Hostess Brands — Investor Presentation (March 2019)
42 slides from Hostess Brands's investor presentation, Mar 20, 2019
Slide 1: Investor Presentation March 2019
® Investor Presentation March 2019
Slide 2: Disclaimer: Forward Looking Statements
Disclaimer Forward Looking Statements This investor presentation contains statements reflecting our views about the future performance of Hostess Brands, Inc. and its subsidiaries (referred to as “Hostess Brands” or the “Company”) that constitute “forward-looking statements” that involve substantial
Slide 3: Agenda
Agenda Company Overview 2019 Growth Pillars Financial Overview
Slide 4: Company Overview
Company Overview
Slide 5: Hostess Brands Key Highlights
Hostess Brands Key Highlights Net Sales: $850.4M Proven Iconic Brands 18% Market Continuous Direct to Adjusted EBITDA: Innovation to Operating $186.2M Share and Warehouse Growing Drive Growth Platform Operating Cash Flow: $143.7M Financial data are for the last twelve months (“LTM”) ended December 3
Slide 6: At Hostess Brands…
At Hostess Brands… We delight consumers and build iconic brands supported by our core competencies to drive profitable growth 6
Slide 7: Core Competencies
Core Competencies Strong Brand Equity Efficient Significant Operating Cash Flow Model Collaborative Continuous Customer Innovation Partnerships 7
Slide 8: High Brand Awareness & Loyalty
High Brand Awareness & Loyalty Permissible Indulgence High brand awareness – 90%* Associated with “Fun”, “Classic,” “Convenient” and “Creamy”^ #1 key purchase criteria is taste and Hostess outperforms its competitors^ Strong brand loyalty Strong brand extendibility * Source: Harmon Atchiso
Slide 9: Iconic Brands Delivering New & Classic Sweet Treats
Iconic Brands Delivering New & Classic Sweet Treats BRANDS SINCE <50 RELAUNCH YEARS OLD 85+ 50+ YEARS OLD YEARS OLD 90% Hostess® Brand Awareness Source: Harmon Atchison, Awareness, Use and Status Perception Study, 12/8/14 9
Slide 10: Brand Attracts Significant Media Attention
Brand Attracts Significant Media Attention 4.1 Billion Estimated Media Impressions YTD 2019^ ^ Source: LAK public relations analysis 10
Slide 11: The Hostess Sweetenial Generated Media Impressions
The Hostess Sweetenial™ Generated >183 Million Estimated Earned and Social Media Impressions & Counting^ ^ Source: LAK public relations analysis 11
Slide 12: Cost Efficient Operating Business Model
Cost Efficient Operating Business Model Enabled by Warehouse Distribution & Efficient Supply Chain Hostess Brands Our Business Model Generates Differentiation within Baking ⦁ Expanded distribution reach ⦁ Compelling retailer economics ⦁ Fast & scalable in-store merchandising capabilities Shelf-life
Slide 13: Collaborative Partnerships With Customers & Retailers
Collaborative Partnerships With Customers & Retailers Across Various Channels for Shared Growth & Profit 13
Slide 14: Strong Market Position Growing in the SBG Category
Strong Market Position Growing in the SBG Category Source: Nielsen, Total Nielsen Universe for the SBG Category and the Company within the SBG Category. Point of Sale and Market Share, 52 weeks ending 1/2/16, 12/31/16, 12/30/17 & 12/29/2018. Current and prior period market data presented herein refl
Slide 15: Growing Sales & Market Share in 2018 Across Multiple Channels
Growing Sales & Market Share in 2018 Across Multiple Channels POS Change 5.2% 5.8% (4.9)% 8.2% 1,392.6% (8.2)% Market Share 22.9% 13.3% 43.6% 22.2% 15.4% 15.9% Market Share 0.6% 14.3% (1.2)% Change 1.6% 0.0% (0.2)% Point of sale and market share data for the 52 weeks ended 12/29/2018 as compared to
Slide 16: Snacking Remains an Overall Growth Opportunity
Snacking Remains an Overall Growth Opportunity Snacking Frequency on the Rise “Treat myself” is the #1 Motivator 60 To treat myself 50 To give myself a break during… 40 To eat on-the-go 30 To eat healthier To relieve stress 20 to refuel when exercising 10 To avoid overindulging at meals To control m
Slide 17: Sustainable, Profitable Growth Through Strengthening Scalable Platform
Sustainable, Profitable Growth Through Strengthening Scalable Platform Core Hostess continues to grow with strong customer partnerships and sharpened analytical capabilities Innovation focus to fuel growth in the core and complementary indulgent and snacking categories . We are building a 3-year
Slide 18: 2019 Growth Pillars
2019 Growth Pillars
Slide 19: Pillars for 2019 Driving Profitable Growth
Pillars for 2019 Driving Profitable Growth Grow the Core Grow Through Innovation Improve Through Agility & Efficiency Cultivate Talent & Capabilities Leverage Strong Cash Flow 19
Slide 20: Grow the Core Profitably
Pillars for 2019 Driving Profitable Growth Grow the Core Profitably Drive Core Growth by Building the Consumer Brand and Building Customer Relationships 20
Slide 21: Grow the Core: Hostess Partnership Program
Grow the Core Hostess Partnership Program Expanding successful Hostess Partnership Program from C-Store to grocery Program funds results Performance criteria: distribution, mix, merchandising and supply chain efficiencies Drives growth with faster velocity SKUs, market share gains, increment
Slide 22: Grow Through Innovation
Pillars for 2019 Driving Profitable Growth Grow Through Innovation Accelerate Growth Through Innovation Based in Consumer Insights and Industry-Leading Capabilities 22
Slide 23: Increase volume on core brands through innovation
Grow Through Innovation Increase volume on core brands through innovation 23
Slide 24: Expanding distribution of value brands
Grow Through Innovation Expanding distribution of value brands (Cloverhill®, Big Texas® and Dolly Madison®) 24
Slide 25: Premium snacking platform: Hostess Bakery Petites
Grow Through Innovation Attract new consumers with premium snacking platform such as the Hostess Bakery Petites® premium snacking innovation made with no artificial flavors or colors or high fructose corn syrup 25
Slide 26: Introducing Incremental Occasions & Filling in Adjacencies
Grow Through Innovation Introducing Incremental Occasions & Filling in Adjacencies 26
Slide 27: Improve Through Agility & Efficiency
Pillars for 2019 Driving Profitable Growth Improve Through Agility & Efficiency Operate at Lowest Practical Costs and Optimum Value to Consumers 27
Slide 28: Improving Through Agility & Efficiency
Improving Through Agility & Efficiency Three Initiatives in 2019: 1. Optimize pricing 2. Drive base bakery efficiency 3. Accelerate Cloverhill bakery efficiency post- capital investments 28
Slide 29: Cultivate Talent & Capabilities
Pillars for 2019 Driving Profitable Growth Cultivate Talent & Capabilities Focused on Investing in Talent, Insights and Information to Create Industry-Leading Capabilities 29
Slide 30: Building Capabilities to Support the Next Phase of Growth
Building Capabilities to Support the Next Phase of Growth CONSUMER AND ANALYTICS TALENT AND CATEGORY INSIGHTS CAPABILITIES Revenue from ROI from Support Innovation and Investments Growth marketing effectiveness 30
Slide 31: Leverage Strong Cash Flow
Pillars for 2019 Driving Profitable Growth Leverage Strong Cash Flow Build Strategic Optionality to Drive Value Creation Ahead of the Industry 31
Slide 32: Leverage Strong Cash Flow Generated From Highly Accretive Revenue & EBITDA
Leverage Strong Cash Flow Generated From Highly Accretive Revenue & EBITDA Operating Cash We expect to utilize our strong operating cash flow to: Flow $150M - $160M • Reinvest in the business • Deleverage $144M • Pursue strategic acquisitions FY 2018A FY 2019E 32
Slide 33: Financial Overview
Financial Overview
Slide 34: Consolidated Financial Results
Consolidated Financial Results Quarter Ended Year Ended December 31, December 31, December 31, December 31, ($ in millions, except per share data) 2018 2017 2018 2017 Net Revenue $ 214.8 $ 196.2 $ 850.4 $ 776.2 Adjusted Gross Profit $ 73.8 $ 80.8 $ 279.4 $ 326.9 Adjusted Gross Margin 34.3% 41.2% 32.
Slide 35: Full-Year 2019 Guidance
Full-Year 2019 Guidance 2018 2019 Guidance ($ in millions, except ratio, per share data and tax rate) Growth well above Net Revenue $850.4 the SBG Category Adjusted EBITDA $186.2 $200 - $210 Adjusted EPS $0.54 $0.57 - $0.62 Leverage Ratio 4.5x 3.5x - 3.7x Cash Flow from Operations $143.7 $150 - $160
Slide 36: A Look Ahead to 2019
A Look Ahead to 2019 Revenue Growth Ahead of SBG Category & Significant Adjusted EBITDA Growth Net Revenue Growth Driven by: Innovation led by breakfast and improved merchandising Multi-faceted price increase Adjusted EBITDA Growth Driven by: Profitability of Cloverhill business Supply chain
Slide 37: A Look Ahead to 2019 by Quarter
A Look Ahead to 2019 Q1 Q2 Q3 Q4 • Execute Pricing & • Expand • Continue • Finish 2019 Launch Breakfast Distribution of Distribution Strong with New Products Build of Significant Breakfast & Revenue & • Accelerate Other EBITDA Growth Organic Growth Innovation Behind Improved • Substantially Merchand
Slide 38: Q&A
Q&A
Slide 39: Appendix
Appendix
Slide 40: Non-GAAP Reconciliations: Adjusted Gross Profit & Margin
NON-GAAP Reconciliations Adjusted Gross Profit & Adjusted Gross Margin Three Months Three Months Twelve Months Twelve Months Ended Ended Ended Ended ($ in millions) 12/31/18 12/31/17 12/31/18 12/31/17 Net revenue $ 214.8 $ 196.2 $ 850.4 $ 776.2 Cost of goods sold 146.0 115.4 583.1 449.3 Gross profit
Slide 41: Non-GAAP Reconciliations: Adjusted EBITDA
Non-GAAP Reconciliations Adjusted EBITDA Three Months Three Months Ended Ended Year Ended Year Ended $ in millions 12/31/18 12/31/17 12/31/18 12/31/17 Net income $ 16.4 $ 189.6 $ 81.4 $ 258.1 Non-GAAP adjustments: Income tax provision 3.6 (98.8) 13.0 (67.2) Interest expense, net 10.3 9.5 39.4 39.2 D
Slide 42: Non-GAAP Reconciliations: Adjusted Net Income & Adjusted EPS
Non-GAAP Reconciliations Adjusted Net Income Attributable to Class A Stockholders & Adjusted EPS Three Months Three Months Twelve Twelve Ended Ended Months Ended Months Ended (in millions except share and per share data) 12/31/18 12/31/17 12/31/18 12/31/17 Net income attributed to Class A stockholde