Whole Earth Brands, Inc. , a global food company enabling healthier lifestyles by providing access to premium plant-based sweeteners, flavor enhancers and other foods through a diverse portfolio of trusted brands and delicious products, today announced its financial results for its fourth quarter and full year ended December 31, 2020. The Company also provided fiscal year 2021 guidance and updated its long-term growth targets.
Irwin D. Simon, Executive Chairman, stated, “We are delighted by our strategic and operational accomplishments in our first eight months as a public company. With the completion of our acquisitions of Swerve during the fourth quarter and of Wholesome in February, we are poised for a strong 2021, supported by a portfolio of leading brands, global distribution capabilities, and a high-quality asset-lite model, while continuing to generate strong free cash flow and manage our capital allocation model thoughtfully.”
Albert Manzone, Chief Executive Officer, commented, “We delivered strong fourth quarter performance as we saw an acceleration of our Branded CPG segment product revenue growth with notable market share gains in our natural products business. We believe we are well-positioned to compete in this growing market. Our addressable market in the ‘better-for-you sweetener’ category has sustainable, secular tailwinds that our Branded CPG portfolio is distinctly able to take advantage of given our innovative products, distribution strength, and global scale. Despite certain COVID-19 headwinds that impacted our Flavors & Ingredients segment, the business continues to produce strong operating income driven by its diverse end-markets. Looking ahead, the additions of Swerve and Wholesome significantly strengthen our leadership position and the integration of both is proceeding as planned. With a healthy balance sheet, a clear vision for our future, and an exceptional team, we believe we can achieve sustainable growth through innovation, continued brand building, increased market penetration in the U.S. and globally, and a world class supply chain. As a result, we are excited to increase our long-term product revenue growth target.”
FOURTH QUARTER 2020 HIGHLIGHTS
Our consolidated financials reflect both predecessor and successor periods indicative of the June 25, 2020 business combination date. The fourth quarter results discussed below compare the successor’s 2020 fourth quarter results ended December 31, 2020 to the predecessor’s 2019 fourth quarter results ended December 31, 2019.
Additionally, we completed the acquisition of Swerve on November 10, 2020. Our reported results include Swerve from that date onwards.
SEGMENT RESULTS
Branded CPG Segment
Branded CPG segment product revenues increased $10.5 million, or 24.6%, to $53.3 million for the fourth quarter of 2020, compared to $42.8 million for the same period in the prior year. On a constant currency basis, product revenues increased 22.1% driven by strong retail and e-commerce growth in our North American business and the addition of Swerve, partially offset by foodservice softness. Excluding Swerve, segment organic product revenue grew 14.5% compared to the prior year fourth quarter, an increase of 12.0% on a constant currency basis.
Operating loss on a GAAP basis was $4.9 million in the fourth quarter of 2020 compared to operating income, on a GAAP basis, of $2.6 million for the same period in the prior year. The decrease was driven primarily by $5.0 million of M&A transaction costs and $4.4 million of both ongoing and one-time public company costs that are included in the Company’s Branded CPG segment.
Flavors & Ingredients Segment
Flavors & Ingredients segment product revenues decreased 13.9% to $22.4 million for the fourth quarter of 2020, compared to $26.0 million for the same period in the prior year. The decrease was primarily driven by timing of shipments within 2020 and impacts from COVID-19.
Operating loss was $2.0 million in the fourth quarter of 2020 compared to operating income of $2.9 million in the prior year period. The decrease was driven by a $3.4 million non-cash purchase accounting adjustment related to inventory revaluations and $1.4 million of amortization of intangible assets resulting from the June 25, 2020 business combination.
FULL YEAR 2020 HIGHLIGHTS
Our consolidated financial statements reflect both predecessor and successor periods indicative of the June 25, 2020 business combination date. The full year results disclosed below combine the successor period from June 26, 2020 through December 31, 2020 with the predecessor period from January 1, 2020 through June 25, 2020. The combined full year results are compared to the predecessor’s 2019 full year results.
Additionally, we completed the acquisition of Swerve on November 10, 2020. Our reported results include Swerve from that date onwards.
CASH FLOW & BALANCE SHEET
The Company generated consolidated cash from operating activities of $10.5 million and capital expenditures were $8.0 million during full year 2020.
As of December 31, 2020, the Company had cash and cash equivalents of $16.9 million and $179.7 million of debt, net of unamortized debt issuance costs.
Subsequent to the end of fourth quarter, on February 5, 2021, the Company entered into an amended and restated credit agreement, in part, to finance its acquisition of WSO Investments, Inc. the holding company for Wholesome Sweeteners Incorporated (“Wholesome”). The new agreement provides for a new $75 million five-year revolving credit facility, and a $375 million seven-year senior secured first-lien term loan B. Reducing balance sheet leverage is a corporate priority and the Company estimates that it will achieve a ratio of net debt to Adjusted EBITDA of approximately 4.0x by December 31, 2021.
RECENT STRATEGIC ACQUISITIONS
During the fourth quarter, on November 10, 2020, the Company closed on its acquisition of Swerve, L.L.C and Swerve IP, L.L.C. (collectively, “Swerve”). Swerve is a marketer of the “Ultimate Sugar Replacement” and provides a key growth platform for the Company to expand its existing offerings in the alternative better-for-you sweetener space, which complements its existing sweetener portfolio.
As previously announced on February 8, 2021, the Company closed on its acquisition of Wholesome, the #1 organic sweetener brand in North America.
The acquisition of Wholesome and its previous purchase of Swerve, a rapidly growing manufacturer and marketer of a portfolio of zero sugar, keto-friendly, and plant-based sweeteners and baking mixes, have doubled the Company’s North American market share in only seven months since the closing of its business combination on June 25, 2020. These acquisitions significantly move the Company’s portfolio mix toward natural sweeteners, which now represent approximately 88% of its North American Branded CPG business.
OUTLOOK
The Company is introducing its outlook for full year 2021, including the impact of its recent acquisitions of Swerve and Wholesome. The outlook includes expectations for growth on a proforma organic basis and margins for the combined business. The Company defines proforma organic growth to be as if the Company owned both Swerve and Wholesome for the full years 2020 and 2021. The Company’s 2021 outlook is as follows:
The Company also updated its 3 to 5 year compound growth targets, which reflects the impact of its recent acquisitions, as follows:
CONFERENCE CALL DETAILS
The Company will host a conference call and webcast to review its fourth quarter and full year results today, Tuesday, March 16, 2021 at 8:30am EDT. The conference call can be accessed live over the phone by dialing (877) 705-6003 or for international callers by dialing (201) 493-6725. A replay of the call will be available until March 30, 2021 by dialing (844) 512-2921 or for international callers by dialing (412) 317-6671; the passcode is 13716176.
The live audio webcast of the conference call will be accessible in the News & Events section on the Company’s Investor Relations website at investor.wholeearthbrands.com. An archived replay of the webcast will also be available shortly after the live event has concluded.
About Whole Earth Brands
Whole Earth Brands is a global food company enabling healthier lifestyles and providing access to premium plant-based sweeteners, flavor enhancers and other foods through our diverse portfolio of trusted brands and delicious products, including Whole Earth Sweetener®, Wholesome®, Swerve®, Pure Via®, Equal® and Canderel®. With food playing a central role in people’s health and wellness, Whole Earth Brands’ innovative product pipeline addresses the growing consumer demand for more dietary options, baking ingredients and taste profiles. Our world-class global distribution network is the largest provider of plant-based sweeteners in more than 100 countries with a vision to expand our portfolio to responsibly meet local preferences. We are committed to helping people enjoy life’s everyday moments and the celebrations that bring us together. For more information on how we “Open a World of Goodness®,” please visit www.WholeEarthBrands.com.
Contacts:
Investor Relations Contact:
Whole Earth Brands
312-840-5001
investor@wholeearthbrands.com
ICR
Jeff Sonnek
646-277-1263
jeff.sonnek@icrinc.com
Media Relations Contact:
Wyecomm
Penny Kozakos
202-390-4409
Penny.Kozakos@wyecomm.com