twnk-20210804
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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): August 4, 2021
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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
Warrants, each exercisable for a half share of Class A Common StockTWNKWThe 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 August 4, 2021, Hostess Brands, Inc. (the "Company") issued a press release announcing financial results for the three and six months ended June 30, 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 August 4, 2021, the Company disseminated an investor presentation to be used in connection with the earnings call. 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: August 4, 2021
By:
/s/ Brian T. Purcell
Name:
Brian T. Purcell
Title:
Executive Vice President, Chief Financial Officer





Document

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Hostess Brands, Inc. Announces Strong Second Quarter 2021 Financial Results
Double-Digit Net Revenue Growth Driven by over 200 basis points of Market Share Expansion
Raises Full-Year 2021 Net Revenue and Earnings Guidance

LENEXA, KS, August 4, 2021 - Hostess Brands, Inc. (NASDAQ: TWNK, TWNKW) (the “Company”) today reported its financial results for the three and six months ended June 30, 2021.

“We had another excellent quarter marked by double-digit net revenue growth as our investments for growth are paying off. Our top-line remains strong while lapping the Voortman pipeline fill from 2020. Our category-leading point-of-sale growth and market share gains within the breakfast, all-day snacking and cookies consumer segments are driven by robust new product innovation and strong execution as we leverage our broad-based distribution strength across channels,” commented Andy Callahan, the Company’s President and Chief Executive Officer.

He continued, “Our outstanding results and the ongoing growth momentum in both at-home and on-the-go snacking occasions makes us optimistic for the balance of the year, enabling us to raise our full year financial outlook and delever to 3x by the end of the year. With our price realization, other revenue management activities and additional productivity initiatives we are well positioned to offset rising inflation. We are confident in our ability to continue to manage second half margins while building on our solid foundation for future growth through investments in capabilities, advertising and marketing to drive shareholder value.”

Second Quarter 2021 Financial Highlights1

Net revenue of $291.5 million increased 13.8%. Adjusted net revenue was $291.5 million, an increase of 10.8% from the same period last year, reflecting strong Hostess® branded products performance in the convenience, grocery, and dollar channels.
Gross profit was $105.1 million, an increase of 17.6%. On an adjusted basis, gross profit increased 7.3% overcoming rising inflation and a difficult year on year comparison as we lapped the Voortman pipeline fill.
Net income was $29.8 million or $0.21 per diluted share. Adjusted net income increased 10.3% to $32.2 million and adjusted EPS of $0.23 compared to $0.22 in the prior year period.
Adjusted EBITDA increased 5.1% to $68.4 million, or 23.5% of adjusted net revenue. The increase was driven primarily by higher Hostess® branded sales, favorable product mix and operating efficiencies more than offsetting inflation and investments made for future growth.
Cash and cash equivalents were $218.8 million as of June 30, 2021. Net leverage ratio declined to 3.4x driven by improved operating cash flow.
Raising full year 2021 guidance for revenue growth to 7.5% - 9.0% and adjusted EBITDA to $260 million - $268 million.

Other Highlights

Hostess manufacturer point-of-sale (“POS”) increased 11.4% and its share of the Sweet Baked Goods category increased by 207 basis points to 21.8%.
Hostess® branded POS grew 12.4% driven by solid core performance and strong contribution from our new product innovation, including great consumer response to our new Baby Bundt products.
Voortman® branded POS grew 23.7% reflecting robust consumer demand and execution of the Company's growth initiatives.
Executed pricing initiatives with realization to begin in the second half of year.
1This press release contains certain non-GAAP financial measures, including adjusted net revenue, adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted EBITDA, adjusted net income, adjusted net income attributed to Class A stockholders 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 second quarter of 2020. 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 category as reported by Nielsen but do not include other products sold outside of the SBG category. All market data in this press release refer to the thirteen week period ended July 3, 2021 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. The Company's leverage ratio is net debt (total long-term debt less cash) divided by the trailing twelve months adjusted EBITDA.


Launched new “Live Your Mostess”® national advertising campaign in June 2021 across multiple retail and consumer digital platforms.
Published first Hostess Brands Corporate Responsibility report in June 2021 demonstrating our commitment to enhancing transparency into our ongoing ESG initiatives.
Advanced the installation of new cake line investment to expand our capacity with ramp up expected in the second half of 2021.
Company repurchased approximately 1.5 million shares for $25 million under its previously authorized $100 million share repurchase authorization.


Guidance and Outlook

The Company is raising its full year 2021 guidance as follows:
Updated GuidanceInitial Guidance
Adjusted net revenue growth7.5% - 9.0%3.0% - 4.5%
Adjusted EBITDA$260 - $268 million$255 - $265 million
Adjusted EPS (diluted)$0.83 - $0.87*$0.80 - $0.85
Leverage ratio~3x~3x
Capital expenditures$60 - $65 million$60 - $65 million
Effective tax rate27.5%27.0%
*Based on weighted average shares outstanding of 139 million, which includes approximately 8 million shares of dilution due to the warrants.

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.

Second Quarter 2021 Compared to Second Quarter 20201

Net revenue was $291.5 million, an increase of 13.8%, or $35.3 million, compared to $256.2 million. Adjusted net revenue was $291.5 million, an increase of 10.8%, compared to $263.0 million in the prior year period. Adjusted net revenue growth was primarily driven by sweet baked goods net revenue, which increased $29.9 million or 12.9%. This growth was driven by double-digit POS growth in grocery, dollar and convenience channels with continued momentum of single-serve products and innovation. Voortman adjusted net revenue of $29.0 million was down $1.4 million or 4.6% due to lapping of last year's inventory pipeline fill to support Voortman's transition to the warehouse distribution model. Voortman POS trends remained strong with 23.7% growth in the quarter.

Gross profit was $105.1 million, or 36.1% of net revenue compared to 34.9% in the same period last year. Adjusted gross profit margin of 36.1% declined from 37.3% in the same period last year as the year-ago period benefited from a temporary margin lift due to Voortman's pipeline fill. Adjusted gross profit increased 7.3% as higher volumes, favorable product mix and productivity initiatives offset commodity, labor and transportation costs inflation.

Operating income was $53.1 million. Adjusted operating income of $54.2 million increased 10.6% from the same period last year as higher gross profit was partially offset by higher general and administrative investments as well as advertising and marketing spending to support top-line growth.
Adjusted EBITDA of $68.4 million, or 23.5% of adjusted net revenue, increased 5.1% from the same period last year driven by strong Hostess® branded volume and favorable product mix. Depreciation and amortization expense declined $1.2 million to $12.5 million and share-based compensation expense declined $0.8 million to $1.6 million in the quarter.
2


The Company's effective tax rate was 28.2% compared to 84.8% in the prior year, which reflected a non-taxable $16.4 million change in fair value of warrant liabilities and the benefit from non-controlling interest in the prior year period. The effective tax rate, excluding discrete items was 27.3% in the current quarter.
Net income was $29.8 million compared to $1.0 million. Adjusted net income of $32.2 million increased 10.3% from the same period last year. GAAP diluted EPS was $0.21. Adjusted EPS was $0.23 compared to $0.22 in the prior year period as higher income was partially offset by higher share dilution from the warrants.
Cash from operations for the six months ended June 30, 2021 was $87.3 million compared to $60.7 million for the same period last year. Operating cash flow benefited from current year improvement in profitability as well as lapping prior-year costs related to the integration and conversion of Voortman's operations, partially offset by an increase in working capital.
Conference Call and Webcast
The Company will host a conference call and webcast with an accompanying presentation today, August 4, 2021 at 4:30 p.m. EDT to discuss the results for the second quarter. Investors interested in participating in the live call can dial 877-413-2411 from the U.S. and 201-389-0882 internationally. A telephone replay will be available approximately two hours after the call concludes through Wednesday, August 18, 2021, by dialing 844-512-2921 from the U.S., or 412-317-6671 from international locations, and entering confirmation code 13717991. The simultaneous, live webcast and presentation will be available on the Investor Relations section of the Company’s website at www.hostessbrands.com. The webcast will be archived for 30 days.

1This press release contains certain non-GAAP financial measures, including adjusted net revenue, adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted EBITDA, adjusted net income 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 second quarter of 2020.
3


About Hostess Brands, Inc.

Hostess Brands, Inc. is a leading packaged food company focused on developing, manufacturing, marketing, selling and distributing snacks in North America sold under the Hostess®, Dolly Madison®, Cloverhill®, Big Texas®, and Voortman® brands. The Hostess® brand’s history dates back to 1919, when the Hostess® CupCake was introduced to the public, followed by Twinkies® in 1930. Today, the Company produces a variety of new and classic treats in addition to Twinkies® and CupCakes, including Donettes®, Ding Dongs®, Zingers®, Danishes, Honey Buns and Coffee Cakes. In January 2020, the Company acquired Voortman Cookies Limited which produces a variety of cookies and wafers products, including sugar-free products under the Voortman® brand. For more information about Hostess® products and Hostess Brands, please visit hostesscakes.com. Follow Hostess on Twitter: @Hostess_Snacks; on Facebook: facebook.com/Hostess; on Instagram: Hostess_Snacks; and on Pinterest: pinterest.com/hostesscakes.

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; 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 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/A for 2020 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 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.
4


HOSTESS BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands, except shares and per share data)
June 30,
2021
December 31,
2020
ASSETS
Current assets:

Cash and cash equivalents$218,807 $173,034 
Accounts receivable, net148,726 125,550 
Inventories52,164 49,348 
Prepaids and other current assets13,150 21,614 
Total current assets432,847 369,546 
Property and equipment, net311,535 303,959 
Intangible assets, net1,956,147 1,967,903 
Goodwill706,615 706,615 
Other assets, net17,976 17,446 
Total assets$3,425,120 $3,365,469 

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Long-term debt and lease obligations payable within one year$14,103 $13,811 
Tax receivable agreement payments payable within one year10,000 11,800 
Accounts payable 67,751 61,428 
Customer trade allowances47,620 46,779 
Warrant liabilities1,316 861 
Accrued expenses and other current liabilities44,514 55,715 
Total current liabilities185,304 190,394 
Long-term debt and lease obligations1,107,021 1,113,037 
Tax receivable agreement obligations137,274 144,744 
Deferred tax liability310,992 295,009 
Other long-term liabilities1,585 1,560 
Total liabilities1,742,176 1,744,744 
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 130,459,939 and 130,347,464 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively13 13 
Additional paid in capital1,297,670 1,281,018 
Accumulated other comprehensive loss(4,728)(10,407)
Retained earnings412,680 356,101 
Treasury stock(22,691)(6,000)
Stockholders’ equity1,682,944 1,620,725 
Total liabilities and stockholders’ equity$3,425,120 $3,365,469 

5


HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except shares and per share data)
Three Months EndedSix Months Ended
June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Net revenue$291,485 $256,226 $556,906 $499,711 
Cost of goods sold186,379 166,852 356,281 331,000 
Gross profit105,106 89,374 200,625 168,711 
Operating costs and expenses:
Advertising and marketing
13,144 11,158 24,925 21,221 
Selling expense
9,454 12,378 18,084 30,498 
General and administrative
23,504 24,153 45,689 49,348 
Amortization of customer relationships
5,878 7,110 11,756 13,594 
Business combination transaction costs— — — 4,282 
Other operating expense— — — 27 
Total operating costs and expenses51,980 54,799 100,454 118,970 
Operating income 53,126 34,575 100,171 49,741 
Other expense (income):
Interest expense, net9,954 10,580 19,971 22,305 
Change in fair value of warrant liabilities531 16,382 455 (62,718)
Other expense1,067 1,132 1,430 1,685 
Total other expense (income)11,552 28,094 21,856 (38,728)
Income before income taxes41,574 6,481 78,315 88,469 
Income tax expense11,727 5,493 21,736 5,741 
Net income 29,847 988 56,579 82,728 
Less: Net income attributable to the non-controlling interest— 1,200 — 1,492 
Net income (loss) attributable to Class A stockholders$29,847 $(212)$56,579 $81,236 
Earnings per Class A share:
Basic$0.23 $— $0.43 $0.66 
Diluted$0.21 $— $0.41 $0.15 
Weighted-average shares outstanding:
Basic131,354,059 123,638,723 131,096,686 123,381,190 
Diluted138,925,489 123,818,404 138,026,854 125,312,658 

6


HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
Six Months Ended
June 30, 2021June 30, 2020
Operating activities
Net income$56,579 $82,728 
Depreciation and amortization25,223 26,477 
Debt discount amortization621 664 
Change in fair value of warrant liabilities455 (62,718)
Unrealized foreign exchange losses73 996 
Non-cash lease expense659 641 
Share-based compensation4,363 4,503 
Deferred taxes13,932 3,973 
Loss on sale of assets— 128 
Change in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable(23,194)(11,320)
Inventories(2,816)4,135 
Prepaids and other current assets 8,844 (1,091)
Accounts payable and accrued expenses1,735 3,323 
Customer trade allowances827 8,242 
Net cash provided by operating activities87,301 60,681 
   
Investing activities
Purchases of property and equipment(20,051)(23,376)
Acquisition of business, net of cash acquired— (318,427)
Acquisition and development of software assets(2,129)(3,402)
Net cash used in investing activities(22,180)(345,205)
Financing activities
Repayments of long-term debt and lease obligations(5,584)(5,584)
Proceeds from long-term debt origination, net of fees paid— 136,888 
Distributions to non-controlling interest— (1,977)
Repurchase of common stock(16,691)— 
Tax payments related to issuance of shares to employees(1,235)(1,036)
Cash received from exercise of options and warrants13,524 563 
Payments on tax receivable agreement(9,270)(1,279)
Net cash provided by (used in) financing activities(19,256)127,575 
Effect of exchange rate changes on cash and cash equivalents(92)(359)
Net increase (decrease) in cash and cash equivalents45,773 (157,308)
Cash and cash equivalents at beginning of period173,034 285,087 
Cash and cash equivalents at end of period$218,807 $127,779 
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest$19,451 $21,885 
Net taxes refunded$(1,506)$(577)
Supplemental disclosure of non-cash investing:
Accrued capital expenditures$5,046 $1,542 



7


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

Adjusted net revenue, adjusted gross profit, adjusted gross profit margin, adjusted operating income, adjusted net income, adjusted Class A net income, adjusted EBITDA, 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 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.

8


HOSTESS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited, amounts in thousands, except per share data)
Three Months Ended June 30, 2021
Gross ProfitOperating IncomeNet IncomeDiluted EPS
GAAP Results$105,106 $53,126 $29,847 $0.21 
Non-GAAP adjustments:
Foreign currency impacts— — (52)— 
Change in fair value of warrant liabilities— — 531 — 
Other (1)158 1,066 2,184 0.02 
Tax impact of adjustments— — (329)— 
Adjusted Non-GAAP results$105,264 $54,192 32,181 $0.23 
Income tax12,056 
Interest expense9,954 
Depreciation and amortization12,532 
Share-based compensation1,640 
Adjusted EBITDA$68,363 
(1) Primarily professional service fees related to certain corporate initiatives, of which $0.2 million is included in cost of goods sold, $0.9 million is included in general and administrative expenses and $1.1 million is included in other non-operating expenses.

Three Months Ended June 30, 2020
Net RevenueGross ProfitOperating IncomeNet IncomeClass A Net IncomeDiluted SharesDiluted EPS
GAAP Results$256,226 $89,374 $34,575 $988 $(212)123,818 $— 
Non-GAAP adjustments:
Foreign Currency impacts— — — 710 676 — 0.01 
Acquisition, disposal and integration related costs (1)6,821 6,943 12,360 12,360 11,767 — 0.09 
COVID-19 costs (2)— 1,831 2,138 2,138 2,035 — 0.02 
Change in fair value of warrant liabilities— — 16,382 16,382 758 0.13 
Other— — (46)381 363 — — 
Tax impact of adjustments— — — (3,722)(3,543)— (0.03)
Adjusted Non-GAAP results$263,047 $98,148 $49,027 29,237 $27,468 124,576 $0.22 
Income tax9,215 
Interest expense10,580 
Depreciation and amortization13,656 
Share-based compensation2,425 
Adjusted EBITDA$65,113 

(1) Acquisition, disposal and integration related operating costs include $1.6 million of selling expense and $3.9 million of general and administrative expenses on the consolidated statement of operations.
(2) COVID-19 operating costs are included in 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.

9


Six Months Ended June 30, 2021
Gross ProfitOperating IncomeNet IncomeDiluted EPS
GAAP Results$200,625 $100,171 $56,579 $0.41 
Non-GAAP adjustments:
Foreign currency impacts— — 71 — 
Change in fair value of warrant liabilities— — 455 — 
Other (1)158 1,066 2,422 0.02 
Tax impact of adjustments— — (428)— 
Adjusted Non-GAAP results$200,783 $101,237 59,099 $0.43 
Income tax22,164 
Interest expense19,970 
Depreciation and amortization25,223 
Share-based compensation4,363 
Adjusted EBITDA$130,819 
(1) Primarily professional service fees related to certain corporate initiatives, of which $0.2 million is included in cost of goods sold, $0.9 million is included in general and administrative expenses and $1.3 million is included in other non-operating expenses.

Six Months Ended June 30, 2020
Net RevenueGross ProfitOperating IncomeNet IncomeClass A Net IncomeDiluted EPS
GAAP Results$499,711 $168,711 $49,741 $82,728 $81,236 $0.15 
Non-GAAP adjustments:
Foreign currency impacts— — — 996 946 0.01 
Acquisition, disposal and integration related costs (1)6,821 7,963 27,446 27,301 25,856 0.21 
Facility transition costs — 3,681 5,711 5,711 5,385 0.04 
COVID-19 Costs (2)— 2,082 2,388 2,388 2,271 0.02 
Other— — (20)674 655 — 
Change in fair-value of warrant liabilities— — — (62,718)(62,718)— 
Tax impact of adjustments— — — (9,236)(9,057)(0.07)
Adjusted Non-GAAP results$506,532 $182,437 $85,266 47,844 $44,574 $0.36 
Income tax14,977 
Interest expense22,305 
Depreciation and amortization26,477 
Share-based compensation4,502 
Adjusted EBITDA$116,105 
(1) Acquisition, disposal and integration operating costs include $8.0 million of selling expense, $7.2 million of general and administrative expenses and $4.3 million of business combination transaction costs on the consolidated statement of operations.
(2) COVID-19 operating costs are included in 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.
10
hostessinvestordeck20c82
Investor Presentation August 4, 2021


 
2 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 operating income, adjusted net income, 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 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 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.


 
3 Raising Full Year Revenue and Earnings Outlook Our Mission is to Inspire Moments of Joy by Putting our into Everything We Do! Delivered 10.8% adjusted net revenue with broad-based Hostess® branded growth Outstanding retail performance driving continued market share gains and double-digit point-of-sale growth in both Hostess® and Voortman® brands across major channels New products innovation led by Baby Bundts driving incremental growth fueled by our consumer insights-based innovation agenda Price initiatives executed with realization to begin in 2H21 along with continued revenue management and productivity initiatives are expected to offset rising inflation Launched new “Live Your Mostess” advertising campaign to drive growth Increasing 2021 net revenue, EBITDA, and EPS guidance to reflect our strong 1H performance and sustained momentum in 2H


 
$65.1 $68.4 Q2 2020 Q2 2021 4 Driven by Hostess® Brand Growth $263.0 $291.5 Q2 2020 Q2 2021 (in millions) 10.8% growth 5.1% growth Results are for three months ended June 30, 2021 and 2020. Adjusted Revenue and Adjusted EBITDA 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.


 
5 Sweet Baked Goods $262.5 $232.6 $29.9 12.9% $500.2 $459.0 $41.2 9.0% Cookies 29.0 30.4 (1.4) (4.6)% 56.7 47.5 9.2 19.4% Total Adjusted Net Revenue $291.5 $263.0 $28.5 10.8% $556.9 $506.5 $50.4 10.0% Sweet Baked Goods net revenue growth driven by strong Hostess® branded sales, most notably in the Convenience, Grocery and Dollar channels. Cookies Q2 2021 revenue reflects sequential growth from Q1 with the YoY decline as we lap the Voortman pipeline fill associated with the conversion to the warehouse distribution model. Adjusted Net Revenue is a non-GAAP financial measure. 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.


 
2.4% -4.0% 6 Multi-Pack Point-of-Sale Single-Serve Point-of-Sale Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Q2 2021 – 13 weeks ended 7/3/21 and prior year comparable periods Q2 2020 Q2 2021 18.8% 5.4% 19.4% 10.5% Q2 2020 Q2 2021 Mobility improving; Hostess® leading single- serve category growth At-home snacking remains elevated; Hostess® leading multi- pack growth 5.4% 18.8% Q2 2019 Q2 2019 2 Yr Stack Growth 15.4% 2 Yr Stack Growth 24.2% Balanced Single-Serve and Multi-Pack Growth Leading the SBG Category


 
7 Growth in $3.6 Billion SBG Breakfast Sub-Category Driven by Innovation and Retail Execution 34.5% 11.9% 23.0% 4.5% -9.6% 1.4% Breakfast Pastries Doughnut Total Breakfast Hostess SBG Category POS Dollars Growth QTD vs Prior Year Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Point of sale (“POS”) changes for the 13 weeks ended 7/3/2021 as compared to the comparable period in the prior year 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.


 
8 POS Growth Ahead of the Category Driven by Share Gains in Convenience, Grocery and Dollar Channels $0 $50 $100 $150 $200 Convenience Grocery Mass Dollar Club Drug 13 WE 7/4/2020 13 WE 7/3/2021 Market Share 29.9% 15.7% 13.6% 32.8% 23.9% 56.4% Market Share Change (bps) 324 181 (213) 596 118 813 POS Change 20.3% 5.4% (10.6)% 28.4% 6.4% 22.1% PO S D ol la rs (In M illi on s) Total Hostess 11.4% 21.8% 207 $393M $353M 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 7/3/2021 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.


 
9 Growing Point-of-Sale and Expanding Market Share in the Sweet Baked Goods Category 2017 2018 2019 18.4% 19.1% 19.5% 2017 2018 2019 $1,117 $1,226 $1,317 17.7% 2020 $1,168 2020 Source: Nielsen, Total Nielsen Universe for the Company within the SBG Category. Point of Sale and Market Share, 52 weeks ending 7/8/17, 7/7/18, 7/6/19, 7/4/20 7/3/21. 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). 20.4% 2021 $1,423 2021


 
23% 24% 25% 26% 27% 28% 29% 30% $460 $500 $540 $580 $620 2018 2019 2020 2021 POS Market Share 10 Market Share Increased to All-Time High Convenience 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 July 3, 2021 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. PO S D ol la rs (In M illi on s) M arket Share Continued Market Share Gains Establish Strong Platform for Future Growth


 
11 Multi-pronged Approach to Innovation Pipeline Establishing New Platforms for Continued Incremental Growth Core Development Building on Iconic Brand Favorites with Flavor Extensions Expanding Breakfast Accelerating Growth within Fastest Growing Subsegment of Category Limited-Time-Offers Keeping Products Relevant and Engaging for Consumers New Platforms Expanding into New Consumer Need States Targeting Younger Consumers Voortman Channel Expansion Penetrating Convenience Channel with Single-serve Usage Occasion


 
Digital First Mindset Enabling Rapid Learning & Continuous Improvement Advertising response rates exceeding CPG benchmarks eCommerce advertising driving incremental sales Increasing Social Engagement 12


 
13 Successfully Executing Against Building Blocks for Accretive Growth Increase Depth of Distribution Increase Brand Awareness through Advertising & Marketing Leverage the Hostess-proven Merchandising Model ACV Expand Breadth of Distribution Across Key Channels Drive Incremental Growth Through Innovation


 
14 Provides Flexibility to Invest in Growth and Generate Shareholder Value Disciplined Approach to Cash Management Reinvest in business for future growth Deleverage the balance sheet Strategic acquisitions Return capital to shareholders through securities repurchases ($25M executed through July ’21) History of successfully reducing leverage while increasing shareholder value through accretive acquisitions and disciplined investments for growth Q2 2020 4.3x** Target Long-Term Leverage 3.0-4.0x * 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. ** 2020 proforma leverages included an assumption of $25 million of incremental EBITDA from the acquisition of Voortman and removal of $1.2 million of historical in-store bakery EBITDA 3.4x Q2 2021


 
15 Double-Digit YTD Net Revenue and Earnings Growth 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. Adjusted Net Revenue $291.5 $263.0 $28.5 10.8% $556.9 $506.5 $50.4 10.0% Adjusted Gross Profit $105.3 $98.1 $7.2 7.3% $200.8 $182.4 $18.4 10.1% Adjusted Gross Margin 36.1% 37.3% (118bps) 36.0% 36.0% 4bps Adjusted Operating Income $54.2 $49.0 $5.2 10.6% $101.2 $85.3 $15.9 18.6% Adjusted EBITDA $68.4 $65.1 $3.3 5.1% $130.8 $116.1 $14.7 12.7% Adjusted EBITDA Margin 23.5% 24.8% (129bps) 23.5% 22.9% 58bps Adjusted EPS $0.23 $0.22 $0.01 5.2% $0.43 $0.36 $0.07 18.9%


 
16 Adjusted Net Revenue, 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’s leverage ratio is net debt (total long-term debt less cash) divided by adjusted EBITDA. 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. Solid Growth Building on Strong 1H 2021 Performance Metric Updated Guidance Initial Guidance Adjusted net revenue growth 7.5% - 9.0% 3.0% - 4.5% Adjusted EBITDA $260 - $268 million $255 - $265 million Adjusted EPS (diluted) $0.83 - $0.87* $0.80 - $0.85 Leverage ratio ~3x ~3x Capital Expenditures $60 - $65 million $60 - $65 million Effective tax rate ~27.5% ~27.0% *Based on weighted average shares outstanding of 139 million, which includes 8 million shares of dilution due to the warrants


 
Organic Revenue Growth Top Quartile of Peer Group1 17 Objective: Long-term leading performance in our peer group Delivering Industry-Leading Total Shareholder Returns Adjusted EBITDA Margin Top Quartile of Peer Group1 Free Cash Flow Conversion2 Top Quartile of Peer Group1 1. Peer group defined as S&P Composite 1500 Packaged Foods and Meats Sub Index. 2. Free Cash Flow conversion is defined as (operating cash flow- capital expenditures)/net income.


 
18 Appendix


 
19 1. Acquisition, disposal and integration operating costs include $1.6 million of selling expense and $3.9 million of general and administrative expense. 2. COVID-19 operating costs are included in 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. Gross Operating Net Class A Diluted Net Gross Operating Net Class A Diluted Profit Income Income Net Income EPS Revenue Profit Income Income Net Income EPS GAAP Results $ 105.1 $ 53.1 $ 29.8 $ 29.8 $ 0.21 $ 256.2 $ 89.4 $ 34.6 $ 1.0 $ (0.2) - Non-GAAP adjustments: Foreign currency impacts - - (0.1) (0.1) - - - - 0.7 0.7 0.01 Acquisition, disposal and integration related costs (1) - - - - - 6.8 6.9 12.4 12.4 11.8 0.09 COVID-19 costs (2) - - - - - - 1.8 2.1 2.1 2.0 0.02 Change in fair value of warrant liabilities - - 0.5 0.5 - - - 16.4 16.4 0.13 Other 0.2 1.1 2.2 2.2 0.02 - - (0.1) 0.3 0.3 - Tax impact of adjustments - - (0.3) (0.3) - - - - (3.7) (3.5) (0.03) Adjusted Non-GAAP results $ 105.3 $ 54.2 32.2 $ 32.1 $ 0.23 $ 263.0 $ 98.1 $ 49.0 29.2 $ 27.5 $ 0.22 Income tax 12.1 9.2 Interest expense 10.0 10.6 Depreciation & amortization 12.5 13.7 Share-based compensation 1.6 2.4 Adjusted EBITDA $ 68.4 $ 65.1 Three Months Ended June 30, 2020Three Months Ended June 30, 2021


 
20 1. Acquisition, disposal and integration operating costs include $0.8 million of selling expense, $7.2 million of general and administrative expenses and $4.3 million of business combination transaction costs. 2. COVID-19 operating costs are included in 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. Gross Operating Net Class A Diluted Net Gross Operating Net Class A Diluted Profit Income Income Net Income EPS Revenue Profit Income Income Net Income EPS GAAP Results $ 200.3 $ 100.1 $ 56.6 $ 56.6 $ 0.41 $ 499.7 $ 168.7 $ 49.7 $ 82.7 $ 81.2 $ 0.02 Non-GAAP adjustments: Foreign currency impacts - - 0.1 0.1 - - - - 1.0 1.0 0.01 Acquisition, disposal and integration related costs (1) - - - - - 6.8 7.9 27.4 27.3 25.9 0.21 Facility transition costs - - - - - - 3.7 5.7 5.7 5.4 0.04 COVID-19 costs (2) - - - - - - 2.1 2.4 2.4 2.2 0.02 Change in fair value of warrant liabilities - - 0.4 0.4 - (62.7) (62.7) 0.13 Other 0.2 1.1 2.4 2.4 0.02 - - 0.1 0.6 0.6 - Tax impact of adjustments - - (0.4) (0.4) - - - - (9.2) (9.0) (0.07) Adjusted Non-GAAP results $ 200.5 $ 101.2 $ 59.1 $ 59.1 $ 0.43 $ 506.5 $ 182.4 $ 85.3 $ 47.8 $ 44.6 $ 0.36 Income tax 22.1 15.0 Interest expense 20.0 22.3 Depreciation & amortization 25.2 26.5 Share-based compensation 4.4 4.5 Adjusted EBITDA $ 130.8 $ 116.1 Six Months Ended June 30, 2020Six Months Ended June 30, 2021