Utz Brands Inc · NYSE:UTZ
Utz Brands — Jefferies Consumer Conference 2021
46 slides from Utz Brands's conference presentation, Jun 22, 2021
Slide 1: Jefferies Consumer Conference Presentation
℠ Jefferies Consumer Conference Presentation June 22, 2021
Slide 2: Disclaimer
Disclaimer Forward-Looking Statements Certain statements made herein are not historical facts but are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended. The forward-looking statements generally are acco
Slide 3: Today's Agenda
Today’s Agenda I Business Overview II Value Creation Strategy III Recent Performance IV 3 ℠
Slide 4: Today's Presenters
Today’s Presenters ℠ Dylan Lissette Cary Devore Ajay Kataria Chief Executive Chief Financial EVP, Finance Officer Officer & Accounting CEO of Utz since EVP & CFO, joined Joined Utz in 2017 2012 Utz in 2016 Joined Utz in Former Managing 20 years of CPG 1995; worked in a Director at experi
Slide 5: I. Business Overview
I. Business Overview BouLDER CLASSIC SEA SALT = KETLESTILE povaTo CHiPs Be Ra
Slide 6: Utz Overview
Utz Overview Business Overview Portfolio Overview Leading manufacturer, marketer and distributor of branded snacks Power Brands Foundation Brands in the U.S., including potato chips, tortilla chips, pretzels, cheese snacks, pork skins, pub / party mixes, veggie snacks and popcorn ℠ Strong portfo
Slide 7: 100-Year Old Family Company with Tremendous Heritage
100-Year Old Family Company with Tremendous Heritage National Scale Multi-Branded Rich Heritage and Regional Expansion Snack Platform Created Today (1921–2011) (2011–2021) Aug 2020: Business Combination with 1921 – Founding by Bill 1990s-2010 – Geographic Collier Creek and Salie Utz in Hanover, Expa
Slide 8: Salty Snacks Is a Highly Attractive CPG Category
Salty Snacks Is a Highly Attractive CPG Category 2010 – 2020 U.S. Retail Sales Growth(1) 5.1% 4.4% 4.1% 3.2% 2.8% 2.8% 2.8% 2.5% 2.4% 1.9% (2) Total Sweet Non- Baked Ice Cream Alcoholic Beauty / Home Salty Snacks Confect. Packaged Biscuits / Alcoholic Goods and Drinks Personal Care F&B Snack Bars Dr
Slide 9: Scale Growth Platform in Salty Snacks Category
Scale Growth Platform in Salty Snacks Category Total United States Salty Snack Dollar Sales(1) ($ in mm) $17,506 Scale is Important Increases scale and relevance with key retailers Optimizes ability to capitalize on growth opportunities across channels, sub-categories, $2,735 ~$2,000 and geograp
Slide 10: Track Record of Consistent Growth
Track Record of Consistent Growth Net Sales ($ in millions)(1) $1,164 2001 – 2020(2) CAGR $866 COVID-19 / Total 9% Recession: $772 Utz 2020A Organic(3) 4% $707 YoY Growth +8%(4) $656 $618 $559 $535 $513 $468 Recession $398 $403 $359 $318 $290 Recession $266 $254 $222 $228 $216 2001 2002 2003 2004 20
Slide 11: Strong Brand Portfolio with Focus on Power Brands
Strong Brand Portfolio with Focus on Power Brands Power Brands (87% of Retail Sales)(1) Iconic Heritage Craft Better For You Licensed Pork Skins Foundation Brands (13% of Retail Sales)(1) Regional Other • Partner Brands • Private Label Chips/Cheese 1) Source: IRI MULO + C Total US for 52-weeks ended
Slide 12: Broad Distribution Across Channels and Customers
Broad Distribution Across Channels and Customers 2020 Retail Sales by Channel(1) Illustrative Customers Other Club 7% 8% C-Store 14% Food / Grocery 52% Mass 19% E-commerce(2) (including retailer sites, click & collect) 15+ Year Average Relationship with Top Customers was 6.8% of FY20 retail sales, g
Slide 13: Flexible, Efficient DSD and Warehouse Distribution System
Flexible, Efficient DSD and Warehouse Distribution System Direct to Warehouse Direct to Store (DSD) ~25,000 Doors 70,000+ Doors ~525 Retailer Distribution ~1,700+ Total Routes Centers Each of Top 3 Salty Snacking Companies Operate DSD Networks(1) Distributor Utz Transition to IOs ~18,000 Doors % of
Slide 14: National Manufacturing Footprint with Broad Capabilities
National Manufacturing Footprint with Broad Capabilities 15 Manufacturing Facilities Festida Acquisition 400+ Million Lbs. Annual Capacity(1) Low 70s% Capacity Utilization(1) Strong Quality and Safety Record (4) Opportunities to Optimize Footprint Festida Facility (Acquisition closed on Ju
Slide 15: Track Record of Accretive and Well-Integrated Acquisitions
Track Record of Accretive and Well-Integrated Acquisitions Pre-Synergy Post-Synergy Cost Synergy Year Target Adj. EBITDA Multiple Adj. EBITDA Multiple % of Revenue (1) (2)(4) 2021 6.0x 5.1x 7.1% (Closed on June 7, 2021) (1) (4) 2021 8.7x 5.9x 4.4% (1) (4) 2020 9.3x 8.4x 2.5% (4) 2020 5.7x 4.9x (1) 2
Slide 16: Attractive Value Creation Potential
Attractive Value Creation Potential Long-Term Organic Growth Model In-Line with Category Net Sales Power Brands Focus 3 – 4% (1) Adj. EBITDA 6 – 8% Productivity / Margin Enhancements Adj. EPS 8 – 10% Deleveraging Exp. Dividend Yield ~2% ~40% Target Payout Ratio Total Shareholder Return ~10 – 12% Plu
Slide 17: II. Value Creation Strategy
II. Value Creation Strategy
Slide 18: Goal: Be Fastest Growing Pure-Play Branded Snack Platform of Scale in the U.S.
Goal: Be Fastest Growing Pure-Play Branded Snack Platform of Scale in the U.S. Reduce Continue Costs and Strategic Enhance Acquisitions Margins 1 Drive Productivity 1. 1 Focus on Branded 1. ℠ Snacking in the U.S. 2 Optimize Revenue and 2. Value Creation Trade 2 Deliver Strong Synergies 2. Strategies
Slide 19: Reduce Costs and Enhance Margins
Reduce Costs and Enhance Margins Productivity Targets (1) Key Productivity Drivers (Annual Savings Manufacturing Efficiencies as % of COGS) Line automation 3–4% Equipment upgrades/expansion Waste/scrap reduction Network Optimization Distribution optimization Pallet/case efficiency 2%
Slide 20: Accelerate Power Brands Through Enhanced Marketing and Innovation
Accelerate Power Brands Through Enhanced Marketing and Innovation Increase Marketing Spend (as a percentage of net sales) Strong Momentum in Key Power Brands Retail Sales ($mm) ACV Distribution (%) 67% LT Target: ~3-4% 4.0% $650 49% $517 2015 2020 2015 2020 $66 2020: ~1% 53% Utz Peer Average (1) Pee
Slide 21: Accelerate Power Brands Through Enhanced Marketing and Innovation
Accelerate Power Brands Through Enhanced Marketing and Innovation Flavored Pretzels are 35% of Sub-Category and Growing over 30%, and Authentic Mexican Style and Utz is Meaningfully Underweight in Flavored (<10% of our mix)(1) Flavor Portfolio Expansion Strategic Variety Pack 100 Year Celebration an
Slide 22: Expand Distribution in Underpenetrated Channels and Customers
Expand Distribution in Underpenetrated Channels and Customers Share by Channel C-Store and Mass Strategies 57.6% 7.5% Expand C-Store presence through Food 5.5% 3.7% strengthened retailer, master 1.7% distributor and redistributor Peer 1 Peer 2 Peer 3 Peer 4 relationships, and drive for customer ℠
Slide 23: Continue National Geographic Expansion
Continue National Geographic Expansion Geographic Priorities(1) Strategies Focus on Large Population Markets WA MT ND VT ME – Key Expansion Markets: South, Midwest, Colorado OR MN NH ID SD WI MA – Key Emerging Markets: Florida, Texas, California, West NY WY MI CT RI IA PA NE NJ NV OH UT CO KS IL I
Slide 24: Continue Strategic Acquisitions
Continue Strategic Acquisitions Near-Term Acquisition Criteria Proven Track Acquisition-Savvy Management Team and 1. 1 Focus on Branded Snacking in the U.S. with Record Experienced Board Concentration on Salty Snacks – Facilitate Geographic Expansion – Increase Presence in Sub-Categories Significant
Slide 25: III. Recent Performance
Ill. Recent Performance POTATO CHIPS a ei
Slide 26: Lapping Significant Market Share Gains in Early 2020
Lapping Significant Market Share Gains in Early 2020 During the early stages of the COVID-19 pandemic Utz significantly outperformed the category, and we continued to gain buyers throughout the year 4-Week Period Retail Sales YoY Change % and Buyer Trends % Change Trailing 52-week vs. YAG Utz Buyers
Slide 27: Strong Buyer and Repeat Rate Growth
Strong Buyer and Repeat Rate Growth # of Buyers (in M) and $ per Buyer % of Buyers Repeating Purchases – Utz + Truco 60.9 57.9 Repurchased 50.5% 53.0% Twice or More $21.51 $19.51 68.3% 70.0% Repurchased Once 17.8% 17.0% Bought Once, 31.7% 30.0% Did Not Repurchase 52wk 12/29/19 52wk 12/27/20 52wk 12/
Slide 28: Strong 2-Year Growth Rates to Begin 2021
Strong 2-Year Growth Rates to Begin 2021 As we begin to lap COVID-19 pantry stocking, we are driving strong 2-year growth rates led by our Power Brands, partially offset by our planned decline in Foundation Brands Retail Sales 2-Year CAGR Rolling 12-Week Trend 10% Utz Power Brands 7.8% 7.1% 7.1% 7.4
Slide 29: Power Brands Increased to Nearly 87% of Retail Sales
Power Brands Increased to Nearly 87% of Retail Sales Our long-term value creation strategies are working as we continue to prioritize our investments and reduce emphasis on Foundation Brands Power Brands Retail Sales Change(1) Foundation Brands Retail Sales Change(1)(2) (13-Weeks Ended 4/4/21) (13-W
Slide 30: Significant Two-Year Share Gains in our Major Sub-Categories
Significant Two-Year Share Gains in our Major Sub-Categories Potato chips and tortilla chips comprise nearly 60% of our retail sales and significantly outpaced the category over the last two years Sub-Category Retail Sales 2-Year CAGR (13-Weeks Ended 4/4/21) Total Sub-Category Power Brands Total Sal
Slide 31: Expansion & Emerging Geographic Momentum Continues
Expansion & Emerging Geographic Momentum Continues Core performance relative to market driven by Good Health® and Foundation Brands that are more weighted towards the Core Geographic Channel Retail Sales 2-Year CAGR (13-Weeks Ended 4/4/21) Total Sub-Category Power Brands Total US Core Expansion Emer
Slide 32: Driving 2-Year Share Gains in Grocery, Club and C-Store
Driving 2-Year Share Gains in Grocery, Club and C-Store Mass performance driven by a lap faced by ON THE BORDER® and we expect trends will improve as we move throughout the year Retail Channel Retail Sales 2-Year CAGR (13-Weeks Ended 4/4/21) Total Sub-Category Power Brands MULO + C Grocery Mass Club
Slide 33: Q1 2021 Highlights
Q1 2021 Highlights Q1 net sales growth of 18% and Adjusted EBITDA growth of 30% 1Q’20 1Q’21 YoY Reflects positive contribution from acquisitions, partially Results Results Change In $millions, except offset by transitory events (lapping COVID-19 impact in 2020, per share amounts February 2021 sn
Slide 34: Managing Through an Inflationary Environment
Managing Through an Inflationary Environment Cost Driver FY21 Considerations Actions We are Taking Commodity Inflation Continue to expect commodity inflation of Improve net price realization through price approximately 4% vs. last year pack architecture enhancements (COGS) Primarily driven by
Slide 35: Capital Focused on Driving Growth
Capital Focused on Driving Growth Cash Flow Priorities Target Leverage Business Growth 1 (Including M&A) • Target Net Leverage of 3 – 4x 2 Debt Reduction • Higher Net Debt / Adj. EBITDA Possible for Strategic Acquisitions, Returning to Target Range within 1 – 2 Years 3 Dividend Increase • LTM Q1 Net
Slide 36: Delivering on Foundational Strategies, With Further Opportunity Ahead
Delivering on Foundational Strategies, With Further Opportunity Ahead Value Creation Strategy Progress to Date Go-Forward Strategy • Targeting productivity of 3-4% of COGS by Margin profile strengthened 2023, in-line with initial expectations Reduce Costs and Productivity initiatives on-track to
Slide 37: Questions
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Slide 38: Appendix
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Slide 39: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures 39 ℠
Slide 40: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (1) Income Tax Rate Adjustment calculated as (Loss) Income before taxes plus (i) Acquisition, Step-Up Depreciation and Amortization and (ii) Other Non-Cash and/or Non-Recurring Adjustments, multiplied by an effective cash t
Slide 41: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures See footnotes in Utz’s Q1 earnings press release dated May 13, 2021. 41 ℠
Slide 42: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Net Sales and Pro Forma Net Sales 14-Wks 13-Wks 13-Wks 53-Wks 52-Wks 52-Wks Ended 1-Wk Ended Ended Ended Ended 1-Wk Ended Ended Ended (dollars in millions) 1/3/21 1/3/21 12/27/20 12/29/19 1/3/21 1/3/21 12/27/20 12/29/19 Net
Slide 43: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Adjusted Selling and Administrative Expense 14-Wks 13-Wks 13-Wks 53-Wks 52-Wks 52-Wks Ended 1-Wk Ended Ended Ended Ended 1-Wk Ended Ended Ended (dollars in millions) 1/3/21 1/3/21 12/27/20 12/29/19 1/3/21 1/3/21 12/27/20 12
Slide 44: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Depreciation & Amortization 14-Wks Ended 13-Wks Ended 53-Wks Ended 52-Wks Ended (dollars in millions) 1/3/21 12/29/19 1/3/21 12/29/19 Core D&A - Non-Acquisition-related included in Gross Profit $ 2.8 $ 4.5 $ 16.9 $ 13.5 Ste
Slide 45: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Net Sales and Pro Forma Net Sales FY 2019 FY 2020 FY 2020 (dollars in millions) Q4 Q1 Q2 Q3 Q4 LTM Net Sales - 53 Weeks $ 201.8 $ 228.0 $ 242.0 $ 248.0 $ 246.3 $ 964.3 53rd Week - - - - 15.9 15.9 Net Sales - 52 Weeks 201.8
Slide 46: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (1) Capital Leases include equipment term loans and excludes the impact of step-up accounting. (2) Excludes amounts related to guarantees on IO loans which are collateralized by routes. We have the ability to recover substa