KANSAS CITY — Surging profits in the company’s fourth quarter helped generate double-digit earnings gains in 2021 at Hostess Brands, Inc. Offering guidance for the new year, Hostess is projecting 2022 earnings growth ranging from 6% to 11%. Additionally, the company will be building a new bakery during the year in Arkansas.
Net income in the year ended Dec. 31, 2021, was $119.3 million, equal to 91¢ per share on the common stock, up 10% from $104.68 million, or 84¢ per share, in 2020. Net revenue for the year was $1.14 billion, up 12% from $1.02 billion.
In early Nasdaq trading March 1, Hostess shares climbed to a new 52-week high of $22.72, up about 5% from the Feb. 28 close of $21.54.
The double-digit gain in net income was enabled by a dramatic improvement in the company’s fourth-quarter financials. Through the first three quarters of 2021, Hostess Brands net income was down 22% from January-September 2020.
In the fourth quarter alone, Hostess net income was $36.5 million, or 27¢ per share, versus a loss a year earlier of $1.43 million. Sales were $297.2 million, up 16% from $256 million a year earlier.
“The Hostess team once again showcased its resilience and tenacity by delivering record high quarterly sales and adjusted EBITDA, well-ahead of expectations,” said Andrew P. Callahan, president and chief executive officer. “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.”
The strong quarterly sales reflected growth of the company’s Hostess brand and Voortman business across all of its sales channels. Despite the higher sales, gross margins were relatively flat in the fourth quarter at 37.2%. Higher prices, volume leverage and productivity initiatives offset double-digit inflation.
A 14.9% increase in adjusted EBITDA reflected higher gross profit, partially offset by investments Hostess said it made in its workforce and selling expenses to support double-digit net revenue growth.
During the quarter, Hostess’ point-of-sale jumped 24%, and the company gained 218 basis points of share in the sweet goods category.
“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,” the company said.
Voortman branded point of sales rose 20% in the quarter, more than double the growth rate of the overall cookie category. Hostess said the strong performance reflected “ongoing distribution gains and strong consumer demand.”
During the quarter, Hostess said it successfully implemented further price increases to “maintain its industry-leading margin structure”.
In 2021, Hostess installed a new cake production line, and in the first quarter of 2022, bought a facility in Arkansas for the installation of a new baking plant to “support growing consumer demand,” Hostess said.
In addition to projecting earnings per share of 93¢ to 95¢ in 2022, an increase of 6% to 11% from adjusted EPS in 2021, Hostess said its net revenues would be up 5% to 8% from last year. Adjusted EBITDA was forecast at $280 million to $290 million, up 4% to 8% from 2021.
Hostess said its capital expenditures in 2021 would total $120 million to $140 million, including $80 million for the new baking plant.“Our strong 2022 financial guidance reflects our confidence in maintaining our ongoing profitable growth momentum,” the company said.