Utz Brands Reports Fourth Quarter and Full Year 2022 Results

HANOVER, Pa.–(BUSINESS WIRE)–Utz Brands, Inc. (NYSE: UTZ), a leading U.S. manufacturer of branded salty snacks, today reported financial results for the Company’s fiscal fourth quarter and full year ended January 1, 2023. 

4Q’22 Summary:

• Net sales increased 17.9% year-over-year to $354.7 million
• Organic Net Sales increased 15.9% year-over-year
• Gross profit margin expanded to 32.5% vs. 30.1% in the year-ago period
• Adjusted Gross Profit Margin expanded to 36.6% vs. 34.4% in the year-ago period
• Net income of $13.8 million vs. a net loss of $(16.2) million in the year-ago period
• Adjusted EBITDA increased 17.0% year-over-year to $44.1 million

FY’22 Summary:

• Net sales increased 19.3% year-over-year to $1,408.4 million
• Organic Net Sales increased 15.5% year-over-year
• Net loss of $(14.0) million vs. net income of $8.0 million in the year-ago period
• Adjusted EBITDA increased 9.2% year-over-year to $170.5 million

FY’23 Outlook Highlights:

• Utz expects Organic Net Sales growth of 4% to 6%. The Company expects to grow Adjusted EBITDA by 6% to 10%.

^{See the description of the Non-GAAP financial measures mentioned in this press release and reconciliations of the Non-GAAP adjusted measures to the most comparable GAAP measures in the tables that accompany this press release.}

“I’m proud of our team’s execution amidst a challenging environment to deliver strong full-year results that exceeded the outlook we set at the beginning of 2022. Our Utz associates did an exceptional job delivering those results while building for an even brighter future,” said Howard Friedman, Chief Executive Officer of Utz. “Looking ahead to 2023, we are well-positioned for another year of sales and Adjusted EBITDA growth, while we continue to make investments in our people, brands, selling infrastructure, and supply chain capabilities. I’m thrilled to be leading Utz at such an exciting time in our growth journey, and I look forward to building on our strong 100-year foundation.”

Fourth Quarter and Full Year 2022 Financial Highlights

Fourth Quarter 2022 Results

Net sales in the quarter increased 17.9% to $354.7 million compared to $300.9 million in the fourth quarter of 2021. The increase in net sales was driven by Organic Net Sales growth of 15.9% and acquisitions of 3.0%, partially offset by the Company’s continued shift to independent operators and the resulting increase in sales discounts that impacted net sales growth by (1.0%).

Organic Net Sales growth was driven by favorable price/mix of 17.9%, partially offset by volume declines of (2.0%). The volume decline was primarily due to SKU rationalization focused on reductions in private label and certain partner brands, and lapping stronger activity in the Mass channel in the prior year.

For the 13-week period ended January 1, 2023, the Company’s retail sales, as measured by IRI MULO-C, increased 14.3% versus the prior-year period and the Company’s Power Brands’ retail sales increased 15.1% versus the prior-year period⁽¹⁾. Power Brands’ sales growth versus the prior-year period was led by Utz®, On The Border®, Zapp’s®, Hawaiian®, Boulder Canyon®, and TGI Fridays®. The Company’s Foundation Brands retail sales increased 9.4%⁽²⁾.

^{(1) IRI Total US MULO-C, custom Utz Brands hierarchy, on a pro forma basis.
(2) IRI does not include certain Partner Brands and Private Label sales that are not assigned to Utz Brands.}

Gross profit increased 27.5% to $115.4 million, or 32.5% as a percentage of net sales, compared to gross profit of $90.5 million, or 30.1% as a percentage of net sales, in the prior-year period. Adjusted Gross Profit increased 25.3% to $129.7 million, or 36.6% as a percentage of net sales, compared to Adjusted Gross Profit of $103.5 million, or 34.4% as a percentage of net sales, in the prior-year period. The increase in Adjusted Gross Profit as a percentage of net sales was primarily driven by higher net price realization, improved mix, and ongoing benefits from the Company’s productivity programs. These benefits were partially offset by higher commodity, transportation, and labor inflation, which are collectively the result of industry-wide supply chain challenges. Additionally, the Company estimates that the continued shift to Independent Operators negatively impacted Adjusted Gross Margins by approximately 100 basis points, but with offsetting benefits in Selling, Distribution, and Administrative (“SD&A”) expense.

The Company reported a net income of $13.8 million compared to loss of $(16.2) million in the prior-year period. Adjusted Net Income in the quarter increased 34.4% to $21.5 million compared to $16.0 million in the prior-year period.

Adjusted EBITDA increased 17.0% to $44.1 million, or 12.4% as a percentage of net sales, compared to Adjusted EBITDA of $37.7 million, or 12.5% as a percentage of net sales, in the prior year period. The Adjusted EBITDA margin performance versus last year was the result of higher Adjusted Gross Profit, offset by higher Adjusted SD&A expense, both versus the prior-year period. Consistent with the Company’s expectations, SD&A expense increased in the quarter primarily driven by higher accruals for incentive compensation, and increased investments in our people, brands, selling infrastructure, and supply chain capabilities to support growth.

Balance Sheet and Cash Flow Highlights

As of January 1, 2023:

• Cash on hand of $72.9 million and $163.0 million was available under the Company’s revolving credit facility, providing liquidity of approximately $236 million.
• Net debt of $860.3 million resulting in a Net Leverage Ratio of 5.0x based on Normalized Adjusted EBITDA of $170.7 million for fiscal 2022, before giving effect to anticipated acquisition synergies of $7.9 million in fiscal 2022⁽³⁾.

For the 52-weeks ended January 1, 2023:

• Cash flow provided by operations was $48.2 million, which is comprised of $71.2 million of operating cash flows less the buyout of third-party distributors of $23.0 million.
• Capital expenditures were $88.0 million, of which $38.4 million was related to the purchase of the Kings Mountain facility, and $49.6 million was primarily related to growth investments.

^{(3) Anticipated acquisition synergies represent identified unrealized integration-related cost savings. The inclusion of these cost savings was originally assumed in the Company’s fiscal 2022 leverage outlook provided on November 10, 2022.}

Fiscal Year 2023 Outlook

In fiscal 2023, the Company expects:

• Total net sales growth of 3% to 5% and Organic Net Sales growth of 4% to 6%, with the Company’s continued shift to Independent Operators impacting total net sales growth by (1.0%). Net sales growth is expected to be driven by net price realization, increased marketing and innovation, and continued distribution gains of the Company’s Power Brands, partially offset by the Company’s SKU rationalization program. Based on these assumptions, the Company expects sales volumes consistent with fiscal 2022.

• Adjusted EBITDA growth of 6% to 10% as gross margin expansion is expected to more than offset higher advertising and marketing expenses, and continued investments in capabilities and selling infrastructure.

The Company also expects:

• An effective tax rate (normalized GAAP basis tax expense, which excludes one-time items) in the range of 20% to 22%;
• Interest expense of approximately $55 million;
• Capital expenditures in the range of $50 to $55 million; and
• Net Leverage Ratio below 4.5x at year-end fiscal 2023.

With respect to projected fiscal 2023 Adjusted EBITDA, a quantitative reconciliation is not available without unreasonable efforts due to the high variability, complexity, and low visibility with respect to certain items which are excluded from Adjusted EBITDA. We expect the variability of these items to have a potentially unpredictable, and potentially significant, impact on our future financial results.

About Utz Brands, Inc.

Utz Brands, Inc. (NYSE: UTZ) manufactures a diverse portfolio of savory snacks through popular brands including Utz®, On The Border® Chips & Dips, Golden Flake®, Zapp’s®, Good Health®, Boulder Canyon®, Hawaiian Brand®, and TORTIYAHS!®, among others.

After a century with strong family heritage, Utz continues to have a passion for exciting and delighting consumers with delicious snack foods made from top-quality ingredients. Utz’s products are distributed nationally through grocery, mass merchandisers, club, convenience, drug, and other channels. Based in Hanover, Pennsylvania, Utz has multiple manufacturing facilities located across the U.S. to serve our growing customer base. For more information, please visit www.utzsnacks.com