HANOVER, Pa.–(BUSINESS WIRE)–Utz Brands, Inc. (NYSE: UTZ), a leading U.S. manufacturer of branded salty snacks, today reported financial results for the fourth quarter and full-year ended December 31, 2023.
4Q’23 Summary:
- Net sales decreased (0.7)% year-over-year to $352.1 million.
- Organic Net Sales decreased (0.3)% year-over-year.
- Net loss of $(33.2) million vs. net income of $13.8 million in the year-ago period.
- Adjusted EBITDA increased 12.0% year-over-year to $49.4 million.
FY’23 Summary:
- Net sales increased 2.1% year-over-year to $1,438.2 million.
- Organic Net Sales increased 2.8% year-over-year.
- Net loss of $(40.0) million vs. net loss of $(14.0) million in the year-ago period.
- Adjusted EBITDA increased 9.8% year-over-year to $187.2 million.
Recent Development:
- Completed dispositions on February 5, 2024: Good Health® and RW Garcia® brands, certain related assets, and three manufacturing facilities.
- After-tax net proceeds of ~$150 million immediately used to pay down variable rate long term debt and reduce leverage.
“In 2023 we evolved through capacity, distribution and capability investments that position Utz to capture its full potential. In a dynamic environment, I am proud of our continued progress on building Utz into a pure-play U.S. snacking company of scale with an advantaged brand portfolio in the attractive Salty Snacks category,” said Howard Friedman, Chief Executive Officer. “As we begin 2024, we have hit the ground running, and closed our recently announced brand and manufacturing plant dispositions which fast-tracks our deleveraging timeline, accelerates our supply chain transformation, and increases focus in our brand portfolio. We have compelling long-term growth opportunities, and our 2024 outlook begins our runway to deliver the 2026 targets that we discussed at our Investor Day in December.”
Fourth Quarter and Full Year 2023 Financial Highlights
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13-Weeks Ended |
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52-Weeks Ended |
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(in $millions, except per share amounts) |
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December 31, |
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January 1, |
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% Change |
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December 31, |
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January 1, |
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% Change |
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Net Sales |
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$ |
352.1 |
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$ |
354.7 |
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(0.7 |
)% |
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$ |
1,438.2 |
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$ |
1,408.4 |
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2.1 |
% |
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Organic Net Sales |
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353.7 |
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354.7 |
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(0.3 |
)% |
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1,447.4 |
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1,408.4 |
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2.8 |
% |
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Gross Profit |
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115.3 |
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115.4 |
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(0.1 |
)% |
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456.5 |
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449.1 |
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1.6 |
% |
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Gross Profit Margin |
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32.8 |
% |
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32.5 |
% |
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25 bps |
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31.7 |
% |
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31.9 |
% |
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(15) bps |
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Adjusted Gross Profit |
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130.6 |
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129.7 |
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0.7 |
% |
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513.6 |
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504.1 |
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1.9 |
% |
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Adjusted Gross Profit Margin |
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37.1 |
% |
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36.6 |
% |
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52 bps |
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35.7 |
% |
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35.8 |
% |
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(8) bps |
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Net (Loss) Income |
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(33.2 |
) |
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13.8 |
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nm |
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(40.0 |
) |
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(14.0 |
) |
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nm |
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Net Income Margin |
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(9.4 |
)% |
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3.9 |
% |
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nm |
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(2.8 |
)% |
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(1.0 |
)% |
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nm |
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Adjusted Net Income |
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22.9 |
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21.5 |
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6.5 |
% |
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81.3 |
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77.7 |
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4.6 |
% |
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Adjusted EBITDA |
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49.4 |
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44.1 |
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12.0 |
% |
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187.2 |
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170.5 |
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9.8 |
% |
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Adjusted EBITDA Margin |
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14.0 |
% |
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12.4 |
% |
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160 bps |
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13.0 |
% |
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12.1 |
% |
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91 bps |
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Basic (Loss) Earnings Per Share(1) |
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$ |
(0.34 |
) |
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$ |
0.18 |
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nm |
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$ |
(0.31 |
) |
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$ |
— |
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nm |
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Adjusted Earnings Per Diluted Share(1) |
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$ |
0.16 |
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$ |
0.15 |
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6.7 |
% |
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$ |
0.57 |
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$ |
0.55 |
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3.6 |
% |
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(1) On an As-Converted Basis |
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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. |
Fourth Quarter 2023 Results
Total net sales in the quarter decreased (0.7)% to $352.1 million compared to $354.7 million in the prior year period. The decrease in net sales was partially driven by the Company’s continued shift to independent operators (“IOs”) and the resulting increase in sales discounts which the Company estimates impacted net sales growth by (0.4%).
Organic Net Sales decreased (0.3)% from lower net price realization of (0.8%) primarily due to lapping +17% price realization in 4Q’22, and certain adjustments to price pack architecture. Pricing was partially offset by increased volume/mix of 0.5% driven by strong growth of the Company’s Power Brands, while also being adversely impacted from earlier than planned holiday shipments in the third quarter of 2023. In addition, volume performance was adversely impacted by the Company’s ongoing SKU rationalization program reducing private label and partner brands to increase focus on our Power Brands. The Company estimates this SKU rationalization program impacted volumes in the fourth quarter of 2023 by approximately (2.5%). Excluding the impact from SKU rationalization, the Company estimates that volume/mix would have increased 3.0% in the fourth quarter of 2023 versus the prior year period.
For the 13-week period ended December 31, 2023, the Company’s retail sales, as measured by Circana MULO-C, increased 4.1% versus the prior-year period led by volume growth of 4.3%. The Company’s Power Brands’ retail sales increased 5.3% versus the prior-year period(1) and was led by Utz®, On The Border®, Boulder Canyon®, and Golden Flake® Pork. The Company’s Foundation Brands’ retail sales decreased (4.2%)(2) versus the prior year period.
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(1) |
Circana Total US MULO-C, custom Utz Brands hierarchy, on a pro forma basis. |
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(2) |
Circana does not include certain Partner Brands and Private Label sales that are not assigned to Utz Brands. |
Gross profit margin was 32.8% compared to 32.5% in the prior year period. Adjusted Gross Margin was 37.1% compared to 36.6% in the prior year period. The benefits from productivity and favorable sales mix more than offset lower net price realization, cost inflation and supply chain investments. However, the continued shift to IOs impacted Adjusted Gross Profit Margin as expected by approximately 40 basis points, but with offsetting benefits in Selling, Distribution, and Administrative (“SD&A”) expense.
SD&A expenses decreased (0.6)% compared to the prior year period. Adjusted SD&A Expense decreased (5.1)% compared to the prior year period primarily due to a reduction in selling costs from the shift to IO’s, lower administrative expenses, and productivity benefits. These factors were partially offset by continued investments in brand marketing, selling infrastructure and people, systems, and supply chain capabilities to support growth.
The Company reported a net loss of $(33.2) million compared to net income of $13.8 million in the prior year period. The decrease in net income compared to the prior year was primarily due to income tax expense of $(14.2) million in the current period versus an income tax benefit of $22.2 million in the prior year. In addition, the decrease in net income was driven by a $(14.4) million loss from the remeasurement of private placement warrant liability in the fourth quarter of 2023 versus a loss of $(3.3) million in the prior year period and interest expense of $(15.7) million in the current period compared to $(12.9) million in the prior year period. The increase in interest expense is primarily attributable to higher interest rates on the portion of the Company’s floating rate debt.
Adjusted Net Income in the quarter increased 6.5% to $22.9 million compared to $21.5 million in the prior year period. Adjusted Earnings per Share increased 6.7% to $0.16 compared to $0.15 in the prior year period. Adjusted EBITDA increased 12.0% to $49.4 million, or 14.0% as a percentage of net sales, compared to Adjusted EBITDA of $44.1 million, or 12.4% as a percentage of net sales, in the prior year period.
Balance Sheet and Cash Flow Highlights
- As of December 31, 2023
- Total liquidity of $210.4 million, consisting of cash on hand of $52.0 million and $158.4 million available under the Company’s revolving credit facility.
- Net debt of $866.7 million resulting in a Net Leverage Ratio of 4.6x based on trailing twelve months Normalized Adjusted EBITDA of $187.2 million.
- Subsequent to year-end, the Company used the ~$150 million in net proceeds from its recent dispositions (as described earlier) to pay down long term debt and reduce leverage.
- For the 52-weeks ended December 31, 2023
- Cash flow from operations was $76.6 million, which reflects strong working capital improvement in the second half of fiscal 2023.
- Capital expenditures were $55.7 million, and dividend and distributions paid were $32.1 million.
Fiscal Year 2024 Outlook
In fiscal 2024, the Company expects:
- Organic Net Sales growth of ~3% or better driven by volume growth, and assumes total net sales to be impacted by ~$45 million due to the recently closed transaction for the dispositions of the Good Health® and R.W. Garcia® brands and manufacturing facilities.
- 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 16% to 21% driven by stronger operating performance and earnings accretion from the dispositions after factoring in the use of net proceeds to pay down long term debt.
The Company also expects:
- An effective tax rate (normalized GAAP basis tax expense, which excludes one-time items) in the range of 19% to 21%;
- Interest expense of ~$50 million;
- Capital expenditures in the range of $80 to $90 million; and
- Net Leverage Ratio of ~3.6x at year-end fiscal 2024.
With respect to projected fiscal 2024 Adjusted EBITDA, 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 Adjusted EBITDA. 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
