Hostess Brands — Q3 2020 Earnings Presentation
31 slides from Hostess Brands's earnings presentation, Nov 5, 2020
Slide 1: Investor Presentation November 5, 2020
Investor Presentation November 5, 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: A Sustainable, Profitable Growth Story
A Sustainable, Profitable Growth Story (in millions) $984 Iconic Brands $906 $832 Continuous Innovation 5.8% CAGR to Drive Growth LTM 2018 LTM 2019 LTM 2020 Collaborative Customer Relationships (in millions) $229 Efficient Manufacturing & $204 Distribution Model $193 5.9% CAGR Proven Scalable Platfo
Slide 4: Exciting Opportunities for Future Growth with Proven Record of Solid Execution
Exciting Opportunities for Future Growth with Proven Record of Solidolid Executionution ƒ Unrelenting focus on maintaining the health and safety of our employeesyees whilee deliveringdelivering on record demand ƒ Delivered double-digit net revenue growth and continued EBITDA margin expansionexxpansi
Slide 5: Well Positioned for Continued Growth
Well Positioned for Continued Growth Grow through Improve through Cultivate Talent Leverage Strong Grow the Core Innovation Agility & Efficiency & Capabilities Cash Flow ƒ 18.5% Net Revenue Growth* ƒ Roll-out of 2021 ƒ Maintained heightened ƒ Leveraged team’s ƒ Delivered Voortman Innovation Slate wi
Slide 6: Driven by Strong Voortman and Hostess Brand Growth
Driven by Strong Voortman® and Hostess® Brand Growth (in millions) 25.9% 14.8% growth growth $260.9 $60.2 $47.8 $227.2 2019 2020 2019 2020 18.5% Growth 29.2% Growth excluding ISB excluding ISB Q3 Results are for three months ended September 30, 2020 and 2019. Adjusted Net Revenue and Adjusted EBITDA
Slide 7: Continued Growth of Sweet Baked Goods
Continued Growth of Sweet Baked Goods Sweet Baked Goods $234.1 $220.2 $13.9 6.3% $693.1 $662.3 $30.8 4.7% Cookies 26.8 - 26.8 100.0% 74.3 - 74.3 100.0% In-Store Bakery -7.1(7.1) (100.0%) - 28.7 (28.7) (100.0%) Total Adjusted Net Revenue $260.9 $227.2 $33.6 14.8% $767.4 $691.0 $76.4 11.1% Sweet Baked
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 $1,337 19.4% $1.0 $1,246 18.5% $1,185 17.9% $1,116 16.8% 2017 2018 2019 2020 2017 2018 2019 2020 Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Point of Sale and Market Share, 52 week
Slide 9: Multi-Packs Continue Strong Double-Digit Growth
Multi-Packs Continue Strong Double-Digit Growth Point-of-Sale Year-Over-Year Growth Single Serve -5.5% Q2 2020 Q3 2020 +2.6% Multi-Pack Q2 2020 +19.4% Q3 2020 +10.3% Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Q3 2020 - 13 weeks ended 9/26/20 and Q2 2020 – 13 wee
Slide 10: Driven by Strong Growth in Convenience, Grocery and Dollar Channels
Driven by Strong Growth in Convenience, Grocery and Dollar Channels Convenience Channel POS Growth Accelerating POS Change 7.8% 10.9% (8.0)% 33.5% (9.6)% 5.3% 6.7% $160 $140 $120 $341M $100 $320M $80 (In Millions) POS Dollars $60 $40 $20 $0 Convenience Grocery Mass Dollar Club Drug Total Hostess All
Slide 11: Provides Flexibility to Invest in Growth and Generate Shareholder Value
Provides Flexibility to Invest in Growth and Generate Shareholder Value Disciplined Approach History of successfully reducing leverage following to Cash Managementg acquisitions while continuing to make disciplined investments for growth – Expect leverage of ~4x by end of 2020 ƒ Reinvest inn busines
Slide 12: Flexibility to Invest in Growth and Generate Shareholder Value
Flexibility to Invest in Growth and Generate Shareholder Value Announced a $100 Continue to have a Expect to have Remain focused on Share repurchase million share disciplined approach increased available organic growth and program provides repurchase program to capital allocation cash flow to execut
Slide 13: Contribution of Voortman Acquisition and Increased Demand, Partially Offset by Sale of In-Store Bakery
Contribution of Voortman Acquisition and Increased Demand, Partially Offset by Sale of In-Store Bakery Adjusted Net Revenue $260.9 $227.2 $33.7 14.8% $767.4 $691.0 $76.4 11.1% Adjusted Gross Profit $91.2 $75.2 $16.0 21.3% $273.6 $235.5 $38.1 16.2% Adjusted Gross Margin 35.0% 33.1% 190bps 35.6% 34.1%
Slide 14: Raised EBITDA and EPS Outlook to Upper-End of Previous Range
Raised EBITDA and EPS Outlook to Upper-End of Previous Range ƒ Assuming no significant disruptions due to the ongoing COVID pandemic, we raised our expected Full Year 2020 to upper-end of our previous guidance as follows: í Adjusted EBITDA of $235 to $240 million (from previous outlook of $230 to $2
Slide 15: Long-Term Growth Drivers
Long-Term Growth Drivers 15
Slide 16: Leading Peer Group Performance
Leading Peer Group Performance Increasing Household Sweet Snacks is Fastest Penetration and Growing Snacking x Growing Repeat 2 Sub-Segment Competitors Repeat Consumers Growth Rate1 Strong Innovation Pipeline with Broad Reach Across % Opportunities for Channels with Highest 91 Expansion within Distr
Slide 17: Snacking Market Growth
Snacking Market Growth $180B $125B $150B 2017 2019E 2022E Source: IRI Actuals Total US -Multi Outlet + Conv Calendar; Mintel Forecast Total US –Multi Outlet + Conv Calendar. 17
Slide 18: Well Positioned to Capture Top Consumer Preferences
Well Positioned to Capture Top Consumer Preferences #1 Snack preference is for Sweet Snacks Consumers Prefer Sweet Snacks Snack Occasions by Type More Than Better-For-You Sweet Snacks 74% Better-for-you snacks 69% 32% 32% Better- Late-night snacks 68% Sweet for-You Breakfast snacks 66% Plant-based p
Slide 19: Hostess Has Over 90% Brand Awareness
Hostess® Has Over 90% Brand Awareness Increasing Households Increasing Repeat Buyers Buying Hostess Over 2x the Category Young Transitionals (Under 35 years old) +6.2% % 16.1% +2.9 SBG Category Source: AYTM Awareness Study, July 2020, Which of the following brands have you heard of? Nielsen Panel 52
Slide 20: Growing Across All Life-stages
Growing Across All Life-stages Increase in Percentage Change of 2+ Time Buyers 7.0% 6.0% 5.0% 33% 4.0% 3.0% 2.0% Percentage Points of Growth Percentage 1.0% 0.0% Empty Nest Independent Older Bustling Senior Senior Singles Start Up Small Scale Young Younger Couples Singles Families Couples Families F
Slide 21: Leading Market Share at All-Time High
Leading Market Share at All-Time High Convenience POS and Market Share $160 28% 27% $150 Continued Market Share Market Share 26% % $140 33 Gains Establish 25% Strong (In Millions) POS Dollars $130 24% Platform for Future Growth $120 23% $110 22% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2018 2018 2018 2018 2
Slide 22: Growth in $3.6 Billion Breakfast Sub-Category Driven by Pastries and Doughnuts
Growth in $3.6 Billion Breakfast Sub-Category Driven by Strong Performance in Pastries and Doughnuts POS Dollars YoY Change 17.3% 14.5% 14.3% 12.9% HostessHHooststesess 9.1% $341M Category 4.7% Breakfast Pastries Doughnut Total Breakfast Source: Nielsen, Total Nielsen Universe for the Company within
Slide 23: Strong Track Record of Successful Innovation
Strong Track Record of Successful Innovation with YTD Innovation up 6% vs. Prior Year New Platforms Expanding Breakfast Voortman Channel Core Development Limited-Time-Offers Expansion Expanding into New Accelerating Growth Building on Iconic Brand Keeping Products Consumer Need States within Fastest
Slide 24: Successfully Executing Against Building Blocks for Accretive Growth
Successfully Executing Against Building Blocks for Accretive Growth 2021 and Beyond 1H Accelerate Growth 2020 through Increased Driving Expanded Merchandising and Transition to Warehouse Depth of Innovation Distribution Model and Distribution and Integration into Hostess Merchandising Operations Sec
Slide 25: Driving Increased Distribution through Expansion Into Convenience Channel
Driving Increased Distribution through Expansion Into Convenience Channel and Increasing LTOs in 2021 DistributionDistribution pointpoint GainGain Food C-Store Drug US xAOC 5Additional Voortman Revenue Growth ~$10Opportunities million ofof AnnualAnnual RRetailetail RRevenueevenue 91% ƒ Distribution
Slide 26: Developing More Brand Activation Activities for Future Growth
Developing More Brand Activation Activities for Future Growth 120% Driving Brand Activation Through Increase in Consumer Increasing Presence in Social and Engagement vs. YA Other MediaMed Outlets Building eCommerce presence through Digital Shelf Optimization 26
Slide 27: We delight consumers and build iconic brands supported by our core competencies
We delight consumers and build iconic brands supported by our core competencies to drive profitable growth Strong Continuous Brand Equity Innovation Strengthening our core Hostess brand and expanding into adjacent categories through innovation and strong partnerships with our customers Core Signific
Slide 28: 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 Conversion2 Top Quartile of Top Quartile of Top Quartile of Peer Group1 Peer Group1 Peer Group1 (Well ahead of the SBG Category) Delivering Industry-Leading Total Shareholder Retur
Slide 29: Appendix
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Slide 30: Three Months Ended September 30, 2020 Non-GAAP Reconciliation
Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Net Gross Operating Net Class A Diluted Net Gross Operating Net Class A Diluted Revenue Profit Income Income Net Income EPS Revenue Profit Income Income Net Income EPS GAAP Results $ 260.9 $ 91.2 $ 41.3 $ 23.9 $ 22.6 $ 0.18
Slide 31: Nine Months Ended September 30, 2020 Non-GAAP Reconciliation
Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Net Gross Operating Net Class ADiluted Net Gross Operating Net Class ADiluted Revenue Profit Income Income Net Income EPS Revenue Profit Income Income Net Income EPS GAAP Results $ 760.6 $ 259.9 $ 91.1 $ 44.0 $ 41.1 $ 0.33 $ 6