Utz Brands Reports First Quarter 2024 Results

HANOVER, Pa.–(BUSINESS WIRE)–Utz Brands, Inc. (NYSE: UTZ), a leading U.S. manufacturer of branded salty snacks and a small-cap growth and value Staples equity, today reported financial results for the Company’s fiscal first quarter ended March 31, 2024. 

1Q’24 Summary⁽¹⁾

• Net sales of $346.5 million
• Organic Net Sales increased 1.5%
• Gross Profit Margin expansion of 480 bps
• Adjusted Gross Margin expansion of 280 bps
• Net income of $2.4 million vs. net loss of $(14.5) million
• Adjusted EBITDA increased 7.4% to $43.4 million
• Basis loss per share of $(0.05)
• Adjusted Earnings per share increased 27.3% to $0.14

FY’24 Outlook

• Reaffirming Organic Net Sales and Adjusted EBITDA outlook
• Raising Adjusted Earnings per Share outlook

Recent Developments

• On April 17, 2024 completed repricing of $630 million Term Loan due in January 2028 (“Term Loan”) resulting in a lower interest rate
• On April 22, 2024 completed disposition of two manufacturing facilities for total consideration of $18.5 million, subject to customary adjustments
• Disposition and repricing transactions help further reduce net debt and interest expense subsequent to the first quarter of 2024

“I’m pleased with our strong start to the year, as we gained dollar, pound, and unit share in the Salty Snacks category in the first quarter. In addition, we delivered our fifth consecutive quarter of year-over-year Adjusted EBITDA Margin expansion, and we drove 27% Adjusted Earnings per Share growth,” said Howard Friedman, Chief Executive Officer of Utz. “As we continue to execute our supply chain transformation strategy, our recent plant dispositions will allow us to focus on the next phase of our optimization efforts as we invest in our remaining facilities and continue to deliver on our value creation initiatives. We are on track to deliver our 2024 outlook and remain confident in delivering the 2026 targets that we introduced at our Investor Day in December.”

(1) All comparisons for the first quarter of 2024 are compared to the first quarter ended April 2, 2023.

First Quarter 2024 Financial Highlights

(1) On an As-Converted Basis
See the description of the Non-GAAP financial measures used in this press release and reconciliations of such Non-GAAP measures to the most comparable GAAP measures in the tables that accompany this press release.

First Quarter 2024 Results

First quarter net sales were $346.5 million compared to $351.4 million in the prior year period. The divestiture of the R.W. Garcia® and Good Health® brands impacted net sales growth by (2.5%), and the Company’s continued shift to independent operators (“IOs”) and the resulting increase in sales discounts impacted net sales growth by an estimated (0.4%). Organic Net Sales increased 1.5% led by increased volume/mix of 1.1% driven by strong growth of the Company’s Power Brands, and net price realization of 0.4%.

For the 13-week period ended March 31, 2024, the Company’s retail sales, as measured by Circana MULO-C, increased 4.1% versus the prior-year period led by volume growth of 4.6%. The Company’s total Power Brands’ retail sales increased 4.9% versus the prior-year period⁽¹⁾ and the Company’s Power Four Brands of Utz®, On The Border®, Zapp’s® and Boulder Canyon® increased 6.0%.

(1) Circana Total US MULO-C, custom Utz Brands hierarchy, on a pro forma basis.

Gross profit margin was 34.5% compared to 29.7% in the prior year period. Adjusted Gross Profit Margin was 37.2% compared to 34.4% in the prior year period as the benefits from productivity, favorable sales mix, and pricing, more than offset supply chain cost inflation and investments to support the Company’s productivity initiatives. The continued shift to IOs impacted Adjusted Gross Profit Margin by approximately 40 basis points, but with offsetting benefits in Selling, Distribution, and Administrative (“SD&A”) expense.

SD&A expenses increased 3.1% compared to the prior year period. Adjusted SD&A Expense increased 6.0% compared to the prior year period primarily due to increased marketing spend, higher distribution costs, and investments in capabilities. These expenses were partially offset by a reduction in selling costs from the shift to IO’s and productivity benefits.

The Company reported net income of $2.4 million compared to a net loss of $(14.5) million in the prior year period. Adjusted Net Income in the quarter increased 38.7% to $20.8 million compared to $15.0 million in the prior year period. Adjusted Earnings per Share increased 27.3% to $0.14 compared to $0.11 in the prior year period. The Adjusted Earnings per Share growth in the first quarter was the result of operating earnings growth, lower core depreciation and amortization expense, and lower interest expense.

Adjusted EBITDA increased 7.4% to $43.4 million, or 12.5% as a percentage of net sales, compared to Adjusted EBITDA of $40.4 million, or 11.5% as a percentage of net sales, in the prior year period. The Adjusted EBITDA margin improvement was driven by Adjusted Gross Margin expansion primarily due to the Company’s productivity programs and lower commodity costs.

Balance Sheet and Cash Flow Highlights

• As of March 31, 2024
  • Total liquidity of $198.9 million, consisting of cash on hand of $47.0 million and $151.9 million available under the Company’s revolving credit facility.
  • Net debt of $728.0 million resulting in a Net Leverage Ratio of 3.8x based on trailing twelve months Normalized Adjusted EBITDA of $190.1 million.
  • Subsequent to quarter-end, the Company:
    • Used ~$9.0 million in net proceeds from its most recent dispositions to pay down long-term debt and put ~$5.0 million on the balance sheet resulting in a ~$14.0 million reduction of net debt.
    • Completed a repricing of its $630 million Term Loan which reduced the applicable interest rate on the Term Loan by approximately 36 bps (assuming one-month SOFR) from Term SOFR plus a credit spread adjustment plus 3.00% to Term SOFR plus 2.75%.
    • The Company estimates that the combination of the ~$9.0 million debt paydown and the repricing of the Term Loam will result in cash interest expense savings of ~$3.0 million annually.
• For the thirteen weeks ended March 31, 2024
  • Cash flow used in operations was $(9.1) million, which reflects the seasonal use of working capital.
  • Capital expenditures were $13.6 million, and dividend and distributions paid were $8.0 million.

Fiscal Year 2024 Outlook

The Company is reaffirming its outlook for Organic Net Sales and Adjusted EBITDA growth, and raising its outlook for Adjusted Earnings per Share growth.

• Organic Net Sales growth of ~3% or better driven by volume growth, and assumes net sales to be impacted by ~$45 million due to the sale of the Good Health® and R.W. Garcia® brands.
• Adjusted EBITDA growth of 5% to 8% and assumes the estimated impact of the forgone contribution to Adjusted EBITDA from the brand dispositions are mostly offset by accelerated cost savings and the transition services agreement.
• Adjusted EPS growth of 23% to 28% (previously 16% to 21%); the improved growth expectation in 2024 is the result of a more favorable effective tax rate, lower interest expense after factoring in the use of net proceeds to pay down long term debt from the April 2024 manufacturing plant dispositions, and the favorable repricing of the Company’s Term Loan.

The Company also expects:

• An effective tax rate (normalized GAAP basis tax expense, which excludes one-time items) in the range of 18% to 20% (previously 19% to 21%);
• Interest expense of ~$47 million (previously ~$50 million);
• Capital expenditures in the range of $80 to $90 million (unchanged); and
• Net Leverage Ratio of ~3.6x (unchanged) at year-end fiscal 2024.

With respect to projected fiscal 2024 Organic Net Sales, Adjusted EBITDA and Adjusted Earnings Per Share, a quantitative reconciliation is not available without unreasonable efforts due to the high variability, complexity, and low visibility with respect to certain items which are excluded from Organic Net Sales, Adjusted EBITDA and Adjusted Earnings Per Share, respectively. We expect the variability of these items to have a potentially unpredictable, and potentially significant, impact on our future financial results.

About Utz Brands, Inc.

Utz Brands, Inc. (NYSE: UTZ) manufactures a diverse portfolio of savory snacks through popular brands, including Utz®, On The Border® Chips & Dips, Zapp’s®, and Boulder Canyon®, among others.

After a century with a strong family heritage, Utz continues to have a passion for exciting and delighting consumers with delicious snack foods made from top-quality ingredients. Utz’s products are distributed nationally through grocery, mass merchandisers, club, convenience, drug, and other channels. Based in Hanover, Pennsylvania, Utz has multiple manufacturing facilities located across the U.S. to serve our growing customer base. For more information, please visit the company’s website or call 1‐800‐FOR‐SNAX.

Investors and others should note that Utz announces material financial information to its investors using its investor relations website, U.S. Securities and Exchange Commission (the “Commission”) filings, press releases, public conference calls, and webcasts. Utz uses these channels, as well as social media, to communicate with our stockholders and the public about the Company, the Company’s products and other Company information. It is possible that the information that Utz posts on social media could be deemed to be material information. Therefore, Utz encourages investors, the media, and others interested in the Company to review the information posted on the social media channels listed on Utz’s investor relations website.