Ladies and gentlemen, thank you for being here. My name is Desiree, and I will be your operator for today's call. I would like to welcome everyone to the Utz Brands, Inc. First Quarter 2025 Earnings Call. I will now hand over the conference to Kevin Powers, Head of Investor Relations. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us today for our live Q&A session and our first quarter 2025 results. With me on today's call are Howard Friedman, CEO; and Ajay Kataria, CFO. I hope everyone has had a chance to listen or read our prepared remarks and also view our presentation, all of which are available on our Investor Relations website. Before we begin our Q&A session, I just have a few housekeeping items to review. Please note that some of our comments today will contain forward-looking statements based on our current view of our business and the actual future results may differ materially. Please see our recent SEC filings which identify the principal risks and uncertainties that could affect future performance. 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 and posted on our website. Now operator, we are ready to open up the line for questions.

And our first question comes from Andrew Lazar with Barclays.

I was hoping maybe to start off with, if you could just explain the difference between sort of flat overall retail sales and the 3% organic sales growth that you reported this quarter. Just trying to get a sense of how much of that difference, if any, is sort of timing related that may reverse in future quarters? Or if it was simply unmeasured channels and the like.

Yes. I appreciate the question, Andrew. Look, I think broadly, I think what you see in our results is a lot of the benefits of some of the opportunities that we continue to have as you think about expansion in our expansion geographies as well as obviously in our core. Specifically to the bridge between net sales and consumption, it's exactly what you said, which is we have had some significant strength in our untracked channels. The natural channel is doing quite well for us, discount and club. We also have the benefit now of the Rice distribution center being opened. So we are seeing much better throughput through that facility as we consolidated six warehouses down to one and so we're getting our shipments out a little bit earlier. So there's a little bit of revenue recognition, which we'll expect to continue. But there is nothing in these results that were pulled forward in the quarter. And we're obviously quite pleased with how the volumes have responded.

That's helpful. And then I know you had anticipated some volume share gains, but some value share contraction in core markets in the near term. Is that simply the bonus pack efforts? And if so, how do you balance the volume outcome with the return on such programs as we think about sort of the sustainability of the approach?

Yes. So you'll recall when we met in December 2023 at our Investor Day, one of the things that we've said pretty consistently is that we want to be able to hold share in our core while we're growing in expansion geographies and this is largely held true as we continue to grow our volume shares. The quarter, obviously, is a little bit more competitive, naturally because we are, in a lot of cases, the number two player. And so we're a little bit more exposed to where the category looks, but I think what you see right now is a couple of things. I think first, you do see the benefit of bonus packs. Second, you're seeing incremental distribution in Boulder Canyon and On The Border, which is also helping. And so I think a lot of it is things that we're trying to just get into balance as we go forward. But really, I think what you'll expect to see is sort of a little bit more normalized volume to value relationship as we go forward as bonus packs wind down.

That's helpful. And I appreciate you putting the case study that you did in the slide deck. That was actually really helpful around what you're seeing in expansion markets. And Ajay, thanks so much for all of your help and wish you all the best going forward.

Thank you, Andrew.

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

And Howard, I had to do a double take on Slide 4. I thought you had stuck in a photo of Kevin as a final send off to the slide deck there. But unfortunately, it was not him. We'll have to get that in the future. I just wanted to follow up maybe on Andrew's question on the bonus pack impact. I think on Slide 23 of the deck, you guys lay out that the impact to price was about 300 basis points. Just is that kind of the similar offset in terms of vol/mix? I didn't see if there was a contribution number for what bonus packs actually contributed to vol/mix in the quarter. So just any additional help there would be appreciated.

Yes. So the short answer is yes. I'll leave it at that. And as you saw, most of our price was related to bonus pack. There was about 60 basis points that was not bonus pack related. And that's the true price cap investment that we made in the quarter, and that flowed through down through the P&L.

And then Howard, just on Boulder Canyon, look, like it's obviously been a tremendous growth driver. I'm not even sure if some of the tracked channel data is picking up some of the new product yet. But just what's kind of been the early reception to some of the new category expansions with Boulder Canyon? How much of what we're seeing in the Nielsen or Arcana data is just existing distribution being pushed out more? And should we kind of start to see that accelerate as the new products start to hit shelves as well?

Yes. So look, we're very pleased with the performance of Boulder Canyon. It's a great product. And for consumers who are looking for non-seed oil offerings, it's a product that delivers great taste. Non-seed oil in a lot of cases, non-GMO. And we're very pleased with, obviously, the consumer and the customer reception to it. Obviously, it's a huge driver, as you saw in our untracked channels, in the natural channel as well as we're now gaining retail distribution in traditional channels and as we move into food. But a lot of that gain is still in front of us. We've gotten the distribution. And so you'll continue to see that business continue to grow in more measured channels. Specifically to reception, we've launched Canyon Poppers last year, which is performing quite well in the cheese ball competitive set. And we also launched incremental flavors. We have a wavy product that's out. And then obviously, most recently in March, we launched our Tortilla Chip. Tortilla Chips is still a little bit early to see in the read, but the rest of the business and the innovation is readable. And the last thing I'll say is while distribution is growing and we're quite pleased with it, what is giving us a lot of optimism on this brand is that velocity is also growing quickly. So it's sort of the best combination that you could hope for, gaining distribution, growing velocity in an on-trend segment where our consumers are headed. So we're quite pleased with it, and we look forward to continuing to drive that business longer-term.

And thanks to Ajay as well for the partnership over the years. I appreciate it.

Thank you.

Our next question comes from the line of Michael Lavery with Piper Sandler.

When you preannounced a nice sales dissection and just some of the non-branded or partner brands versus the rest and how they've been growing, can you just give us a sense of what you expect going forward? And for Partner Brands, maybe how you can manage those? Or if and how much you control kind of how they flow through and what the growth outlook or declines might look like going forward?

So, on our non-branded non-salty business, Dips & Salsa is expected to face some short-term pressure as we compare to last year, but we anticipate it will stabilize towards the end of Q2. Regarding Partner Brands, these are the brands we carry for route averages to meet retailer and customer needs. We don't have control over them, but we aim to ensure that as our brand expands, we get more of our products on each truck, which should naturally make the Partner Brands smaller. We expect them to continue declining, but we don't foresee the declines being as severe moving forward.

And you called out the new flavored On The Border tortilla chips, maybe can you just give us a sense of how far that brand could go or how big a flavored opportunity might be? And what, if any, other white spaces you see as opportunity?

Yes. So obviously, we’re quite pleased with On The Border. It was an acquisition that we made a couple of years back, and it has continued to grow nicely as we continue to expand distribution. I still think that there’s a distribution gain opportunity in our expansion markets, much like there is for the rest of our portfolio. And then with respect to innovation, look, we know that unflavored tortilla chips is a great place for On The Border. We would expect that we can also bring flavors and it’s a piece of the category that is growing, that continues to grow, and it’s a place where we think that there’s a fair bit of white space. I think, longer term, just like any other business, On The Border has got opportunities in additional flavors. Potentially, there are other formats that we can introduce and as consumers indicate their interests in different product experiences, we think that brand has got a lot of legs to stretch.

Next question comes from the line of Robert Moskow with TD Cowen.

The bonus pack program, I think you're talking about it in terms of a limited time offer. Is that right? And how will you evaluate how long to keep it in the market? Does it depend on competitive dynamics or just the category kind of response to it?

There are a few things to mention. You are right about the intention being to explore various ways to provide value to consumers. We've seen a very positive response to the bonus packs, and we feel optimistic about how we can operate in different contexts. In expanding markets, it served as an excellent trial tool, allowing consumers to engage and try our products. At the heart of it, this initiative aimed to offer a fresh way to deliver value. Additionally, we're employing this strategy across our entire portfolio, including Boulder Canyon in the natural channel and club, as well as other products in discount channels. We anticipated this would be a temporary initiative, flowing in and out as we move towards our merchandising plans for the summer.

Okay. Does that mean as you transition, it might be pulled back, pulled out in the summer? And then a quick follow-up.

Yes. So yes, our expectation is that, that program is winding down now. And as we transition into the summertime, we have pretty normal commercial plans to go to support our innovation, increased marketing and making sure that our pricing is correct in the market as we go through the peak selling seasons for us.

Okay. And then maybe broadly speaking, how should we think about price mix compared to volume for the rest of the year? Should we expect price mix to continue to be negative? Can you balance out those two in your sales forecast?

Yes. So we should be normal course from here on out. So you should expect about a point of price investment going forward.

Our next question comes from the line of Rupesh Parikh with Oppenheimer.

This is actually Erica Eiler on for Rupesh. So I guess first, I wanted to touch on natural organic. So we've obviously seen tremendous momentum across the natural inorganic space. You've seen great results in Boulder Canyon. So maybe you could just talk about the further opportunities that you see to capitalize on this trend, whether it's accelerating initiatives in Boulder Canyon or through M&A. I would just love to get your thoughts there.

Yes. So I agree, we're quite happy with how Boulder Canyon has been doing in the natural and organic class of trade. And what you're seeing right now is we are extending innovation, so we're entering into new segments of the category, talked a little bit about Canyon Poppers and some of our flavors to our Tortilla Chips launching right now. I think the opportunity also more broadly for us, specifically to Boulder is to actually start telling its story. So we're working on ways to make investments in the brand equity and drive its overall awareness. But I think in the near term, what you're going to continue to see is distribution gains supported by shopper and consumer support and innovation as we go forward. So I think we got a lot of runway left. It's growing quite nicely. Right now, consumer response has been excellent, and we would continue to see opportunities to drive that momentum further.

Okay. That's super helpful. And then just on the channels, I mean you called out, I think, natural, hard discount and dollar again in your scripted remarks. As we think about channels, particularly in light of the current backdrop that we're seeing and those, obviously, a couple of those channels cater to that value-seeking behavior. Are there any other new shifts of note from a channel perspective lately?

I believe there are a couple of important points. First, we use Circana MULO-C+ with convenience as the reference, which helps us understand our business better. Much of what you observe in the bridge really comes down to what's being tracked versus what's not. We continue to experience strong support and momentum in food, and our mass channel is also performing well. However, what we're currently seeing is that consumers are increasingly looking for value, and this extends across the range from premium products to merchandising and promotional support in different trade classes. This reflects the overall trend we're observing. Consumers are actively seeking value and responding positively to our offerings across the board.

Our next question comes from the line of Jim Salera with Stephens Inc.

However, I wanted to maybe drill down a little bit on potato chip subcategory. Obviously, that's where your growth saw kind of the most stark outperformance driven by Boulder and Utz, which is interesting because Boulder is kind of a premium offering where Utz, particularly with the bonus bag is I would use more of a value offering, just kind of walk us through the dynamic at play there and how we're seeing household growth both at the kind of premium and at the value side?

Yes, I think there are a few key points. First, we believe that consumers are generally looking for value. Boulder Canyon, being a premium-priced chip, reaches various market segments. Regarding Utz, we take pride in the brand and the positive consumer feedback. Our main opportunity lies in expanding market distribution and enhancing perimeter display activities, which our teams have supported through bonus packs. The different factors contributing to their outperformance include Boulder’s distribution gains and the enhanced merchandising support for Utz, which account for the differences in performance.

Are there any significant differences when we compare an Utz household to a Boulder household? Is there a considerable amount of overlap, or do each of them have unique characteristics that limit cross-pollination?

I'm not sure we've ever actually shared the overlap between the two. I would be cautious in assuming they consist of exclusive households. It may not unfold as one might expect. However, I can say that the Boulder household tends to be more affluent and is looking for healthier options compared to non-seed oil products, whereas our brand generally reaches a more mainstream audience. Yet, I don't believe we've specifically analyzed the overlap or exclusivity between them. Overall, I think we would anticipate some overlap across the portfolio.

Okay. And maybe if I could just sneak in one other quick one. Just thinking about the distribution gain opportunity at Boulder, you talked about still a lot of runway ahead of you. I had seen the product in some new places and retailers in my area. Can you just give us a sense for kind of what we should expect from a sequencing perspective this year? I mean, is it in all the major club regions? Is there anything kind of imminent that we should be thinking about as we're building out the demand drivers for the back half of the year?

I believe we have made considerable progress in distribution gains. We have received support and some rotational backing from various retailers. You can expect to see ongoing distribution growth in the business. Although it is a bit more challenging to observe in the natural channel, we continue to gain additional shelf space there, and it is apparent in conventional grocery stores as well. Therefore, continued distribution growth is anticipated. There is still significant potential within our portfolio. We expect to keep demonstrating the advantages of our category to both consumers and retailers, with Boulder likely benefiting in the near term. It's not surprising to see these developments, and I anticipate more progress as we move forward.

And Ajay, I just wanted to say it's been a pleasure working with you, best of luck in whatever the next endeavor is for you.

Thank you, James.

Next question comes from the line of Scott Marks with Jefferies.

First question from my side is you spoke to kind of volume share gains in core geographies. It seems like maybe some of that could be attributed to those bonus packs. So just wondering, one, if that's the case? And then two, how do you think about incremental distribution opportunities within those core geographies as maybe larger peers continue to see a bit more pressure?

Yes, the volume share gain we experienced is indeed partly attributed to the bonus packs. At our Investor Day, we indicated our strategy involves maintaining our volume share in core markets while achieving stronger distribution growth in our expansion areas to meet our revenue expectations. In our core, we see significant potential with three of our key Power 4 brands: On The Border, Zapp's, and Boulder Canyon, which can enhance both item distribution and overall gains. In the current quarter, we’ve seen improvements in distribution for On The Border and Boulder Canyon in our core markets, which is supporting our volume share. Looking ahead, we plan to continue pursuing distribution opportunities in our core areas with these brands, as well as expanding into new markets and additional classes of trade with our entire portfolio. As we increase distribution, we find that we become more beneficial to consumers, customers, and the category overall.

And then a second question for me. understand you've been speaking about this bonus packs program being more limited and winding down right now. But I guess based on what we've heard maybe from some peers around the industry is that the U.S. consumer seems to be a little bit more pressure. Maybe there's some weakening sentiment out there. So maybe what might change your mind about maybe bringing back this bonus packs program? Is there certain metrics you might have to see that would make you want to bring that back and test it again?

I believe we are observing the market's response and the trends in consumer behavior. As a brand-focused company, understanding these dynamics is essential for us. We continue to monitor how consumers seek value. Our approach has been to enhance value through various methods, such as premium products, value offerings, innovation, and marketing, which have consistently supported our category. We do not rely on pricing alone; consumers choose our brand because of the quality, innovation, and marketing we provide, along with fair pricing. We will keep exploring ways to create value in the future. The bonus packs program was one of the strategies we employed to do this. We have maintained our price gaps and expanded distribution for our products. We will utilize a comprehensive marketing strategy, and if the situation allows, we will apply the insights we've gained from this round of bonus packs and reconsider it as market conditions evolve.

And our last question comes from the line of John Baumgartner with Mizuho.

Maybe first off, just with the bonus packs and the volume response there. I'm curious, Howard, if you can see through any impact on consumption from new trial and new consumers relative to benefits from frequency. How much has been subsidized relative to maybe accelerating new buyer growth that has a longer tail benefit for you from here? I know it's not a long duration program, but just any gleanings you have thus far?

Yes, it’s a bit challenging for us to break down the impact of the bonus packs since they were treated as a flow-through item. Essentially, we delivered the product and aimed for it to sell through within a specific timeframe. Therefore, distinguishing that impact is difficult. However, I want to highlight that our household penetration has reached 49% over the past 12 months, which marks an all-time high for us. We are generally maintaining our buy rate, which is a notable achievement given the influx of new users who may try our product and then not return. We are quite pleased with our panel metrics and remain optimistic about the quality of our overall portfolio. I do think there is some trial occurring in our expansion markets concerning the bonus pack, as it was widely distributed across various trade classes. We will keep monitoring this as we proceed. Overall, our trial and repeat rates are strong, and household penetration is on the rise, which is crucial for us moving forward.

Okay. And then as a follow-up on C-stores specifically, I think the comment there was that performance is improving, but it's not yet back to growth. Is there anything at this point that you can do as a company to accelerate that turn? Or is it just largely dependent on overall traffic trends and sort of the macro backdrop?

Yes, there is a two-part answer to that. The channel needs to continue improving, and I believe you can see that progress starting to take shape. I wouldn't say it's broadly improved yet, but I think it's getting better. Specifically for us, we are focusing on three areas that we’ve mentioned in previous calls. First, we need to enhance our distribution in convenience stores and ensure we have the right pricing, product sizes, and planograms. So, distribution is a key focus. Secondly, we need to deliver innovation tailored to that channel, which can be unique since convenience is often about immediate consumption, typically with smaller bags. There are opportunities for us to enhance the flavor profiles of some products and to innovate for that market. Lastly, we must keep collaborating with retailers and our independent operators to ensure that consumers find adequate space and service to access our products wherever they choose to shop.

That concludes the question-and-answer session. I would like to turn the call back over to our CEO, Howard Friedman for final remarks.

Yes. So thanks, operator. I just want to say thank you to everybody for the call. I think what you see through our first quarter is us executing our playbook and continuing to drive the results that we expect to deliver. There's obviously it's only the first quarter, and so there's quite a bit more to do. But I would be remiss if I didn't thank Ajay Live on the call for all his leadership and support over the last several years and say thank you, and good luck, and we appreciate everything that you've done.

Thank you, Howard.

And then last but not least, I'd like to thank Kevin who's also moving forward as he winds down his time. Obviously, many of you know we have an extraordinary IR program here at us, and it's been largely driven by his leadership and support over the years. So we also wish Kevin all the best as he moves on to his next great adventure.

Thank you, Howard.

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