Sovos Brands, Inc. (“Sovos Brands” or the “Company”) (Nasdaq:
SOVO), one of the fastest-growing food companies of scale in the
United States, today reported financial results for its fourth
quarter and fiscal year ended December 30, 2023.
Fourth Quarter Highlights:
- Net sales of $292.1 million increased 11.4% year-over-year,
representing the 10th consecutive quarter of double-digit net sales
growth since IPO
- Organic net sales growth of 25.3%1 was driven by 21.7% volume
and 3.6% pricing growth
- Note: Organic net sales excludes the contribution from the
Birch Benders brand and the extra week in the prior year
period
- Rao’s net sales of $234.3 million increased 24.9%
year-over-year, or 34.7% on an organic basis1, benefitting from
36.2% dollar consumption growth for the entire franchise 2
- Rao’s sauce dollar consumption grew 31.7% year-over-year,
reflecting 410 bps of household penetration growth to 15.9%, the
largest YoY gain in the brand’s history, and a meaningful increase
in awareness to 63%2
- Rao’s franchise outside of sauce continued to expand, with
combined dollar consumption for the frozen, soup, and pasta
categories up 53.2% year-over-year, including the benefit from
Rao’s frozen pizza which is off to a strong start2
- Gross margin increased 100-basis points to 30.0%; Adjusted
gross margin3 increased 80-basis points to 30.0%
- Net income was $15.5 million or $0.15 per diluted share;
adjusted net income3 was $26.8 million or $0.26 per diluted
share
- Adjusted EBITDA3 of $46.0 million grew 24.3% year-over-year,
inclusive of a 12.4% year-over-year combined increase in Marketing
and R&D expense
Fiscal Year 2023 Highlights:
- Net sales of $1,020.4 million increased 16.2%
year-over-year
- Organic net sales growth1 of 24.6% was driven by 18.1% volume
and 6.5% pricing growth
- Note: Organic net sales excludes the contribution from the
Birch Benders brand and the extra week in the prior year
period
- Rao’s continued its march towards $1 billion of annual net
sales, finishing the year with $774.7 million, up 33.5%
year-over-year, or 36.8% on an organic basis1
- Rao’s sauce dollar consumption grew 30.6% year-over-year,
benefitting from strong gains in household penetration as a result
of a material step up in distribution and awareness
- Rao’s franchise outside of sauce grew combined dollar
consumption for the frozen, soup, and pasta categories 46.1%
year-over-year2
- Gross margin increased 180-basis points to 29.9%; Adjusted
gross margin3 increased 170-basis points to 30.0%
- Net income was $30.2 million or $0.29 per diluted share,
impacted by costs related to the pending merger with Campbell’s;
adjusted net income3 was $82.9 million or $0.80 per diluted
share
- Adjusted EBITDA3 of $156.1 million grew 30.3% year-over-year,
inclusive of a 19.7% year-over-year combined increase in Marketing
and R&D expense
- Net Leverage4 of 1.6x improved from 2.9x in the prior year,
reflecting strong fundamental performance and cash generation, with
total cash finishing the year at $232 million
- Due to the pending merger with Campbell’s, the Company will not
be providing guidance for Fiscal Year 2024
"Fiscal year 2023 was a landmark year for Sovos Brands,"
commented Todd Lachman, Chief Executive Officer. "Our team
delivered sector-leading, volume-driven top and bottom-line growth,
surpassing $1 billion of net sales and $150 million of adjusted
EBITDA, expanded margins by nearly 200 bps and improved net
leverage to 1.6x. Notably, net sales growth was driven primarily by
volumes in contrast to most of our peers.”
Mr. Lachman continued, “I am also excited that we are one step
closer to completing our previously announced merger with
Campbell's for $23 per share, reflecting a 92% return for
shareholders from our September 2021 IPO price. Our success would
not have been possible without our tenacious and highly talented
team and partners who continue to execute with excellence every
day."
Campbell Soup Company (“Campbell’s”) Merger
UpdateAs previously disclosed, on August 7, 2023, the
Company entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with Campbell’s and Premium Products Merger Sub, Inc.,
a Delaware corporation and a wholly-owned subsidiary of Campbell’s
(“Merger Sub”). The Merger Agreement provides, among other things,
that subject to the satisfaction or waiver of the conditions set
forth therein, including the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”), Merger Sub
will merge with and into the Company (the “Merger”) with the
Company surviving as a wholly owned subsidiary of Campbell’s. As
previously disclosed in a Form 8-K filed on October 23, 2023, the
Company and Campbell’s each received a request for additional
information (the “Second Request”) from the U.S. Federal Trade
Commission (the “FTC”) in connection with the FTC’s review of the
transactions contemplated by the Merger Agreement, which extended
the waiting period under the HSR Act until 30 days after both the
Company and Campbell’s substantially complied with the Second
Request. As previously disclosed in a Form 8-K filed on February
13, 2024 (the “February 13, 2024 Form 8-K”), the Company and
Campbell’s issued a joint press release announcing that both
companies had certified substantial compliance with the Second
Request. As previously disclosed in the February 13, 2024 Form 8-K,
the certification of substantial compliance triggered the start of
the 30-day waiting period under the HSR Act, which is expected to
expire on March 11, 2024, after which the Merger can be finalized.
Subject to the satisfaction or waiver of customary closing
conditions, the Company continues to expect to complete the Merger
within days of the March 11, 2024 expiration date.
Summary of Reported (GAAP) and Adjusted3
Results
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13 Weeks Ended |
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14 Weeks Ended |
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Fiscal Year Ended |
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December 30, 2023 |
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December 31, 2022 |
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Change |
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December 30, 2023 |
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December 31, 2022 |
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Change |
Net sales ($ millions) |
$ |
292.1 |
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$ |
262.1 |
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11.4 |
% |
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$ |
1,020.4 |
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$ |
878.4 |
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16.2 |
% |
Net income (loss) ($
millions) |
$ |
15.5 |
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$ |
(28.7 |
) |
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|
154.1 |
% |
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$ |
30.2 |
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$ |
(53.5 |
) |
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156.5 |
% |
Net income (loss) margin
(%) |
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5.3 |
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% |
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(11.0 |
) |
% |
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1630 |
bps |
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2.8 |
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% |
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(6.1 |
) |
% |
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890 |
bps |
Adjusted net income3 |
$ |
26.8 |
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$ |
19.6 |
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36.2 |
% |
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$ |
82.9 |
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$ |
60.4 |
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37.1 |
% |
Diluted EPS |
$ |
0.15 |
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$ |
(0.28 |
) |
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153.6 |
% |
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$ |
0.29 |
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$ |
(0.53 |
) |
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154.7 |
% |
Adjusted diluted EPS3 |
$ |
0.26 |
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$ |
0.19 |
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36.8 |
% |
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$ |
0.80 |
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$ |
0.60 |
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33.3 |
% |
Adjusted EBITDA3($
millions) |
$ |
46.0 |
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$ |
37.0 |
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24.3 |
% |
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$ |
156.1 |
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$ |
119.8 |
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30.3 |
% |
Adjusted EBITDA
margin3(%) |
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15.7 |
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% |
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14.1 |
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% |
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160 |
bps |
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15.3 |
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% |
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13.6 |
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% |
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170 |
bps |
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Summary of Reported and Organic Net Sales Growth –
Fourth Quarter and Fiscal Year 2023
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13 Weeks Ended December 30, 2023 |
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ReportedNet Sales |
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M&A |
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Extra Week |
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OrganicNet Sales |
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Organic Net Sales GrowthKey
Drivers |
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% Change |
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Contribution |
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Contribution |
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% Change1 |
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Volume |
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Price |
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Rao’s |
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24.9 |
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% |
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9.8 |
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% |
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34.7 |
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% |
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noosa |
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(9.1 |
) |
% |
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7.1 |
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% |
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(2.0 |
) |
% |
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Michael Angelo’s |
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(10.1 |
) |
% |
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6.6 |
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% |
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(3.5 |
) |
% |
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Total Net
Sales |
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11.4 |
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% |
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6.9 |
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% |
|
7.0 |
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% |
|
25.3 |
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% |
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21.7 |
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% |
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3.6 |
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% |
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Fiscal Year Ended December 30, 2023 |
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ReportedNet Sales |
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M&A |
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Extra Week |
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OrganicNet Sales |
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Organic Net Sales GrowthKey
Drivers |
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% Change |
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Contribution |
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Contribution |
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% Change1 |
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Volume |
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Price |
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Rao’s |
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33.5 |
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% |
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3.3 |
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% |
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36.8 |
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% |
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noosa |
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0.1 |
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% |
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1.8 |
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% |
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1.9 |
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% |
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Michael Angelo’s |
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(12.7 |
) |
% |
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1.5 |
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% |
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(11.2 |
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% |
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Total Net
Sales |
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16.2 |
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% |
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6.3 |
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% |
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2.1 |
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% |
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24.6 |
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% |
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18.1 |
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% |
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6.5 |
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% |
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Fourth Quarter 2023 Results
Net sales of $292.1 million increased 11.4% year-over-year,
representing the tenth consecutive quarter of double-digit net
sales growth since IPO. Organic net sales growth of 25.3% was
driven by 21.7% volume and 3.6% price, reflecting another robust
performance from the Rao’s franchise, which grew 34.7%
year-over-year on an organic basis. 1
Gross profit of $87.5 million increased 15.2% versus the prior
year period. Gross margin was 30.0%, up 100-basis points from the
prior year period. Adjusted gross profit3 of $87.5 million
increased 14.3% year-over-year driven primarily by volume growth.
Adjusted gross margin3 was 30.0%, an 80-basis point improvement
versus the prior year period, reflecting benefits from productivity
and pricing that were partially offset by inflation.
Total operating expenses of $57.4 million decreased 44.9%
year-over-year, driven by the year-ago Loss on Asset Sale related
to the sale of the Birch Benders brand and certain related assets.
Adjusted operating expense3 of $44.4 million increased 4.6% versus
the prior year period, reflecting a 12.4% year-over-year increase
in combined marketing and R&D investments, higher volume-driven
selling expenses and continued investments in our talent.
Net interest expense was $8.1 million, a decline of $1.4 million
as compared to the prior year period due to higher interest income
as a result of higher cash balances.
Net income was $15.5 million, 5.3% of net sales, or $0.15 per
diluted share. This compared to a net loss of $28.7 million, or
$(0.28) per diluted share in the prior year period. Adjusted net
income3 was $26.8 million, or $0.26 per diluted share, as compared
to adjusted net income of $19.6 million or $0.19 per diluted share
in the prior year period.
Adjusted EBITDA3 of $46.0 million increased 24.3% versus the
prior year period, benefitting from adjusted gross profit growth
and adjusted operating expense leverage while reinvesting
meaningfully into marketing and R&D. Adjusted EBITDA margin3
was 15.7%, up 160-basis points versus the prior year period.
Balance Sheet and Cash Flow Highlights
As of December 30, 2023, cash and cash equivalents were $232.0
million and total debt was $484.0 million, resulting in a net debt
to last twelve months adjusted EBITDA3 ratio of 1.6x.
Cash from operating activities for the full fiscal year was
$105.3 million, a $59.9 million increase as compared to the prior
year period. Higher cash flow was driven by improved profitability
and working capital. Full year capital expenditures were $11.9
million.
Fiscal Year 2024 Outlook
Due to the pending merger with Campbell’s, Sovos Brands will not
be providing forward looking guidance.
Footnotes:
(1) Organic net sales and organic net sales growth are defined
as reported net sales or reported net sales growth excluding, when
they occur, the impact of a 53rd week of shipments as well as
acquisitions and divestitures. For discussions of fourth quarter
and fiscal year 2023 results, organic net sales and organic net
sales growth excluded the impact of the Birch Benders divestiture
and the 53rd week in the prior year.
(2) Source: Market performance refers to dollar sales and unit
growth rates as reported by Circana MULO in the 13-week or 52-week
period ended December 31, 2023 and, as applicable, as compared to
the 13-week or 52-week period ended January 1, 2023. Household
penetration refers to data reported by Circana All Outlet for the
52-week period ended December 31, 2023 and, as applicable, as
compared to the 52-week period ended January 1, 2023.
(3) Adjusted gross profit, adjusted gross margin, adjusted
operating expense, adjusted operating income, EBITDA, adjusted
EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted
diluted EPS are non-GAAP measures. For additional information,
including a reconciliation of adjusted results to the most directly
comparable measures presented in accordance with GAAP, see the
Non-GAAP Financial Information and Reconciliation of Non-GAAP
Financial Measures sections of this release.
(4) Net leverage is defined as Net Debt (Total Debt minus Cash)
divided by trailing twelve month adjusted EBITDA.
Earnings Conference Call Details
Due to the pending merger with Campbell’s, Sovos Brands will not
be holding an earnings call. Press release materials are available
publicly on the Investor Relations section of the Company’s website
at ir.sovosbrands.com.
About Sovos Brands, Inc.Sovos Brands, Inc. is a
consumer-packaged food company focused on building disruptive
growth brands that bring today’s consumers great tasting food that
fits the way they live. The Company’s product offerings include a
variety of pasta sauces, dry pasta, soups, frozen entrées, frozen
pizza and yogurts, all of which are sold in North America under the
brand names Rao’s, Michael Angelo’s and noosa. All Sovos Brands’
products are built with authenticity at their core, providing
consumers with one-of-a-kind food experiences that are genuine,
delicious, and unforgettable. The Company is headquartered in
Louisville, Colorado. For more information on Sovos Brands and its
products, please visit www.sovosbrands.com.
ContactsInvestors: Joshua
LevineIR@sovosbrands.com
Media:Lauren Armstrong
media@sovosbrands.com
Non-GAAP Financial Information
In addition to the Company’s results which are determined in
accordance with generally accepted accounting principles in the
United States (“GAAP”), the Company believes the following non-GAAP
measures presented in this press release are useful in evaluating
its operating performance: EBITDA, Adjusted EBITDA, EBITDA margin,
Adjusted EBITDA margin, organic net sales, organic net sales
growth, adjusted gross profit, adjusted gross margin, adjusted
operating expenses, adjusted operating income, adjusted income tax
(expense), adjusted effective tax rate, adjusted net income, and
diluted earnings per share from adjusted net income. We define
EBITDA as net income (loss) before net interest expense, income tax
(expense) benefit, depreciation and amortization. We define
Adjusted EBITDA as EBITDA adjusted for non-cash equity-based
compensation costs, non-recurring costs, gain (loss) on foreign
currency contracts, supply chain optimization costs, impairment of
goodwill, transaction and integration costs and IPO readiness
costs. EBITDA margin is determined by calculating
the percentage EBITDA is of net sales. Adjusted EBITDA margin
is determined by calculating the percentage Adjusted EBITDA is
of net sales. We define organic net sales as reported net sales
growth excluding, when they occur, the impact of a 53rd week of
shipments, acquisitions and divestitures. Organic net sales growth
is determined by calculating the percentage of increase or decrease
in organic net sales compared to the prior year period. Adjusted
gross margin is determined by calculating adjusted gross profit as
a percentage of net sales. Adjusted gross profit, adjusted
operating expenses, adjusted operating income, adjusted income tax
(expense) and adjusted effective tax rate, and adjusted net income
consists of gross profit, total operating expenses, operating
income (loss), reported income tax (expense) benefit, reported
effective tax rate and net income (loss) before non-cash
equity-based compensation costs, non-recurring costs, gain (loss)
on foreign currency contracts, supply chain optimization costs,
impairment of goodwill, transaction and integration costs, IPO
readiness costs, acquisition amortization and tax-related
adjustments that we do not consider in our evaluation of our
ongoing operating performance from period to period as discussed
further below. Diluted earnings per share from adjusted net income
is determined by dividing adjusted net income by the weighted
average diluted shares outstanding. Non-GAAP financial measures are
included in this release because they are key metrics used by
management to assess our operating performance. Management believes
that non-GAAP financial measures are helpful in highlighting
performance trends because non-GAAP financial measures eliminate
non-recurring and unusual items and non-cash expenses, which we do
not consider indicative of ongoing operational performance. Our
presentation of non-GAAP financial measures should not be construed
to imply that our future results will be unaffected by these items.
By providing these non-GAAP financial measures, management believes
we are enhancing investors’ understanding of our business and our
results of operations, as well as assisting investors in evaluating
how well we are executing our strategic initiatives.
EBITDA, Adjusted EBITDA, EBITDA margin, Adjusted EBITDA margin,
organic net sales, organic net sales growth, adjusted gross profit,
adjusted gross margin, adjusted operating expenses, adjusted
operating income, adjusted income tax (expense), adjusted effective
tax rate, adjusted net income and diluted earnings per share from
adjusted net income are not defined under GAAP. Our use of the
terms EBITDA, Adjusted EBITDA, EBITDA margin, Adjusted EBITDA
margin, organic net sales, organic net sales growth, adjusted gross
profit, adjusted gross margin, adjusted operating expenses,
adjusted operating income, adjusted income tax (expense), adjusted
effective tax rate, adjusted net income and diluted earnings per
share from adjusted net income may not be comparable to similarly
titled measures of other companies in our industry and are not
measures of performance calculated in accordance with GAAP. Our
presentation of non-GAAP financial measures is intended to provide
supplemental measures of our performance that are not required by,
or presented in accordance with, GAAP. Non-GAAP financial measures
should not be considered as alternatives to operating income
(loss), net income (loss), earnings (loss) per share, net sales or
any other performance measures derived in accordance with GAAP, or
as measures of operating cash flows or liquidity.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, including but not limited
to statements regarding the pending merger with Campbell’s. These
forward-looking statements are based on Sovos Brands’ current
assumptions, expectations and beliefs and are subject to
substantial risks, uncertainties, assumptions, and changes in
circumstances that may cause Sovos Brands’ actual results,
performance, or achievements to differ materially from those
expressed or implied in any forward-looking statement.
With respect to the pending merger with Campbell’s, these risks
and uncertainties include, but are not limited to:
- the timing to consummate the pending merger;
- our ability to retain and hire key personnel and other
employees, which could require us to use more expensive or less
effective resources to support our business or otherwise adversely
affect our business, financial condition and results of
operations;
- the risk that a condition to closing of the pending merger may
not be satisfied or that the closing of the pending merger might
otherwise not occur;
- the risk that required regulatory approval for the pending
merger, including under the HSR Act, is not obtained or is obtained
subject to conditions that are not anticipated;
- the diversion of management time on merger-related issues;
and
- the risk that the pending merger and its announcement could
have an adverse effect on our ability to retain third-party
relationships and related talent.
These and other risks and uncertainties, including risks related
to our sales and costs, are more fully described in Sovos Brands’
filings with the Securities and Exchange Commission (the “SEC”),
including in the Company’s Definitive Proxy Statement relating to
the proposed transaction filed on September 13, 2023, in the
Company’s Definitive Additional Materials filed on October 10,
2023, in the section entitled “Risk Factors” in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 30,
2023 and in other filings and reports that Sovos Brands may file
from time to time with the SEC. Moreover, Sovos Brands operates in
a very competitive and rapidly changing environment. New risks
emerge from time to time. It is not possible for management to
predict all risks, nor can Sovos Brands assess the impact of all
factors on its business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
Sovos Brands may make. In light of these risks, uncertainties and
assumptions, Sovos Brands cannot guarantee that future results,
levels of activity, performance, achievements, or events and
circumstances reflected in the forward-looking statements will
occur. Forward-looking statements represent managements’ beliefs
and assumptions only as of the date of this press release. Sovos
Brands disclaims any obligation to update forward-looking
statements except as required by law.
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SOVOS BRANDS, INC.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(Amounts in thousands, except for
share and per share data)(Unaudited) |
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13 Weeks Ended |
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14 Weeks Ended |
|
Fiscal Year Ended |
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|
December 30, 2023 |
|
December 31, 2022 |
|
December 30, 2023 |
|
December 31, 2022 |
Net sales |
|
$ |
292,051 |
|
|
$ |
262,098 |
|
|
$ |
1,020,421 |
|
|
$ |
878,371 |
|
Cost of sales |
|
|
204,577 |
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|
|
186,181 |
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|
|
714,935 |
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|
|
631,706 |
|
Gross
profit |
|
|
87,474 |
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|
|
75,917 |
|
|
|
305,486 |
|
|
|
246,665 |
|
Operating expenses: |
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|
|
Selling, general and administrative |
|
|
51,329 |
|
|
|
45,696 |
|
|
|
200,847 |
|
|
|
163,025 |
|
Depreciation and amortization |
|
|
6,054 |
|
|
|
7,173 |
|
|
|
24,077 |
|
|
|
28,785 |
|
Loss on asset sale |
|
|
— |
|
|
|
51,291 |
|
|
|
— |
|
|
|
51,291 |
|
Impairment of goodwill |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
42,052 |
|
Total operating
expenses |
|
|
57,383 |
|
|
|
104,160 |
|
|
|
224,924 |
|
|
|
285,153 |
|
Operating income (loss) |
|
|
30,091 |
|
|
|
(28,243 |
) |
|
|
80,562 |
|
|
|
(38,488 |
) |
Interest (income) |
|
|
(2,859 |
) |
|
|
(679 |
) |
|
|
(8,503 |
) |
|
|
(1,050 |
) |
Interest expense |
|
|
10,936 |
|
|
|
10,116 |
|
|
|
42,580 |
|
|
|
28,901 |
|
Interest expense, net |
|
|
8,077 |
|
|
|
9,437 |
|
|
|
34,077 |
|
|
|
27,851 |
|
Income (loss) before
income taxes |
|
|
22,014 |
|
|
|
(37,680 |
) |
|
|
46,485 |
|
|
|
(66,339 |
) |
Income tax (expense)
benefit |
|
|
(6,501 |
) |
|
|
8,993 |
|
|
|
(16,311 |
) |
|
|
12,888 |
|
Net income (loss) |
|
$ |
15,513 |
|
|
$ |
(28,687 |
) |
|
$ |
30,174 |
|
|
$ |
(53,451 |
) |
Earnings (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.15 |
|
|
$ |
(0.28 |
) |
|
$ |
0.30 |
|
|
$ |
(0.53 |
) |
Diluted |
|
$ |
0.15 |
|
|
$ |
(0.28 |
) |
|
$ |
0.29 |
|
|
$ |
(0.53 |
) |
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
101,435,281 |
|
|
|
100,961,986 |
|
|
|
101,303,730 |
|
|
|
100,917,978 |
|
Diluted |
|
|
104,018,656 |
|
|
|
100,961,986 |
|
|
|
103,143,363 |
|
|
|
100,917,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOVOS BRANDS, INC.CONDENSED CONSOLIDATED
BALANCE SHEETS(Amounts in thousands)(Unaudited) |
|
|
|
|
|
|
|
|
|
December 30, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
231,988 |
|
|
$ |
138,654 |
|
Accounts receivable, net |
|
|
97,655 |
|
|
|
87,695 |
|
Inventories, net |
|
|
95,515 |
|
|
|
92,602 |
|
Prepaid expenses and other current assets |
|
|
7,843 |
|
|
|
11,974 |
|
Total current assets |
|
|
433,001 |
|
|
|
330,925 |
|
Property and equipment,
net |
|
|
64,699 |
|
|
|
64,317 |
|
Operating lease right-of-use
assets |
|
|
11,447 |
|
|
|
13,332 |
|
Goodwill |
|
|
395,399 |
|
|
|
395,399 |
|
Intangible assets, net |
|
|
329,122 |
|
|
|
351,547 |
|
Other long-term assets |
|
|
1,313 |
|
|
|
3,279 |
|
TOTAL
ASSETS |
|
$ |
1,234,981 |
|
|
$ |
1,158,799 |
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
Accounts payable |
|
$ |
64,486 |
|
|
$ |
49,264 |
|
Accrued expenses |
|
|
81,356 |
|
|
|
69,571 |
|
Current portion of long-term debt |
|
|
184 |
|
|
|
99 |
|
Current portion of long-term operating lease liabilities |
|
|
3,275 |
|
|
|
3,308 |
|
Total current liabilities |
|
|
149,301 |
|
|
|
122,242 |
|
Long-term debt, net of debt issuance costs |
|
|
483,800 |
|
|
|
482,344 |
|
Deferred income taxes |
|
|
60,157 |
|
|
|
63,644 |
|
Long-term operating lease liabilities |
|
|
11,388 |
|
|
|
14,063 |
|
Other long-term liabilities |
|
|
346 |
|
|
|
483 |
|
TOTAL LIABILITIES |
|
|
704,992 |
|
|
|
682,776 |
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
Preferred Stock |
|
|
— |
|
|
|
— |
|
Common Stock |
|
|
101 |
|
|
|
101 |
|
Additional paid-in-capital |
|
|
602,123 |
|
|
|
577,664 |
|
Accumulated deficit |
|
|
(73,117 |
) |
|
|
(103,291 |
) |
Accumulated other comprehensive income |
|
|
882 |
|
|
|
1,549 |
|
TOTAL STOCKHOLDERS’
EQUITY |
|
|
529,989 |
|
|
|
476,023 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
$ |
1,234,981 |
|
|
$ |
1,158,799 |
|
|
|
|
|
|
|
|
|
|
|
SOVOS BRANDS, INC.CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(Amounts in
thousands)(Unaudited) |
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
December 30, 2023 |
|
December 31, 2022 |
Operating activities |
|
|
|
|
|
|
Net income (loss) |
|
$ |
30,174 |
|
|
$ |
(53,451 |
) |
Adjustments to reconcile net
income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
33,951 |
|
|
|
38,868 |
|
Equity-based compensation expense |
|
|
24,459 |
|
|
|
18,438 |
|
(Gain) loss on foreign currency contracts |
|
|
(68 |
) |
|
|
33 |
|
Non-cash interest expense |
|
|
921 |
|
|
|
59 |
|
Deferred income taxes |
|
|
(3,271 |
) |
|
|
(13,821 |
) |
Amortization of debt issuance costs |
|
|
1,266 |
|
|
|
1,331 |
|
Non-cash operating lease expense |
|
|
2,711 |
|
|
|
2,418 |
|
Provision for excess and obsolete inventory |
|
|
3,310 |
|
|
|
2,482 |
|
Loss on disposal of property and equipment |
|
|
359 |
|
|
|
— |
|
Impairment of goodwill |
|
|
— |
|
|
|
42,052 |
|
Loss on asset sale |
|
|
— |
|
|
|
51,291 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable, net |
|
|
(9,960 |
) |
|
|
(17,032 |
) |
Inventories, net |
|
|
(6,224 |
) |
|
|
(48,891 |
) |
Prepaid expenses and other current assets |
|
|
(1,938 |
) |
|
|
603 |
|
Other long-term assets |
|
|
73 |
|
|
|
388 |
|
Accounts payable |
|
|
15,482 |
|
|
|
11,552 |
|
Accrued expenses |
|
|
17,748 |
|
|
|
12,238 |
|
Other long-term liabilities |
|
|
(135 |
) |
|
|
62 |
|
Operating lease liabilities |
|
|
(3,534 |
) |
|
|
(3,225 |
) |
Net cash provided by operating activities |
|
|
105,324 |
|
|
|
45,395 |
|
Investing activities |
|
|
|
|
|
|
Proceeds from sale of business |
|
|
— |
|
|
|
40,000 |
|
Purchases of property and equipment |
|
|
(11,861 |
) |
|
|
(12,817 |
) |
Net cash (used in) investing
activities |
|
|
(11,861 |
) |
|
|
27,183 |
|
Financing activities |
|
|
|
|
|
|
Repayments of capital lease obligations |
|
|
(129 |
) |
|
|
(78 |
) |
Net cash (used in) financing
activities |
|
|
(129 |
) |
|
|
(78 |
) |
Net increase in cash and cash equivalents |
|
|
93,334 |
|
|
|
72,500 |
|
Cash and cash equivalents at beginning of period |
|
|
138,654 |
|
|
|
66,154 |
|
Cash and cash
equivalents at end of period |
|
$ |
231,988 |
|
|
$ |
138,654 |
|
|
|
|
|
|
|
|
|
|
|
SOVOS BRANDS, INC.RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
14 Weeks Ended |
|
Fiscal Year Ended |
(In thousands) |
|
December 30, 2023 |
|
% ofNet sales |
|
December 31, 2022 |
|
% ofNet sales |
|
December 30, 2023 |
|
% ofNet sales |
|
December 31, 2022 |
|
% ofNet sales |
Net income (loss)(1) |
|
$ |
15,513 |
|
|
5.3 |
|
% |
|
$ |
(28,687 |
) |
|
(11.0 |
) |
% |
|
$ |
30,174 |
|
|
2.8 |
|
% |
|
$ |
(53,451 |
) |
|
(6.1 |
) |
% |
Interest (income) |
|
|
(2,859 |
) |
|
(1.0 |
) |
|
|
|
(679 |
) |
|
(0.3 |
) |
|
|
|
(8,503 |
) |
|
(0.8 |
) |
|
|
|
(1,050 |
) |
|
(0.1 |
) |
|
Interest expense |
|
|
10,936 |
|
|
3.7 |
|
|
|
|
10,116 |
|
|
3.9 |
|
|
|
|
42,580 |
|
|
4.2 |
|
|
|
|
28,901 |
|
|
3.3 |
|
|
Income tax (expense) benefit |
|
|
(6,501 |
) |
|
(2.3 |
) |
|
|
|
8,993 |
|
|
3.4 |
|
|
|
|
(16,311 |
) |
|
(1.6 |
) |
|
|
|
12,888 |
|
|
1.5 |
|
|
Depreciation and amortization |
|
|
8,468 |
|
|
2.9 |
|
|
|
|
9,684 |
|
|
3.7 |
|
|
|
|
33,951 |
|
|
3.4 |
|
|
|
|
38,868 |
|
|
4.4 |
|
|
EBITDA(1) |
|
|
38,559 |
|
|
13.2 |
|
|
|
|
(18,559 |
) |
|
(7.1 |
) |
|
|
|
114,513 |
|
|
11.2 |
|
|
|
|
380 |
|
|
— |
|
|
Non-cash equity-based compensation(2) |
|
|
6,165 |
|
|
2.1 |
|
|
|
|
5,198 |
|
|
2.0 |
|
|
|
|
24,459 |
|
|
2.4 |
|
|
|
|
18,438 |
|
|
2.1 |
|
|
Non-recurring costs(3) |
|
|
285 |
|
|
0.1 |
|
|
|
|
439 |
|
|
0.2 |
|
|
|
|
2,660 |
|
|
0.3 |
|
|
|
|
4,050 |
|
|
0.5 |
|
|
(Gain) loss on foreign currency contracts(4) |
|
|
(1,346 |
) |
|
(0.5 |
) |
|
|
|
(3,222 |
) |
|
(1.2 |
) |
|
|
|
(68 |
) |
|
— |
|
|
|
|
33 |
|
|
— |
|
|
Supply chain optimization(5) |
|
|
— |
|
|
— |
|
|
|
|
613 |
|
|
0.2 |
|
|
|
|
128 |
|
|
— |
|
|
|
|
1,904 |
|
|
0.2 |
|
|
Impairment of goodwill(6) |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
42,052 |
|
|
4.8 |
|
|
Transaction and integration costs(7) |
|
|
2,320 |
|
|
0.8 |
|
|
|
|
52,527 |
|
|
20.0 |
|
|
|
|
14,435 |
|
|
1.4 |
|
|
|
|
52,586 |
|
|
6.0 |
|
|
Initial public offering readiness(8) |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|
384 |
|
|
— |
|
|
Adjusted
EBITDA(1) |
|
$ |
45,983 |
|
|
15.7 |
|
% |
|
$ |
36,996 |
|
|
14.1 |
|
% |
|
$ |
156,127 |
|
|
15.3 |
|
% |
|
$ |
119,827 |
|
|
13.6 |
|
% |
____________________________
(1) |
|
Net income (loss) as a percentage of net sales is also referred to
as net income (loss) margin. EBITDA and Adjusted EBITDA as a
percentage of net sales are also referred to as EBITDA margin and
Adjusted EBITDA margin. |
(2) |
|
Consists of non-cash equity-based compensation expense associated
with the grant of equity-based compensation provided to officers,
non-employee directors and employees. |
(3) |
|
Consists of costs for professional fees related to organizational
optimization and capital markets activities. |
(4) |
|
Consists of unrealized (gain) loss on foreign currency
contracts. |
(5) |
|
Consists of write-downs associated with packaging optimization and
a strategic initiative to move co-packaging production from an
international supplier to a domestic supplier. |
(6) |
|
Consists of expenses for impairment of goodwill. |
(7) |
|
Consists of costs associated with the pending merger, the
divestiture of the Birch Benders brand and certain related assets
and other potential transactions. |
(8) |
|
Consists of costs associated with building the organizational
infrastructure to support a public company environment. |
|
|
|
|
SOVOS BRANDS, INC.RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended December 30, 2023 |
|
|
|
Reported |
|
M&A |
|
Extra Week |
|
Organic |
|
(In thousands) |
|
Net Sales |
|
Contribution |
|
Contribution |
|
Net Sales |
|
Rao’s |
|
$ |
234,333 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
234,333 |
|
|
noosa |
|
|
40,038 |
|
|
|
|
|
|
|
|
|
|
|
40,038 |
|
|
Michael Angelo’s |
|
|
17,691 |
|
|
|
|
|
|
|
|
|
|
|
17,691 |
|
|
Birch Benders |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
(11 |
) |
|
Total Net
Sales |
|
$ |
292,051 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
292,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 Weeks Ended December 31, 2022 |
|
|
|
Reported |
|
M&A |
|
Extra Week |
|
Organic |
|
|
|
Net Sales |
|
Contribution(1) |
|
|
Contribution(2) |
|
Net Sales |
|
Rao’s |
|
$ |
187,688 |
|
|
$ |
|
|
|
$ |
13,743 |
|
|
$ |
173,945 |
|
|
noosa |
|
|
44,064 |
|
|
|
|
|
|
|
3,206 |
|
|
|
40,858 |
|
|
Michael Angelo’s |
|
|
19,674 |
|
|
|
|
|
|
|
1,343 |
|
|
|
18,331 |
|
|
Birch Benders |
|
|
10,672 |
|
|
|
10,672 |
|
|
|
|
|
|
|
— |
|
|
Total Net
Sales |
|
$ |
262,098 |
|
|
$ |
10,672 |
|
|
$ |
18,292 |
|
|
$ |
233,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic Net Sales
Growth ($) |
|
|
|
|
|
|
|
|
|
$ |
58,917 |
|
|
Organic Net Sales
Growth (%) |
|
|
|
|
|
|
|
|
|
|
25.3 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 30, 2023 |
|
|
|
Reported |
|
M&A |
|
Extra Week |
|
Organic |
|
(In thousands) |
|
Net Sales |
|
Contribution |
|
Contribution |
|
Net Sales |
|
Rao’s |
|
$ |
774,706 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
774,706 |
|
|
noosa |
|
|
176,258 |
|
|
|
|
|
|
|
|
|
|
|
176,258 |
|
|
Michael Angelo’s |
|
|
70,639 |
|
|
|
|
|
|
|
|
|
|
|
70,639 |
|
|
Birch Benders |
|
|
(1,182 |
) |
|
|
|
|
|
|
|
|
|
|
(1,182 |
) |
|
Total Net
Sales |
|
$ |
1,020,421 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,020,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31, 2022 |
|
|
|
Reported |
|
M&A |
|
Extra Week |
|
Organic |
|
|
|
Net Sales |
|
Contribution(1) |
|
Contribution(2) |
|
Net Sales |
|
Rao’s |
|
$ |
580,088 |
|
|
$ |
|
|
|
$ |
13,743 |
|
|
$ |
566,345 |
|
|
noosa |
|
|
176,166 |
|
|
|
|
|
|
|
3,206 |
|
|
|
172,960 |
|
|
Michael Angelo’s |
|
|
80,925 |
|
|
|
|
|
|
|
1,343 |
|
|
|
79,582 |
|
|
Birch Benders |
|
|
41,192 |
|
|
|
41,192 |
|
|
|
|
|
|
|
— |
|
|
Total Net
Sales |
|
$ |
878,371 |
|
|
$ |
41,192 |
|
|
$ |
18,292 |
|
|
$ |
818,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic Net Sales
Growth ($) |
|
|
|
|
|
|
|
|
|
$ |
201,534 |
|
|
Organic Net Sales
Growth (%) |
|
|
|
|
|
|
|
|
|
|
24.6 |
|
% |
_________________________
(1) |
|
Reflects net sales for Birch Benders brands generated in the fiscal
year ended December 31, 2022 (inclusive of the $0.8 million
generated by the Birch Benders brand in the extra week). |
(2) |
|
Reflects net sales generated in the extra week by Rao’s, Michael
Angelo’s and noosa brands. |
|
|
|
|
SOVOS BRANDS, INC.RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
(In thousands, except share and per share
data) |
|
December 30, 2023 |
|
|
Gross profit |
|
Operating expenses |
|
Operating income |
|
Interest (income) |
|
Interest expense |
|
Income tax (expense) |
|
Net income |
|
As reported (GAAP) |
|
$ |
87,474 |
|
|
$ |
57,383 |
|
|
$ |
30,091 |
|
|
$ |
(2,859 |
) |
|
$ |
10,936 |
|
|
$ |
(6,501 |
) |
|
$ |
15,513 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash equity-based compensation(1) |
|
|
— |
|
|
|
(6,165 |
) |
|
|
6,165 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,165 |
|
|
Non-recurring costs(2) |
|
|
— |
|
|
|
(285 |
) |
|
|
285 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
285 |
|
|
Gain on foreign currency contracts(3) |
|
|
— |
|
|
|
1,346 |
|
|
|
(1,346 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,346 |
) |
|
Transaction and integration costs(6) |
|
|
— |
|
|
|
(2,320 |
) |
|
|
2,320 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,320 |
|
|
Acquisition amortization(8) |
|
|
— |
|
|
|
(5,606 |
) |
|
|
5,606 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,606 |
|
|
Tax effect of adjustments(9) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(304 |
) |
|
|
(304 |
) |
|
One-time tax (expense) items(10) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,489 |
) |
|
|
(1,489 |
) |
|
As adjusted |
|
$ |
87,474 |
|
|
$ |
44,353 |
|
|
$ |
43,121 |
|
|
$ |
(2,859 |
) |
|
$ |
10,936 |
|
|
$ |
(8,294 |
) |
|
$ |
26,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted (% of net sales) |
|
|
30.0 |
|
% (11) |
|
15.2 |
|
% |
|
14.8 |
|
% |
|
(1.0 |
) |
% |
|
3.7 |
|
% |
|
(2.8 |
) |
% |
|
9.2 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.15 |
|
|
Adjusted Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.26 |
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted for net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,018,656 |
|
|
Diluted for adjusted net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,018,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOVOS BRANDS, INC.RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 Weeks Ended |
(In thousands, except share and per share
data) |
|
December 31, 2022 |
|
|
Gross profit |
|
Operating expenses |
|
Operating income (loss) |
|
Interest (income) |
|
Interest expense |
|
Income tax (expense) benefit |
|
Net income (loss) |
|
As reported (GAAP) |
|
$ |
75,917 |
|
|
$ |
104,160 |
|
|
$ |
(28,243 |
) |
|
$ |
(679 |
) |
|
$ |
10,116 |
|
|
$ |
8,993 |
|
|
$ |
(28,687 |
) |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash equity-based compensation(1) |
|
|
— |
|
|
|
(5,198 |
) |
|
|
5,198 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,198 |
|
|
Non-recurring costs(2) |
|
|
— |
|
|
|
(439 |
) |
|
|
439 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
439 |
|
|
Gain on foreign currency contracts(3) |
|
|
— |
|
|
|
3,222 |
|
|
|
(3,222 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,222 |
) |
|
Supply chain optimization(4) |
|
|
613 |
|
|
|
— |
|
|
|
613 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
613 |
|
|
Transaction and integration costs(6) |
|
|
— |
|
|
|
(52,527 |
) |
|
|
52,527 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
52,527 |
|
|
Acquisition amortization(8) |
|
|
— |
|
|
|
(6,811 |
) |
|
|
6,811 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,811 |
|
|
Tax effect of adjustments(9) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23,258 |
) |
|
|
(23,258 |
) |
|
One-time tax (expense) items(10) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,223 |
|
|
|
9,223 |
|
|
As adjusted |
|
$ |
76,530 |
|
|
$ |
42,407 |
|
|
$ |
34,123 |
|
|
$ |
(679 |
) |
|
$ |
10,116 |
|
|
$ |
(5,042 |
) |
|
$ |
19,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted (% of net sales) |
|
|
29.2 |
|
% (11) |
|
16.2 |
|
% |
|
13.0 |
|
% |
|
(0.3 |
) |
% |
|
3.9 |
|
% |
|
(1.9 |
) |
% |
|
7.5 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.28 |
) |
|
Adjusted Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.19 |
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted for net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,964,827 |
|
|
Diluted for adjusted net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,449,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOVOS BRANDS, INC.RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
(In thousands, except share and per share
data) |
|
December 30, 2023 |
|
|
Gross profit |
|
Operating expenses |
|
Operating income |
|
Interest (income) |
|
Interest expense |
|
Income tax (expense) |
|
Net income |
|
As reported (GAAP) |
|
$ |
305,486 |
|
|
$ |
224,924 |
|
|
$ |
80,562 |
|
|
$ |
(8,503 |
) |
|
$ |
42,580 |
|
|
$ |
(16,311 |
) |
|
$ |
30,174 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash equity-based compensation(1) |
|
|
— |
|
|
|
(24,459 |
) |
|
|
24,459 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
24,459 |
|
|
Non-recurring costs(2) |
|
|
— |
|
|
|
(2,660 |
) |
|
|
2,660 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,660 |
|
|
Gain on foreign currency contracts(3) |
|
|
— |
|
|
|
68 |
|
|
|
(68 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(68 |
) |
|
Supply chain optimization(4) |
|
|
128 |
|
|
|
— |
|
|
|
128 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
128 |
|
|
Transaction and integration costs(6) |
|
|
150 |
|
|
|
(14,285 |
) |
|
|
14,435 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,435 |
|
|
Acquisition amortization(8) |
|
|
— |
|
|
|
(22,425 |
) |
|
|
22,425 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22,425 |
|
|
Tax effect of adjustments(9) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,493 |
) |
|
|
(9,493 |
) |
|
One-time tax (expense) items(10) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,862 |
) |
|
|
(1,862 |
) |
|
As adjusted |
|
$ |
305,764 |
|
|
$ |
161,163 |
|
|
$ |
144,601 |
|
|
$ |
(8,503 |
) |
|
$ |
42,580 |
|
|
$ |
(27,666 |
) |
|
$ |
82,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted (% of net sales) |
|
|
30.0 |
|
% (11) |
|
15.8 |
|
% |
|
14.2 |
|
% |
|
(0.8 |
) |
% |
|
4.2 |
|
% |
|
(2.7 |
) |
% |
|
8.1 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.29 |
|
|
Adjusted Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.80 |
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted for net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,143,363 |
|
|
Diluted for adjusted net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,143,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOVOS BRANDS, INC.RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
(In thousands, except share and per share
data) |
|
December 31, 2022 |
|
|
Gross profit |
|
Operating expenses |
|
Operating income (loss) |
|
Interest (income) |
|
Interest expense |
|
Income tax (expense) benefit |
|
Net income (loss) |
|
As reported (GAAP) |
|
$ |
246,665 |
|
|
$ |
285,153 |
|
|
$ |
(38,488 |
) |
|
$ |
(1,050 |
) |
|
$ |
28,901 |
|
|
$ |
12,888 |
|
|
$ |
(53,451 |
) |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash equity-based compensation(1) |
|
|
— |
|
|
|
(18,438 |
) |
|
|
18,438 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,438 |
|
|
Non-recurring costs(2) |
|
|
— |
|
|
|
(4,050 |
) |
|
|
4,050 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,050 |
|
|
Loss on foreign currency contracts(3) |
|
|
— |
|
|
|
(33 |
) |
|
|
33 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33 |
|
|
Supply chain optimization(4) |
|
|
1,904 |
|
|
|
— |
|
|
|
1,904 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,904 |
|
|
Impairment of goodwill(5) |
|
|
— |
|
|
|
(42,052 |
) |
|
|
42,052 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
42,052 |
|
|
Transaction and integration costs(6) |
|
|
— |
|
|
|
(52,586 |
) |
|
|
52,586 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
52,586 |
|
|
Initial public offering readiness(7) |
|
|
— |
|
|
|
(384 |
) |
|
|
384 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
384 |
|
|
Acquisition amortization(8) |
|
|
— |
|
|
|
(27,240 |
) |
|
|
27,240 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
27,240 |
|
|
Tax effect of adjustments(9) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(31,730 |
) |
|
|
(31,730 |
) |
|
One-time tax (expense) items(10) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,079 |
) |
|
|
(1,079 |
) |
|
As adjusted |
|
$ |
248,569 |
|
|
$ |
140,370 |
|
|
$ |
108,199 |
|
|
$ |
(1,050 |
) |
|
$ |
28,901 |
|
|
$ |
(19,921 |
) |
|
$ |
60,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted (% of net sales) |
|
|
28.3 |
|
% (11) |
|
16.0 |
|
% |
|
12.3 |
|
% |
|
(0.1 |
) |
% |
|
3.3 |
|
% |
|
(2.3 |
) |
% |
|
6.9 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.53 |
) |
|
Adjusted Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.60 |
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted for net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,917,978 |
|
|
Diluted for adjusted net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,967,287 |
|
|
______________________
(1) |
|
Consists of non-cash equity-based compensation expense associated
with the grant of equity-based compensation provided to officers,
non-employee directors and employees. |
(2) |
|
Consists of costs for professional fees related to organizational
optimization and capital markets activities. |
(3) |
|
Consists of unrealized gain (loss) on foreign currency
contracts. |
(4) |
|
Consists of write-downs associated with packaging optimization and
a strategic initiative to move co-packaging production from an
international supplier to a domestic supplier. |
(5) |
|
Consists of expenses for impairment of goodwill. |
(6) |
|
Consists of costs associated with the pending merger, the
divestiture of the Birch Benders brand and certain related assets
and other potential transactions. |
(7) |
|
Consists of costs associated with building the organizational
infrastructure to support a public company environment. |
(8) |
|
Amortization costs associated with acquired trade names and
customer lists. |
(9) |
|
Tax effect was calculated using the Company's adjusted annual
effective tax rate. |
(10) |
|
Represents the removal of the tax effect of impairment of goodwill,
costs associated with the pending merger, removal for remeasurement
of deferred taxes related to intangibles for changes in deferred
rate, the removal of the tax effect of non-deductible transaction
costs and the removal of the excess tax benefits related to
equity-based compensation vesting. |
(11) |
|
Adjusted gross profit as a percentage of net sales is also referred
to as adjusted gross margin. |
|
|
|
|
SOVOS BRANDS, INC.RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
14 Weeks Ended |
|
|
Fiscal Year Ended |
|
(In thousands) |
|
December 30, 2023 |
|
|
December 31, 2022 |
|
|
December 30, 2023 |
|
|
December 31, 2022 |
|
Reported income tax (expense) benefit |
|
$ |
(6,501 |
) |
|
|
$ |
8,993 |
|
|
|
$ |
(16,311 |
) |
|
|
$ |
12,888 |
|
|
Non-cash equity-based compensation(1) |
|
|
(347 |
) |
|
|
|
(456 |
) |
|
|
|
(1,194 |
) |
|
|
|
(1,551 |
) |
|
Non-recurring costs(2) |
|
|
431 |
|
|
|
|
(25 |
) |
|
|
|
(384 |
) |
|
|
|
(424 |
) |
|
Gain (loss) on foreign currency contracts(3) |
|
|
— |
|
|
|
|
799 |
|
|
|
|
— |
|
|
|
|
(8 |
) |
|
Supply chain optimization(4) |
|
|
— |
|
|
|
|
(143 |
) |
|
|
|
(27 |
) |
|
|
|
(461 |
) |
|
Impairment of goodwill(5) |
|
|
— |
|
|
|
|
105 |
|
|
|
|
— |
|
|
|
|
(10,172 |
) |
|
Transaction and integration costs(6) |
|
|
(497 |
) |
|
|
|
(12,703 |
) |
|
|
|
(3,395 |
) |
|
|
|
(12,718 |
) |
|
Initial public offering readiness(7) |
|
|
— |
|
|
|
|
2 |
|
|
|
|
— |
|
|
|
|
(446 |
) |
|
Acquisition amortization(8) |
|
|
(1,380 |
) |
|
|
|
(1,614 |
) |
|
|
|
(6,355 |
) |
|
|
|
(7,029 |
) |
|
Adjusted income tax
(expense) |
|
$ |
(8,294 |
) |
|
|
$ |
(5,042 |
) |
|
|
$ |
(27,666 |
) |
|
|
$ |
(19,921 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported effective tax
rate |
|
|
29.5 |
|
% |
|
|
23.9 |
|
% |
|
|
35.1 |
|
% |
|
|
19.4 |
|
% |
Non-cash equity-based compensation(1) |
|
|
(1.2 |
) |
|
|
|
(0.1 |
) |
|
|
|
(1.1 |
) |
|
|
|
0.3 |
|
|
Non-recurring costs(2) |
|
|
1.5 |
|
|
|
|
— |
|
|
|
|
(0.3 |
) |
|
|
|
0.1 |
|
|
Gain (loss) on foreign currency contracts(3) |
|
|
— |
|
|
|
|
0.1 |
|
|
|
|
— |
|
|
|
|
— |
|
|
Supply chain optimization(4) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
0.1 |
|
|
Impairment of goodwill(5) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
1.7 |
|
|
Transaction and integration costs(6) |
|
|
(1.7 |
) |
|
|
|
(1.5 |
) |
|
|
|
(3.0 |
) |
|
|
|
2.1 |
|
|
Initial public offering readiness(7) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
0.1 |
|
|
Acquisition amortization(8) |
|
|
(4.7 |
) |
|
|
|
(0.2 |
) |
|
|
|
(5.7 |
) |
|
|
|
1.2 |
|
|
Adjusted effective tax
rate |
|
|
23.4 |
|
% |
|
|
22.2 |
|
% |
|
|
25.0 |
|
% |
|
|
25.0 |
|
% |
____________________________
(1) |
|
Tax effect adjustment of non-cash equity-based compensation expense
associated with the grant of equity-based compensation provided to
officers, non-employee directors and employees. |
(2) |
|
Tax effect adjustment of professional fees related to
organizational optimization and costs for capital markets
activities. |
(3) |
|
Tax effect adjustments of unrealized gain (loss) on foreign
currency contracts. |
(4) |
|
Tax effect adjustments of write-downs associated with packaging
optimization and a strategic initiative to move co-packaging
production from an international supplier to a domestic
supplier. |
(5) |
|
Tax effect adjustment of impairment of goodwill. |
(6) |
|
Tax effect adjustment of costs associated with the pending merger,
the divestiture of the Birch Benders brand and certain related
assets and other potential transactions. |
(7) |
|
Tax effect adjustment of costs associated with building the
organizational infrastructure to support a public company
environment. |
(8) |
|
Tax effect adjustment of amortization costs associated with
acquired trade names and customer lists. |
|
|
|
Sovos Brands (NASDAQ:SOVO)
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