UTZ Brands (UTZ) Q3 2024 [Q&A] earnings summary

Executive summary

• Q3 2024 net sales were $365.5M, with organic net sales up 1.9% year-over-year, driven by Power Brands and increased marketing, despite divestitures impacting reported sales.

• Adjusted EBITDA increased 3.6% to $54.0M, marking the seventh consecutive quarter of margin expansion, supported by productivity initiatives.

• Full-year organic growth outlook of 2%-2.5% reaffirmed, requiring Q4 acceleration to at least 3.5% from Q3's 1.9% growth.

• Power Brands and Expansion geographies led volume and share gains, with Boulder Canyon and On The Border driving household penetration.

• Major divestitures included the sale of Good Health and R.W. Garcia brands and manufacturing facilities, generating $185.9M in proceeds and impacting reported sales.

Financial highlights

• Q3 net sales declined 1.7% year-over-year due to divestitures, but organic net sales increased 1.9%.

• Gross profit margin expanded to 35.8% in Q3, with adjusted gross margin up 270bps to 39.0% year-over-year.

• Adjusted EBITDA margin improved to 14.8% from 14.0% a year ago.

• Adjusted EPS grew 23.5% to $0.21, with adjusted net income up 20.3% to $29.6M.

• Net cash from operations (YTD) was $52.0M; net debt at $731.5M; net leverage ratio at 3.7x.

Outlook and guidance

• FY2024 organic net sales growth expected at 2%-2.5%, with Q4 acceleration supported by distribution, marketing, and innovation.

• Adjusted EBITDA growth forecasted at 5%-8%; adjusted EPS growth at 28%-32%.

• Year-end net leverage ratio targeted at ~3.6x; capex guidance unchanged at $80–$90M.

• Kings Mountain facility to add kettle production capacity in Q1 2025, supporting Boulder Canyon growth.

• C-Store channel expected to become less of a headwind in 2025.