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| Statement |
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| I am proud of our team's ability to continue to deliver attractive long-term growth as we build a premier pure-play snacking company |
| We are well positioned to deliver another year of strong results with above algorithm profits and continue our track record of generating sustained profitable growth and leading shareholder value |
| We delivered another quarter of strong operating results with double-digit profit growth and higher margins, enabling us to raise our adjusted EBITDA and EPS expectations, which are both well-above our long-term growth targets while maintaining our full year top line outlook |
| If you look at the data there we feel really good about coming out of there |
| On a two-year stack basis our Sweet Baked Goods retail sales were up 18.5% in the quarter and Voortman growth was even stronger at 32.2%, driven by our continued momentum in the Zero Sugar subsegment |
| This positive trend accelerated in July where we are seeing a meaningful step-up in shipments versus the prior year behind customer support of favorable shelf resets and a strong merchandising for back-to-school programming, providing additional confidence in our second half volume expectations |
| There are some other things that we've obviously actively managed the portfolio, but the underlying health of the Voortman business is extremely strong as we continue to grow into a large billion total Cookie category |
| I appreciate your confidence that you place in our team to execute on our plan and drive sustainable profitable growth over time |
| On a two-year stacked basis, Voortman POS increased by 32.2%, as we continue to capitalize on our leading position in the faster-growing Zero Sugar cookies subsegment with strong innovation and our ongoing and increasing investment to drive brand awareness and penetration |
| Second quarter profit trends highlighted the strength of our business and our continued focus on retail and operational execution as both EBITDA and EPS grew by strong double-digits along with a meaningful year-over-year increase in our quarterly gross margin |
| In addition, we successfully refinanced our term loan and revolving credit facility during the quarter and are very proud of our team's ability to achieve very attractive rates in the current markets |
| We have a strong foundation with the right capabilities to drive our category growth strategy which provide us the confidence we can continue to grow market share over time |
| We believe the successful refinancing provides us significant financial flexibility to execute on our strategic objectives and continue to drive strong shareholder returns |
| Given the strong first half results, we now expect adjusted EBITDA towards the higher end of our $315 million to $325 million range and adjusted EPS towards the higher end of our $1.08 to $1.13 per share range delivering above our long-term algorithm profit growth |
| It's important within the category that is enhancing and is very strong |
| I am proud of the sustainability of our growth, as we built a premier pure-play snacking company on the foundation of favorable positioning in growing snacking categories with expandable consumption occasions, category-leading innovation, focused investments and strong and growing executional capabilities |
| Let me talk about a few of the key growth drivers in more detail, which provide me confidence in our ability to deliver another year of strong sustainable top line growth and above algorithm profit growth in 2023 |
| But given the dynamics we're seeing within the consumer our customers are always looking for ideas that how do we -- and they go to us increasingly I think we have a great partnership and the leadership partner with our customers |
| We have a deep understanding of these occasions and continue to refine our strategy focus on five of the fastest-growing indications with an addressable market of more than $65 billion in retail sales and more important, where we believe our portfolio has a strong right to win |
| So we feel really good about our position within Voortman |
| So -- and we expect a strong back-to-school programming and the enthusiasm of our customers as we see shipments early in July or a good future to that |
| Initial performance continues to be highly encouraging with both distribution and velocities trending in line with our high expectations |
| Kazbars also is receiving high praise from consumers with initial positive feedback at some of the highest levels among all of our recently launched innovations such as Baby Bundts and other highly successful and category-expanding launches |
| Kazbars is the standout innovation in Sweet Baked Goods category in 2023 and is getting strong support from our retailer partners as we continue to build on our track record of bringing excitement and news to the category |
| We're in we have a very strong position in the reduced sugar Zero Sugar subsegment of that which has growing at a greater rate on a two-year stack basis our Voortman business is nearly 32% growth |
| And the fact that we're able to see Sweet Baked Goods experience really high pricing in a sharper period of time than a lot of the category and grow overall a percentage of dollars in that pie is really a testament to the strength of baking and, therefore, the bakings ability to get share of dollars within that total category |
| So yes we want share to grow, but we believe we're in a good position to deliver our back half as we communicate it |
| Shipments are very strong |
| So I think there's a good runway for that both in RGM as well as in our productivity initiatives |
| But that's a good position for our investors, because my experience in this industry there's a long runway for us to continue to drive a pipeline of continuous improvement efficiency programs at industry accepted margins that will drive fuel as we call it to invest into our proven growth strategies |
| Statement |
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| As a reminder, promotion levels in the back half of last year were below historical levels |
| You talked about this a little on the call that some of your competitors are getting more promotional and you have seen some share losses, albeit or above, where you were two years ago |
| I will tell you specifically that this year if I implied, we looked at too far in the history that would be a bad takeaway |
| In the 13 weeks ended July 1st, 2023 our share of the Sweet Baked Goods category dollar sales declined by 93 basis points to 20.8% |
| Certainly is difficult and some -- when we have such a large disruption due to the supply chain services and coming back into the business, it's difficult to forecast |
| So that was difficult to forecast |
| So the indications are well that a lot of the impacts of those, which Q2 was a dynamic time and we didn't get exactly forecast it, right, but it was going to be difficult and always a transition quarter |
| But then I also thought, I heard you say maybe volumes were a little bit weaker in the second quarter maybe pricing was slightly higher than you had originally expected |
| So it was a difficult time for us to forecast |
| In a year ago, when we were in our Q4, when we were experienced the customer -- the category disruption due to a competitor the merchandising wasn't going to give any -- it wasn't going to add as much because we were already up there |
| However, we now expect full year volume to be down slightly relative to previous expectations of relatively flat, which is expected to be offset by stronger net price realization |
| As we continue to bring growth, innovation and excitement to the category, I believe our growth partnerships with key retail customers, has never been stronger |
| We continue to expect high single-digit inflation for the full year with moderating headwinds in the second half |
| And then, I guess just to follow up, just on gross margin, the guide of 40 50 basis points I think it implies essentially kind of clearly flat to down in the back half, not sure of kind of cadence of which quarter might see a little bit more pressure year-over-year |
| I continue to believe the foundation of Hostess Brands has never been stronger |
| So we've adjusted to real-time Q2 which was a little bit below where we expected for those factors and we believe we're set up for the back half |
| Some of them have lagged |
| But just in terms of on-shelf market share, I think perhaps you might have -- I'm not trying to put words in your mouth hope that you'd be retaking share or at least your main competitor wouldn't still be taking share by now at least that's the sense I got |
| I wanted to clarify on your expectations for volumes to be down slightly this year, does that assume that volumes are still down in the second half? Andy Callahan No, it does not |
| Andy Callahan Well there's -- this is a unique situation relative to having a competitor that's with a large disruption in the category |
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