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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Hostess Brands Inc | NASDAQ:TWNK | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 33.30 | 32.40 | 33.50 | 0 | 01:00:00 |
Double-digit Top and Bottom Line Growth
Raises Full Year Sales Growth, Adjusted EBITDA and Adjusted EPS Guidance
Hostess Brands, Inc. (NASDAQ: TWNK) (the “Company”, “we”, “our”) today reported its financial results for the three and nine months ended September 30, 2022.
“Hostess Brands delivered another quarter of record-high sales, highlighting the strength of our snacking-oriented portfolio, impactful innovation that targets growing snacking occasions, and successful pricing actions to offset elevated inflation. The resiliency of our operating model and the agility of our talented team enabled us to deliver double-digit adjusted EBITDA growth in a volatile environment," commented Andy Callahan, the Hostess Brands’ President and Chief Executive Officer.
He continued, “Given our strong year-to-date results and continued momentum, Hostess Brands is raising its full-year net revenue, adjusted EBITDA, and adjusted EPS guidance as we continue to make investments in innovation and advertising to generate top-tier growth over the longer-term.”
Third Quarter 2022 Financial Highlights1
Other Highlights
Guidance and Outlook
The Company is raising its full year 2022 guidance:
Updated Guidance
Previous Guidance
Net revenue growth
17% - 19%
At least 15%
Adjusted EBITDA
$290 - $293 million
Towards the higher end of $280 - $290 million
Adjusted EPS (diluted)
$0.96 - $0.98
$0.93 - $0.98
Capital expenditures
$125 - $135 million
(Including capacity expansion)
$120 - $140 million
(Including capacity expansion)
Effective tax rate
27.0%
27.0%
Weighted average shares outstanding
~138 million
138.5 – 139.5 million
The Company provides guidance on a non-generally accepted accounting principles (non-GAAP) basis and does not provide a reconciliation of the Company’s forward-looking financial expectations to the most directly comparable GAAP financial measure because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for deferred taxes, remeasurement of the tax receivable agreement, and other non-operating gains or losses reflected in the Company’s reconciliation of historic non-GAAP financial measures, the amount of which could be material. Please refer to the Reconciliation of Non-GAAP Financial Measures included in this press release for further information about the use of these measures.
Third Quarter 2022 Compared to Third Quarter 2021
Net revenue was $346.2 million, an increase of 20.2%, or $58.2 million, from the prior-year period. Contribution from pricing actions and product mix provided 20.1% of the growth, while higher volume accounted for 0.1% of the quarterly growth. Compared to the same period last year, sweet baked goods net revenue of $307.3 million increased 18.7% or $48.5 million, while cookies net revenue of $38.9 million increased 33.2% or $9.7 million.
Gross profit was $115.4 million or 33.3% of net revenue, compared to 34.4% for the same period last year. Gross margin declined 105 basis points, 93 basis points on an adjusted basis, as favorable price/mix, including revenue growth management initiatives, and productivity benefits were more than offset by inflation and inefficiencies caused by supply-chain fragility. Adjusted gross profit increased 16.9% on pricing actions and productivity partially offset by inflation.
Operating income was $54.4 million, an increase of 16.7% from the prior-year period. Adjusted operating income of $54.2 million increased 9.7% from the same period last year, as higher gross profit more than offset higher workforce investments, depreciation and advertising.
Adjusted EBITDA of $72.7 million, or 21.0% of net revenue, increased 12.2% from the same period last year as higher gross profit was partially offset by higher operating expenses.
The Company’s effective tax rate was 12.8% compared to 27.4% in the prior year. The effective tax rate for the three months ended September 30, 2022, was impacted favorably by the $33.0 million non-taxable gain related to receipt of proceeds under the Voortman acquisition representation and warranty insurance policy and a tax benefit related to revaluing our deferred tax liabilities due to a change in the estimated state tax rate. The current year effective tax rate, excluding these and other immaterial discrete items, was 26.7%, consistent with the prior-year period.
Net income was $66.3 million, a significant increase from $26.2 million from the prior-year period due to the $33.0 million gain from receipt of the Voortman insurance proceeds. Adjusted net income of $32.2 million increased 11.4% from the same period last year. Diluted EPS was $0.48 compared to $0.19 in the prior-year period due to the changes in net income. Adjusted EPS was $0.23 compared to $0.21 in the prior-year period due to the increase in adjusted net income.
Operating cash flows for the nine months ended September 30, 2022 were $164.2 million, as compared to $147.6 million for the same period last year. Operating cash flow benefited from increased profitability, including receipt of the Voortman insurance proceeds of $33.0 million, partially offset by an increase in tax payments and an increase in working capital.
Conference Call and Webcast
The Company will host a conference call and webcast with an accompanying presentation today, November 2, 2022 at 4:30 p.m. ET to discuss the results for the third quarter. Investors interested in participating in the live call can dial 877-451-6152 from the U.S. and +1-201-389-0879 internationally. A telephone replay will be available approximately two hours after the call concludes through November 16, 2022, by dialing 844-512-2921 from the U.S., or +1-412-317-6671 internationally, and entering confirmation code 13733435. The simultaneous, live webcast and presentation will be available on the Investor Relations section of the Company’s website at www.hostessbrands.com. The webcast will be archived for 30 days.
About Hostess Brands, Inc.
Hostess Brands, Inc. (NASDAQ: TWNK) is a snacking powerhouse with a portfolio of iconic brands and a mission to inspire moments of joy by putting our heart into everything we do. Hostess Brands is proud to make America’s No. 1 cupcake, mini donut and sugar-free cookie brands. With annual sales exceeding $1.1 billion and employing approximately 2,600 dedicated team members, Hostess Brands produces new and classic snacks, including Hostess® Donettes®, Twinkies®, CupCakes, Ding Dongs® and Zingers®, as well as a variety of Voortman® cookies and wafers. For more information about Hostess Brands please visit hostessbrands.com.
Forward-Looking Statements
This press release contains statements reflecting the Company’s views about its future performance that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. Forward-looking statements are generally identified through the inclusion of words such as “believes,” “expects,” “intends,” “estimates,” “projects,” “anticipates,” “will,” “plan,” “may,” “should,” or similar language. Statements addressing the Company’s future operating performance and statements addressing events and developments that the Company expects or anticipates will occur are also considered as forward-looking statements. All forward-looking statements included herein are made only as of the date hereof. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.
These statements inherently involve risks and uncertainties that could cause actual results to differ materially from those anticipated in such forward-looking statements. These risks and uncertainties include, but are not limited to, maintaining, extending and expanding the Company’s reputation and brand image; protecting intellectual property rights; leveraging the Company’s brand value to compete against lower-priced alternative brands; correctly predicting, identifying and interpreting changes in consumer preferences and demand and offering new products to meet those changes; operating in a highly competitive industry; the continued ability to produce and successfully market products with extended shelf life; the ability to pass cost increases on to our customers; the ability to maintain or add additional shelf or retail space for the Company’s products; our ability to identify or complete strategic acquisitions, alliances, divestitures or joint ventures; our ability to successfully integrate, achieve expected synergies and manage our acquired businesses and brands; the ability to drive revenue growth in key products or add products that are faster-growing and more profitable; adverse impact or disruption to our business caused by COVID-19 or future outbreaks of highly infectious or contagious diseases; volatility in commodity, energy, and other input prices and the ability to adjust pricing to cover increased costs; significant changes in the availability and pricing of transportation; dependence on major customers; increased labor and employee related costs; strikes or work stoppages; product liability claims, product recalls, or regulatory enforcement actions; dependence on third parties for significant services; unanticipated business disruptions; geographic focus could make the Company particularly vulnerable to economic and other events and trends in North America; consolidation of retail customers; unsuccessful implementation of business strategies to reduce costs; increased costs to comply with governmental regulation; failures, unavailability, or disruptions of the Company’s information technology systems; dependence on key personnel or a highly skilled and diverse workforce; the Company’s ability to finance indebtedness on terms favorable to the Company; and other risks as set forth from time to time in the Company’s Securities and Exchange Commission filings.
As a result of a number of known and unknown risks and uncertainties, the Company’s actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Risks and uncertainties are identified and discussed in Item 1A-Risk Factors in the Company’s Annual Report on Form 10-K for 2021. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are expressly qualified in their entirety by these risk factors. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.
HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands, except shares and per share data)
September 30, 2022
December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
190,828
$
249,159
Short-term investments
41,891
—
Accounts receivable, net
199,917
148,180
Inventories
65,444
52,813
Prepaids and other current assets
10,914
10,564
Total current assets
508,994
460,716
Property and equipment, net
385,085
335,305
Intangible assets, net
1,926,758
1,944,392
Goodwill
706,615
706,615
Other assets, net
72,732
19,283
Total assets
$
3,600,184
$
3,466,311
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Long-term debt and lease obligations payable within one year
$
14,251
$
14,170
Tax receivable agreement payments payable within one year
11,100
11,600
Accounts payable
95,958
68,104
Customer trade allowances
68,799
52,746
Accrued expenses and other current liabilities
54,513
47,009
Total current liabilities
244,621
193,629
Long-term debt and lease obligations
1,088,914
1,099,975
Tax receivable agreement obligations
124,592
134,265
Deferred tax liability
343,009
317,847
Other long-term liabilities
1,568
1,605
Total liabilities
1,802,704
1,747,321
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 142,567,808 issued and 134,570,118 shares outstanding as of September 30, 2022 and 142,031,329 shares issued and 138,278,573 shares outstanding as of December 31, 2021
14
14
Additional paid in capital
1,307,813
1,303,254
Accumulated other comprehensive income (loss)
36,172
(506
)
Retained earnings
606,703
475,400
Treasury stock
(153,222
)
(59,172
)
Stockholders’ equity
1,797,480
1,718,990
Total liabilities and stockholders’ equity
$
3,600,184
$
3,466,311
HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except shares and per share data)
Three Months Ended
Nine Months Ended
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Net revenue
$
346,226
$
287,969
$
1,018,749
$
844,875
Cost of goods sold
230,805
188,990
675,004
545,271
Gross profit
115,421
98,979
343,745
299,604
Operating costs and expenses:
Advertising and marketing
15,816
14,767
43,353
39,692
Selling
9,696
8,166
29,610
26,250
General and administrative
30,502
23,565
90,301
69,254
Amortization of customer relationships
5,878
5,877
17,634
17,633
Tax receivable agreement remeasurement
(860
)
—
(860
)
—
Total operating costs and expenses
61,032
52,375
180,038
152,829
Operating income
54,389
46,604
163,707
146,775
Other expense (income):
Interest expense, net
10,276
9,928
29,683
29,899
Change in fair value of warrant liabilities
—
228
—
683
Other expense (income)
(31,921
)
378
(31,992
)
1,808
Total other expense (income)
(21,645
)
10,534
(2,309
)
32,390
Income before income taxes
76,034
36,070
166,016
114,385
Income tax expense
9,765
9,878
34,713
31,614
Net income
$
66,269
$
26,192
$
131,303
$
82,771
Earnings per Class A share:
Basic
$
0.49
$
0.20
$
0.95
$
0.63
Diluted
$
0.48
$
0.19
$
0.95
$
0.60
Weighted-average shares outstanding:
Basic
136,436,428
129,846,551
137,636,441
130,679,974
Diluted
137,604,256
138,058,866
138,702,172
138,036,371
HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
Nine Months Ended
September 30, 2022
September 30, 2021
Operating activities
Net income
$
131,303
$
82,771
Depreciation and amortization
44,500
37,992
Debt discount amortization
921
931
Tax receivable agreement remeasurement
(860
)
—
Change in fair value of warrant liabilities
—
683
Unrealized foreign exchange losses (gains)
790
(177
)
Non-cash lease expense
375
971
Share-based compensation
7,600
7,005
Deferred taxes
12,104
18,280
Change in operating assets and liabilities:
Accounts receivable
(51,904
)
(31,240
)
Inventories
(12,631
)
39
Prepaids and other current assets
(468
)
13,991
Accounts payable and accrued expenses
16,332
7,949
Customer trade allowances
16,143
8,441
Net cash provided by operating activities
164,205
147,636
Investing activities
Purchases of property and equipment
(55,240
)
(33,360
)
Acquisition of short-term investments
(62,891
)
—
Proceeds from maturity of short-term investments
21,000
—
Acquisition and development of software assets
(8,578
)
(3,330
)
Net cash used in investing activities
(105,709
)
(36,690
)
Financing activities
Repayments of long-term debt and lease obligations
(8,375
)
(8,375
)
Repurchase of common stock
(94,050
)
(50,063
)
Tax payments related to issuance of shares to employees
(5,582
)
(1,277
)
Cash received from exercise of options and warrants
2,541
13,285
Payments on tax receivable agreement
(9,313
)
(9,270
)
Net cash used in financing activities
(114,779
)
(55,700
)
Effect of exchange rate changes on cash and cash equivalents
(2,048
)
(184
)
Net increase (decrease) in cash and cash equivalents
(58,331
)
55,062
Cash and cash equivalents at beginning of period
249,159
173,034
Cash and cash equivalents at end of period
$
190,828
$
228,096
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized
$
29,342
$
29,019
Net taxes paid
$
19,023
$
1,568
Supplemental disclosure of non-cash investing:
Accrued capital expenditures
$
23,103
$
5,603
HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted gross profit, adjusted gross profit margin, adjusted operating income, adjusted net income, adjusted net income margin, adjusted EBITDA, adjusted EBITDA margin and adjusted EPS collectively referred to as “Non-GAAP Financial Measures,” are commonly used in the Company’s industry and should not be construed as an alternative to net revenue, gross profit, operating income, net income or earnings per share as indicators of operating performance (as determined in accordance with GAAP). These Non-GAAP Financial Measures may not be comparable to similarly titled measures reported by other companies. The Company has included these Non-GAAP Financial Measures because it believes the measures provide management and investors with additional information to measure the Company’s performance, estimate the Company’s value and evaluate the Company’s ability to service debt.
Non-GAAP Financial Measures are adjusted to exclude certain items that affect comparability. The adjustments are itemized in the tables below. You are encouraged to evaluate these adjustments and the reason the Company considers them appropriate for supplemental analysis. In evaluating adjustments, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments set forth below. The presentation of Non-GAAP Financial Measures should not be construed as an inference that future results will be unaffected by unusual or recurring items.
The Company defines adjusted EBITDA as net income adjusted to exclude (i) interest expense, net, (ii) depreciation and amortization (iii) income taxes and (iv) share-based compensation, as further adjusted to eliminate the impact of certain items that the Company does not consider indicative of its ongoing operating performance. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of the Company’s results as reported under GAAP. For example, adjusted EBITDA:
HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited, amounts in thousands, except percentages and per share data)
Three Months Ended September 30, 2022
Gross Profit
Gross Margin
Operating Income
Net Income
Net Income Margin
Diluted EPS
GAAP Results
$
115,421
33.3
%
$
54,389
$
66,269
19.1
%
$
0.48
Non-GAAP adjustments:
Foreign currency remeasurement
—
—
—
1,009
0.3
0.01
Tax receivable agreement remeasurement
—
—
(860
)
(860
)
(0.3
)
(0.01
)
Gain on Voortman insurance proceeds (1)
—
—
—
(32,970
)
(9.5
)
(0.24
)
Accelerated depreciation related to network optimization
681
0.2
681
681
0.2
0.01
Other
—
—
(17
)
23
—
—
Remeasurement of tax liabilities
—
—
—
(2,161
)
(0.6
)
(0.02
)
Discrete income tax expense
—
—
—
644
0.2
—
Tax impact of adjustments
—
—
—
(462
)
(0.1
)
—
Adjusted Non-GAAP results
$
116,102
33.5
%
$
54,193
32,173
9.3
$
0.23
Income tax
11,744
3.4
Interest expense
10,276
3.0
Depreciation and amortization
15,869
4.5
Share-based compensation
2,613
0.8
Adjusted EBITDA
$
72,675
21.0
%
(1) Gain from receipt of insurance proceeds under the representation and warranty insurance policy purchased in connection with the Voortman acquisition in 2020 included in other expense (income) on the condensed consolidated statement of operations.
Three Months Ended September 30, 2021
Gross Profit
Gross Margin
Operating Income
Net Income
Net Income Margin
Diluted EPS
GAAP Results
$
98,979
34.4
%
$
46,604
$
26,192
9.1
%
$
0.19
Non-GAAP adjustments:
Foreign currency remeasurement
—
—
—
(249
)
(0.1
)
—
Project consulting costs (1)
—
—
1,604
1,604
0.6
0.01
Change in fair value of warrant liabilities
—
—
—
228
0.1
—
Other (2)
370
0.1
1,185
1,810
0.6
0.01
Tax impact of adjustments
—
—
—
(674
)
(0.2
)
—
Adjusted Non-GAAP results
$
99,349
34.5
%
$
49,393
28,911
10.1
$
0.21
Income tax
10,552
3.7
Interest expense
9,928
3.4
Depreciation and amortization
12,769
4.4
Share-based compensation
2,642
0.9
Adjusted EBITDA
$
64,802
22.5
%
(1) Project consulting costs are included in general and administrative on the condensed consolidated statement of operations.
(2) Costs related to certain corporate initiatives, of which $0.4 million is included in cost of goods sold, $0.8 million is included in general and administrative and $0.6 million is included in other expense (income) on the condensed consolidated statement of operations.
Nine Months Ended September 30, 2022
Gross Profit
Gross Margin
Operating Income
Net Income
Net Income Margin
Diluted EPS
GAAP Results
$
343,745
33.7
%
$
163,707
$
131,303
12.9
%
$
0.95
Non-GAAP adjustments:
Foreign currency remeasurement
—
—
—
789
0.1
0.01
Project consulting costs (1)
—
—
3,887
3,887
0.4
0.03
Tax receivable agreement remeasurement
—
—
(860
)
(860
)
(0.1
)
(0.01
)
Gain on Voortman insurance proceeds (2)
—
—
—
(32,970
)
(3.2
)
(0.24
)
Accelerated depreciation related to network optimization
776
0.1
776
776
0.1
0.01
Other (3)
161
—
161
350
—
—
Remeasurement of tax liabilities
—
—
—
(2,161
)
(0.2
)
(0.02
)
Discrete income tax expense
—
—
—
1,156
0.1
0.01
Tax impact of adjustments
—
—
—
(1,566
)
(0.2
)
(0.01
)
Adjusted Non-GAAP results
$
344,682
33.8
%
$
167,671
100,704
9.9
$
0.73
Income tax
37,284
3.7
Interest expense
29,683
2.9
Depreciation and amortization
43,726
4.3
Share-based compensation
7,600
0.7
Adjusted EBITDA
$
218,997
21.5
%
(1) Project consulting costs are included in general and administrative on the condensed consolidated statement of operations.
(2) Gain from receipt of insurance proceeds under the representation and warranty insurance policy purchased in connection with the Voortman acquisition in 2020 included in other expense (income) on the condensed consolidated statement of operations.
(3) Costs related to certain corporate initiatives, of which $0.2 million is included in cost of goods sold and $0.2 million is included in other expense (income) on the condensed consolidated statement of operations.
Nine Months Ended September 30, 2021
Gross Profit
Gross Margin
Operating Income
Net Income
Net Income Margin
Diluted EPS
GAAP Results
$
299,604
35.5
%
$
146,775
$
82,771
9.8
%
$
0.60
Non-GAAP adjustments:
Foreign currency remeasurement
—
—
—
(178
)
—
—
Project consulting costs (1)
—
—
2,503
2,503
0.3
0.02
Change in fair-value of warrant liabilities
—
—
—
683
0.1
—
Other (2)
528
—
1,352
3,334
0.4
0.03
Tax impact of adjustments
—
—
—
(1,102
)
(0.1
)
(0.01
)
Adjusted Non-GAAP results
$
300,132
35.5
%
$
150,630
$
88,011
10.5
$
0.64
Income tax
32,716
3.9
Interest expense
29,899
3.5
Depreciation and amortization
37,992
4.5
Share-based compensation
7,005
0.8
Adjusted EBITDA
$
195,623
23.2
%
(1) Project consulting costs are included in general and administrative on the condensed consolidated statement of operations.
(2) Costs related to certain corporate initiatives, of which $0.5 million is included in cost of goods sold, $0.8 million is included in general and administrative and $2.0 million is included in other expense (income) on the condensed consolidated statement of operations.
View source version on businesswire.com: https://www.businesswire.com/news/home/20221102006006/en/
Investor Contact: Amit Sharma asharma@hostessbrands.com
Media Contact: Carly Schesel carly.schesel@clynch.com
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