Thank you for joining us. My name is Pam, and I will be your operator for today's conference. I would like to welcome everyone to the Utz Brands First Quarter 2024 Earnings Call. I will now hand the call over to Kevin Powers, Head of Investor Relations. You may begin.

Good morning, and thank you for joining us today. On the call today are Howard Friedman, CEO, Ajay Kataria, CFO; and Cary Devore, COO and Chief Transformation Officer. Howard and Ajay will make prepared comments this morning and all three will be available to answer questions during our live Q&A session. Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Please see our recent SEC filings, which identify their principal risks and uncertainties that could affect future performance. Before I turn the call over to Howard, I just have a few housekeeping items to review. Today, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials posted on our website. Finally, the company has also prepared presentation slides and additional supplemental financial information, which are posted on our Investor Relations website. And now I'd like to turn the call over to Howard.

Thank you, Kevin, and good morning, everyone. Starting off with a few key takeaways. I'm pleased with our good start to the year. And for the second straight quarter, we gained dollar, pound, and unit share in the salty snacks category led by several of our consumer-loved Power Four brands to include On the Border and Boulder Canyon. In addition, productivity programs across our organization continued to build momentum, and we delivered our fifth consecutive quarter of adjusted EBITDA margin expansion as well as 27% adjusted earnings per share growth. To continue building our momentum in April, we opportunistically accelerated our network optimization strategy by disposing of two additional manufacturing plants. These follow the three dispositions announced back in February. Importantly, our former associates at those plants are being offered full employment, and we thank them for their hard work and dedication over the years and wish them the best moving ahead. Bringing it all together, given our first quarter results and confidence in the remainder of the year, this morning, we reaffirmed our organic net sales and adjusted EBITDA outlook and raised our adjusted EPS outlook. We are on track to deliver a strong 2024 as well as the 2026 targets introduced at our Investor Day back in December. Our four fundamental strategies underpin our efforts, and we've made good progress across each of these strategies this year, positioning us well to hit our goals and build momentum for the next three years. To quickly review our progress, our first fundamental strategy is focusing our portfolio to further penetrate our expansion geographies while holding the core. In the quarter, we gained retail sales market share for the 13-week period ended March 31 that includes share gains in both our core and expansion geographies led by continued distribution gains and increases in household penetration. While our salty snack measured channel performance was strong in the quarter, our sales trends in unmeasured areas of the portfolio did not keep the same pace. Part of this is intentional as we optimize our sales mix and investment to focus on our more profitable Power brands, while other areas require better execution. These include improving the performance of dips and sauces and our small format channel, where we have the opportunity to strengthen our price pack architecture in a couple of key brands as consumers remain value-seeking in this environment. Moreover, we continue to do portfolio shaping in our foundation brands that impact these channels, and we expect that these areas will collectively improve throughout the year. Our second fundamental strategy is transforming our supply chain to fund growth and margin improvement. We are making good progress on our productivity programs, which is reflected in our adjusted gross margin expansion in the quarter of nearly 300 basis points, and our five plant dispositions are accelerating our network optimization strategy, which is enabling us to increase investment in our more scale plants. Our third fundamental strategy is developing leading capabilities to build a best-in-class organization. We are in the process of fully implementing our integrated business planning system and building out our consumer and sales analytics, as well as continuing to make progress on our marketing and innovation capabilities. I'm excited to see the impact we can make in market as we increase our investments behind both our new product lineup and two of our Power Four brands in the second quarter. Our fourth fundamental strategy is improving balance sheet flexibility and pursuing opportunistic M&A. As I mentioned earlier, we have disposed of five manufacturing plants and two brands with the proceeds going to reduce debt and accelerate our leverage reduction timeline. In addition, our transformation efforts across the company are collectively improving our cash conversion cycle. Before turning the call over to Ajay to discuss our financials in more detail, I'll take a few minutes to review our consumption trends in the quarter. Our retail consumption increased 4.1%, fueled by strong branded volume growth of 4.6%, which ranked first among our branded salty snack peers. Our consumption growth was again led by Power brand growth of 4.9%. And within our Power brand portfolio, our Power Four brands increased 6%, which was nearly 4x the category growth of 1.4%. From a salty snack subcategory perspective, our growth was led by significant outperformance in our tortilla chips and cheese snacks. Tortilla chips growth was led by On the Border consumption growth of 15%, resulting in a 0.5-point share gain, fueled by strong growth in both traditional grocery and mass channels. Our rebound in cheese snacks continued in the quarter, led by share gains for iconic cheese balls with strong growth in mass and the club channels. Within potato chips, our consumption was basically in line with the subcategory driven by share gains for us and Boulder Canyon brands, led by continued distribution gains. Our Zapp's trends remained below the category given softness in the C-store channel, but we are actively making price pack architecture improvements and regaining distribution. Finally, consistent with our expectations, our pretzels trends were below category given we are lapping our Zapp's flavored pretzel sell-in in the previous year. These trends will begin to normalize as we get into the latter part of the year. From a geography standpoint, we gained share in both our core and expansion geographies for our total portfolio, our Power brands and our Power Four brands. Growth was most pronounced in our expansion geographies with growth of 8%, fueled by continued distribution gains, which easily exceeded category growth of 1.7%. Share gains across geographies were led by On the Border and Boulder Canyon with continued share gains in expansion for our US brand as well. Moving to our better-for-you portfolio of salty snacks, our consumption in the natural channel continues to grow and dollar sales were up 21.9% compared to 3.9% for the salty snack category over the last 12 weeks ending March 24. Our leading Better-For-You brand in the natural channel continues to be Boulder Canyon, accounting for three-quarters of our sales in the channel and the largest driver of growth, up 31.3%, which is 8x the rate of total salty snacks growth. Boulder Canyon has now delivered 31 consecutive periods of double-digit growth in spins and is the #2 potato-chip brand in the natural channel with our avocado oil chip now ranked #1 in terms of dollar sales. Looking ahead to the rest of the year, from a portfolio standpoint, our focus will remain on driving outsized investment and focus on our Power Four brands, On the Border, Zapp's, and Boulder Canyon. This will be seen in terms of advertising and consumer spend, innovation, and overall marketing capabilities. This year, we are amplifying our innovation to focus on bigger launches. We are focused on delivering craveable flavors, and we're introducing a new limited time offering of Mike's Hot Honey extra hot potato chips this summer. Hot & Spicy is the #1 flavor in salty snacks at $7.5 billion and growing nearly 2x the category rate. In addition, we launched our Zapp's mix Minis in three flavors in the strong flavored pretzel segment, which makes up half the pretzel subcategory and is posting 12% growth, which is 4x the unflavored segment. In addition, our innovation this year will center around capturing occasions and expanding positive choices. As consumers continue to snack across occasions, we plan to be there with a proven strategy around seasonal and multipack innovation to include our new On the Border Red White and Blue café style tortilla chips and our new Zapp's Voodoo Halloween multipack. And as consumers continue to look for no compromise snacks with bold flavors in our flagship Better-For-You brand Boulder Canyon, we are moving our Spicy Green Chile from a limited time offer to an everyday flavor. In addition, we have moved beyond potato chips and launched our Boulder Canyon Poppers, which is a better-for-you cheese snack made in avocado oil. We launched in White Cheddar and Hawaiian Ranch flavors, and the early consumer feedback has been great. Finally, we have begun to invest behind marketing after a year of capability building. We started with increased investments behind e-commerce and retail media. And next quarter, we will be introducing campaigns for Zapp's and Utz. While it is still early in the year, the increased confidence we have in our gross margin delivery, our early marketing returns, both financially and from a consumer response, and our ample investment opportunities, we are now planning to increase investment behind our brands this year beyond the 40% that was originally assumed in our outlook. This is consistent with our belief that we make money before we spend money, and we build our businesses overnight and our brands over time. I'm very optimistic we will be able to do both. Now, I'd like to turn the call over to Ajay. Ajay?

Thank you, Howard, and good morning, everyone. I will start by congratulating all our associates for delivering a strong start to the year. As Howard mentioned in his remarks, thanks to our team's efforts in the first quarter, we are well on our way to delivering our 2024 commitments, as well as our 2026 targets introduced at our Investor Day back in December. In the first quarter, our organic net sales increased 1.5%. Adjusted EBITDA increased 7.4%, and adjusted earnings per share increased 27.3% as our productivity programs and actions to optimize our network and portfolio are delivering stronger profitability. Importantly, our organic net sales growth, combined with these actions resulted in our fifth consecutive quarter of adjusted EBITDA margin expansion as we delivered 12.5% adjusted EBITDA margin in the quarter. During the quarter, our organic net sales performance was led by volume mix growth of 1.1%, driven by our Power Four brands. Pricing increased 40 basis points due to certain price pack architecture adjustments to better position us in the marketplace, as well as price realization in our partner brands. Finally, our total net sales growth was impacted by the conversion of company-owned routes to independent operators, which reduced growth by 40 basis points and the divestiture of the RW Garcia and Good Health brands, which reduced net sales growth by 2.5%. Moving down the P&L. Adjusted gross margin expanded 280 basis points in the first quarter. I will note that our first quarter margin expansion was better than we had originally anticipated with our productivity programs, driven by manufacturing plant and procurement savings, delivering stronger results, which more than offset inflation and supply chain investments to support our growth. Adjusted SG&A expense increased 6% as productivity within selling and logistics was offset as expected by continued investments in e-commerce, as well as selling capabilities that support our expansion into new geographies. To that end, in the quarter, we had higher-than-expected delivery costs given unplanned Boulder Canyon transfer shipments to support significant volume growth in the East. That said, we are now producing Boulder Canyon potato chips in Hanover to support more profitable growth in this area of the country. Finally, our marketing expense increased 40 basis points as a percent of sales, consistent with our strategy as we invest in capabilities and spend to grow our share of voice in the marketplace. Bringing it together, adjusted EBITDA increased 7.4% to $43.4 million, and margins expanded 100 basis points to 12.5% of sales. The margin expansion was driven by 400 basis points of productivity and 40 basis points of price, partially offset by 220 basis points of supply chain costs, 80 basis points from selling and administrative expenses, and 40 basis points from higher marketing expenses. In addition, adjusted net income increased 38.7% and adjusted EPS increased by 27.3% to $0.14 per share. Stronger operating earnings were aided by lower core depreciation and amortization and lower interest expense. Turning to cash flow and the balance sheet. Consistent with normal seasonality, cash flow used in operations was $9.1 million, and capital expenditures were $13.6 million, primarily related to investments in our manufacturing plants. In addition, we paid $8 million in dividends and distributions to shareholders. Finishing with the balance sheet, cash on hand was $47 million, and our liquidity remained strong at nearly $200 million, giving us ample financial flexibility. Net debt at quarter end was $728 million or 3.8x trailing 12 months normalized adjusted EBITDA of $190.1 million. Just to note, this represents an improvement of 1.3 turns versus the end of the first quarter last year. As a reminder, on February 5, we closed the disposition transactions of the Good Health and RW Garcia brands, and three manufacturing facilities. The transaction included a total consideration of $182.5 million, with approximately $150 million in after-tax proceeds, which we immediately used to pay down long-term debt. In addition, after the quarter ended, we closed on the dispositions of two additional manufacturing facilities and used $9 million in net proceeds to pay down long-term debt and put $5 million on the balance sheet. We have also successfully completed a repricing of our $630 million term loan due in January 2028, which reduced the applicable interest rate by 36 basis points. These two debt repayments plus the lower interest rate on our term loan will result in approximately $40 million in lower interest expense for 2024. Notably, our fixed-rate debt now comprises approximately 80% of our total debt. Consistent with our strategy, these actions accelerate our time frame to achieving our target of a 3x net leverage ratio to year-end 2025, which, as you know, is a year ahead of the year-end 2026 targets set at Investor Day in December. Now, turning to our full year outlook for fiscal 2024. Our 2024 outlook continues to position us well to deliver our 2026 financial targets. We are maintaining our organic net sales outlook for growth of approximately 3% or better, which reflects our outlook for normalizing salty snack category growth, and our growth rate accelerating largely led by distribution gains. Our growth is expected to be led by volume with outsized strength in our expansion geographies and pricing about flat for the year. In terms of phasing, we continue to expect about a 49-51 first half, second half split for our net sales. Moving to adjusted EBITDA. We continue to expect growth of 5% to 8%, fueled by gross margin expansion from our productivity program, partially offset by investments in growth. Our first quarter productivity benefit was higher than expected, which gives us confidence in our ability to deliver on our cost savings commitments this year and now expand adjusted gross margins by more than the 200 basis points that were previously assumed in our guidance. That said, we will step up investments in our growth as gross margin expansion comes through to fund investments to support distribution gains, particularly in our expansion geographies, as well as investments in marketing and capability. Our 2024 adjusted EBITDA outlook continues to maintain a balance between productivity savings and investments. Finally, we are raising our adjusted earnings per share growth to 23% to 28%, given our revised expectation for a more favorable effective tax rate, and also lower interest expense after factoring in the use of net proceeds to pay down long-term debt from our April 2024 manufacturing plant disposition, and the favorable repricing of our term loan. We now expect our adjusted effective tax rate to be between 18% to 20%, and interest expense of approximately $47 million. Our outlook for capital investments of between $80 million to $90 million is unchanged, as is our net leverage outlook of approximately 3.6x at fiscal year-end 2024, which I'll note is a full turn improvement from year-end 2023. Our 2024 outlook and improved capital structure and building momentum in our productivity program, as well as capabilities that allow us to invest in growth, position us well to deliver our three-year goals. More importantly, I'm excited to see the entire Utz team working together to deliver on our four fundamental strategies.

Your first question comes from Andrew Lazar with Barclays.

Howard, you mentioned a couple of times, weakness in small format stores and adjustments that need to be made on sort of price pack architecture. I'm trying to get a sense if your value equation in these areas are either out of line with competitors in this specific channel or if it's the overall category that needs some adjustments there. And I guess, given the timing of making these adjustments, is it such that we should continue to expect a gap between scanner data and what you report on an organic sales basis for a couple more quarters, very much like what we saw in the first quarter.

I appreciate the question. One thing I want to highlight is our extensive discussions about the consumer and how we have been navigating the price ladder. Over the last few quarters, we have effectively enhanced our revenue management strategies and aligned our product selection accordingly. This is evident in our cheese balls and pretzels, among other product categories. Regarding small formats, we've specifically made changes by increasing the pack size, which has not aligned with current consumer preferences. As a result, we will adjust back to a lower price point to ensure that value-seeking consumers can find what they need. This is not a widespread issue nor a problem across the entire category. We remain confident in our performance and expect to see the gap narrow as we progress into the second quarter and beyond.

Got it. Okay. And then with a number of key salty snack players mentioning the need to maybe focus a little bit more on value moving forward. Have you seen any, I guess, significant shift in sort of category competitiveness or merchandising activity that maybe you would characterize as either unexpected or irrational? Or I guess that poses any additional risk to your full year outlook? And I guess I'm trying to get a sense of what your full year outlook sort of contemplates with respect to category sort of competitiveness. And I think you mentioned in your prepared remarks, there's an assumption there that the salty snack category sort of growth normalizes, and I didn't know how either reasonable or aggressive that type of assumption might be in the context of your full year guidance.

I appreciate the question. First, I want to say that we feel very positive about how we've begun the year. Our organic net sales have come in slightly better than anticipated. We benefited a bit from pricing, though there were some trade-offs involved. The category we anticipated entering this year has largely developed as we expected. However, we've noticed that the category is becoming more promotional, which is evident quarter over quarter. The good news is that our competition, and the category as a whole, remains rational, especially considering the price points, and is still driven by innovation and brand building. While pricing is important for consumers at those levels, we're generally comfortable with our position and believe this trend will continue. We're closely monitoring price gaps to stay competitive. Additionally, our growth is supported by the strength of our distribution strategy in both our core and expanding geographic areas, where we are seeing consistent and significant increases in our distribution points, helping to mitigate any potential short-term impacts.

Your next question comes from the line of Nik Modi from RBC Capital.

Just two quick questions. Just Howard, maybe you can provide some context on Snap, obviously, a year ago, getting taken away from the consumer, at least the emergency allotment. And you have some states that kind of went off it earlier. So, I was wondering if you had any perspective on some of those leading indicator's states in terms of are you seeing the category trend rate improve to some degree? And then I guess the broader question is retailers are obviously, seeking suppliers who can grow volume right now. And obviously, you have that, and it's very unique in the industry. So, I'm curious in terms of the narration, the narrative you have with retailers, are you getting even more traction just because they're looking for suppliers that can actually grow volume? And how are you managing that with your capacity plans?

Yes. So first, with respect to Snap, what I think what I would tell you is, at least from what we're seeing is it's still a little early to tell. A lot of the Snap lapse is really starting to happen, I think, now as you go as it progresses through the middle part of the year. And I think that's part of why I think many of us believe that volumes will continue to inflect and the consumer will become a little bit more normalized as we get into Q2, Q3, and Q4. So, I think a little bit early. We're pretty comfortable and pleased with our overall performance with consumers across the classes of trade with the places where we've talked about. But overall, I think it's still a little bit early. I think with respect to our retailer partners, we have been very fortunate over the last couple of years that we have been able to gain distribution, demonstrate the value that we can create to the category, and show that we can actually add something incremental to the overall assortment that retailers have. And I think even before this quarter or last quarter, those conversations are ongoing. We have great use cases and we have great incrementality, and I think retailers are recognizing that. So as a result, not surprisingly, you are seeing distribution gains that we're getting in the core, specifically around Boulder Canyon and On the Border being places where we're bringing that into our traditional core, as well as into some of our expansion geographies. We are seeing space gains, and we'll continue to expect to see that as we get through towards the end of Q2 and into the back half of the year. So, retailers are looking for partners that can grow across multiple years in multiple contexts, and I think we're proving that.

Your next question comes from the line of Peter Galbo of Bank of America.

Just two quick clarifications. One, going back to Andrew Lazar's question about kind of the gap between reported and scanner. So just so I understand it, we should start to see in Q2 and maybe even more so in the back half, a pretty meaningful narrowing of that gap, right, just to be able to hit kind of the 3% organic sales number. I just want to make sure I have that clear. And then the second clarification, and I have a follow-up as well. Ajay, did you give a split on EBITDA for the first half, second half of the year?

Yes, I can clarify that really quickly. We are maintaining what we said in February. So, first half, second half EBITDA should look like last year in terms of split. Yes.

And then Peter, it's Howard. The short answer is yes. You should continue to see a meaningful narrowing between the two sales numbers. And actually, Q4 to Q1, you did see a narrowing as well. So, this is, by and large, playing out as we expected it to. We hit the organic net sales we'd expected, as I mentioned to Andrew. Composition was slightly different. But the couple of areas where we have some work that caused that to be a little bit wider. Dips in salsa are a contributor as we've discussed, I know when Nielsen comes out. And we have the IO conversion, which obviously starts to go away, and then there's a small format opportunities on price pack architecture. I think those are the three biggest drivers to the Delta, and all of those we would expect to improve as we progress through the year.

Your next question comes from the line of Rob Dickerson of Jefferies.

Great. Howard, I have a quick question for you. Considering the recent strong performance of your four core brands and the success in new regions, I'm wondering if the more effective your strategy is, the easier it will be to gain retailer acceptance as you expand further west. If you had approached a retailer a year ago and proposed your plans, they might have been skeptical. Now, you can demonstrate that your approach is successful and that you’re outperforming the category. This should increase the likelihood of your future strategy being successful.

Yes. I think the short answer is it's much easier to be able to sell it facts and evidence specifically in a market, but even more powerfully in a retailer, other geographies, right? So, we are now at the point with a lot of the national retailers where we can actually point to geographies where we've been added and the benefits that we've had, which makes them obviously much more positive to expanding and broadening their relationship with us. So, the short answer is yes, the more the strategy works, the easier the distribution gains and the selling opportunities are. But equally important, I think the easier it is for us to talk to our independent operators about making the investments that they need to be able to build routes and build the infrastructure because they really own a lot of the final leg. And so, the whole puzzle comes into place as we continue to have greater success with our Power Four brands.

Your next question comes from Oppenheimer.

I guess, on the cost side, just curious the latest on the input cost inflation you're seeing in just some of the other cost pressures in the business.

Yes, Rupesh, thanks for the question. So, as we talked about during our guidance in February, we are seeing very consistent with our plans. We are seeing costs in labor and some in freight as well as you would expect. And then there is offset in commodities. So, as we said, commodities get better as we move through the year, especially around potatoes, we are still paying for the higher potato costs that are contracted through Q1, and then we get into a new potato crop later this year, and that should get better. So overall, still expecting inflation to be flat for the year, higher on conversion costs offset by commodities.

Great. And then maybe just one follow-up question. Just given concerns out there on the consumer backdrop. Just curious, as you look at your business, are you seeing any signs of increased channel shifting or really any changes in consumer behavior versus your last update?

Rupesh, it's Howard. I think, like you're noticing across the industry, consumers are seeking value, and we have seen a segment of low-income consumers becoming more focused on price shopping than in the past. We're witnessing similar trends. These changes are influencing some of the adjustments in our price pack architecture that we mentioned earlier. However, what differentiates us is our distribution and expansion opportunities, along with the potential for our portfolio to grow. By introducing our Power Four brands in various markets, we can mitigate some of the current challenges, but we will also adjust our pricing and packaging to ensure that all shoppers in every channel can access our products at their desired price point.

Your next question comes from Matt McGinley from Needham.

In your EBITDA bridge, you noted that 4-point benefit from productivity savings, but also that 2.2% drag from the supply chain costs. How much of that supply chain impact was inflation versus the Boulder Canyon transport issue that you mentioned? And if that was primarily Boulder Canyon related, does that headwind primarily dissolve over the course of, I guess, into this quarter, second quarter?

Yes. I would estimate that slightly under half of the impact was due to inflation, as I mentioned earlier. We are experiencing the conversion cost inflation that we anticipated. Additionally, we noticed delivery costs, which I view as a worthwhile investment that we discussed in the prepared remarks. We also made other investments aimed at enhancing productivity and capabilities. So, you are correct that the delivery cost investments will decrease, but we will begin to make other investments to maintain productivity.

Got it. And your guide for the full year implies about a point of EBITDA growth, and you did that this quarter as well. It sounded like you're getting more from productivity, but then you're going to reinvest that back into marketing. But I guess my question is, do you get any leverage on G&A on the higher volume in the back half? Or does that G&A continue to be a headwind? And I said G&A exclusive of the advertising and marketing that you're going to spend more on.

Yes. We'll get some leverage on G&A. So, I will say that we are very excited to see the results in the first quarter. Productivity is definitely flowing through, a little more than we expected. So, to your point, as gross margins expand higher than expectation, we'll continue to make high ROI investments. And you called out marketing, I'll say there are really three areas that we invest in around our brands, which is marketing, distribution, and selling capabilities, as well as building out our team and our capabilities, such as in the area of analytics, marketing, driving productivity, revenue management, integrated business planning, so on and so forth. So, you will see us invest in all three areas. But yes, behind the brands is a primary area of investment this year.

Your next question comes from John Baumgartner of Mizuho Securities.

First off, in measured channels, your volume lifts on promo across your main categories, potato chips, tortilla chips, pretzels, those lifts have been above the categories for quite some time now. Can you speak, Howard, can you speak to that outperformance? What do you think drives that gap? Is it more outsized trial in growth markets? Is it more your consumers in core geographies expanding consumption? Is there something in the execution in general that stands out? I'm curious what you're seeing there.

Yes. I appreciate the question, John. Obviously, my revenue management people want me to call out the fact that I have great revenue management folks. So I needed to get that built in. Look, I think a couple of things. One of the things I think you're seeing right now with our promotional efforts is twofold. First, it's sort of the maturation of our revenue management capabilities, where we have historically been a lot more about getting our price gaps right and maintaining them. Over the last year or so, we have been acquiring new talent and capabilities from other places, which is allowing us to experiment with different promotional constructs as well. So, it's not necessarily just a straight lift. It can be a must-buy program. We're playing with different price points as well to try and experiment. So, I think part of what you're seeing are the benefits of that construct. The second is we are doing a better job of making sure that our promotional returns on investments are working. So, you're getting a promotional benefit of just getting sharper and more effective across the retailer universe as well. Obviously, we're very pleased with that progress. And then the last thing I would just offer you is our customer mix. As we continue to mature, we're getting different customers with different levels of expectations in terms of how to execute consumer trial and promotional activity. So, all of those things together kind of roll up to a better-quality merchandising lift than potentially you're seeing with others.

Okay. Building on that, regarding the decision to increase marketing spending beyond 40% this year, will that additional funding for the brands also support more in-store displays? Should we be considering any specific events or seasonal timeframes in your allocation strategy?

Yes. And Ajay kind of referenced this in the last question as well. When we think about investing in growth, we sort of think about it not only in terms of investing in the brand, which is more consumer pull, but also retailer push, right? So, that means more displays, more end cap space that we are able to get as well. So, that's a piece of it. You'll see greater expansion to show up in distribution, and obviously, greater space as we progress through the year. I think the second area is you see a lot more effort from us on innovation behind craveable flavors. We've addressed our multipack and variety pack, and occasions there. We're excited about the Voodoo Halloween variety pack that we're going to push through. So, there's some investment there as well. And then the last is really is, as we are building out our capabilities, Zapp's and Utz will have marketing campaigns as we go into the back half of the year, starting this quarter in Q2 and then building in support, not only of the distribution, but also in support of building those brands. So, there will be a lot more concerted effort to making sure that consumers can come and understand who we are and what we offer as we go forward. And then last is really, if you look at e-commerce and our e-commerce business. That business is growing really nicely, and that's because we're getting much more effective with both retailer.com, and some of the digital places where we can invest and get high ROI, high trial activity. So, you put it all together, it will be kind of across all three distributions, innovation, communication, and then retailer-specific execution to support our growth.

Your next question comes from Robert Moskow of TD Cowen.

I just want to make sure I fully understand the gap between your net sales and the IRI reported numbers. You mentioned it's mostly unmeasured channels and dips and salsa. And just to be clear, the unmeasured channels, is it club stores, or is it small format stores that you don't think are really covered in the IRI?

Thank you for your question. We are quite pleased with the performance of our club store and discount channels, as well as the dollar channel. Our execution has been strong, and we are seeing the expected growth. This is primarily driven by some of the untracked channels, particularly small format stores. We also have some challenges with our price pack architecture, which I believe contributes significantly to the situation. Additionally, there are issues related to dips and salsa, where the data shows a noticeable difference when comparing the pure salty category to total Utz. Lastly, the IO conversion tends to decline over time, contributing another roughly 40 basis points. We are confident that we will address the small format issue as the year progresses. We have implemented the necessary changes and need to ensure our product assortment is in the right place. Overall, we feel very positive about our performance in the discount dollar value channel and club.

These are small formats that are not reflected in the IRI data, as IRI includes convenience stores but not these small formats.

Yes, that's correct.

Okay. And then the last question, fourth quarter, do you feel that you have an easy comparison to your performance a year ago coming up in the fourth quarter? Optically, it looks like that when I look at fourth quarter sales, but there's all kinds of factors. So, how do you view it?

Yes. We believe that if you observe the progression over the year, particularly in the first quarter, there was a lot of noise at the beginning. After finishing the first quarter, the second quarter becomes somewhat easier, and this trend continues into the third and fourth quarters. However, we anticipate that the fourth quarter presents the most straightforward comparison.

Your last question comes from Jim Salera of Stephens.

Just want to dig down on Boulder, just given the continued strength of the natural channel there. How much of the assortment of Boulder in natural do you think is transferable to traditional grocery? And I believe, Ajay, you said that now that you're making Boulder in Hanover, does that improve your ability to go after new distribution on the East Coast? Because correct me if I'm wrong, but I think Boulder is actually one of your few brands that has better market share out West versus in your core markets in the East?

Yes. So, I appreciate the question. Look, we've been talking about our aspirations for Boulder for a while. And I think it's one of the brands that we're particularly excited about, not only because it has a clear point of difference around healthier oils. But to your point about where its geography of origin comes from. So, to answer the question, yes, we believe it is transferable. We believe that the consumer interest in healthier oils will be true across the country and that we are seeing really good distribution gains as we're moving east. And we're also seeing good distribution opportunities as we think about places like club. So, to Ajay's point, we put in the capital to be able to make the product in the East specifically to address the higher levels of demand that we're starting to see. And if you certainly look at the core performance in the first quarter, you're seeing that transferable demand. So, we're excited about Boulder. I think it is a brand that is growing nicely and growing quickly, and consistently. And as we build over time, we are staging our supply chain to be able to meet that demand.

Great. And if I could maybe ask one more on just retailer engagement on the recent innovation launches. I know in my local grocery store, I've seen Mike's Hot Honey mix minis on end caps along with some of the other activation. Do you have a sense for how many incremental households that brings to the brand? And if you can offer any color on maybe conversion from, let's say, like the mixed minis back to the traditional core potato chip offerings?

Yes, I believe it's still early in the process. We're in what I consider the second purchase cycle, so we won't have a clear understanding for a few more months regarding the trial and repeat data. However, I can share that we are seeing positive acceptance from retailers for our innovations so far, due to the needs we are addressing and the attractive growth in some subcategories we are entering. For example, the flavored pretzel segment is experiencing rapid growth, and we are positioned well with our flagship Utz brand. Retailers have reacted positively to early sales. While it’s too soon to fully gauge the trial and repeat data, we will share that information once it becomes available.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.