Hostess Brands: Announces Strong Q1-2022 Financial Results

Lenexa / KS. (twnk) Hostess Brands Inc., one of the largest manufacturers and marketers of sweet baked goods in the United States including «Twinkies», «Ding Dongs», «Ho Hos», «Donettes» and a variety of new and classic treats, reported its financial results for the three months ended March 31, 2022.

«Our exceptional top-line and bottom-line growth in the first quarter highlighted our access to growing occasions, best-in-class business model, and accelerating innovation and marketing capabilities as outlined in our recent Investor Day presentations. Our strong volume growth during the quarter, even as we successfully implemented pricing actions to offset high inflation, underscores favorable snacking behaviors as well as our superior innovation and supply-chain execution,» commented Andy Callahan, the Company’s President and Chief Executive Officer, the results. «We are raising our full year guidance to reflect our strong momentum even as we take actions to mitigate escalating inflationary headwinds due to the recent macro events.»

First Quarter 2022 Financial Highlights

  • Net revenue of USD 332.1 million increased 25.1 percent from the same period last year as strong, broad-based consumer demand drove volume growth which contributed 15 percent of the growth this quarter, with the remaining growth from planned pricing actions and favorable product mix.
  • Gross profit increased 21.0 percent to USD 115.6 million. On an adjusted basis, gross profit increased 21.3 percent to USD 115.8 million, or 34.9 percent of net revenues as pricing and productivity largely offset double-digit inflation.
  • Net income was USD 34.6 million or USD 0.25 per diluted share. Adjusted net income increased 41.3 percent to USD 38.0 million, and adjusted EPS was USD 0.27 compared to USD 0.20 in the prior year period.
  • Adjusted Ebitda increased 23.8 percent to USD 77.4 million, the second consecutive quarter of record-high quarterly adjusted Ebitda. Adjusted Ebitda margin of 23.3 percent was largely in-line with the prior year period.
  • Cash and cash equivalents were USD 238.4 million as of March 31, 2022, reflecting a net leverage ratio of 3x.
  • Capital expenditures increased to USD 24.9 million from USD 10.9 million in the prior-year period. The Company continues to expect capital expenditures to be in the USD 120-USD 140 million range in 2022.
  • Raising full year 2022 guidance for net revenue growth to at least 12 percent, adjusted Ebitda towards the higher end of its initial USD 280 – USD 290 million range while maintaining its adjusted EPS guidance of USD 0.93 – USD 0.98.

Other Highlights

  • Hostess Brands’ Sweet Baked Goods point-of-sale («POS») increased 24.7 percent and its share of the category increased by 135 basis points to 22.0 percent driven by solid core performance and strong contribution from new products innovation.
  • Voortman® branded POS grew 29.0 percent and its share of the Cookie category increased 342 basis points reflecting continued consumer demand in the faster-growing sugar-free cookies sub-segment and distribution gains.
  • Inflation is now expected to be at least high teens, including the impact from stronger-than-expected volume growth. We are planning additional pricing actions along with a combination of revenue management activities to offset higher inflation.
  • Completed the purchase of the Arkadelphia, Arkansas facility which will be converted into our previously announced new bakery to support growing consumer demand.
  • Repurchased USD 9.7 million of shares under our previously announced USD 150 million share repurchase program.
  • Announced the appointment of Travis Leonard as the Chief Financial Officer. Mr. Leonard will join the Company on May 11, 2022.