Hostess Brands (TWNK) Tops Q4 EPS by 1c, Revenues Beat; Offers FY21 EPS Outlook

Hostess Brands (NASDAQ: TWNK) reported Q4 EPS of $0.21, $0.01 better than the analyst estimate of $0.20. Revenue for the quarter came in at $256 million versus the consensus estimate of $251.83 million.

Fourth Quarter 2020 Financial Highlights as Compared to the Prior Year Period1:

• Net revenue was $256.0 million, an increase of 18.1%, driven primarily by strong performance of Voortman Cookies Limited (“Voortman”) and Hostess® branded sales, partially offset by other non-Hostess® branded sales.
• Gross profit was $95.8 million, an increase of 35.3%. On an adjusted basis, gross profit increased 27.2%, primarily due to improved price and mix, the accretive margin expansion generated from Voortman and operational efficiencies.
• Net income was $24.4 million, or $0.18 per diluted share compared to $23.6 million, or $0.17 per diluted share. Adjusted net income increased $5.9 million, or 25.9%, to $28.7 million, resulting in $0.21 adjusted EPS compared to $0.16 adjusted EPS. The increases in adjusted net income and adjusted EPS were primarily due to the accretion from Voortman and an increase in Hostess® branded sales.
• Adjusted EBITDA was $63.7 million, or 24.9% of net revenue, an increase of 21.6%. The increase was primarily driven by Voortman's adjusted EBITDA contribution and higher Hostess® branded sales.
• Cash and cash equivalents were $173.0 million as of December 31, 2020 resulting in a leverage ratio of 3.9x.

“I am proud of the many accomplishments our team achieved during this unprecedented year. Hostess achieved our 12th consecutive quarter of net revenue growth with double-digit revenue and EBITDA growth in the fourth quarter. We remain informed, nimble and focused on our commitment to keeping our employees and communities safe and healthy as we continue to service our customers and consumers,” commented Andy Callahan, Hostess Brands, Inc. President and Chief Executive Officer. “As we turn to fiscal year 2021, we are confident we will continue our profitable growth momentum and shareholder value creation over the long term behind our strong execution, high penetration in growing consumer segments, expansion of Voortman and ability to deleverage with our strong cash flow.”

GUIDANCE:

Hostess Brands sees FY2021 EPS of $0.80-$0.85, versus the consensus of $0.83.

Assuming there are no significant disruptions due to the COVID-19 pandemic, the Company expects the following consolidated financial results for the full year 20212:

• Adjusted net revenue growth of 3.0% to 4.5%;
• Adjusted EBITDA of $255 million to $265 million, an increase of 6.3% to 10.4% from 2020;
• Adjusted EPS of $0.80 to $0.85, an increase of 6.7% to 13.3% from 2020**;
• Leverage ratio of approximately 3x at the end of 2021 compared to 3.9x at December 31, 2020**;
• Capital expenditures of approximately $60 million to $65 million, which includes a $25 million investment to increase the Company's cake production capacity to support continued growth;
• Income tax rate of approximately 27%, reflecting the elimination of the non-controlling interest in the fourth quarter of 2020 and higher state taxes.

** Outlook assumes an effective net share settlement of outstanding warrants which expire in November 2021 and no other strategic uses of cash.

The Company reaffirms its long-term financial objectives of organic revenue growth, adjusted EBITDA margins and free cash flow conversion in the top-quartile of its peers.

For earnings history and earnings-related data on Hostess Brands (TWNK) click here.

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