Utz Brands (NYSE:UTZ) released first-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.

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Summary

Utz Brands experienced a softer start to Q2 due to factors like Easter shift and previous year programming impacts but expects improvement with new product innovations and increased marketing efforts.

The company maintained its full-year guidance, with a hedging program covering most of the year on fuel, agriculture, and freight, and a productivity program aimed at offsetting inflation impacts.

Marketing spend increased by 35% in Q1, with a long-term target of 3-4% of sales, focusing on supporting key brands and expansion markets, particularly in California.

Household penetration increased, driven by geographic expansion, innovation, and advertising, with a strong emphasis on consumer loyalty.

Management expressed confidence in their commercial plans despite competitive pricing activities, noting successful distribution gains and marketing strategies in various channels.

Full Transcript

OPERATOR

Thank you for standing by. My name is Kate and I will be your conference operator today. At this time I would like to welcome everyone to the Utz Brands Inc. First quarter 2026 earnings call. All lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Trevor Martin, Senior Vice President, Head of Corporate Finance. Please go ahead.

Trevor Martin (Senior Vice President, Head of Corporate Finance)

Thank you Operator and good morning everyone. Thank you for joining us today for our live Q and A session of our first quarter 2026 earnings results. With me today on today's call are Howard Friedman, CEO and B.K. Kelly, CFO. I hope everyone has had a chance to read our prepared remarks and our presentation, all of which are available on our investor relations website. Before we begin our Q and A session, I just have a few administrative items to review. Please note that some of our comments today will contain forward looking statements based on our current view of the business and that actual future results may differ materially. Please see our recent SEC filings which identify the principal risks and uncertainties that could affect future performance. Today we will discuss certain adjusted or non-GAAP financial measures which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials listed on our website now. Operator we are ready to open the line for questions.

OPERATOR

At this time I would like to remind everyone in order to ask a question, press Star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q and A roster. Your first question comes from the line of Peter Galbo with Bank of America. Your line is open.

Peter Galbo (Equity Analyst)

Hey, good morning guys. Thanks for taking the question Howard. Maybe, maybe to start just you had some commentary on the second quarter in your prepared remarks kind of addressing some of the softness to start Q2 particularly in April. So was hoping maybe you could expand a little bit just on that point as well as whether or not you think April represents kind of the bottom within the quarter and we should see improvement in May and June. So May I'll start there and let you kind of elaborate on your commentary.

Howard Friedman (Chief Executive Officer)

Yeah, thanks for the question Pete. So a couple things. Look I think first of all we always expected that April was going to be sort of would be a more difficult lap for a couple of reasons beyond sort of the Easter shift. We have year-over-year programming that we had done in the prior year. Specifically, you see it on Boulder Canyon and you can see it in the cheese business business. We also had some laps in some larger customers where there's some merchandising, that timing that actually shifted. So, you know, as you, as you look at the year-over-year, we expected the quarter, the quarter to start out a little bit softer than the run rate had been. I think if you look at the Food Channel Overall, you know, 50% of our business, I think it's a pretty good indicator of our underlying strength, which continues to be positive. And as we progress through the second quarter, you'll actually see some incremental activations coming. Boulder Canyon has some activity behind Tallow. You'll see new product innovations start to hit and obviously California will continue to grow. So I think we're off to where we expected to be in the second quarter and largely through Q1 as well.

B.K. Kelly

Great, thanks for that. And BK just maybe as a follow up, you left the guidance unchanged for the year, actually reiterated all elements of it. I think there was a bit of concern out there in the market that just given maybe less of a scaled DSD platform, things like freight resins might hit you a bit sooner. So maybe you can just talk a little bit about the hedging program and how you're locked on freight and go forward for the rest of the year. Thanks very much, guys. Yeah, thanks Pete. Thanks for the question. So, so first of all, I would say, you know, we're covered for most of the year on fuel ags and freight. Our productivity program that we touted a bit here at approximately 4% is going well and we'll continue to build on those plans in H2 and that will help us offset any incremental inflation which we think, you know, comes from primarily a small impact from fuel for us, but mostly packaging driven by the resin impact. You know, we'll continue to maximize the other levels levers that we have, you know, the Revenue Growth Management tools around price pack architecture. And you know, we've been using AI to improve our promo effectiveness and we'll continue to improve our sales mix. The net impact for us is that you have many levers to address potential inflation, but we are mostly covered on the fuel AGs and freight pieces to your point. Great.

OPERATOR

Your next question comes from the line of Michael Avery with Piper Sandler. Your line is open.

Luke

Hi guys. Morning. This is Luke on from Michael, thanks for taking our question. I just wanted to ask on marketing spend, you increased marketing spend by 35% in the first quarter and I believe your long term Target is for 3 to 4% of sales. How close will you get to that target this year and in 2027? And then also where do you see the biggest opportunities for return on marketing spending?

Howard Friedman (Chief Executive Officer)

Thanks for the question. I think what we've said, you know, we're largely in line with what we would have expected on the marketing investment for the year. We will expect to about 40% year over year and we continue to have conviction that that's the right place to be. We're still many probably a couple of years out from being able to get to that 3 to 4% longer term target because as you can imagine, when we start to think about the available resources we have and the opportunities we have to grow, whether it's with westward expansion, continue to drive capabilities as well as marketing and innovation, there is a reasonable competition for those dollars. I would tell you that we feel great about the innovation this year and I think it's probably the strongest lineup we've certainly had in my time here. I think in terms of where we see ongoing investment, I think there are a couple places. One is Obviously supporting our Power 4 Brands, Utz, Boulder Canyon, Zaps and on the Border. Boulder Canyon has new advertising that will be out this year to support the momentum on that brand, which continues to grow very quickly. Second is in our expansion markets where we're introducing the brand. California will obviously get investment as we continue to scale that area. And then the last is in supporting our tour where it's a little bit more traditional competitive dynamics for us within the category. So I think over time you'll continue to see us grow our advertising and consumer spend and we'll remain focused and disciplined on how we deploy those resources.

Luke

Okay, that's great. Thank you. And your household penetration increased just over a point. What's working there and what opportunities are ahead?

Howard Friedman (Chief Executive Officer)

Yeah, so look, I think part of our household, we feel very good about the household penetration trend we've been on. I think equally important to us is that the loyalty rates continue to grow because obviously as you grow penetration, you're introducing yourself to newer users and they may not repeat quite as much. And what we're seeing is very strong loyalty rates as well, which I think is a testament to the quality of our products and the variety of items that we offer. You know, I think that the major drivers again are going to be partially, it's going to be about expansion geographies, which, you know, obviously for the Utz brand is as we're moving westward and for the remaining Power 3, it's also bringing into Utz as core geography. So we're introducing new households in both places. Second, you know, our innovation is introducing products into households that they may not have had before. Feel very good about the early start on tallow. And then lastly is just driving incremental advertising, which is also doing a good job of being both effective and efficient but also driving our brand story. So, you know, I think we're kind of hitting on most of the cylinders right now and you know, lots left to do. Great. Thank you. Thank you.

OPERATOR

Your next question comes from the line of Scott Marks with Jeffries. Your line is open.

Scott Marks (Equity Analyst)

Hey, good morning. Thanks so much for taking our questions. First thing I wanted to ask about in the prepared remarks, you made a comment about not seeing any need to change commercial plans because of competitor activity. Wondering if you can expand on that a little bit and just help us understand what you're seeing out there from a competitive perspective and how some of the recent changes within the category may or may not have impacted your own business.

Howard Friedman (Chief Executive Officer)

Yeah, thanks for the question, Scott. Look, I think overall we feel like we're where we expected to be at this point in the year and that our commercial plans are holding. And you know, a lot of the innovation, expansion and investment in marketing consumer I think is going to deliver on the goals that we've had for the year. I think with respect to what we're seeing competitively, you know, I tell you, what we've observed is obviously dependent delivered market prices or the on pack price has come down and we have seen some sharper promotional price points with some customers in some of the subcategories. And you know, this isn't wildly different than what we had seen in Q4 as we were going through the observing the early testing. And you know, we do believe that at this point it will continue to be a targeted and focused activity from the competition. You know, from our perspective, you know, we feel pretty good. I think if you look at the first two major merchandising windows of the year, super bowl and Easter, we were able to take dollar share. You know, we grew our distribution 7% on TDP's and we increased marketing to the as we said, to 35% while also being mindful of where our price gaps need to be to remain competitive. So, you know, I think we feel confident in our drivers for the year. I think we feel confident that California will continue to build and that we've invested in our revenue management capabilities to make sure that we are able to compete. And you know, the nice thing about our company is we can be fairly agile and with productivity giving us more resources potentially to deploy if we had to, we feel like we can compete in a variety of contexts.

Scott Marks (Equity Analyst)

Appreciate the thoughts there. And then just a follow up from me, a lot of comments in today's remarks about the bonus bags. I know it's been mentioned a lot, but obviously it's in there. You know, you obviously helped us give us a little bit of context in terms of what the numbers look like excluding the bonus packs. Wondering if you can break that down between core markets versus expansion markets. What would, what would the impact have been if we exclude the bonus bags just in terms of, you know, price versus volume and kind of where that growth is coming from.

Howard Friedman (Chief Executive Officer)

Yeah. So a couple of things I think, I know we haven't broken it out between core and expansion geography. It's kind of more difficult for us to do just given the nature of the fact that bonus bags were actually the same upc. So we'd have to do quite some additional work to be able to offer that. I think what you can say for the field is that bonus bags broadly were a mostly in the core geography. That's where the majority of our distribution is with respect to things like us and on the border, which is where it was. But we tried to give you a perspective of on a two year basis, you know, we're holding up quite well competitively and that both volume, mix and price are being equal, similar contributors to our overall growth rate. Which I think really kind of the point we wanted to make sure we got across. Appreciate it. Thanks. Thanks. Scott.

OPERATOR

Your next question comes from the line of Rob Dickerson with Dtig. Your line is open.

Rob Dickerson (Equity Analyst)

Great, thanks a lot. Hey, Rob. Hello, people. Hey, how are you? Good to hear from you. I'm great, yeah. Just, just a quick question on, on the category. You know, I realize you're using retail dollars in the quarter category is not flat. Right. It was up, I think over 2% based off of what you spoke to. You know, the guidance that you've been talking for a while of kind of expecting kind of flat for the year. Is it just kind of, you know, obviously the market is very dynamic right now, kind of. We're still in the early or at least first half of the year. So there's no need to say, oh, we actually think, you know, the category could be more than flat this year and maybe we'll be in line with the category. I'm just trying to gauge a sense of kind of where head is right now, you know, sitting, you know, in early May with respect to the category and maybe its potential for the year and then kind of how you could maybe operate vis a vis that category growth. Thanks.

Howard Friedman (Chief Executive Officer)

Yeah, I think first, I think when you think about the beginning of the year, we have continued to project a more flattish category just given how early it has been in the year. And there is a very. It's certainly been noisy in the first three, four months of the year, you know. So I think at this point we're just continuing to take a conservative view on the category. I think what we would expect is that as the year continues and as the category sort of starts to demonstrate more consistency, then we would re look at that, look at our assumptions. But from our perspective, you know, obviously we've never been solely dependent on the category for our growth expansion. Geographies remain a significant area of white space for us and our increases in innovation in ANC we believe, puts us in a position to make sure that we are delivering against the guidance that we provided as we go forward. And obviously, if the category continues to improve, then we'll take a different decision as we continue to navigate the year.

Rob Dickerson (Equity Analyst)

All right, super. And then I guess just on the innovation front, I think you mentioned you were saying like, you know, beef tallow going for 20 bucks on auction. And then I know you have flavored tortillas coming and nice protein, some oats protein skus. You know, there are a few other competitors that, you know, might have some healthier options coming in as well. But just as you know, we think about kind of consumer re engagement right in the category like Boulder is clearly doing very well, engaging well with the consumer. Again, kind of coming back, I guess to us, but then also to the category. It just feels like they're, you know, there's clearly action in motion that would support, you know, kind of category, category improvement potentially as we get through the year, but especially just within consumer re engagement. I don't know if that makes sense to share your comments.

BK Kelly (Chief Financial Officer)

Yeah, it does. Look, we think that there are kind of three areas where consumer engagement really kind of matters to us. I think the first, to your point, is around better for you. And we're certainly seeing many people entering into the better for you category. Larger scale competitors and smaller guys. We feel really good about Boulder Canyon's ability to compete. Tallow has gotten off to a great start. It was a new One for me to go onto an auction site and see the product there. But really around better for you attributes and non seed oil and that business continues to grow in both the natural and I think we've also seen that it's actually able to stretch with to your point, unflavored and now flavored tortilla chips which we feel very good about. The authorizations and early consumption trends on that business is strong. I think protein is introducing that brand into what we call an elevated performance. Not necessarily all the way to the Boulder Canyon side, but the presence of positive we think is a big territory for consumers who are looking to incorporate more protein in and we'll continue to try and work on the better for you attributes across. We have snacking made simple on our UTS brand is our sort of our organizing idea which highlights the simple ingredients that are in our core products. You know the next two areas really are around flavor and then value and those two areas also are places where I think consumers have always engaged in this category and will continue to do so as we go forward. So I do think you're going to see more effort by everybody to continue to introduce presence of positives. I think it's a consumer trend, but I also think flavor and value you'll also see.

Rob Dickerson (Equity Analyst)

All right, and then just maybe a quick one for me too for bk just on the free cash flow front, you know, is there anything to call out, you know, as we get, you know, as we're now in early maybe for the year and I'm really just kind of speaking to that expected kind of sequential improvement free cash flow this year, then kind of that ability to hit that larger target longer term. That's all. Thanks a lot.

BK Kelly (Chief Financial Officer)

Yeah, I think the thanks for the question. You know, our confirmation of our guidance included the 60 to 80 million of free cash flow that we were chasing this year. Q1 for us is always going to be a quarter where we we burn cash as we build for the seasons. I think the improvement in our leverage year on year is something that is indicative of the improvement we're making in our processes and capabilities in this area. We continue to think that that will build over the year and we'll be on track for the free cash flow that we expect to generate as well as a lot of targets that we set.

Rob Dickerson (Equity Analyst)

Super, thank you. I'll pass it on.

OPERATOR

Before going to the next question again, if you would like to ask a question, press Star then the number one on your telephone keypad. Your next question comes from the line of Jim Salera with Stevens. Your line is open.

Jim Salera (Equity Analyst)

Hey, Howard. Hey, bk. Good morning. Thanks for taking a question. I wanted to circle back on the pricing actions you mentioned by large competitors and kind of the limited impact on the commercial plan from some of the work that we've done. It seems like those pricing actions are most pronounced in mass, particularly the largest mass retailer. I wonder if you could share how you're thinking about your pricing maybe on a kind of channel basis relative to peers and if we should see maybe a more strategic opportunity for you to differentiate yourself in channels outside of mass.

Howard Friedman (Chief Executive Officer)

Yeah, thanks for the question. Certainly we've seen similar performance in in the mass channel, which is not that much of a surprise to us. I think you've seen that we've seen that historically, which kind of goes back to the original point of this. Nothing that we're doing, we've seen so far has been all of that surprising to us. And if you think about how our commercial strategy kind of unfolds, we have got a wide range of competitive dynamics across the price ladder. So, you know, we continue to grow very nicely in the natural channel. We've been making good progress in club behind some of our premium brands, notably Boulder, our expansion geographies and frankly the Food Channel overall continues to perform for us with the larger national grocers as well as the regional players. And so, you know, we will compete there. You know, obviously our reven capability really comes through in the Food Channel because that's where promotional effectiveness and timing can really can really kick in. And then I think, you know, more broadly as you think about sort of the rest, the remainder of the mass channel, we are feeling very good about the performance of our business there. We've seen distribution gains. So you know, overall we are it is a subcat by subcat channel by channel game for us. And that's again, I think we have a lot of different ways to get to our goals and our objectives. And I think that's kind of what you're seeing in the first quarter. Great. And then I could shift gears and ask a quick one on California. You mentioned your prepared remarks. You know, California was up high single digits. It might be too early, but I want to ask if given any sense for the repeat rates in California, given your brand is going to be new to a lot of folks out there. Curious to see kind of the initial loyalty response.

Jim Salera (Equity Analyst)

Yeah, it's early for us to see. We have to get through a couple of purchase cycles before we really be able to give you a better sense of loyalty. What I can tell you is if you look at our overall marketing metrics nationally, which of course our expansion geographies are a significant portion of our growth, you continue to see loyalty and repeat rates actually fairly consistent across. So I think that that gives us quite a bit of confidence that even with a lower relative brand awareness on a brand like us, that the product once in consumers hands and pantries will have a, will earn its right to stay there. I think beyond that, remember that Boulder Canyon and Hawaiian are also brands that exist in that market marketplace today. And so that is also the opportunity for us to expand distribution of those items which are more familiar to the California market. So you know, it will be a full suite of our Power 4 brands and some of our targeted brands as we kind of mature that, that, that geography over time. But like I said, high single digits, couple weeks in, you know, call it five, six weeks into it, we feel pretty good about where we are in California. Lots to do, but we're excited about it. Great. I appreciate the thought. So I'll hop back in the queue.

Howard Friedman (Chief Executive Officer)

Thanks Jim.

OPERATOR

Ladies and gentlemen, that concludes today's call. Thank you all for joining.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.