Hostess Brands — FY2019 Earnings Presentation
22 slides from Hostess Brands's earnings presentation, Feb 26, 2020
Slide 1: Investor Presentation February 26, 2020
Investor Presentation February 26, 2020
Slide 2: Forward Looking Statements
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 risks and
Slide 3: Hostess: a sustainable, profitable growth story
Hostess a sustainable, profitable growth story
Slide 4: Celebrating Years of Delighting Consumers
Celebrating 100 Years of Delighting Consumers Iconic Brands #1 Market Share 2019 Annual Net Revenue in Subcategory $908 million 18.8% Market Share 2019 Annual Adjusted EBITDA Continuous Innovation $205 million to Drive Growth Efficient Manufacturing & 2019 Annual Operating Cash Flow Distribution Mod
Slide 5: Achieved Significant Strategic Objectives While Driving Sustainable Growth
Achieved Significant Strategic Objectives While Driving Sustainable Growth ▪ Net Revenue up 8.7%, excluding the In-Store Bakery (“ISB”) business sold in 2019, well ahead of the SBG Category Financial Results ▪ Grew market share by 75 bps, driven by Hostess branded market share growth of 69 bps Refle
Slide 6: We delight consumers and build iconic brands supported by our core competencies
We delight consumers and build iconic brands supported by our core competencies Strong Continuous to drive profitable growth Brand Equity Innovation Strengthening our core Hostess brand and expanding Core into adjacent categories through innovation and Significant strong partnerships with our custom
Slide 7: Snacking trends and growth in the snack market
increase in % of U.S. adults % snacking frequency 1 95 snack daily 21 in 2018 vs. 20171 Growth projected 1/3 of growing $ in snack market, snacking occasions 30B from 2018-20223 are in the morning2 ($150B-$180B) 1. Mintel Snacking Motivations and Attitudes, January 2019 2. Hostess snacking needstate
Slide 8: Consistent Point-of-Sale and Market Share Growth in the Sweet Baked Goods Category
Consistent Point-of-Sale and Market Share Growth in the Sweet Baked Goods Category 18.8% $1.3 18.0% $1.2 17.0% $1.1 16.3% $1.1 2016 2017 2018 2019 2016 2017 2018 2019 Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Point of Sale and Market Share, 52 weeks ending 12/3
Slide 9: Growth Across Multiple Channels
Growth Across Multiple Channels POS Change 5.2% 2.2% 4.3% 12.5% 62.8% (1.0%) 6.5% $600 $500 $1.2B $1.3B $400 $300 (In (In Millions) POS Dollars POS $200 $100 $0 Convenience Grocery Mass Dollar Club Drug Total Hostess 52 WE 12/29/2018 52 WE 12/28/2019 Market Share 23.9% 13.4% 15.8% 23.2% 23.1% 41.8%
Slide 10: Continued Industry-Leading Results
Continued Industry-Leading Results (in millions) % 6.7 9.9% $907.7 Growth Growth $204.7 $850.4 $186.2 2018 2019 2018 2019 8.7% Growth 11.4% Growth excluding ISB excluding ISB Results for year ended December 31, 2019 and 2018. Adjusted EBITDA is a non-GAAP financial measure. See “Use of Non-GAAP Fina
Slide 11: Successfully reduced leverage while continuing to make disciplined investments for growth
Successfully reduced leverage while continuing to make disciplined investments for growth ▪ Reinvest in business for future growth 4.4x ▪ Strategic acquisitions 4.0x ▪ De-leverage 3.5x ▪ Return capital to shareholders 3.4x Completion of $320 million Voortman acquisition in January 2020 will increase
Slide 12: Meaningful Growth as Compared to Prior Year
Meaningful Growth as Compared to Prior Year Quarter Ended Year Ended Change Change December 31, December 31, Net Revenue $216.7 $214.8 $1.9 0.9% $907.7 $850.4 $57.3 6.7% Adjusted Gross Profit $75.3 $73.8 $1.5 2.0% $310.8 $279.4 $32.5 11.6% Adjusted Gross Margin 34.8% 34.3% 39 bps 34.2% 32.9% 139 bps
Slide 13: Strategic priorities: Grow the Core, Innovation, Efficiency, Talent, Cash Flow
Grow the Core Grow through Improve through Cultivate Talent Leverage Strong Innovation Agility & Efficiency & Capabilities Cash Flow Profitably drive core Accelerate Operate at lowest Focus on investing Generate strong growth by expanding growth through practical cost and in talent, insights cash fl
Slide 14: 2019 accomplishments by strategic priority
Grow the Core Grow through Improve through Cultivate Talent Leverage Strong Innovation Agility & Efficiency & Capabilities Cash Flow ✓ Executed multi- ✓ Launch of ✓ Cloverhill ✓ Created new ✓ Generated faceted price Birthday Business hub for operating cash increase across all Cupcakes, improved mark
Slide 15: Accomplished Stated Objectives and More
Accomplished Stated Objectives and More Q4 Finish 2019 Strong Q3 with Significant Revenue & Strong Back-to- EBITDA Growth Q2 School Programming Q1 Expand Distribution Complete Sale of In- Substantially of New Products Store Bakery Improve Net Execute Pricing & Business Leverage Launch Br
Slide 16: Voortman acquisition: entry into wafer and sugar-free cookie categories
Provides Entry Into Attractive Wafer and Sugar-Free Cookie Categories Leverages Hostess’ Model and Unlocks Meaningful Distribution Opportunity ▪ Announced conversion from direct store delivery to Hostess’ warehouse distribution model beginning April 2020 ▪ Re-engineered and road-tested new case conf
Slide 17: Double-Digit Adjusted EBITDA and EPS Growth Expected
Double-Digit Adjusted EBITDA and EPS Growth Expected 2020 Guidance Impact of Voortman ($ in millions, except ratio, per share 2019 Actuals data and tax rate) (including Voortman) Acquisition Organic growth ahead of Net revenue $907.71 ~$90 SBG Category Adjusted EBITDA $204.71 $225 - $240 ~$20 Adjust
Slide 18: 2020 quarterly priorities
Strong Revenue Growth and EBITDA Margin Expansion Q4 Q3 Q2 Continue distribution Q1 build of new innovation Expand distribution Integrate Voortman Close on purchase of for new innovation into Hostess and further build Voortman distribution model longer-term Meaningfully reduce net Complete
Slide 19: Objective: long-term leading performance in our peer group
Objective: long-term leading performance in our peer group Organic Revenue Adjusted EBITDA Free Cash Flow Growth Margin Conversion Top Quartile of Top Quartile of Top Quartile of 1 1 Peer Group1 Peer Group Peer Group (Well ahead of the SBG Category) Delivering Industry-Leading Total Shareholder Retu
Slide 20: Appendix
Appendix 20
Slide 21: Non-GAAP reconciliation: three months and year ended December 31, 2019
Three Months Ended December 31, 2019 Year Ended December 31, 2019 Gross Operating Net Diluted Gross Operating Net Diluted Profit Income Income EPS Profit Income Income EPS GAAP Results $ 70.8 $ 39.5 $ 23.5 $ 0.17 $ 299.8 $ 136.0 $ 77.6 $ 0.55 Non-GAAP adjustments: Foregin currency contract gain - (7
Slide 22: Non-GAAP reconciliation: three months and year ended December 31, 2018
Three Months Ended December 31, 2018 Year Ended December 31, 2018 Gross Operating Net Diluted Gross Operating Net Diluted Profit Income Income EPS Profit Income Income EPS GAAP Results $ 68.8 $ 30.3 $ 16.3 $ 0.12 $ 267.3 $ 121.6 $ 81.4 $ 0.61 Non-GAAP adjustments: Acquisition, disposal and integrati