Utz Brands Reports Fourth Quarter and Full-Year 2020 Financial Results

Utz Brands, Inc. (NYSE: UTZ) (“Utz” or the “Company”), a leading U.S. manufacturer of branded salty snacks, today reported financial results for the Company’s 14-week fiscal fourth quarter and 53-week fiscal 2020 ended January 3, 2021.

“2020 was a transformational year for Utz. We began our new chapter as a publicly traded company, and we delivered double-digit retail sales growth, making Utz the #3 brand platform in U.S. Salty Snacks and one of the fastest growing salty snack platforms of scale. Growth was led by our Power Brands and we added three million more buyers during the year. Despite the challenges of the pandemic and the demanding environment for our team, we reacted quickly and put protocols in place to protect our associates and customers, which enabled us to deliver these strong results,” said Dylan Lissette, Chief Executive Officer of Utz. “Looking ahead, we remain excited about our opportunity for continued long-term profitable growth, as we actively deploy our value creation strategies for the benefit of our stockholders.”

Fourth Quarter and Full-Year 2020 Financial Highlights

Fourth Quarter and Full-Year 2020 Growth Highlights

For the 13-week period ended December 27, 2020, our retail sales as measured by IRI MULO-C increased 9.3%, significantly above the total salty snack category growth of 7.1%, as we continued to perform well across most product sub-categories, channels and geographies. Our IRI retail sales growth exceeded our pro forma net sales growth due primarily to the impact of unmeasured channels and the increase in IO discounts.

For the 13-week period ended December 27, 2020, Power Brands retail sales growth of 11.1% was led by Utz®, ON THE BORDER®, Zapp’s®, TORTIYAHS!®, Golden Flake® Pork Skins and Boulder Canyon® brands. The retail sales decline of 1.2% in Foundation Brands reflects our strategy to focus on our Power Brands, and softness in the convenience channel primarily due to COVID-19. Conversely, our Power Brands have a stronger presence in the large format channels which continued to perform well during the quarter.

IRI Retail Sales YoY Growth Highlights(1)

Fourth Quarter 2020 Financial Results

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

Net sales for the 14-week fourth quarter of 2020 increased 22.1% to $246.3 million compared to $201.8 million for the 13-week fourth quarter of 2019. The Company’s fourth quarter 2020 results benefited from the impact of the 53rd week in fiscal 2020 and estimates the “extra week” contributed approximately $16 million in net sales. The 22.1% increase in net sales for the fourth quarter of 2020 was driven by acquisitions of +10.6%, the additional week of +7.9%, volume gains of +4.1%, and favorable price/mix of +1.0%, partially offset by our continued shift to independent operators (“IO”) and the resulting increase in sales discounts of 1.5%.

Pro Forma Net Sales increased 6.8% on a comparable 13-week basis to $268.6 million versus $251.5 million for the fourth quarter of 2019. Pro Forma Net Sales assumes the Company owned Kennedy Endeavors, Kitchen Cooked, H.K. Anderson and Truco Enterprises on the first day of fiscal 2019.

Gross profit increased 24.2% to $81.6 million, or 33.1% as a percentage of net sales, for the 14-week fourth quarter of 2020, compared to $65.7 million, or 32.6% as a percentage of net sales, during the 13-week fourth quarter of 2019. Adjusted Gross Profit for the fourth quarter of 2020 increased 27.5% to $90.5 million, or 36.7% as a percentage of net sales, compared to $71.0 million, or 35.2% as a percentage of net sales, in the prior year period during the 13-week fourth quarter of 2019.. The increase in Adjusted Gross Profit as a percentage of net sales was primarily driven by scale benefits in our manufacturing network from higher volume, price/mix, and lower commodity costs.

Selling and Administrative expenses were $82.2 million for the 14-week fourth quarter of 2020 compared to $80.5 million in the 13-week fourth quarter of 2019. Adjusted Selling and Administrative Expenses for the fourth quarter of 2020 were $56.9 million, or 23.1% as a percentage of net sales, compared to $57.0 million, or 28.2% as a percentage of net sales, in the prior year period. The decrease in Adjusted Selling and Administrative Expenses as a percentage of net sales was primarily due to the timing of certain selling expenses in the prior period, partially offset by higher incentive compensation in the current period due to the Company’s strong performance in fiscal 2020 as well as increased brand marketing investments.

Net loss was $(13.6) million for the 14-week fourth quarter of 2020, compared to a net loss of $(24.0) million for the 13-week fourth quarter of 2019. The net loss during the fourth quarter of 2020 was primarily driven by transaction expenses related to the acquisition of Truco Enterprises which closed in December 2020. Adjusted Net Income in the fourth quarter of 2020 was $20.4 million compared to Adjusted Net Income of $0.5 million in the fourth quarter of 2019.

Adjusted EBITDA increased $17.4 million to $34.0 million, or 13.8% as a percentage of net sales, for the 14-week fourth quarter of 2020, compared to $16.6 million, or 8.2% as a percentage of net sales, in the 13-week fourth quarter of 2019. The Company estimates the “extra week” contributed approximately $3 million in Adjusted EBITDA. The improved Adjusted EBITDA margin was driven by a combination of Adjusted Gross Margin expansion and a reduction in Adjusted Selling and Administrative Expense, as a percent of net sales.

Balance Sheet and Cash Flow Highlights

Subsequent to the end of fiscal year 2020, on January 20, 2021, the Company placed a new $720 million Term Loan B due 2028 that extended the maturity profile by over three years and reset certain credit agreement terms, providing increased financial flexibility. Together with approximately $181 million in cash from the exercise of the public warrants and forward purchase warrants in advance of the redemption date, the Company repaid in full the $490 million Bridge Credit Facility used to fund the acquisition of Truco Enterprises and the rights to the ON THE BORDER® brand. In addition, Utz refinanced its existing $410 million Term Loan B due 2024. This refinancing resulted in a 2020 pro forma net leverage ratio of 3.7x based on Normalized Further Adjusted EBITDA of $186.4 million and Pro Forma Net Debt of $691.7 million.

Capital expenditures totaled $6.9 million in the fourth quarter, and $21.7 million for the 53-weeks ended January 3, 2021. Excluded from these capital expenditure amounts was spend of $3.4 million and $7.2 million in the fourth quarter and full-year, respectively, related to the Company’s cloud-based ERP implementation.

Acquisition of VITNER’S®

On January 11, 2021, Utz announced that it entered into a definitive agreement with Snak-King Corp. to acquire certain assets of the C.J. Vitner business, a leading brand of salty snacks based in the Chicago, IL area. Utz closed on this transaction on February 8, 2021 and the purchase price of approximately $25 million was funded from current cash-on-hand. The acquisition further strengthens Utz’s position in the Chicago metropolitan area, which complements our third-party distribution partners there and across the state of Illinois where Utz had previously acquired Kitchen Cooked’s Central Illinois DSD platform.

Fiscal Year 2021 Outlook

“We are encouraged with our start to 2021 with solid year-to-date retail sales growth through the end of February. While we will begin to lap strong results from the impact of COVID-19 in the prior year, our brands are well-positioned for long-term growth. Based on the significant increase in new buyers and higher repeat rates of purchase over the past twelve months, we believe that the COVID-19 impact on at-home eating occasions will have a lasting, beneficial impact to long-term demand trends. Our projected pro forma two-year CAGR for fiscal 2020 and 2021 of approximately 6% is well above our stated long-term organic growth outlook of 3 to 4%, and we will continue to invest incremental marketing dollars to build our brands and accelerate revenue growth,” said Cary Devore, Chief Financial Officer of Utz.

“From a cost and margin standpoint, our productivity efforts are on-target and set to double to 2% of COGS in 2021, and we remain on track to ramp up to our previously stated productivity goals of 3-4% of COGS by 2023. In addition, we are implementing pricing initiatives to help offset expected commodity inflation of approximately 4%. We will continue to pursue actions that strengthen our long-term fundamentals, and our goal remains to be the fastest growing, pure-play branded snack platform of scale in the U.S.,” Devore added.

For the 52-week fiscal year ending January 2, 2022, the Company is providing the following guidance:

• Net sales consistent with 2020 Pro Forma Net Sales of $1.16B(1) with modest organic sales growth year over year. The Company’s projected pro forma two-year CAGR for fiscal 2020 and 2021 of approximately 6% is well-above the Company’s long-term growth outlook of 3 – 4%.
• Adjusted EBITDA of $180 – $190 million(2) versus 2020 Further Adjusted EBITDA of $181 million(3), delivering a margin of approximately 16%.
• Adjusted Earnings Per Share of $0.70 – $0.75, which excludes step-up depreciation & amortization (“D&A”), stock compensation expense, and non-recurring items. This assumes fully diluted shares on an as-converted basis of approximately 142 million.

In addition to the risks and uncertainties identified under “Forward-Looking Statements,” the Company’s 2021 guidance is estimated based on the following assumptions:

• Funded $25 million Vitner's acquisition in February 2021 with balance sheet cash
• Expecting 200 – 250 Independent Route (“IO”) conversions
• Core D&A of $25 – $27 million and step-up D&A of $57 – $59 million, both comprised of approximately 2/3 cost of goods sold and 1/3 selling and administrative expense
• Capital expenditures of $30 – $40 million
• Commodity inflation of approximately 4%
• Productivity of approximately 2% of cost of goods sold
• Cash interest expense of approximately $30 million(4)
• Effective cash tax rate of 23.0 - 25.0% (% of pre-tax book income)
• Net leverage ratio of approximately 3.5x by end of 2021(5)

For the purpose of the Company’s fiscal 2021 outlook, the Company has assumed (i) the macroeconomic environment continues as it has for the last several months and (ii) there is no significant change on the Company from the impact of COVID-19.

With respect to projected fiscal year 2021 Adjusted EBITDA and Adjusted Earnings Per Share, 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, and which are excluded from Adjusted Earnings per Share. We expect the variability of these items to have a potentially unpredictable, and potentially significant, impact on our future financial results.

Conference Call and Webcast Presentation

The Company will host a conference call to discuss these results today at 8:30 a.m. Eastern Time. Please visit the “Events & Presentations” section of Utz’s Investor Relations website at https://investors.utzsnacks.com/ to access the live listen-only webcast and presentation. Investors can also dial in over the phone by calling (833) 670-0764 from the North America and (343) 761-2595 internationally. The Company has also posted presentation slides and additional supplemental financial information, which are available now on Utz’s Investor Relations website.

A replay will be archived online and is also available telephonically approximately two hours after the call concludes through Thursday, March 25, 2021, by dialing (800) 585-8367 from North America, or (416) 621-4642 from international locations, and entering confirmation code 7688957.

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 nearly 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 and internationally through grocery, mass merchant, club, convenience, drug and other channels. Based in Hanover, Pennsylvania, Utz operates fourteen facilities located in Pennsylvania, Alabama, Arizona, Illinois, Indiana, Louisiana, Washington, and Massachusetts. For more information, please visit www.utzsnacks.com or call 1‐800‐FOR‐SNAX.

Investors and others should note that Utz announces material financial information to its investors using its investor relations website (https://investors.utzsnacks.com/investors/default.aspx), SEC filings, press releases, public conference calls and webcasts. Utz uses these channels, as well as social media, to communicate with our stockholders and the public about the Company, the Company’s products and other issues. It is possible that the information that Utz posts on social media could be deemed to be material information. Therefore, Utz encourages investors, the media, and others interested in the Company to review the information posted on the social media channels listed on Utz’s investor relations website.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Utz’s actual results may differ from its expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, Utz’s expectations with respect to future performance. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside Utz’s control and are difficult to predict. Factors that may cause such differences include, but are not limited to: the risk that the recently completed business combination with Collier Creek Holdings and other acquisitions recently completed by Utz (collectively, the “Business Combinations”) disrupt plans and operations; the ability to recognize the anticipated benefits of such Business Combination, which may be affected by, among other things, competition and the ability of the Company to grow and manage growth profitably and retain its key employees; the outcome of any legal proceedings that may be instituted against the Company following the consummation of such Business Combinations; changes in applicable law or regulations; costs related to the Business Combinations; the inability of the Company to maintain the listing of the Company’s Class A Common Stock on the New York Stock Exchange; the inability of the Company to develop and maintain effective internal controls; the risk that the Company’s gross profit margins may be adversely impacted by a variety of factors, including variations in raw materials pricing, retail customer requirements and mix, sales velocities and required promotional support; changes in consumers’ loyalty to the Company’s brands due to factors beyond the Company’s control; changes in demand for the Company’s products affected by changes in consumer preferences and tastes or if the Company is unable to innovate or market its products effectively; costs associated with building brand loyalty and interest in the Company’s products, which may be affected by the Company’s competitors’ actions that result in the Company’s products not suitably differentiated from the products of competitors; fluctuations in results of operations of the Company from quarter to quarter because of changes in promotional activities; the possibility that the Company may be adversely affected by other economic, business or competitive factors; and other risks and uncertainties set forth in the section entitled “Risk Factors” and “Forward-Looking Statements” in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “Commission”) for the fiscal year ended January 3, 2021 and other reports filed by the Company with the Commission. Some of these risks and uncertainties may in the future be amplified by the COVID-19 outbreak and there may be additional risks that Utz considers immaterial or which are unknown. It is not possible to predict or identify all such risks. Utz cautions that the foregoing list of factors is not exclusive. Utz cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Utz does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, except as otherwise required by law.

Non-GAAP Financial Measures:

Utz uses non-GAAP financial information and believes it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provides additional insight and transparency on how we evaluate the business. We use non-GAAP financial measures to budget, make operating and strategic decisions, and evaluate our performance.

Management believes that non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies. We believe that the presentation of non-GAAP financial measures is useful to investors in the evaluation of our operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by the companies in this industry.

Utz uses the following non-GAAP financial measures in its financial communications, and in the future could use others:

• Pro Forma Net Sales
• Adjusted Gross Profit
• Adjusted Gross Profit as % of Net Sales (Adjusted Gross Profit Margin)
• Pro Forma Gross Profit
• Pro Forma Adjusted Gross Profit
• Adjusted Selling and Administrative Expense
• Adjusted Selling and Administrative Expense as % of Net Sales
• Adjusted Net Income
• EBITDA
• Adjusted EBITDA
• Adjusted EBITDA as % of Net Sales (Adjusted EBITDA Margin)
• Further Adjusted EBITDA
• Further Adjusted EBITDA as % of Pro Forma Net Sales (Further Adjusted EBITDA Margin)
• Normalized Further Adjusted EBITDA

Pro Forma Net Sales is defined as Net Sales including the historical net sales relating to the pre-acquisition periods of Kennedy, Kitchen Cooked, H.K. Anderson and Truco Enterprises acquisitions.

Adjusted Gross Profit represents Gross Profit excluding Depreciation and Amortization expense, a non cash item. In addition, Adjusted Gross Profit excludes the impact of costs that fall within the categories of non-cash adjustments and non-recurring items such as those related to stock-based compensation, hedging and purchase commitments adjustments, asset impairments, acquisition and integration costs, business transformation initiatives, and financing-related costs. Adjusted Gross Profit is one of the key performance indicators that our management uses to evaluate operating performance. We also report Adjusted Gross Profit as a percentage of Net Sales as an additional measure for investors to evaluate our Adjusted Gross Profit margins on Net Sales.

Pro Forma Gross Profit is defined as Gross Profit including the historical Gross Profit relating to the pre-acquisition periods of Kennedy, Kitchen Cooked, H.K. Anderson and Truco Enterprises acquisitions.

Pro Forma Adjusted Gross Profit is defined as Adjusted Gross Profit including the historical Adjusted Gross Profit relating to the pre-acquisition periods of Kennedy, Kitchen Cooked, H.K. Anderson and Truco Enterprises acquisitions.

Adjusted Selling and Administrative Expense is defined as all Selling and Administrative expense excluding Depreciation and Amortization expense, a non cash item. In addition, Adjusted Selling and Administrative Expenses exclude the impact of costs that fall within the categories of non-cash adjustments and non-recurring items such as those related to stock-based compensation, hedging and purchase commitments adjustments, asset impairments, acquisition and integration costs, business transformation initiatives, and financing-related costs. We also report Adjusted Selling and Administrative Expense as a percentage of Net Sales as an additional measure for investors to evaluate our Adjusted Selling and Administrative margin on Net Sales.

Adjusted Net Income is defined as Net Income excluding the additional Depreciation and Amortization expense, a non-cash item, related to the Business Combination with Collier Creek Holdings and the acquisition of Kennedy Endeavors’, Kitchen Cooked, Inventure, Golden Flake and Truco Enterprises. In addition, Adjusted Net Income is also adjusted to exclude certain non-cash items, such as those related to stock-based compensation, hedging and purchase commitments adjustments, asset impairments, acquisition and integration costs, business transformation initiatives, and financing-related costs. Lastly, Adjusted Net Income normalizes the income tax provision to account for the above-mentioned adjustments.

EBITDA is defined as Net Income before Interest, Income Taxes, and Depreciation and Amortization.

Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash items, such as stock-based compensation, hedging and purchase commitments adjustments, and asset impairments; acquisition and integration costs; business transformation initiatives; and financing-related costs. Adjusted EBITDA is one of the key performance indicators we use in evaluating our operating performance and in making financial, operating, and planning decisions. We believe Adjusted EBITDA is useful to the users of this release and financial information contained in the release in the evaluation of Utz’s operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by companies in this industry. We have historically reported an Adjusted EBITDA metric to investors and banks for covenant compliance. We also provide in this release, Adjusted EBITDA as a percentage of Net Sales, as an additional measure for readers to evaluate our Adjusted EBITDA margins on Net Sales.

Further Adjusted EBITDA is defined as Adjusted EBITDA after giving effect to pre-acquisition Adjusted EBITDA of Kennedy Endeavors, Kitchen Cooked, Collier Creek Holdings, H.K. Anderson and Truco Enterprises acquisitions. We also report Further Adjusted EBITDA as a percentage of Pro Forma Net Sales as an additional measure to evaluate our Further Adjusted EBITDA margins on Pro Forma Net Sales. This definition does not include adjustments for estimated unrealized cost synergies, estimated unrealized public company costs or trade spend normalization, as reflected in Normalized Further Adjusted EBITDA.

Normalized Further Adjusted EBITDA is defined as Further Adjusted EBITDA including adjustments for estimated unrealized cost synergies related to the acquisition of Kennedy Endeavors, Kitchen Cooked, H.K. Anderson and Truco Enterprises acquisitions. In addition, Normalized Further Adjusted EBITDA also adjusts for estimated unrealized public company costs, and a one-time trade spend normalization adjustment at the end of 2019.

Management believes that the non-GAAP financial measures are meaningful to investors because they increase transparency and assists investors to understand and analyze our ongoing operational performance. The financial measures are shown as supplemental disclosures in this release because they are widely used by the investment community for analysis and comparative evaluation. They also provide additional metrics to evaluate the Company’s operations and, when considered with both the GAAP results and the reconciliation to the most comparable GAAP measures, provide a more complete understanding of the Company’s business than could be obtained absent this disclosure. The non-GAAP measures are not and should not be considered an alternative to the most comparable GAAP measures or any other figure calculated in accordance with GAAP, or as an indicator of operating performance. The Company’s calculation of the non-GAAP financial measures may differ from methods used by other companies. Management believes that the non-GAAP measures are important to have an understanding of the Company’s overall operating results in the periods presented. The non-GAAP financial measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. As new events or circumstances arise, these definitions could change. When the definitions change, we will provide the updated definitions and present the related non-GAAP historical results on a comparable basis.

Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures

Net Sales and Pro Forma Net Sales

Gross Profit, Adjusted Gross Profit and PF Adj Gross Profit

Adjusted Selling & Admin Expense

Adjusted Net Income

Depreciation & Amortization

EBITDA, Adjusted EBITDA and Further Adjusted EBITDA