Amplify Snack Brands, Inc. Reports Third Quarter 2017 Financial Results

    Nov. 14, 2017

    Source Amplify Snack Brands, Inc.

    Amplify Logo 5a0b21d2d355a

    AUSTIN, Texas--(BUSINESS WIRE)--Amplify Snack Brands, Inc. (“Amplify” or the “Company”) (NYSE:BETR), a leading marketer and manufacturer of branded better-for-you snack food products, today reported financial results for the 13 and 39 weeks ended September 30, 2017. 

    13 Weeks Ended September 30, 2017 Highlights 

    • Net sales were $94.9 million, an increase of 39.5% year-over-year 
    • Organic net sales increase of 9.4% year-over-year 
    • Gross profit was $35.9 million, representing 37.9% of net sales 
    • Net income was $0.7 million, or $0.01 per fully diluted share 
    • Adjusted net income (non-GAAP) was $5.0 million, or $0.07 per fully diluted share 
    • Adjusted EBITDA (non-GAAP) was $20.9 million, representing 22.0% of net sales 

    39 Weeks Ended September 30, 2017 Highlights 

    • Net sales were $283.1 million, an increase of 55.4% year-over-year 
    • Organic net sales increase of 8.6% year-over-year 
    • Gross profit was $109.7 million, representing 38.8% of net sales 
    • Net income was $2.4 million, or $0.03 per fully diluted share 
    • Adjusted net income (non-GAAP) was $15.3 million, or $0.20 per fully diluted share 
    • Adjusted EBITDA (non-GAAP) was $63.6 million, representing 22.5% of net sales 

    “During the quarter, we continued to drive strong growth and profitability and, while our quarterly results did not meet our expectations, we made good progress on our strategic initiatives across our business and believe we are well positioned for the future,” said Tom Ennis, Amplify’s President and Chief Executive Officer. “In the face of a difficult environment in food retail, we believe we can be a trusted partner for our customers to help drive growth as we deepen our strategic relationships with them. During the quarter, we continued to make key investments in our leading better-for-you brands increasing consumer engagement initiatives, adding talented team members, executing against our operational improvement and cost reduction initiatives and enhancing our systems and processes to support strong future growth and profitability. Furthermore, our brands continue to perform well and we are particularly encouraged by the performance of our new product innovations. Looking ahead, we remain excited about the significant potential of our portfolio of brands and believe we have the right people, processes and plans to achieve the growth and profitability we know we are capable of over the next several years.” 

    13 Weeks Ended September 30, 2017 

    Net sales for the 13 weeks ended September 30, 2017 increased 39.5% to $94.9 million compared to $68.0 million for the three months ended September 30, 2016. The increase in net sales primarily reflects the addition of Tyrrells’ international portfolio of brands, which the Company did not own for the full quarter of the prior year period, and growth from our SkinnyPop brand. On an organic basis the company grew net sales by 9.4% for the period. Foreign currency exchange had an immaterial impact on the Company’s operating results for the 13 weeks ended September 30, 2017. 

    Gross profit was $35.9 million for the 13 weeks ended September 30, 2017, or 37.9% of net sales, compared to $32.3 million, or 47.6% of net sales for the three months ended September 30, 2016. The decrease in gross margin percentage for the 13 weeks ended September 30, 2017 was primarily due to the acquisition of Tyrrells, increased promotional activity and to a lesser extent increased net sales mix from the Oatmega and Paqui brands and new SkinnyPop innovation, all of which have lower gross margin profiles than the SkinnyPop ready-to-eat products. 

    SG&A was $20.5 million for the 13 weeks ended September 30, 2017 as compared to $24.9 million for the three months ended September 30, 2016. Net income was $0.7 million, or $0.01 per fully diluted share, for the 13 weeks ended September 30, 2017 as compared to net income of $1.6 million, or $0.02 per fully diluted share, for the three months ended September 30, 2016. Adjusted net income, which is a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, was $5.0 million, or $0.07 per fully diluted share, for the 13 weeks ended September 30, 2017 as compared to adjusted net income of $9.0 million for the three months ended September 30, 2016, or $0.12 per fully diluted share. 

    Adjusted EBITDA, which is a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 3.7% to $20.9 million for the 13 weeks ended September 30, 2017 from $20.1 million for the three months ended September 30, 2016, primarily reflecting higher net sales and gross profit, partially offset by higher Adjusted SG&A (non-GAAP). As a percentage of net sales, Adjusted EBITDA was 22.0% for the 13 weeks ended September 30, 2017 as compared to 29.6% in the three months ended September 30, 2016. The decrease in Adjusted EBITDA as a percentage of net sales was primarily due to the addition of Tyrrells and strategic investments in consumer marketing activities to drive brand awareness and trial, as well as investments in infrastructure and personnel. 

    39 Weeks Ended September 30, 2017 

    Net sales for the 39 weeks ended September 30, 2017 increased 55.4% to $283.1 million, compared to $182.2 million for the nine months ended September 30, 2016. The increase in net sales reflects the addition of Oatmega and Tyrrells’ international portfolio of brands, which the Company did not own during the full prior year period, strong growth from SkinnyPop product innovation, as well as new distribution and increased velocity of the Paqui brand. 

    Gross profit for the 39 weeks ended September 30, 2017 increased $16.4 million to $109.7 million, or 38.8% of net sales, compared to $93.3 million, or 51.2% of net sales for the nine months ended September 30, 2016. The decrease in gross margin percentage for the 39 weeks ended September 30, 2017 was primarily due to the acquisition of Tyrrells and increased promotional activity as compared to the prior year period. To a lesser extent, gross margin was impacted by the increased net sales mix from the Oatmega and Paqui brands, and new SkinnyPop innovation, all of which have lower gross margin profiles than the SkinnyPop ready-to-eat products. 

    SG&A was $63.3 million for the 39 weeks ended September 30, 2017 as compared to $50.2 million for the nine months ended September 30, 2016. Net income was $2.4 million, or $0.03 per fully diluted share, for the 39 weeks ended September 30, 2017 as compared to net income of $18.8 million, or $0.25 per fully diluted share, for the nine months ended September 30, 2016. Adjusted net income, which is a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, was $15.3 million, or $0.20 per fully diluted share, based on 76.9 million diluted shares outstanding for the 39 weeks ended September 30, 2017, compared to adjusted net income of $30.4 million for the nine months ended September 30, 2016, or $0.24 per fully diluted share, based on 75.1 million diluted shares outstanding. 

    Adjusted EBITDA, which is a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 3.5% to $63.6 million for the 39 weeks ended September 30, 2017 from $61.4 million for the nine months ended September 30, 2016, primarily reflecting higher net sales and gross profit, partially offset by higher Adjusted SG&A (non-GAAP). As a percentage of net sales, Adjusted EBITDA was 22.5% for the 39 weeks ended September 30, 2017 as compared to 33.7% in the nine months ended September 30, 2016. The decrease in Adjusted EBITDA as a percentage of net sales was primarily due to the addition of the Tyrrells and Oatmega brands and strategic investments in consumer marketing activities to drive brand awareness and trial, as well as investments in infrastructure and personnel. 

    Segment Review 

    North America: For the 13 weeks ended September 30, 2017, North America segment net sales and operating income were $63.5 million and $19.5 million, respectively. This compares with North America segment net sales and operating income of $59.5 million and $19.4 million, respectively for the three months ended September 30, 2016. 

    For the 39 weeks ended September 30, 2017, North America segment net sales and operating income were $193.2 million and $62.6 million, respectively. This compares to North America segment net sales and operating income of $173.7 million and $61.9 million, respectively for the nine months ended September 30, 2016. 

    International: For the 13 weeks ended September 30, 2017, International segment net sales and operating income were $31.4 million and $0.3 million, respectively. This compares to International segment net sales and operating income of $8.5 million and $0.6 million, respectively for the three months ended September 30, 2016, during which we acquired the Tyrrells portfolio of brands on September 2, 2016. 

    For the 39 weeks ended September 30, 2017, International segment net sales and operating loss were $89.9 million and $1.4 million, respectively. This compares to International segment net sales and operating income of $8.5 million and $0.6 million, respectively for the nine months ended September 30, 2016. 

    Balance Sheet and Cash Flow 

    As of September 30, 2017, the Company had cash and cash equivalents of $8.3 million and net availability under its $50.0 million revolving line of credit of $40.7 million. Net debt, as defined under the Company’s credit facility, represents outstanding indebtedness less cash and cash equivalents, was $602.1 million as of September 30, 2017, compared to $595.6 million as of July 1, 2017. The increase was primarily attributable to additional capital expenditures during the period to fund growth and cost savings initiatives during the 13 weeks ended September 30, 2017. Amplify’s leverage ratio as calculated under the Company’s credit facility was 6.0x trailing twelve month EBITDA at September 30, 2017. The Company remains committed over the long-term to reducing its net leverage to under 4.5x of Consolidated EBITDA, as defined under the Company’s credit facility. 

    Outlook 

    The Company updated its full year 2017 guidance to reflect its year-to-date results and current view on the remainder of the year. For the full year 2017 the Company now expects the following: 

    • Net sales of $375 million to $379 million 
    • Adjusted EBITDA of $84 million to $86 million 
    • Cash and non-cash interest expense of approximately $44 million to $45 million 
    • Effective tax rate (non-GAAP) of approximately 38% 
    • Adjusted EPS (non-GAAP) of $0.25 to $0.27 
    • Fully diluted share count of approximately 77.0 million shares 
    • Capital expenditures of $23 million to $25 million 

    The Company has not reconciled its expected Adjusted EBITDA to net income or Adjusted EPS to earnings per share under “Outlook” because it has not finalized calculations for several factors necessary to provide the reconciliations, including net income and income tax expense. In addition, certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted, which are included in reported GAAP results, including foreign exchange impacts, mark to market adjustments, and costs related to one-time items that may have significant impact to reported GAAP results. 

    Conference Call and Webcast 

    The Company will host a conference call with members of the executive management team to discuss these results today, Tuesday, November 7, 2017 at 3:30 p.m. Central time (4:30 p.m. Eastern time). Investors interested in participating in the live call can dial 877-407-9039 from the U.S. International callers can dial 201-689-8470. 

    In addition, the call will be broadcast live over the Internet hosted at the “Investor Relations” section of the Company's website at http://amplifysnackbrands.com. The webcast will be archived for 30 days. A telephone replay will be available approximately two hours after the call concludes and will be available through Tuesday, November 21, 2017, by dialing 844-512-2921 from the U.S., or 412-317-6671 from international locations, and entering confirmation code 13671886. 

    About Amplify Snack Brands, Inc. 

    Headquartered in Austin, Texas, Amplify Snack Brands is a high growth snack food company focused on developing and marketing products that appeal to consumers’ growing preference for Better-For-You (BFY) snacks. Our brands SkinnyPop®, Tyrrells®, Paqui®, Oatmega®, Lisa’s® Chips, The Wholesome Food CompanyTM, and Thomas ChipmanTM embody our BFY mission of “snacking without compromise” and have amassed a loyal customer base across a wide range of food distribution channels in the United States, United Kingdom, Canada, Europe and Australia. For additional information, please visit: http://amplifysnackbrands.com. 

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