Hostess Brands' 10% revenue increase in Q3 signals continued momentum

Twinkie-maker Hostess Brands Inc. (Nasdaq: TWNK) reported revenue, sales and profit gains in its financial results for the three and nine months ended Sep. 30.

“Our solid momentum continued in the third quarter enabling us to exceed our top and bottom-line expectations. Third quarter sales increased by 10% as strong execution across our retail network and exciting innovation generated meaningful volume growth in both Hostess and Voortman branded portfolios," said Hostess president and chief executive Andy Callahan.

Callahan added that "productivity initiatives and higher price realization offset rising inflation allowing [Hostess] to maintain our attractive margin structure." 

As a result, Hostess is raising its full-year net revenue guidance while maintaining its EBITDA and EPS outlook.

Hostess Brands third-quarter 2021 financial highlights

• Net revenue of $288 million increased 10.4% from the same period last year, reflecting strong Hostess and Voortman branded growth across multiple channels.
• Gross profit increased 8.6% to $99. million. On an adjusted basis, gross profit increased 8.9% to $99.3 million, or 34.5% of net revenues, as higher volume, favorable product mix, pricing and productivity offset rising inflation.
• Net income was $26.2 million or $0.19 per diluted share. Adjusted net income increased 14.2% to $28.9 million and resulted in adjusted EPS of $0.21, compared with $0.19 in the prior year period.
• Adjusted EBITDA increased 7.6% to $64.8 million, or 22.5% of net revenue, as higher gross profits were partially offset by higher advertising and marketing spend.
• Cash and cash equivalents were $228.1 million as of Sep. 30, 2021. Net leverage ratio declined to 3.3x driven by improved operating cash flow.
• Hostess is raising full year 2021 guidance for net revenue growth to 9%-10% and reiterating adjusted EBITDA and adjusted EPS guidance of $260 million to $268 million and $0.83 to $0.87, respectively.

Hostess said its third-quarter growth was primarily driven by sweet baked goods net revenue, which increased $24.7 million or 10.6%. This growth was led by gains in the club, dollar, convenience, drug and grocery channels with continued momentum of single-serve products driving favorable product mix. Cookies net revenue of $29.2 million increased 9% or $2.4 million due to expanded distribution and strong point of sale growth.

Management changes

Hostess Brands also announced that Brian T. Purcell, executive vice president and chief financial officer, resigned from the company, effective Nov. 9. The company’s board of directors has appointed Michael J. Gernigin, senior vice president and corporate controller, as its interim chief financial officer until a permanent successor has been named.

“We appreciate Brian’s contributions to Hostess and wish him the best in his future endeavors,” Callahan said. “Mike, who has been with the company since 2016, is a strong finance and accounting executive and is well positioned to lead the talented finance organization while we search for a new permanent CFO.”