category whole to small things category going by one-third year. place feel the with programs XX% it to what's maybe thoughts set how volume going large not almost the mixture might such

Andy Callahan

your ideas work Well large or customer comment competitor on that's there's different always have for generally -- think a the this -- is they're that I'd differently Related and the customers. a do partner the given unique same? they say situation our partnership leadership the dynamics within a we are consumer a category. disruption we're we with do how seeing I us same. in relative and our categories looking having But with to to go customers to great increasingly the the

a you better of if displays. the as category every better drive does, continue year So but full we on the to framework certainly brand do every year they are we have which goes and and plan referring which certainly you're does to as merchandising by enhance agile

agility see the in the any can So in. I've is implication everything category for we programming enhance year and not our not something Hostess for that we lived certainly that customer. when in you any that's that with to business been the that customer respond It's start stone as the with I've our set in is categories

David Palmer

it. Got you. Thank

Andy Callahan

Thank you, Dave.

Operator

end turn the call comments. reached for to of the over back the to closing now question-and-answer Callahan I'd We've Andy session. like

Andy Callahan

to our plan over execute sustainable growth drive our team appreciate Thanks time. everyone. on in and your I place profitable that you confidence

team. So where of investors thanks And everybody our seeing our for joining next the call. to for all we forward work on quarter to the hard we look continue you and call and

Operator

conference. today's concludes This

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

Hostess Brands (TWNK) 8 Aug 232023 Q2 Earnings call transcript