Utz Brands(UTZ) - 2025 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company spent $100 million on capital expenditures (CapEx) last year and expects to spend a similar amount this year, indicating a significant investment cycle [5][6] - The company is guiding for EBITDA to grow at a mid-teens level year-over-year in the second half, which would represent nearly 200 basis points of year-over-year EBITDA margin expansion [45][46] - Net leverage ticked up to 4.1 times this quarter, but the company maintains its expectation for net leverage to approach three times by fiscal year-end [52] Business Line Data and Key Metrics Changes - Boulder Canyon has been a significant contributor to top-line sales, surpassing the initial target of $100 million and expected to reach closer to $200 million by year-end [18][23] - The productivity program is expected to normalize around 3% to 4% in the future, with current savings at 6% of cost of goods sold (COGS) [8][12] Market Data and Key Metrics Changes - Distribution gains in core markets have been around 10%, while expansion geographies have seen gains of approximately 18% [20] - The company has experienced both value and volume market share gains in core markets for the first time in several quarters [31][32] Company Strategy and Development Direction - The company is focused on supply chain transformation and capital investments to drive productivity and efficiency [4][5] - There is a commitment to maintain a strong brand presence and invest in marketing and innovation, with a target of reaching 3% to 4% of sales in advertising and consumer spending over time [48][50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the salty snack category, noting that household penetration continues to grow, indicating consumer demand [38] - The competitive environment has been rational, with no unusual activity from competitors, which is seen as a positive for the company [36] Other Important Information - The company has been active in the M&A market but has slowed down due to a focus on debt paydown, with a high hurdle for any potential acquisitions [58][60] - The company is seeing improvements in the convenience store channel, which had previously been slower than desired [65] Q&A Session Summary Question: What drove the organic sales growth outlook increase? - The company raised its outlook for organic sales growth due to strong distribution gains and the performance of Boulder Canyon, expecting a good year despite a dynamic competitive environment [42][43] Question: What are the key drivers for EBITDA margin expansion in the second half? - Key drivers include productivity gains from CapEx investments and a discrete item related to the Grand Rapids facility closure, contributing to a strong EBITDA close for the year [45][46] Question: How is the company addressing the slower performance in the convenience channel? - The company acknowledges past assortment management choices that affected performance but is now seeing distribution gains and expects to be around flattish before the end of the year [65]