Continues to Deliver Sustained Profitable Growth

Reaffirms Full-Year Guidance

Hostess Brands, Inc. (NASDAQ: TWNK) (the “Company”, “we”, “our”) today reported its financial results for the three months ended March 31, 2023.

“The strength of Hostess Brands’ business model and power of our brands enabled us to deliver another quarter of revenue and profit growth, while lapping very strong year-ago comparisons. As we continue to build a premier snacking company, Hostess Brands is focused on growing snacking occasions, and we believe that we have the right consumer insights, the right innovation pipeline and the right brand-building strategy in place to deliver long-term sustainable growth and shareholder value,” said Andy Callahan, President and Chief Executive Officer, Hostess Brands.

Callahan added, “We are maintaining its full-year net revenue, adjusted EBITDA, and adjusted EPS guidance, delivering above-algorithm profitable growth in 2023.”

First Quarter 2023 Financial Highlights as Compared to the Prior Year Period¹

• Net revenue of $345.4 million increased 4.0% from the same period last year as 14.6% contribution from price/mix more than offset lower volume in the quarter.

• Gross profit increased 4.4% to $120.7 million, or 34.9% of net revenue, while on an adjusted basis, gross profit increased 4.6% to $121.1 million, or 35.1% of net revenue. Gross margin increased by 13 basis points, 20 basis points on an adjusted basis, from year-ago levels as favorable price/mix and productivity offset 13.7% inflation.

• Net income was $38.3 million, or $0.28 per diluted share, compared to $34.6 million, or $0.25 per diluted share, in the same period last year. Adjusted net income increased slightly to $38.2 million, resulting in $0.28 adjusted EPS as compared to $0.27 in the prior period.

• Adjusted EBITDA increased 3.9% to $80.4 million. Adjusted EBITDA margin remained flat at 23.3%.

• Cash and cash equivalents were $101.7 million as of March 31, 2023, resulting in a net leverage ratio of 3.0x.

• Capital expenditures were $24.4 million, including the build out of the new bakery in Arkadelphia, Arkansas.

Other Highlights

• Launched a variety of new innovation items during the quarter including Hostess® Kazbars™, Old Fashioned Donettes® and Chocolate Baby Bundts and Voortman® Zero Sugar Mini Wafer.

• The Company’s Sweet Baked Goods point-of-sale (“POS”) increased 0.5% for the quarter, 25.2% on a two-year stacked basis. Its share of the category decreased approximately 170 basis points to 20.3%.

• Voortman® branded POS grew 10.1%, 39.1%, on a two-year stacked basis. Its share of the Cookie category declined approximately 10 basis points to 2.2% for the quarter.

• Repurchased $13.7 million shares year-to-date through March 31, 2023. The Hostess Brands Board approved a new $150 million share repurchase authorization.

Guidance and Outlook

The Company reaffirms the following expected consolidated financial results for the full year 2023:

• Net revenue growth of 4% to 6%
• Adjusted EBITDA of $315 million to $325 million, an increase of 7% to 10% from 2022
• Adjusted EPS of $1.08 to $1.13, an increase of 10% to 15% from 2022
• Weighted average diluted shares outstanding of approximately 135 million
• Capital expenditures of approximately $150 million to $170 million
• Income tax rate of approximately 27%

The Company provides guidance 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, 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.

First Quarter 2023 Compared to First Quarter 2022

Net revenue was $345.4 million, an increase of 4.0%, or $13.3 million, from the prior-year period. Contribution from previously taken pricing actions and favorable mix provided 14.6% of the growth, offset by a 10.6% decline from volume. Sweet baked goods net revenue increased $12.0 million, or 4.0%, while cookies net revenue increased $1.3 million, or 3.6%.

Gross profit increased 4.4% and was 34.9% of net revenue, an increase of 13 basis points from a gross margin of 34.8% for the same period last year. The increase in gross margin was due to favorable price/mix and productivity benefits which more than offset higher supply chain costs including inflation. Adjusted gross profit increased 4.6% driven by favorable price/mix and productivity partially offset by inflation.

Operating income was $62.1 million, an increase of 6.5% from the prior-year period. Adjusted operating income of $62.5 million increased 1.1% from the same period last year. First quarter operating costs increased by 2.3% as compared to the prior-year period. Operating costs increased primarily due to the planned increase in advertising and marketing investments, higher depreciation and higher share-based compensation expense.

Adjusted EBITDA of $80.4 million, or 23.3% of net revenue, increased 3.9% from the same period last year.

The Company’s effective tax rate was 26.0% compared to 28.4% in the prior year. The decrease in the tax rate is attributed to a discrete tax benefit of $0.5 million during the three months ended March 31, 2023 as compared to a discrete tax expense of $0.6 million during the three months ended March 31, 2022, both related to share-based compensation. The effective tax rate, excluding these and other immaterial discrete items, was 26.9% in the current year period, largely in-line with 27.1% in the prior-year period.

Net income was $38.3 million, an increase of 10.7% from $34.6 million in the prior-year period. Adjusted net income of $38.2 million remained relatively flat as compared to the same period last year. Diluted EPS was $0.28 compared to $0.25 in the prior-year period. Adjusted EPS of $0.28 increased a penny from $0.27 in the prior period largely due to lower shares outstanding.

Operating cash flows for the three months ended March 31, 2023 were $27.9 million, as compared to $31.5 million for the same period last year. Operating cash flows were lower due to higher tax and incentive compensation payments partially offset by favorable working capital fluctuations and increased profitability in the current year period.

Share Repurchase

The Company announced today that its Board of Directors has approved a share repurchase authorization of up to $150 million of its Class A Common Stock, replacing its previous authorization, to provide additional flexibility to generate greater shareholder returns. The program has no expiration date and acquired shares will be held as treasury stock. The share repurchase program may be amended, suspended or discontinued at any time at the Company’s discretion and does not commit the Company to repurchase shares of its Class A common stock. The actual timing, number and value of shares to be purchased under the program will be determined by the Company at its discretion and will depend on a number of factors, including the performance of the Company’s stock price, general market and other conditions, applicable legal requirements, and compliance with the terms of the Company’s outstanding indebtedness.

Conference Call and Webcast

The Company will host a conference call and webcast with an accompanying presentation today, May 9, 2023 at 4:30 p.m. ET to discuss the results for the first quarter. Investors interested in participating in the live call can dial 877-451-6152 from the U.S. and +1-201-389-0879 internationally. A telephone replay will be available approximately three hours after the call concludes through May 23, 2023, by dialing 844-512-2921 from the U.S., or +1-412-317-6671 internationally, and entering confirmation code 13737548. 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.

About Hostess Brands, Inc.

Hostess Brands, Inc. (NASDAQ: TWNK) is a premier snacking company with a portfolio of iconic brands and a mission to inspire moments of joy by putting our heart into everything we do. Hostess Brands is proud to make America’s No. 1 cupcake, mini donut and zero sugar cookie brands. With annual sales of $1.4 billion and approximately 3,000 dedicated team members, Hostess Brands produces new and classic snacks, including Hostess® Donettes®, Twinkies®, CupCakes, Ding Dongs® and Zingers®, as well as a variety of Voortman® cookies and wafers. For more information about Hostess Brands please visit www.hostessbrands.com.

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.

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; leveraging the Company’s brand value to compete against lower-priced alternative brands; the ability to pass cost increases on to our customers; correctly predicting, identifying and interpreting changes in consumer preferences and demand and offering new products to meet those changes; protecting intellectual property rights; operating in a highly competitive industry; the ability to maintain or add additional shelf or retail space for the Company’s products; the 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 integrate and manage capital investments; the ability to manage changes in our manufacturing processes resulting from the expansion of our business and operations, including with respect to cost-savings initiatives and the introduction of new technologies and products; the ability to drive revenue growth in key products or add products that are faster-growing and more profitable; volatility in commodity, energy, and other input prices due to inflationary pressures and the ability to adjust pricing to cover increased costs; loss of one or more of our co-manufacturing arrangements; significant changes in the availability and pricing of transportation; negative impacts of climate change; dependence on major customers; increased labor and employee related costs; strikes or work stoppages; product liability claims, product recalls, or regulatory enforcement actions; the ability to produce and successfully market products with extended shelf life; dependence on third parties for significant services; unanticipated business disruptions; adverse impact or disruption to our business caused by pandemics or outbreaks of highly infectious or contagious diseases; disruptions in global economy due to the Russia and Ukraine conflict; 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 for 2022, filed on February 21, 2023. 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.

HOSTESS BRANDS, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Adjusted gross profit, adjusted gross profit margin, adjusted operating income, adjusted net income, adjusted EBITDA, adjusted EBITDA margin 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 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 or the tax receivable agreement.

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