twnk-20220301
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 1, 2022
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Hostess Brands, Inc.
(Exact name of registrant as specified in its charter)
Delaware
1-37540
47-4168492
(State or other jurisdiction
 of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
7905 Quivira Road
Lenexa,
KS
66215
(Address of principal executive offices)
(Zip Code)
(816) 701-4600
(Registrant’s telephone number, including area code)

7905 Quivira Lenexa, Kansas 66215
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each ClassTrading SymbolName of exchange on which registered
Class A Common Stock, par value $0.0001 per shareTWNKThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
                                
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.











Item 2.02 Results of Operations and Financial Condition.

On March 1, 2022, Hostess Brands, Inc. (the "Company") issued a press release announcing financial results for the three and twelve months ended December 31, 2021, a copy of which is attached as Exhibit 99.1.

The information in this Item 2.02 and Exhibit 99.1 attached hereto is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

Item 7.01 Regulation FD Disclosure.

On March 1, 2022, the Company disseminated an investor presentation. A copy of the investor presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

The information furnished in this Item 7.01, and Exhibit 99.2 attached hereto is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as may be expressly set forth by specific reference in such filing.

The Company expressly disclaims any obligation to update or revise any of the information contained in the investor presentation. The investor presentation is available on the Company's website located at www.hostessbrands.com, although the Company reserves the right to discontinue that availability at any time.

Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No.
Description of Exhibits
99.1
99.2
104.1
The cover page from this Current Report on Form 8-K, formatted in Inline XBRL









SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.
HOSTESS BRANDS, INC.
Date: March 1, 2022
By:
/s/ Michael J. Gernigin
Name:
Michael J. Gernigin
Title:
Senior Vice President, Chief Accounting Officer and Interim Chief Financial Officer
(Principal Financial Officer)




Document

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Hostess Brands Delivers Strong Profits Driven by 16.1% Net Revenue Growth in the Fourth Quarter
2022 Guidance Continues Profitable Growth Momentum
Investor Day to Outline Strategic Vision and Initiatives for Long-term Growth

LENEXA, KS, March 1, 2022 - Hostess Brands, Inc. (NASDAQ: TWNK) (“Hostess Brands” or the “Company”) today reported its financial results for the fourth quarter and year ended December 31, 2021.
“The Hostess team once again showcased its resilience and tenacity by delivering record high quarterly sales and adjusted EBITDA, well-ahead of expectations. Our double-digit top-line growth and stable margins in the fourth quarter, and for the full year, reflect higher volumes, multiple pricing actions, increasingly impactful innovation, omni-channel presence and outstanding execution. We continue to perform at best-in-class levels while navigating inflation and supply chain challenges,” commented Andy Callahan, the Company’s President and Chief Executive Officer.

He continued, “Our strong 2022 financial guidance reflects our confidence in maintaining our ongoing profitable growth momentum. We are even more excited to share our long-term strategic vision and planned investments to continue to deliver top-tier shareholder returns at our Investor Day presentation, beginning at noon ET today.”


Fourth Quarter 2021 Financial Highlights as Compared to the Prior Year Period1:
Net revenue of $297.2 million increased 16.1% from the same period last year, reflecting strong Hostess® and Voortman® branded growth across all channels.
Gross profit increased 15.2% from the year-ago period to $110.4 million, or 37.1% of net revenue. On an adjusted basis, gross profit increased 15.4% and gross margin was relatively flat at 37.2% as higher price, volume leverage, and productivity initiatives offset double-digit inflation.
Net income of $36.5 million, or $0.25 per diluted share compared to a net loss of $1.4 million, or $0.01 per diluted share in the same period last year. Adjusted net income increased $5.3 million, or 18.5%, to $34.0 million, resulting in $0.25 adjusted EPS compared to $0.21 in the year-ago period.
Adjusted EBITDA increased 14.9% to $73.2 million, or 24.6% of net revenue. The increase was driven by higher gross profit, partially offset by investments in its workforce and selling expenses to support double-digit net revenue growth.
Cash and cash equivalents were $249.2 million as of December 31, 2021. Net leverage ratio improved from 3.9x to 3.1x driven by improved operating cash flow.
Other Highlights:
Hostess manufacturer point-of-sale (“POS”) increased 24.1% for the quarter and its share of the Sweet Baked Goods category increased by 218 basis points to 21.5%. The ongoing Hostess® momentum is driven by the strength of its core portfolio and greater contributions from new innovation including Baby Bundts, Muff'n Stix and Strawberry Cheesecake Donettes®.
Voortman® branded POS grew 19.7% for the quarter, more than 2x faster than the overall Cookie category, reflecting ongoing distribution gains and strong consumer demand.
Successfully implemented additional pricing actions as the Company continues to execute its revenue management initiatives to maintain its industry-leading margin structure.
Installed a new cake production line in 2021 and purchased a facility in the first quarter of 2022 for the Company’s planned bakery in Arkansas to support growing consumer demand.
Executed $61.1 million of total repurchases under the previously announced $100 million securities repurchase authorization, including $53.2 million during 2021.
1 This press release contains certain non-GAAP financial measures, including adjusted net revenue, adjusted gross profit, adjusted gross margin, adjusted EBITDA, adjusted EBITDA margin, adjusted operating income, adjusted net income margin and adjusted earnings per share ("EPS"). Please refer to the schedules in the press release for reconciliations of non-GAAP financial measures to the comparable GAAP measure. Unless otherwise stated, all comparisons of financial measures in this press release are to the fourth quarter of 2021. All measures of market performance contained in this press release, including point of sale and market share, include all Company branded products within the SBG or Cookie categories as reported by Nielsen but do not include other products sold outside of those categories. All market data in this press release refer to the 13-week period ended January 1, 2022 and the prior-year comparable period. The Company's leverage ratio is net debt (total long-term debt less cash) divided by adjusted EBITDA.



2022 Financial Guidance2
The Company’s guidance for the full year 2022 is as follows:
Adjusted net revenue growth of 5% to 8%;
Adjusted EBITDA of $280 million to $290 million, an increase of 4% to 8% from 2021;
Adjusted EPS of $0.93 to $0.98, an increase of 6% to 11% from 2021;
Weighted average diluted shares outstanding of 137 million to 138 million;
Capital expenditures of approximately $120 million to $140 million, including nearly $80 million for the new bakery;
Income tax rate of approximately 27%.
Fourth Quarter 2021 Compared to Fourth Quarter 2020
Net revenue was $297.2 million, an increase of $41.2 million, or 16.1%, compared to $256.0 million with higher volumes accounting for approximately 10 percentage points of the quarterly growth. Sweet baked goods increased $39.3 million, or 17.3%, while Cookies net revenue of $30.6 million increased 6.6%, or $1.9 million.
Gross profit was $110.4 million, or 37.1% of net revenue compared to 37.4% in the same period last year. Adjusted gross profit increased 15.4% from year-ago levels. Adjusted gross margin of 37.2% was relatively unchanged from the prior year period as higher transportation costs and input cost inflation was effectively offset by pricing actions, volume leverage, productivity initiatives and favorable product mix.
Operating income was $54.0 million. Adjusted operating income of $56.9 million increased 19.3% from the same period last year as higher gross profit was partially offset by incremental workforce investments and higher selling expenses. Depreciation and amortization expense declined $0.3 million to $13.7 million while share-based compensation expense increased $0.5 million to $2.6 million in the quarter.
Adjusted EBITDA of $73.2 million, or 24.6% of net revenue, increased 14.9% from the same period last year driven by strong volume and favorable price/mix.
The Company’s effective tax rate was 19.6% compared to 108.6% in the prior year. Effective tax rates were significantly impacted by non-taxable changes in the fair value of the warrant liabilities, which drove a $1.2 million gain in the current year period, compared to a $25.0 million loss in the prior year period. The effective tax rates, excluding discrete items, were 27.7% and 23.2% in the current year and prior year periods, respectively.
Net income was $36.5 million. Adjusted net income of $34.0 million increased 18.3% from the same period last year. Diluted EPS was $0.25. Adjusted EPS was $0.25 compared to $0.21 in the prior year period as higher income was partially offset by higher share dilution from the warrants.
Cash flow from operations for the twelve months ended December 31, 2021 was $203.0 million compared to $159.2 million for the same period last year. Operating cash flow benefited from increased profitability as well as lapping prior-year costs related to the integration and conversion of Voortman’s operations.
Share Repurchase
The Company announced today that its Board of Directors has approved a stock repurchase authorization of up to $150 million shares of its Common Stock replacing its previous program, to provide additional flexibility to generate greater shareholder returns. The program has no expiration date and acquired shares of the Class A common stock will be held as treasury stock. The share repurchase program may be amended, suspended or discontinued at any time at the Company’s discretion and does not commit the Company to repurchase shares of its Class A common stock. The actual timing, number and value of shares to be purchased under the program will be determined by the Company at its discretion and will depend on a number of factors, including the performance of the Company’s stock price, general market and other conditions, applicable legal requirements, and compliance with the terms of the Company’s outstanding indebtedness.
2 The Company provides guidance only on a non-generally accepted accounting principles (non-GAAP) basis and does not provide a reconciliation of the Company's forward-looking financial expectations to the most directly comparable GAAP financial measure because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation; including adjustments that could be made for deferred taxes; remeasurement of the tax receivable agreement, transformation expenses and other non-operating gains or losses reflected in the Company's reconciliation of historic non-GAAP financial measures, the amount of which could be material. Please refer to the Reconciliation of Non-GAAP Financial Measures included in this press release for further information about the use of these measures.

2


Conference Call and Webcast
The Company will host a virtual Investor Day on Tuesday, March 1, 2022, from noon to approximately 3:00pm Eastern Standard Time (EST). Andy Callahan, President and Chief Executive Officer, will be joined by other members of the senior leadership team to discuss the Company’s quarterly and full year results, and review its long-term strategy to drive profitable growth based on its advantaged position in growing snacking occasions. A live question and answer session will follow management’s presentations. Questions for presenters may be entered at any time during the event on the webcast dashboard.
About Hostess Brands, Inc.
Hostess Brands, Inc. is a leading sweet snacks company focused on developing, manufacturing, marketing, selling and distributing snacks in North America sold under the Hostess® and Voortman® brands. The Company produces a variety of new and classic treats including iconic Hostess® Donettes®, Twinkies®, CupCakes, Ding Dongs® and Zingers®, as well as a variety of Voortman® cookies and wafers. For more information about Hostess Brands, Inc., please visit hostessbrands.com.
Forward-Looking Statements
This press release contains statements reflecting the Company’s views about its future performance that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. Forward-looking statements are generally identified through the inclusion of words such as “believes,” “expects,” “intends,” “estimates,” “projects,” “anticipates,” “will,” “plan,” “may,” “should,” or similar language. Statements addressing the Company’s future operating performance and statements addressing events and developments that the Company expects or anticipates will occur are also considered as forward-looking statements. All forward-looking statements included herein are made only as of the date hereof. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.
These statements inherently involve risks and uncertainties that could cause actual results to differ materially from those anticipated in such forward-looking statements. These risks and uncertainties include, but are not limited to, maintaining, extending and expanding the Company’s reputation and brand image; protecting intellectual property rights; leveraging the Company’s brand value to compete against lower-priced alternative brands; correctly predicting, identifying and interpreting changes in consumer preferences and demand and offering new products to meet those changes; operating in a highly competitive industry; the continued ability to produce and successfully market products with extended shelf life; the ability to pass cost increases on to our customers; the ability to maintain or add additional shelf or retail space for the Company’s products; our ability to identify or complete strategic acquisitions, alliances, divestitures or joint ventures; our ability to successfully integrate, achieve expected synergies and manage our acquired businesses and brands; the ability to drive revenue growth in key products or add products that are faster-growing and more profitable; adverse impact or disruption to our business caused by COVID-19 or future outbreaks of highly infectious or contagious diseases; volatility in commodity, energy, and other input prices and the ability to adjust pricing to cover increased costs; significant changes in the availability and pricing of transportation; dependence on major customers; supply chain disruptions; increased labor and employee related costs; strikes or work stoppages; product liability claims, product recalls, or regulatory enforcement actions; dependence on third parties for significant services; unanticipated business disruptions; geographic focus that could make the Company particularly vulnerable to economic and other events and trends in North America; consolidation of retail customers; unsuccessful implementation of business strategies to reduce costs; increased costs to comply with governmental regulation; failures, unavailability, or disruptions of the Company’s information technology systems; dependence on key personnel or a highly skilled and diverse workforce; the Company’s ability to finance indebtedness on terms favorable to the Company; and other risks as set forth from time to time in the Company’s Securities and Exchange Commission filings.
As a result of a number of known and unknown risks and uncertainties, the Company’s actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Risks and uncertainties are identified and discussed in Item 1A-Risk Factors in the Company’s Annual Report on Form 10-K for 2021 to be filed today. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are expressly qualified in their entirety by these risk factors. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.


3


HOSTESS BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands, except shares and per share data)
December 31,December 31,
ASSETS20212020
Current assets:
Cash and cash equivalents$249,159 $173,034 
Accounts receivable, net148,180 125,550 
Inventories52,813 49,348 
Prepaids and other current assets10,564 21,614 
Total current assets460,716 369,546 
Property and equipment, net335,305 303,959 
Intangible assets, net1,944,392 1,967,903 
Goodwill706,615 706,615 
Other assets, net19,283 17,446 
Total assets$3,466,311 $3,365,469 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Long-term debt and lease obligations payable within one year$14,170$13,811 
Tax receivable agreement obligations payable within one year11,60011,800 
Accounts payable68,10461,428 
Customer trade allowances52,74646,779 
Warrant liabilities861 
Accrued expenses and other current liabilities47,00955,715 
Total current liabilities193,629190,394
Long-term debt and lease obligations1,099,9751,113,037 
Tax receivable agreement obligations134,265144,744 
Deferred tax liability317,847295,009 
Other long-term liabilities1,6051,560 
Total liabilities1,747,321 1,744,744 
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 142,031,329 shares issued and 138,278,573 shares outstanding as of December 31, 2021 and 130,791,908 shares issued and 130,347,464 shares outstanding as of December 31, 202014 13 
Additional paid in capital1,303,254 1,281,018 
Accumulated other comprehensive loss(506)(10,407)
Treasury stock(59,172)(6,000)
Retained earnings475,400 356,101 
Stockholders’ equity1,718,990 1,620,725 
Total liabilities and stockholders’ equity $3,466,311 $3,365,469 


4


HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except shares and per share data)
Three Months EndedYear Ended
December 31,
2021
December 31,
2020
December 31,
2021
December 31,
2020
Net revenue$297,161 $256,043 $1,142,036 $1,016,609 
Cost of goods sold186,782 160,270 732,053 660,970 
Gross profit110,379 95,773 409,983 355,639 
Operating costs and expenses:
Advertising and marketing11,991 12,741 51,683 45,724 
Selling10,038 7,556 36,288 46,729 
General and administrative29,919 21,599 99,173 92,860 
Amortization of customer relationships5,877 6,177 23,510 26,510 
Business combination transaction costs — — — 4,282 
Tax receivable agreement remeasurement(1,409)150 (1,409)760 
Other operating expense— 3,318 — 3,464 
Total operating costs and expenses56,416 51,541 209,245 220,329 
Operating income 53,963 44,232 200,738 135,310 
Other expense:
Interest expense, net9,863 10,256 39,762 42,826 
Change in fair value of warrant liabilities(1,249)25,037 (566)(39,941)
Other expense (income)(78)1,220 1,730 3,723 
Total other expense8,536 36,513 40,926 6,608 
Income before income taxes45,427 7,719 159,812 128,702 
Income tax expense8,899 8,383 40,513 20,405 
Net income (loss)36,528 (664)119,299 108,297 
Less: Net income attributable to the non-controlling interest— 761 — 3,621 
Net income (loss) attributable to Class A shareholders$36,528 $(1,425)$119,299 $104,676 
Earnings (Losses) per Class A share:
Basic$0.27 $(0.01)$0.91 $0.84 
Diluted$0.25 $(0.01)$0.86 $0.51 
Weighted-average shares outstanding:
Basic134,247,010 127,959,039 131,571,733 124,927,535 
Diluted138,435,782 128,352,959 138,198,176 127,723,488 


5


HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
Year Ended
December 31,
2021
December 31,
2020
Operating activities
Net income$119,299 $108,297 
Depreciation and amortization51,681 54,940 
Impairment and loss on sale of assets— 3,329 
Debt discount (premium) amortization1,238 1,289 
Tax receivable agreement remeasurement(1,409)760 
Change in fair value of warrant liabilities(566)(39,941)
Unrealized loss (gain) on foreign currency (503)2,061 
Non-cash lease expense1,247 571 
Share-based compensation9,585 8,671 
Deferred taxes18,995 16,806 
Change in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable(22,728)4,434 
Inventories(3,465)5,824 
Prepaids and other current assets9,876 (5,301)
Accounts payable and accrued expenses13,723 1,900 
`Customer trade allowances6,056 (4,397)
Net cash provided by operating activities203,029 159,243 
   
Investing activities
Purchases of property and equipment(60,803)(51,983)
Acquisition of business, net of cash— (316,013)
Acquisition and development of software assets(4,622)(6,269)
Net cash used in investing activities(65,425)(374,265)
Financing activities
Repayments of long-term debt and financing lease obligations(11,167)(11,168)
Proceeds from long-term debt origination, net of fees paid— 136,888 
Distributions to non-controlling interest— (3,422)
Repurchase of warrants— (2,000)
Repurchase of common stock(53,172)(6,000)
Payment of taxes related to the net issuance of employee stock awards(1,767)(1,440)
Payments on tax receivable agreement(9,270)(10,327)
Cash received from exercise of options and warrants, net of fees14,121 690 
Net cash provided by (used in) financing activities(61,255)103,221 
Effect of exchange rate changes on cash and cash equivalents(224)(252)
Net increase (decrease) in cash and cash equivalents76,125 (112,053)
Cash and cash equivalents at beginning of period173,034 285,087 
Cash and cash equivalents at end of period$249,159 $173,034 
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest$38,567 $41,776 
Taxes paid$12,081 $5,825 
Supplemental disclosure of non-cash investing:
Accrued capital expenditures$2,244 $4,718 




6


HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Adjusted net revenue, adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted net income, adjusted net income margin, adjusted Class A net income, adjusted EBITDA, adjusted EBITDA margin, adjusted diluted shares and adjusted EPS collectively referred to as “Non-GAAP Financial Measures,” are commonly used in the Company’s industry and should not be construed as an alternative to net revenue, gross profit, operating income, net income, net income margin, net income attributed to Class A stockholders, diluted shares outstanding or earnings per share as indicators of operating performance (as determined in accordance with GAAP). These Non-GAAP Financial Measures may not be comparable to similarly titled measures reported by other companies. The Company has included these Non-GAAP Financial Measures because it believes the measures provide management and investors with additional information to measure the Company’s performance, estimate the Company’s value and evaluate the Company’s ability to service debt.
Non-GAAP Financial Measures are adjusted to exclude certain items that affect comparability. The adjustments are itemized in the tables below. You are encouraged to evaluate these adjustments and the reason the Company considers them appropriate for supplemental analysis. In evaluating adjustments, you should be aware that in the future, the Company may incur expenses that are the same as or similar to some of the adjustments set forth below. The presentation of Non-GAAP Financial Measures should not be construed as an inference that future results will be unaffected by unusual or recurring items.
The Company defines adjusted EBITDA as net income adjusted to exclude (i) interest expense, net, (ii) depreciation and amortization (iii) income taxes and (iv) share-based compensation, as further adjusted to eliminate the impact of certain items that the Company does not consider indicative of its ongoing operating performance. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of the Company’s results as reported under GAAP. For example, adjusted EBITDA:
does not reflect the Company’s capital expenditures, future requirements for capital expenditures or contractual commitments;
does not reflect changes in, or cash requirements for, the Company’s working capital needs;
does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’s debt; and
does not reflect payments related to income taxes, the tax receivable agreement or distributions to the non-controlling interest to reimburse its tax liability.


7


HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited, amounts in thousands, except per share data)
Three Months Ended December 31, 2021
Gross
 Profit
Gross MarginOperating IncomeNet
 Income
Net Income MarginDiluted
 EPS
GAAP results$110,379 37.1 %$53,963 $36,528 12.3 %$0.25 
Non-GAAP adjustments:
Foreign currency remeasurement— — — (327)(0.1)— 
Project consulting costs (1)— — 3,578 3,578 1.2 0.03 
Change in fair value of warrant liabilities— — — (1,249)(0.4)(0.01)
Tax receivable agreement remeasurement — — (1,409)(1,409)(0.5)— 
Other (2)176 0.1 755 1,004 0.3 0.01 
Remeasurement of tax liabilities— — — (3,357)(1.1)(0.02)
Tax impact of adjustments— — — (769)(0.3)(0.01)
Adjusted Non-GAAP results$110,555 37.2 %$56,887 33,999 11.4 $0.25 
Income tax13,025 4.4 
Interest expense9,863 3.3 
Depreciation and amortization13,689 4.6 
Share-based compensation2,580 0.9 
Adjusted EBITDA$73,156 24.6 %

(1) Project consulting costs are included in general and administrative on the consolidated statement of operations.
(2) Costs related to certain corporate initiatives, including $0.5 million of Voortman acquisition related costs. Of the total $1.0 million, $0.2 million is included in cost of goods sold, $0.6 million is included in general and administrative and $0.2 million is included in other non-operating expenses.


8


HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited, amounts in thousands, except per share data)
Three Months Ended December 31, 2020
Gross
 Profit
Gross MarginOperating IncomeNet
 Income (Loss)
Net Income (Loss) MarginClass A Net Income (Loss)Diluted SharesDiluted
 EPS
GAAP results$95,773 37.4 %$44,232 $(664)(0.3)%$(1,425)128,353 $(0.01)
Non-GAAP adjustments:
Foreign currency remeasurement— — — 671 0.3 649 — 0.01 
Acquisition, disposal and integration related costs (1)— — 309 309 0.1 299 — — 
Tax receivable agreement remeasurement— — 150 150 0.1 150 — — 
Impairment of property and equipment, intangible assets and goodwill— — 3,009 3,009 1.2 2,909 — 0.02 
Change in fair value of warrant liabilities— — — 25,037 9.8 25,037 4,050 0.19 
Other— — — 549 0.2 531 — — 
Remeasurement of tax liabilities— — — 767 0.3 767 — 0.01 
Tax impact of adjustments— — — (1,089)(0.4)(1,089)— (0.01)
Adjusted Non-GAAP results$95,773 37.4 %$47,700 28,739 11.3 $27,828 132,403 $0.21 
Income tax8,705 3.4 
Interest expense10,256 4.0 
Depreciation and amortization13,941 5.4 
Share-based compensation2,088 0.8 
Adjusted EBITDA$63,729 24.9 %

(1) Acquisition, disposal and integration costs are included in general and administrative expenses on the consolidated statement of operations.



9


HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited, amounts in thousands, except per share data)
Year Ended December 31, 2021
Gross
 Profit
Gross MarginOperating IncomeNet
 Income
Net Income MarginDiluted
 EPS
GAAP Results$409,983 35.9 %$200,738 $119,299 10.4 %$0.86 
Non-GAAP adjustments:
Foreign currency remeasurement— — — (505)— — 
Project consulting costs (1)— — 6,081 6,081 0.5 0.04 
Change in fair value of warrant liabilities— — — (566)— — 
Tax receivable agreement remeasurement— — (1,409)(1,409)(0.1)(0.01)
Other (2)704 0.1 2,107 4,338 0.4 0.03 
Remeasurement of tax liabilities— — — (3,357)(0.3)(0.03)
Tax impact of adjustments— — — (1,871)(0.2)(0.01)
Adjusted Non-GAAP results$410,687 36.0 %$207,517 122,010 10.7 $0.88 
Income tax45,741 4.0 
Interest expense39,762 3.5 
Depreciation and amortization51,681 4.5 
Share-based compensation9,585 0.8 
Adjusted EBITDA$268,779 23.5 %

(1) Project consulting costs are included in general and administrative on the consolidated statement of operations.
(2) Costs related to certain corporate initiatives, including $2.8 million of Voortman acquisition related costs. Of the total $4.3 million, $0.7 million is included in cost of goods sold, $1.4 million is included in general and administrative and $2.2 million is included in other non-operating expenses.




10


HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited, amounts in thousands, except per share data)
Year Ended December 31, 2020
Net RevenueGross
 Profit
Gross MarginOperating IncomeNet
 Income
Net Income MarginClass A Net IncomeDiluted
 EPS
GAAP results$1,016,609 $355,639 35.0 %$135,310 $108,297 10.7 %$104,676 $0.51 
Non-GAAP adjustments:
Foreign currency remeasurement— — — — 2,065 0.2 1,966 0.02 
Acquisition, disposal and integration related costs (1)6,821 7,963 0.5 29,166 29,166 2.7 27,569 0.22 
Facility transition costs (2)— 3,681 0.4 5,710 5,710 0.6 5,396 0.04 
Impairment of property and equipment— — — 3,009 3,009 0.3 2,909 0.02 
Tax receivable agreement remeasurement— — — 760 760 0.1 760 — 
COVID-19 costs (3)— 2,082 0.2 2,388 2,388 0.2 2,257 0.02 
Change in fair value of warrant liabilities— — — — (39,941)(3.9)(39,941)— 
Other— — — 100 1,766 0.2 1,681 0.01 
Remeasurement of tax liabilities— — — — (455)(0.1)(455)— 
Tax impact of adjustments— — — — (10,961)(1.1)(10,961)(0.09)
Adjusted Non-GAAP results$1,023,430 $369,365 36.1 %$176,443 101,804 9.7 $95,857 $0.75 
Income tax31,821 3.1 
Interest expense42,826 4.2 
Depreciation and amortization54,940 5.4 
Share-based compensation8,671 0.9 
Adjusted EBITDA$240,062 23.5 %

(1) Adjustments to net revenue represent initial slotting fees paid to to customers to obtain space in customer warehouses for the Voortman transition. Adjustments to operating costs included $8.0 million of selling expense, $8.9 million of general and administrative expenses and $4.3 million of business combination transaction costs on the consolidated statement of operations.
(2) Facility transition costs are included in general and administrative expenses on the consolidated statement of operations.
(3) COVID-19 costs are included in costs of goods sold and general and administrative expenses on the consolidated statement of operations. Total COVID-19 non-GAAP adjustments primarily consist of costs of incremental cleaning and sanitation, personal protective equipment and employee bonuses in the first half of 2020.

11
hostessinvestordeck2021q
Investor Presentation MARCH 1, 2022


 
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 risks and uncertainties. Forward-looking statements are generally identified through the inclusion of words such as “believes,” “expects,” “intends,” “estimates,” “projects,” “anticipates,” “will,” “plan,” “may,” “should,” or similar language. Statements addressing our future operating performance and statements addressing events and developments that we expect or anticipate will occur are also considered forward-looking statements. All forward looking statements included herein are made only as of the date hereof. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. These statements inherently involve risks and uncertainties that could cause actual results to differ materially from those anticipated in such forward-looking statements. These risks and uncertainties include, but are not limited to; our ability to maintain, extend or expand our reputation and brand image; failing to protect our intellectual property rights; our ability to leverage our brand value to compete against lower-priced alternative brands; our ability to correctly predict, identify and interpret changes in consumer preferences and demand and offering new products to meet those changes; our ability to operate in a highly competitive industry; our ability to maintain or add additional shelf or retail space for our products; our ability to continue to produce and successfully market products with extended shelf life; our ability to successfully integrate, achieve expected synergies and manage our acquired businesses and brands; our ability to drive revenue growth in our key products or add products that are faster-growing and more profitable; volatility in commodity, energy, and other input prices and our ability to adjust our pricing to cover any increased costs; the availability and pricing of transportation to distribute our products; our dependence on our major customers; our geographic focus could make us particularly vulnerable to economic and other events and trends in North America; consolidation of retail customers; increased costs to comply with governmental regulation; general political, social and economic conditions; increased healthcare and labor costs; the fact that a portion of our workforce belongs to unions and strikes or work stoppages could cause our business to suffer; product liability claims, product recalls, or regulatory enforcement actions; unanticipated business disruptions; dependence on third parties for significant services; inability to identify or complete strategic acquisitions; our insurance not providing adequate levels of coverage against claims; failures, unavailability, or disruptions of our information technology systems; departure of key personnel or a highly skilled and diverse workforce; and our ability to finance our indebtedness on terms favorable to us; and other risks as set forth under the caption “Risk Factors” from time to time in our Securities and Exchange Commission filings. The impact of COVID-19 may also exacerbate these risks, any of which could have a material effect on the Company. This situation is changing rapidly and additional impacts may arise that the Company is not aware of currently. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company's behalf are expressly qualified in their entirety by these risk factors. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Industry and Market Data In this Investor Presentation, Hostess Brands relies on and refers to information and statistics regarding market shares in the sectors in which it competes and other industry data. Hostess Brands obtained this information and statistics from third-party sources, including reports by market research firms, such as Nielsen. All prior period market data in this presentation reflects the restatement of convenience channel data executed by Nielsen during 2020. Additionally, prior period Nielsen data was adjusted to exclude the Cloverhill® and Big Texas® brands in the periods they were not owned by Hostess. Hostess Brands has supplemented this information where necessary with information from discussions with Hostess customers and its own internal estimates, taking into account publicly available information about other industry participants and Hostess Brands’ management’s best view as to information that is not publicly available. Use of Non-GAAP Financial Measures Adjusted net revenue, adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted net income, adjusted net income margin, adjusted Class A net income, adjusted diluted shares and adjusted EPS collectively referred to as “Non-GAAP Financial Measures,” are commonly used in the Company’s industry and should not be construed as an alternative to net revenue, gross profit, operating income, net income, net income attributed to Class A stockholders, diluted shares outstanding or earnings per share as indicators of operating performance (as determined in accordance with GAAP). These Non-GAAP financial measures exclude certain items included in the comparable GAAP financial measure. This Investor Presentation also includes non-GAAP financial measures, including earnings before interest, taxes, depreciation, amortization and other adjustments to eliminate the impact of certain items that we do not consider indicative of our ongoing performance (“Adjusted EBITDA”) and Adjusted EBITDA Margin. Adjusted EBITDA Margin represents Adjusted EBITDA divided by adjusted net revenues. Hostess Brands believes that these Non-GAAP Financial Measures provide useful information to management and investors regarding certain financial and business trends relating to Hostess Brands’ financial condition and results of operations. Hostess Brands’ management uses these Non-GAAP Financial Measures to compare Hostess Brands’ performance to that of prior periods for trend analysis, for purposes of determining management incentive compensation, and for budgeting and planning purposes. Hostess Brands believes that the use of these Non-GAAP Financial Measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. Management of Hostess Brands does not consider these Non-GAAP Financial Measures in isolation or as an alternative to financial measures determined in accordance with GAAP. Other companies may calculate non-GAAP measures differently, and therefore Hostess Brands’ Non-GAAP Measures may not be directly comparable to similarly titled measures of other companies. The Company does not provide a reconciliation of the forward-looking information to the most directly comparable GAAP measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. Totals in this Investor Presentation may not add up due to rounding. 2 Disclaimer


 
Outstanding Fourth Quarter and Full Year Performance 3 Full year 2021 results above our raised expectations  Strong topline momentum with double digit net revenue growth for both the full year and the fourth quarter  Accelerating market share gains as our share of the Sweets Baked Goods category increased to 21.5%* with solid POS sales trends across all channels  Strong contribution from new products as our exciting innovation pipeline headlined by Baby Bundts and Muff’n Stix continues to gain traction  Double digit EBITDA and EPS growth as we continue to successfully manage an increasingly challenging operating environment  Successful execution of multiple pricing actions to offset inflationary headwinds, including double digit inflation in the second half  Net debt leverage falls to the low-end of our targeted 3-4x range, while completion of the warrants exercise simplified our capital structure *Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Point of Sale and Market Share, 13 weeks ending 1/1/22


 
4 Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures. See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP financial measures and reconciliations to the comparable GAAP measures. Double Digit Growth in the Fourth Quarter $63.7 $73.2 Q4 2020 Q4 2021 $256.0 $297.2 Q4 2020 Q4 2021 Net Revenue (in millions) Adjusted EBITDA (in millions) 16.1% growth 14.9% growth $0.21 $0.25 Q4 2020 Q4 2021 Adjusted EPS (in millions) 19.0% growth Outstanding execution in an increasingly challenging operating environment


 
5 Q4 Revenue Growth Driven by Hostess® Three Months Ended Twelve Months Ended December 31, Change December 31, Change ($ in millions) 2021 2020 $ % 2021 2020 $ % Sweet Baked Goods $266.6 $227.3 $39.3 17.3% $1,025.5 $920.4 $105.1 11.4% Cookies 30.6 28.7 1.9 6.6% 116.5 103.0 13.5 13.1% Total Adjusted Net Revenue $297.2 $256.0 $41.2 16.1% $1,142.0 $1,023.4 $118.6 11.6% Adjusted Net Revenue is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP financial measures. Double-digit annual growth across our portfolio of sweet baked goods and cookies


 
26.2% 2.8% 4.1% 6 Ideally Positioned to Benefit from Evolving Consumer Behaviors 22.2% 6.9% 13.4%Multi-Pack Point-of-Sale Single-Serve Point-of-Sale Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Q4 2021 – 13 weeks ended 1/1/2022 and prior year comparable periods. Q4 2020 Q4 2021 Two-year stack accelerated as Hostess® leading single-serve category growth At-home snacking remains elevated; Hostess® leading multi-pack growth Q4 2019 Two-Year Stack Growth 29.0% Two-Year Stack Growth 29.1% Leading Sweet Baked Goods category growth across both single-serve and multi-pack Q4 2020 Q4 2021 Q4 2019


 
13.5% 6.3% 13.2% 43.1% 28.2% 32.3% Breakfast Pastries Donut Total Breakfast Category Hostess 7 Strong Momentum in Breakfast Driven by on-trend innovation, superior retail execution, and growing morning snacking occasion Retail Dollar Growth QTD vs YA Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Point of sale (“POS”) changes for the 13 weeks ended 1/1/2022 as compared to the comparable period in the prior year.


 
Market Share Gains Across All Channels 8 Broad-based gains driving growth ahead of the Sweet Baked Goods category Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Point of sale (“POS”) and market share data changes for the 13 weeks ended 1/1/2022 as compared to the comparable period in the prior year. Prior period Nielsen data reflects the restatement of convenience channel data executed by Nielsen during 2020. $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Convenience Grocery Mass Dollar Club Drug 13 WE 1/1/2021 13 WE 1/1/2022 30.3% 15.6% 12.1% 32.9% 23.8% 60.2% 288 201 49 155 248 988 POS Change 27.1% 22.7% 16.6% 11.2% 49.7% 32.9% PO S D ol la rs (I n M illi on s) $323M $401M Total Hostess 24.1% 21.5% 218 Market Share Market Share Change (bps)


 
Consistent Track Record of Market Share Gains 9 Outstanding execution in 2021 drives 187 basis points of share gains in Sweet Baked Goods category Market Share (52 Weeks) 2017 2018 2019 18.0% 19.6% 19.5% Point-of-Sale (52 weeks, in millions) 2017 2018 2019 $1,123 $1,275 $1,354 17.0% 2020 $1,143 2020 Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Point of Sale and Market Share, 52 weeks ending 1/6/18, 1/5/19, 1/4/20, 1/2/21 1/1/22. Prior period Nielsen data reflects the restatement of convenience channel data executed by Nielsen during 2020. Additionally, prior period Nielsen data was adjusted to exclude the Cloverhill® and Big Texas® brands in the periods they were not owned by Hostess (2017 – 2018). $1,549 2021 21.3% 2021


 
23% 24% 25% 26% 27% 28% 29% 30% $450 $500 $550 $600 $650 $700 2018 2019 2020 2021 POS Market Share Accelerating Growth in the Key C-Store Channel 10 Hostess market share increased to all-time high levels Convenience Store POS and Market Share Source: Nielsen, Total Nielsen Universe for the Company in the Convenience channel within the SBG Category for the 52 weeks ended 1/1/2022 and the comparable prior year periods and reflects a scheduled one-week shift in current and prior-year reporting periods performed by Nielsen in April 2021 to better coincide with calendar periods. M arket SharePO S D ol la rs (I n M illi on s)


 
Net Debt Leverage Near the Low End of Targeted Range 11 Provides Flexibility to Invest in Growth and Generate Shareholder Value 4.0x** * Net Leverage ratio is net debt (total long-term debt less lease obligations, unamortized debt premiums and cash and cash equivalents) divided by Adjusted EBITDA for the trailing twelve-month period. Adjusted EBITDA is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP financial measures. 3.3x Net Leverage Ratio* History of successfully reducing leverage while increasing shareholder value through accretive acquisitions and disciplined investments for growth 3.9x 3.1x Q4 2020 Target Long- Term Leverage 3.0-4.0x Q4 2021


 
Consolidated Financial Results 12 Double-Digit Net Revenue and Earnings Growth Adjusted Net Revenue, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS are non-GAAP financial measures. See “Use of Non- GAAP Financial Measures” in the Appendix for an explanation of all non-GAAP financial measures and reconciliations to the comparable GAAP measures. Three Months Ended Twelve Months Ended December 31, Change December 31, Change ($ in millions, except per share data) 2021 2020 $ % 2021 2020 $ % Adjusted Net Revenue $297.2 $256.0 $41.2 16.1% $1,142.0 $1,023.4 $118.6 11.6% Adjusted Gross Profit $110.6 $95.8 $14.8 15.4% $410.7 $369.4 $41.3 11.2% Adjusted Gross Margin 37.2% 37.4% (21bps) 36.0% 36.1% (13bps) Adjusted Operating Income $56.9 $47.7 $9.2 19.3% $207.5 $176.4 $31.1 17.6% Adjusted EBITDA $73.2 $63.7 $9.5 14.9% $268.8 $240.1 $28.7 12.0% Adjusted EBITDA Margin 24.6% 24.9% (25bps) 23.5% 23.5% 8bps Adjusted EPS $0.25 $0.21 $0.04 19.0% $0.88 $0.75 $0.13 17.3%


 
Introducing 2022 Guidance ($ in millions, except EPS) 2021 Actuals 2022 Guidance Net Revenue $1,142.0 5% - 8% Growth Adjusted EBITDA $268.8 $280 – $290 (Growth of 4% – 8%) Adjusted EPS $0.88 $0.93 – $0.98* (Growth of 6% – 11%) Capital Expenditures $65.4 $120 - $140 (Including Capacity Expansion) Income Tax Rate 27.3% 27% 13 Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures. See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP financial measures. The Company does not provide a reconciliation of forward-looking financial expectations to the most directly comparable GAAP financial measure because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation; including adjustments that could be made for deferred taxes; remeasurement of the tax receivable agreement, transformation expenses and other non-operating gains or losses reflected in the Company's reconciliation of historic non-GAAP financial measures, the amount of which could be material. Please refer to the Reconciliation of Non-GAAP Financial Measures included in the Appendix for further information about the use of these measures. *Based on weighted average shares outstanding of 137 - 138 million.


 
14 Appendix


 
Non-GAAP Reconciliations 15 1. Acquisition, disposal and integration operating costs are included in general and administrative expenses on the consolidated statement of operations. 2. Project consulting costs are included in general and administrative expenses on the consolidated statement of operations. 3. In 2021, costs related to certain corporate initiatives, including $0.5 million of Voortman acquisition related costs. Of the total $1.0 million, $0.2 million is included in cost of goods sold, $0.6 million is included in general and administrative and $0.2 million is included in other non-operating expenses.


 
16 Non-GAAP Reconciliations 1. Acquisition, disposal and integration operating costs include $8.0 million of selling expense, $8.6 million of general and administrative expenses and $4.3 million of business combination transaction costs on the consolidated statement of operations. 2. COVID-19 costs are included in cost of goods sold and general and administrative expenses on the consolidated statement of operations. Total COVID-19 non-GAAP adjustments primarily consist of costs of incremental cleaning and sanitation, personal protective equipment and employee bonuses. 3. Project consulting costs are included in general and administrative expenses on the consolidated statement of operations. 4. In 2021, costs related to certain corporate initiatives, including $2.8 million of Voortman acquisition related costs. Of the total $4.3 million, $0.7 million is included in cost of goods sold, $1.4 million is included in general and administrative and $2.2 million is included in other non-operating expenses.