Why Amplify Snack Brands Inc. Stock Plunged Today
Image source: Amplify Snack Brands.
What happened
Shares ofAmplify Snack Brands Inc.(NYSE: BETR)were down 24.6% as of 12:30 p.m. EST Tuesday after the healthy snack food products company released weaker-than-expected third-quarter 2016 earnings.
So what
Quarterly revenue climbed 48.1% year over year, to $68 million, driven by a combination of growth from Amplify's SkinnyPop brand, additional distribution of its Paqui brand, and its newer Oatmega brand. Amplify's recently closed acquisition of the Tyrrells international brand portfolio contributed $8.6 million in sales during the quarter.
On the bottom line, based on generally accepted accounting principles (GAAP), that translated to net income of $1.6 million, or $0.02 per diluted share. On an adjusted basis, which adds perspective by excluding things like stock-based compensation and acquisition costs, Amplify Snack Brands' net income was $9.0 million, or $0.12 per diluted share, flat from last year's third quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $20.1 million.
By comparison, analysts' consensus estimates called for lower revenue of $65.2 million, but higher adjusted earnings of $0.15 per share.
Now what
Amplify Snack Brands also revised its full-year guidance, and now expects 2016 revenue of $268 million to $272 million (up from its prior range of $260 million to $270 million), and adjusted EBITDA of $84 million to $86 million (down from its prior range of $92 million to $96 million).
During the subsequent conference call, Amplify CFO Brian Goldberg explained that this top-line guidance incorporates a faster-than-expected closing of the Tyrrells acquisition, which added a partial-month period of performance from the new brand, as well as its year-to-date performance and expectations for the remainder of 2016. As for the adjusted EBITDA guidance reduction, Goldberg pointed largely to lower-than-expected volume levels related to missing retailer reset windows for innovation and other products in the second half of this year, which meant deferring new distribution into early 2017. To a lesser extent, unfavorable brand, product, and customer mix negatively affected margins.
To be fair, these items can all be corrected going forward, so Amplify Snack Brands should hardly be considered a broken business as today's drop seems to imply. But given its earnings shortfall and with shares still trading at a lofty 33 times trailing-12-month earnings even after the decline, it's hard to blame investors for taking a step back.
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