Hostess Brands — Q3 2018 Earnings Presentation
22 slides from Hostess Brands's earnings presentation, Nov 7, 2018
Slide 1: 3rd Quarter 2018 Earnings Investor Presentation
3rd Quarter 2018 Earnings Investor Presentation November 7, 2018
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: Hostess Brands – Highlights
HOSTESS BRANDS – HIGHLIGHTS ICONIC AMERICAN BRANDS DELIVERING NEW AND CLASSIC SWEET TREATS TO CUSTOMERS FOR GENERATIONS KEY HIGHLIGHTS LTM Net Sales: Product Portfolio with 19% Market Continuous Direct to Proven $832m Numerous Iconic Brands Share and Innovation to Warehouse Platform LTM Adj. EBITDA:
Slide 4: Core Competencies
CORE COMPETENCIES 4
Slide 5: Hostess Brands Core Competencies
HOSTESS BRANDS CORE COMPETENCIES WHAT DIFFERENTIATES US . . . Strong Brand Equity Significant Low Cost Cash Flow Model Continuous Collaborative Customer Innovation Partnerships Prioritize our anchor c-store channel through supply chain and in-store excellence 5
Slide 6: Iconic Brands Delivering New and Classic Sweet Treats
ICONIC BRANDS DELIVERING NEW AND CLASSIC SWEET TREATS BRANDS SINCE <50 RELAUNCH 50+ YEARS OLD 85+ YEARS OLD YEARS OLD Hostess® Brand 90%+ Awareness Source: Harmon Atchison, Awareness, Use and Status Perception Study, 12/8/14 6
Slide 7: Strong Market Position and Growing in the SBG Category
STRONG MARKET POSITION AND GROWING IN THE SBG CATEGORY Market Share Point-of-Sale 19.0% $1.27 $1.19 $1.15 In Billions $1.05 17.7% 17.0% $6.75 $6.73 $6.70 15.9% $6.60 2015 2016 2017 2018 2015 2016 2017 2018 SBG Category POS * Source: Nielsen, Total Nielsen Universe for the SBG Category and the Compan
Slide 8: Cost Effective, Advantaged Business Model Enabled by Warehouse Distribution
COST EFFECTIVE, ADVANTAGED BUSINESS MODEL ENABLED BY WAREHOUSE DISTRIBUTION AND EFFICIENT SUPPLY CHAIN Our Business Model Generates Hostess Brands Disruption within the Supply Chain Expanded distribution reach Compelling retailer economics Fast & scalable in-store merchandising capabilities
Slide 9: Collaborative Partnerships with Customers & Retailers Across Various Channels
COLLABORATIVE PARTNERSHIPS WITH CUSTOMERS & RETAILERS ACROSS VARIOUS CHANNELS FOR SHARED GROWTH AND PROFIT 9
Slide 10: Leader of Innovation
LEADER OF INNOVATION WILLINGNESS TO REVITALIZE AND DISRUPT UNDERINVESTED CATEGORIES Innovation within the Core Launch new flavors of iconic products to leverage the brand’s power and expand the core Innovation Attracting New Consumers Attract new consumers with premium innovation such as the Hostess
Slide 11: Third Quarter Highlights
THIRD QUARTER HIGHLIGHTS
Slide 12: Q3 2018 Highlights: Continued Growth Ahead of SBG Category
Q3 2018 HIGHLIGHTS CONTINUED GROWTH AHEAD OF SBG CATEGORY ➢ Point-of-sale increased 3.8% and market share grew 90 bps to 18.9%* ➢ Revenue growth of 9.7% driven by acquisition and organic growth across small- format and grocery channels offset by lower revenue within the mass channel ➢ Sequentially i
Slide 13: Growing Sales and Market Share Across Multiple Channels
GROWING SALES AND MARKET SHARE ACROSS MULTIPLE CHANNELS POS Change 4.6% 3.9% 0.3% 4.5% 516.0% (15.2)% In millions $ 160 140 Achieved over 4% Organic POS 120 Growth in 75% of the SBG 100 Category 80 60 40 Point of Sale DollarsSaleof Point 20 0 Convenience Grocery Drug Dollar Club Mass Q3 2017 POS $ Q
Slide 14: Building a Solid Foundation for Profitable Growth
BUILDING A SOLID FOUNDATION FOR PROFITABLE GROWTH We are building a strong foundation Priorities for future growth by developing and enhancing our: ➢ Strengthen the Profitability of the Core ➢ Customer Relationships ➢ Adjust pricing & merchandising programs ➢ Pricing Capabilities ➢ ➢ Execute distrib
Slide 15: Transformative Growth: Breakfast Expansion
TRANSFORMATIVE GROWTH BREAKFAST EXPANSION Accelerating Growth in the Breakfast Segment ➢ Hostess’ “Fair Share” development presents an incremental POS opportunity of over a ~$100 million ➢ Launch of Hostess® breakfast products have strong customer acceptance ➢ Accelerating Cloverhill® and Big Texas®
Slide 16: Q3 2018 Financial Results
Q3 2018 FINANCIAL RESULTS
Slide 17: Consolidated Financial Results
CONSOLIDATED FINANCIAL RESULTS Q3 2018 Q3 2017 ($ in millions, except per share data) Net Revenue $211.0 $192.3 Adjusted Gross Profit $64.1 $78.4 Adjusted Gross Margin 30.4% 40.8% Adjusted EBITDA $40.1 $54.7 Adjusted EPS $0.10 $0.14 ➢ Net Revenue increase was driven by recently acquired breakfast br
Slide 18: Full-Year 2018 Outlook: Updated Guidance
FULL-YEAR 2018 OUTLOOK UPDATED GUIDANCE Q2 Guidance Q3 Guidance ($ in millions, except ratio and per share data) Adjusted EBITDA $190 – $200 $185 - $190 Net Income $73 – $81 $83 - $87 Adjusted EPS $0.52 – $0.58 $0.52 - $0.55 Cash Flow from Operations $145 – $150 $140 – $145 Capital Expenditures $50
Slide 19: Appendix
Appendix
Slide 20: Non-GAAP Reconciliations: Adjusted EBITDA
NON-GAAP RECONCILIATIONS ADJUSTED EBITDA Three Months Twelve Months Three Months Ended Ended Ended $ in millions 9/30/18 9/30/18 9/30/17 Net income (loss) $11.2 $254.7 $16.1 Non-GAAP adjustments: Income tax provision 2.6 (89.5) 10.3 Interest expense, net 10.0 38.6 10.0 Depreciation and amortization
Slide 21: Non-GAAP Reconciliations: Adjusted Gross Profit and Gross Margin
NON-GAAP RECONCILIATIONS ADJUSTED GROSS PROFIT AND GROSS MARGIN Three Months Three Months Ended Ended ($ in millions) 9/30/18 9/30/17 Net revenue $211.0 $192.3 Cost of goods sold 150.6 113.9 Gross profit $60.4 $78.4 Gross margin 28.6% 40.8% Non-GAAP adjustments: Acquisition and integration costs 3.5
Slide 22: Non-GAAP Reconciliations: Adjusted Net Income and Adjusted EPS
NON-GAAP RECONCILIATIONS ADJUSTED NET INCOME ATTRIBUTABLE TO CLASS A STOCKHOLDERS AND ADJUSTED EPS Three Months Three Months Ended Ended (in millions except share and per share data) 9/30/18 9/30/17 Net income attributed to Class A stockholders $7.9 $9.5 Non-GAAP adjustments: Tax receivable agreemen