Flowers Foods (FLO) Q2 2024 Prepared Remarks earnings summary

Executive summary

• Achieved strong Q2 2024 results with net income up 5% to $67.0 million and adjusted EBITDA up 7.8% to $143.5 million, driven by cost savings, improved branded bread performance, and margin expansion in private label and away-from-home segments.

• Branded retail outperformed the fresh packaged bread category, gaining unit and dollar share, with notable strength in sandwich buns, rolls, and breakfast subcategories.

• Transformation and digital strategy initiatives, including ERP upgrades and supply chain optimization, are ongoing.

• Enhanced organizational structure with a new SVP and Chief Customer Officer to drive revenue, market share, and profitability.

Financial highlights

• Q2 2024 net sales were $1.225 billion, down 0.2% year-over-year, with price/mix up 1.0% and volume down 1.2%.

• Gross margin (excluding D&A) rose 90 bps to 49.9%–50.1% year-over-year, aided by moderating costs and improved mix.

• GAAP diluted EPS was $0.32, up $0.02; adjusted diluted EPS was $0.36, up $0.03 year-over-year.

• Net income increased 5% to $67.0 million; operating income grew to $95.2 million, up 7.5%.

• Operating cash flow YTD increased to $168.4 million; capex YTD was $61.3 million; dividends paid YTD totaled $101.9 million.

Outlook and guidance

• FY2024 sales expected between $5.091 billion and $5.172 billion, flat to up 1.6%; adjusted EBITDA $524–$553 million; adjusted EPS $1.20–$1.30.

• Cost-saving initiatives projected to deliver $40–$50 million in annual savings.

• Capital expenditures for FY2024 anticipated at $145–$155 million, with $3–$6 million for ERP upgrade.

• Effective tax rate projected at 25%.

• Headwinds from business exits and California distribution transition expected to diminish in H2.