Hostess Brands, Inc.

Greetings and welcome to Hostess Brands Incorporated third quarter 2022 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. Thank you. You may begin.

Good afternoon and welcome to Hostess Brands' third quarter 2022 earnings conference call. Joining me on today's call is Andy Callahan, Hostess Brands' President and CEO, and Travis Leonard, Chief Financial Officer. By now, everyone should have access to the earnings release for the period ended September 30, 2022. That was published at approximately 4 p.m. Eastern Time. The press release and investor presentations are available on Hostess website at hostessbrands.com. This call is being webcast and a replay will be available on our 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. Actual results may differ materially from these forward-looking statements, and we undertake no obligations to update or revise these forward-looking statements. A detailed list of these risks and uncertainties can be found in today's earnings release and in our SEC files. Management 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 compatible GAAP measures is included in the earnings release. With that, I'll turn the call over to Andy Callahan, our President and CEO.

Thank you Amit. I would like to begin with a few highlights from another quarter of strong top and bottom line results. I will then offer a few comments on our long term growth outlook before handing it over to Travis for a detailed review of our quarterly financial results. We will close with a discussion of our higher guidance for the full year before opening up to you for questions. Let me start with the third quarter, which delivered strong growth across all three key elements of our financial performance, net revenue, adjusted EBITDA, and adjusted EPS. The growth was driven by successful pricing and revenue growth management initiatives, as well as improving supply chain execution and productivity savings, which helped to mitigate inflation. Given our strong year-to-date results and continued momentum, we are raising our full-year top and bottom line outlook. We now expect our 2022 net sales to increase by 17% to 19%, while raising our full-year EBITDA and EPS growth guidance to $290 to $293 million and $0.96 to $0.98, respectively. Now, a few highlights for the quarter. We delivered 20% organic net revenue growth with a stronger contribution from price mix as we executed our most recent pricing actions. Our strong top line led to solid bottom line growth with our adjusted EBITDA and adjusted EPS increasing by 12.2% and 9.5% respectively, even as we continue to encounter pockets of supply chain fragility and elevated cost inflation. The third quarter was our 11th consecutive quarter of at least 9% revenue growth and the sixth consecutive quarter of double-digit growth. It was also notable that we were able to keep our volume essentially flat in the quarter, demonstrating the strength of our portfolio supported by our innovation and marketing investments and focus, which helped to offset elasticity from recent pricing actions. We are well positioned to continue to drive growth during the challenging economic times due to the resiliency of our categories, our pure place snacking portfolio, and our accessible price points. At the retail sales level, Sweet Baked Goods and Cookies both posted strong broad-based growth in the quarter. Our Sweet Baked Goods point of sale, led by the hostess brand, grew by 17% in the quarter. As expected, Pricing was a bigger driver of hostess growth during the quarter as retail prices increased by double digits, reflecting our recent pricing actions and our continued focus on revenue growth management. Underlying consumption trends remain solid as snacking frequencies, including for sweet indulgent snacks, remain elevated even in the post-pandemic environment. Our access to all retail channels and our affordable price points are particularly attractive in the current environment as consumers seek better value to fit with their lifestyle and consumption occasions, which is reflected in another quarter of double-digit growth for Hostess brand single-serve and multi-pack offerings. Point of sale for each increased by more than 15% during the quarter. with two-year stack growth of approximately 33% and 29% respectively, both well ahead of underlying category trends. Turning to the Bortman brand, Bortman point of sale increased by 28.8% in the quarter, including 28.1% growth in the sugar-free segment, where it gained 500 basis points of share during the quarter. Bortman's strong ongoing growth momentum continues to be driven by expanding distribution and our investments in advertising to increase brand awareness and impactful innovation. We continue to be very pleased with the performance of Bortman Business, which is margin accretive to our portfolio and is continuing to deliver against our initial expectations. With strong double-digit top and bottom line growth over the last three years, we have built an impressive track record of strong performance during a period of unprecedented volatility and challenges. More importantly, as I said on our March Investor Day, despite an increasingly complex consumer and macroeconomic environment, I continue to believe the foundation of Hostess Brands has never been stronger, and I've never been more confident of our team's capabilities and drive to deliver our long-term growth algorithm. Let me offer a few highlights. First, We have unique access to broad, fast-growing snacking occasions and a best-in-class business model that fits perfectly with our impulse-driven categories. The indulgent sweet snacking segment is one of the largest and fastest growing segments within macro snacking, which itself continues to grow faster than overall food and has also shown to be consistently more resilient in prior economic downturns. In fact, A recent survey to better understand the impact of the current environment on our consumers and core categories signaled the majority of the consumers surveyed are indeed worried about the economy and plan to cut back spending. However, a vast majority of the same consumers indicated they will continue to look for new snacking options, and 82% say that sweet snacks brings them joy, especially during times of uncertainty. This is consistent with other data and research and reinforces our belief that the hostess brand's portfolio is well positioned as consumers look for value in the current environment. Within the overall macro snacking universe in which we compete, we are attractively priced relative to other snack offerings, providing consumers an accessible option as they look to stretch their shopping dollars. In addition to our presence in growing categories, we are targeting the most attractive snacking occasions where Hostess and Boardman are uniquely positioned to win. We are prioritizing five fast-growing occasions, which are more than $50 billion in retail sales and provides us a large and sustainable platform for our future growth. Now, second, we're accelerating innovation, marketing, and consumer-facing capabilities to fully unlock the potential of our iconic brands and access to these attractive snacking occasions. Our impactful innovation is a key driver of our growth strategy. We have not slowed our investments in innovation, even during times of resource constraints and supply chain challenges. Our retail partners have certainly noticed that, and they are equally enthusiastic about our innovation. And it's really about how we are leveraging our occasion-based framework our consumer and shopper insights to innovate and generate profitable and sustainable growth. From last year's standout baby buns to this year's highly anticipated hosts as bouncers, we are building and executing a multi-year pipeline of new products to continue our innovation momentum and drive category growth. Bouncers. which reimagines our iconic Twinkie, Ding Dong, and Donette offerings in a poppable version, ideal for the lunchbox occasion, is off to a strong start. While it is early, we've had strong display support for the key back-to-school period with good sell-through, driving trial, and expanding placement in the traditional channels before its introduction into convenience store channel this month. As we are committed to increasing our advertising and marketing support for both our innovation and core products, as we mentioned at our investor day earlier this year, our A&M spending will likely grow ahead of our expected revenue growth over the next several years as we establish a new base level of spend to support long-term, mid-single-digit top-line growth. That said, we continue to be highly disciplined with our A&M spend to ensure we achieve a high ROI. Our test and learn process is proven to be successful and provides us the confidence that our future investments will drive continued profitable growth. We also continue to invest in talent throughout the organization, including our bakeries, warehouse, and importantly in our R&D and product quality teams. Last month, We announced the addition of Adrian Peretti as our chief supply chain officer. Adrian joins us with nearly 30 years of diverse supply chain experience with Kimberly-Clark, which began in his native Argentina and culminated as head of global capabilities. His appointment continues our track record of attracting industry-leading talent to build upon our strong execution history and capability development. Additionally, our innovation and marketing investments are attracting new households to our brands and our investment in product quality are driving an increase in our two-time buyer at more than twice the rate of the category. These two consumer fundamental metrics together reinforces my confidence that our model is working and are good indicators of the sustainability of our top line growth. Third, In addition to pricing actions, we continue to pull on multiple levers to manage the current inflationary environment, as well as protect and modestly expand margins over the long term. As expected, higher prices to offset elevated inflation were the main driver of both our top and bottom line during the quarter. Revenue growth management is a key component of our growth flywheel, and we continue to step up efforts to accelerate our productivity agenda. Our productivity initiatives which span procurement, our bakeries, transportation, and distribution are also gaining traction and are beginning to deliver results. Overall, I'm proud of our dedicated and talented workforce for continuing to execute at high levels through these challenging periods. While we successfully navigate the current environment, we remain focused on growing the right way over the long term. We are making great progress in corporate responsibility initiatives as outlined in our second corporate responsibility report. Attaining our key CSR goals is part of strategic objectives of our executive team with direct oversight from our board as we continue to build a strong, sustainable corporate culture that values nimbleness, integrity, tenacity, inclusivity, and a commitment to quality. In summary, I am pleased with our strong quarterly and year-to-date results, which are enabling us to raise our full-year sales, EBITDA, and EPS guidance and build on our track record of delivering excellent results through a challenging operating environment. We are executing on our strategic priorities and remain confident in our ability to deliver our attractive long-term growth algorithm. With that, let me turn it over to Travis to go through the quarterly financial results and our revised outlook in greater detail.