Hello, everyone, and welcome to Utz Quality Foods' Utz Brands Fourth Quarter and Full Year 2024 Earnings Conference Call. I'd now like to hand over the call to Kevin Powers, Head of Investor Relations. You may now begin. Thank you, Operator, and good morning, everyone. Thank you for joining us today for our live Q&A session on our Fourth Quarter and Full Year 2024 results. With me on today's call are Howard Friedman, CEO, and Ajay Kataria, CFO. I hope everybody has had a chance to listen or read our prepared remarks and also view our presentation, all of which are available on our Investor Relations website. Before we begin our Q&A session, just a few housekeeping items. Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and the 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 and posted on our website. Now, Operator, we are ready to open up the line for questions. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. Your first question comes from Andrew Lazar from Barclays. Your line is now open. Great. Thanks so much. Good morning, everybody. Morning, Andrew. Good morning. Yeah. Maybe to kick it off, Howard, what is your category growth assumption for fiscal 2025? And does that outlook embed sort of holding value share in core while also expanding value share in your expansion markets, as was the plan laid out at Investor Day? Yeah. Thanks, Andrew. Look, I think we think the category is going to be somewhere around 0%-1% next year, so call it slightly better than flattish. And I think it will continue to progress through the year. To your point on our strategy, our strategy remains intact. We intend to hold our core relative market share and actually grow in expansion markets as our distribution gains and increased marketing support come through and take hold. Okay. I know Utz is, per the prepared remarks, looking for a modest headwind from price in fiscal 2025. I guess, what gives you the confidence that you're building in enough flexibility in light of what you've called out and we've seen in the data as a still sluggish category and some increased competitiveness as well? Thanks so much. Yeah. Yep. I think there are a couple of things that we look at. First of all, I think we're looking to deliver value beyond price. We've engaged in some bonus bags. We're working on a price pack architecture to be able to sell up and down the price ladder. So we don't believe those impacts will necessarily be significant drags to pricing. I think the second thing we would expect is if you think about how price happened this year in the category, you sort of saw a progressive march to a more promotional category as you went through really the mid part of the year to the end of the year. Eventually, we believe that will normalize as we lap that behavior and as I think the category participants take stock on what is motivating the shopper to buy and participate in the category, which has always been marketing and innovation and having the right assortment. Got it. Last quick thing. Just, I know you expect on the top line pretty even first half, second half in terms of growth. Anything to keep in mind, specifically discrete around one Q or on the top line that we should be aware of, just given where some of the recent data has looked like for the category as well as that? Thank you. Yep. Yeah. I think for us, you'll recall that January of 2024 was actually our strongest month of the year where we grew a little over 6%. So we had anticipated a decline in January given the nature of that lap, which was really promotionally driven. We would expect to see January continue or Q1 to continue to improve as we go through and the year is largely beginning as we would have expected. Thanks so much. Your next question comes from Peter Galbo from Bank of America. Your line is now open. Hey, guys. Good morning. Thanks for taking the questions. Morning. Morning. Maybe just a clarifying point to start or an ask on behalf of all of us. Will there be a further breakout historically of the branded salty versus non-branded, non-salty kind of breakout that you gave today on a quarterly cadence? I think you said that in the prepared remarks that the realignment will also allow us to better kind of track it relative to the scanner data. So just if there's a longer historical period, it at least allows us to test us that. So that would be just one ask or if that's your plan. Pete, this is Kevin. Absolutely. We are more than happy to provide those historical components in terms of the net sales breakdown for the first three quarters of last year. Yes, we will plan to do that. Okay. Great. Thanks. And then on the back of that, and I promise there are actual questions in here. Just, Howard, when do you fully lap kind of the dips and spreads weakness that's been persisting now? It feels like for maybe longer than you anticipated, but I don't know if there's anything discrete in there that happened this quarter that you'll lap over the next few quarters. Yeah, Pete. Dips and salsa was actually starting to become a headwind as we had some assortment decisions last year, really beginning in May is where we should see the lapping occur. And then it will progressively improve through sort of the back half of the year. Okay. Thanks. And then just the second kind of follow-up there. Howard, on tortilla chips in particular, you call that out in the slides. It was one of the bigger kind of core category areas of weakness. It seems like maybe there was some channel dynamics or some shifting that you had all within your portfolio. But just given the increased level of competitiveness, certainly that seems like coming from your biggest competitor in tortilla chips, maybe you can address that more specifically. Thanks very much. Yeah. I think the issue we saw with tortilla chips in the quarter really was an issue of lapping and some discrete choices that we've made on assortment. There's not really not been anything more significant than that. Pete, I think tortilla chips and On The Border specifically continues to enjoy strong consumer reception. I think we believe it's at a sharp price point. We obviously have some activity that we're now doing with bonus packs on that business as well. But it's really more about that lap that we talked about in the last question, really with December, January, February is really where prior year you would have seen a lot of the consumption improvement. So as we lap that, we would expect it to continue to be strong. Your next question comes from Robert Moskow from TD Cowen. Your line is now open. Hi. Thanks. A couple of quick questions. First is, what are the big building blocks this year for expanding EBITDA margin given that the sales? What gives you comfort that even though sales decelerate a bit, that margins are still on track to expand? And you said even exceed in 2026. So how do we disassociate these two things from each other? And then I just had a follow-up. Hey, Doc. This is Ajay. What you're going to see in 2025, very similar to 2024, our productivity program remains pretty strong. We delivered about $60 million of productivity in 2024, and we have line of sight to $150 million now or more over the three-year period of 2024 through 2026. 2025 is going to be similar to what we called out at Investor Day. The algorithm is going to be productivity sort of generates gross margin. We make investments in our supply chain and our capabilities, and then net out about 100 basis points of 80-ish basis points of EBITDA margin expansion. Okay, but Ajay, maybe is there anything specific that you can call out as to what's giving you such strong productivity? Is it capital investments at the plants? Is it the new distribution center? Is there any one or two things that really stand out? Yeah. So I'll start, and Howard should weigh in. All of the above. We are making capital investments in our network. You've seen us do that in 2024. We'll continue at that pace in 2025. The capital investments is driving automation. It's driving more capacity in the plants and sort of leveraging our fixed costs or spreading our fixed costs out further. So that's one piece of it. And then we have done a lot of work around procurement, around logistics. We just opened our RDC Distribution Center, in December. So that's consolidating multiple buildings and inventory in there. So a lot of work that's going into the supply chain, a lot of heavy lift that was done in 2024, and that process should continue in 2025. Yeah. I'll just add on two things. I think we feel great about the progress we've made in our supply chain optimization and network optimization efforts. And really, as you will recall, it was predicated on a couple of things. One was getting our footprint in order, which we are ahead of schedule on. Two was to start to make investments in automation and actually making sure that our distribution network was as efficient as possible to get the total delivered costs lower across the network. If you look at things like the RDC or you look at a lot of the automation that we've done and you look at sort of the capacity expansion that we've been doing, it actually allows us to be able to produce products closer to where they're sold as well. So we're taking product off the road. We're actually doing it in a far more efficient and effective way. And a lot of that has really been coming online over the last, call it, back half of this past year and will continue into the first half of next year. and I think the last thing I would say is we are getting better at understanding our business and understanding demand. And as we do that, there's some waste that comes out of the system that are benefits that just make us more efficient overall. So I think we're ahead of schedule on supply chain. I think we've done a lot of good work. And frankly, we still have probably another year to year and a half of consistent effort that we have to apply to continue to make that accelerate before we get to a much younger, more modernized, more efficient network overall. Makes sense. Thanks. My follow-up. Maybe you put it in the prepared remarks, but is there an outlook for the non-branded side of the business? It was down, I think, 18% in fourth quarter. I think that includes the dips also. So should we expect another double-digit decline in 2025 impacting your sales? The short answer is no. You should not expect another double-digit decline impacting our sales. Part of it was the lap that we saw on our dips and salsa business, which we control, and part of it has been on the non-branded side of our business as well, which we've been carefully managing as we go, but I feel like we're in a pretty good place that those businesses will continue to be important for us and our consumer and our IOs, but you should not see that type of decline moving forward. Okay. Thank you. Thank you. Your next question comes from Michael Lavery from Piper Sandler. Your line is now open. Thank you. Good morning. You touched on some price pack architecture adjustments. Can you maybe just unpack that a little bit and maybe touch on some of the timing and how that may look for the consumer? And also maybe what, if any, margin impact some of those incremental SKUs might have? Yeah. I appreciate the question. Look, I think there are a couple of things in terms of price. It's really a price pack architecture, and it's also a class of trade question. Right? And so I think on price pack architecture, what you're seeing us do, what you see right now in the marketplace, we have bonus bags out on potato chips and tortilla chips to be able to add value to the business. It's basically 20% more in the business. We're also continuing to expand the distribution. We've been fortunate. We have a lot of the right pack sizes and making sure that we are putting appropriate emphasis on sort of lower price point in certain classes of trade to make sure that we're hitting critical price thresholds and steps on the ladder. So those things, I think, we're really just pushing more of. The other thing I would say is you're going to see us actually at the high end of the price ladder as well. When you think about Club, which is Circana, MULO, C-Store with convenience actually will help us be able to read a little bit better. So you'll see step up in selling there as well. So you'll see it, I think, across the entire ladder. In terms of the margin, I mean, I'll let Ajay answer, but I think our view is that our guidance largely contemplates the impact of the margins. Yeah, it does. We have carefully understood the mixed impact and put that in our models. Okay. Great. And just to follow up on distribution expansion, can you maybe touch on what expectations might be baked into guidance, especially for maybe geographical expansion and what sort of investments might be needed to move, say, further west, for example? Yeah. So one of the things I think you saw through the rest of last year is we continue to see a lot of interest and enthusiasm in our portfolio as we continue to work with not only Mass and Club, but obviously larger national grocers regionally. And so I think what you saw over the back half of last year, really September through the end of the year as we started to gain distribution, really kind of building through the end of the year. So you'll see more out west. It's going to be a continuation of the same geographies that we've talked historically about. We've invested in Texas. We've invested in Michigan. We've invested in Colorado as well. And so you'll see more of that coming this year. I think what you saw in the last quarter was you got to see our Power 4 brands in our expansion geographies growing quite nicely. So we would expect to see more of that in the year to come. In terms of what kind of spending you need to do, remember, it's not as much a promotional price point because we're relatively new to the market. It's a lot more about consumer awareness. That's part of why you saw that step up of 70% in the fiscal year last year. Our initial guide, as we gain distribution, we will then add incremental advertising to those markets to make sure that consumers can find our brands. Okay. Great. Thanks so much. Thank you. Your next question comes from Rob Dickerson from Jefferies. Your line is now open. Great. Thanks so much. Good morning. I guess, Howard, just quickly, I just wanted to kind of get your perspective on any channel dynamics taking place right now. Just kind of how do you view C-Store channel? Do you think there could be some improvement, hopefully, as we get through kind of more of the seasonal kind of peak period, kind of as we head into summer? Do you think consumers maybe are buying maybe a little bit more of the bonus bag relative to the smaller pack sizes? Trying to understand the channel and the general consumer behavior on purchase rates. Yeah. I appreciate the question. A couple of things. I think, first of all, I'm going to kind of kick through a couple of channels, a couple of things. I think we feel really good about what's been going on in traditional grocery. We continue to outperform there and continue to be one of our biggest growth opportunities as we go forward. We understand it well. We perform well in the category, and our brands work extremely well. I think similarly, you're going to see continued expansion and movement in Club. We are working very hard with our Club partners to try and make sure that we have the right assortment items and make sure that when consumers want to pay for the inventory, that they can get our products where they're selling. There's no question that C-Store has been more of a persistent challenge for us through the course of the year for decisions that we made in the past. We have not moved as quickly to get those things to be reflected in the data as we would like. We would expect that to improve as we go through the year, and we would expect that challenge to return to modest growth when we have this call a year from now. In terms of the consumer behavior, I think you continue to see value seeking. You continue to see promotional activity and promotion shopping, and you continue to see them shopping up and down the ladder. If you are looking for an absolute price point at a low relative cost, you can find that. If you're looking for a lower per ounce cost when you can afford the cost of the inventory, you can see that as well. The one thing I would certainly say is the promotional mix in the category has been interesting as well, as you see household penetration. Really, in the category being up for the year, it's really been buy rate as consumers are for a holiday; they're doing multi-buy purchases and taking the inventory and consuming it, and in other cases, maybe buying it and actually then being out of the market for a minute, which is causing promotional lift to be a little bit more lumpy. That, I think, will kind of sort itself out as we go through the year. Okay. Great. And then maybe just to follow up to that last point, we did hear from a competitor earlier this week who kind of spoke to, quite frankly, a number of food companies kind of spoke to some of that lumpiness, right, in the promotional spending taking place. And then I hear you also speak to price pack architecture, kind of introducing these few smaller pack sizes. So is that also how you're viewing it kind of collectively? I mean, we kind of talk about, well, what's the net pricing effect, but it also sounds like, well, maybe it's just more efficient to not be promoting as much given the lumpiness and maybe be driving real demand through other product offerings. I don't know if that's supposed to be the kind of point take. Thanks. Yeah. Look, I think that as you think about price pack, if you're a shopper who's going with a fixed amount of money in your wallet, you want to make sure that you're hitting an absolute price point because the fixed amount of money that's in your wallet needs to cover all of your demands, which is why making sure that we are sharp on an absolute price point basis is important for us as we move. I think when you smooth some of that lumpiness, I think that what we're seeing is when you look at multi-buys, you have to make sure that it's at a price point and there's enough of an assortment, which we are fortunate to have, that a consumer can buy a range of products in that multi-purchase occasion. So I think that's kind of what the lumpiness is. I'm not sure. We've always been a little bit of a, relatively speaking, lower-promoted category because brand building and innovation has always been so important for the shopper in this set, which I still think will remain the same. So I think promotional intensity will normalize as we go through the year. And I think there's no reason to believe, at least in my opinion, that this category is going to be fundamentally different moving forward. I think innovation, communication, and promotional pricing will always remain important along with, obviously, quality and availability. All right. Super. Thank you. Thank you. Question comes from John Baumgartner from Mizuho. Your line is now open. Good morning. Thanks for the question. Hey, John. Howard, I wanted to touch on promotions for 2025, and in particular, the planned investments in display and non-price promo. At the category level, are you expecting or seeing, I guess, any notable changes relative to history in terms of the allocations provided to salty snacks from retailers given the softness we've seen, either in terms of quantity or format? And then secondly, as you ramp innovation and diversify the pack sizes and expand in seasonals, are there any notable changes that we should expect from your activity year on year in 2025, whether it's increased concentration in certain channels or a larger concentration for certain events? Any insights there? Yeah. So a couple of things, John. We have not experienced any change sort of in the customer allocation for display activity. And if anything, I think one thing that I hope you're seeing because we are setting them is you're seeing a lot more display activity and end cap activity from us in both our core and expansion markets. It's important for us, especially as we start to compete not only on price, but also, obviously, on availability. And in expansion markets, it's a great way for us to enter and start to gain the consumer traction that we need. So we have not seen any change in display activity, both in terms of around the perimeter as well as end caps. I think part of what continues to be a positive for this category is, again, household penetration for this category is up on the year, which I think is something that we all should be mindful and proud of as we go and continue to prove that consumers want the product in their pantries. In terms of kind of how do we think about the year coming, I think what you'll continue to see is we will continue to compete around our core four. Obviously, Boulder Canyon continues to be a brand that is gaining traction given its nutrition profile and non-seed oils. We continue to see that business just growing and obviously past $100 million this past year. I think you'll see more activity there and more classes of trade as we go forward. And I think you'll also see from us some innovation that we're proud of and that we expect will continue to allow us to drive consumer interest. Probably on this other branded salty business, we also are, I think, in a really good place and allow value seekers to be able to participate in other products that we sell and other brands should they choose to do that, which we continue to believe that they will. Okay. And then in terms of the broader portfolio, I know it's early to speak to M&A in terms of activity, but I am curious. Your last couple of deals focused on capacity and route to market. As you look at the broader category at this point and some of the changes, do you think the portfolio might need to take another stab or a larger stab in the future at brands that are perceived as better for you? Or do you feel as though with the scalability of Boulder, that's sufficient to go organically in that space? Yeah. So look, first I'll say I feel great about our portfolio. I mean, broadly speaking, I think we have assembled, and obviously, over the last 15 years, we've assembled a portfolio of brands that we feel great about, and consumers love them, and they have a lot of elasticity that we can go do in terms of what the consumer would be interested in buying from those brands. Boulder, obviously, is one of them and is certainly a place where we believe that it continues to have the flexibility to enter into different subcategories and into different classes of trade and will continue to do that. I feel the same way, frankly, about Utz's On The Border and some of our other brands where they do have permission to travel, and they have permission from consumers to be able to both respond to a marketing message as well as incremental innovation, which you'll see. In terms specifically of do we need to go, should we go and acquire a brand, look, we will always pay attention to what's going on out in the marketplace. And if there's something out there that's interesting, the first thing we ask ourselves is, would we be good owners of it? And if the answer is yes to that, then we'll do some work. But I don't necessarily feel like there is a brand out there at the moment that we would look at and say, "Boy, we don't think we can do that within our existing portfolio." Whether it's better for you or value, I think our portfolio is pretty solid and I'm pretty excited about it. Okay. Thanks, Howard. Thank you. Your next question comes from Jim Salera from Stephens Inc. Your line is now open. Hey, guys. Good morning. Thanks for taking our question. Hey, Jim. Howard, I wanted to maybe circle back to the beginning of the conversation just with the outlook for 2025 and the category kind of flattish to up modestly. If we think about what you guys did in 2024 with both household penetration and the repeat rate increasing simultaneously, how should we think about that in 2025? Because I would think that as you add new households, that might have a negative impact on the repeat rate, but obviously, we didn't see that in 2024. And so just you can maybe give us some detail around the composition there. What's driving those both up at the same time? And is that in the core market, expansion market, just any color around that would be helpful. Yeah. So I agree with you that the marketing math would always say that as household penetration rises, and we're super pleased that our household penetration has achieved an all-time high for us. Every time I say things like that, it makes me nervous. I'm not going to lie. But our household penetration is very strong. We would expect, naturally, that consumers, some consumers will try it, and they will no longer be interested. And that's not what we're experiencing. We're actually seeing both metrics moving together higher. And I think that speaks to the quality of our products and the diversity of our portfolio. So consumers can come in and try a potato chip, and then we can offer them a whole range. Obviously, part of that is also driven by our expansion geographies and what we've been able to do on end caps of being able to present our entire portfolio. So I think it goes to the quality of the product and the strategy of how we're entering markets, of why those two things are traveling together. I would also say that we feel very good about our plans for expansion markets going forward into 2025. Obviously, we've done some work in the Q4 of this past year, and we would expect a lot of that momentum to continue into the year. We feel pretty good about the distribution opportunities that we have in our core markets. As we've always talked about, our core markets for us have always been more expansion markets for the other three power brands. And what we're gaining is distribution in those, and we're shifting the assortment a little bit on those brands and bringing them into the core. So those two things together will continue to be centerpieces to our expansion strategy. I think we feel like next year should be another strong year of household penetration gains and households overall. Okay. Great. And then maybe if I could shift gears a little bit, but still tie it back to that first question. In the data and the slide deck that you provided on Boulder, obviously, 4Q in the MULO+ data was over 100% over the full-year trend. Can you just talk to what's driving that outside of the macro channels? Is it just better shelf placement, and it's just appearing on shelf, and consumers are becoming aware of it? Or do you see higher repeat rates there? And to tie that back, can you, if you have the data available, offer up which brands you see the highest repeat rates on in that power brands portfolio? Yeah. In terms of the repeat rates, I probably need to get back to you with an answer on. But I think that what you're seeing on Boulder, there's two things happening. One is we are gaining distribution as consumer interest in the product continues to grow. We're obviously having great success in expanding our distribution of that item. But probably more exciting is the fact that it's a velocity-led growth story. So yes, we're gaining distribution, but it is actually accelerating. And certainly, we are proud of the avocado oil chip. And we get a little bit of in the last four weeks, it's January, so I always want to be a little bit careful, but it was the number one chip in the Natural channel for the period. So we see the consumers loving the item. The velocities are very strong. I think what we're now seeing is as more retailers are interested in looking at that piece of the portfolio, better for you and avocado oil and non-seed oils. Boulder is obviously square dead center in that trend with a great product that actually delivers on taste and affordability. Great. I'll pass it along. Thanks for the call. Thank you. We don't have any questions as of the moment. We are now closing the floor for questions. Thank you so much for attending today's call. You may now disconnect. Have a wonderful day.