Flowers Foods (FLO) Q3 2024 Prepared Remarks earnings summary

Executive summary

• Achieved strong margin improvement and bottom-line growth despite a 0.7% sales decline, driven by lower legal settlement costs, moderating input costs, and strong branded bread performance.

• Leading bread brands outperformed the market, gaining share in both unit and dollar sales, with all primary brands growing in tracked channels.

• Significant progress made in profitability of the Other category and successful transition of the California distribution model, which is over halfway complete.

• No serious injuries or loss of life reported from recent hurricanes; company supported affected communities.

• Narrowed 2024 guidance, reflecting increased certainty and strong branded retail bread performance.

Financial highlights

• Q3 2024 net sales declined 0.7% year-over-year to $1.191 billion, with price/mix up 1.7% and volume down 2.4%.

• Net income rose by $111.7 million to $65.0 million, driven by lower legal settlements and a lower tax rate.

• Adjusted EBITDA increased 10.0% year-over-year to $133.3 million, with margin up 110 basis points to 11.2%.

• Cash flow from operations increased $25 million to $282.4 million year-to-date; capital expenditures decreased $10 million to $86.6 million.

• Dividends paid year-to-date were $152.5 million; long-term debt stood at $1.05 billion.

Outlook and guidance

• Fiscal 2024 net sales expected between $5.116 billion and $5.147 billion, up 0.5% to 1.1% year-over-year.

• Adjusted EBITDA forecasted at $530 million to $542 million; adjusted diluted EPS expected at $1.24 to $1.28.

• Capital expenditures projected at $130 million to $140 million, with $5 million to $7 million for ERP upgrades.

• Key factors influencing results include consumer environment, promotional activity, new business ramp-up, California distribution transition, and savings initiatives.

• Effective tax rate estimated at approximately 25%.