Flowers Foods (FLO) Q4 2022 Prepared Remarks earnings summary

Executive summary

• FY2022 sales rose 11.0% to $4.806B; operating income increased 2.8% to $303.2M and net income rose 10.8% to $228.4M.

• Pricing and mix gains offset only part of input-cost inflation, production constraints and lower volumes; branded retail remained above pre-pandemic mix levels.

• Priorities remain team development, brand investment, margin improvement and disciplined M&A, supported by digital and ERP transformation initiatives.

Financial highlights

• Sales were $4.806B vs. $4.331B in FY2021; net income was $228.4M vs. $206.2M.

• Adjusted net income was $271.0M vs. $263.1M; adjusted diluted EPS was $1.27 vs. $1.24, excluding items affecting comparability.

• Diluted EPS was $1.07 vs. $0.97; income from operations was $303.2M vs. $294.9M.

• Operating cash flow was $360.9M; capital expenditures were $169.1M, including $61.3M for the ERP upgrade.

Outlook and guidance

• FY2023 sales expected to benefit from FY2022 and early FY2023 price increases and Papa Pita, partly offset by unpredictable shifts in consumer buying patterns.

• FY2023 cost savings target: $20M-$30M, following $24M achieved in FY2022.

• FY2023 capital expenditures estimated at $140M-$150M, including $20M-$30M for ERP; ERP costs expected at $80M-$90M in FY2023.

• Long-term targets, excluding acquisitions where specified: annual sales growth 1%-2%, EBITDA growth 4%-6%, and EPS growth 7%-9%.

• Input costs expected to remain volatile and weigh on results in FY2023, particularly in H1; higher marketing expense planned for the national DKB snack bar launch.