Good afternoon, everyone, and thank you for joining us at Oppenheimer's 26th Annual Consumer Growth and E-Commerce Conference. My name is Rupesh Priek, and the Senior Food, Grocery, and Consumer Products Annals here at Oppenheimer. I'm happy to introduce our next presenting company, Utz Brands. Joining us today are CEO, Howard Friedman, EVP and CFO, Bill Kelly, and SVP Head of Corporate Finance, Trevor Martin. So thank you all for being here. The format today's session will be a fireside chat with a number of questions I've prepared. So let's get started. I was hoping to kick it off with the latest you're seeing in terms of dynamics within the salty snacks category. Your team continues to expect flat category growth, despite the plus 2.4% retail sales growth in Q1 for the category. So can you remind us how you think about the category growth for 2026?

Yeah, thanks, Rupesh, and I'm excited to be here again this year. Look, I think in terms of the overall category, you're correct that we did hold our flat assumption. Q1 was nicely ahead of that number, obviously, to your point, and quarter to date is still positive for the category. But what we said in our Q1 call, and I think we continue to believe that we want to see a little bit more as the year progresses, to include, obviously, we're going into the peak summer season of what we would call the 100 days of summer, but Memorial Day and 4th of July before we would update our view. So look, if the category continues to deliver strength, then we would update our thinking accordingly. But at this point, I think we feel pretty comfortable with a flat category based on what we've seen so far.

Great. And then you also talked about your conviction that the category will eventually return to stronger growth. What do you think is the right growth rate for the category longer term versus the 5% or so we saw pre-pandemic?

Yeah, look, I think we believe that this continues to be like one of the best categories in all of food, right? And, you know, haven't spoken a lot about a longer-term growth rate since our 2023 investor day. And I think, you know, based on our last attempt to call the category, it's probably a more prudent approach, especially as you think about the last couple of years. But what I would say is, you know, if you think about what has always made this category great, you know, it's always been a brand innovation and consumer-led category, which then translated into mixed price and some volume growth, which, you know, I think is the historical pattern. And if you look at our own business and kind of where we've been investing over the last couple of years, it's really been driving better innovation, better revenue management, and better assortment and better marketing to be able to support a similar algorithm of volume mix and positive price. And I think we believe that we can do our job in supporting that category view over time.

And then with regards to your own performance, it came up on the last earnings call that April was maybe a tougher comparison and that you're cycling some specific merchandising vets last year, including for Boulder Canyon. So curious, is the quarter evolving as you expected so far?

Yeah, I mean, certainly as you think about how Q1 progressed at a prior year and then this year, you know, we always anticipated that as we got kind of got into that that March, April window, those would be kind of the toughest comps is to your point about some specific merchandising and that we would be more weighted to May and June. So, so far, you know, we do see our trends improving May versus April, including, you know, a nice acceleration to your point on Boulder Canyon. And so, overall, you know, as you think about how the rest of the quarter progresses with innovation coming, with distribution gains, with increased advertising, you know, we feel pretty good about where we are. But, you know, obviously, we have a month to go.

Okay, that's helpful. And next, I was going to, I was hoping to get your latest views on the consumer. So, value-seeking behavior is one thing that we've seen for some time. But curious if there's anything else in note that you're seeing in terms of changes in consumer behavior, particularly given a more uncertain backdrop with higher gas prices, geopolitical headlines, et cetera.

Yeah, I mean, look, I think, you know, I've always believed in the consumer and I continue to believe in the consumer and the environment continues to be uncertain and a little choppy, kind of how a lot of folks have referred to, especially as you think about sort of the macro environment. And some of the data that we, you know, that you've seen more recently around consumer confidence, saving rates and inflation readings obviously show that the consumer needs to continue to be choiceful and, you know, play up and down the ladder as they think about, you know, obviously value and price points. You know, we think we're in a pretty good place and pretty well insulated, especially given the growth of Boulder Canyon, which, you know, for a consumer who is looking for value as defined by increased benefits or maybe can afford the cost of the inventory, you know, that is a place where, you know, that brand continues to work on the premium end. And then as you sort of think about sort of the more value end, we're fortunate we have a broad portfolio of items and products that appeal to a more value-seeking consumer on sort of maybe an absolute price point. Brands like Megalitos or Golden Flake and Dirty, you know, and so while we think about the environment and we're watching the consumer and their behavior, overall, we feel pretty good that we have a portfolio that can perform in this type of an environment.

Okay, great. And then from a channel perspective, are you seeing any channel shifts?

Well, you know, obviously food is the largest for us. And, you know, as we mentioned in our last call, you know, the trends there have been pretty steady. And we are actually seeing, I know we've talked about this many times with many, many folks who are listening, we are seeing better trends in our convenience store business, including a return to growth in the more recent periods. And part of that is because of Boulder Canyons growing nicely and gaining distribution. But we also have done things like getting sharper on our single-serve assortment. You know, obviously, ZAP's potato chips continues to improve as well. And, you know, we feel like overall we're in a pretty good place right now.

And then quickly on SNAP, are you seeing any impact on SNAP exclusions in certain states restricting to purchase certain items? And can you remind us of what is contemplated in your guidance with regards to SNAP?

Yeah, so obviously there are kind of two parts to this, right? One is the state regulations that are that are excluding things from SNAP, which, you know, at least at this point, haven't included salty. It's more some of the some of the candy and soft drinks and maybe some dessert items. So that's not been a place where we have necessarily seen any any consumer response from sort of a pure restriction perspective. The second is, obviously, there have been some reductions or changes in SNAP eligibility given some legislation last year, which were known and were included kind of as we were thinking about our guide for the year. So, that's largely been what we would have expected, and I would kind of characterize it as relatively modest. But, again, as money is fungible and we're an affordable indulgence, we want to make sure that we continue to monitor what the consumer is experiencing. Okay, great. moving on to competition have you seen any changes lately on the competitive front and then more specifically are you seeing any impacts from free delays price reductions and overall how are you feeling about your price gaps yeah so you know we went into detail on this in our last call and i you know i said at the time and i um you know i continue to believe there's what we what we have seen is largely what it was characterized right while there have been competitive pricing changes they've been relatively focused and targeted um and you You know, obviously, we were already in a good place from a price gap perspective, given kind of the last couple of years of pricing actions that were taken that we did not follow on. You know, and then one of the places I think where we're particularly proud is, you know, as we've been investing in capabilities, one of the capabilities we've been building is really around this revenue growth management, which is really trying to make sure that we're sharp on understanding where our price gaps need to be, where our price pack architecture needs to live, and make sure that that whole ladder is working coherently. So, you know, the net of all of it is, you know, we'll obviously manage our gaps and ensure that we remain in the right places across channels. But we haven't seen anything, at least at this point, that would lead us to conclude that we need to change our commercial plans for the year thus far and you know we also had a view that you know where we thought we would um where the where the pricing may happen from competitors would show up and it's largely been exactly what we expected based on the testing that we had observed okay great and another promotional front i know in the past few years at times promotional intensity has picked up how do you characterize your overall promotional backdrop right now yeah look i so a couple things i would i'd still characterize it as rational um you know we we We continue to see, you know, promotion is really just another form of price investment. And, you know, obviously there has been some interplay between kind of what the on-pack and list price would be relative to the promotional depth. But, you know, overall, I think these are all part of revenue management levers that all of us, the industry tends to observe. And our view remains that the environment is rational. And in spite of the actions that we talked about with one competitor, you know, over the long term, you know, we still believe that innovation and marketing and brand building are going to be the things that drive the mixed price and volume that you'd expect to see come out. It'll never be just a pure price category.

Okay, great. Now, I'll shift gears to some odd-specific questions. So, Howard, you've talked about some plans for later this year with brands that explicitly address value and consumer affordability. So, in light of some of the consumer uncertainty out there. I want to discuss these next. I'm curious how we should be thinking about your efforts here. Is there a particular brand or part of the portfolio that will be targeted? Any additional color you're able to provide would be super helpful.

Yeah, look, so I mean, obviously, our job is to meet consumers where they are. And, you know, that continues to be a theme that we talk about. You know, I've always pushed on value being not just absolute price, but also in terms of the bundle of benefits that any brand or product can deliver. And we are fortunate that we have a very clear view of our price ladder and different brands within our portfolio that can target different consumer value needs. So if you think about on the value tier, the absolute price players, we have brands like Miguelitos and Golden Flake that we discussed earlier. Miguelitos is really a brand that we've been working on more recently. And, you know, you'll see you'll hear more from us. But we have a pipeline of innovation for for those brands that will bring news and and consumer engagement into those into those businesses. And, you know, we have plans to continue to further lean into them as we progress through 2026.

Great. So next, I wanted to talk to your better for you, Brand Builder Canyon. So you had significant momentum in recent quarters. In Q1, you saw growth in 19% of natural channel and 101% of conventional channel. And you've also highlighted the potential for Boulder Canyon to be a $500 million plus brand. So a few questions here. So first, are you expecting double-digit growth for the brand again in 2026? Is it fair to assume Boulder Canyon can continue to grow in the double digits for the foreseeable future?

Yeah, I mean, obviously, Boulder Canyon is a brand that we're that we're very happy with the performance and, you know, we believe has a lot more to do. And, you know, as a as a as a marketing, as a consumer goods person, our view of brands that have margin momentum and materiality are the ones that we want to push on. And, you know, as we look at Boulder, we see it as a place where it has a lot of different ways that it can continue to grow. You know, first and foremost is continuing to gain distribution in the conventional classes of trade, which are still below some of our larger brands like us. You know, second, not only just the base distribution, but also the average items per store opportunity, where on average we have around four. Third is really around the stretch. So you've seen this stretch into different forms of potato chips and obviously into cheese balls two years ago. So this year, you know, we've also added in some incremental innovation and incremental areas like flavored tortilla chips and beef tallow, both of which are off to, you know, very good starts for us this year. And, you know, as we've said in our earnings call to date, Boulder Canyon's grown about 45 percent as measured by Circana. And we have seen acceleration from there as we would have anticipated. So, you know, we're going to take it year by year, but feel really good about the path that we can chase in order to get to that $500 million plus long term, which would assume healthy growth rates on a multi-year basis.

And your team also launched a new marketing campaign for Boulder Canyon. So curious what the consumer response has been and how that campaign performed versus your expectations.

Yeah, so far so good. But, you know, it's still early days, and it's always exciting to be able to give a brand a voice and a perspective. But it's really around this Be Real campaign and talking about, you know, in a world where there's so many things that are generated and you have to really read what you read. You have to question, is it authentic and true or not? That insight lives very well in this brand. And so I feel very good about the early consumer response on it. And, you know, we have a lot of enthusiasm for it as it continues to grow.

Okay, great. Now shifting to maybe my favorite brand, On the Border. So you've had some softness there in prior quarters. How did the brand perform in Q1? And how do you think about growth for On the Border for the balance of the year?

Yeah, so I actually am a big On the Border consumer as well. And, you know, between Boulder, On the Border, and Utz, it tends to be a competitive environment. My family is our big Zaps users, so we're pretty well represented in the power four every day. You know, OTB is measured in Serkana, was down low single digits in Q1, which obviously we're not, we understand we want to see that business grow, and it has a lot of growth trajectory ahead of it. It does represent an improvement from the back half of 2025, and we continue to expect that we will see an acceleration from initiatives that we have with the brand this year. We will have seasonally relevant packaging that is hitting right now. We have some incremental distribution opportunities and innovation as we go, and, you know, we'll continue to work to expand into new channels as well. So on the border, you know, obviously had a hiccup in the back half of last year, but we expect continued growth improvement from here, and we're seeing that traction build as we go.

Great. Then shifting gears to your other brands, we talked about Boulder Canyon on the border. Is there anything else you want to highlight for Utz or Zapps?

Yeah, I mean, obviously, Utz is not only the name on the front door, but it's also our largest brand, and we continue to be very proud of it as we continue to drive growth there. We are continuing to expand westward, and that's always been a key part of our growth story. You know, our marketing support continues to increase as well. And we have a, you know, what I would argue is a really good innovation pipeline, including for us on proteins and some flavors, you know, some seasonally relevant lapse to the limited time offers we did last year. We have a backyard burger flavored potato chip coming out. We're going to repeat Lemonade as well. But, you know, obviously, that's in the core geographies is where we are continuing to do some work to improve the trends, and it tends to be the most mature environment. So in addition to the incremental marketing support and innovation, you know, obviously continuing to make sure that we expand into new channels to make sure that, you know, we're properly represented everywhere is important. And then obviously a lot of our growth management capability, making sure price points are sharp, making sure that we're getting, we're maximizing the growth potential of that brand is really important.

Okay, great. Now I want to dive deeper into your California expansion. How is your role like with the Insinia and the distribution gains progressing versus your expectations? And are you pleased with what you're seeing from a trial consumption perspective to date?

Yeah, well, we're definitely pleased with what we're seeing in terms of trial and consumption performance so far. You know, we obviously started California late in Q1. So we've been in the market for, you know, really less than six months and running these routes. We did talk about in the Q1 call that we grew high single digits in the first quarter, which was was good for us. And, you know, that our expectation was that this was going to be a phased rollout. And, you know, so far, so good. It's proceeding pretty much how we planned it to be. always get some learnings along the way, but we feel good about the opportunity and how it's going so far. And, you know, when you think about this as a multi-year growth trajectory, you know, backed by a model that we have been working on for several years, we feel pretty good about and confident in that growth trajectory.

And are there any key learnings that you took from entering new markets like Florida that you're applying here to California?

Most definitely. I mean, obviously, Florida predates me, but it was a clear success for the company. And, you know, while Florida is a somewhat different market, it is actually fairly similar as well. And, you know, when we went to Cagney, you know, we kind of gave a case study. But, you know, there are a few things that we tend to do early. First is we'd like to partner with large customers in the food channel. You know, we ensure that we have enough items per store and point of sale, both material, both media, but really physical presence so that the consumer doesn't have to walk down the aisle to experience our brands for the first time. And, you know, that is largely what you can see unfolding in California as well. So, you know, we're taking learnings about how we start with assortment, how we drive the trial curve quickly so that we can then add more items per store and making sure that we have the right level of frequency from our independent operator partners. I think the good thing for us has been, because we've done this in a couple of geographies at this point, a lot of the partners we have in California can see in their own stores with their own data the incrementality and the benefit that we bring to the category, which gives us a very collaborative partnership with those retailers as we grow.

Okay, that's great. And then as you look at all your expansion markets, what is your confidence in the high single-digit growth rate going forward? I know we discussed California, but just overall in achieving that goal.

Yeah, I mean, obviously, we break down expansion markets into two groups to show kind of how we're growing, really, and kind of in that mid-single digits. Obviously, we have initial markets where you tend to grow a little bit faster. But, you know, overall, we continue to expect that we'll be in the high single digits, even with some of those more maturing geographies. You know, overall, it really is a growing distribution and adding incremental occasions for the retailer, helping them grow their share and allow some differentiation of their strategy. And that tends to help us drive our business as well.

In another area, we get a lot of questions is just on GLP-1 drugs. So just curious what your team has seen from GLP-1 impacts on your portfolio or the category and then just overall how you think about the impact longer term on your business.

Yeah, I mean, look, obviously, we have not been shy about the fact that we're not solely dependent on the category for growth because of the sort of the incremental distribution opportunities. And so we don't believe at this point that GLP-1s will be a deciding factor in our ability to grow. And, you know, interestingly, we were talking earlier about the category growing in the first quarter and change. and that's been really kind of despite the introduction of GLP-1 pills and some of the other trends. So while we haven't really made any public statements or quantified the impact on GLP-1s, we do understand that it is something that is affecting consumer choices and it really will become a question of kind of how. Is it a tool that consumers use to lose weight and then they rotate off of it? Or is it something that the consumer, you know, kind of stays on? If it's cyclic, we think the impact will be slightly different as they rotate in and off like they would any other diet. And if it is sort of a more consistent weight management tool that a consumer uses longer term, that will habituate new behaviors and new activities that we will tailor our portfolio to meet those needs, whether it's protein or fiber or other benefits. So, you know, overall, I think it is certainly something that's happening with the consumer, but I think we feel pretty good that it's something that we can work around and work to address to make sure that our growth continues.

Great. So that's a good segue into the next area I want to cover, just innovation, just overall, you know, high level, just how do you feel about your innovation pipeline and better for you? So maybe we'll just start there, just overall thoughts on just innovation.

Yeah, you You know, if I were to give you a theme on our innovation, it's, you know, more significant bets, right? We've been at the innovation game since I've been here and obviously predates me. But what we've been trying to do is continue to invest in and build our capabilities around our innovation understanding and thinking. And, you know, we have some of the usual flavor in and out innovation with us and some other brands. But, you know, we've also introduced things like tallow and flavored tortilla chips from Boulder, which were obviously much more significant initiatives. And we also have launched the UTS brand with protein, with cheese and pretzels. So, you know, while we haven't talked as much about some of the others, it is, I think, a really good pipeline. And we're pretty proud of it. And then we have a good portfolio of products around Megalitos, which we talked about as our value brand. And so, you know, as you look at 26, I think we feel really good about where we are, but also confident in our 27, 28 outlooks, which, you know, we won't talk about here today. But just know that there will continue to be this will continue to be a big agenda for us as we go forward.

And as we look at some of your recent innovations like the beef tallow, protein pretzels, overall, how is it performing versus your team's expectations?

Yeah. So, I mean, obviously on protein a little bit earlier, early to call because, you know, it was really coming in the latter half of Q2. So it's kind of just hitting the market now. Consumer response has been has been good. But, you know, we're still watching that. I think Tallo, we've been we've been very encouraged by as well. Some of the early consumer interactions and early merchandising events we've had have sold very nicely. So feel good about that.

We're that we're on to something and something that we can do uniquely, given kind of our history with grandma huts which is a different brand that we don't talk as much about but really understanding different types of oils including animal fat is a capability that we have great i'm going to switch gears to marketing so marketing has been it has been a big focus for the company since howard you stepped into the coc so curious what you see as a bigger opportunities going forward to optimize and enhance your efforts on the marketing front are you pleased with the returns you're seeing on your marketing ad spend?

Yeah, so I haven't been shy about wanting to make sure that we can compete as, you know, as branded companies do, right? And so we have been investing steadily in marketing, which I think manifests itself in both communication, innovation, as well as making sure that we have a point of view for some of our bigger brands. And so far, I think we're very pleased with both the consumer response to them as well as our ability to fund the journey along the way. Obviously, by having increased our spending, it allows us to launch bigger innovation, allows us to bring consumers into our business overall. And I think we feel great about where we are, and I think we're just getting started.

Great. And then you're targeting marketing investments to represent 3% to 4% of sales over time. Why is this a sweet spot for us? And how does this benchmark compare versus your peers?

Yeah, so actually, you know, when we have looked both historically at the DSMAC as well as even today of brands and businesses in a similar size, that 3% to 4% feels like would give us a share of always commensurate with our overall business size. So it would put us in line. I would love to spend more as we go, but that will be contingent on us continuing to show the returns that we want. because, as you know, a marginal dollar in our portfolio has a lot of places it can go. And, you know, I think when you start talking to BK, he'll tell you he loves strong, powerful brands, and he likes brands that we can monetize, and he likes good returns. And so right now we're delivering all of those things, and we anticipate that will continue into the future.

Okay, great. Now I'd like to wrap up with a few financial questions. So on your Q1 call last month, your team seemed pretty confident in navigating the recent increase in energy prices. Can you remind us how you're thinking about the impacts here this year? And what do you see as the opportunities to manage through these headwinds if they persist into next year?

Hi, Rupesh. I'll take this one. Good to be with you. And Howard's like, right, I like all those things that he just said. Thank you for your question. As it relates to 2026, you know, what we said is that we were close to fully hedged energy and fuel for the year and that the most notable place we had some exposure in the back half as the oil prices continue to increase would be on resident-based packaging like film. Specifically, based on today's prices, give or take, we think we can still navigate this source of pressure in 2026. Just as a reminder, the levers we have beyond 26 are productivity, our revenue growth management that Howard talked about in terms of managing some of those pieces mix, and we will still try to grow our top line. So all CPG companies are going to be forced to navigate inflation if it proves more sticky, but we feel pretty good about the number of levers we have and where we can pull them going forward.

Okay, great. And then earlier this year at Cagney, your team updated your financial algorithm calling for organic sales growth. of two to three points faster than the salty snacks category and six to eight percent adjusted EBITDA growth. Additionally, you highlighted the longer-term sales potential of 1.9 billion and a potential achieved 17 percent adjusted EBITDA margins over time. What gives your team confidence in delivering on these targets, especially on the top line?

Thanks, Rufesh. So first, the adjusted EBITDA margin of 17 percent and the $1.9 billion of sales were meant to give a sense of long-term potential value without committing us to a set timeline. That was very intentional on our part, given the environment has remained dynamic, particularly during the last few years, and with category growth more uneven. The algorithm of two to three points above category and adjust even our growth of 68% is more controllable to us. We were in this range in 2025 on both fronts. And while 2026 has some incremental investments we have to make that were included in our guidance from the California investments, as an example, offset partially by the benefit of the 53rd week, 6% to 8% feels achievable longer term, given we have very good confidence in at least 4% annual productivity on a multi-year basis. The level of investment can be probably metered to adjust to what we are seeing in the category, our own opportunity set, inflation, and other factors.

Great. That's a good segue into my next question. So the 4% annual longer-term productivity target, I think it would be helpful if you could maybe summarize some of the bigger opportunities that you see to achieve this target.

Yeah, so first, you know, there remain significant opportunities in procurement through areas like value engineering. You know, second, on the manufacturing side, automation and better efficiency remains a longer-term opportunity over a multi-year basis. You know, even though our CapEx is decreasing, a noble part of our CapEx budget is earmarked for these productivity-related projects. So, even though we went to seven major facilities, we think there's still opportunity in the network to be more efficient and automated. And then in the final area, you know, logistics and distribution are still an opportunity for us. On the logistics side, ensuring we are being more efficient with the freight modes we are using, lanes we are using, things of that nature. On the distribution network side, we have closed to 140 DSD warehouses. We alluded to trying to make that network as efficient as possible for both the company and our independent operator partners. Putting it together, there are many things in the pipeline, and we are already working on the next several years of productivity plans.

Okay, great. Another area that's a hot topic in our investor conversation is free cash flow. So your team is very focused on free cash flow generation than we've seen in the past, targeting $60 million to $80 million this year and $100 million annually thereafter. So, I know CapEx is expected to step down, but just overall, you know, other opportunities you see to improve cash flows going forward?

Thank you. You know, it definitely has been a focus. CapEx and lower cash restructuring are two key places that you've already mentioned. On the working capital front, we are pursuing the usual areas on cash conversion improvement, bringing in AR more efficiently and quickly, looking at payment terms and harmonizing those where possible, managing inventory across the network, both through finished goods and raw materials.

Okay, great. And the last, I would say, hot topic that comes up in our conference is just leverage. And I know since Howard's joined, you guys have made a ton of progress. So if you could just talk about your conference and getting closer to three times leverage by the end of the year.

Great. Thanks for that. In Q1, we significantly improved year on year. We got it down to 3.6 times. That's the lowest Q1 leverage since being public. We do not see any sort of step up from here, and we see continued improvement as we go through the year, especially in Q3 and Q4 when we seasonally release cash. So our guidance range of 3 to 3.2 times, and we feel confident in that range. Great.

So I want to wrap up with one final question just on capital allocation. If you could just remind us of the priorities that your team has on the capital allocation front going forward.

You know, we continue to invest a healthy amount in CapEx to drive productivity, although it is normalizing from the high levels of 2024 and 2025. De-leveraging is certainly the key priority right now beyond our business investment. After that, you know, we'll continue to pay our regular dividend and grow it modestly over time. We also have the shared buyback in place as a tool to be opportunistic. And while we're still making sure we deliver on the other priorities I just mentioned. great so i'd like to thank the ops management team for joining us today thanks for having me thank you