Utz Brands(US:UTZ)2023-11-09 19:25Financial Data and Key Metrics Changes - The company reported organic net sales growth of 3% and adjusted EBITDA growth of 9% in the third quarter [127][142] - Adjusted EBITDA margins expanded to 14%, the highest level in two years, driven by productivity programs and pricing strategies [142][150] - Adjusted net income increased by 9.5% and adjusted EPS rose by 9.2% to $0.17 per share [151] Business Line Data and Key Metrics Changes - Power Brands grew by 5%, with notable contributions from Utz Potato Chips, On the Border, Zappâs, and Boulder Canyon [127] - Foundation brands experienced a decline, particularly Golden Flake, which was impacted by supply chain disruptions and SKU rationalization efforts [128][135] - The company expects to see brand volume growth of nearly 3% when adjusted for SKU rationalization impacts [156] Market Data and Key Metrics Changes - The Salty Snack category growth is normalizing, with the company seeing a 6.5% increase in the potato chip segment, while its growth was slightly lower [82] - The company is experiencing channel shifts as consumers increasingly seek value, impacting sales across various segments [132][136] Company Strategy and Development Direction - The company is focused on optimizing its supply chain and portfolio, including reducing its plant network from 17 to 13 and insourcing volume from co-manufacturers [134][135] - There is a strong emphasis on expanding distribution in geographic areas such as the Midwest and Florida, as well as targeting unmeasured channels like dollar stores and discounters [90][91] - The company aims to enhance its marketing efforts for brands like Zappâs to capture more market share [44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the core markets but expressed optimism about the performance of Power Brands and expansion geographies [117][118] - The company is confident in its ability to navigate supply chain optimization without significant market share loss, supported by a robust expansion strategy [60] - Management highlighted the importance of household penetration as a key indicator of long-term success, with positive trends observed [141] Other Important Information - The company revised its organic net sales outlook to 3% to 4% growth, reflecting normalizing category trends and the impact of supply chain actions [155] - Adjusted gross margins expanded year-over-year by 40 basis points, driven by pricing and productivity programs [147] Q&A Session Summary Question: Can you elaborate on the supply chain optimization lessons learned? - Management noted the importance of understanding inventory safety stock levels and the need for trusted co-man partners for redundancy [137] Question: What is the impact of channel shifts on sales? - Management indicated that channel shifts are a smaller impact on overall business but represent an opportunity for growth in unmeasured channels [22] Question: How is the competitive environment characterized? - Management described the competitive environment as rational, with no significant changes in pricing or behavior observed [33] Question: What are the drivers behind Boulder Canyon's growth? - Management attributed Boulder Canyon's growth to consumer trends towards healthier options and strong acceptance in natural channels [40] Question: What is the status of SKU rationalization? - Management confirmed that SKU rationalization is nearing completion and will not materially impact results going forward [144][155]