8-K: Utz Brands Reports Mixed Q2 Results, Raises Sales Outlook Amid Strategic Supply Chain Overhaul

Utz Brands, Inc. announced its second fiscal quarter 2025 financial results, showing strong organic net sales growth and gross profit margin expansion, alongside a decline in net income and adjusted EPS, while also updating its full-year guidance and detailing a manufacturing facility consolidation.

Summary

• Net Sales increased 2.9% to $366.7 million for the second fiscal quarter ended June 29, 2025, compared to $356.2 million in the prior year period.
• Organic Net Sales also increased 2.9% year-over-year, driven by a favorable volume/mix contribution of 3.9%.
• Branded Salty Snacks Organic Net Sales, representing 88% of total Net Sales, increased 5.4%, led by Power Four Brands (Utz, On The Border, Zapps, Boulder Canyon).
• Non-Branded & Non-Salty Snacks Organic Net Sales declined 11.8%, primarily due to Partner Brands and Dips & Salsas.
• Gross Profit Margin declined 40bps to 34.6%, while Adjusted Gross Profit Margin expanded 220bps to 39.8%, driven by productivity savings.
• Net Income decreased 60.2% to $10.1 million, and Adjusted Net Income decreased 14.2% to $23.6 million.
• Diluted Earnings Per Share decreased 47.8% to $0.12, and Adjusted Earnings Per Share decreased 10.5% to $0.17.
• Adjusted EBITDA decreased 2.0% to $48.7 million, or 13.3% as a percentage of Net Sales.
• Total liquidity was $170.9 million, with net debt at $826.3 million, resulting in a Net Leverage Ratio of 4.1x.
• Cash flow used in operations for the twenty-six weeks ended June 29, 2025, was $3.9 million, with capital expenditures of $65.7 million.
• The company is consolidating its manufacturing footprint from eight primary plants to seven, closing its Grand Rapids, Michigan facility, expected to generate cost savings in the second half of 2025 and be completed by early 2026.
• Fiscal Year 2025 outlook was updated: Organic Net Sales growth raised to 2.5% or better, Adjusted EBITDA growth tightened to 7% to 10%, and Adjusted Earnings Per Share growth lowered to 7% to 10% due to higher interest and depreciation & amortization linked to accelerated capital expenditures.

Sentiment

Score: 7

Explanation: The company demonstrated strong organic sales growth and significant adjusted gross profit margin expansion, indicating operational efficiency and market demand. Strategic investments in supply chain and geographic expansion are positive long-term drivers. However, the decline in net income and adjusted EBITDA, coupled with a lowered Adjusted EPS guidance, presents short-term profitability challenges, albeit explained by strategic capital deployment. The overall sentiment is cautiously positive, reflecting a company executing a long-term growth strategy despite immediate earnings pressure.

Positives

• Organic Net Sales increased 2.9%, demonstrating continued top-line growth.
• Branded Salty Snacks portfolio accelerated with 5.4% growth, indicating strong performance in core categories.
• Gained value and volume shares in both Core and Expansion Geographies, marking the eighth consecutive quarter of volume share growth in the Salty Snacks category.
• Achieved significant Adjusted Gross Profit Margin expansion of 220bps, driven by productivity savings.
• Raised the 2025 Organic Net Sales outlook to 2.5% or better, reflecting stronger revenue trends and confidence in growth drivers.
• Tightened the Adjusted EBITDA growth range to 7% to 10%, indicating increased confidence in productivity programs.
• Strategic investments in the manufacturing network and automation capabilities are expected to position the company for sustained Adjusted EBITDA margin expansion and continued geographic expansion in 2026 and beyond.
• Ample liquidity of $170.9 million provides financial flexibility.
• New product innovation, including Utz Fried Dill Pickle flavored LTO for Club, Potbelly's collaboration with Zapp's, and small format expansion, is driving market engagement.
• Increased household penetration and buyer repeat rates for Utz products, indicating growing consumer base and loyalty.

Negatives

• Net Income decreased significantly by 60.2% to $10.1 million.
• Adjusted Net Income decreased 14.2% to $23.6 million.
• Diluted Earnings Per Share decreased 47.8% to $0.12.
• Adjusted Earnings Per Share decreased 10.5% to $0.17.
• Adjusted EBITDA decreased 2.0% to $48.7 million.
• Gross Profit Margin declined 40bps to 34.6%.
• Selling, Distribution, and Administrative Expenses (SD&A) increased as a percentage of Net Sales, primarily due to investments in capabilities and geographic expansion.
• Non-Branded & Non-Salty Snacks Organic Net Sales declined 11.8%.
• Lowered the Adjusted Earnings Per Share growth guidance for fiscal year 2025 from 10-15% to 7-10%.
• Higher interest expense (approximately $46 million for FY25) and increased depreciation & amortization are impacting profitability.
• Cash flow used in operations for the twenty-six weeks ended June 29, 2025, was $3.9 million.
• Net Leverage Ratio increased to 4.1x, indicating higher indebtedness relative to EBITDA.
• The strategic decision to close the Grand Rapids, Michigan manufacturing facility will impact associates, though support is being provided.

Risks

• Operation in an industry with high levels of competition and consolidation.
• Reliance on key customers and ability to obtain favorable contractual terms and protections.
• Changes in demand for products driven by shifts in consumer preferences and tastes or ability to innovate or market products effectively.
• Changes in consumers' loyalty to brands due to factors beyond control.
• Impacts on reputation caused by concerns relating to the quality and safety of products, ingredients, packaging, or processing techniques.
• Potential for products to be recalled if they become adulterated or are mislabeled.
• Loss of retail shelf space and disruption to sales of food products due to changes in retail distribution arrangements.
• Reliance on third parties to effectively operate both direct-to-warehouse delivery system and direct-store-delivery network system.
• Evolution of e-commerce retailers and sales channels.
• Disruption to manufacturing operations, supply chain, or distribution channels.
• Effects of inflation, including rising labor costs.
• Shortages of raw materials, energy, water, and other supplies.
• Changes in the legal and regulatory environments, including with respect to tax legislation.
• Potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries, or investigations into the business.
• Potential adverse effects or unintended consequences related to the implementation of growth strategy.
• Ability to successfully identify and execute acquisitions or dispositions and to manage integration or carve out issues.
• Geographic concentration of markets.
• Ability to attract and retain highly skilled personnel, including risks associated with executive leadership transition.
• Impairment in the carrying value of goodwill or other intangible assets.
• Ability to protect intellectual property rights.
• Disruptions, failures, or security breaches of information technology infrastructure.
• Climate change or legal, regulatory or market measures to address climate change.
• Exposure to liabilities, claims or new laws or regulations with respect to environmental matters.
• Increasing focus and opposing views, legislation and expectations with respect to ESG initiatives.
• Restrictions on operations imposed by covenants in debt instruments.
• Exposure to changes in interest rates.
• Adverse impacts from disruptions in the worldwide financial markets, including on ability to obtain new credit.
• Exposure to any new or increased income or product taxes.
• Pandemics, epidemics or other disease outbreaks.
• Exposure to changes to trade policies and tariff and import/export regulations by the United States and other jurisdictions.
• Potential volatility in Class A Common Stock caused by resales thereof.
• Dependence on distributions made by subsidiaries.
• Payment obligations pursuant to a tax receivable agreement, which in certain cases may exceed tax benefits realized or be accelerated.
• Provisions of Delaware law and governing documents and other agreements that could limit the ability of stockholders to take certain actions or delay or discourage takeover attempts.
• Exclusive forum provisions in governing documents.
• Influence of certain significant stockholders and members of Utz Brands Holdings, LLC, whose interests may differ from those of other stockholders.
• Effects of private placement warrants on the market price of Class A Common Stock and net income.

Future Outlook

The company updated its fiscal year 2025 outlook, raising Organic Net Sales growth to 2.5% or better (from low-single digits) and tightening Adjusted EBITDA growth to 7% to 10% (from 6% to 10%). However, Adjusted Earnings Per Share growth guidance was lowered to 7% to 10% (from 10% to 15%) due to higher interest expense and accelerated capital expenditures related to network optimization and facility consolidation. Capital expenditures are now expected to be approximately $100 million, and the Net Leverage Ratio is projected to approach 3x by year-end fiscal 2025.

Management Comments

• Howard Friedman, CEO: "I am pleased with our strong performance in the second quarter, with Organic Net Sales growth of nearly 3%. Our Branded Salty Snacks portfolio is accelerating, with 5.4% growth in the quarter. We gained value and volume shares in both our Core and Expansion Geographies. Our proactive approach to cost management and operational excellence has enabled us to achieve significant Adjusted Gross Profit Margin expansion."
• Howard Friedman, CEO: "Were encouraged by our summer sales performance thus far, as we successfully capitalize on seasonal demand and snacking occasions. Our strong performance illustrates our ability to deliver growth independent of the category in a rational competitive environment. Looking ahead to the remainder of 2025, we expect our strong productivity cost savings will continue to provide us with the flexibility to invest in our brands, while expanding profit margins. With geographic expansion driving much of our growth strategy, we remain on track to deliver solid results in 2025 and continue to create long-term shareholder value."
• Bill Kelley, EVP and CFO: "We are raising our 2025 Organic Net Sales outlook to reflect stronger revenue trends through the first half and our confidence in the growth drivers ahead. We now expect Organic Net Sales growth of 2.5% or better, driven by our advantaged portfolio of brands and expansion geographies. We are also tightening our Adjusted EBITDA range to 7% to 10% growth, reflecting our confidence in the significant productivity programs ramping in the second half. We are lowering our Adjusted Earnings Per Share guidance to 7 to 10% growth due to higher interest and depreciation & amortization linked to our accelerated capex investments. We believe these strategic investments in our manufacturing network and automation capabilities will position us for sustained Adjusted EBITDA margin expansion and continued geographic expansion in 2026 and beyond."
• Howard Friedman, CEO, on plant closure: "While these types of decisions are never easy, they are necessary steps to streamline our operations and strengthen our supply chain for the long-term. We are deeply grateful for the contributions of our Grand Rapids team and are committed to supporting them through this transition."

Industry Context

The company's performance indicates a strong position within the U.S. Salty Snacks market, outperforming the overall category which saw a 1.5% decline in retail sales. Its focus on geographic expansion and strategic investments in supply chain and automation aligns with broader industry trends towards efficiency and market penetration. The ability to gain volume and value share in a competitive environment, coupled with accelerating growth in Branded Salty Snacks, suggests effective brand management and market strategy, distinguishing it from general category trends.

Comparison to Industry Standards

• The company's Branded Salty Snacks Retail Sales increased 3.3% compared to a 1.5% decline for the Salty Snack category overall, as measured by Circana MULO+ w/convenience.
• Retail Volumes increased by 4.3% compared to a 1.5% decline for the Salty Snack category, demonstrating significant outperformance.
• The company drove volume share gains in both its Core and Expansion geographies, indicating effective market penetration and competitive strength.
• Power Four Brands (Utz, On The Border, Zapps, and Boulder Canyon) Retail Sales increased by 5.7%, significantly outpacing the overall category decline.
• The company is the 3rd largest in Salty Snacking with 5.7% Volume Share and 4.3% Dollar Share, as of June 29, 2025.
• Boulder Canyon's growth in Club, Food, and Natural channels is outperforming its category, highlighting success in specific segments.
• The company's strategic investments in manufacturing network and automation capabilities are aimed at achieving sustained Adjusted EBITDA margin expansion, a key performance indicator for efficiency and profitability in the food manufacturing industry.

Management Changes

Stakeholder Impact

• Shareholders: Experience mixed financial results with strong sales growth and strategic investments, but also a decline in net income and adjusted EPS, and a lowered EPS outlook. The long-term strategic benefits are emphasized.
• Employees: Those at the Grand Rapids, Michigan manufacturing facility will be impacted by its closure, but the company is committed to supporting them with opportunities at other facilities, transition assistance, and severance pay.
• Customers: Expected to benefit from optimized supply chain, continued product innovation, and expanded geographic availability of products.
• Creditors: The Net Leverage Ratio increased to 4.1x, but the company aims to reduce it to approximately 3x by year-end fiscal 2025, indicating a commitment to debt management.

Next Steps

• Hold a conference call and webcast on July 31, 2025, to discuss Q2 results and outlook.
• Begin the strategic consolidation of the Grand Rapids, Michigan manufacturing facility in August 2025, with completion expected by early 2026.
• Continue to allocate more volume to larger, more efficient facilities and drive fixed cost leverage and enhanced automation capabilities across the remaining network.
• Support impacted associates from the Grand Rapids facility closure with opportunities at other facilities, transition assistance, job fairs, and severance pay.
• Focus on building increased supply chain network capabilities and delivering accelerated productivity savings through capital expenditures of approximately $100 million in FY25.
• Work towards achieving a Net Leverage Ratio approaching 3x by year-end fiscal 2025.

Key Dates

Recommendation

The company demonstrates strong organic net sales growth and significant adjusted gross profit margin expansion, indicating healthy demand for its core products and effective cost management. Strategic investments in supply chain optimization and geographic expansion are positive long-term drivers. However, the decline in reported net income and adjusted EPS, coupled with a lowered Adjusted EPS guidance for the full year, presents short-term profitability concerns. While these are attributed to strategic capital expenditures, the immediate impact on earnings warrants a cautious stance. The increased net leverage also requires monitoring. Given the mixed financial performance but clear strategic direction, a 'hold' recommendation allows investors to observe the execution of these initiatives and their impact on future profitability and deleveraging.

Keywords

Salty Snacks, Snack Food, Consumer Staples, Food Manufacturing, Utz, On The Border, Zapps, Boulder Canyon, Earnings, Financial Results, Supply Chain, Manufacturing Consolidation, Guidance Update, Organic Sales Growth, Adjusted EBITDA, Adjusted EPS, Retail Sales, Volume Share, Geographic Expansion