Flowers Foods, Inc. · NYSE:FLO
Flowers Foods — Investor Presentation (March 2023)
46 slides from Flowers Foods's investor presentation, Mar 1, 2023
Slide 1: Investor Presentation March 1-2, 2023
INVESTOR PRESENTATION March 1-2, 2023
Slide 2: Regarding Forward-Looking Statements
REGARDING FORWARD-LOOKING STATEMENTS Statements contained in this presentation and certain other written or oral statements made from time to time by Flowers Foods, Inc. (the “company”, “Flowers Foods”, “Flowers”, “us”, “we”, or “our”) and its representatives that are not historical facts are forwar
Slide 3: Business Overview & Strategy
Business Overview & Strategy 3
Slide 4: Investment Highlights
INVESTMENT HIGHLIGHTS LEADER IN LARGE AND ATTRACTIVE CATEGORIES Operate the #1 loaf, organic, and gluten-free bread brands; gaining share in stable categories throughout the economic cycle LEADING BRANDS TO DRIVE GROWTH Brand-focused portfolio strategy drives above-market growth via innovation, impr
Slide 5: 100+ Year History of Growth and Evolution
100+ YEAR HISTORY OF GROWTH AND EVOLUTION Today #1 loaf, organic, and gluten-free bread brands in the U.S. 1968 to 2020 46 operating bakeries 1919 1968 2nd-largest baked foods company in U.S. One family-owned bakery FLO Listed publicly as “FLO” Proven business model Efficient bakeries & distribution
Slide 6: Business Overview
BUSINESS OVERVIEW Diverse product line across the Majority of business composed Diversified channel mix with broad baked foods spectrum of faster-growing, higher-margin distribution reach and e-Commerce branded retail products upside 2022 SALES MARKET SHARE1 SALES MIX BY CHANNEL3 Flowers Branded 17%
Slide 7: Large and Stable U.S. Fresh Bakery Market
LARGE AND STABLE U.S. FRESH BAKERY MARKET ESTIMATED $47B1 U.S. MARKET FOR US FRESH BAKERY RETAIL SALES FRESH AND FROZEN BAKERY AT RETAIL (52 weeks ended) $28 • Large and stable U.S. Fresh Bakery category $24 $25 $25 $22 $22 with sales of $28B+ $20 $ in billions • Present in 98% of households; buy th
Slide 8: Strategic Priorities
STRATEGIC PRIORITIES Aligned to long-term targets and disciplined capital policies LONG-TERM GROWTH +1 – 2% +4 – 6% +7 – 9% TARGETS1,2 SALES EBITDA3 EPS4 Develop Team Focus on Brands Invest in team to drive portfolio Pursue targeted innovation and optimization through brand growth, marketing to enha
Slide 9: Developing Our Team with Enhanced Organizational Structure
DEVELOPING OUR TEAM WITH ENHANCED ORGANIZATIONAL STRUCTURE PRIORITIZING BRAND BUILDING, CAKE • Chief Brand Officer is responsible for managing the brand portfolio and prioritizing TURNAROUND, brand-building investments FOODSERVICE PROFITABILITY, AND • Chief Marketing Officer leads stand-alone innova
Slide 10: Portfolio Strategy Focused on Growth
PORTFOLIO STRATEGY FOCUSED ON GROWTH Allocates investment to the highest-return brands 3 BALANCE GROWTH 11 ACCELERATE GROWTH High Grow at or slightly above the category rate Grow at or near double-digit rate Store Brand Foodservice • LOAF • PRIORITY • PRIORITY • PRIORITY • LOAF • LOAF • ALL Right To
Slide 11: Growing Sales with Iconic Brands
GROWING SALES WITH ICONIC BRANDS Flowers’ branded products driving top line SALES BY CLASS1 MARKET SHARE2 CAGR CAGR 5.6% $3.1B 2.2% 17.4 FY - 15 FY - 22 14.9 $2.2B $1.6B $ 1.7B Branded Retail Sales Non‐branded and Non‐retail Sales Flowers' Share (1) Internal Sales Data Warehouse 52 Weeks Ending Janu
Slide 12: Expanding Brand Presence Geographically
EXPANDING BRAND PRESENCE GEOGRAPHICALLY Under-developed markets offer significant growth potential CAPITALIZING ON BRAND 7.0% SHARE GROWTH POTENTIAL BY INCREASING PRESENCE 13.1% 5.1% SHARE SHARE • Expand breadth and depth 10.1% SHARE of distribution • Drive awareness, trial, and repeat with increase
Slide 13: Leveraging Innovation to Grow Adjacent Segments
LEVERAGING INNOVATION TO GROW ADJACENT SEGMENTS TARGETED INNOVATION FLOWERS DOLLAR SHARE1 TO DRIVE GROWTH IN ADJACENT SEGMENTS 2018 2022 AND ENTRY INTO NEW AREAS 29.9 27.1 9.5 10.5 8.4 4.6 LOAF SANDWICH BUNS/ROLLS BREAKFAST ITEMS LOAF SANDWICH BUNS/ROLLS BREAKFAST ITEMS Segment Size (Annual) $8.6 B
Slide 14: Portfolio Strategy Drives Margins
PORTFOLIO STRATEGY DRIVES MARGINS POST-PANDEMIC Significant margin increase as Combining right portfolio mix Recent results reflect impact of RESULTS SHOW branded retail business grew to with improved bakery network inflationary pressures on POTENTIAL BENEFIT a larger percentage of sales enhances ma
Slide 15: Prioritizing Margins with Supply Chain Optimization
PRIORITIZING MARGINS WITH SUPPLY CHAIN OPTIMIZATION REDUCING FIXED COSTS, ENHANCING DISTRIBUTION BAKERY OVERHEAD OPERATING LEVERAGE AND NETWORK OPERATIONS PROCUREMENT EXPENSES • Backhaul utilization • Bakery of the future • Optimize strategic • Staffing optimization sourcing strategies • Cube optimi
Slide 16: Positioned for Growth Through Smart M&A
POSITIONED FOR GROWTH THROUGH SMART M&A Proven track record DAVE'S KILLER BREAD CANYON BAKEHOUSE of acquiring and growing TRACKED RETAIL SALES ($M) TRACKED RETAIL SALES ($M) differentiated bakery brands #1 Organic Loaf $800 $731 $140 #1 Gluten-free Loaf $129 $700 $120 Seeking out innovative $600 4YR
Slide 17: Papa Pita Acquisition Highlights
PAPA PITA ACQUISITION HIGHLIGHTS • $270 million purchase price • Manufacturer and distributor of high-quality bagels, tortillas, breads, buns, English muffins, and flat breads • Significant co-manufacturing business, including longstanding relationship with Flowers, with state-of-the-art 270,000 squ
Slide 18: Financial Review & Capital Allocation
Financial Review & Capital Allocation 18
Slide 19: Q4 2022 Financial Review
Q4 2022 FINANCIAL REVIEW NET SALES CASH FLOWS — FY’22 Cash from Ops Dividends $1.083B +10.1% v PY $360.9M $186.5M • Price/Mix +16.7%1 • Volume -6.6%2 Capex • Price increases to mitigate inflation, partly offset by lower volume $169.1M NET INCOME GAAP DILUTED EPS $48.6M +23.6% v PY $0.23 +$0.05 v PY
Slide 20: Q4 2022 Financial Highlights
Q4 2022 FINANCIAL HIGHLIGHTS Sales grew due to price increases to mitigate inflation, partly offset Adjusted EBITDA increased primarily due to higher sales, partly by lower volume offset by inflationary pressures Net income increased 23.6% to $48.6 million from $39.3 million in the same quarter of 2
Slide 21: Fiscal 2023 Guidance
FISCAL 2023 GUIDANCE (Provided February 9, 2023) SALES ADJ. EBITDA1 ADJ. EPS1 Fiscal 2023 $5.176 to $513 to $1.20 to Considerations $5.242B $543M $1.30 • Ability to mitigate inflation • Consumer resiliency OTHER • Timing of cost savings initiatives Depreciation & amortization Effective tax rate • Pr
Slide 22: Long-Term Growth Target Scorecard
LONG-TERM GROWTH TARGET SCORECARD (1) Off FY’19 base (2) FY’20 was a 53-week year (3) Implied return using FY’23 guidance midpoint (4) No reconciliation of the forecasted range for Adjusted EPS to Diluted EPS and adjusted EBITDA to net income for the 52-week Fiscal 2023 is included in this press rel
Slide 23: Consistent Sales and Margin Profile
CONSISTENT SALES AND MARGIN PROFILE Stable performance in a variety of economic environments Sales Adj EBITDA margin** 12.0% $5 Recession 10.0% $4 8.0% Billions 6.0% $3 Recession 4.0% $2 2.0% $1 0.0% * 53-week year ** Adjusted for items affecting comparability 23
Slide 24: Steady Free Cash Flow
STEADY FREE CASH FLOW Free cash flow1 to fuel accretive investments Strong free cash flow CASH FLOW DRIVERS FREE CASH FLOW IN EXCESS OF NET INCOME growth supports • Growing sales (MILLIONS) investments in the • Focus on cash business, M&A margins strategy and capital Free Cash Flow* Net income (GAAP
Slide 25: Shareholder-Friendly Capital Allocation
SHAREHOLDER-FRIENDLY CAPITAL ALLOCATION Named to S&P High Yield Dividend Aristocrats Index CAPITAL ALLOCATION CAPITAL ALLOCATION (MILLIONS) PRINCIPLES: $600 • Capex to support core business growth $500 $395 Dividends Share Repurchases • Maintain investment grade credit rating Cash for Acquisitions $
Slide 26: Track Record of De-Leveraging Post M&A
TRACK RECORD OF DE-LEVERAGING POST M&A REVENUE1 (MILLIONS) ADJ. EBITDA1 (MILLIONS) $550 $4,500 $450 $4,806 $522 $491 $502 $4,388 $4,331 $4,124 $434 $447 $443 $3,927 $3,921 $3,952 $411 $423 $3,779 $350 $3,500 2015 2016 2017 2018 2019 2020 2021 2022 2015 2016 2017 2018 2019 2020 2021 2022 NET DEBT2 (M
Slide 27: Long Track Record of Growth
LONG TRACK RECORD OF GROWTH SALES GROWTH COMPONENTS1 (MILLIONS) TOTAL SHAREHOLDER RETURNS2 $32.00 $27.00 $22.00 $17.00 CAGR +2.6% $12.00 10-year TSR $7.00 +7.4% $2.00 Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 $(3.00) 1. Source: Company filings. 2. Total
Slide 28: Our Vision Has Never Been Clearer
OUR VISION HAS NEVER BEEN CLEARER Right structure with a passionate team committed to continued success Emotional connection of fresh bread offers innovative brands the opportunity to appeal powerfully to consumers Competitive, leading operator with combination of strong brands and scale Opportunity
Slide 29: Market Share Review
Market Share Review 29
Slide 30: Flowers' Market Share
FLOWERS’ MARKET SHARE FLO Bread Share FLO Cake Share 17.6 17.9 17.8 17.6 17.6 17.5 17.1 17.0 16.5 7.1 7.3 7.2 7.1 7.0 7.1 6.8 6.4 6.3 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Source: Flowers Custom Database – IRi Total US Mulo + C Store 30
Slide 31: Flowers Fresh Packaged Breads
FLOWERS FRESH PACKAGED BREADS Dollar Sales % Chg Unit Sales % Chg 15.9% 12.7% 11.1% 9.7% 9.7% 9.8% 3.5% 3.6% -0.1% -2.2% -2.1% -2.8% -2.9% -3.5% -4.5% -5.4% -6.1% -10.0% Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Source: Flowers Custom Database – IRi Total US Mulo + C St
Slide 32: Flowers Commercial Cake
FLOWERS COMMERCIAL CAKE Dollar Sales % Chg Unit Sales % Chg 12.1% 9.3% 7.3% 4.3% 4.7% 4.2% 3.8% 2.0% -0.4% -1.6% -2.5% -2.2% -3.8% -4.6% -7.0% -10.1% -14.0% -16.3% Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Source: Flowers Custom Database – IRi Total US Mulo + C Store 32
Slide 33: Organic Category Sales
ORGANIC CATEGORY SALES ORGANIC minus FLOWERS FLOWERS ORGANIC FLOWERS SHARE OF ORGANIC 73.2 1040.0 70.7 67.6 70.0 960.0 64.0 880.0 59.4 800.0 60.0 720.0 51.4 640.0 731.1 594.6 657.3 50.0 560.0 480.0 470.2 384.7 400.0 273.5 40.0 320.0 240.0 30.0 160.0 258.5 262.7 264.4 284.3 272.5 267.0 80.0 0.0 20.0
Slide 34: Gluten-Free Category Sales
GLUTEN-FREE CATEGORY SALES GLUTEN FREE minus FLOWERS FLOWERS GLUTEN FREE FLOWERS SHARE OF GLUTEN FREE 400.0 35.2 40.0 32.4 29.0 350.0 30.0 21.8 20.0 300.0 12.5 128.7 7.3 93.5 108.0 10.0 250.0 32.8 61.8 17.4 - 200.0 (10.0) 150.0 (20.0) 229.7 221.7 229.1 224.9 237.4 221.0 100.0 (30.0) 50.0 (40.0) - (5
Slide 35: Branded vs Store Brand Market Share
BRANDED VS STORE BRAND MARKET SHARE FRESH PACKAGED BREAD CATEGORY 79.6 80.7 80.4 75.8 76.2 76.9 24.2 23.8 23.1 20.4 19.3 19.5 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Branded Store Branded Source: Flowers Custom Database – IRi Total US Mulo + C Store 35
Slide 36: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non- GAAP Financial Measures 36
Slide 37: Information Regarding Non-GAAP Financial Measures
INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES Information Regarding Non-GAAP Financial Measures The company prepares its consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP). However, from time to time, the company may present in its public st
Slide 38: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF EARNINGS PER SHARE TO ADJUSTED EARNINGS PER SHARE For the 12‐Week For the 12‐Week Period Ended Period Ended December 31, 2022 January 1, 2022 Net income per diluted common share 0.23 $ 0.18 Business process improvement consulting costs
Slide 39: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (000S OMITTED) For the 12 Week For the 12 Week Period Ended Period Ended December 31, 2022 January 1, 2022 Net income $ 48,597 $ 39,322 Income tax expense 15,346 12,720 Interest expense, net 330
Slide 40: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME (000S OMITTED) For the 12 Week For the 12 Week Period Ended Period Ended December 31, 2022 January 1, 2022 Net Income $ 48,597 $ 39,322 Business process improvement consulting costs 3,228 2,923 Pension
Slide 41: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (000S OMITTED) For the Fiscal Year For the Fiscal Year For the Fiscal Year For the Fiscal Year For the Fiscal Year For the Fiscal Year For the Fiscal Year Ended Ended Ended Ended Ended Ended Ende
Slide 42: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (000S OMITTED) For the Fiscal For the Fiscal Year For the Fiscal Year For the Fiscal Year For the Fiscal Year Ye ar Ende d Ended Ended Ended Ended January 2, 2016 January 3, 2015 December 28, 201
Slide 43: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (000S OMITTED) For the Fiscal Year For the Fiscal Year For the Fiscal Year For the Fiscal Year For the Fiscal Year Ended Ended Ended Ended Ended January 1, 2011 January 2, 2010 January 3, 2009 De
Slide 44: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF SALES TO ADJUSTED EBITDA MARGIN (000S OMITTED) Adj EBITDA Sales Adj EBITDA Margin FY22 4,805,822 502,030 10.4% FY21 4,330,767 490,861 11.3% FY20 4,387,991 521,690 11.9% FY19 4,123,974 422,726 10.3% FY18 3,951,852 410,936 10.4% FY17 3,92
Slide 45: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF DEBT TO NET DEBT AND CALCULATION OF NET DEBT TO ADJUSTED EBITDA RATIO (000S OMITTED) December 31, 2022 January 1, 2022 January 2, 2021 December 28, 2019 December 29, 2018 December 30, 2017 December 31, 2016 January 2, 2016 Total debt* $
Slide 46: Reconciliation of Non-GAAP Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW* Cash Provided by Purchase of Plant, Operating Property and Time Period Activities Equipment Free Cash Flow FY'22 360,889 169,071 191,818 FY'21 344,610 135,964 208,646 FY'20 454,46