Hostess Brands, Inc.

Greetings and welcome to Hostess Brands' second quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Amit Sharma, Vice President, Investor Relations at Hostess Brands. Thank you. You may begin.

Good afternoon, and welcome to Hostess Brand's second quarter 2021 earnings conference call. Joining me on today's call are Andy Callahan, Hostess Brand's president and CEO, and Brian Purcell, chief financial officer. By now, everyone should have access to the earnings release for the period ended June 30, 2021, that went out at approximately 4 p.m. Eastern time. A press release and an updated investor presentation are available on Hostess' website at www.hostessbrands.com. This call is being webcast and a replay will be available on the company's website. During the course of this call, management will make a number of forward-looking statements, including expectations and assumptions regarding the company's future performance. The company's actual results may differ materially from these forward-looking statements, and the company undertakes no obligation to update or revise these forward-looking statements. A detailed list of these risks and uncertainties can be found in today's earning release and in the company's SEC filings. The company will make a number of references to non-GAAP financial measures that we believe will provide useful information to the investors. A full reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in the earnings release. With that, I will turn the call over to Andy Callahan, our President and CEO.

Thank you, Amit. We are very excited to have you on board as our new head of IR. And good afternoon, everyone. I'd like to begin by offering a few highlights from our second quarter performance to underscore the ongoing strength of our business. I will then turn it over to Brian to discuss our financial results in greater detail, and we'll wrap it up with a discussion of our higher sales and earnings outlook for the back half as we continue to gain more confidence in the sustainability of our growth model before opening it up to your questions. We had an excellent second quarter. With our 14th consecutive quarter of attractive top-line growth and solid momentum heading into the second half, even as we lap last year's high single-digits growth. This yet again accentuates Host's advantage-branded portfolio and its increasing share in the faster-growing, high-margin subsegments of the snacking category. Now, to some of the key quarterly highlights. Adjusted net revenue grew 10.8% in the quarter, with growth accelerating sequentially from the first quarter on both a one-year and a two-year basis, as sweet baked goods business, led by the Hostess brand, posted 12.9% growth in the quarter, our highest growth rate in over two years. Our sweet baked goods point of sale trends accelerated sequentially as well at 11.4% growth, led once again by our Hostess branded growth of 12.4%. This growth drove over 200 basis points of market share gains in measure channels, demonstrating Hostess's outstanding execution in a fluid environment and increasing payoff from our investments in innovation, consumer-facing marketing, and talent throughout the organization. Even on a two-year stacked basis, our sweet baked goods point-of-sale growth accelerated to 19.3% versus the category growth of 9.8%, showcasing the sustainability of our growth trends before, during, and in the normalizing COVID environment. Wortmann posted another quarter of strong POS growth with one-year and two-year stack growth rates of 23.7% and 23.9% respectively. Both are well ahead of the cookie category. Wortmann continues to execute on five building blocks of growth. Greater depth of existing distribution, extending in the new channels of distribution, activating Hostess' proven merchandising model, building brand awareness, and finally, impactful innovation. Now, our Hostess single-serve and multi-pack sub-segments both post a solid double-digit two-year stack POS growth in the second quarter, highlighting the unique strength of our brands. Our share of sweet baked goods sales increased in convenience, grocery, dollar, club, and drug channels as we leverage our deep, broad-based distribution footprint across both large and small format retailers. In fact, our convenience store market share increased by nearly 325 basis points to 29.9% for the quarter, positioning us exceedingly well to benefit from the positive impact of improving consumer mobility on C-store sales. At the same time, our market share in grocery channel increased by nearly 180 basis points in the quarter, to 15.7% as we posted mid single digit point of sale growth in the channel, despite lapping strong COVID driven growth in the year ago period. We are very pleased with our first half performance. Brian will take you through our revised full year outlook, but I want to reiterate that I am confident of our ability to maintain this momentum in the second hand, even as the cost environment becomes more challenging. Let me touch on a few key themes as to why our portfolio is indeed advantaged. First, the majority of our sales come from our hostess and Bortman brands, which command a good price premium and are higher margin. Next, we have strong positions in sub segments of indulgent snacking that are growing at a faster rate than overall snacking. Additionally, our overall brand assets position us to grow faster in these sub-segments. And third, we are uniquely positioned to benefit from both improving mobility as consumers return to work or school, as well as from the sticky, elevated level of at-home snacking consumption, even as a broader at-home food consumption trends moderate from the year-ago COVID-driven spike. This is evidenced by our strong one- and two-year stack top-line trends as our single serve POS was up over 19% in the quarter, while multi-pack business was up mid single digits versus the year ago period, and over 24% on a two year stack basis. In summary, we're advantaged because we can grow more profitably and faster than not only overall food, but also the snacking aisle. To fuel this growth, we are rapidly improving our understanding of our key consumers. Not just their purchase behavior, but also what leads to that decision, the path to purchase, enable us to create a very detailed, granular snacking occasion map. The key to intercepting consumer behavior in the impulse driven snacking category. This directly fuels our innovation pipeline and is already starting to bear fruits evidenced by the strong success of our recent new products. For instance, recently launched baby buns, one of our key innovation items in breakfast, is off to a very strong start across multiple channels. In fact, Baby Bunt Lemon and Baby Bunt Cinnamon were one and four fastest growing SKUs in the category across total Nielsen universe over the past four weeks ending July 17th. We expect our new products momentum to continue as we extend new Baby Bunts single serve sales and launch new flavors. We will also be launching a number of other new products, including on-the-go versions of Christie Minis in the coming months. We are supporting our innovation through incremental advertising and marketing support. I am very excited about our new Live Your Mostest campaign launched during the quarter, our first national ad campaign in nearly a decade. To highlight the moments of joy our brand brings, drive engagement across multiple digital platforms and position us to win with both consumers and our retail partners. With a full pipeline of new consumer facing initiatives, we firmly believe that sustained investments in advertising capabilities and our people will drive sustained growth and long-term shareholder value creation. We are also laser focused on execution. We continue to execute at the highest levels. particularly in light of the volatile retail marketplace and challenging operating environment. Our demonstrated excellence at retail is best exemplified by the strong success of our hostess partnership program, which is fueled by our investment in data and capabilities and continues to drive our share in the C-Store channel. These investments are clearly elevating our competitive positioning within key channels. Our small format success is simply remarkable. We continue to gain market share in C-store, dollar, and drug channels with year-over-year gains of 300 to 800 basis points in just the second quarter. Given our improving in-store execution, I firmly believe that these share gains will serve us well as overall on-the-go channel trends improve from last year's depressed levels. I'm also extremely proud of our agile supply chain, which has continued to execute at the high levels in the face of heightened volume, mixed volatility, and the exceedingly tight labor market. Our flexible manufacturing footprint, which has enabled us to successfully manage increased complexity and launch highly incremental new products such as Baby Buns and Christie Minis, along with our advantage lower cost distribution platform, has been a key enabler of our strong market share performance over the last 12 to 18 months. More importantly, We believe that our ongoing initiatives will make our supply chain even more efficient and nimble and a source of sustained competitive advantage in snacking. Rising inflation and access to labor remain two of the biggest challenges across the CPT landscape in the near term. As included in our revised 2021 outlook, our input and labor inflation are going to be higher than our initial estimates due to commodities, freight and packaging inflation, incremental costs from stronger than expected volume growth and tighter labor markets. We expect to continue to incur higher labor costs as we have higher overtime, attrition and elevated hiring needs given the increased consumer demand. We are actively working on a variety of programs to attract and retain our workforce to support our continued growth. With that said, We're confident we will mitigate these higher costs by continuing to drive additional productivity initiatives, utilizing our revenue management toolkit, and as we benefit from higher prices in the second half. Pricing is never easy, but our pricing conversations with our retail partners have progressed as expected, with higher realized prices beginning to flow through our P&L in July. We are closely monitoring elasticities as shelf prices begin to move higher and early indications suggest that they are largely in line with our expectations. We also continue to make great progress on our ESG initiatives with the launch of our first ever ESG report in June. We've embedded ESG goals into our operating model and are committed to operate with higher and consistent standards of transparency, fairness, and integrity for all stakeholders. We view this report as a meaningful start and important milestone on our perpetual journey towards sustainable, profitable growth. In summary, we had a strong second quarter and first half. More importantly, we remain confident about our second half outlook, enabling us to raise our full-year sales, EBITDA, and EPS guidance. With that, let me turn it over to Brian to go through the quarter's financial results in greater detail.