HANOVER, Pa.--(BUSINESS WIRE)--Utz Brands, Inc. (NYSE: UTZ), a leading U.S. manufacturer of branded salty snacks, today reported financial results for its third quarter ended September 27, 2020.

“We are pleased to report strong financial results for our first quarter as a public company,” said Dylan Lissette, Chief Executive Officer of Utz. “Our strong portfolio of brands, competitively-advantaged manufacturing and distribution network, and strong execution helped us improve our market positions in key channels, geographies, product sub-categories, and in total. A special thank you to our dedicated associates, all of whom have helped the Company perform so well during this difficult time with COVID-19. Our growth opportunities are multi-faceted, and our results for our third quarter demonstrate our commitment to be the fastest-growing, pure-play branded salty snack company of scale in the U.S.”

Third Quarter 2020 Financial Highlights Compared to Prior Year Period

• Net sales of $248.0 million, an increase of 24.2% over the prior year period

• Gross Profit of $86.2 million, an increase of $16.4 million or 23.5% over the prior year period. Adjusted Gross Profit of $99.2 million, an increase of $25.6 million or 34.8% over the prior year period. Adjusted Gross Profit Margin improved to 40.0% from 36.9% in the prior year

• Net loss of $7.3 million, compared to Net income of $10.3 million in prior year; the net loss was driven by transaction-related expenses from the successful combination of Collier Creek Holdings with Utz Brands Holdings, LLC, which closed August 28, 2020 (the “Business Combination”). Adjusted Net Income of $17.9 million, compared to $8.5 million in the prior year

• Adjusted EBITDA of $38.2 million, an increase of $10.9 million or 39.8% over the prior year period

• Cash and cash equivalents of $32.0 million, total debt of $420.0 million, and net debt of $388.0 million, all as of the end of the third quarter 2020

Growth Highlights for the Third Quarter 2020 Compared to the Prior Year Period

• Retail sales growth of 12.9%, in excess of market growth of 8.7% for the thirteen weeks ending September 27, 2020, as measured by IRI MULO-C

• Power Brand retail sales growth of 15.1% for the thirteen weeks ending September 27, 2020, as measured by IRI MULO-C

• Strong double-digit retail sales growth across our Core, Expansion and Emerging geographies for the thirteen weeks ending September 27, 2020, as measured by IRI MULO-C

• Increase of 1.7 million households purchasing Utz products to 49.1 million for the last 52 weeks ended September 27, 2020, versus the last 52 weeks ended September 29, 2019, as measured by IRI

Third Quarter 2020 Financial Highlights

Third quarter of 2020 net sales increased 24.2% to $248.0 million compared to $199.6 million for the third quarter of 2019. The 24.2% increase in net sales for the third quarter of 2020 was driven by acquisitions of 15.9%, volume +9.7% and price/mix +1.2%, which were partially offset by our continued shift to independent operators (IO) and the resulting increase in sales discounts of (2.5%). Pro Forma net sales increased 7.2% to $248.0 million compared to $231.3 million for the third quarter of 2019. Pro Forma Net Sales is a Non-GAAP financial measure defined under “Non-GAAP Measures,” and is reconciled to Net Sales in the financial tables that accompany this release.

Excluding the impact of higher IO discounts and brands acquired through our Kennedy Endeavors (Conagra DSD Snacks), and Kitchen Cooked acquisitions, Power Brand sales increased by approximately 10%, while Foundation Brand sales were down approximately 2% against the prior year period. Growth in Power Brands was led by Utz®, Zapp’s®, Tortiyahs!® and Golden Flake® Pork Skins brands, with strong increases across Core, Expansion and Emerging geographies. The decline in Foundation Brands reflects our strategy to focus on our Power Brands and continued softness in foodservice, up-and-down-the-street customers, and the convenience channel due to COVID-19. Conversely, our Power Brands have a stronger presence in the large format channels which have performed very well during this time period.

For the 13-week period ended September 27, 2020, our retail sales as measured by IRI MULO-C grew 12.9%, significantly above the Total Salty Snack category growth of 8.7%, as we continued to gain share 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.

Gross profit grew 23.5% to $86.2 million, or 34.8% as a percentage of net sales, for the third quarter of 2020, compared to $69.8 million, or 35.0% as a percentage of net sales, in the same period last year. Adjusted Gross Profit for the third quarter of 2020 grew 34.8% to $99.2 million, or 40.0% as a percentage of net sales, compared to $73.6 million, or 36.9% 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 due to contribution from higher net sales, scale benefits in our manufacturing network from higher volume, and lower commodity costs. Adjusted Gross Profit is a Non-GAAP financial measure defined under “Non-GAAP Measures,” and is reconciled to Gross Profit in the financial tables that accompany this release.

Selling and Administrative expenses were $84.6 million for the third quarter of 2020 compared to $50.9 million in the prior year period. Adjusted Selling and Administrative expenses for the third quarter of 2020 was $60.7 million, or 24.5% as a percentage of net sales, compared to $43.9 million, or 22.0% as a percentage of net sales, in the prior year period. The increase in Adjusted Selling and Administrative expense as a percentage of net sales was driven by higher incentive compensation related to performance and the timing of certain selling expenses. Adjusted Selling and Administrative expense is a Non-GAAP financial measure defined under “Non-GAAP Measures,” and is reconciled to Selling and Administrative expense in the financial tables that accompany this release.

Net loss was $7.3 million for the third quarter of 2020, compared to net income of $10.3 million for the prior year period; the net loss was driven by transaction expenses related to our Business Combination with Collier Creek Holdings. Adjusted Net Income was $17.9 million for the third quarter of 2020 compared to $8.5 million for the prior year period. The increase in Adjusted Net Income was due primarily to higher net sales and higher margins. Adjusted Net Income is a Non-GAAP financial measure defined under “Non-GAAP Measures,” and is reconciled to Net Income in the financial tables that accompany this release.

Adjusted EBITDA grew 39.8% to $38.2 million, or 15.4% as a percentage of net sales, for the third quarter of 2020, compared to $27.3 million, or 13.7% as a percentage of net sales, in the third quarter of 2019. The increase in Adjusted EBITDA was due to higher net sales and higher adjusted gross profit margins, partially offset by higher Adjusted Selling and Administrative expense. Adjusted EBITDA is a Non-GAAP financial measure defined under “Non-GAAP Measures,” and is reconciled to EBITDA in the financial tables that accompany this release.

Balance Sheet and Cash Flow Highlights

As of September 27, 2020, the Company’s cash and cash equivalents balance was $32.0 million, total debt was $420.0 million, and net debt was $388.0 million. Capital expenditures totaled $14.8 million for the nine months ended September 27, 2020 compared to $13.2 million for the prior year period.

Successful Business Combination

On August 28, 2020, Utz Brands Holdings, LLC and Collier Creek Holdings, a special purpose acquisition company, completed their Business Combination to form Utz Brands, Inc. The Class A Common Stock of Utz Brands began trading under the ticker symbol “UTZ” on the New York Stock Exchange beginning August 31, 2020. Proceeds from the transaction were used primarily to repay existing borrowings at Utz. The Rice and Lissette family, the founding family and owners of the Utz businesses, retained more than 90% of their existing equity stake, which represents more than 50% ownership in the Utz businesses as of the completion of the transaction. Please refer to the Investor FAQ on the Investor Relations portion of our site for more detail behind outstanding shares and warrants at https://s25.q4cdn.com/130011723/files/doc_presentations/2020/Utz-Brands-Share-Count-Detail-vF.pdf.

Acquisition of H.K. Anderson™

On September 29, 2020, Utz announced that it entered into a definitive agreement with Conagra Brands, Inc. (NYSE: CAG) to acquire certain assets of the H.K. Anderson business, a leading brand of peanut butter-filled pretzels. Utz closed this transaction on November 2, 2020 and the purchase price of less than $10 million was funded from current cash-on-hand. The acquisition enables Utz to jump-start its entry into the growing filled pretzel segment, leveraging the synergies of its salty snack platform. The acquisition is expected to contribute $12 million in net sales and $2 million in Adjusted EBITDA in FY 2021.

Fiscal Year 2020 Outlook

For full year 2020, the Company has increased its net sales and Adjusted EBITDA outlook versus what had been previously provided in the Business Combination investor presentations. For the purpose of this 2020 outlook change, 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. The guidance excludes any results from the H.K. Anderson acquisition, which closed on November 2, 2020.

For the 53-week fiscal year ending January 3, 2021, the Company is providing the following guidance:

• Net Sales growth of 10 – 11% versus 2019 Pro Forma Net Sales of $865.5 million, with the 53rd Week representing approximately two percentage points

• Adjusted EBITDA in the range of $129 to $132 million, including an estimated 53rd Week impact of approximately $3 million. This Adjusted EBITDA range excludes estimated unrealized cost synergies of approximately $4 million related to the Kennedy Endeavors and Kitchen Cooked acquisitions and estimated unrealized public company costs of $2M

• Net leverage ratio of approximately 3x at the end of FY 2020

• Full year capital expenditures of approximately $28 million

About Utz Brands, Inc.

Utz manufactures a diverse portfolio of savory snacks under popular brands including Utz®, 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