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Sovos Brands Reports Fourth Quarter and Fiscal Year 2023 Financial Results

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Sovos Brands, Inc. reported FY 2023 net sales surpassing $1 billion with accelerated volume growth driving double-digit top and bottom-line growth. Q4 net sales grew 11.4% YoY, led by Rao’s net sales up 24.9% on an organic basis. Gross margin increased, net income improved, and adjusted EBITDA grew. The pending merger with Campbell’s is progressing towards completion.
Positive
  • FY 2023 net sales exceeded $1 billion with significant volume growth driving overall growth.
  • Q4 net sales increased by 11.4% YoY, with organic net sales growth of 25.3% driven by volume and pricing growth.
  • Rao’s net sales surged by 24.9% YoY, or 34.7% organically, fueled by strong dollar consumption growth.
  • Gross margin and adjusted gross margin improved, with net income and adjusted EBITDA showing significant growth.
  • The pending merger with Campbell’s is moving forward, with the waiting period under the HSR Act expected to expire soon.
  • Cash and cash equivalents were $232.0 million, with total debt at $484.0 million, resulting in a net debt to adjusted EBITDA ratio of 1.6x.
  • Cash from operating activities for FY 2023 increased by $59.9 million compared to the prior year period.
  • Full-year capital expenditures stood at $11.9 million.
  • Sovos Brands will not provide guidance for FY 2024 due to the pending merger with Campbell’s.
Negative
  • None.

Insights

The reported financial results of Sovos Brands, indicating a significant year-over-year growth in net sales and a strong increase in organic net sales growth, are noteworthy from an investment perspective. The data suggests that the company has effectively navigated inflationary pressures, which is evident from the expansion of its gross margin by 100-basis points to 30.0%. The adjusted EBITDA growth of 24.3% year-over-year also reflects a robust operating performance, outpacing many competitors in the sector.

From a financial health standpoint, the improvement in net leverage from 2.9x to 1.6x signals a stronger balance sheet and enhanced ability to service debt. The substantial cash reserves of $232 million further provide Sovos Brands with liquidity to support ongoing operations and potential strategic initiatives. However, investors should be aware of the costs associated with the pending merger with Campbell's, which can affect net income and potentially lead to short-term volatility in the stock price.

The impressive organic growth in the Rao's franchise, particularly the 36.2% dollar consumption growth, indicates a successful expansion strategy and a strong brand resonance with consumers. The reported 410 basis points increase in household penetration for Rao's sauce and the expansion into frozen, soup and pasta categories demonstrate the company's ability to innovate and capture additional market share.

Moreover, the strategic merger with Campbell's could potentially enhance Sovos Brands' distribution capabilities and product portfolio, which may lead to synergies and further growth opportunities. However, the integration process and the response from consumers and retailers will be critical factors to monitor post-merger.

The pending merger with Campbell's, set at $23 per share, represents a significant premium over the IPO price, indicating a favorable outcome for Sovos Brands' shareholders. The transaction is subject to regulatory approval, including compliance with the Hart-Scott-Rodino Antitrust Improvements Act. The companies' recent certification of substantial compliance with the FTC's Second Request is a positive step towards finalizing the merger.

However, investors should consider the regulatory risks associated with such transactions, as any unforeseen antitrust concerns could delay or even prevent the merger's completion. The expected completion of the merger shortly after the waiting period expires on March 11, 2024, is an important event to track, as it will have a significant impact on the company's future operations and strategy.

FY 2023 Net Sales Surpassed $1 Billion; Accelerated Volume Growth Drove
Double-Digit Top and Bottom-Line Growth
Q4 Net Sales Grew 11.4% YoY (Organic 25.3%), Led by Rao’s Net Sales Up 24.9% (Organic 34.7%)1

LOUISVILLE, Colo., Feb. 28, 2024 (GLOBE NEWSWIRE) -- 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 Update
As 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

                      
 13 Weeks Ended 14 Weeks Ended     Fiscal Year Ended    
 December 30, 2023 December 31, 2022  Change December 30, 2023 December 31, 2022  Change
Net sales ($ millions)$292.1  $262.1   11.4% $1,020.4  $878.4   16.2%
Net income (loss) ($ millions)$15.5  $(28.7)  154.1% $30.2  $(53.5)  156.5%
Net income (loss) margin (%) 5.3 % (11.0)% 1630bps  2.8 % (6.1)% 890bps
Adjusted net income3$26.8  $19.6   36.2% $82.9  $60.4   37.1%
Diluted EPS$0.15  $(0.28)  153.6% $0.29  $(0.53)  154.7%
Adjusted diluted EPS3$0.26  $0.19   36.8% $0.80  $0.60   33.3%
Adjusted EBITDA3($ millions)$46.0  $37.0   24.3% $156.1  $119.8   30.3%
Adjusted EBITDA margin3(%) 15.7 % 14.1 % 160bps  15.3 % 13.6 % 170bps
                        

Summary of Reported and Organic Net Sales Growth – Fourth Quarter and Fiscal Year 2023

                       
  13 Weeks Ended December 30, 2023 
  Reported
Net Sales
  M&A
  Extra Week
  Organic
Net Sales
  Organic Net Sales Growth
Key Drivers
 
  % Change  Contribution
  Contribution
  % Change1  Volume
  Price
 
Rao’s 24.9 %     9.8 % 34.7 %        
noosa (9.1)%     7.1 % (2.0)%        
Michael Angelo’s (10.1)%     6.6 % (3.5)%        
Total Net Sales 11.4 % 6.9 % 7.0 % 25.3 % 21.7 % 3.6 %
                         


                       
  Fiscal Year Ended December 30, 2023 
  Reported
Net Sales
  M&A
  Extra Week
  Organic
Net Sales
  Organic Net Sales Growth
Key Drivers
 
  % Change  Contribution
  Contribution
  % Change1  Volume
  Price
 
Rao’s 33.5 %     3.3 % 36.8 %        
noosa 0.1 %     1.8 % 1.9 %        
Michael Angelo’s (12.7)%     1.5 % (11.2)%        
Total Net Sales 16.2 % 6.3 % 2.1 % 24.6 % 18.1 % 6.5 %
                         

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.

Contacts
Investors: 
Joshua Levine
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 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.

 
SOVOS BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except for share and per share data)
(Unaudited)
             
  13 Weeks Ended 14 Weeks Ended Fiscal Year Ended
  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   186,181   714,935   631,706 
Gross profit  87,474   75,917   305,486   246,665 
Operating expenses:            
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 % of
Net sales
 December 31, 2022 % of
Net sales
 December 30, 2023 % of
Net sales
 December 31, 2022 % of
Net 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.
   

FAQ

How much did FY 2023 net sales surpass for Sovos Brands, Inc.?

FY 2023 net sales for Sovos Brands, Inc. surpassed $1 billion.

What was the YoY growth in Q4 net sales for Sovos Brands, Inc.?

Q4 net sales for Sovos Brands, Inc. grew by 11.4% YoY.

How much did Rao’s net sales increase YoY in Q4 on an organic basis for Sovos Brands, Inc.?

Rao’s net sales for Sovos Brands, Inc. increased by 24.9% YoY, or 34.7% on an organic basis in Q4.

What was the adjusted EBITDA growth YoY for Sovos Brands, Inc.?

Adjusted EBITDA for Sovos Brands, Inc. grew by 24.3% YoY.

What is the pending merger update for Sovos Brands, Inc. with Campbell Soup Company?

The pending merger with Campbell Soup Company is progressing towards completion, with the waiting period under the HSR Act expected to expire soon.

What is the net debt to last twelve months adjusted EBITDA ratio for Sovos Brands, Inc.?

The net debt to last twelve months adjusted EBITDA ratio for Sovos Brands, Inc. is 1.6x.

Sovos Brands, Inc.

NASDAQ:SOVO

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SOVO Stock Data

2.34B
63.53M
4.22%
110.3%
11.85%
Packaged Foods
Consumer Defensive
Link
United States
Louisville