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Greetings. Welcome to Hostess Brands' Second Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Amit Sharma, Vice President, Investor Relations at Hostess Brands. Thank you. You may begin.
Good afternoon, and welcome to Hostess Brands second quarter 2021 earnings conference call. Joining me on today's call are Andy Callahan, Hostess Brands' President and CEO; and Brian Purcell, Chief Financial Officer. By now, everyone should have access to the earnings release for the period ended June 30, 2021, that went out at approximately 4:00 P.M. Eastern Time.
The press release and an updated investor presentation are available on Hostess' website at www.hostessbrands.com. This call is being webcast and a replay will be available on the company's website. During the course of this call management will make a number of forward-looking statements, including expectations and assumptions regarding the company's future performance. The company's actual results may differ materially from these forward-looking statements and the company undertakes no obligation to update or revise these forward-looking statements. A detailed list of these risks and uncertainties can be found in today's earnings release and in the company's SEC filings. The company will make a number of references to non-GAAP financial measures that we believe will provide useful information to the investors. A full reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in the earnings release.
With that, I will turn the call over to Andy Callahan, our President and CEO.
Thank you, Amit. We are very excited to have you on board as our new Head of IR and good afternoon everyone. I'd like to begin by offering a few highlights from our second quarter performance that underscores the ongoing strength of our business. I will then turn it over to Brian to discuss our financial results in greater detail and we'll wrap it up with a discussion of our higher sales and earnings outlook for the back half as we continue to gain more confidence in the sustainability of our growth model before opening it up to your questions. We had an excellent second quarter with our 14th consecutive quarter of attractive top-line growth and solid momentum heading into the second half even as we lap last year's high single digits growth. This yet again accentuates Hostess' advantage branded portfolio, and its increasing share in the faster growing high margin sub-segments of the snacking category.
Now to some of the key quarterly highlights. Adjusted net revenue grew 10.8% in the quarter with growth accelerating sequentially from the first quarter on both a one-year and a two-year basis as Sweet Baked Goods business led by the Hostess Brand posted 12.9% growth in the quarter, our highest growth rate in over two years. Our Sweet Baked Goods point-of-sale trends accelerated sequentially as well at 11.4% growth led once again by our Hostess Branded growth of 12.4%. This growth drove over 200 basis points of market share gains in measure channels demonstrated Hostess' outstanding execution in a fluid environment and increasing payoff from our investments in innovation, consumer facing marketing and talent throughout the organization.
Even on a two year stack basis, our Sweet Baked Goods point-of- sale growth accelerated to 19.3% versus the category growth of 9.8%, showcasing the sustainability of our growth trends before, during and in the normalizing COVID environment. Voortman posted another quarter of strong POS growth with one year and two year stack growth rates of 23.7% and 23.9% respectively, both are well ahead of the cookie category. Voortman continues to execute on five building blocks of growth: greater depth of existing distribution, extending into new channels of distribution, activating Hostess' proven merchandising model, building brand awareness and finally impactful innovation.
Now, our Hostess’ single-serve and multi-packs, sub-segments both post a solid double digit two year stack POS growth in the second quarter highlighting the unique strength of our brands. Our share of Sweet Baked Goods sales increased in convenience, grocery, dollar, club and drug channels as we leverage our deep broad-based distribution footprint across both large and small format retailers. In fact, our convenience store market share increased by nearly 325 basis points to 29.9% for the quarter, positioning us exceedingly well to benefit from the profit of impact of improving consumer mobility on C-store sales. At the same time, our market share and grocery channel increased by nearly 180 basis points in the quarter to 15.7% as we posted mid single digit point-of-sale growth in the channel, despite lapping strong COVID driven growth in the year ago period. We are very pleased with our first half performance.
Brian will take you through our revised full year outlook, but I want to reiterate that I am confident of our ability to maintain this momentum in the second half, even as the cost environment becomes more challenging.
Let me touch on a few key themes as to why our portfolio is indeed advantaged. First, the majority of our sales come from our Hostess and Voortman brands, which command a good price premium and our higher margin. Next, we have strong positions in sub segments of indulgent snacking that are growing at a faster rate than overall Snacking. Additionally, our overall brand assets position us to grow faster in these sub-segments. And third, we are uniquely positioned to benefit from both improving mobility as consumers return to work or school, as well as from the sticky, elevated level of at-home snacking consumption even as a broader at-home food consumption trends moderate from the year ago, COVID-driven spike.
This is evidenced by our strong one and two-year stack topline trends as our single-serve POS was up over 19% in the quarter, while multipack business was up mid-single digits versus the year ago, period and over 24% on a two-year stack basis.
In summary, we're advantaged because we can grow more profitably and faster than not only overall food, but also the snacking aisle. To fuel this growth, we are rapidly improving our understanding of our key consumers, not just the purchase behavior, but also what leads to that decision. The path to purchase enables us to create a very detailed, granular snacking occasion map the key to intercepting consumer behavior in the impulse-driven snacking category. This directly fuels our innovation pipeline and is already starting to bear fruits evidenced by the strong success of our recent new products.
For instance, recently launched Baby Bundts, one of our key innovation items in breakfast, is off to a very strong start across multiple channels. In fact, Baby Bundts Lemon and Baby Bundts Cinnamon were one and four fastest growing SKUs in the category across total Nielsen Universe over the past four weeks ending July 17.
We expect our new products momentum to continue as we extend new Baby Bundts, single-serve sales and launch new flavors. We will also be launching a number of other new products, including On-The-Go versions of Cr!spy Minis in the coming months.
We're supporting our innovation through incremental advertising and marketing support. I am very excited about our new Live Your Mostess ads campaign launched during the quarter, our first national ad campaign in nearly a decade.
To highlight the moments of joy are brand drinks drive engagement across multiple digital platforms and position us to win with both consumers and our retail partners. With a full pipeline of new consumer facing initiatives, we firmly believe that sustained investments in advertising, capabilities and our people will drive sustained growth and long-term shareholder value creation.
We are also laser focused on execution. We continue to execute at the highest levels, particularly in light of the volatile retail marketplace and challenging operating environment. Our demonstrated excellence at retail is best exemplified by the strong success of our Hostess partnership program, which is fueled by our investment in data and capabilities and continues to drive our share in the C-store channel. These investments are clearly elevating our competitive positioning within key channels.
Our small format success is simply remarkable. We continue to gain market share in C-store dollar and drug channels with year-over-year gains of 300 to 800 basis points in just the second quarter. Given our improving in-store execution, I firmly believe that the share gains will serve as well as overall on-the-go channel trends improve from last year's depressed levels.
I'm also extremely proud of our agile supply chain, which has continued to execute at the high levels in the face of heightened volume, mix volatility and the exceedingly tight labor market. Our flexible manufacturing footprint, which has enabled us to successfully manage increased complexity and launch highly incremental new products such as Baby Bundts and Crispy Minis, along with our advantage, lower cost, distribution platform has been a key enabler of our strong market share performance over the last 12 to 18 months.
More importantly, we believe that our ongoing initiatives will make our supply chain even more efficient and nimble and a source of sustained competitive advantage in snacking.
Rising inflation and access to labor remain two of the biggest challenges across the CPT landscape in the near-term. As included in our revised 2021 outlook, our input and labor inflation are going to be higher than our initial estimates due to commodities, freight and packaging inflation incremental costs from stronger than expected volume growth and tighter labor markets.
We expect to continue to incur higher labor cost as we have higher overtime, attrition and elevated hiring needs, given the increased consumer demand. We are actively working on a variety of programs to attract and retain our workforce to support our continued growth.
With that said, we're confident we will mitigate these higher costs by continuing to drive additional productivity initiatives, utilizing our revenue management toolkit. And as we benefit from higher prices in the second half.
Pricing is never easy, but our pricing conversations with our retail partners have progressed as expected with higher realized prices beginning to flow through our P&L in July.
We are closely monitoring elasticities as shelf prices begin to move higher and early indications suggest that they are largely in line with our expectations. We also continue to make great progress on our ESG initiatives with the launch of our first ever ESG report in June. We've embedded ESG goals into our operating model and are committed to operate with higher and consistent standards of transparency, fairness, and integrity for all stakeholders.
We view this report as a meaningful start and important milestone on our perpetual journey towards sustainable profitable growth. In summary, we had a strong second quarter and first half. More importantly, we remain confident about our second half outlook, enabling us to raise our full year sales, EBITDA and EPS guidance.
With that, let me turn it over to Brian to go through the quarter's financial results in greater detail.
Thanks, Andy. It's a privilege to speak to another outstanding quarter of Hostess, underscoring the power of our brands, strength of our business model and excellent execution. Net revenue for the quarter was $291.5 million, an increase of 10.8% on an adjusted basis. The increase in adjusted net revenue was primarily due to continued strength in sweet baked goods, which increased by 12.9% during the quarter more than offsetting the expected 4.6% decline in Voortman due to the lapping of last year's inventory pipeline and still ahead of its shift to the warehouse distribution model.
Stronger POS growth in our single-serve portfolio continues to drive favorable mix in the quarter. We are clearly benefiting from increased consumer mobility as sales and traffic trends rebound in the C-store channel. Our 325 basis point share gain in the convenience channel during the quarter also highlights our strong execution and improving capabilities that Andy alluded to in his comments. Our multipack and bagged donut business grew 5.4% despite lapping of last year's COVID bump, driven by continued growth in the dollar, convenience and grocery channels.
Adjusted gross profit of $105.3 million increased by 7.3% for the quarter while gross margin came in at 36.1% down from 37.3% entirely due to the expected headwinds from lapping elevated Voortman margin in the year ago, quarter when we transitioned to the warehouse to with the remodel. Gross margins were flat on a year-to-date basis as increasing contributions from favorable mix and productivity initiatives are offsetting higher inflation. Adjusted operating income of $54.2 million increased $5.2 million or 10.6% from the prior year as higher gross profit dollars were partially offset by higher A&M and G&A investments to support our top line momentum.
Adjusted SG&A as a percent of revenues declined from the year ago quarter, but SG&A dollars increased as we are increasing A&M spending and investing in talent to drive innovation and growth. Adjusted EBITDA for the quarter was $68.4 million or 23.5% of net revenue compared to $65.1 million or 24.8% of net revenue in the prior year quarter, including $7.5 million EBITDA contribution from Voortman in the quarter, the increase was driven by strong Hostess branded volume and favorable mix, slightly offset by lower Voortman EBITDA, due to the aforementioned lap and increased A&M spending.
Year-to-date EBITDA increased 12.7% to $130.8 million for the first half. Our effective tax rate, excluding discrete items was 27.3% compared to 24% in the prior year quarter. The effective tax rate for the prior year period benefited from the allocation to the non-controlling interest, which was eliminated in fourth quarter 2020. Net income was $29.8 million and diluted EPS was $0.21 per share. Adjusted net income of $32.2 million for the quarter, increased 10.1% from the prior year while adjusted EPS of $0.23 per share, increased 5% as a second quarter adjusted diluted EPS assumes average, fully diluted shares outstanding of $139 million versus $123.8 million in the year ago period.
At the end of the quarter, we had cash and cash equivalents of $218.8 million and net debt of $878.3 million with a leverage ratio of 3.4 times, down from 3.9 times at Q4 2020, driven by our strong operating cash flow growth. We repurchased approximately 1.5 million shares for $25 million through July and now have $67 million available under our previously authorized $100 million share repurchase authorization.
Turning to our outlook, given our strong first half performance, as well as solid momentum and visibility to the second half, we are raising full year guidance for net revenue growth from 3% to 4.5% to 7.5% to 9%, as well as raising our adjusted EBITDA expectations from $255 million to $265 million to $260 million to $268 million and adjusted EPS from $0.80 to $0.85 per share to $0.83 to $0.87 per share.
Our updated guidance continues to include Voortman sales and EBITDA approaching $120 million and $38 million in 2021. Our new EPS guidance assumes an effective tax rate of 27.5% up from 27% in our previous outlook, an average shares outstanding of $139 million. Our updated guidance assumes full-year inflation of mid-single digits up from our initial guide of 2.5% to 3.5% reflecting incremental costs to support stronger volume growth as well as higher inflation in our non-hedge costs, including certain commodities, freight, packaging and labor.
Inflation is indeed expected to be higher in the second half. However, we remain confident in our ability to continue to be able to offset rising costs with higher realized prices and additional productivity initiatives. And as our updated EBITDA guidance implies, we plan to reinvest some of the volume and pricing driven upside into the business to sustain our top line momentum. Our 2021 CapEx guidance remains unchanged at $60 million to $65 million. And given our solid year-to-date cash flows, we remain confident that our leverage will approach three times by year-end, absent M&A or any material buyback.
As we deliver almost a full turn in 2021, we remain committed to executing against our key capital allocation priorities, including investing for growth, making strategic acquisitions and returning cash to shareholders. We are really proud of the team's abilities to grow not only top line, but also achieving growth in EBITDA and EPS above our initial expectations during this exceedingly volatile and challenging environment.
With that, I will turn the call back to Andy for closing comments.
Thanks, Brian. We are emerging from the pandemic in a stronger position. Each quarter builds more confidence that Hostess will deliver sustained top quartile growth through the remainder of 2021 and beyond. We are enabled by our strong brand of portfolio, over indexed exposure to attractive categories, breadth and depth of our distribution, increasing growth investments and excellent execution. Our increased outlook for the back half and the full year in an increasingly challenging operating environment clearly demonstrates our ability to deliver sustainable profitable long-term growth. With that Brian and I are available for your questions.
[Operator Instructions] Our first question comes from David Palmer with Evercore. Please proceed with your question.
Thanks. Great quarter and a nice guidance. I wanted to ask about the guidance. You actually had some very specific numbers on Voortman. Did you say you expected almost 40 million in EBITDA from Voortman and over 120 million in sales? I mean, did I get those numbers right? And then I have I have a couple of other clarifying questions.
Yeah. Hey David, yeah, you heard correctly. So we'd set approaching $120 million in net revenue for Voortman and approaching 38 million in EBITDA. That's the guide that we actually gave at the beginning of the year and we're basically just reiterating that. So it's just not set of the overall guide. We're bringing up our overall guide. Then we're basically reiterating what we said at the beginning of the year for Voortman.
Great. And the recent scanner trends in July were pretty high. I know there's volatility in any given weeks, but they were looking like they are mid-teens on a one-year basis. Your guidance looks like it implies 6% to 8% in the second half of the year. Maybe you can confirm if that math is right. But are there things that you're thinking about in the recent trends that's not sustainable? How are you looking at the comparisons and the plans for those of us tracking your progress in the scanner data?
I think David, good to hear you. A couple of things on the scanner data. Overall, we were a couple of weeks early on our back to school promotion. It's about equal level that it was a year ago. It's just a little bit early. So I think we're – what we're seeing now is going a little bit moderate, I'd say, as we go through the year. I think your math on the full-year number feels generally good, but I think what's most important is we feel terrific about the underlying consumer trends that we're seeing that supports this sustained growth.
As we went through COVID, we had the decrease in mobility, the increase in home snacking as we get to a more normalized rate, what we're seeing is increased mobility, improving our on-the-go and immediate consumption sales and even with the return of that mobility, we're still seeing an elevated level of consumers in the home and when consumers are in their home, more they're snacking more. So we have a portfolio, as I mentioned in my prepared remarks that are, is well positioned for what we believe are some sustained consumer trends around adults in snacking and how they snack. The majority of our portfolio is individually portioned, it's portion controlled, but it's available in the home and on the go and we're well positioned for sustained growth there. But I believe you have your numbers, correct?
Yes. I mean, just a comment, just given the fact that we're seeing such a sustained strength in Voortman’s. It just seems like you're being conservative there on that particular brand keeping that guidance the same. I'm wondering if you're seeing comparisons there. But one thing I would have asked before I let you go, is the instant consumables. Yes, you cited that it was a positive mixed driver. What was the relative growth of convenience or on-the-go packaging if you wouldn't mind?
Yes. Just give me a second. I'll give you the exact numbers, because we had that in our presentation. So if you go to, I know you, it just got released. But if you go to Page 6 of our investor deck, you'll say that it just got released. So the Q2 our single-serve was up 19, that's lapping, obviously with mobility down, but if you look at the two years, it's very good. And then you can see multi-pack just continues to perform well over three – any way you look at it.
Okay, great. Yeah. Thank you.
Yeah. Thank you.
Our next question is from Ken Goldman with JPMorgan. Please proceed with your question.
Oh, hi. Thank you. I just wanted to ask about the increased sales guidance, which I think is $46 million at the midpoint. If my math is correct and then $8 million for EBITDA, I think that implies incremental revenue versus your prior guidance carrying only about a 16% EBITDA margin, which is obviously much lower than the corporate average. So, I know you have higher costs, I know – but you had higher costs in the first half as well. It just feels a little conservative to me on the EBITDA line, even if you are investing more as you said. So I'm just curious if there is an element to sort of, hey, let's wait and see where our costs and pricing elasticity really come in or whether, no, you're actually going to invest that much more in the business beyond what you initially thought.
Yes, it's Brian. So if you look at our guide, we're taking out both the top-line and the bottom-line. Relative to our initial guide, I think there's kind of two different things going on. We've got better visibility on fleet. And from that standpoint, I think our story in the second half is going to be similar to what we're seeing in the front half. We feel good about our ability to offset that inflation with pricing and productivity, it's different than the front half where we have mix as a big favorability along with productivity. But the net outcome is the same. We're basically flat from a margin standpoint to prior year and the front half. We expect that to be the same in the back half.
Relative to SG&A, I think the back half on a total SG&A basis. We will probably look directionally more like Q2 on an absolute basis than Q1. So it implies a little stepped up investment versus the first half. And as we're driving our business with advertising and marketing and you have things like incentive compensation like that, that are going up as well as some talent that we brought into the business. So I think from an overall standpoint, we've got better visibility to inflation and we've got better visibility to how we want to invest behind our brands with advertising and marketing. And so, we're bringing up both top and bottom-line, but the EBITDA contemplates that.
Okay, no, that's helpful. And then I guess my follow-up, I hate to pick on this one channel because you're obviously killing it in most channels, but I'm just curious, Andy, when do you expect, what's your latest on, when we should start seeing the market share losses in the mass channel turn – flip on their head and turn into market share gains. I'm only asking because we're starting to see losses on top of year ago losses now. So not a big deal, obviously you're doing great besides that, just trying to get a little sense of that particular factor.
Yes. So I don't as you know, I don't discuss specific channels, but you're right in the sense that not all channels are to the potential that they have or where they will be. I'm not going to communicate specific timing and when they all get there, but what you're seeing really most importantly, is the strength of our broad based distribution and the availability we have across it. You mentioned we're up despite not all channels being to their potential, we're up 10 points in availability to the rep, the next closest competitor. And our brands really strong and that's what's driving nearly in the first half, nearly two points of share growth. So I don't have a timing. But I know that we will have them all working. It'll be choppy as we go in the back half, but I feel good about where we're at.
Thank you.
Our next question is from Rob Dickerson with Jefferies. Please proceed with your question.
So I just wanted to ask you about 2022 a little bit. I realized, obviously you can't provide too much color. Obviously, the question is coming up. I think for a lot of companies now especially for you just given some of this cost inflation vis-à-vis, the pricing dynamic. I'm assuming there are some hedges, you still have on. I'm assuming at some point some of those hedges roll off and then there'll be a mark-to-market cost impact. By the way you're speaking now is that, essentially for this year, you're able to offset the productivity and pricing, but I just want to kind of hear you say it, like, if you think about that pricing that would be entering the market from your perspective, at least, a less thing further flight than you should been still a decent position on a profitability basis as you enter next year? That makes sense.
Yes. I think – look, I think overall, I think that's right Rob. The pricing, we've got good visibility to inflation in the back half, it's obviously rising and the pricing that we're enacting in the second half has contemplated that. So we'll get a wrap around benefit as we're going into next year. And from a 2022 standpoint we've got a playbook that we typically run in terms of locking in commodities. We started to do that. I don't have specific guidance for you on 2022, but the pricing that we are enacting in the marketplace in the second half does contemplate kind of our outlook on inflation. And as you mentioned, the back half – we feel good about offsetting that inflation with pricing and productivity.
Okay, perfect. And then I guess maybe just coming back to Ken's question a bit again, [indiscernible], but I kind of view it as more upside than further downside. Just something seems to kind of be going on in that mass channel. I realized maybe some of the back to school shouldn't have pulled forward just a little bit. But then there's kind of non-back to school resets and kind of those broader conversations. I'm just curious, now where you sit with some of the new innovation, some of the renovation on Boardman. How do you see, or let's say, how are some of those conversations going with some of those mass retailers with respect to increased distribution points, shelf space, what have you? That's all I have. Thanks.
Yes. Hey, thanks, Rob. Yes. No, I'll just reiterate the restaurant distribution is really showing through, we're gaining two share points across I liked the productive conversations we have with all of our customers regardless of channel, even in the channels where we're not performing well. I feel good Voortman's doing very well across all of those channels. When you look at point of sale, that's coming through. We're in sub-segments that are growing.
I feel really good about some of the news with the front-end resets and the strength of our single serve business that we will see coming through as we get through the end of the summer and specific to baby buds across all channels, including some of the channels who are not performing, while some of the Number one, are new items. So we're really positioned for the long-term, especially given the affinity of our consumers and the strength of our brands over time. So a lot of these planning's, they don't happen just overnight, and I feel really well where we are positioned across all of our capital.
Alright. Great. Thanks. Fair enough. Thank you.
Our next question from Ryan Bell with Consumer Edge Research. Please proceed with your question.
Hi. How are you? When we're thinking about the pricing that you're taking or trying to get maybe a broader sense of the percentage or the mix of the pricing that's coming from frontline pricing versus mix, I think that could be helpful to understand the dynamic. And then when we're just looking at the scanner data we're seeing, sort of mid, maybe even to high-single-digit price mix increases on a weekly basis. In July, is that roughly in line sort of what the expectations over the balance of the year?
So just I'm clear, Ryan, when you're saying, I think you said you're seeing single serve, is it the single serve mix you're referring to is higher than multipack? Is that what you're saying?
I don't know, sorry. I was just saying that, right now in July, we're seeing mid- to high-single-digit price mix increases. Is that just the overall year-over-year pricing? Is that something that we'd expect to move the balance of the year? And then I know you talked about there being benefits from mixed shifts, potentially versus some frontline pricing. And I was trying to see how that would play out over the balance of the year.
Yes. So, just directionally from – if you think about the front half of the year and I'll give him the back app. But on the front half of the year, we've got a lot of mixed benefit, particularly driven by a single serve. So Andy alluded to in our investor deck, there's a slide where we showed that we were actually down in single serve in Q2 last year, and we're up substantially this year, that's helping drive our mix saver ability that helps our margins. And it helps offset inflation. The front half allows productivity.
As we moved to the back half, I think that mix upside starts to wane and it trans – it transforms more into pricing upside is we have pricing in the marketplace, you know, more in the back half. So any interim where you're talking about July specifically, I think, I won't comment like for one-month, but I think over the back half, I would expect our – from a margin standpoint and pricing in the marketplace that you're seeing. You're going to see that more from over the second half; it's going to be more pricing driven, the next driven relative to the front half, if that answers your question.
Yes. That's helpful. And then when I'm thinking about the potential volatility in demand across channels, given the unknown, the Delta variant, would you be able to frame your ability to manage around that? You did a good job last year, when things came up, and then have you noticed any slowdown in heavier hit regions in terms of the mobility and how that relates to demand?
Yes, thanks, Ryan, I'll pick that. And I would I agree with you. I feel confident on our team to be able to execute in multiple challenges. I mean, we ramped up our Edgerton distribution center, Integrated Voortman dealt with COVID. And in each of them, the agility of the team and the excellence in execution has resulted in a sustainable growth model. And so now we have history on COVID. And we have a pretty good feel for how consumers behave, when different things happen.
And I feel confident that we're well positioned to capitalize and to service our consumers and customers in a changing environment as we have over the last 18 months with COVID. So I don't anticipate although I could be off a little bit of a “lockdown” or dramatic change, like we saw before. However, if that does happen, we'll be ready. So I feel really, really good about that.
Thank you. That's it for me.
Our next question comes from Ben Bienvenu with Stephens. Please proceed with your question.
Hi, thanks. Good afternoon, everybody.
Hi, Ben.
I want to ask, in light of the deleveraging going on in the business, I know it was not overly significant, but you did buy back some stock in the quarter, just how you think about utilizing the cash flow coming in the door and that concurrent with the leveraging, presumably providing you some increased flexibility, just how you think about capital allocation as you get through the year?
Yes, so from a capital allocation standpoint, we always think investing in the business is a good use for our cash. So, investing in the business, like we've done, as evidenced by, additional don't outline, our cake line that's going to be coming on the back half of this year, are moved to address in those are all good high ROI projects.
So investing in the business is always a good use of cash for us against these good projects. M&A is also a, we'd call that as a use of cash obviously, that's a little bit more opportunistic when that comes available for the right company. And, as you mentioned, we're delivering almost a full turn this year. It you know, absent any significant M&A or additional buyback activity, we'll be around three times at the end this year we were close to four times when we started the year. And we just bought back 1.5 million shares, that's through July, the majority that was in Q2, but that's up through July, we spent 25 million on a share buyback.
So we said that, returning capital to shareholders was in our playbook. And we just demonstrated that. And as we're thinking about the balance of the year, all those options are still on the table for us. We've obviously, we got 67 million still available under our share repurchase authorization. And those are things that we talk about on a consistent basis. So that's generally, how we think about prioritizing our cash allocation. And I do feel like we're in a good spot as we continue deliver, as you mentioned.
Okay, great and I know, there's been some commentary on pricing, some color you've given, you talked about the receptivity from the market, as it relates to demand elasticity. To the extent we get further labor tightening in the workforce, and that drives or necessitates increased pricing beyond even what we've contemplated. Where do you think, we stand on the demand elasticity front to enable incremental pricing on top of what we're contemplating now?
Yes, as, we're very data-driven, analytically driven. We have very detailed models related to elasticity we pass it through, but more importantly to your question is I feel really good about our equity. Our consumer loyalty is extremely high, our ability to be able to pass through pricing when needed, which we're now demonstrating now. I feel good about, you also said, we have a pipeline of revenue management that we talked about that we monitor all the time. It's always integrated. We look at it all the time, not just in these high inflationary environments, but it's a daily part of integrated the way we run the business.
And I feel good that we have a good pipeline and revenue management and productivity initiatives to be able to manage our margins over a sustainable period. That's a capability not just a, onetime events. So I feel good about where we are.
Okay, very good. Congrats and best of luck.
Yes. Thanks, Ben. Thanks.
Our next question comes from Pamela Kaufman with Morgan Stanley. Please proceed with your question.
Hi, how are you thinking about the sustainability of strong consumer demand given you're benefiting from a combination of continued elevated at home consumption, as well as improving mobility? Do you see this as a sustainable dynamic? And would you expect top line to grow next year as consumer’s transition out of the pandemic?
Yes. Hey, Pam it’s good that good to hear your voice. I do. I would expect us to continue to grow. I think before the pandemic opened up by, I believe we were in good indulgent categories that were growing and what we're experiencing now, when early in the pandemic on-the-go business, we were able to expand our distribution and our share of shelf. We saw penetration within the convenience channel, for example increase, and now we're holding onto those increases and mobility is increasing. So that's a good positive tailwind.
Within the in-home snacking or the carried away from home, it's really interesting, because we're not – when the – it opened up a little bit, so consumers were maybe lack at home, they're still in home more. And even though they may eat out at restaurants, being at home more means snacking at home more, and we're benefiting from that. And I think that's going to be a sustainable shift. So I think, we're well positioned for our on-the-go business. And I believe we'll continue to be able to grow in our in-home snacking business, because of that dynamic that we're a snacking business, not necessarily a center of the plate business.
Great. Thanks. And also you highlighted some of the new products that you've launched that are targeting younger consumers. You've talked a lot about your strategy to expand into new occasions like breakfast, but you also see opportunity to increase penetration within certain demographics? And how are you incorporating this into your innovation strategy?
Yes, we do. We test our innovation – first of all, thanks for the question, I love this question, because we've invested a lot to really understanding our consumer, we've invested a lot to understand the occasions in which we compete. We've also looked at where those occasions are fastest growing, who is our core target in demographic. And that underpins how we test and how we develop Tina and Dan, who are on our growth side, do a great job of really threading the consumer target, which is younger than new products that are going to capture their imagination and fit their needs. And then our advertising does that as well.
So we expand not just our frame of reference around who's going to come into the occasions in the snacking, but we also make sure we're talking to them not only directly through our advertising, but also with products that fit their needs. That's why you see things like our Crispy Minis that are more around an occasion where those consumers are looking forward, it's combination of baked and crunchy Baby Bundt is just absolutely doing really well and it's doing well across the demographic spectrum. So it's inherent in the way we understand our consumers, their locations and then develop new products and communications to them.
Great, thanks. And then can you just give an update on the investments that you're making into the breakfast category and what you're seeing broadly in terms of growth in eating locations for Sweet Baked Goods?
Well, as you know, breakfast is a growing subsegment of Sweet Baked Goods, it's growing in total. I think consumers at home mean eating breakfast a little bit more at home. When we invested – when we originally talked about accelerating our growth in breakfast to put it in perspective, we were underdeveloped by five share of development in breakfast versus our overall share within Sweet Baked Goods was about five points below. We're now at, or slightly above our total development. So the initiatives we're taking have been extremely positive.
I'm looking at some of those initiatives. We entered Hostess with our Danish business and expanded within that with jumbo Donettes. We now muffin sticks out this year, Baby Bundt is doing extremely well. We've also expanded space and in some customers we've segmented specific shelves related to breakfast, so that consumers could really understand how it fits within their usage occasions.
So we're seeing that not only from a consumer standpoint, that the breakfast is increasing penetration in sweets to get this positive start to their day, but also the repeat purchases. And we're giving them products that they want within that occasion, both for on-the-go and within the retail space. So we thought about it three years ago, we have been successful with that strategy and we actually believe that there is a long way to go that we're just really getting started. So I feel really good about that strategy. On Page 7 of our investor presentation, you'll see some headlines of total breakfast and where we've – how we're performing well a quarter to-date.
Great. Thank you.
We have reached the end of the question-and-answer session. At this time, I'd like to turn the call back over to Andy Callahan for closing comments.
I just want to thank everyone for your participation and continued interest in Hostess. As you can hear, we're excited about the continued strong execution of all of our teams against our priorities as we drive growth and continue to – working hard for our shareholders to continue to increase shareholder value. So thanks for participating today, we'll continue to work hard and see you next quarter.
This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.