Utz Brand's Q3 2025: Contradictions Emerge on Investment Strategies, Pricing Dynamics, Bonus Pack Impact, and Growth Initiatives

Date of Call: September 28, 2025

Financials Results

• Revenue: Net sales up 3.4% YOY (organic net sales growth 3.4%; branded salty snacks organic net sales +5.8%)
• EPS: Adjusted EPS up 9.5% YOY
• Gross Margin: Adjusted gross profit margin expanded 210 basis points YOY
• Operating Margin: Adjusted EBITDA margin 16%, expanded 120 basis points YOY

Guidance:

• Organic net sales growth for 2025 expected to be approximately 3% (raised from prior ~2.5%).
• Adjusted EBITDA growth guidance reiterated at 7%–10%; adjusted EPS guidance 7%–10%; Q4 adjusted EBITDA to exceed Q3 by a few million.
• Effective normalized tax rate 17%–19%; interest expense ~ $46M; 2025 capex expected ~$100M focused on supply chain.
• Expect net leverage approaching/below 3x by year-end 2025; preliminary 2026 capex $60–70M and productivity to normalize to ~3%–4%.

Business Commentary:

• Strong Sales and Volume Growth:
• The company reported a 3.4% increase in net sales for the third quarter, with branded salty snacks leading the growth at 5.8%.

• The growth was driven by the momentum of the Power4 brands, which increased 7.1% in retail sales dollars, and the expansion in new markets like California.

• Expansion in California:

• The acquisition of Insignia International's direct store delivery assets in California represents a major westward expansion strategy.

• This move is expected to unlock significant opportunities, as California is the largest salty snack market in the U.S. with a current market share of only 1.9% for the company.

• Profitability and Margin Expansion:

• Adjusted EBITDA for the third quarter was up 11.7%, with adjusted EBITDA margin expanding by 120 basis points to 16%.

• Productivity initiatives, offsetting supply chain costs and inflation, as well as investments in sales and marketing, contributed to the margin expansion.

• Productivity and Efficiency Initiatives:

• The company achieved a productivity target of approximately 6% of adjusted COGS for 2025 through supply chain investments and transformation.
• These initiatives include automating processes like central palletizing and consolidating production facilities, aimed at enhancing efficiency and capability.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 3.4% net sales growth, branded salty snacks organic growth of 5.8%, adjusted EBITDA up 11.7% and adjusted EPS up 9.5%. Adjusted EBITDA margin expanded to 16% (up 120 bps) and management stated confidence in approaching sub-3x leverage by year-end driven by productivity, working capital initiatives and planned real estate divestitures.

Contradiction Point 1

Investment and Infrastructure Expansion

It highlights inconsistencies in the company's strategy and commitment to infrastructure investments, which directly affect operating costs and future growth potential.

Can you provide an overview of the introduction and management section? - Trevor, Investor Relations/Moderator

2025Q3: We are excited about the acquisition of Insignia International’s direct store delivery assets, enhancing our distribution capabilities in California. We are particularly pleased with this acquisition from an outgrowth opportunity perspective. - Howard Friedman(CEO)

EBITDA remained flat in the first half, yet you’re targeting 8.5% annual growth. How do you remain confident in this outlook despite the first-half flatness? - Andrew Lazar (Barclays Bank PLC)

2025Q2: We have a significant investment in productivity that will contribute to margin expansion. A plant closure is also expected to impact the back half positively. - Howard A. Friedman(CEO)

Contradiction Point 2

Volume and Pricing Dynamics

It involves differing explanations of the volume and pricing dynamics, which are crucial for understanding sales growth and market performance.

Can you provide an introduction and management overview? - Trevor, Investor Relations/Moderator

2025Q3: Our net sales increase of 3.4% was led by volume mix growth of 4.5%. This was partially offset by lower pricing of 1.1%. - B.K. Kelley(CFO)

Can you explain the distribution gains in the Midwest and how they support your westward expansion? - Michael Lavery (Piper Sandler & Co.)

2025Q2: We're gaining distribution across channels like club, discount, and dollar. This expansion allows us to build strength upon strength, leading to incremental space in core and expansion markets. - Howard A. Friedman(CEO)

Contradiction Point 3

Bonus Packs and Volume Share Impact

It involves the impact of bonus packs on volume share, which directly affects the company's sales and market performance.

What updates can you share on brand and market performance? - Howard Friedman(CEO)

2025Q3: Our strong consumption results reflect sustained momentum of Boulder Canyon, strong gains and expansion geographies, including from Huts, our largest brand and Target and promotional investments. We posted 4.8% dollar consumption growth in the quarter, driven by 3% volume growth. - Howard Friedman(CEO)

Was the bonus pack impact on volume/mix a similar 300 basis points offset as the price impact mentioned in Slide 23? - Peter Galbo(Bank of America)

2025Q1: Bonus packs contributed significantly, with about 300 basis points impacting price. Most of this was value-based, not necessarily related to brand enhancement. - Ajay Kataria(CFO)

Contradiction Point 4

Investment in Growth Initiatives

It highlights changes in the company's approach to investing in growth initiatives, which can impact future growth and profitability.

How does management plan to address the current supply chain disruptions impacting Q4 product deliveries? - [Questioner's Name]([Questioner's Company])

2025Q3: We delivered strong margin performance with adjusted EBITDA up 11.7%, adjusted earnings per share rising 9.5%, and adjusted gross profit margin expansion of two ten basis points. Our productivity initiatives drove these gains, allowing us to offset other supply chain costs and inflation and fund our continued SD and A investments. - B.K. Kelley(CFO)

What are the key factors driving EBITDA margin expansion, and how do you separate 2025 sales deceleration from margin expansion expectations? - Robert Moskow (TD Cowen)

2024Q4: Our productivity program is strong. We'll deliver about $150 million of productivity over three years. The algorithm is productivity generating gross margin, with investments in supply chain and net EBITDA margin expansion of about 80 basis points. - Ajay Kataria(CFO)