Flowers Foods, Inc. · NYSE:FLO
Flowers Foods — Barclays Global Consumer Staples Conference 2022
46 slides from Flowers Foods's conference presentation, Sep 8, 2022
Slide 1: Barclays Global Consumer Staples Conference
BARCLAYS GLOBAL CONSUMER STAPLES CONFERENCE September 8, 2022
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 2021 SALES MARKET SHARE1 SALES MIX BY CHANNEL2 5% 3% Flowers Brand
Slide 7: Large and Stable U.S. Fresh Bakery Market
LARGE AND STABLE U.S. FRESH BAKERY MARKET ESTIMATED $43B1 U.S. MARKET FOR US FRESH BAKERY RETAIL SALES FRESH AND FROZEN BAKERY AT RETAIL (52 weeks ended) • Large and stable U.S. Fresh Bakery category $24 $25 $25 $22 $22 with sales of $25B+ $20 $ in billions • Present in 98% of households; buy the ca
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 innovat
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 $2.9B CAGR CAGR 4.7% 3.1% 18 FY - 15 FY - 21 15 $2.2B $1.6B $ 1.5B Branded Retail Sales Non‐branded and Non‐retail Sales Flowers' Share (1) Internal Sales Data Warehouse 52 Weeks Ending December
Slide 12: Expanding Brand Presence Geographically
EXPANDING BRAND PRESENCE GEOGRAPHICALLY CAPITALIZING UNDER-DEVELOPED FLOWERS DOLLAR SHARE OF FRESH ON BRAND GROWTH MARKETS OFFER HUGE PACKAGED BREAD CATEGORY1 POTENTIAL BY GROWTH POTENTIAL INCREASING PRESENCE • Focused approach • Expand breadth and depth of distribution • Drive awareness, trial, and
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 2021 AND ENTRY INTO NEW 30.5 AREAS 27.1 9.5 10.9 7.8 4.6 LOAF SANDWICH BUNS / ROLLS BREAKFAST ITEMS LOAF SANDWICH BUNS/ROLLS BREAKFAST ITEMS Segment Size (Annual) $7.7
Slide 14: Portfolio Strategy Drives Margins
PORTFOLIO STRATEGY DRIVES MARGINS STRONG RECENT Significant margin increase as Combining right portfolio mix Accelerating optimization RESULTS SHOW branded retail business grew to with improved bakery network to deliver margin expansion POTENTIAL EFFECT a larger percentage of sales enhances margins
Slide 15: Prioritizing Margins with Supply Chain Optimization
PRIORITIZING MARGINS WITH SUPPLY CHAIN OPTIMIZATION REDUCING FIXED COSTS, ENHANCING DISTRIBUTION BAKERY OVERHEAD OPERATING LEVERAGE AND NETWORK OPERATIONS PROCUREMENT EXPENSES • Backhaul utilization • Bakery of the future • Optimize strategic • Staffing optimization sourcing strategies • Cube optimi
Slide 16: Positioned for Growth Through Smart M&A
POSITIONED FOR GROWTH THROUGH SMART M&A Proven track record DAVE'S KILLER BREAD CANYON BAKEHOUSE of acquiring and growing TRACKED RETAIL SALES ($M) TRACKED RETAIL SALES ($M) differentiated bakery brands #1 Organic Loaf $700 $655 $120 #1 Gluten-free Loaf $600 $108 $100 Seeking out innovative $500 3YR
Slide 17: Financial Review & Capital Allocation
Financial Review & Capital Allocation 17
Slide 18: Q2 2022 Financial Review
Q2 2022 FINANCIAL REVIEW NET SALES CASH FLOWS — YTD Cash from Ops Dividends $1.129B +11.0% v PY $183.8M $93.4M • Price/Mix +14.4% • Volume -3.4% Capex • Price increases to mitigate inflation, partly offset by lower volume and mix shift $97.9M NET INCOME GAAP DILUTED EPS $53.7M -4.8% v PY $0.25 -$0.0
Slide 19: Q2 2022 Financial Highlights
Q2 2022 FINANCIAL HIGHLIGHTS Sales grew due to price increases to mitigate inflation, Adjusted EBITDA decreased due to inflationary pressures, partly offset by lower volume and mix shift partly offset by price increases, and lower labor and marketing expenses and distributor distribution fees Net in
Slide 20: Fiscal 2022 Guidance
FISCAL 2022 GUIDANCE (Provided August 11, 2022) SALES ADJ. EPS1 Fiscal 2022 10.0% to $1.25 to Considerations 12.0% $1.30 • Ability to mitigate inflation • Demand elasticity OTHER • Supply chain disruptions and availability of materials Depreciation & amortization Effective tax rate • Timing of cost
Slide 21: Long-Term Growth Target Scorecard
LONG-TERM GROWTH TARGET SCORECARD Continuing to exceed financial targets (1) Off FY’19 base (2) FY’20 was a 53-week year (3) Implied return using FY’22 guidance midpoint (4) No reconciliation of the forecasted range for adjusted EBITDA or adjusted EPS is included in this presentation because we are
Slide 22: Consistent Sales and Margin Profile
CONSISTENT SALES AND MARGIN PROFILE Stable performance in a variety of economic environments Sales Adj EBITDA margin** 12% $5 Recession 10% $4 8% Billions 6% $3 Recession 4% $2 2% $1 0% * 53-week year ** Adjusted for items affecting comparability 22
Slide 23: 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 Free Cash Flow* Net income (GAAP) business, M&A $357 margins strategy and c
Slide 24: Shareholder-Friendly Capital Allocation
SHAREHOLDER-FRIENDLY CAPITAL ALLOCATION 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 $400 • Support strong dividend $200 • Smart, discipl
Slide 25: Track Record of De-Leveraging Post M&A
TRACK RECORD OF DE-LEVERAGING POST M&A REVENUE1 (MILLIONS) ADJ. EBITDA1 (MILLIONS) $4,500 $600 $500 $400 $300 $4,388 $4,331 $522 $491 $434 $447 $443 $411 $423 $4,124 $200 $3,927 $3,921 $3,952 $100 $3,779 $- $3,500 2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021 NET DEBT2 (MILLI
Slide 26: Long Track Record of Growth
LONG TRACK RECORD OF GROWTH SALES GROWTH COMPONENTS1 (MILLIONS) TOTAL SHAREHOLDER RETURNS2 $30.00 $25.00 $20.00 $15.00 CAGR +5.7% $10.00 10-year TSR +7.1% $5.00 $- Sept Sept Sept Sept Sept Sept Sept Sept Sept Sept Sept '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 1. Source: Company filings. 2. Total
Slide 27: 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 28: Market Share Review
Market Share Review 28
Slide 29: Flowers' Market Share
FLOWERS’ MARKET SHARE FLO Bread Share FLO Cake Share 17.7 18.0 17.9 17.4 17.5 17.6 17.5 17.1 17.1 7.6 7.2 7.1 7.3 7.2 7.1 7.0 7.1 6.8 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Source: Flowers Custom Database – IRi Total US Mulo + C Store 29
Slide 30: Category Review: Flowers Fresh Packaged Breads
CATEGORY REVIEW FLOWERS FRESH PACKAGED BREADS Dollar Sales % Chg Unit Sales % Chg 18.4% 15.9% 14.7% 14.4% 12.8% 10.9% 9.7% 9.5% 3.5% 3.6% -0.1% -2.2% -2.1% -2.8% -3.0% -5.4% -6.0% -9.9% Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Source: Flowers Custom Database – IRi Tota
Slide 31: Category Review: Flowers Commercial Cake
CATEGORY REVIEW FLOWERS COMMERCIAL CAKE Dollar Sales % Chg Unit Sales % Chg 12.0% 11.8% 9.8% 7.7% 6.7% 4.8% 5.2% 4.7% 3.9% 0.7% 0.0% -1.6% -1.6% -2.1% -4.2% -4.1% -6.6% -10.5% Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Source: Flowers Custom Database – IRi Total US Mulo
Slide 32: Organic Category Sales
ORGANIC CATEGORY SALES ORGANIC FRESH PACKAGED BREAD XFLO FLOWERS ORGANIC FLOWERS SHARE OF ORGANIC 90.0 $1,040.0 70.8 72.3 $960.0 67.9 64.2 70.0 59.6 $880.0 51.5 $800.0 50.0 $720.0 $640.0 30.0 $701.0 $657.2 $560.0 $594.6 $480.0 $470.2 10.0 $384.7 $400.0 $273.4 $320.0 (10.0) $240.0 $160.0 (30.0) $257.
Slide 33: Gluten-Free Category Sales
GLUTEN-FREE CATEGORY SALES GLUTEN FREE FRESH PACKAGED BREAD XFLO FLOWERS GLUTEN FREE FLOWERS SHARE OF GLUTEN FREE $400.0 40.0 34.4 32.4 29.0 30.0 $350.0 21.8 20.0 $300.0 12.5 $119.9 $93.5 $108.0 7.3 10.0 $250.0 $32.8 $61.8 $17.4 - $200.0 (10.0) $150.0 (20.0) $221.1 $229.9 $221.8 $229.3 $224.9 $228.9
Slide 34: Branded Products Continue Share Gains
BRANDED PRODUCTS CONTINUE SHARE GAINS FRESH PACKAGED BREAD CATEGORY BRANDED VS. STORE BRAND MARKET SHARE 79.7 80.8 81.0 75.8 76.3 77.0 24.2 23.7 23.0 20.3 19.2 19.0 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 LATEST 52WKS ENDING 7-17-22 Branded Store Branded Source: Flowers Custom Database – IRi Total U
Slide 35: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures 35
Slide 36: 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 37: Reconciliation of Earnings per Share to Adjusted EPS
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF EARNINGS PER SHARE TO ADJUSTED EARNINGS PER SHARE F o r t he 12 - We e k For the 12-Week P e rio d E nde d P erio d Ended J uly 16 , 2 0 2 2 July 17, 2021 Net i ncome per di l uted common s ha re $ 0.25 $ 0.26 Bus i nes s proces s i mpr
Slide 38: Reconciliation of Net Income to EBITDA and Adjusted EBITDA
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 July 16, 2022 July 17, 2021 Net income $ 53,680 $ 56,358 Income tax expense 16,689 16,586 Interest expense, net 1,504 1,07
Slide 39: Reconciliation of Net Income to Adjusted Net Income
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 July 16, 2022 July 17, 2021 Net Income $ 53,680 $ 56,358 Business process improvement consulting costs 8,743 9,904 Legal settleme
Slide 40: Reconciliation of EPS - Full Year Fiscal 2022 Guidance
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF EARNINGS PER SHARE - FULL YEAR FISCAL 2022 GUIDANCE RANGE ESTIMATE Reconciliation of Earnings per Share ‐ Full Year Fiscal 2022 Guidance Range Estimate Net income per diluted common share $ 1.16 to $ 1.21 Business process improvement co
Slide 41: Reconciliation of Net Income to EBITDA and Adjusted EBITDA
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (000S OMITTED) For the 52 Weeks 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 Ended J
Slide 42: Reconciliation of Net Income to EBITDA and Adjusted EBITDA
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 Ended Ended Ended Ended January 3, 2015 December 28, 2013 December 29, 2012 December 31, 2011 Net In
Slide 43: Reconciliation of Net Income to EBITDA and Adjusted EBITDA
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 Sales to Adjusted EBITDA Margin
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF SALES TO ADJUSTED EBITDA MARGIN (000S OMITTED) Adj EBITDA Sales Adj EBITDA margin 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 3,920,733 443,250 11.3% FY16 3,92
Slide 45: Reconciliation of Debt to Net Debt and Net Debt to Adjusted EBITDA
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES RECONCILIATION OF DEBT TO NET DEBT AND CALCULATION OF NET DEBT TO ADJUSTED EBITDA RATIO (000S OMITTED) January 1, 2022 January 2, 2021 December 28, 2019 December 29, 2018 December 30, 2017 December 31, 2016 January 2, 2016 Total debt* 890,609 960,103 866
Slide 46: Reconciliation of Operating Cash Flow to Free Cash Flow
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 FY21 $ 344,610 $ 135,964 $ 208,646 FY20 454,464 97,929 356,535 FY19 366,
Flowers Foods — Barclays Global Consumer Staples Conference 2022 on 6ix