Hostess Brands announces strong first-quarter 2022 results; raises 2022 full-year guidance
Hostess Brands Inc. reported its financial results for the three months ending March 31, 2022.
“Our exceptional top-line and bottom-line growth in the first quarter highlighted our access to growing occasions, best-in-class business model, and accelerating innovation and marketing capabilities as outlined in our recent Investor Day presentations,” Andy Callahan, the company’s president and chief executive officer, said in the announcement. “Our strong volume growth during the quarter, even as we successfully implemented pricing actions to offset high inflation, underscores favorable snacking behaviors as well as our superior innovation and supply-chain execution.”
He continued, “We are raising our full year guidance to reflect our strong momentum even as we take actions to mitigate escalating inflationary headwinds due to the recent macro events.”
First-quarter 2022 financial highlights
- Net revenue of $332.1 million increased 25.1% from the same period last year as strong, broad-based consumer demand drove volume growth, which contributed 15% of the growth this quarter, with the remaining growth from planned pricing actions and favorable product mix.
- Gross profit increased 21% to $115.6 million. On an adjusted basis, gross profit increased 21.3% to $115.8 million, or 34.9% of net revenues as pricing and productivity largely offset double-digit inflation.
- Net income was $34.6 million or $0.25 per diluted share. Adjusted net income increased 41.3% to $38 million, and adjusted EPS was $0.27 compared to $0.20 in the prior year period.
- Adjusted EBITDA increased 23.8% to $77.4 million, the second consecutive quarter of record-high quarterly adjusted EBITDA. Adjusted EBITDA margin of 23.3% was largely in-line with the prior year period.
- Cash and cash equivalents were $238.4 million as of March 31, 2022, reflecting a net leverage ratio of 3x.
- Capital expenditures increased to $24.9 million from $10.9 million in the prior-year period. The company continues to expect capital expenditures to be in the $120-$140 million range in 2022.
- Raising full year 2022 guidance for net revenue growth to at least 12%, adjusted EBITDA toward the higher end of its initial $280-$290 million range while maintaining its adjusted EPS guidance of $0.93 - $0.98.
Other highlights include:
- Hostess Brands’ Sweet Baked Goods point-of-sale (POS) increased 24.7% and its share of the category increased by 135 basis points to 22% driven by solid core performance and strong contribution from new products innovation.
- Voortman branded POS grew 29.0% and its share of the cookie category increased 342 basis points reflecting continued consumer demand in the faster-growing sugar-free cookies sub-segment and distribution gains.
- Inflation is now expected to be at least high teens, including the impact from stronger-than-expected volume growth. The company is planning additional pricing actions along with a combination of revenue management activities to offset higher inflation.
- Completed the purchase of the Arkadelphia, Arkansas, facility, which will be converted into previously announced new bakery to support growing consumer demand.
- Repurchased $9.7 million of shares under previously announced $150 million share repurchase program.
- Announced the appointment of Travis Leonard as the chief financial officer. Leonard will join the company May 11, 2022.
