Hostess Brands — Investor Presentation (April 2017)
34 slides from Hostess Brands's investor presentation, Apr 18, 2017
Slide 1: Hostess Brands April 2017
® 1 ® HOSTESS BRANDS April 2017
Slide 2: Disclaimers
® DISCLAIMERS 2 Forward Looking Statements This investor presentation contains statements reflecting our views about our future performance that constitute “forward-looking statements” that involve substantial risks and uncertainties. Forward-looking statements are generally identified through the i
Slide 3: Agenda
® 3 AGENDA COMPANY OVERVIEW INVESTMENT HIGHLIGHTS GROWTH DRIVERS FINANCIAL OVERVIEW APPENDIX 2 1 4 3
Slide 4: Company Overview
® COMPANY OVERVIEW 1 4
Slide 5: Hostess Brands at a Glance
® 5 Kansas City, MO Product portfolio with numerous iconic brands #2 market position in $6.5bn Sweet Baked Goods category Modern and efficient national manufacturing system Direct to Warehouse distribution model driving industry leading profitability Proven platform with multiple avenues of growth K
Slide 6: Business Transformation
® BUSINESS TRANSFORMATION 6 Note: See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP measures and reconciliations to the comparable GAAP measures. (1) See Appendix for an explanation of all non-GAAP measures and a reconciliation to the most comparable GAAP m
Slide 7: Strong Market Position in Key Segments
® STRONG MARKET POSITION IN KEY SEGMENTS 7 Donuts $1.5B Snack Cakes $1.7B Pies, Bars & Other $459M $308M Blondies, Brownies Breakfast pastries, Danish $1.3B $482M Muffins $805M SBG Cookies Danish, Honey Buns, Sweet Rolls Mini and Jumbo Muffins Donettes Twinkies®, Zingers®, CupCakes, Ding Dongs®, Ho
Slide 8: Brand Strength Driving Growth and Category
® BRAND STRENGTH DRIVING GROWTH AND CATEGORY 8 Note: Market share based on retail sales dollars. Hostess data does not include Superior. The Company has transitioned to a new Nielsen database for Market Share and Industry Data, all prior periods have been restated utilizing the updated database. (1)
Slide 9: Key Investment Highlights
® 9 KEY INVESTMENT HIGHLIGHTS 2
Slide 10: Key Investment Highlights
® KEY INVESTMENT HIGHLIGHTS Hostess is a $1.1bn brand at Retail with significant upside potential 10Source: Nielsen U.S. total universe, 52 weeks ending 2/25/17. Iconic American brand synonymous with snacking Innovation engine across product lines DTW distribution driving margins and channel penetra
Slide 11: Emotional Brand Connection
® EMOTIONAL BRAND CONNECTION U.S. consumers share a special emotional relationship with the 96 year old Hostess, a brand that defines the rapidly growing “Indulgent Snacking” trend ICONIC BRAND SYNONYMOUS WITH SNACKING Delivering New and Classic Sweet Treats 11
Slide 12: Innovation Engine Across Product Lines
® INNOVATION ENGINE ACROSS PRODUCT LINES Successes in 2016 12 The Return of Suzy Q Brownie Innovation Twinkies Innovation Note: M&M’s is a registered trademarks of Mars, Incorporated. Ghostbusters is a registered trademark of Columbia Pictures Industries, Inc. New & Improved Whole Grain Mini Muffins
Slide 13: DTW Distribution Driving Margins and Channel Penetration
® DTW DISTRIBUTION DRIVING MARGINS AND CHANNEL PENETRATION Competitively advantaged business model 13 Warehouse model Close partnerships with third party distributors Enhanced in-store merchandising capabilities Compelling retailer economics Expanded distribution reach
Slide 14: DTW Distribution: Capitalizing on Channel Opportunity
® DTW DISTRIBUTION DRIVING MARGINS AND CHANNEL PENETRATION Clear road to capitalizing on channel opportunity 14 Hostess Share of Retail Sales – Small Formats $93M $2.3B$320M 2016OldCoTotal Category Size 26.3% 0.9% 33.2% 49.1% 20.4% 21.5% Total US Drug Total US Dollar Total US Convenience 1.7% 19.3%
Slide 15: Experienced Senior Leadership
® EXPERIENCED SENIOR LEADERSHIP 15 Dean Metropoulos Executive Chairman Bill Toler President & CEO Tom Peterson EVP & CFO Michael Cramer EVP & Chief Administrative Officer Andrew Jacobs SVP & Chief Customer Officer Stuart Wilcox SVP & COO Burke Raine SVP & CMO Jolyn Sebree SVP, General Counsel & Corp
Slide 16: Growth Drivers
® 16 GROWTH DRIVERS 3
Slide 17: Hostess Has Significant Room for Growth
® HOSTESS HAS SIGNIFICANT ROOM FOR GROWTH 17 (1) Current sales, AC Nielsen total universe, 52 weeks ending 2/25/17. (2) Estimated based on assumptions of reasonable share gains against market size in new snack categories. $1.1B ~1.5x potential ~2.0x potential TOD A Y (1 ) IN -A IS L E WHIT E S P A C
Slide 18: Further Strengthen the Core Business
® 16.9% 22.8% 52 weeks ending 2/25/2017 OldCo FURTHER STRENGTHEN THE CORE BUSINESS Hostess Still Has Significant Headroom For Growth and Share Gains 18 Notes: Hostess data does not include Superior. The Company has transitioned to a new Nielsen database for Market Share and Industry Data, all prior
Slide 19: Innovation & Line Extensions
® INNOVATION & LINE EXTENSIONS Launching in 2017 19 Cinnamon Sugar Crunch Donettes White Fudge Twinkies Innovation Peanut Butter Apple Streusel Cupcake Expansion
Slide 20: Whitespace Opportunity
® WHITESPACE OPPORTUNITY In-Store Bakery (sweets) is a $8.2 billion category 20 Source: Nielsen Perishable Group, In-Store Bakery, 52 Weeks ending 12/31/16. Note: Total In-Store Bakery was $11.6 Billion for 52 weeks ending 12/31/16. ISB – $ Share Breakfast Bakery 30% Desserts and Sweet Snacks 70%
Slide 21: Whitespace
® WHITESPACE 21 Frozen Aisle Schools Club Channel Licensing Canada Foodservice
Slide 22: Financial Overview
® 22 FINANCIAL OVERVIEW 4
Slide 23: Significant Growth Since Re-Launch
® $555 $621 2014A 2015A 2016A SIGNIFICANT GROWTH SINCE RE-LAUNCH WITH MEANINGFUL UPSIDE POTENTIAL 23 Net Revenue(1)(2) ($ in millions) Adjusted Gross Profit(1)(2)(3) ($ in millions) $234 $265 2014A 2015A 2016A % Adj. Gross Profit Margin(3) 42% 43% 43% Adjusted EBITDA(1)(2)(3) ($ in millions) $145 $1
Slide 24: Attractive Margins Relative to Peers
® ATTRACTIVE MARGINS RELATIVE TO PEERS 24 Notes: FCF conversion defined as (Adj. EBITDA-Capex) / Adj. EBITDA is a non-GAAP metric. (1) See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP measures and reconciliations to the comparable GAAP measures. (2) Repres
Slide 25: Efficient and Scalable Manufacturing Footprint
® EFFICIENT AND SCALABLE MANUFACTURING FOOTPRINT WITH DIRECT-TO-WAREHOUSE DISTRIBUTION 25 (1) ISB consists of Superior, which we purchased in May 2016, and which manufactures and distributes eclairs, madeleines, brownies, and iced cookies in the ISB section of grocery and club retailers. (2) From 20
Slide 26: Sustainability of Margins
® SUSTAINABILITY OF MARGINS 26 Well invested manufacturing capabilities to leverage Fully built out SG&A and distribution with no legacy costs Premium pricing supported by superior penny profits for retailers
Slide 27: Strong Cash Flow Enables Multiple Value Creation Opportunities
® STRONG CASH FLOW ENABLES MULTIPLE VALUE CREATION OPPORTUNITIES 27 Notes: FCF conversion defined as (Adj. EBITDA-Capex) / Adj. EBITDA is a non-GAAP metric. See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP measures and reconciliations to the comparable GAA
Slide 28: Concluding Remarks
® CONCLUDING REMARKS Differentiated Business Model Drives Continued Growth 28 Hostess is well positioned for future growth… Warehouse distribution unique in SBG category Supports strength of innovation pipeline and speed-to-market Compelling opportunity for continued market share and volume gains ac
Slide 29: Appendix
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Slide 30: Adjusted EBITDA Reconciliation
® 30Footnotes on next page $ in millions Successor 4-Nov-16 to 31-Dec-16 Predecessor 1-Jan-16 to 31-Dec-16 Pro Forma Combined, Year Ended 31-Dec-16 Year Ended 31-Dec-15 Year Ended 31-Dec-14 Net income (loss) ($8.5) $60.4 $82.4 $88.8 $81.5 Plus non-GAAP adjustments: Income tax provision (7.8) 0.4 32.
Slide 31: Hostess Non-GAAP Reconciliations: Adjusted EBITDA Footnotes
® HOSTESS NON-GAAP RECONCILIATIONS Adjusted EBITDA 31 Footnotes from prior page: (1) For the Successor period November 4, 2016 through December 31, 2016 and pro forma combined year ended December 31, 2016, we recorded a gain on extinguishment of Former First Lien of $0.8 million, which consisted of
Slide 32: Hostess Non-GAAP Reconciliations: Adjusted Gross Profit
® 32Footnotes on next page HOSTESS NON-GAAP RECONCILIATIONS Adjusted Gross Profit $ in millions Successor 4-Nov-16 to 31-Dec-16 Predecessor 1-Jan-16 to 31-Dec-16 Pro Forma Combined, Year Ended 31-Dec-16 Year Ended 31-Dec-15 Year Ended 31-Dec-14 Net revenue $112.0 $615.6 $727.6 $620.8 $554.7 Cost of
Slide 33: Warrant Impact on Equity
® T WARRANT IMPACT ON EQUITY 33 Note: All dilution and repurchase information is for illustration only. Actual could differ from illustration. (1) Share price as of 4/13/2017. (2) For any 20 trading days within a 30 trading day period ending on the third business day before the Company sends the not
Slide 34: Glossary
® GLOSSARY 34 Term Definition BFY Better-for-you ISB In-store bakery SBG Sweet baked goods SKU Stock keeping unit