Utz Brands Inc Class A Common Stock

Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your operator for today's call. At this time, I would like to welcome everyone to the Utz Brands Inc. first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw a question, again, press the star one. I would now like to turn the conference over to Kevin Powers, head of investor relations. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us today for our live Q&A session on our first quarter 2025 results. With me on today's call are Howard Friedman, CEO, and Ajay Kataria, CFO. I hope everyone has had a chance to listen or read a prepared remarks and also view our presentation, all of which are available on our investor relations website. Before we begin our Q&A session, I just have a few housekeeping items to review. Please note that some of our comments today will contain forward-looking statements based on our current view of our business and the actual future results may differ materially. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. Today, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. Now, operator, we are ready to open up the line for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. And our first question comes from the line of Andrew Lazar with Barclays. Your line is open.

Great. Thanks so much. Good morning, everybody. Good morning, Andrew. Good morning. I was hoping maybe to start off with you could just explain the difference between sort of flat overall retail sales and the 3% organic sales growth that you reported this quarter. Just trying to get a sense of how much of that difference, if any, is sort of timing related that may reverse in future quarters or if it was simply unmeasured channels and the like.

Yeah, I appreciate the question, Andrew. Look, I think broadly, I think what you see in our results is a lot of the benefits of some of the opportunities that we continue to have as you think about expansion in our expansion geographies as well as obviously in our core. Specifically to the bridge between net sales and consumption is exactly what you said, which is we have had some significant strength in our untracked channels. Natural channel is doing quite well for us, discount and club. We also have the benefit now of the rice distribution center being open. So we are seeing much better throughput through that facility as we consolidated six warehouses down to one. And so we're getting our shipments out a little bit earlier. So there's a little bit of revenue recognition, which we'll expect to continue. But there is nothing in these results that were pulled forward in the quarter. And we're obviously quite pleased with how the volumes have responded.

That's helpful. Thank you. And then I know you had anticipated – some volume share gains, but some value share contraction in core markets in the near term. Is that simply the bonus pack efforts? And if so, how do you balance the volume outcome with the return on such programs as we think about sort of the sustainability of the approach?

Yeah, so you'll recall when we met in December 23, our investor day, one of the things that we've said pretty consistently is that we want to be able to hold up share in our core while we're growing in expansion geographies. Yeah, and this is largely held true as we continue to grow our volume shares. The quarter obviously is a little bit more competitive naturally because we are in a lot of cases the number two player. And so we're a little bit more exposed to where the category looks. But I think what you see right now is a couple of things. I think first, you do see the benefit of bonus packs. Second, you're seeing incremental distribution in Boulder Canyon and uh, and on, on the border, which is also helping. Um, and so, you know, I think a lot of it is things that we're trying to just get into balance as we go forward. Um, but really I think what you'll expect to see is sort of a little bit more normalized volume to value relationship as we go forward as, as bonus packs wind down.

That's helpful. Thanks for that. And, um, I appreciate you putting the, uh, the case study that you did in the slide deck. That was actually real helpful around what you're seeing in expansion markets. And, um, Jay, thanks so much for all of your help and wish you all the best going forward. Thanks. Thank you, Andrew. Thanks, Andrew.

Our next question comes from the line of Peter Galba with Bank of America. Your line is open.

Hey, guys. Good morning. Thanks for taking the questions. And Howard, I had to do a double take on slide four. I thought you had snuck in a photo of Kev as a final send-off. to the slide deck there, but unfortunately it was not him. We'll have to get that in the future. I just wanted to follow up maybe on Andrew's question on the bonus pack impact. I think on slide 23 of the deck you guys lay out that the impact to price was about 300 basis points. Just is that kind of the similar offset in terms of all mix? I didn't see if there was a contribution number for what bonus packs actually contributed to all mix in the quarter. So just any additional help there would be appreciated.

Yeah. So the short answer is yes. You know, I'll leave it at that. And, you know, as you saw, most of our price was related to bonus pack. You know, there was about 60 bps that was not bonus pack related. And that's the true price gap investment that we made in the quarter, and that flowed down through the P&M.

Okay. All right. Got it. Helpful. And then, Howard, just on Boulder Canyon, look, it's obviously been a tremendous growth driver. I'm not even sure if some of the track channel data is tracked channel data is picking up some of the new product yet, but just, you know, what's kind of been the early reception to some of the new, you know, category expansions with Boulder Canyon? How much of what we're seeing in the, you know, in the Nielsen or Cercana data is just existing distribution being pushed out more? And should we kind of start to see that accelerate, you know, as the new products start to hit shelves as well? Thanks very much.

Yeah, so we're very pleased with the performance of Boulder Canyon. It's a great product, and for consumers who are looking for non-seed oil offerings, it's a product that delivers great taste, non-seed oil, in a lot of cases, non-GMO. And we're very pleased with, obviously, the consumer and the customer reception to it. Obviously, it's a huge driver, as you saw in our untracked channels, in the natural channel, as well as we're now gaining customers retail distribution in traditional channels as we move into food. But a lot of that gain is still in front of us. We've gotten the distribution, and so you'll continue to see that business continue to grow in more measured channels. Specifically to reception, we've launched Canyon Poppers last year, which is performing quite well, and the Cheese Ball. competitive set. And we also launched incremental flavors. We have a wavy product that's out. And then obviously, most recently in March, we launched our tortilla chip. Tortilla chips is still a little bit early to see in the read, but the rest of the business and the innovation is readable. And the last thing I'll say is while distribution is growing and we're quite pleased with what is giving us a lot of optimism on this brand is that velocity is also growing quickly. So it's sort of the best combination that you could hope for, gaining distribution, growing velocity in an on-trend segment where consumers are headed. So we're quite pleased with it, and we look forward to continuing to drive that business longer term.

Great. Thanks very much, and thanks to Ajay as well for the partnership over the years. Appreciate it, guys. Thank you.

Our next question comes from the line of Michael Lavery with Piper Sandler. Your line is open.

Thank you. Good morning. Hey, Mike. Good morning. Dave, when you pre-announced the nice sales dissection and just some of the non-branded or partner brands versus the rest and how they've been growing, can you just give us a sense of what you expect going forward and For partner brands, maybe how you can manage those or if and how much you control kind of how they flow through and what the growth outlook or decline might look like going forward.

So a couple of things. Obviously, on our non-branded, non-salty piece of business, Zips and Salsa continues to be a business that we would expect. We'll have some near-term pressure on it as we continue to lapse prior year, and then we expect it to start to inflect and become more stable as we get into the end of Q2. With respect to partner brands, what partner brands are by their nature, brands that we carry on our IOs carry and deliver for route averages and to make sure that they're delivering what the retailer and what our customers ultimately want. We don't really control them. What we do try to do is make sure that over time, that as our brand grows, that we actually get more of our products on every truck and that those businesses will naturally get a little bit smaller. But we would expect them to continue to decline, although we don't expect them to be as negative as we go forward.

Okay, that's helpful. And you called out the new flavored on-the-border tortilla chips. Um, maybe can you just give a sense of, of how far that brain could go or how big a flavored opportunity might be? And what, if any other white spaces you see as a opportunity?

Yeah. So obviously, um, we're quite pleased with on the border. It was an acquisition that we made a couple of years, a couple of years back and it has continued to grow nicely. as we continue to expand distribution. I still think that there's a distribution gain opportunity in our expansion markets, much like there is for the rest of our portfolio. And then with respect to innovation, we know that unflavored tortilla chips is a great place on the border. We would expect that we can also bring flavors in. It's a piece of the category that is growing, that continues to grow, and it's a place where we think that there's a fair bit of white space I think longer term, you know, just like any other business on the border, rather, has got opportunities in additional flavors. You know, potentially there are other formats that we can introduce. And as, you know, consumers indicate their interests in different product experiences, we think that brand has got a lot of legs to stretch.

Okay, great. Thanks.

Next question comes from the line of Robert Moscow with TD Cowen. Your line is open.

Hi, thanks. The bonus pack program, I think you're talking about it in terms of a limited time offer. Is that right? And how will you evaluate how long to keep it in the market? Does it depend on competitive dynamics or just the category kind of? response to it.

Thanks. Yeah. Well, a couple of things. You're correct. The intention was for this to be an opportunity for us to try and test different ways to deliver value to consumers, right? And so one thing that we have certainly seen on bonus packs, obviously the consumer response was very positive and we feel really good about how it kind of played different roles in different places, to be perfectly honest. In expansion geographies, it was also a great trial vehicle. So we were able to, as we are getting product into new markets, it's giving consumers an opportunity to opt in and try it. And in our core, it was obviously a way to deliver a different way to deliver value. The one thing I would say, though, is we're doing that across the entire portfolio. Obviously, you can see Boulder Canyon in the region. natural channel, as well as in club, and then also obviously with the rest of our portfolio in the discount channels. So, you know, I think our expectation was that if we would do it for a brief period of time, it would flow in and flow out, and we continue to expect that to be true as we transition into the merchandising plans that we have for the summertime.

Okay. Does that mean as you transition, it might be pulled out in the summer? And then a quick follow-up.

Yeah. So, yes, our expectation is that that program is winding down now. And as we transition into the summertime, we have pretty normal commercial plans to go to supporter innovation, increased marketing, and making sure that our pricing is correct in the market as we go through the peak selling seasons for us.

Okay. And then maybe broadly speaking, how should we think about price mix compared to volume for the rest of the year? Should we expect price mix to continue to be negative? You know, can you balance out those two when you're in your sales forecast?

Yeah, so we should be normal course from here on out. So you should expect, you know, about a point of price investment going forward.

Okay, great. All right, thanks, AJ, and best wishes. Thank you.

Our next question comes from the line of Krupesh Parikh with Oppenheimer.

Your line is open. Good morning. This is actually Erica Eiler on for Krupesh. Thanks for taking our questions. So I guess first I wanted to touch on natural organics. So we've obviously seen tremendous momentum across the natural and organic space. um you've seen great results in boulder canyon so maybe you could just talk about you know the further opportunities that you see to capitalize on this trend uh whether it's accelerating initiatives in boulder canyon or through m a would just love to get your thoughts there yeah so uh agreed we're quite happy with how boulder canyon has been doing uh in you know in the natural and organic um class of trade and

What you're seeing right now is we are extending innovation, so we're entering into new segments of the category. Talk a little bit about Canyon Poppers and some of our flavors, tortilla chips launching right now. I think the opportunity also more broadly for us specifically to Boulder is to actually start telling its story. So we're working on ways to make investments in the brand equity and drive its overall awareness. But I think in the near term, what you're going to continue to see is distribution gains supported by shopper and consumer support and innovation as we go forward. So I think we've got a lot of runway left. It's growing quite nicely right now. Consumer response has been excellent. And we would continue to see opportunities to drive that momentum further.

Okay, that's super helpful. Just on the channels, you called out, I think, natural hard discount and dollar again in your scripted remarks. As we think about channels, I mean, particularly in light of the current backdrop that we're seeing and those, obviously, a couple of those channels, hard discount dollars, cater to that value-seeking behavior. Are there any other new shifts of note from a channel perspective lately?

Yeah. Look, I think, so a couple things. One, you know, we obviously, we use Cercana, Mule, C-Plus with convenience as the read, which actually helps, we think, understand our business. And so some of what you see in the bridge is really just a question of, like, what's tracked versus what's not. So obviously, we continue to see good support and strong momentum in food. Our mass channel is also performing, but really what we see right now is as consumers seek value, they're seeking value across the spectrum from premium to merchandising support, promotional support, and different classes of trade. So I think that's really kind of the story of our print. You continue to see that value-seeking reaction and consumers responding well to what we're doing and what we're offering across the spectrum.

Okay, great. Thanks. I'll pass it along.

Our next question comes from the line of Jim Salera with Stephens Inc. Your line is open.

Hey, Howard and AJ. Thanks for taking the question. Howard, I wanted to maybe drill down a little bit on potato chip subcategory. Obviously, that's where your growth saw kind of the most stark outperformance driven by both Boulder and us, which is interesting because, you know, Boulder is kind of a premium offering, where us, particularly with the bonus bag, is I would use more of a value offering. Just kind of walk us through the dynamic at play there and how, you know, we're seeing household growth both at the, you know, kind of premium and at the value side.

Yeah, so I think there's a couple of things. One, I think we believe that consumers are seeking value broadly, right? And as you look at Boulder Canyon, Boulder Canyon obviously is a premium priced chip and is delivered into different classes of trade. And I think to your point on us, us is really, we're quite proud of the brand and we're quite proud of the consumer response to it. But the opportunity for us was really in that expansion market distribution gains and the perimeter display activity that we were able to get, that our IOs were able to deliver behind the bonus pack. So kind of different reasons for their outperformance, right? Bolder distribution gains, a little bit more merchandising support are really what's driving that difference.

Okay. And then are there any significant distinctions between

like when we think about a nuts household versus the boulder household i mean is there a lot of overlap there or are there kind of unique characteristics that you can assign to each and you find that there isn't a ton of cross-pollination um i'm not sure we've ever actually uh shared sort of the over the overlaps i would be i would be a little um cautious on thinking that they would be exclusive households it just doesn't it wouldn't necessarily be what i would expect to happen But what I would tell you is the Boulder household specifically tends to be a household that is a little bit more affluent and is actually looking for better-for-you credentials than non-seed oil, where I think what you see in us is a more mainstream household, broadly speaking. But I don't know that we've ever really looked to say is there an overlap or an exclusivity to them. Generally speaking, I think we would expect to see overlap across the portfolio.

And if I could just sneak in one other quick one. Just thinking about the distribution gain opportunity at Boulder, you know, you talked about still a lot of runway ahead of you. I've seen the product in some new places and retailers in my area. Can you just give us a sense for, you know, kind of maybe what we should expect from a sequencing perspective this year? I mean, is it in, you know, all the major club regions? I mean, is there anything kind of imminent that we should be thinking about as we're, you know, building out the demand drivers for the back half of the year?

Look, I think we've seen a significant amount of distribution gains. We have gotten some support and some rotational support in some retailers as well. I think what you'll see is continued distribution gains in the business. Obviously, in the natural channel, it's a little harder to see, but we continue to get incremental space there, and you're seeing it now in the more conventional grocer, in conventional grocers as well. So you should see continued distribution gains. We've got a lot of white space left across this portfolio, as you know, and we would expect to continue to demonstrate our benefits to the category and to consumers with retailers across our portfolio. and with Boulder being, I think, a near-term beneficiary. And I'm not surprised you're seeing it, and I expect you'll see more of it as we go forward. Okay, great.

And, Jay, I just wanted to say, you know, it's been a pleasure working with you. Best of luck in, you know, whatever the next endeavor is for you.

Thank you, Jim.

Next question comes from the line of Cockmarts with Jeffries. Your line is open.

Hey, good morning, guys. Thanks so much for taking our questions. First question from my side is, you know, you spoke to kind of volume share gains in core geographies. It seems like maybe some of that could be attributed to those bonus packs. So just wondering, one, if that's the case, and then two, how do you think about incremental distribution opportunities within those core geographies as maybe larger peers continue to see a bit more pressure?

Yeah, so the first answer to your question is, of course, some of the volume share gain that we had is being driven by bonus packs. You'll recall at our investor day, what we basically have said is we believe that we can continue to grow by holding our volume share in the core and then driving outsized distribution gains in our expansion markets and to be able to deliver on our top line expectations. Part of what was happening in the core was also us as core has significant opportunity on three of our remaining Power 4 brands. So On the Border, Zaps, and Boulder Canyon all have average item carry opportunities and distribution opportunities within the core geography to be able to drive gains, which is part and parcel to how we expect to hold our volume share. What you certainly see in the current quarter is you do see gains on the border and Boulder Canyon in our core geography. Distribution gains are up, which is also helping support volume share. And then obviously, again, to your point, the bonus patch was a contributor as well. I think as you go forward, you should expect us to continue to drive our white space opportunities in our core with those items. And then our expansion geographies and incrementally in additional classes of trade with the rest of our portfolio. Because the one thing that we continue to see is that as we gain distribution, we stay and we're helpful to the consumer, the customer, and obviously the category.

Understood. Thanks for that. And then the second question for me, you know, understand you've been speaking about this bonus bag program being more limited and winding down right now. But I guess, you know, based on what we've heard, maybe from some peers around the industry is that, you know, the U.S. consumer seems to be, you know, maybe a little bit more pressured. Maybe there's some weakening sentiment out there. So maybe what might change your mind about maybe bringing back this bonus bag program? Is there certain metrics you might have to see that would make you want to bring that back and test it again? Thanks.

Yeah, so look, I think, and I'm not going to break any new ground here by saying that I think we're watching how the market is responding and what consumer behavior looks like as a branded company. That's obviously job one for us. And value-seeking across the consumer base continues to be an area that we're all watching. Our theory has been that we can add value in a variety of different ways, whether it's in premium products and value offerings or in innovation and marketing, which have always been the thing that have sustained this category. We've never been a a price-driven business. You know, consumers come down the aisle because they like the brands, they like the innovation, and they like the marketing, and then fair pricing. So we'll continue to look at ways to address value as we go forward. You know, the bonus pack program obviously was one way that we went after it. We maintained our price gaps. We've also gained distribution in our items. So we're going to play the full marketing mix And, you know, if the opportunity came back again, we have a lot of learnings from this round of bonus packs. And, you know, we'll evaluate it as conditions change.

Understood. Thanks so much. We'll pass it on.

And our last question comes from the line of John Baumgartner with Mizzou. Your line is open.

Good morning. Thanks for the question. Hey, John. Hi. Maybe first off, just sticking with the bonus packs and the volume response there, I'm curious, Howard, if you can see through to any impact on consumption from new trial and new consumers relative to benefits from frequency, how much has been subsidized relative to maybe accelerating new buyer growth that has a longer tail benefit for you from here? I know it's not a long-duration program, but just any gleanings you have thus far.

Yeah, so look, I think I would say it's a little hard for us to tease it out exclusively for bonus facts because it was a flow-through item. So they were not, what we did was we delivered the product. We wanted to have it sell through this window of time and then move forward. So it's a little harder for us to tease that out. What I would point to, however, John, is if you look at the household penetration results that we continue to see on our business, We've gotten now to 49% if you look at the rolling 12 months, which is an all-time high for us. And we are, broadly speaking, holding our buy rate, which, as you know, is hard to do when you bring in a lot of new users and then they try you and then they move on. So we're obviously quite proud of the panel metrics and continue to be pretty optimistic about the resonance of our overall portfolio and its quality. But I do believe that there is some trial that is happening with respect to expansion markets with the bonus pack, because it was broadly delivered to the classes of trade. And we'll obviously continue to watch it as we go forward. But trial and repeat rates on our business are pretty strong, and household penetration continues to grow, which, at least from my

seed is the thing the one thing that we want to make sure that we continue to deliver against okay and then uh as a follow-up on on c stores specifically i think the comment there was that performance is improving but it's not yet back to growth is there anything at this point that you can do as a company to accelerate that turn or is it just largely dependent on overall traffic trends and sort of the macro backdrops

Yeah, so I think there's a two-part answer to that. Obviously, the channel needs to continue to improve. And as the channel improves, I think what you're seeing now is that that is starting to happen. I wouldn't broadly say that it's improved, period. But I think it's getting better. I think for us specifically, there's three things that we are continuing to work on. And they're kind of things we've talked about in previous calls. First is we need to continue to drive our distribution in convenience stores and make sure that we have the price pack architecture correct, get those sizes right, get the items right, get the planograms correct. And so we're focused on distribution. And then the second is delivering innovation in that channel at times can be a little different because a lot of convenience is a me moment, right? Smaller bags that tend to be consumed right away. And so I think we have opportunities on the flavor side Howard Marks, M.D.: : profiles of some of our products as well, and the innovation that we need to offer to that class of trade. Howard Marks, M.D.: : And then the last is just making sure that we continue to work with those retailers and our ios to make sure that we have the space and service that I think the consumer reasonably should expect when they walk in to be able to get our products, wherever it is that they want to shop.

Okay, okay great thanks Howard and Jay.

Okay.

That concludes the question and answer session. I would like to turn the call back over to our CEO, Howard Freidman, for final remarks.

Yeah, so thank you, Aubrey. I just want to say thank you to everybody for the call. I think what you see through our first quarter is us executing our playbook and continuing to drive the results that we expect to deliver. Obviously, it's only the first quarter, and so there's quite a bit more to do. But I would be remiss if I didn't thank Jay live on the call for all his leadership and support over the last several years and say thank you and good luck. And we appreciate everything that you've done. Thank you, Albert. And then last but not least, I'd like to thank Kevin, who is also moving forward as he winds down his time. Obviously, many of you know we have an extraordinary IR program here at us, and it's been largely driven by his leadership and support over the years. So we also wish Kevin all the best as he moves on to this next great adventure.

Thank you, Howard.

Ladies and gentlemen, this concludes today's conference call. Thank you all for joining, and you may now disconnect.