Sovos Brands Reports Fourth Quarter and Fiscal Year 2021 Financial Results
Sovos Brands (SOVO) reported a robust fiscal 2021 with net sales of $719.2 million, reflecting a 28.4% year-over-year increase. In Q4, net sales reached $189.2 million, up 17.0%, driven by strong performances from Rao’s, noosa, and Michael Angelo’s. However, the company experienced a net loss of $3.8 million, with adjusted net income at $13.0 million. Looking ahead, Sovos Brands anticipates fiscal 2022 net sales between $800 million and $815 million and adjusted EBITDA between $116 million and $122 million, factoring in inflationary pressures and public company costs.
- Q4 net sales increased by 17.0% to $189.2 million.
- Fiscal 2021 net sales rose by 28.4% to $719.2 million.
- Rao's became the #2 pasta and pizza sauce brand with 15.4% market share.
- Adjusted EBITDA for FY 2021 increased by 26.3% to $115.1 million.
- Guidance for FY 2022 net sales set at $800-$815 million.
- Net loss of $3.8 million in Q4, compared to a loss of $0.5 million in the previous year.
- Adjusted EBITDA margin declined to 14.0%, down 90 basis points year-over-year.
- Operating expenses increased by 28.5% in Q4.
Fiscal Year 2021 Net Sales and Adjusted EBITDA Exceeds Full-Year Guidance
Fourth Quarter Net Sales +
Provides Fiscal Year 2022 Guidance
LOUISVILLE, Colo., March 15, 2022 (GLOBE NEWSWIRE) -- Sovos Brands, Inc. (“Sovos Brands” or the “Company”) (Nasdaq: SOVO), the fastest-growing food company of scale in the United States, today reported financial results for its fourth quarter and fiscal year ended December 25, 2021.
Fourth Quarter Highlights:
- Net sales were
$189.2 million , a17.0% increase over the prior year period, led by strong volume growth across core categories – sauce, yogurt and frozen - Rao’s became the #2 pasta and pizza sauce brand, with dollar market share reaching an all-time high of
15.4% ; household penetration for Rao’s sauce also reached a new record of10.9% , up over 260 basis points versus the prior year1 - noosa and Michael Angelo’s grew dollar consumption double digits,
13.0% and15.5% , respectively2 - Net loss was
$3.8 million or a loss of$0.04 per diluted share; adjusted net income3 was$13.0 million or$0.13 per diluted share - Adjusted EBITDA3 was
$26.5 million , a$2.3 million or9.7% increase over the prior year period, and includes public company costs that did not exist in the prior year period. Adjusted EBITDA increased$3.6 million or15.9% , versus the prior year period when comparing Adjusted EBITDA against the prior year period once proportionately burdened by public company costs. - Adjusted EBITDA margin3 was
14.0% , a 90-basis point reduction versus the prior year period. On a comparative basis and burden the prior year period with a similar level of public company costs, adjusted EBITDA margin would imply only a 10-basis point reduction year-over-year.
Fiscal Year 2021 Highlights:
- Net sales were
$719.2 million , a28.4% increase over the prior year, led by a$106.3 million or33.9% increase in Rao’s net sales to$420.0 million resulting from higher volumes - Rao’s was the fastest growing center store brand of scale over the two-year period (2019-2021)4
- Net income was
$1.9 million or$0.02 per diluted share; adjusted net income3 was$54.3 million or$0.67 per diluted share - Adjusted EBITDA3 was
$115.1 million , a26.3% increase over the prior year, which includes public company costs that did not exist in the prior year. Adjusted EBITDA increased$25.9 million , or29.0% , versus the prior year when comparing adjusted EBITDA against the prior year once proportionately burdened by public company costs. - Adjusted EBITDA margin3 of
16.0% , a 30-basis point reduction versus the prior year. On a comparative basis and burden the prior year with a similar level of public company costs, adjusted EBITDA margin would imply a 10-basis point improvement year-over-year.
“I am proud to report our robust results for the fourth quarter, which concludes a remarkable year for Sovos Brands,” commented Todd Lachman, President and Chief Executive Officer. “In our first year as a public company, we achieved over
Mr. Lachman continued, “While 2021 presented a complex operating environment, our agile, growth-oriented and experienced team has worked tenaciously to manage through the near-term inflation and supply chain disruptions. Looking ahead, market conditions are still demanding; however, I am confident in our ability to grow profitability in 2022 given planned pricing initiatives on our strong portfolio of brands as well as our robust pipeline of productivity initiatives, and I look forward to creating value for our stakeholders over the long-term.”
| 13 Weeks Ended | 52 Weeks Ended | ||||||||||||||||||||
| December 25, | December 26, | December 25, | December 26, | ||||||||||||||||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||
| Net sales ($ millions) | $ | 189.2 | $ | 161.7 | 17.0 | % | $ | 719.2 | $ | 560.1 | 28.4 | % | |||||||||
| Net income (loss) ($ millions) | $ | (3.8 | ) | $ | (0.5 | ) | 701.7 | % | $ | 1.9 | $ | 10.8 | (82.3 | ) | % | ||||||
| Adjusted net income | $ | 13.0 | $ | 10.8 | 20.3 | % | $ | 54.3 | $ | 44.1 | 23.1 | % | |||||||||
| Diluted EPS | $ | (0.04 | ) | $ | (0.01 | ) | 300.0 | % | $ | 0.02 | $ | 0.14 | (85.7 | ) | % | ||||||
| Adjusted diluted EPS3 | $ | 0.13 | $ | 0.14 | (7.1 | ) | % | $ | 0.67 | $ | 0.58 | 15.5 | % | ||||||||
| Adjusted EBITDA3($ millions) | $ | 26.5 | $ | 24.2 | 9.7 | % | $ | 115.1 | $ | 91.1 | 26.3 | % | |||||||||
| Adjusted EBITDA margin3(%) | 14.0 | % | 14.9 | % | (90 | ) | bps | 16.0 | % | 16.3 | % | (30 | ) | bps | |||||||
Fourth Quarter 2021 Results
Net sales of
Gross profit of
Total operating expenses of
Operating loss was
Net loss was
Adjusted EBITDA3 of
Balance Sheet and Cash Flow Highlights
As of December 25, 2021, the end of the fourth quarter, cash and cash equivalents were
Accounts receivable increased to
Cash from operating activities was
Fiscal 2022 Outlook
In fiscal 2022, we expect to deliver net sales between
As a result, the Company views it as useful to consider these factors in evaluating Sovos Brands’ year-over-year performance. The adjusted EBITDA guidance range provided for fiscal 2022 of
The Company is introducing fiscal year guidance, inclusive of a 53rd week, as follows:
| Net sales | ||||
| Adjusted EBITDA |
The Company’s outlook assumes no significant disruption from the COVID-19 pandemic and that inflationary pressures will be partially absorbed by certain pricing actions and productivity improvements.
Sovos Brands cannot provide a reconciliation between its forecasted adjusted EBITDA and a forecasted net income without unreasonable effort due to the inherent difficulty of forecasting and providing reliable estimates for certain items. These items may reside outside the Company’s control and vary greatly between periods and could significantly impact future financial results. For more information regarding the use of non-GAAP measures, please see discussion provided under Non-GAAP Financial Information in this press release and the Company’s public filings.
Footnotes:
(1) Source: Market share performance refers to dollar sales as reported by IRI MULO in the 4-week period ended December 26, 2021. Household penetration refers to data reported by IRI All Outlet for the 52-week period ended December 26, 2021 and is compared to the 52-week period ended December 27, 2020.
(2) Source: Market share performance refers to dollar sales as reported by IRI MULO in the 13-week period ended December 26, 2021.
(3) EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating expense, adjusted net income, and adjusted 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) Source: Performance refers to a two-year compounded annual growth rate in dollar sales using IRI MULO + SPINS for the 52-week period ended December 26, 2021 compared to the 52-week period ended December 29, 2019. Applies to branded products with greater than
Earnings Conference Call Details
The Sovos management team will host a conference call and webcast at 8:30 a.m. ET today to discuss the results. The webcast will be available on the Investor Relations section of the Company’s website at ir.sovosbrands.com. Investors may also dial in to the live call using 855-493-3518 and entering the access code 4499776. The webcast will be archived and available for replay.
About Sovos Brands, Inc.
Sovos Brands, Inc. is a consumer-packaged food company focused on acquiring and 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, yogurts, pancake and waffle mixes, other baking mixes, and frozen waffles, all of which are sold in the United States under the brand names Rao’s, Michael Angelo’s, noosa, and Birch Benders. 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.
Contacts
Investors:
Chris Mandeville, ICR
IR@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 and discussed on the related teleconference call are useful in evaluating its operating performance: EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, adjusted net income, adjusted diluted earnings per share, adjusted income tax (expense) benefit and adjusted effective tax rate. 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 impairment of goodwill and intangible assets, transaction and integration costs, initial public offering readiness, non-cash equity-based compensation, supply chain optimization and non-recurring costs. Adjusted EBITDA margin is determined by calculating the percentage adjusted EBITDA is of net sales. Adjusted operating expenses is defined as total operating expenses adjusted for impairment of goodwill and intangible assets, transaction and integration costs, initial public offering readiness, non-cash equity-based compensation, supply chain optimization and non-recurring costs related to operating expenses. Adjusted net income consists of net income (loss) before impairment of goodwill and intangible assets, transaction and integration costs, initial public offering readiness, non-cash equity-based compensation, supply chain optimization, non-recurring costs, acquisition amortization and tax related adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period. Adjusted diluted earnings per share is defined as adjusted net income divided by diluted weighted average shares outstanding.
Management believes that EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating expense, adjusted net income, adjusted diluted earnings per share, adjusted income tax (expense) benefit and adjusted effective tax rate are helpful in highlighting performance trends because these metrics eliminate non-recurring and unusual items and non-cash expenses, which the Company does not consider indicative of ongoing operational performance. The Company’s presentation of non-GAAP financial information should not be construed to imply that its future results will be unaffected by these items. The Company believes that by providing these non-GAAP financial measures it is enhancing the reader’s understanding of the Company’s business and its results of operations, as well as assisting the reader in evaluating how well the Company is executing its strategic initiatives. The Company’s management team uses these non-GAAP financial measures to evaluate business performance in comparison to budgets, forecasts, and prior period financial results. The non-GAAP financial information is presented for supplemental informational purposes only, has important limitations as analytical tools, should not be considered a substitute for financial information presented in accordance with GAAP and may be different from similarly titled non-GAAP measures used by other companies. In evaluating EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating expense, adjusted net income, adjusted diluted earnings per share, adjusted income tax (expense) benefit and adjusted effective tax rate, readers should be aware that in the future we may incur expenses similar to those eliminated in this presentation. A reconciliation is provided herein for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Readers are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
Forward-Looking Statements
This press release and the earnings call referencing this press release contain 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 Sovos Brands’ market opportunity, anticipated growth, and future financial performance, including management’s outlook for the fiscal year ending December 31, 2022 and longer-term. 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.
The risks and uncertainties referred to above include, but are not limited to regional, national or global political, economic, business, competitive, market and regulatory conditions and the following: inflation, including our vulnerability to decreases in the supply of and increases in the price of raw materials and labor, manufacturing, distribution and other costs, and our inability to offset increasing costs through cost savings initiatives or pricing; supply disruptions; competition in the packaged food industry and our product categories; the COVID-19 pandemic and associated effects; our inability to accurately forecast pricing elasticities and the resulting impact on volume growth and/or distribution gains; our inability to maintain our workforce; our inability to identify, consummate or integrate new acquisitions or realize the projected benefits of acquisitions; our inability to effectively manage our growth; our inability to successfully introduce new products or failure of recently launched products to meet expectations or remain on-shelf; our inability to expand household penetration and successfully market our products; erosion of the reputation of one or more of our brands; issues with the major retailers, wholesalers, distributors and mass merchants on which we rely, including if they give higher priority to other brands or products, perform poorly or declare bankruptcy; our vulnerability to the impact of severe weather conditions, natural disasters and other natural events on our manufacturing facilities, co-packers or raw material supplies; failure by us or third-party co-packers or suppliers of raw materials to comply with food safety, environmental or other laws or regulations, or new laws or regulations; our dependence on third-party distributors and third-party co-packers, including one co-packer for the substantial majority of our Rao’s Homemade sauce products; failure to protect, or litigation involving, our tradenames or trademarks and other rights; our level of indebtedness under our First Lien Credit Agreement (as defined herein), which as of December 25, 2021 was
These risks and uncertainties are more fully described in Sovos Brands’ filings with the Securities and Exchange Commission (the “SEC”), including in the section entitled “Risk Factors” in its Annual Report on Form 10-K for the fiscal year ended December 25, 2021, and 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.
SOVOS BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except for share and per share data)
(Unaudited)
| 13 Weeks Ended | 52 Weeks Ended | |||||||||||||||
| December 25, 2021 | December 26, 2020 | December 25, 2021 | December 26, 2020 | |||||||||||||
| Net sales | $ | 189,244 | $ | 161,731 | $ | 719,186 | $ | 560,067 | ||||||||
| Cost of sales | 129,752 | 107,325 | 498,394 | 373,314 | ||||||||||||
| Gross profit | 59,492 | 54,406 | 220,792 | 186,753 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 43,693 | 41,102 | 135,060 | 124,612 | ||||||||||||
| Depreciation and amortization | 7,240 | 6,821 | 28,871 | 24,744 | ||||||||||||
| Loss on extinguishment of debt | 5,665 | — | 15,382 | — | ||||||||||||
| Forgiveness of capital advance | 5,000 | — | 5,000 | — | ||||||||||||
| Total operating expenses | 61,598 | 47,923 | 184,313 | 149,356 | ||||||||||||
| Operating income (loss) | (2,106 | ) | 6,483 | 36,479 | 37,397 | |||||||||||
| Interest expense | 6,272 | 4,983 | 30,885 | 19,895 | ||||||||||||
| Income (loss) before income taxes | (8,378 | ) | 1,500 | 5,594 | 17,502 | |||||||||||
| Income tax (expense) benefit | 4,538 | (1,979 | ) | (3,675 | ) | (6,677 | ) | |||||||||
| Net income (loss) | $ | (3,840 | ) | $ | (479 | ) | $ | 1,919 | $ | 10,825 | ||||||
| Earnings (loss) per share: | ||||||||||||||||
| Basic | $ | (0.04 | ) | $ | (0.01 | ) | $ | 0.02 | $ | 0.15 | ||||||
| Diluted | $ | (0.04 | ) | $ | (0.01 | ) | $ | 0.02 | $ | 0.14 | ||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 100,289,965 | 74,058,719 | 80,616,326 | 74,058,569 | ||||||||||||
| Diluted | 100,289,965 | 74,058,719 | 80,616,326 | 75,921,065 | ||||||||||||
SOVOS BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for par value and share data)
(Unaudited)
| December 25, 2021 | December 26, 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 66,154 | $ | 37,026 | ||||
| Accounts receivable, net | 70,729 | 60,996 | ||||||
| Inventories | 51,615 | 47,069 | ||||||
| Prepaid expenses and other current assets | 6,685 | 4,388 | ||||||
| Total current assets | 195,183 | 149,479 | ||||||
| Property and equipment, net | 62,671 | 59,481 | ||||||
| Operating lease right-of-use assets | 15,672 | — | ||||||
| Goodwill | 437,451 | 437,290 | ||||||
| Intangible assets, net | 464,655 | 491,895 | ||||||
| Other long-term assets | 2,299 | 6,681 | ||||||
| TOTAL ASSETS | $ | 1,177,931 | $ | 1,144,826 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 37,254 | $ | 31,170 | ||||
| Accrued expenses | 51,757 | 65,101 | ||||||
| Current portion of long-term debt | 98 | 3,818 | ||||||
| Current portion of long-term lease liabilities | 3,216 | — | ||||||
| Total current liabilities | 92,325 | 100,089 | ||||||
| Long-term debt, net of debt issuance costs | 481,420 | 360,046 | ||||||
| Deferred income taxes | 76,976 | 74,733 | ||||||
| Long-term operating lease liabilities | 17,302 | — | ||||||
| Other long-term liabilities | 421 | 13,257 | ||||||
| TOTAL LIABILITIES | 668,444 | 548,125 | ||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred Stock | — | — | ||||||
| Common Stock | 101 | 6 | ||||||
| Stockholder's note receivable | — | (6,000 | ) | |||||
| Additional paid-in-capital | 559,226 | 654,454 | ||||||
| Accumulated deficit | (49,840 | ) | (51,759 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | 509,487 | 596,701 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,177,931 | $ | 1,144,826 | ||||
SOVOS BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands)
(Unaudited)
| 52 Weeks Ended | ||||||||
| (In thousands) | December 25, 2021 | December 26, 2020 | ||||||
| Cash provided by (used in): | ||||||||
| Operating activities | $ | 46,943 | $ | 62,914 | ||||
| Investing activities | (14,182 | ) | (150,139 | ) | ||||
| Financing activities | (3,633 | ) | 93,570 | |||||
| Change in cash and cash equivalents | $ | 29,128 | $ | 6,345 | ||||
SOVOS BRANDS, INC
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands)
(Unaudited)
| 13 Weeks Ended | 52 Weeks Ended | ||||||||||||||||
| (In thousands) | December 25, 2021 | December 26, 2020 | December 25, 2021 | December 26, 2020 | |||||||||||||
| Net income (loss) | $ | (3,840 | ) | $ | (479 | ) | $ | 1,919 | $ | 10,825 | |||||||
| Interest | 6,272 | 4,983 | 30,885 | 19,895 | |||||||||||||
| Income tax (expense) benefit | 4,538 | (1,979 | ) | (3,675 | ) | (6,677 | ) | ||||||||||
| Depreciation and amortization | 9,510 | 9,050 | 37,812 | 33,797 | |||||||||||||
| EBITDA | 7,404 | 15,533 | 74,291 | 71,194 | |||||||||||||
| Transaction and integration costs(1) | 249 | 5,120 | 4,227 | 12,396 | |||||||||||||
| Initial public offering readiness(2) | 383 | 1,971 | 5,559 | 2,701 | |||||||||||||
| Non-cash equity-based compensation(3) | 7,739 | 459 | 9,823 | 1,915 | |||||||||||||
| Supply chain optimization(4) | — | 925 | — | 1,914 | |||||||||||||
| Non-recurring costs(5) | 10,716 | 147 | 21,245 | 1,012 | |||||||||||||
| Adjusted EBITDA | $ | 26,491 | $ | 24,155 | $ | 115,145 | $ | 91,132 | |||||||||
| EBITDA margin | 3.9 | % | 9.6 | % | 10.3 | % | 12.7 | % | |||||||||
| Adjusted EBITDA margin | 14.0 | % | 14.9 | % | 16.0 | % | 16.3 | % | |||||||||
————————————
| (1) Consists of transaction costs and certain integration costs associated with the Birch Benders Acquisition as well as costs associated with incomplete potential acquisitions and substantial one-time costs related to a large, uncompleted transaction. For the 13 weeks and 52 weeks ended December 25, 2021, (2) Consists of costs associated with preparing for an IPO, including public company readiness, primarily comprised of professional fees. For all periods presented, these costs are included in total operating expenses. (3) Consists of non-cash equity-based compensation expense associated with the grant of equity-based compensation provided to officers, directors and employees. For all periods presented, these costs are included in total operating expenses. (4) Consists of expenses for professional fees related to supply chain manufacturing optimization and costs associated with SKU rationalization and certain other strategic initiatives. There are no costs for the 13 weeks and 52 weeks ended December 25, 2021. For the 13 weeks and 52 weeks ended December 26 2020, (5) Consists of costs related to loss on extinguishment of debt, forgiveness of capital advance, legal and consulting costs associated with the dividend, ERP conversion costs related to integrating acquisitions and employee separation costs. For all periods presented, these costs are included in total operating expenses. |
SOVOS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(amounts in thousands)
(Unaudited)
| 13 Weeks Ended | 52 Weeks Ended | ||||||||||||||||
| (In thousands) | December 25, 2021 | December 26, 2020 | December 25, 2021 | December 26, 2020 | |||||||||||||
| Selling, general and administrative | $ | 43,693 | $ | 41,102 | $ | 135,060 | $ | 124,612 | |||||||||
| Depreciation and amortization | 7,240 | 6,821 | 28,871 | 24,744 | |||||||||||||
| Loss on extinguishment of debt | 5,665 | — | 15,382 | — | |||||||||||||
| Forgiveness of capital advance | 5,000 | — | 5,000 | — | |||||||||||||
| Total operating expenses | 61,598 | 47,923 | 184,313 | 149,356 | |||||||||||||
| Transaction and integration costs(1) | (249 | ) | (4,783 | ) | (3,929 | ) | (12,059 | ) | |||||||||
| Initial public offering readiness(2) | (383 | ) | (1,971 | ) | (5,559 | ) | (2,701 | ) | |||||||||
| Non-cash equity-based compensation(3) | (7,739 | ) | (459 | ) | (9,823 | ) | (1,915 | ) | |||||||||
| Supply chain optimization(4) | — | (925 | ) | — | (1,328 | ) | |||||||||||
| Non-recurring costs(5) | (10,716 | ) | (147 | ) | (21,245 | ) | (1,012 | ) | |||||||||
| Total adjusted operating expenses | $ | 42,511 | $ | 39,638 | $ | 143,757 | $ | 130,341 | |||||||||
————————————
| (1) Consists of transaction costs and certain integration costs associated with the Birch Benders Acquisition as well as costs associated with incomplete potential acquisitions and substantial one-time costs related to a large, uncompleted transaction. (2) Consists of costs associated with preparing for an IPO, including public company readiness, primarily comprised of professional fees. (3) Consists of non-cash equity-based compensation expense associated with the grant of equity-based compensation provided to officers, directors and employees. (4) Consists of expenses for professional fees related to supply chain manufacturing optimization and costs associated with SKU rationalization and certain other strategic initiatives. (5) Consists of costs related to loss on extinguishment of debt, forgiveness of capital advance, legal and consulting costs associated with the dividend, ERP conversion costs related to integrating acquisitions and employee separation costs. |
SOVOS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands, except share and per share data)
(Unaudited)
| 13 Weeks Ended | 52 Weeks Ended | |||||||||||||||
| (In thousands) | December 25, 2021 | December 26, 2020 | December 25, 2021 | December 26, 2020 | ||||||||||||
| Net income (loss) | $ | (3,840 | ) | $ | (479 | ) | $ | 1,919 | $ | 10,825 | ||||||
| Transaction and integration costs(1) | 249 | 5,120 | 4,227 | 12,396 | ||||||||||||
| Initial public offering readiness(2) | 383 | 1,971 | 5,559 | 2,701 | ||||||||||||
| Non-cash equity-based compensation(3) | 7,739 | 459 | 9,823 | 1,915 | ||||||||||||
| Supply chain optimization(4) | — | 925 | — | 1,914 | ||||||||||||
| Non-recurring costs(5) | 10,716 | 147 | 21,245 | 1,012 | ||||||||||||
| Acquisition amortization(6) | 6,810 | 6,409 | 27,240 | 23,228 | ||||||||||||
| Tax effect of adjustments(7) | (10,244 | ) | (4,243 | ) | (14,858 | ) | (10,391 | ) | ||||||||
| One-time tax expense items(8) | 1,195 | 505 | (878 | ) | 505 | |||||||||||
| Adjusted net income | $ | 13,008 | $ | 10,814 | $ | 54,277 | $ | 44,105 | ||||||||
| Earnings (loss) per share: | ||||||||||||||||
| Diluted | $ | (0.04 | ) | $ | (0.01 | ) | $ | 0.02 | $ | 0.14 | ||||||
| Adjusted diluted | $ | 0.13 | $ | 0.14 | $ | 0.67 | $ | 0.58 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Diluted for net income | 100,289,965 | 74,058,719 | 80,616,326 | 75,921,065 | ||||||||||||
| Diluted for adjusted net income | 100,515,665 | 76,627,895 | 80,616,326 | 75,921,065 | ||||||||||||
————————————
| (1) Consists of transaction costs and certain integration costs associated with the Birch Benders Acquisition as well as costs associated with incomplete potential acquisitions and substantial one-time costs related to a large, uncompleted transaction. For the 13 weeks and 52 weeks ended December 25, 2021, (2) Consists of costs associated with preparing for an IPO, including public company readiness, primarily comprised of professional fees. For all periods presented, these costs are included in total operating expenses. (3) Consists of non-cash equity-based compensation expense associated with the grant of equity-based compensation provided to officers, directors and employees. For all periods presented, these costs are included in total operating expenses. (4) Consists of expenses for professional fees related to supply chain manufacturing optimization and costs associated with SKU rationalization and certain other strategic initiatives. There are no costs for the 13 weeks and 52 weeks ended December 25, 2021. For the 13 weeks and 52 weeks ended December 26 2020, (5) Consists of costs related to loss on extinguishment of debt, forgiveness of capital advance, legal and consulting costs associated with the dividend, ERP conversion costs related to integrating acquisitions and employee separation costs. For all periods presented, these costs are included in total operating expenses. (6) Amortization costs associated with acquired trade names and customer lists. (7) Tax effect was calculated using the Company's adjusted annual effective tax rate. (8) Represents the 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 prior year adjustments of non-deductible items. |
SOVOS BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands)
(Unaudited)
| 13 Weeks Ended | 52 Weeks Ended | ||||||||||||||||
| (In thousands) | December 25, 2021 | December 26, 2020 | December 25, 2021 | December 26, 2020 | |||||||||||||
| Reported income tax (expense) benefit | $ | 4,538 | $ | (1,979 | ) | $ | (3,675 | ) | $ | (6,677 | ) | ||||||
| Transaction and integration costs(1) | (61 | ) | (4,021 | ) | (1,032 | ) | (5,808 | ) | |||||||||
| Initial public offering readiness(2) | (456 | ) | (484 | ) | (1,716 | ) | (663 | ) | |||||||||
| Non-cash equity-based compensation(3) | (230 | ) | — | (229 | ) | — | |||||||||||
| Supply chain optimization(4) | — | (231 | ) | — | (480 | ) | |||||||||||
| Non-recurring costs(5) | (5,228 | ) | (37 | ) | (5,186 | ) | (249 | ) | |||||||||
| Acquisition amortization(6) | (3,074 | ) | 1,035 | (7,573 | ) | (2,686 | ) | ||||||||||
| Adjusted income tax (expense) | $ | (4,511 | ) | $ | (5,717 | ) | $ | (19,411 | ) | $ | (16,563 | ) | |||||
| Reported effective tax rate | 54.3 | % | 132.0 | % | 65.8 | % | 38.2 | % | |||||||||
| Transaction and integration costs(1) | (0.2 | ) | (104.8 | ) | (2.6 | ) | (6.4 | ) | |||||||||
| Initial public offering readiness(2) | (1.4 | ) | (12.6 | ) | (4.3 | ) | (0.7 | ) | |||||||||
| Non-cash equity-based compensation(3) | (0.7 | ) | — | (0.6 | ) | — | |||||||||||
| Supply chain optimization(4) | — | (6.0 | ) | — | (0.5 | ) | |||||||||||
| Non-recurring costs(5) | (16.5 | ) | (0.9 | ) | (13.0 | ) | (0.3 | ) | |||||||||
| Acquisition amortization(6) | (9.8 | ) | 26.9 | (19.0 | ) | (3.0 | ) | ||||||||||
| Adjusted effective tax rate | 25.7 | % | 34.6 | % | 26.3 | % | 27.3 | % | |||||||||
————————————
| (1) Tax effect adjustment of transaction costs and certain integration costs associated with the Birch Benders Acquisition as well as costs associated with incomplete potential acquisitions and substantial one-time costs related to a large, uncompleted transaction. (2) Tax effect adjustment of costs associated with preparing for an IPO, including public company readiness, primarily comprised of professional fees. (3) Tax effect adjustment of non-cash equity-based compensation expense associated with the grant of equity-based compensation provided to officers, directors and employees. (4) Tax effect adjustment of expenses for professional fees related to supply chain manufacturing optimization and costs associated with SKU rationalization and certain other strategic initiatives. There are no costs for the 13 weeks and 52 weeks ended December 25, 2021. (5) Tax effect adjustment of costs related to loss on extinguishment of debt, forgiveness of capital advance, legal and consulting costs associated with the dividend, ERP conversion costs related to integrating acquisitions and employee separation costs. (6) Tax effect adjustment of amortization costs associated with acquired trade names and customer lists. |
FAQ
What were the fourth quarter 2021 results for Sovos Brands (SOVO)?
What is the fiscal 2022 guidance for Sovos Brands (SOVO)?
How did Sovos Brands (SOVO) perform in fiscal year 2021?
What contributed to the increase in net sales for Sovos Brands (SOVO)?
What challenges did Sovos Brands (SOVO) face in Q4 2021?
