HANOVER, Pa.–(BUSINESS WIRE)–Utz Brands, Inc. (NYSE: UTZ), a leading U.S. manufacturer of branded Salty Snacks and a small-cap value Staples equity, today reported financial results for the Company’s fiscal third quarter ended September 29, 2024.
3Q’24 Summary(1)
- Net Sales of $365.5 million
- Organic Net Sales increased 1.9%
- Gross Profit Margin expansion of 370bps
- Adjusted Gross Profit Margin expansion of 270bps
- Net Income of $0.8 million
- Adjusted EBITDA increased 3.6% to $54.0 million
- Diluted loss per share of $(0.03)
- Adjusted Earnings Per Share increased 23.5% to $0.21
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(1) All comparisons for the third quarter of 2024 are compared to the third quarter ended October 1, 2023. |
“In the third quarter our momentum continued with solid Organic Net Sales growth, our seventh consecutive quarter of Adjusted EBITDA Margin expansion, and Adjusted Earnings Per Share growth of nearly 24%,” said Howard Friedman, Chief Executive Officer of Utz. “We are executing well on our distribution growth opportunities, and we believe our accelerated productivity cost savings will give us the flexibility to expand our margins and increase investments in our brands to support our continued growth. While we continue to expect a more competitive promotional environment in response to consumers seeking value, we will continue to make appropriate adjustments to our activities to meet consumer expectations. We are on track to meet our full-year financial targets, and we look forward to a strong finish to the year.”
Third Quarter 2024 Results
Third quarter net sales of $365.5 million compared to $371.9 million in the prior year period. The divestiture of the R.W. Garcia® and Good Health® brands impacted net sales by (3.6%). Organic Net Sales increased by 1.9% led by favorable volume/mix of 2.4% driven by strong growth of the Company’s Power Brands, partially offset by lower net price realization of (0.5%).
For the 13-week period ended September 29, 2024, the Company’s retail sales, as measured by Circana MULO-C, decreased by 1.3% versus the prior-year period. The Company’s total Power Brands’ retail sales decreased by 1.2% versus the prior-year period and the Company’s Power Four Brands of Utz®, On The Border®, Zapp’s® and Boulder Canyon® decreased by 0.6%. Utz’s retail sales trends were primarily impacted by a more competitive promotional environment in potato chips, and also softness in the convenience store channel. Despite this, the Company’s retail volumes increased by 0.4% compared to a 0.2% decline for the Salty Snack category. Further, Utz’s Organic Net Sales growth outpaced retail sales growth driven primarily by solid performance in non-measured channels and planned strong seasonal shipments to support incremental merchandising events compared to the prior year.
Gross profit margin of 35.8% expanded 370bps compared to 32.1% in the prior year period. Adjusted Gross Profit Margin of 39.0% expanded 270bps compared to 36.3% in the prior year period. These increases were driven by benefits from productivity and favorable sales volume/mix, which more than offset supply chain cost inflation, investments to support the Company’s productivity initiatives, and disciplined promotional investments.
SD&A expenses were $110.0 million, compared to $105.5 million in the prior year period. Adjusted SD&A Expenses were $88.7 million compared to $83.0 million in the prior year period, primarily due to increased marketing spend, higher distribution costs, and investments in selling capabilities to support distribution growth in Expansion geographies. These expenses were partially offset by productivity benefits related to logistics costs included in distribution.
The Company reported net income of $0.8 million compared to net income of $16.2 million in the prior year period. The change in net income was primarily due to an increase in the loss on the remeasurement of the warrant liability of $22.4 million. Adjusted Net Income in the quarter increased 20.3% to $29.6 million compared to $24.6 million in the prior year period. Adjusted Earnings Per Share increased 23.5% to $0.21 compared to $0.17 in the prior year period. The Adjusted Earnings Per Share growth in the third quarter was the result of operating earnings growth, lower Core Depreciation and Amortization Expense, and lower interest expense as a result of increased long-term debt repayment.
Adjusted EBITDA increased 3.6% to $54.0 million, or 14.8% as a percentage of net sales, compared to $52.1 million, or 14.0% 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.
Balance Sheet and Cash Flow Highlights
- As of September 29, 2024
- Total liquidity of $223.7 million, consisting of cash on hand of $64.9 million and $158.8 million available under the Company’s revolving credit facility.
- Net debt of $731.5 million resulting in a Net Leverage Ratio of 3.7x based on trailing twelve months Normalized Adjusted EBITDA of $196.5 million.
- For the thirty-nine weeks ended September 29, 2024
- Cash flow provided by operations was $52.0 million, which reflects strong working capital performance in the third quarter. In addition, cash flow from operations also includes an approximately $30 million negative impact from the sale of Good Health® and R.W. Garcia®, and the manufacturing facilities.
- Capital expenditures were $60.9 million, and dividends and distributions paid were $30.8 million.
Fiscal Year 2024 Outlook
- The Company is reaffirming its outlook for Organic Net Sales growth of 2%-2.5%. The Company continues to expect Organic Net Sales growth driven by volume growth that will be fueled by increased marketing investments, product innovation, already achieved distribution gains, and a more favorable fourth quarter growth comparison. The Company’s outlook also assumes net sales will be impacted by approximately $45 million due to the sale of the Good Health® and R.W. Garcia® brands.
- The Company is reaffirming its outlook for Adjusted EBITDA growth of 5%-8% and assumes the estimated impact of the forgone profit contribution from the brands divested in February 2024 are mostly offset by accelerated cost savings and the transition services agreement.
- The Company is reaffirming its outlook for Adjusted Earnings per Share growth of 28%-32%. The Company continues to expect growth driven by increased operating earnings, a more favorable effective tax rate, and lower core depreciation and amortization expense resulting from the Company’s plant divestitures in April 2024.
The Company also expects:
- An effective tax rate (normalized GAAP basis tax expense, which excludes one-time items) in the range of 17%-19% (unchanged);
- Interest expense of approximately $47 million (unchanged);
- Capital expenditures in the range of $80-$90 million (unchanged); and
- Net Leverage Ratio of approximately 3.6x (unchanged) at year-end fiscal 2024.
Quantitative reconciliations are not available for the forward-looking non-GAAP financial measures used herein 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, Net Leverage Ratio, normalized GAAP basis tax expense, excluding one-time items, 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.
