Utz Brands(UTZ) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2025, organic net sales grew by 2.4%, while branded salty organic net sales increased by 4.7%, contrasting with a 0.5% decline in the category's retail sales dollars [3][4] - Adjusted EBITDA margin expanded by 260 basis points to 18.2%, with productivity savings contributing 620 basis points to this expansion [21][22] - Adjusted earnings per share rose by 18.2%, reflecting strong margin performance and productivity initiatives [21][30] Business Line Data and Key Metrics Changes - In the fourth quarter, branded salty snacks organic net sales grew by 2.5%, driven by a volume mix growth of 2.1% [20][9] - Non-branded and non-salty snacks experienced a decline of 14.8%, attributed to headwinds faced in the branded salty segment [20] - The Power Four Brands achieved a 5.3% increase in retail sales dollars, driven by a 3.8% price per pound growth [12] Market Data and Key Metrics Changes - Retail sales in core geographies increased by 0.5%, with Power Four Brands leading at 1.8% compared to the total salty category's 1.1% growth [13] - Expansion geographies saw a retail sales growth of 7.3%, significantly outpacing the salty snacks category growth of 1.1% [14] - The average market share in expansion geographies is 3.2%, compared to 6.7% in core markets, indicating substantial growth potential [15] Company Strategy and Development Direction - The company plans to continue increasing marketing spending to support brand growth, with a 35% increase in 2025 on top of a nearly 70% increase in 2024 [5][18] - Expansion into the California market is seen as a key growth differentiator, with shipments expected to begin shortly [6] - The company aims to deliver consistent and predictable Adjusted EBITDA growth while focusing on free cash flow generation for deleveraging and capital allocation flexibility [25][37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds in the fourth quarter but emphasized substantial progress on long-term strategies during 2025 [3] - The company remains cautiously optimistic about the category environment, expecting organic net sales growth of 2%-3% for 2026 [26] - Management highlighted the importance of productivity initiatives and revenue management strategies to achieve growth targets [10][28] Other Important Information - The company plans to introduce new reconciliation tables of GAAP to non-GAAP in the first quarter of 2026 to enhance transparency regarding supply chain and corporate transformation costs [33] - Adjusted free cash flow is expected to be between $60 million and $80 million in 2026, representing about 70% conversion of expected adjusted net income [34] Q&A Session Summary Question: What are the expectations for organic net sales growth in 2026? - The company expects organic net sales growth of 2%-3%, assuming a flat category at the midpoint [26] Question: How will the company manage its capital expenditures moving forward? - Capital expenditures are expected to decline from $102.8 million in 2025 to a range of $60-$65 million in 2026, reflecting a more normal cadence [32] Question: What is the outlook for adjusted EPS in 2026? - Adjusted EPS is expected to decline between 3% and 6% due to higher depreciation, interest expense, and a modestly higher tax rate [30]