Utz Brands Inc Aktie

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. [Operator Instructions] I would now like to turn the call over to Trevor Martin, Senior Vice President, Head of Corporate Finance. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us today for our live Q&A session of our first quarter 2026 earnings results. With me today on today's call are Howard Friedman, CEO; and BK Kelley, 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&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 posted on our website.

Now operator, we are ready to open the line for questions.

[Operator Instructions] Your first question comes from the line of Peter Galbo with Bank of America.

Howard, 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 2Q, particularly in April. So I 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 then we should see improvement in May and June. So maybe I'll start there and let you kind of elaborate on your commentary?

Yes. Thanks for the question, Pete. So a couple of things. Look, I think, first of all, we always expected that April was going to be sort of -- it 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 on the cheese business. We also had some laps in some larger customers where there's some merchandising timing that actually shifted.

So as you look at the year-over-year, we expected 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, 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 the -- through Q1 as well.

Great. 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 could just talk a little bit about the hedging program and kind of how you're locked on freight and go forward for the rest of the year.

Yes. Thanks, Pete. Thanks for the question. So first of all, I would say we're covered for most of the year on fuel, ags and freight. Our productivity program that we've 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 comes from primarily a small impact from fuel for us, but mostly packaging driven by the resin impact.

We'll continue to maximize the other levers that we have, the RGM tools around price pack architecture, and we'll be using AI to improve our promo effectiveness, and we'll continue to improve our sales mix. The net impact for us is that we have many levers to address potential inflation, but we are mostly covered on the fuel, ags and freight pieces to your point.

Your next question comes from the line of Michael Lavery with Piper Sandler.

This is Luke on for Michael. 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 do you get to that target this year and in 2027? And then also, where do you see the biggest opportunities for return on marketing spend?

Thanks for the question. Look, I think what we've said, we're largely in line with what we would have expected on the marketing investment for the year. We will expect to add [indiscernible] 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 the -- in my time here. I think in terms of where we see ongoing investment, I think there are a couple of places. One is obviously supporting our Power Four Brands, Utz, Boulder Canyon, Zapp's 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. In California, we'll obviously get investment as we continue to scale that area. And then the last is in supporting our core 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.

Okay. That's great. And your household penetration increased just over 1 point. What's working there? And what opportunities are ahead?

Yes. 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.

I think that the major drivers, again, are going to be -- partially it's going to be about expansion geographies which obviously, for the Utz brand is as we're moving westward and for the remaining Power of Three, it's also bringing it into Utz's core geography. So we're introducing new households in both places. Second, our innovation is introducing products into households that they may not have had before. We 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 I think we're kind of hitting on most of the cylinders right now and lots left to do.

Your next question comes from the line of Scott Marks with Jefferies.

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.

Yes. 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 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, I'd tell you what we've observed is, obviously, the Bell-Mark 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 subcats.

And this isn't wildly different than what we had seen in Q4 as we were going through the -- observing the early testing. And we do believe that at this point, it will continue to be a targeted and focused activity from the competition. From our perspective, we feel pretty good. I think if you look at the first 2 major merchandising windows of the year, Super Bowl and Easter, we were able to take dollar share. We grew our distribution 7% on TDPs, and we increased marketing to, as we said, to 35%, while also being mindful of where our price gaps need to be to remain competitive.

So 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 the nice thing about our company is we can be fairly agile and with productivity giving us more resources potentially to deploy it if we had to, we feel like we can compete in a variety of contexts.

Appreciate the thoughts there. And then just a follow-up for me. A lot of comments in today's remarks about the bonus bags. Hate to bring up the term again, but obviously, it's in there. 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 the impact have been if we exclude the bonus bags just in terms of price versus volume and kind of where that growth has come from?

Yes. So a couple of things. I think -- I know we haven't broken it out between core and expansion geographies. 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 have to do quite some additional work to be able to offer that. I think what you can take [indiscernible] is that bonus bags broadly were mostly in the core geography because that's where the majority of our distribution is with respect to things like Utz and On The Border, which is where it was. But we tried to give you a perspective of on a 2-year basis, we're holding up quite well competitively and that both volume mix and price are being similar contributors to our overall growth rate, which is I think really kind of the point we wanted to make sure we got across.

Your next question comes from the line of Rob Dickerson with BTIG.

Yes, just a quick question on the category. 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, 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 -- 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 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 your head is right now sitting 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?

Yes. 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 3, 4 months of the year. 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 -- we'll relook at that, look at our assumptions.

But from our perspective, obviously, we've never been solely dependent on the category for our growth. The expansion geographies remain a significant area of white space for us and our increases in innovation in A&C, we believe, puts us in a position to make sure that we are delivering against the guidance that we've 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.

All right. Super. And then I guess just on the innovation front, I think you mentioned you were saying like Beef Tallow going for $20 on auction. And then I know you have flavored tortillas coming and Utz Protein, some Utz Protein SKUs. There are a few other competitors that might have some healthier options coming in as well. But just as we think about kind of consumer reengagement, right, in the category like Boulder is clearly doing very well, engaging well with the consumer.

Again, kind of coming back, I guess, to Utz, but then also to the category, it just feels like there's clearly action in motion that would support kind of category improvement potentially as we get through the year, but especially just within consumer reengagement. I don't know if that makes sense. Just to hear your comments.

Yes, it does. Look, we think that there are kind of 3 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 on to 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 conventional channels.

I think we've also seen that it's actually able to stretch with, to your point, both 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 in Utz 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 positives, 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 Utz brand is our sort of our organizing idea, which highlights the simple ingredients that are in our core products. The next 2 areas really are around flavor and value. And those 2 areas also are places where I think consumers have always engaged in this category and we 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.

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

Yes. I think the -- thanks for the question. Our confirmation of our guidance included the $60 million to $80 million of free cash flow that we were chasing this year. The Q1 for us is always going to be a quarter where 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 the leverage targets that we set.

[Operator Instructions] Your next question comes from the line of Jim Salera with Stephens.

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?

Yes. Thanks for the question. Certainly, we've seen similar performance 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 the 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 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 we will compete there. Obviously, our [ rev man ] capability really comes through in the food channel because that's where promotional effectiveness and timing can really kick in.

And then I think 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 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 if I could shift gears and ask a quick one on California. You mentioned in your prepared remarks, California was up high single digits. It might be too early, but I want to ask if -- do you have 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.

Yes. 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 Utz that the product once in consumers' hands and pantries will have -- will earn its right to stay there.

I think beyond that, remember that Boulder Canyon and Hawaiian are also brands that exist in that marketplace today. And so that -- it's also the opportunity for us to expand distribution of those items, which are more familiar to the California market. So it will be a full suite of our Power Four Brands and some of our targeted brands as we kind of mature that geography over time. But like I said, high single digits, a couple of weeks in, call it, 5, 6 weeks into it, we feel pretty good about where we are in California, lots to do, but we're excited about it.

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

Good afternoon, everyone. Let's welcome Utz Brands to the CAGNY stage for the very first time. And before we get started, please join me in thanking the company for their generous sponsorship, both for that awesome break outside and for the extra drops of tasty snacks throughout the week. Thank you, guys.

Utz offers a robust savory snacking portfolio, including its namesake brand as well as Boulder Canyon, On The Border, Zapp's, among others. Over the past few years, the company has delivered consistent top line growth despite a tough overall snacking environment while also driving significant productivity across its supply chain. As we turn and look ahead to this year, Utz is looking to build further on that commercial momentum as well as driving a meaningful free cash flow inflection.

Presenting today, we have CEO, Howard Friedman; and CFO, BK Kelley. Let's welcome the team. And again, thank you for the generous sponsorship.

With that, I'll hand it over to Howard.

Thank you all. Again, I'm Howard Friedman, CEO of Utz, and we're glad to be at CAGNY for the first time since going public. And we're excited to introduce to you the company and lay out our strategy. Before we start, I'll just remind you that our remarks today include forward-looking statements, and I'll give you a second to look them over.

With me today is BK. Kelley, our CFO, who joined our company about a year ago with extensive background in CPG.

Let me start with some key messages and why to consider Utz. Despite being a smaller capitalization company, Utz is the largest pure-play salty snacking company in the country. Our video ended with a nod to our 100-year history and our potential, and we're leveraging this history and our strong portfolio of brands for our next phase of growth. We have multiple top line growth drivers to scale these brands nationally and expect that several of these differentiated growth drivers have multiyear runways. Since joining Utson as CEO at the end of 2022, our focus has really been on integrating and modernizing the company for this next phase of growth. We built a strong operational foundation and have more margin potential in the years ahead.

Importantly, we plan to deliver accelerated cash generation to delever as we exit the more capital-intensive stage of the last 2 years. While the Utz brand started over 100 years ago in 1921, the company you see today was really built through a number of acquisitions over the last 25 years, including 3 of our Power Four brands, Zapp's, Boulder Canyon and On the Border. In 2020, we became a public company.

Beginning in 2024, we embarked on our supply chain transformation, where we divested several plants and modernized the remaining plants, creating a more efficient and capable network. This multiyear project is winding down as we enter 2026. And in just a few weeks, we begin our expansion in California. We'll talk more about this multiyear growth initiative later in the presentation. Our long history of strategic acquisitions and successful integrations have created an approximately $1.4 billion revenue business today with significant growth potential.

Turning to our brand portfolio. Our Power Four brands, Utz, On The Border, Boulder Canyon and Zapp's comprise 70% of our portfolio with Utz being our largest brand and Boulder Canyon, our fastest growing. Branded salty snacks represent 89% of our revenue at the end of 2025, and we will continue to shift this mix. The remaining 11% of our portfolio is partner brands, which we distribute for other companies and our non-salty business, which is mostly branded dips and salsa. Our brands compete in nearly all salty snack subcategories with potato chips being 46% of our sales, followed by tortilla chips at 17% and pretzels at 11%.

Importantly, we aim to gain share in all the subcategories in which we compete. We have a well-defined brand portfolio architecture, which prioritizes the growth of our Power Four and allows us to focus our marketing and innovation resources accordingly. We also leverage targeted growth opportunities with our regional and subcategory-specific brands. Golden Flake in the Prok Rinds subcategory is a good example. We also have the Hawaiian brand primarily on the West Coast, which has significant potential as we build our distribution capabilities Westward.

Lastly, there are a small group of regional brands that we manage for consistent revenue and cash flow. Importantly, we have been and continue to be active managers of our brand portfolio over time with both acquisitions and divestitures. In salty snacking, strong retail distribution and shelf presence is a key competitive advantage, and we have found it strategically important to service our customers through multiple distribution methods. We use what we call a hybrid distribution model with about 50-50 split between direct store delivery or DSD and our direct to warehouse.

We also have some geographies where we partner with larger distributors, especially early on when we're building scale. Importantly, we believe that DSD gives us an advantage in salty snacks given the breadth of the subcategories in which we compete. This hybrid distribution model enables us to achieve broad retail channel coverage. Our largest channel is food at about 50% of our sales, and we have had success broadening our distribution to faster-growing channels, such as club, which now nearly comprises 10% of our sales.

Over the past few years, we've built a strong foundation of consistent organic top line growth faster than the category by holding share in our core geographies, the Mid-Atlantic and Northeast and gaining share in our expansion geographies across the rest of the country. This strategy delivered 2.4% compounded annual growth over the last 3 years. Over this period, importantly, we've been able to hold our volume share of 8.2% in our core as we invested to maintain value for consumers.

Our expansion geographies have gained almost 0.5 point of both dollar and pound share since 2022, but with our retail dollar share at only 3% and our volume share at 4.2%, we have a lot more share to gain. This concept of hold the core and grow and expansion is central to our strategy, which we will continue to cover in much greater depth. Our strategy has been to focus on and grow our branded salty snacks and deemphasize our non-branded and non-salty business.

Since Q1 of 2023, we have shifted our branded salty business from 82% of our sales to 89% by the end of last year. With the revenue and margin significantly higher on branded versus non-branded, this shift continues to drive mix improvement. Our focus has driven strong branded net sales growth quarter after quarter, even in the most recent quarter when we experienced some destocking from the SNAP payment delays and the government shutdown.

As I've said in my opening remarks, we've built a strong foundation of operating efficiency over the past several years. Our productivity program plays an important part in both funding our growth and expanding our margins. In 2022, our productivity savings was 3% of adjusted cost of goods sold and has consistently grown to an exceptional 7% in 2025. This productivity, our mix improvement and our growth has driven our adjusted gross margin from 28% in 2022 to 32% last year. Our EBITDA margin has improved 300 basis points as some of our gross margin improvement was reinvested back into marketing and capabilities to drive future top line growth. Importantly, we believe there is significant room for more margin improvement over time.

With our focus on organic revenue growth and productivity, we've been able to generate relatively consistent high single-digit adjusted EBITDA growth year after year with an overall 8% compounded annual growth rate from 2022 to 2025. Accelerating and improving our marketing support has been a significant area of reinvestment, increasing at a 40% compounded annual growth rate over the past 3 years. We plan to increase marketing at a similar rate in 2026. Our marketing efforts are impactful with high ROIs and are driving strong awareness and increasing purchase intent of our Power Four brands.

As I like to say, our marketing needs to drive sales overnight and brands over time. Our marketing efforts have been very successful in growing our household penetration with total Utz penetration up over 300 basis points over the past 2 years to 50% of households, which is our highest level ever. Compare this to a salty snack category where penetration while growing is closer to flat.

We're focused on attracting younger demographics where we're gaining households even faster. Among millennials, our penetration increased by nearly 500 basis points to 48%. We think this bodes well for our brands and their future potential.

Now let's shift to our long-term strategy, which has served us well over the past few years in a dynamic category in which we are evolving slightly for our next phase of growth. We're confident that when executed well on the following 4 strategies, we will create value for the company and its shareholders. Our first strategy is to outgrow the category by 200 to 300 basis points profitably, driven by growing in our expansion geographies and strengthening our core geographies.

Our second strategy is to consistently expand margins through productivity and mix improvement. Our third strategy, which is new versus prior years, is to accelerate our free cash flow to be able to delever and allocate our capital efficiently. And finally, our fourth strategy supports these aims by deploying the leading capabilities that we've built during the past few years into a best-in-class organization.

Turning now to our first and most important strategy, outgrow the category profitably through differentiated revenue drivers that I will review in detail. Looking at our path to outgrowth versus the category, we think it can be understood through 3 major components. First, expansion geographies, which represent 45% of our retail sales and can continue to grow at a high single-digit rate, particularly with our California expansion. The expansion geographies growth could contribute 3 to 4 points of our total growth over the category.

Second, hold our core geographies, which represent 55% of our retail sales. We believe through innovation and focus on our Power Four, we can hold our share and grow with the category. Third, manage an expected headwind of about non-branded and non-salty. However, this headwind should dissipate over time as the business becomes less of our portfolio. These 3 components comprise the 2 to 3 points of Utz growth above the category, which we believe is an achievable goal in the years ahead.

One of the misconceptions about Utz is that it's a zero-sum game between us and the category leader. However, there is a significant opportunity to source share from all other branded, mostly regional players that represent 14% of the category. Importantly, private label also plays a relatively modest role in the category at 7% share. Relatively limited private label is a structural positive for this category. Salty snacks has been and will continue to be a terrific category within the food industry. Prior to the pandemic, the category grew at about 5% annually, driven by strong brands, innovation and rational competition.

During the pandemic and the period of inflation that followed, the category grew over 11% per year, driven by pricing. Over the past couple of years, the category has been down slightly as consumers adjusted to these prices. However, we are encouraged by the most recent quarter in which the category was up over 1%. Prudently, our plan only assumes a flat category in 2026, but we have conviction that the category will return to growth in the medium and long term.

Now let's talk about the key growth differentiators that drive our net sales to 2 to 3 points faster than the category. First is our fastest-growing brand, Boulder Canyon, which still has significant distribution opportunities and a robust innovation pipeline. Second is our geographic expansion westward with California being meaningful. Third is strength in core geographies where we aim to hold share through new initiatives on the Power Four brands. And finally, fourth is our winning innovation with exciting new products also focused on our Power Four.

Let's start with Boulder Canyon, a brand we acquired 10 years ago and has experienced rapid growth more recently. We have multiple levers to continue Boulder Canyon's strong growth. First, continuing to grow in the natural channel where Boulder Canyon got its start. second, increasing distribution and assortment in other underpenetrated retail channels; third, driving brand awareness with Boulder's first fully national marketing campaign; and fourth, launch targeted innovation, leveraging the brand's better-for-you credentials.

I hope you had an opportunity to sample our Boulder Canyon products at the break because the brand is attracting new consumers with better-for-you snacks that taste amazing. The vast majority of Boulder Canyon business is seed oil-free and non-GMO and has become a snacking choice for modern consumers without sacrificing taste. We're proud to say that Boulder Canyon is now the #1 salty snack brand in the natural channel. And importantly, we believe the brand can successfully stretch into multiple salty snack subcategories and packaging formats.

While the brand has grown rapidly from $45 million in net sales in 2022 to nearly $200 million last year, substantial opportunity remains. With the space gains, strong velocities and innovation planned for 2026, we expect another year of very strong double-digit growth for Boulder Canyon. Longer term, with more items per store and space, we believe Boulder Canyon has the potential to be a $500 million-plus brand, which would equate to about 1/3 of our total company sales today. Boulder Canyon's performance in the natural channel has been outstanding with several -- with share in the natural channel doubling from 3.2% in 2022 to 6.6% in 2025, assuming the leadership position. We continue to work with our natural partners to ensure that we're bringing innovation and driving more awareness and trial.

Continuing our momentum in the natural channel is important, and we are also expanding Boulder Canyon in other retail channels by growing distribution and assortment. One of the key reasons we are confident in Boulder Canyon's growth trajectory is that our ACV distribution, excluding the natural channel, is still well below some of our other brands. Boulder Canyon's ACV was only 50% for the full year 2025 compared to Utz, which is nearly 80%. Second, our average items per store at 3.6 is well below other brands like us, and we would expect 8 to 10 items per store for Boulder Canyon in the medium term.

Another unlock for Boulder comes from our first national marketing campaign called Be for Real. The idea of the campaign is to get away from our screens, artificial intelligence prompts and the other parts of modern life and journey back into the real world. We believe this reflects part of Boulder Canyon's brand strength, nothing fake or artificial, real simple ingredients that taste good. We will use our marketing playbook of digital and connected TV, social media and partnerships along with point-of-sale activations.

Let me show you now some of our commercial spots.

[Presentation]

We're also excited by our Boulder Canyon innovation pipeline, several of which I hope you were able to try at the break. Last year, we launched Boulder Canyon tortilla chips made with blue corn, and we're excited to expand our product range this year with a selection of flavored tortilla chips to include on-trend flavors like Chili Lime and Sweet Spicy Chili, all cooked in avocado oil. Early consumer response has been encouraging, and these will launch nationally throughout 2026.

Also starting this quarter in select retailers, we will launch Boulder Canyon potato chips cooked in beef tallow, a non-seed oil fat that has received significant consumer attention.

Moving to our second key growth driver, geographic expansion. As you saw in my earlier revenue build, this is a key driver for outgrowing the category. Expansion geographies represent just 45% of our retail sales versus 64% for the category, which illustrates the tremendous white space opportunity ahead. Over the long term, we would expect that our business will become more evenly split between our expansion and core geographies. We believe there's significant opportunity for strong share growth in expansion geographies given we had a 3% share in 2025 versus our 4.4% average nationally and our 6.6% share in our core geographies. We have a proven track record of consistently building share in expansion geographies, and we believe California will accelerate this.

To demonstrate the expansion geographies opportunity, let me share the significant distribution and items per store potential for each of our Power Four brands. For example, On The Border only has 64% distribution with just 3.7 average items on shelf. Over time, we would expect to increase the distribution and items per share per shelf on all of our powerful brands within our core assortment and innovation, and we'll talk shortly about how this playbook has played out in our Florida case study. A common question we get is how are your initial expansion geographies doing and are they still growing? We're introducing a split out by stage of expansion geographies to answer this question, which we're calling initial expansion and recent expansion.

In our initial expansion geographies like Florida and Illinois, we achieved a strong retail sales growth of 5.8% in 2025. In our recent expansion geographies, which represents 30% of the salty snack category, our growth was an outstanding 11% in 2025, and that's before our current expansion into California. With expansion geographies, we use a phased growth strategy, leveraging our hybrid distribution to scale efficiently from entry to greater maturity. The first phase of market entry utilizes direct to warehouse and distribution partnerships to establish a foothold. This is how we were structured in California before our expansion initiative this year. Phase 2, as we build scale, we add dedicated DSD. This is what we're doing in California in 2026 after our purchase of DSD route assets last year.

The final phase is when we leverage our scale by setting up a fully independent operator network, augmented by select distribution partners. This is what we have done in geographies like Florida. We remain selective about DSD activation, focusing on concentrated population centers, large retail partners and supply chain proximity. As I mentioned, Florida is a great case study on how we execute this proven playbook. The build-out of our DSD route infrastructure in the early 2020s led to a significant retail sales growth and share in Florida, with retail sales of $118 million and share of 4.3% in 2025. This share in Florida is now approaching our company average, up from just 2.5% 5 years ago.

Importantly, we were able to keep our contribution margin in Florida steadily ramping up with sales even as we transition to a more dedicated DSD model. To achieve this strong revenue and share growth in Florida, we increased our total distribution points by approximately 2.5x from 2020 to 2025, with average items per store increasing by a similar magnitude, all unlocked by the DSD routes we acquired or built. We plan to apply the same playbook to California. California represents 10% of salty snacks nationally, but only 5% of sales today. So there's significant opportunity for growth in the state.

To support this expansion, we acquired DSD routes and assets in the state towards the end of 2025. While this was not a meaningful capital outlay, it does give us the infrastructure to quickly pursue new retail growth opportunities. Expanding California could add approximately $125 million of incremental sales on top of our $80 million retail sales today. This means that California could represent a $200 million-plus retail sales business for Utz. Calibrating this with the Florida case study, even if we went from our current 2 share to 4 share, which is less than our 4.5% share in Florida, we could gain $85 million in incremental retail sales.

While we expect this to be a multiyear journey and gradual, we're encouraged by the long-term potential and what California can do for our expansion geographies growth. Being even more specific, we plan to achieve this position in California by capturing the huge distribution and assortment opportunity available to us. We currently have about 1,600 distribution points in California. For context, the category has over 61,000 distribution points.

In our currently very limited distribution, we only have 9 items per store, while our expansion geographies typically have over 15 and our core geographies have over 30. Now you can understand why we're so excited about this opportunity. I mentioned earlier that California would be an accelerant to our overall expansion geographies growth. And recall that these markets we have already been in growing sales in the mid-single-digit range during the last few years. We think our California expansion can accelerate this to high single digits longer term, which ties to our 3 to 4 points of overall sales growth contribution from expansion geographies.

Now let's talk about our next growth differentiator, strength in core geographies. Core geographies represent 55% of our retail sales. And while expansion geographies are important for growth, we also must hold share in the core. And to hold the core, we need to strengthen our core. Within core geographies, the Utz brand is the key to holding share since the brand represents 61% of our retail sales within these geographies. And while we're focused on ensuring the Utz brand is successful, there's still great potential for our other Power Four brands in the core, some of which were introduced in expansion geographies like Boulder Canyon.

We have 4 key strategies to strengthen our core. First, investing marketing behind the Utz brand while ensuring optimal price points; second, expanding distribution of our other Power Four brands, Boulder Canyon, On The Border and Zapp's; third, building distribution in faster-growing channels and optimizing assortment across channels; and fourth, launching winning and on-trend innovation across the Power Four brands. As I said before, we have held volume share in core geographies at 8.2%, but our retail sales have been relatively flat due to channel mix.

Looking forward, we plan to hold both volume and dollar share in our core. An important aspect of investing behind the Utz brand is our marketing support, and we're addressing consumer interest in simple and clean labels through our Snacking Made Simple marketing message. This is a broader than an ingredient story and can be delivered across multiple consumer touch points. Over 80% of Utz branded products have only 3 ingredients, and we rolled out packaging late last year, highlighting only 3 simple ingredients, no artificial flavors or colors. Critical to success in core geographies is addressing consumers' price value needs, and we do this many different ways. The first is by leveraging brands up and down the price ladder from value brands like Golden Flake to mainstream brands like Utz and On the Border to elevated items like On The Border Organic to premium brands like Boulder Canyon.

Price pack architecture provides different pack sizes to address different consumer needs and occasions while offering value at each price point. We've invested significantly in our revenue management capabilities over the past 3 years to ensure that we have the right price discount or premium to competitors depending on the brands. We balance base price and price promotion strategy depending on the retail channel, and this slide shows our retail strategy in a variety of channels.

Our next key growth differentiator is winning innovation. As we ramp up our marketing and scale nationally, innovation becomes a more important part of our growth, and our pipeline has improved significantly, and we are excited and proud to talk about some of our 2026 innovations today. Our innovation pipeline is organized by key consumer drivers in salty snacks that we've identified from our research, those being delivering craveable flavors, capturing occasions, driving value and expanding positive choices.

We plan to launch innovations in each of these areas during 2026. On our Utz brand, we are continuing to introduce on-trend flavors. This year, we are introducing a restaurant-inspired one called Sweet and Smokey sauce. We are also rotating in a new seasonal item after last year's success with our lemonade flavor called Sizzlin' Summer Burger. And lastly, we will continue our occasion-based offerings, including those tied to major sporting events, Easter and Halloween.

One of the more exciting innovations we plan for Utz brand in 2026 is our protein line. While consumers have been asking for protein offerings for some time, we felt it was critical to introduce products that met this need without sacrificing taste. These products will offer 8 to 10 grams of protein per serving and will be available nationally in a variety of pack sizes starting in the second quarter of 2026.

Shown here are 3 pretzel items, which I hope you enjoyed at the break. In addition to pretzels, we will also have 2 Cheese Curl items with 10 grams of protein per serving. While we focus on innovation on Power Four brands, meeting consumer need for value in our price ladder is a priority with brands like Miguelito’'s and Golden Flake. We'll be expanding these brands with Miguelito’'s, Crunchy Curls and tortilla chips and Golden Flake Fries, which will launch in the second half of 2026.

Our winning innovation is supported by our increased marketing support, which I said before, needs to drive sales overnight and brand equity over time. We've made significant marketing investments over the past 4 years with spending rising at a 40% compounded annual growth rate. We expect to continue increasing marketing meaningfully again in 2026 to approximately 2% of sales, and we believe that 3% to 4% is the right long-term level, although this will continue to be a multiyear journey.

I've just reviewed our 4 key growth differentiators, Boulder Canyon, expansion geographies, strength in core and winning innovation. Taken together, these differentiators allow for multiyear growth potential well into the future. Longer term, we believe these differentiators represent approximately $500 million of incremental revenue opportunity, taking our total revenue potential to $1.9 billion. We believe our expansion geographies, excluding Boulder Canyon, can achieve 4% market share, still well below our core geography market share of 6.6%. I said that we expect Boulder Canyon to be a $500 million-plus brand longer term. And we will also continue to strengthen our core so we can hold share and participate in any category growth over time.

With that, I appreciate your time. I'm going to hand this over to BK Kelly, our CFO, to present our other key strategies.

Thank you, Howard. Let me start with our second strategy to expand margins consistently over time by driving productivity and mix improvement. Our supply chain transformation and productivity accelerated when we divested several plants in early 2024, which resulted in substantial outperformance versus our expectations.

Our manufacturing footprint has been rationalized from 16 plants at the end of 2022 to 7 plants today, increasing revenue by per plant by nearly 4x from $60 million to $207 million. The capacity utilization for our key potato chips and tortilla chip subcategories is now above 80%, up from approximately 55% 3 years ago. We also outperformed our productivity savings target, generating 6% productivity as a percent of COGS in 2024 and 7% or $66 million in 2025, a significant step-up from just a few years ago.

While we are in the later stages of the capital-intensive phase of our transformation, we still have a robust pipeline of productivity projects in the years ahead. This operational excellence has driven significant adjusted gross margin expansion, up by 400 bps since 2022 to 32.3% in 2025, and we will continue to drive this metric higher in coming years. Our adjusted gross margin now includes outbound freight and a large portion of our DSD costs.

We have made a substantial $200 million CapEx investment in our Now Focused Network over the past 2 years to modernize the equipment and automate production. This was a requirement to in-source production from the facilities that we closed or divested. Our network is now geographically dispersed and should support our national expansion plans very efficiently on a go-forward basis. Our CapEx spending is now normalizing after the significant step-up over the past 2 years when our investments in capacity, automation and modernization reached 7% of net sales. With this transformation largely complete, we expect our CapEx to step down to approximately 4% of net sales in 2026 and expect it to step down further to approximately 3% of net sales in 2027 and longer term, which will help drive stronger free cash flow generation. This normalized CapEx will deliver strong ROI with 80% of spending for high ROI productivity and growth projects and with maintenance projects only being approximately 20% of spending.

Putting this together, the average ROI of our CapEx spending will be significantly above our cost of capital. With the completion of our supply chain transformation, we are pursuing new efficiency initiatives in addition to base productivity and have multiple levers going forward. We expect base productivity to continue to deliver at least 3% of annual COGS savings. A new efficiency initiative is our distribution network optimization, which I will discuss shortly. We expect this new initiative to deliver approximately 1% of cost of goods above our base productivity of 3% for a total of 4% COGS savings over an extended multiyear period. Lastly, we are working across the enterprise to use technology to become more efficient, which should generate incremental cost efficiencies, particularly in our SG&A.

The sources of base productivity are in these 3 areas: procurement, manufacturing and logistics. Procurement will be a larger area of savings going forward at 45% with a focus on key initiatives like value engineering and strategic sourcing. Manufacturing savings will normalize at 35% as we complete our supply chain transformation, but we have continuing opportunities in automation and line efficiency. Lastly, logistics between our plants will continue to be an area of opportunity at 20% with route optimization and integrated planning. We believe direct order delivery or DSD distribution is a strategic asset for the company and represents half of our sales.

We continue to scale this DSD network nationally with independent operators, or IOs. Today, our DSD system is 99% IOs with 2,500 routes serving 125,000 retail outlets weekly. To support these IOs, we have 130 DSD warehouses nationally, and we believe there is significant opportunity to improve efficiency in this distribution network. Importantly, this distribution network optimization initiative will improve the network's effectiveness and service of both the company and IOs at a lower cost and expect to deliver 1% of COGS savings per year. We will achieve this productivity savings through drop size improvement and digital enablement, ensuring we have the right products and the right warehouses at the right time. There will be better asset utilization through a more efficient network structure with warehouses strategically placed and highly utilized. And finally, this optimized network will have working capital benefits and improved inventory turns.

Our historical financial performance provides a good framework for our expectations in the future. Our CAGR from 2022 to 2025 has been 2.4% organic net sales, 5.5% adjusted gross profit growth and 8.3% in adjusted EBITDA growth and 13.8% in adjusted EPS growth. Going forward, our priorities is to deliver consistent and predictable revenue and adjusted EBITDA growth. We expect organic net sales to grow 2% to 3% faster than the category, which we are assuming is flat in 2026. We would expect the category to return to growth longer term. We plan to expand adjusted EBITDA margins at a solid pace, supported by productivity of 4% of COGS, but this pace is dependent on our level of reinvestment, inflation and our top line trajectory.

Our target is to grow EBITDA by 6% to 8% annually, with some years being more top line driven and others being more margin expansion driven based on the business environment. 2026 is modestly below this algorithm at 4% to 7% without the 53rd week as we invested in our California expansion.

Lastly, on adjusted EPS, we would expect adjusted EPS growth to follow adjusted EBITDA growth before any share repurchases. 2026 is a unique year given headwinds from depreciation and amortization, interest and tax rate, but we expect this growth relationship to normalize in 2027 and beyond.

Importantly, relative to our peers, there remains significant longer-term margin -- long-term margin opportunity. Given our strong productivity program, we believe that we have the potential to achieve 17% adjusted EBITDA margins over time. However, the pace and the time line will depend on the category, reinvestment needs and inflation dynamics. Our focus will be on growing adjusted EBITDA in the range of 6% to 8% per year. How quickly we achieve a 17% adjusted EBITDA margin will depend on where we perform in the range and whether our adjusted EBITDA growth is more top line or cost driven. We remain confident in our long-term structural margin drivers, including productivity and mix.

Turning now to our new third strategy to accelerate our free cash flow to delever and to be able to allocate our capital efficiently. Our historical cash flow generation has shown improving cash flow from operations over the last 2 years, but this has been offset by the significant step-up in CapEx that I discussed earlier. As a result, our new adjusted free cash flow metric has been relatively flat at around $30 million. We are including sales of property and equipment in this adjusted free cash flow metric as these asset sales have increased as a result of the reconfiguration of our supply chain and are considered when we make our capital allocation decisions.

Our aim is to increase conversion of adjusted net income to free cash flow, and we have multiple drivers at our disposal to achieve this. In 2026, we expect adjusted net income to adjusted free cash flow to convert around 70%. Looking at 2027, we think the planned step down in CapEx in addition to working capital initiatives and further monetization of noncore real estate should allow us to reach our target of 80% to 90% adjusted income conversion to adjusted free cash flow. As we expect our adjusted free cash flow should accelerate nicely on a multiyear basis given these drivers. From approximately $34 million in both 2024 and 2025, we expect $60 million to $80 million of adjusted free cash flow in 2026 and $100 million plus annually thereafter. This cash flow will allow us -- will give us the ability to deleverage and pursue our capital allocation priorities over time.

The higher cash will be used according to our capital allocation priorities. We will always first invest in our business if the proper return is available and our plans capture these needs. Our second priority is debt paydown and deleverage remains our key priority. We will continue to pay our current dividend with modest growth. We just announced our first share buyback program of $50 million, which we plan to use over time opportunistically.

And finally, we will pursue M&A if the value creation potential for shareholders exceeds other capital return options. More specifically, our stronger cash flow will allow us to delever further to a 2.5x leverage ratio longer term. After ending 2025 at 3.4x, we expect to be able to reduce leverage approximately 0.3 to 0.4 turns per year, targeting to 3.2x at the end of 2026, 2.7 to 3x at the end of 2027 and then 2.5x longer term.

Returning to M&A for a moment, we will remain disciplined in valuation. We'll be thoughtful about the leverage impact of any transaction. We have an acquisition-savvy management team, an experienced Board and a scaled manufacturing and distribution system capable of capturing synergies effectively. Any acquisitions must be strategically additive to our to our brand portfolio. They must be incremental from both a consumer and retailer perspective and enhance our long-term growth profile.

Finally, as we discussed since our transition to the public markets in 2020, part of the strategic rationale has always included the optionality of a Reverse Morris Trust transaction. We believe we continue to be a strong candidate and credible RMT candidate.

Let me talk about one initiative in our last strategy, deploy leading capabilities. This initiative is about technology enablement and capturing AI opportunities. By deploying advanced analytics, we are confident that we can drive end-to-end efficiency. More specifically, within our commercial operations, AI will drive our planning and forecasting and support more predictive revenue management. In our supply chain, we will leverage optimized manufacturing and distribution along with automated processes. And finally, in our digital core, we'll achieve common unified data to better support our integrated business planning.

Let me now summarize what you have heard today and why we believe Utz is a great investment. We are targeting to deliver sales growth 2 to 3 points faster than the category consistently over time given the differentiators that Howard discussed. We are focused on continued and sustainable margin improvement, leveraging our productivity engine. We are targeting long-term annual adjusted EBITDA growth of 6% to 8%, driven by solid top line growth and margin expansion. And finally, we will ensure that our bottom line results convert to accelerating adjusted free cash flow, which we can use to delever and allocate capital efficiently.

Thank you again for this opportunity, and we'll be happy to take questions during our breakout. Thank you.

Maybe we're going to head right over to the breakout. So I know you all just clapped. Let's do it one more time to thank Utz for the generous sponsorship of the conference.

Good morning, and thank you for joining us today for our prerecorded discussion of our fourth quarter and full year 2025 earnings results. Joining me on the call today are Howard Friedman, CEO; and BK Kelley, EVP and CFO. In addition, this morning at 8:30 a.m. Eastern Time, we will host a live question-and-answer session, which you can access via webcast on our Investor Relations website.

Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Please see the forward-looking statement disclaimer in the earnings materials and 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 Investor Relations website.

The company has also posted presentation slides and additional supplemental financial information on our Investor Relations website. Lastly, I want to mention that we plan to file our 2025 10-K after the market closes today, February 12.

And now I'd like to turn the call over to Howard.

Good morning, everyone, and thank you, Trevor. I will start with a summary of our 2025 performance and follow with an update on the fourth quarter, after which BK will provide detailed financial commentary and 2026 guidance. Before we get started, I would like to thank all of our hard-working associates across the company for their dedication to Utz. While we navigated some headwinds in the fourth quarter, we made substantial progress on our long-term strategies during 2025.

2025 was a year of accelerating top line growth versus the category, strong Branded Salty organic sales performance and significant adjusted gross margin and adjusted EBITDA margin expansion. For the year, organic net sales grew 2.4% and Branded Salty organic net sales grew 4.7%, while the category was down 0.5% in retail sales dollars. We gained volume share in our core geographies, while expansion geographies continue to demonstrate the stretch of our brands with both dollar and volume share gains. According to Circana MULO with convenience for the 52 weeks ended December 28, 2025, our expansion geographies grew retail sales by 7.8%.

Our supply chain transformation and consolidation were largely complete by year-end with substantial capital expenditure allocated to network consolidation, automation and modernization during both 2024 and 2025. Since 2022, we've reduced the number of our major facilities from 16 to 7, including the expected closure of Grand Rapids.

Our productivity programs continue to deliver best-in-class results. We delivered 7% productivity in 2025, well above our goal of 6% of adjusted cost of goods sold, expanding adjusted gross margin by 260 basis points and adjusted EBITDA margin by 80 basis points for the full year. Note that our 6% of adjusted COGS target was prior to the reclassification of cost of goods sold that we announced on February 3 via 8-K filing. BK will give more details on this change.

The productivity and efficiency programs continue to fund reinvestment in our brands and organizational capabilities with marketing spending increasing 35% in 2025 on top of nearly 70% increase in 2024. We plan to continue to increase marketing spending in 2026 to support our brands.

We also announced our expansion into the California market with the purchase of Insignia's DSD routes and select assets in the state. We believe that California will be a key growth differentiator for the next several years. California shipments through the Insignia assets will begin later this month.

The balance sheet continues to improve with strong fourth quarter cash flow performance and deleveraged to 3.4x versus 3.6x a year ago. You will hear a lot about free cash flow from BK on this call. We are focused on accelerating our free cash flow generation as our supply chain work progresses to a significantly less capital-intensive stage. We expect this strengthened free cash flow to allow us to further delever our balance sheet to longer-term desired levels and then, as appropriate, utilize our inaugural share buyback authorization of up to $50 million. This share buyback authorization is an important addition to our long-term capital allocation strategy.

Turning to our performance in the fourth quarter. Our net sales results were below our expectations despite strong retail sales growth. This was primarily due to inventory destocking that caused shipments to lag consumption in the second half of the quarter. Encouragingly, shipments normalized versus consumption as we exited the year, and these trends have continued so far during the first quarter of 2026. We also believe that retail inventory levels are beginning to normalize.

Net sales growth was 0.4% in the fourth quarter, led by Branded Salty Snacks organic net sales of 2.5%. Note, that as there were no acquisitions or divestitures impacting the fourth quarter, organic net sales growth is equal to reported net sales growth. This marks our eighth consecutive quarter of growth in Branded Salty Snacks, which now represents 89% of our total net sales.

Net sales were driven by a 0.5% increase in price versus a 0.1% decrease of volume mix as more acute pressures in our core geographies during the quarter, primarily related to SNAP delays and the government shutdown, in addition to weaker partner brands and Non-Salty volume mix impacted this metric. Branded Salty organic net sales were driven by solid volume/mix growth of 2.1% and price of 0.4%. We are pleased with our positive price performance in the quarter as we strategically implemented revenue management initiatives and managed our price gaps.

Affordability has consistently been part of our strategy at Utz. We will continue to ensure we are offering a good value proposition to consumers. The price investments we made in 2025 and our enhanced capabilities in revenue management give us confidence that we can achieve our 2026 top- and bottom-line guidance in the current category environment through innovation, marketing and our current promotional strategy. We also feel good about the distribution and shelf space gains planned for 2026.

Our innovation plan for 2026 is robust, and we are pleased to announce some exciting news. As we look to meet consumer needs and expand positive choices, we are launching Utz Protein Pretzels and Cheese Curls in the second quarter of 2026. These products offer 8 to 10 grams of protein per serving and will allow the brand to participate in this growing trend.

Boulder Canyon will launch a new non-seed oil fats line with kettle chips cooked and beef tallow. The ability of Boulder Canyon to stretch into new product areas is encouraging and response from channel partners has been very positive. Boulder Canyon Classic Sea Salt cooked in beef tallow is expected to launch in the first quarter, and we look forward to sampling these products for the investment community next week at the CAGNY conference.

Turning to our fourth quarter retail performance. We gained both dollar and volume share in the Salty Snacks category for the 13-week period ended December 28, 2025, as measured by Circana MULO with convenience. This marks our 10th consecutive quarter of share growth. Our performance was again driven by the momentum of our Power Four Brands.

Our strong consumption results reflect the sustained momentum of Boulder Canyon, strong gains in expansion geographies, including from Utz, our largest brand, and targeted promotional investments. We posted solid 3.5% dollar consumption growth in the quarter, led by 3.1% price per pound growth compared to the category's 1.1% dollar growth. Our Power Four Brands increased 5.3% in retail sales dollars, driven by 3.8% price per pound. We believe that Circana MULO plus convenience captures approximately 85% of our reported Branded Salty Snacks organic net sales. As we mentioned, Branded Salty Snacks organic net sales grew 2.5% in the fourth quarter.

Now turning to our core geographies, where certain headwinds, primarily related to the SNAP payment delays and government shutdown, caused more pressure on our business versus the category. Despite this, we continue to gain dollar share in our Power Four Brands within the core. Total company retail sales dollars in core geographies increased 0.5% with Power Four Brands leading at 1.8% versus the total Salty category up 1.1%. Total company retail volume decreased by 2.4%, while Power Four Brands performed modestly better with a 1.7% volume decline versus the category's 0.2% volume increase. While Boulder Canyon was the leading growth driver in core markets, we also saw dollar and volume share growth in Utz cheese and Golden Flake Pork Rinds.

Momentum in our expansion geographies continued this quarter with the total company and our Power Four Brands capturing both dollar and volume share. We achieved strong total company retail sales growth of 7.3%, which significantly outpaced the Salty Snacks category growth of 1.1% in these markets, driven by ongoing distribution gains and higher velocities. Brands contributing to our growth in expansion markets include Utz, Boulder Canyon and Golden Flake Pork Rinds.

Our expansion geographies represent 45% of total company retail sales per Circana data, reflecting our sustained progress. We believe the growth runway remains substantial as our average market share of 3.2% in our expansion geographies versus 6.7% in our core markets illustrates the opportunity ahead. This quarter saw four of our expansion markets exceed 4% market share, Florida, Illinois, Colorado and Missouri. The average growth of these four markets on a 52-week basis according to Circana MULO with Convenience was 5.8% year-over-year. We believe this demonstrates that some of our larger expansion markets are continuing to show healthy growth well above the category.

From a subcategory perspective, our measured channel share gains for the total company were led by potato chips and pork. In potato chips, our total retail sales grew 11.3% versus a subcategory decrease of 0.2%, our performance largely driven by strong Boulder Canyon growth. In tortilla chips, our retail sales declined 3.9% versus a subcategory increase of 1.1%. Our sales performance came in lower than the subcategory, primarily due to softness in On The Border, but we were encouraged by the improvement in trends versus the third quarter.

In pretzels, across our total portfolio, our retail sales increased 1%, which was lower than the subcategory increase of 6.4%, but our Utz branded pretzels grew by 7% ahead of the subcategory. In cheese snacks, our retail sales increased 3.6% versus subcategory increase of 2.2%. Utz branded cheese snacks growth of 6.6% outpaced the subcategory. In the pork rinds subcategory, we significantly outperformed the market with retail sales growth of 7.9% compared to a 2.3% decline for the overall subcategory. This strong performance was driven by Golden Flake velocity gains.

Our Boulder Canyon brand continues to outperform and gain share in both the natural and conventional channels with growth of 29% and 140% in the fourth quarter, respectively. Consumers are continuing to connect with this brand and are appreciating its better-for-you attributes and great taste. With Boulder Canyon's ACV currently at 59% according to Circana MULO with convenience versus some of our larger brands near 80%, we believe there remains significant growth potential ahead. Shelf space gains already awarded in 2026 and the innovation pipeline, including our tallow launch, gives us confidence in Boulder Canyon's continued growth trajectory.

On the marketing front, we increased investments significantly in the quarter with marketing up 72% year-over-year. As I mentioned before, we have increased our full year 2025 marketing spend by 35% on top of a nearly 70% increase in full year 2024. We believe our household penetration statistics continue to support our investment in a more meaningful share of voice. For the 52-week period ended December 28, 2025, versus the comparable prior year period, our household penetration has increased 164 basis points to 50.2%. Buyers have increased by 2.6 million to 65.7 million and buyer repeat rates increased by 80 basis points to 70.2%.

Our fourth quarter and full year performance underscores the effectiveness of our approach in a more dynamic macro backdrop, focusing on advantaged growth through Branded Salty Snacks, our Power Four Brands and our expansion geographies. We continue to believe that these initiatives will allow us to outperform the category during the mid and long term.

With that, I'll turn it over to BK, who will walk you through our financial results and 2026 guidance in more detail.

Thank you, Howard, and good morning, everyone. In the fourth quarter, our net sales increase of 0.4% was led by price growth of 0.5%. This was partially offset by lower volume/mix of 0.1%, which is impacted by the headwinds Howard described earlier. We delivered Branded Salty Snacks organic net sales growth of 2.5%, led by volume/mix growth of 2.1%. Organic net sales in our Non-Branded and Non-Salty Snacks declined 14.8%. We believe this segment was also impacted by the headwinds experienced in our Branded Salty segment.

I will briefly touch on the reclassification of certain expenses from SD&A, now called SG&A to cost of goods sold beginning in Q4 of 2025, which we announced February 3 via an 8-K filing. We believe that including delivery and other certain distribution costs related to our DSD network and cost of goods sold better reflects our business and how we manage our network productivity and efficiency programs. This had no impact on EBITDA, adjusted EBITDA, net income and adjusted net income. We believe our go-forward adjusted SG&A expenses are a better reflection of corporate costs in addition to marketing and selling. Importantly, as we look forward, our productivity guidance will assume this higher base of cost of goods sold.

We delivered strong margin performance with adjusted EBITDA of 17.5%, adjusted earnings per share rising 18.2% and adjusted gross profit margin expansion of 560 basis points. Our productivity initiatives drove these gains, allowing us to offset other supply chain costs and inflation and fund our continued SG&A investments.

Adjusted EBITDA margin expanded by 260 basis points to 18.2%. Productivity savings contributed 620 basis points to adjusted EBITDA margin expansion and pricing contributed 30 basis points. This was partially offset by 70 basis points from volume/mix, 200 basis points of increased supply chain costs and inflation, 80 basis points of higher marketing spend and 40 basis points of selling, general and administrative expenses.

Adjusted SG&A expense increased 18.9% versus the prior year quarter or 280 basis points as a percentage of net sales. This increase was largely driven by planned investments in marketing, selling and capabilities.

Our supply chain transformation is largely concluded with the accelerated capital expenditures in 2024 and 2025, in addition to the expected closure of the Grand Rapids facility this year. We executed our plan to sell Grand Rapids in the fourth quarter, and we are pleased with the outcome. To allow for increased flexibility and in partnership with the new owner, we have decided to lease the facility and operate a single production line with limited staff for the remainder of 2026 until we exit. Our cost savings expectations have not changed, and we expect to fully realize the remaining expected savings in the first quarter as planned.

While our transportation costs remain meaningful in the fourth quarter, we believe that they will substantially normalize in 2026. I will go in more detail on our expected restructuring and transformation costs later.

Turning to cash flow and the balance sheet. Cash provided by operations for the 52 weeks ended December 28, 2025, was $112.2 million as we executed on the three strategic areas we outlined on the third quarter call. One, working capital initiatives to improve cash conversion; two, maximizing our seasonal release of cash; and three, real estate sales, including Grand Rapids.

Capital expenditures were $102.8 million and reflect the increased spending to support our supply chain transformation and modernization initiatives. We paid $37.7 million in dividends and distributions to shareholders during 2025.

Regarding the balance sheet, cash on hand was $120.4 million as of fiscal year-end. Liquidity, including access to our revolver, remained strong at $240.1 million, giving us ample financial flexibility. Net debt at quarter end was $741.8 million, and our net leverage ratio was 3.4x trailing 12-month adjusted EBITDA of $216.5 million.

Now turning to our outlook for 2026, where we have introduced some new guidance metrics. 2026 also benefits from the 53rd week in the fourth quarter, and we have quantified the impact of the extra week where appropriate.

We have operated in a dynamic category environment during the past 2 years, and we are proud of our progress. It remains a top priority to deliver consistent and predictable adjusted EBITDA growth in a variety of category outcomes. Accelerating free cash flow to allow for deleverage and capital allocation flexibility has also become a priority.

For 2026, we expect organic net sales growth of 2% to 3%, which assumes a flat category at the midpoint. While the category is off to a solid start in 2026, and we are encouraged by recent trends, consumer purchasing ahead of winter storms and the Super Bowl have provided some benefit, and we'd like to see the positive trend sustain for a longer period before taking a more constructive category view. We believe this is a prudently conservative approach given the relatively soft category of the past 2 years. This organic net sales metric excludes the 53rd week, and we expect an approximate $20 million benefit to reported sales in the fourth quarter as a result of the 53rd week.

From a sales phasing perspective and excluding the 53rd week benefit, we would expect sales split about equally between first half and second half with the first and fourth quarters exhibiting the strongest year-over-year growth trends.

Volume/mix and price should both be positive and contribute to 2026 growth as we lap bonus bags and continue to benefit from revenue management initiatives. Recall, we made targeted price investments throughout 2025. Related to lapping bonus bags, in the first quarter of 2026, we expect to see a positive impact on price of approximately 3 points, offset by a similarly negative 3-point impact on vol/mix from this promotion. As it relates to Non-Branded and Non-Salty pieces of our portfolio, we would expect declines to moderate somewhat from 2025 with the first half being weaker than the second half.

Moving to adjusted EBITDA. We expect 2026 growth of 5% to 8%. This range assumes solid EBITDA margin expansion. The 53rd week is included in the adjusted EBITDA range. The 53rd week is expected to benefit fourth quarter adjusted EBITDA by approximately $3 million. Included in our adjusted EBITDA guidance is $4 million to $6 million of investment in our California expansion, which we expect to be more heavily weighted in the first half.

Productivity is expected to be approximately 4% of our adjusted cost of goods sold base, which is larger versus our previous guidance framework due to reclassification of shipping and distribution costs. We anticipate the strongest productivity benefits in the first half of 2026, driven by projects launched in 2025 and normalization as we progress throughout the year.

From a phasing perspective and excluding the $3 million benefit in the fourth quarter from the 53rd week, we expect adjusted EBITDA weighting to be more in line with historical averages after a more second half weighted year in 2025 due to productivity phasing. We expect approximately 46% of adjusted EBITDA in the first half with the highest year-over-year growth rate in the second quarter. As a reminder, the toughest growth comparisons are in the fourth quarter.

Turning to adjusted EPS. We expect adjusted EPS growth to be below adjusted EBITDA growth in 2026 due to higher depreciation and amortization, interest expense and a modestly higher tax rate. I will go into the drivers of these three factors shortly. Adjusted EPS is expected to decline between 3% and 6%. The combination of these three items is expected to impact adjusted EPS by approximately $0.12 versus 2025 at the midpoint of our guidance ranges. The 53rd week is included in the adjusted EPS range and should benefit fourth quarter adjusted EPS by approximately $0.02. Long term, we would expect adjusted EPS to grow in line with adjusted EBITDA. Also note that our current adjusted EPS guidance assumes no paydown of our Term Loan B or share buybacks.

We expect depreciation and amortization of $93 million to $97 million, a step-up of approximately $13 million from 2025 as all capital projects will be in service for the entirety of fiscal year 2026. Interest expense is expected in the range of $47 million to $49 million, which primarily reflects higher costs associated with our new Term Loan B swap. Lastly, we expect an effective normalized tax rate of 17% to 19%, an increase from 15.9% in 2025 as we were able to take advantage of some discrete tax benefits last year.

I'd like to spend a moment on depreciation and amortization as the company's supply chain consolidation and transformation have caused significant movement in this metric. Going back to 2022, the company reported approximately $87 million in depreciation and amortization. As we divested brands and plants, D&A declined to as low as $70 million in 2024. The capital required, above $200 million spread over 2024 and 2025, to in-source this production and modernize our remaining facilities has resulted in the expected $93 million to $97 million run rate. We expect more modest increases in depreciation and amortization going forward.

As we look forward, cash conversion and free cash flow will take on increased importance as we look to further deleverage and opportunistically return capital to shareholders. We expect capital expenditures to decline from $102.8 million in 2025 to a range of $60 million to $65 million in 2026. We believe this reflects a meaningful step towards a more normal cadence of capital expenditure, but expect to lower spending again in 2027 towards our longer-term run rate.

Transformation, restructuring and other frictional costs related to our supply chain consolidation, modernization and corporate initiatives were elevated in 2024 and 2025. These costs are expected to substantially normalize in 2026. We expect cash supply chain and corporate restructuring and transformation costs to decline to approximately $30 million to $35 million in 2026, a significant reduction versus 2025. Those costs should decline further in 2027.

The combined benefit to our free cash flow generation potential from reduced capital expenditures and normalized transformation and restructuring costs should be meaningful. We also plan to introduce new reconciliation tables of GAAP to non-GAAP in the first quarter of 2026 to allow for enhanced presentation of our supply chain and corporate transformation and restructuring costs, so you can track our progress on this metric.

We are also introducing adjusted free cash flow guidance, and we believe that our free cash flow generation potential allows us to prioritize debt paydown and opportunistically buy back shares over time on the $50 million authorization Howard mentioned earlier. The adjusted free cash flow metric represents cash flow from operations less capital expenditures plus net sales of property and equipment. Given our capital expenditure and facility consolidation is what has allowed us to consistently divest excess real estate and equipment, we think including these sales in our adjusted free cash flow metric reflects how we manage our capital expenditure decisions.

In 2026, we expect adjusted free cash flow to be between $60 million and $80 million, which represents just about 70% conversion of expected adjusted net income at the midpoint. As CapEx and transformation costs normalize further, we would expect adjusted net income to convert at an 80% to 90% rate to adjusted free cash flow. The further decline of capital expenditures and cash transformation and restructuring costs should allow the business to generate adjusted free cash flow of more than $100 million in 2027 and beyond.

Finally, as it relates to the balance sheet, we expect to reach between 3x and 3.2x leverage by year-end. Deleveraging will remain our clear priority. Any buyback activity will not impact our ability to end the year in this range. Longer term, we would expect the business to delever approximately 0.3x to 0.4x per year, while allowing for some flexibility in capital allocation.

It is important to remember that our business builds working capital in the first half and releases it in the second half, and there is a seasonal pattern to leverage. We would expect 2026 to follow typical patterns, the highest leverage point of the year being in the first quarter and declining thereafter. We would also expect leverage to exhibit year-over-year improvement each quarter.

Our 2026 guidance reflects our approach to dynamic operating environment, deliver organic net sales growth of 2% to 3%, while assuming Salty Snacks category as flat, grow adjusted EBITDA consistently and predictably fueled by productivity and convert our profits into free cash flow to fund our capital allocation priorities.

With that, I'll turn it back to Howard for closing remarks.

Thank you, BK. I am proud of our full year results and how we have executed well despite certain category and macro headwinds. Our playbook remains the same: grow profitably above the category, driven by our Branded Salty segment and expansion geographies, expand margin and reinvest in our business fueled by productivity.

We believe we can deliver consistent, predictable growth with our model while also generating significant free cash flow. Normalizing capital expenditures and transformation costs give us controllable levers to improve our returns and accelerate capital allocation, led by the priority of deleveraging while still driving towards our growth aspirations.

On behalf of everyone at Utz, I want to thank you for your ongoing confidence in our team as we continue bringing our beloved salty snacks to new markets and new consumers nationwide.

Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I'd like to welcome you to the Utz Brands, Inc. Third Quarter 2025 Earnings Conference Call, question-and-answer session. [Operator Instructions]

I will now turn the call over to Trevor Martin, Senior President of Investor Relations.

Thank you, operator, and good morning, everyone. Thank you for joining us today for our live Q&A session on our third quarter 2025 results. With me on today's call are Howard Friedman, CEO; and BK Kelly, CFO. I hope everyone has had a chance to read our prepared remarks and view our presentation, all of which are available on our Investor Relations website.

Before we begin our Q&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 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 the line for questions.

[Operator Instructions] Your first question comes from the line of Andrew Lazar from Barclays.

Maybe to start off, at your Investor Day a couple of years ago, I know you laid out a 3-year financial plan. And obviously, the sales and consumer environment has changed dramatically since then with us though continuing to obviously outperform the category pretty meaningfully. And the company has maintained its expectation for EBITDA margins of around 16% in '26 or about 100 basis points of expansion each year. You've delivered that the last 2 years. In the prepared remarks, I know you made some comments around maybe some incremental investments in '26, particularly to support the California expansion for the acquisition announced today, which is exciting. I'm just curious like in terms of thinking through expectations for next year, if perhaps that EBITDA margin expansion could be a bit less significant just in an effort to maintain the strong top line momentum that you've been able to deliver over the last couple of quarters.

Yes. Andrew, I'll start, and I'll hand it over to BK to continue. Look, I think if you went back to Investor Day, there were a few things that we had laid out. One obviously was that we had a meaningful top line, bottom line and gross margin opportunity that we wanted to progressively address, that we believe that we could drive accelerated top line growth above the category as we were able to hold our core geographies and expand eventually getting coast to coast and funding that through a productivity program that would deliver meaningful gross margin expansion and obviously fall through to EBITDA. I think as you look at over the last couple of years, we're pretty pleased with our progress around all of those objectives. And one of the things that I think that has been important in our story has been the ability for us to drive expansion market top line growth and enter into new geographies, which we have, at this point, a pretty solid proven playbook.

And as you look at something like Florida, where we had entered a couple of years ago and you were actually able to see progression where we made incremental investments to build out that business and start to accelerate our top line, we look at that as a good example of kind of what we are looking at in California, although obviously, California is a much greater scale. So as you look at our building blocks in '25 turning into '26, I think we feel very good about the top line momentum that we have and the opportunity to further accelerate it as we get into California in a more meaningful way in 2026. We've said 200 to 300 basis points ahead of the category and obviously, by entering into California and making some incremental investments there, we believe we should be at the higher end of that range. I'll hand it over to BK for the rest of the question.

Thanks, Howard. Good morning, everyone. The first thing I would say is there's nothing structural preventing us from getting to 15% EBITDA [indiscernible] period. I think the building blocks that Howard talks about underlying our financials strong productivity, the ability to have good revenue growth management tools in place, those all are really, really strong. In '26, as I said in the script, we will have -- continue to have best-in-class productivity activity coming through as our supply chain transformation that has been a heavy lift with potential CapEx, it kind of steps down. So when I start talking about free cash flow, that's intended to be incremental and additive to our story. We are doing the things you would expect us to do at this point in time, having come off our peak CapEx and our key transformation cost elements. And so now the focus has started to -- not only are we able to expand margins and grow our top line, we can also drive free cash flow.

Great. And then I would like to dig in a little bit more on the California route acquisition, which is exciting. I guess maybe you can get into a little more detail, Howard, on how sort of previous deals like this in other regions sort of have enabled us to sort of step change the market penetration that we can look forward to in California, or, in other words, I guess, have allowed you to continue to sort of drive share in these expansion markets even after the initial launch into these markets, meaning in years 2, 3 and beyond?

Yes. I appreciate the -- obviously, probably the most -- the easiest example for us to give you is something like Florida, where it is a geography where we actually entered and then we have bought routes over time. Obviously, we bought a route system last year back with our national acquisition. But if you were to go all the way back to, say, like 2020 in Florida, we were about a 2.5% market share. And the first couple of years was really about getting into the market in a more focused way and sort of starting to mature it.

And then really in 2022 was when we actually saw a meaningful -- first meaningful step change, which is about a 70 basis point improvement relative to that 2020 range. And we've been able to add market share growth from there. So call it from a 2.5% to a 3.2% and latest 52 weeks in Florida, we're at about 4.2%. And I think it's important to realize that this actually does, to your point, grow gradually over time as we get into the market and get our execution up and running and actually make sure that our playbook is working the way we'd expect it to. But where we go, we stay, and we have a high degree of confidence that this is the next step in continuing our accelerated top line growth.

Your next question comes from the line of Michael Lavery from Piper Sandler.

I wanted to unpack California maybe a little bit more. Can you give us a sense of does the acquired network cover the entire state? What are those routes carrying now? How easily do you have room on the trucks for your products? Is there a swap out? And maybe a little sense of -- you mentioned it's included in guidance, I assume that means costs. What are some of the costs that are associated with it other than the acquisition price?

Yes. So let me start. Obviously, it's early days on the integration work that we have to do. I think what the route network allows us to do is to actually look at the portfolio of products with an existing network and infrastructure and customer relationships and begin to introduce our products onto those routes, call it, in early 2026. So there is going to be some work there to make sure that we have the right assortment and that we're working with our IO partners and the retailers to make sure that we're getting the distribution that we're expecting. So a little early on the puts and takes of what will be there, but yes, we're confident that we can bring our products into those systems and start to drive the growth that we expect that we can get.

I mean, for context, remember, we're only about a 1.9% share of market in California, and it's about 10% of the salty category in the total U.S. So there's a big opportunity. In terms of the size of the market, obviously, this is an entry and so, they're about the same size as the national route system was. There's some routes in the upper Midwest that we also got as part of this transaction where we already carry some of our product. But we'll be making some -- we'll make continued investments to fully mature that market with our hybrid distribution model over time.

Okay. And just on the volume price mix split, very strong volume gains, obviously. You have very slightly negative price. It would seem like that's probably helped or driven at least a bit by expansion markets where I think you tend to promote a bit more to drive trial. Can you unpack a little bit maybe just how to think about the runway there? Is price at the right level? Is it mostly trial related? Obviously, you've got the strong volume momentum. Would you expect price to be positive going forward or is it sort of similar to the split in this quarter here?

Sure. Let me answer that. On the pricing piece, what you saw in the quarter was about a 1% drag, 1% drag is what we talked about and it played out how we anticipated. To your point, we are price followers, but we also have very good revenue management and our ability to compete in the best interest of both the consumers and the category. So there are many variety of ways for us to price. We think we will always choose the one that makes most sense for us. And our surgical approach to pricing but we also manage it through trade, through promotion and to your point, expansion markets. And our goal is to continue to be more effective more quickly and bringing those expansion markets in line.

Yes. I'll just add, Mike, what we said in Q3 or in Q2 was that we expected a 1-point drag in Q3 and Q4. And so the year is largely the way we would have expected to. And I think as you go into next year, we'll kind of see where we are. But to BK's point, feel very good about what we're doing on the rev man side of things. And I think the quarter generally came in the way we would have envisioned when we started this.

Your next question comes from the line of Peter Galbo with Bank of America.

Howard, I just wanted to ask maybe a few, I don't know, more technical questions about the California expansion. It's been 2.5 years, I guess, since the last kind of acquired, and that was Kings Mountain, so even going further back on routes. But I mean, should we expect that this -- like are these independent operators? Are they company-owned? Are we going to have to go through an IO conversion cycle again? Should we be looking at things like pruning of that portfolio the way you would have on an RW Garcia? Like I just want to understand some of the more technical components of what kind of will be factored in now the deal is kind of consummated?

Yes. Fair question. So a couple of things. First of all, I would offer you, we bought a similar-sized business or a similar sized route network in national last year in Florida. And I'd say that generally, the IO conversion discussion that we've had has not been driven by routes that we acquire because you think about it as we were already paying a commission in some cases or we didn't have a relationship and it was new business. And so, generally, when we bought back our distribution, it was actually a benefit of less commission to a mass distributor and but a commission to an independent operator. Where the IO conversion a couple of years ago was different as we were actually transitioning from, we own the entire relationship on the revenue line to suddenly we had this commission that we were paying. So we don't anticipate mechanically that being a topic of conversation next year.

I do feel like you're getting the greatest hits of my first year when we talked about private label SKU rationalization. We're also not anticipating that to be a significant part of the story. If you think about where we've been on partner brands over time, all of these -- all of the things that are on this route would fall into the partner brand line within the P&L, and we would expect that, that will continue to decline modestly or continue to improve. The decline that we will get will lessen, but it will still continue over some period of time as we actually continue to expand our business. So I'm not sure -- I don't think you should expect a whole lot of historical mechanics to actually have to come back into the story.

Okay. Cool. Helpful. And then I don't know, free served to either Howard or Bill on this one. But I think part of the stock reaction today, both is in response to maybe the commentary around the '26 margin, and it seems like maybe there is a bit of backing off on that 16%. But also in the quarter itself, I think the EBITDA margins were okay, but the gross margins were a bit light. There was some discussion around a worse potato crop, I think, that may be influenced. And I know you buy from the East Coast, but there was like a record potato crop through most of the U.S. this year. So just trying to understand like what happened? And how quickly can you pivot and there should be a lot of cheap potatoes floating around. So just how quickly can you kind of recover that gross margin piece?

I'll start on potatoes and then Howard can expand on it. Just to give a few facts, about 1/4 of our raw material basket is potatoes, and we source what we call chipping potatoes that are mostly from the Midwest and East Coast. This is very different than the crop that is used by folks that manufacture or make them sell and deliver French fries as an example but the areas that we source from are very close to our primary facilities. And what we saw in the quarter was some weather-related crop issues. Obviously, we had a very cold wet spring in the East and then followed by a very dry, dry summer.

So what happens is that we build it and potatoes not meeting the quality specs and it required more potatoes for the same throughput. So that was very different than a year ago. I think the good news is that that was -- that ended in the quarter. That's not something that is progressing. We've seen that the crowd come back and the tables are in good shape. So we don't think we have a systemic issue here at all. We think it happened in the quarter, and it did have pressure to gross profit, but it is essentially behind us in isolated.

Yes. And the only thing I'll add is, obviously, as you think about the overall gross margin, while some of the input costs were obviously a little bit higher, you also saw us address that with productivity in the distribution line. So you saw distribution costs go down year-over-year, which doesn't show up in gross margin for us. So I think if you look at the total cost basket and kind of how we work as operators to make sure that we're keeping those things in balance, I think that the journey through the P&L is a little bit different, but I think we address cost with cost.

Your next question comes from the line of Scott Marks with Jefferies.

First thing I wanted to ask about is you called out in the prepared remarks some softness with On The Border and talked about how you've kind of isolated the issues and are actively addressing them. Just wondering if you can share some incremental color on what you're seeing with that brand and how you're thinking about those steps to correct the brand.

Yes. I think so the first thing I would say -- and I appreciate the question. First thing I would say is, look, we don't believe that we have any sort of a structural issue with On The Border. I think it's a great brand for us. It's a business that we've been growing over time, and we have a great deal of confidence that the issues that we're having are relatively short term in nature. And it's a couple of things. One is, obviously, regionally, we're seeing some greater consumer value seeking behavior both up and down the price ladder. And so, we have some regional brands that have showed up that we are addressing -- that we're addressing in the near term. And then we had a short-term issue that I don't really want to go too far into that we were able to identify early in Q3 that we had to -- that we needed to address, and we are actively addressing an isolated issue, and you should see correction beginning in Q4 and into next year. But I think overall, we feel very good about the tortilla chip business and just some short-term noise.

Understood. Next question from me would be just on Boulder Canyon. It sounds like it was another strong quarter, and I think you noted some shelf space being awarded for 2026. Wondering if you can kind of help us understand, is that kind of in expansion geographies? Is that in core geographies with incremental products or categories? Just trying to get a better sense of how those wins are coming about.

Yes. So I appreciate the question, we feel very good about the momentum on Boulder Canyon. And obviously, it will -- it continues to drive a lot of growth for us. And it's really driven by, obviously, the consumers looking for better-for-you credentials and great tasting products. And over the last year-to-date, we are -- it is the #1 potato chip brand in the natural channel. And we actually have the #1 SKU in the channel over all time periods for 13, 26 and 52 weeks. So that business is growing really nicely, and I expect it to continue. If you look at the quarter, it is being driven by both velocity and distribution gains. Velocity in the natural channel about 35% in the conventional channel up almost 200%. And you -- but you can also see the ACV where we are today is really only around 50%, 52% versus, say, a brand like us at a little over 80%.

So as you look into next year, we expect to continue to enjoy broader-based distribution gains across channels and geographies. We have a great deal of confidence and visibility into those opportunities. It will be predominantly getting our actual assortment correct broadly and actually driving data chips into those markets. And then innovation, which we'll share a little bit more with you in February, will also follow because I think one of the things we're most pleased with is our partners in both natural and conventional are supporting this brand, and we're able to continue to sustain the momentum in both sides, which is obviously a little bit unusual, but an area that we take very seriously and making sure we're investing in growth.

Your next question comes from the line of Robert Moskow from TD Cowen.

I wanted to ask, Howard, about how you viewed your biggest competitors' lineup of new products for next year. They're adding a new sub-brand that's natural colors. They're adding a protein chip line and a package redesign. Do you see this having an impact on the category next year? Is it a positive? And do you think in the fight for shelf space, does it influence what you're able to get in any way?

Yes. So look, a couple of things. I think that, broadly speaking, any time the category leader is active in trying to grow the category, it's a net positive for all of us. I think that what you look at this brand -- this category over time, it is an innovation and communication that has really kind of driven consumer interest and appeal. So I think that regardless of who the competitor is, if they are able to bring more shoppers down the aisle, that is a net positive for us and for the category. I think as you look at what does that mean for us, I think there are a few things that retailers like about our business. One is that we are generally incremental. Two is that we actually bring investment and support through a hybrid model that can get it through DSD or DTW. And third is that we all can see the same data sets now of what our products are doing in their stores. And so I'm not concerned that we can't get the distribution gains that we have.

We certainly have not heard from any retailers that, that has been an issue because I think that they are -- that our core offering and our partnership continues to grow and mature. And I think that, that will -- that should continue to yield the types of gains that we have been expecting that's allowed us to grow 200 to 300 basis points faster than the category. So I think overall, I would view it as a net positive thing. Obviously, communication and innovation are always uncertain, and we'll see how the consumer responds to all of the offerings across all the category participants next year.

Okay. And I know you got asked this last quarter, but protein chips, there's clearly a significant pocket of demand for that type of product. And I want to know if your thinking on that subcategory has evolved in any way and maybe just discuss that.

Yes. I mean, look, I think that if you were to look at sort of the consumer trends right now that are out there, protein, non-seed oil, portion control, substantial snacking are all areas that we continue to understand the consumer is looking for and are seeking to try to address. I think when we get to February, we can show you how we think about addressing all of those subcategories as we talk about our innovation lineup. But certainly, as a consumer marketing guy, I want to sell the products to consumers that they are most interested in and be able to sort of drive the trend, which is kind of what you're seeing right now in non-seat with Boulder. So more to come on innovation, but it is certainly an area that we are paying attention to.

Your next question comes from John Baumgartner from Mizuho.

I'd like to ask about next-generation productivity. I guess as savings migrate down to more normalized levels as a percent of COGS, maybe the dollar amount of savings moderates. But how should we think about the ROI from new productivity initiatives elsewhere, whether it's on sales growth, volumes, in-store execution? I mean I'm guessing there's benefits outside of pure dollar savings from new technology. So I'm curious your thoughts, your view on implications for the top line.

Yes. So I mean, I can start and then offer to BK. Look, I think a lot of what we've done on the productivity line, to your point, has been really around getting the supply chain consolidation and modernization investments done. I think we still continue to have opportunities in our ways of working and equipping our independent operator partners with better information on how to execute sales and make our assortment and our display activity further impactful. I think it winds up -- it should be a top line enabler over time. And I would anticipate that, that's going to be part of the way that you'll see us continue to outperform the market as we continue, call it, a couple of hundred basis points better than the category. I think in the near term, what I would offer you is that we have a lot of work that we are completing, and you'll start to see that productivity step down to at or above world-class levels, still at that 3% to 4% and the rest will kind of communicate as we understand it. BK, anything?

Thanks, Howard. That's a great point for us, and I'll just build on Howard's points. It's what we kind of call our second wave of value capture. If you think about kind of within the supply chain and outside the rest of the company, there are still areas that we continue to grow. On the supply chain side, obviously, we have opportunities in the indirect procurement that we've done in direct procurement. We have opportunities in working capital and inventory management. If you think about the DSD network that we have and continue to optimize our transportation and logistics, that's helpful to us.

And then within the 4 walls of manufacturing plant, I think the team will take the next step on OEE improvement, predictive maintenance, et cetera. And then as you kind of expand outside the supply chain, parts of the business that others of us drive, you can think about automation and data leverage, whether it's RPAs and analytics and bots, the advanced demand thinking tools that are out there, self-serve analytics, digital twin modeling, I can go on and on, but there is a [ plethora ] of opportunities for us to continue to drive productivity at very high levels.

Your next question comes from the line of Jim Salara from Stephens.

Howard, I wanted to dig in a little bit on some of the market share dynamics because I've been impressed by the continued gain, obviously, in expansion, but maybe even more so in core where you guys have a lot more visibility and awareness. Can you just kind of walk through where you're seeing that incremental market share pickup in the core market? And is there maybe an opportunity as we think about retailers really fine-tuning what they have on shelf to make sure they're capitalizing on any pockets of growth. Is there maybe opportunity to continue to see sustained share gains in the core market?

Yes. I mean -- so a couple of things. I think, as you know, our strategy has been to hold the core and then grow through expansion markets. And obviously, to your point, we are pleased with that we're actually taking share in our core markets as well. Not surprisingly, when you look at our original strategy, we had said that really our core market is most significantly in Utz market and that the opportunity was to continue to expand our assortment of our Power Four Brands into the core geography. And as you look at kind of this year, obviously, Boulder Canyon is a significant contributor to the core, along with Utz pretzels and cheese, I think also continue to be areas where we're seeing some better performance. So I think what you're seeing is just our portfolio shifting in the core a little bit and that the benefit of Utz, the breadth of our portfolio is actually coming through in that market share performance.

I think the other thing that is helping us is that the convenience store channel continues to improve, we're by no means where we need to be yet. But as that becomes less negative, it actually also continues to help us as we look at overall market share. I think longer term, it is the one geography where we are most linked to the category. It's kind of really the only one. And so, I think what you'll expect to see us do is what will drive our share is innovation, communication and assortment to drive it further. But I think we like the notion of over the long term, if we can hold there and get our expansion markets growing faster, that you'll continue to see the performance that we're getting.

Great. And then maybe as a follow-up, you guys called out Florida, Illinois, I think Colorado and Missouri as expansion markets that are above 4%. We talked a little bit about Florida already, but maybe if you can just highlight, are there any kind of idiosyncratic, whether it's brands or consumer kind of consumption patterns in those states that drive that share 100 basis points ahead of kind of the average expansion market share?

Actually, not really. I mean, generally speaking, they tend to -- those 4 markets obviously are some of our fastest growing. They're averaging about 6%, 6.4% growth across them. And what we wanted to highlight is that we're getting -- after we get distribution gains in some of our older vintage expansion markets that we are continuing to show and sustain growth. I do think in those markets, what is true is we do have very strong relationships with the national retailers and our IOs in those markets. And so we continue to see very good execution there. And I think that the nature of our relationship with those retailers is actually what you continue to see. They continue to reward us with space, and we continue to invest and make sure that we're participating in their category growth, and it's kind of working for everyone.

Your next question comes from the line of Rupesh Parikh from Oppenheimer.

So I guess just going back to the salty snacks category. I know it's obviously still a challenge out there. But as you guys look forward, are there any green shoots or anything that gives you optimism as you look out in the coming quarters?

Yes, look, I think I continue to believe and have been a salty bowl. I think that it's a great category, and I think it's probably the best in food. And I continue to look at household penetration as the first place that I would look at is, are consumers coming and participating in this category more this year than they did the year before and the year before that? And I think the answer to that continues to be yes. It's not immune to the dynamics of the market and the consumer environment. But on average, when consumers are choosing how to invest their money into an affordable indulgence, they continue to choose salty more than they did the year before. So I think in that regard, I remain very optimistic about where the category is.

I think second is, as you look at the category progressing, we did say that we thought that the category would get better, would progress through the course of the year and become less negative. Obviously, we thought we'd be more flattish in the year, so we're a little off of that. But you do see that the category has been improving through the course of the year, which I also think is a net positive. And then the last thing I'll say is that if you look at category participants, we have always been an innovation and communication brand-led category, and that continues to be the case. The pricing environment remains rational. You're not seeing things that are -- that don't make sense. And I think you're seeing some of the drivers that have always driven this category coming back more to the front. So overall, I feel pretty good about where the category is going. Obviously, it's been an uneven category for the last couple of years, but I continue to be very, very optimistic about the future of this portfolio -- this category and this portfolio.

Great. And then maybe just one follow-up question. You guys also talked about some of your marketing efforts and also noted that I think you plan to increase your investments in retail media. So just curious what you're seeing there in terms of effectiveness and returns on your efforts with retail media?

Yes. So a couple of things. Obviously, we committed at Investor Day to 40% marketing investment year-over-year-over-year. Last year, we delivered 68%. This year, year-to-date, we're right around 30%. And that is really being driven by the consumer pressure. Our strategy has always been that we'll build the business overnight and our brands over time, and that we'll be flexible about where we make those investments in any given quarter. And so a, we looked at this quarter and we look at some of the distribution gains we had and some of the opportunities that we had to invest in retail media, they were the place that we prioritized. We, by no means, have a lack of investment -- high ROI investment opportunities that we can make but we'll always be choiceful in what we're doing first. And this quarter, it made more -- it made a lot of sense for us to invest in the retail pressure that we could get as consumers are in-store and making choices. So you'll continue to see us making investments in consumer media, and you'll continue to see that 40% kind of progressing into 2026.

Your next question comes from the line of Peter Grom with UBS.

I wanted to ask maybe 2 related questions on the category. One more from an innovation perspective and maybe more just how you're seeing it going forward. So more just kind of a follow-up to Rob's question, which I thought was a good one. You talked about this a little bit in your prepared remarks around highlighting fewer ingredients, removing artificial dyes and kind of the protein dynamic that you alluded to earlier. I guess my question is, do you think this innovation can actually move the needle and drive an improvement in category growth as we look out to '26? And then just related, you touched on kind of the sequential improvement, albeit maybe at a slower pace than you anticipated. Do you have any preliminary views on the category or industry as we look out to '26?

Yes. So look, I think I'll start with the innovation question first. The short answer is yes, I do actually think that innovation can help move the category. I mean it's -- I think that what you really -- when you look at innovation, what you're really trying to do is to drive consumer engagement in the category. And so a consumer may buy a new product and then pick up a normal bag of whatever their typical repertoire is and they haven't been down the aisle in a little while. I think that, that always helps with consumer interest in keeping the assortment fresh and keeping news coming through. So I do think that it can help drive the category. Obviously, the category is large, and it has a lot of traditional portfolio of offerings and those offerings also need to be healthy and growing.

And part of that is, I think, what you're talking about in terms of ingredient simplification, artificial flavors and colors. Those are frankly the need not only addressing what consumer interests are in, but also making sure that this category overall and obviously, our products remain on trend and allow consumers engagement in potentially a modestly different way. I mean, a reminder, 80% of our portfolio already exists as no artificial flavors or colors. And so, we'll continue to highlight those credentials as we go forward across our range. I think as you look at our future innovation path, there are opportunities to get new consumers into the portfolio potentially weren't there before. As we're entering into new geographies, I think innovation is a piece of the story, but our core assortment and its trial and repeat rates are very strong. And so, getting those products in front of the consumer also will be critically important to our top line growth. So yes, I think it can help. I think the whole portfolio story has to continue in order for the category to grow significantly over time. And I feel pretty good that that's where we are taking steps to do.

[Operator Instructions] And with no further questions in queue, this is going to conclude our conference call. You may now disconnect.

Welcome back, everybody. For our next session, I'm thrilled to welcome back Utz Brands, and with us today are Chief Executive Officer, Howard Friedman; Chief Financial Officer, Bill Kelley. Thanks to both of you for being here with us.

Yes, thanks for having us.

Good to see you. I guess, normally, we'd start with sort of the category and top line trends, and I'm sure we'll get to that shortly. But maybe we can start a little differently and talk about the supply chain transformation and CapEx cycle that really ramped up last year and continued through '25. You've been outgrowing the category partially driven by your investments in A&C and distribution that are funded by the supply chain productivity and CapEx. How do you feel about the progress on the manufacturing network transformation and the path from here? And relative to other packaged food companies, I guess where does your supply chain stand in terms of efficiencies and whatnot at this stage?

Yes. Look, I appreciate the question. I think we feel really good about the work we've been doing in the supply chain and sort of over the last couple of years, if you went all the way back to our Investor Day, we basically explained that we had 15, 16 plants total and that we thought that over time, we could actually drive that overall plant network down to become a little bit more to standard. And over that period of time, we also did a transaction where we sold a few plants and a couple of brands, and that actually necessitated us pulling forward some of the capital investment. So we spent $100 million last year, and we're guiding something similar this year and feel like we're making a lot of progress in translating into the productivity path that we've had.

We're 6% of COGS last year and we are on path to do the same again as we go into next year. I think when you get to the end of, sort of, 2026, the network will be relatively set for where we want to be and then we'll move more into a more maintenance and sort of standard capital structure. So, so far, so good. I think we've done a lot of work to get there, and we're very proud of what we've built and very proud of kind of where we are to be able to now start to drive the westward expansion and the geographies that you're seeing.

Understandably, the CapEx has been a bit of a drag on free cash and certainly represented a significant investment cycle. You mentioned you also accelerated CapEx. So what's the CapEx path from here?

Yes. Look, I think it's a very fair question. I think we talked about peak CapEx this past year. And obviously, it is impacting sort of the cash flow as we've gone. I think it is, again, important to know that we're a couple of years ahead of schedule on that plant consolidation. And we've said that we're at sort of a peak CapEx as we're in this year. I think what you'll see as we go into next year and the years beyond, is you'll start to see a step down in the amount of capital that we're spending. And I think it's fair to say there will be a significant step down next year. I think CapEx will probably start with a 7% next year and then the year after, you'll see the next step down after that.

Great. And since we're on the topic of, I guess, supply chain transformation, can we touch on the productivity program. It will be about 6% of cost of goods in '25. This will be the second consecutive year near this level of savings. How much opportunity remains with respect to productivity, and should investors be thinking about the next year or 2 being around that elevated 6% level and where lie the greatest opportunities from here.

Yes. So I think I'll start, and then I'll hand it over to BK to give you a little bit more. If you went back to my first year in the role, we wound up getting to about 4% cost of goods, and then we stepped up to 6%...

And prior to you being there, it was like 1.

Yes. I think we finished at 2% the first -- the year before me. And so obviously, a lot of early stages in terms of the productivity program. And we're not doing anything exotic per se, we started to look at our procurement structure. We started to look at our costing models and we actually were able to drive efficiency within the box and then with the number of boxes that we went through. So that stepped up from 4% to 6%, 6% again this year. And then I think I started to move toward maturity, but I think you're starting to see the benefit of all that capital and the work we've been doing in building capabilities in order to actually start to deliver the gross margin expansion. I think we all aspired and hoped for in the category that then funds the A&C and capability building. BK?

Yes, sure. So I think the first thing is the 6% was a quite a remarkable number for us, and we're very proud of that. I think it's really driven as how we're just said around the capital. If you go back to even the second half of last year and the first half of this year, our CapEx really ramped up. It will ramp down here in the second half, and as Howard said, to moderate significantly next year. But those benefits really drove the productivity piece.

Also, and more discreetly, we did announce the facility closure of Grand Rapids that will happen here in late Q4, and we'll see some of those benefits this year and some of those benefit -- and some benefits next year. But I think that's been very, very helpful. I think we will normalize productivity around 3% to 4%. We'll always go to cover our inflation. And as Howard said, we're able to invest in our brands appropriately. But I think in 2026, we'll talk about those building blocks when we get there, but you may see productivity just be a bit elevated off that baseline.

Great. Maybe it's a good time to transition to sort of the category and sales trends. I think a good place to start is what's driving the well above category growth rates that -- I guess despite the continued struggles for the broader salty snack category, which we'll get into later, the company has been able to deliver relatively robust organic sales growth. Two key drivers of this outgrowth right are Boulder Canyon and the expansion geographies. Maybe walk us through a bit the opportunities from these 2 key levers going forward.

Yes. I mean -- so look, I think we're very happy with our top line this year. We got to -- we've gotten to sort of a rhythm where we're starting to grow the way I think we all would have expected to. And in years past. We did some portfolio shaping and some cleanup, which I think is now allowing our power brands and our brands overall to that growth to come through. Boulder Canyon obviously has been a great contributor to our top line sales, and it's sort of a perfect combination of the trend around non-seed oil, a trend toward consumer shopping for premium and also looking for value.

And so we promised that we would get to $100 million by the end of next year. We passed $100 million at the end of last year. And look, we expect to be closer to $200 million as we get into the year-end. So obviously, a business that has doubled over the last period of time and continues to be growing really nicely with both its natural channel and natural organic channel, but also into -- entering into the conventional channel and growing both velocity and distribution simultaneously in both. So that is something we have a lot of high hopes for expectations.

On the expansion geographies, look, our promise was always to do our best to hold the core and then to be able to expand and grow more. And a wise man once use that expression, and we have used it internally since. And what you see right now is our distribution gains in our core have been around 10% in [ TDPs ] and in expansion geographies it's been more like 18%, and that's been bringing our Utz Brands Boulder Canyon on the border and Zapps into new markets and be able to begin to demonstrate that our model can repeat itself and the success we've had in Florida can actually transcend as we move westward, which you can certainly see in the growth rate. And I think we've got several more years of growth to come in that regard, regardless of what the category ultimately does.

It's an idiosyncratic driver here to the story for sure, that we don't see for many of the companies that we follow in the space. Maybe we can dive a bit deeper into both of these. I guess regarding Boulder brand, as you mentioned, is already blown by its initial target to be a $100 million retail sales brand. I guess in the next 3 years, how big could this brand be? And what would sort of be the key drivers of this outcome?

Yes. So I probably -- the couple of things that we were most excited about Boulder is, again, I think if you try the product, it's a non-seed oil, but there is no taste sacrifice. So you can feel great about serving it. It actually performs for the consumer that wants that, and there isn't something that you're like, it's great. It's not as good as its conventional counterpart, it actually performs pretty much identically. And -- but more importantly, the brand itself has actually demonstrated some stretch. So we were able to enter into cheese balls. Last year, we entered into tortilla chips. We've actually expanded the range of offerings in a wavy and we brought in some flavors as well as set sour cream this year, and it continues to perform in every channel that we move into.

It will be $200 million this year. Could it be $0.5 billion. I'm not quite sure we are ready to say that, but I think we believe that there's a lot of upside yet to go on that brand, and it will be a growing and much more significant piece of our portfolio as we continue to execute.

Not surprisingly, the success of the brand has attracted competition to the avocado oil space. I guess, how do you view the more competitive landscape? And how do you remain advantaged in this space?

Yes. Look, I think the root of our advantage is always going to be in the speed and agility with which we can react to the environment that we're in. And I think if you look at the competition, we love competition. We think the competition is healthy and important for the category. And I don't think that this space is yet by any means, limited at this point. in terms of how much more area that avocado oil can grow. So I think as competition comes in and introduces other consumers to the space and to the benefits of the oil I think as the #1 player in the segment right now. I think that does nothing but help us as we continue to drive adoption.

Yes. Maybe switching gears to the white space distribution opportunities and expansion markets. At this stage, what's the key opportunity? Is it expanding the company's presence in FDM channels with new customers and increased shelf space? Or is it expanding into other channels like club or convenience?

Yes. It largely depends on what geography you're talking about. I think if you were to look at somewhere like Florida where some of our expansion geographies that are starting to mature, then clearly, it is continuing to spread the channels that are being sold in. We typically will start with a -- in the food channel when we enter into a market because there are large anchor customers who want and support our brands and give us the support that we're looking for. And then over a little bit of time, start to build out and proliferate into classes of trade.

So C-store, as you know, is a place where we've talked a lot about over the last couple of years being an area of attention. It has been improving for us. But clearly, there's some more work to do. As you look at expansion geographies, really food and club and mass are the places that we look to go, typically entering with food and then building out an IO network and then filling in the rest of the channels because it tends to be the place where we can start to drive the revenue certainty we need to get our independent operators in and stood up.

In expansion markets where the company has cycled initial distribution gains. So Florida is an example. I mean what does growth look like? And how do you use that data to convince retailers and other new expansion markets to sort of take on the brand, where it's new to that space?

Yes. I mean, obviously, Florida has been a wonderful success for us. It's something that I inherited when I joined the company. And what we have been able to see is we first got chain-wide in a large retailer. And then actually, over time, we're able to not only build the original core assortment, but broaden the assortment and bring more of our portfolio and be able to invest more meaningfully in some of the merchandising and co-promotional opportunities of that merchant has and then build out infrastructure around it, we bought the IO network or the national distribution rights back last year as you look in Florida.

And that has, I think, been a proven model for us. The nice thing is in the 30 markets we're in, we're growing in all 30, and we're taking share, but a lot of the retailers that we would want to talk to about entering into new geographies, we actually have existing business with them in other geographies. So they're actually able to look at their own data. And it's much more about even talking about the shelf space and talking about the assortment and getting the preconditions right to be able to enter in and then continue to advance. So it's a much better story when we can all debate a lot of things, but everyone is looking at the same data, and it's coming from them, it's been very helpful.

Great. Maybe shifting gears to core markets. This past quarter, the company delivered both value and volume market share gains in core markets where it already has very strong market share. I guess for the first time in several quarters, that was the case. So what enabled this outcome? And would you expect this dynamic to continue going forward?

Yes. So you're right. I think there are a couple of things that were happening in the core in the last quarter and a couple of things that we've been talking about historically. One is around this notion around portfolio shaping, where we are actually able to -- we've now brought in our Power 4 brands. If you look at on the Boulder or Zapps or Boulder Canyon, all of them had significant distribution gains in the quarter. So we're optimizing our mix, which was always part of the story.

And then the second is our convenience store channel trends, which had been a little bit softer over the last, call it, several quarters actually started to improve. They're not yet where we want them to be, but convenience store tends to be supportive to our core market share. So we want to be at 0. We were at basically 0.2 points of volume share in the quarter, and that was actually -- was a welcome outcome of all the work we've been doing there.

The white space opportunity that we've talked about in expansion markets is pretty clear. How would you contextualize the distribution opportunity that's still available in core?

Yes. I think it's -- I think our core markets are actually, again, have quite a bit to go because when we talk about the core, what we're really talking about is the Utz core, right? We're talking about the Utz brand and kind of the distribution that it has more so than we're talking about sort of the remaining Power 3 and some of the other SKUs. So we have an opportunity to continue to bring Boulder Canyon, OTB and Zapp's in. We have continued opportunity to bring innovation in as well and to also play the price ladder with some of our assortment. So I think there's still quite a bit of distribution opportunities for us within the core, which are really non-core for the rest of our branded portfolio. And then obviously, the reciprocal is true as you think about the West.

And I know the summer back-to-school is a key timeframe for the salty snack category overall. What have you seen of late in terms of category performance? And what is that seeing in terms of the competitive environment?

Yes. I mean I think we are -- the competitive environment has actually been pretty rational for us. I mean you're not seeing any sort of unusual activity from any of the competitors, which has actually been great to see. I think that this is a category that has historically been built on brand building, marketing innovation and then a rational promotional environment. And I think that is what you're seeing right now. And I think for us, that is a -- that's always a positive tailwind when everybody is competing to build this business and build this category for the long term.

Salty snack category obviously has remained sluggish, probably a lot longer than anyone would have initially anticipated, and I think longer than anyone really would like to see. I guess what do you expect from the category for the remainder of this year? And while early, are there reasons to believe the category could return to some modest form of growth in '26? And then what are you expecting from the pricing environment in the back half of this year?

Yes. Look, so I mean, I think we've talked about this a little bit. I actually have a -- I'm pretty positive on the salty snack category overall. I think if you look at the metrics that really truly matter over time, household penetration continues to grow, which would at least suggest to me and to us that consumers and shoppers want these items in their pantry. And I think that we've been a 0 to 1 price in a 3 to 4 -- I do this each time, a 0 to 1 volume in a 3 to 4 price category. I think, obviously, when inflation happened, the category got quite a bit of ahead of itself.

And I think we're just seeing some of that kind of work through as we can, again, continue to build back into what builds this category. I think as you look at the back half, last year, we're anniversarying, I think, a much more competitive environment. So there was a sort of a step-up in promotional activity in H2 of last year that kind of more or less carried over pretty consistently into H1 of this year. There was no incremental step higher. And so I think you're going to see a category that starts to normalize a bit as we go into the rest of the year is kind of what I'm expecting. And then I think longer term, I do think that being able to put price into this category is really about driving consumer engagement and value in the brands and the category that we support.

Last quarter, the company raised its outlook for organic sales growth for the full year from up low single digit to up 2.5% or better due to the first half sort of outperformance. What came in better than you expected in the first half? And the guidance implies a bit of a sequential deceleration in trends from the 3% result in the first half. What would be causing that?

Yes. So I'll start, and I'll give it to BK. Look, I think if you look at our building blocks, we had said at least 2.5% or better. And if you think about the distribution gains that we've had and sort of the strength of Boulder Canyon, I think we continue to feel pretty good about that our drivers are in place. But the competitive environment is dynamic and the category continues to evolve. And I think that we would expect that we should have a pretty good quarter and a pretty good year. But we're, I think, continuing to just watch what's happening and watch the adoption. BK?

Yes, I think that's a good point. We did say 2.5% or better. And what drove that is we thought we had some room given the favorable lapse that we'll have in the second half here that Howard just mentioned. Howard expressed our view on the category, but I think overall, the category does have a bit of uncertainty to it. We want to continue to monitor that. And then the consumer macro trends are a bit of a debate as well. But I know everyone looks at our scanner data, and so I'll let that speak for itself, but we feel pretty positive on the top line for the year.

Yes. And maybe shifting to profitability. So on the EBITDA side, Implied in the full year outlook is the expectation in the second half for EBITDA to grow at sort of a mid-teens level year-over-year, which would represent nearly 200 basis points of year-over-year EBITDA margin expansion. I guess what are the key drivers to this level of margin expansion in the back half?

Yes. I think the first piece for us is that we expect EBITDA to grow 100 bps for the year, and our midpoint of our guide confirms that. EBITDA in our business model is always a bit back-half loaded. I think last year, we delivered 54% of EBITDA in the second half. This year, that number, to your point, is up higher at 57%. I think the productivity gains we've talked about is really the big driver for us.

The CapEx we spent in the second half of last year and the first half of this year really is going to drive the productivity. And the things that we have in terms of our ability to be more efficient in the factory, putting in better equipment route palletizers, take out some of the labor pieces with automation, those are all been very helpful. And this year, particularly, we had a discrete item in Q4 as we talked about our Grand Rapids closure. So all those will ramp nicely into a strong EBITDA close for the year.

Got it. And following a year in which the company expanded its A&C spend by some 60%, they're just planning for another sort of 40% year-over-year increase this year. As a percent of sales, what level of A&C will the company exit the year with. And do you still expect that target to be in a sort of 3% to 4% of sales range and over time? And when would you expect to reach that level?

Yes. I think the first thing I always want to reiterate as we think about spending is A&C, or a branded business, and we want to continue to build and have healthy brands. But it's not an article of faith. We want -- we expect to save money before we spend money. And so as the productivity has continued to ramp, it actually gave us some room last year to accelerate that. We are committed to get to, call it, 3% to 4% over time, and that's sort of the sequential 40% that you're talking to.

I think we'll end this year probably closer to around 2% of revenue. So we still have several more years of opportunity. And we talk about margin momentum and materiality. We want to spend it on our biggest businesses that we make money on that actually have momentum. And as long as we can continue to do that, we think that the returns will be positive until we get to sort of a more normal state.

Net leverage ticked up to 4.1x this quarter, but it's maintained its expectation for net leverage to approach 3x at fiscal year-end. I guess what happened in the quarter with respect to leverage? And weather that's feel comfortable reaffirming its guidance?

Yes, I think that's right, Andrew. Our leverage was higher. We had an opportunity to accelerate the CapEx spending, and that was driving our productivity program. So we took advantage of that. Also, the seasonality opportunity in our business where we were able to build some additional working capital will be helpful. I think our original target at our Investor Day was to be at 3x net leverage at 2026. We did update that guidance to say we approach 3 times here in 2025. We think we're on track for that. Free cash flow will be the key. I talked about the EBITDA ramping up being helpful to us. Howard also mentioned that CapEx is at our peak, and that will step down here in the second half.

And I'll walk through building blocks of the future as we guide into next year. But it will be a very important focus for us to really improve our free cash flow yield. We're comfortable with our cash conversion cycle is pretty -- performs very well for us. We think we can improve it on top of that. And then obviously, CapEx will be a really big driver of that as we go forward. And we'll do other things that you expect us to do around managing working capital and structurally we do see it. We have an integrated business plan program that will reduce inventory levels for us and all the things that you expect us to do around receivables and payables. But we feel very comfortable with our approach here.

And really, you're not getting any specifics about next year at this point, but maybe can you dimensionalize what sort of free cash acceleration we could see in fiscal '26?

Yes. It's probably too early for us to talk about it. But as Howard said, we expect CapEx to come down meaningfully. He said you'll have a 7 handle, that's quite a bit different than the $100 million we'll spend this year as we confirmed in our Q2 call. And we think, along with that, our OpEx spend and our onetime friction costs will come down as well. So we do think there's some opportunity here to drive free cash flow. This is an important part of our story. We think in the future, we'll come back and talk more about it, but our free cash flow yield will be a very big focus for us.

Okay. Great. The company has been pretty active in the M&A market over the years, took a bit of a pause in the past couple of years as it focused on sort of debt pay down. How much was the slower pace of M&A for -- it's a reflection of leverage rather than maybe timing of deals? And should investors expect it to pick back up again? And what kind of assets would the company even target at this stage?

Yes. Look, I mean, I think a couple of things, and we've maintained, we'll look at everything. But we've always had a high hurdle for things that we would be interested in acquiring. It always starts with do we think we would be good owners of it. And if there had been a got to have it asset, then we would have looked at the balance sheet and the full force of what we could do. But obviously, paying down our debt was a priority I think the more important thing is that we don't necessarily need an inorganic transaction to meet our growth goals. We have so much growth opportunities as you think about our expansion geographies, our A&C opportunities the ability to build out our DSD network that -- M&A has an even higher hurdle because it has to, by definition, take some of those resources away from the organic opportunity.

I think as you look forward, I think there are a couple of areas we've talked about meat and popcorn historically, we tend to be good buyers after synergies. We're in the mid-single digits in terms of what we're paying for it, and we'll continue to look. But I feel very good that our top line momentum and the top line that we're chasing would only be enhanced if we were to do a deal, but it's not something by any stretch we need to do right now.

Right. Salsa and dips and Partner Brands have been sort of material headwinds to the top line growth for the past few quarters. What's your expectation for each of those going forward? And I guess when can we get to a point where there is really no longer a drag, which would only accelerate the type of growth that you're seeing on the top line from where it is already?

Yes. I mean, for context, we're talking about 12% of the business, right, and sort of equally split between Dips and Salsa and Partner Brands. Obviously, on partner brands, I'm not really qualified to say what the people that we are carrying products for are going to do. So let me spend more of the time on dips and salsa. Last year, we had a distribution change. We added a large retailer who consolidated. We were in the Hispanic set and the conventional set. They consolidated into the conventional set. And so we had to lap that. That largely has passed us through the end of the second quarter, linked a little bit into the third quarter, then we have a little bit of merchandising timing in terms of some club channel activity that we had a year ago.

But we think that those businesses are important, and we will restore them to growth. Right now, the other piece of it is, is that it's an area where the margins are not particularly strong, and we've been focused on margin improvement and pricing in that subsegment. But I think if you were to look at the more recent scanner data, you're starting to see some improvement in those businesses, and we would expect that to continue.

Got it. How is Utz performing in the convenience channel of late? I know this is an area where the company still sees opportunity, but it's been slower than desired. And part of that is the overall channel, but then part of it's been Utz's performance within it. So where do we go from here in C stores?

Yes, I think that's right. I think we had some assortment management took choices and some distribution losses a couple of years ago that disproportionately affected the business. So while the convenience store -- while the convenience channel had actually slowed, we slowed even more. I think if you were to look at the most recent periods, there are a couple of the larger chain accounts where you see the distribution gains and you actually see top line growth. And I think the channel overall is improving. So while we're not yet to bright, I think you're seeing an improvement in the trend, and we would expect to be around flattish before the end of the year.

Great. Bill, having now been in the CFO seat for about a quarter or so. I mean what have been your biggest takeaway so far because you've been in a number of CFO roles in the industry, both public and private?

Yes, I'm happy to be at. It's been a great opportunity for me. I think my first observation is that we have a very clear strategy and it's working. I think as we talked about using our productivity gains to drive our wonderful brands and expansion that's on track. I think the other -- the work is that the team's work on productivity, in particular, is really be best-in-class from my perspective and the brand building opportunities are very strong there as well.

And then finally for me, personally, I'm working with the team to bring forward just new capabilities, particularly in the areas around technology, particularly in the support functions and around the DSD model, I think we can be helpful there as we go forward, but just able to be here. Obviously, I've known Howard for years now, our days at Kraft Heinz, and it's been a good opportunity for me.

Howard, maybe in our sort of remaining moments, I mean when you were first brought on board, the thinking was that this would be a new stage of growth for Utz moving from more of a DSD led sort of push mode to more of a marketing and innovation driven, more of a hybrid consumer push pull model. Obviously, the environment has changed meaningfully in the last couple of years. But I guess, how would you characterize that just performance in these areas over the last couple of years? And do you have confidence that the company is set up for continued volume gains even when distribution white space opportunities sort of eventually wind down?

Yes. look, I think when I got here, there were a couple of mandates that we were trying to build. And I think this was an incredibly well-run company, and it was a company that had been built over a generation of pushing into new geographies and moving quickly and being willing to take entrepreneurial risks in the pursuit of and building scale. And then the question was, how do you then take that scale and make it really beneficial?

And so I do think that we've always said, I think, whether you call it 70-30 push versus pull or 60-40 that over time once we get to the point where all of the consumers understand and get out of the availability that people have to want and desire these brands. And so spent a lot of time building a marketing function and building analytic capabilities and forecasting capabilities, revenue management, all the things that you would expect to see. And I think what I'm particularly proud of is that our communication plan is on track and that our innovation agenda is also on track.

Once you get to national distribution, you can actually take bigger bets and innovation and growth. And I think we're pretty much where we want to be with those capabilities and we're starting to kind of show it in kind of -- in our results and kind of where we are. I think our brand builders are doing a great job of understanding the consumer in ways they haven't before. We're talking about lemonade chips earlier with some folks and was something that I probably would not have done on my own, but they had evidence in data and facts that said the consumer would actually respond really well and which has clearly been a wonderful success for us and the consumer response and the buzz that we got for it was great. We're much better in digital and online now than we've ever been before. And we still have a relatively modest A&C budget with an opportunity to spend a whole lot more.

I'm curious, as one of the only sort of large mainstream salty snack players that's really driving growth in a more sluggish category right now. I'm curious how your meetings with -- your top-to-top meetings with key retail customers have gone as a key player that's driving growth for them. How do those -- how do those conversations go? And are you able to sort of take this moment and say, "Hey, we're the one driving growth that should translate into either more TDPs or better shelf placement." Maybe some examples or whatever you can share on that front?

Yes. Look, I think for sure, the conversation is different, right? I think when we -- if you went back a few years ago, the question was, are you a regional brand and can you move westward. And the answer we had was, yes, we can move westward and we've done that. I think we were growing Boulder Canyon and could you actually get to a #1 share position in natural and we did that. And so I think that the retailers are now much more willing to give us the challenge of what else can we do to grow together as opposed to prove to us that you can grow. And that I think is manifesting itself in participation in bigger programs with them. We're a nice-sized business, but there are programs that were being included in that. I'm not necessarily sure that our size in the category would have necessarily demanded a couple of years back.

And you're certainly seeing them giving us more distribution space, which is the highest complement any merchant can give you is to say, I'm going to put more of your products on the shelf. So I think from here, the biggest -- the biggest difference is we're being asked our opinion and we're being asked to actually demonstrate some category leadership that we've spent 3 years trying to build to be ready for those questions. And when you went from being in the mid-tier to moving toward a top-tier supplier, the expectations are that you'll have a point of view and that you'll help drive the growth. And our retailers have been -- and our IOs have been incredible partners.

Great. All right. I think that's a great point to take it over to the breakout session. Thank you both for being here. Please join me in thanking Howard and Bill for being here.

Thank you.

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Utz Brands, Inc. Second Quarter 2025 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Trevor Martin, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us today for a live Q&A session and our second quarter 2025 results. With me on today's call are Howard Friedman, CEO; and Bill Kelly, CFO. I hope everyone has had a chance to read our prepared remarks and view our presentation, all of which are available on our Investor Relations website.

Before we begin our Q&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 and posted on our website.

Now operator, we are ready to open up the line for questions.

[Operator Instructions] We'll go first to Andrew Lazar at Barclays.

First off, EBITDA was roughly flat in the first half of the year. You're looking for 8.5% growth for the year at the midpoint -- in the back half, I think -- actually you're looking for 8.5% growth at the midpoint for the full year, it implies high-teens growth in the back half. I was hoping you can go through maybe a bit more detail on what gives you the confidence in that outlook, especially in light of just the more muted first half EBITDA performance.

Andrew, it's Howard. I'll start and then hand it over to Bill for any other color. But look, I think there are a couple of things that are going on in the quarter. Obviously, a lot of the investments that we have been making to drive our overall top line, which are coming through require investment as we build into the year.

When you look specifically to gross margin, first is that it naturally steps up as we build through the year. Q3 is typically a significant step up versus Q2. And as you look at what's coming into the back half of this year, the accelerated CapEx does accelerate productivity savings as we go in. We obviously announced a plant closure that also is going to impact the back half of the year.

And then I think the last thing that you're going to see is there is some benefit to our portfolio mix as well as we are continuing to see top line momentum that also helps the step-up as we go into the back half of the year. I think overall, we feel like it's -- we're in a good place on the guide and have some clarity and line of sight to the productivity savings and the margin expansion as we progress through the rest of the year.

Got it. Okay. And then obviously, you have delivered strong top line results in the first half in an overall category that at least doesn't appear to have improved very much as of yet. I guess what specifically led to the better top line? Is it frankly just more distribution gains than you might have expected, better velocities, new products? What's kind of led to the -- at least above what your initial expectation was around top line?

Yes. Here are a couple of things that are going on in the quarter. We feel really good about where we are on our top line. And as you know, we are not solely dependent on the category in order to be able to drive our growth. The first -- as you suggest, which is obviously, we've had a significant increase in expansion market, distribution points you see about as we went into the first half of the year. We are investing in infrastructure, which is allowing us to see significant growth in the first half in those geographies.

I think the second thing is, is I think for the first time in a couple of quarters, you actually saw volume and value share gains in our core, and that's really being driven by bringing Boulder Canyon and On The Border into our core geographies as well as seeing some improvement in our C-store performance as well. We're not where we want to be yet on C-store, but you are seeing an improvement in the trend. And so we kind of have measured and unmeasured channels, all kind of moving together very positively in the first half and certainly in the second quarter, distribution gains supporting it. And then we've been making investments to drive that westward expansion, and they're also coming through the top line results.

We'll move next to Peter Galbo at Bank of America.

Howard, maybe just to start, I'd love to get a little bit more clarity on the revision on the EPS line specifically. The stock is currently down about 11% at the open. And I think that, that a lot of that has to do with just the mechanics of what changed in the EPS guidance. So maybe you can talk a little bit more in detail about what below the line is specifically changing? I know there was a comment around interest expense, but also accelerated depreciation. So just like what was the number before? Where is it going to? No impact to EBITDA, but clarifying comments there would be very helpful.

Yes. So let me start, and then I'll hand it to BK because Pete, obviously, as you know, we've always maintained that EBITDA is obviously the first indicator of the overall health of our business. And we continue to feel very good about the EBITDA plan for the year as we obviously nudged up the low end from 6 to 10 to 7 to 10. So kind of -- we feel pretty good about where we are on the cost savings programs and productivity, all of those things are coming through. As it relates specifically to EPS, let me turn it to BK to go take us the rest of the way.

Yes. Thank you, Howard, and thank you for your question. On the EPS piece, the original guide that we put in place was the EPS growth of 10% to 15%. We revised that in our print yesterday to be -- or this morning to be 7% to 10%. As Howard said, EBITDA is the indicator for us in the health of our business. But the impact of our revision, the midpoint to midpoint is about $0.03. Half of that is interest. The other half is D&A.

On the interest side, on cash interest, we're picking up a couple of pennies there, given the impact of the higher CapEx spend that we decided to do to accelerate our productivity programs and to help grow our business. We borrowed a bit more sooner in that line, and that's picking up there in terms of more interest.

On the CapEx side, we did confirm a higher spend on the -- higher end of our range on CapEx and we spent more of that more quickly than in the past. Our CapEx is about 70% spent through the first half of the year, and that's different than our historical kind of pattern. That did create more amortization and depreciation, and that's the other $0.01 or so that's coming through in our guide. So we thought that was the way to think about it.

Looking forward, we think that we are confident that 2025 will be the peak of our CapEx spending. And so we think we can manage through that. But I thought it was prudent to just confirm the thinking on EPS. I know it's not the most significant metric for us, but I want to make sure that we had the right thinking there going forward.

Got it. Thanks for that Bill, helpful. And Howard, maybe just to pivot it back to the business and in relation to Andrew's question, look, there was, I think, a slide in the deck around potato chips clearly outpacing the category but then you had two other kind of subcategories in tortilla chips and pretzels that were maybe a bit below trend.

So just kind of what needs to be done to get those on the same trajectory or turned around? Maybe there's something in the comps, but additional color there would be helpful as well.

Yes. Thanks for the question, Pete. I think there are a couple of things going on. Obviously, to your point, potato chips is doing well, and it's a little bit of a tale of within the expansion geographies, our Power 4 brands, are all performing quite well, and we're pleased with the performance. Potato chips obviously, from a subcategory perspective in the quarter was also very strong. As you look at pretzels, you sort of have the Utz brand, which was actually growing in line with the subcat and is performing well. And then the rest of our pretzel portfolio a little bit softer, which kind of pulled the number down. But our primary power brand in Utz is growing strong in pretzel and then obviously, Zapp's and Bachman and some others were a little bit softer.

And then on tortilla chips, it was a little bit more of a overlap of merchandising. We had some activity in the club channel as well as in the south central portion of the United States where we were lapping some promotions in the prior year, not an issue that we see but more just a quirk of the calendar.

We'll move next to Michael Lavery of Piper Sandler.

Just wanted to unpack some of the distribution gains a little bit. You've obviously got really good momentum that you called out in the Midwest. Can you give a sense of, is that smaller retailers and kind of what the shape of the channels look like there? And how much does that momentum help your selling story to bigger retailers? And how well establishes your infrastructure to support a bigger push out there?

Yes. So we actually are seeing -- so obviously, we're seeing growth in all 30 of the expansion geographies. So we did actually -- we are seeing momentum picking up across the expansion markets. And it's a combination of things that are going on, Mike, Obviously, we've been -- we continue to get very strong retailer support from national chains as they are taking our products westward with us. And so that continues to be a good news story. And we're also seeing good progress in channels, whether it's club, discount, dollar, all also continuing to see momentum.

And so from a distribution gain perspective, it's a little bit more broad-based than sort of a smaller retailer, but it's certainly something that we're pleased with. And that, obviously, the thing that we have found historically, and we've seen it in most of our expansion geographies once we get in and start to execute our playbook around the perimeter, around the end caps and around the distribution because we are additive and incremental to the category retail, we tend to get incremental space as we go.

And so what we wind up doing is building strength upon strength. And so you're starting to see distribution gains both in core and expansion markets kind of across the board. And from an infrastructure perspective, that is the benefit of our hybrid model between direct to warehouse and DSD. We can service a customer based on how their unique preferences are or in some cases, start out in a market before we can get to it via the route infrastructure that we need for customers that want to be serviced that way.

So hopefully, that answers the question. But I'm feeling really good about where we are, and we believe that, that was part of the logic of saying that we would bring our -- the low end of our guide to at least 2.5% moving into the back half of the year.

No, that's great color. And just a quick follow-up on packaging, that slide with some of the new innovation. It looks good. I know you've got a big portfolio, but does it reflect maybe any even subtle changes to brand architecture that might be applied more broadly?

Yes. Well, look, I think at the moment, there's a lot of -- there are a lot of things going on with our packaging. We obviously introduced a cheeseball barrel refresh that we want to do from a structure perspective. The front-of-pack graphics at the moment, we continue to obviously look to make sure that the brands are fresh and modern and that the packaging is appealing. So we'll continue to look at that and to tweak as necessary. But for the moment, I think that we're pretty pleased with our architecture overall.

We'll take our next question from Robert Moskow at TD Cowen. Mr. Moskow, your line is open. You may be on mute.

Sorry about that, I'm having trouble with the headphone. I'm glad you have Trevor there to help explain why the stock is down because I don't think I can. This is -- I thought the print was pretty good.

Can I ask, the bridge, the EBITDA bridge in the back has the investment spending that you talked about, Howard, in SG&A to drive the distribution gains. Can you -- I would imagine that, that continues in the back half of the year because it's supporting your growth in expansion categories or expansion geographies and also your DSD system. So is that true? Will that continue in the back half?

Yes. I think if you look at SG&A front half versus back half, we do expect that on a percentage basis, that them -- that SG&A in the second half will be modestly higher. Some of that is, to your point, being able to invest in the sales infrastructure for the westward expansion. And obviously, marketing spending in Q3 will be higher because we're in the peak of the summer selling season. So I think that, that's a fair assumption.

There's also a little bit of cost inflation around health care that's in there. But by and large, the investment that you're seeing in SG&A is to continue to drive the top line momentum which is obviously being supported by gross margin expansion that you saw in the first half of the year, and we expect to continue and accelerate.

Okay. And is there any way to isolate the margin of Boulder Canyon in relation to the rest of the portfolio? Is this a higher-margin brand? And will that eventually help your path towards margin expansion as it continues to grow?

Yes. I think -- so we haven't disclosed obviously our brand margins historically, but I think it is fair to say that Boulder Canyon is a premium brand and that we expect that it actually has a margin benefit to the business. It's a little bit what we talked about earlier on why do we believe that there's a mix benefit in the back half of the year to EBITDA on our brand and channel mix. So we're bringing Boulder Canyon as an example, into -- not only is in our untracked channels in club and natural and what we're also bringing into our most profitable channels, which is really food. So you should see a benefit over time there. And we think that, that actually will support supports the higher EBITDA guide that we have in the back half of the year.

We'll move next to Brian Holland at D.A. Davidson.

Just curious within your outlook, what is assumed from a category standpoint around a year ago, the competitive landscape became a bit more aggressive on promotions. So what's your view of that dynamic as we head into back-to-school this year?

Yes. So obviously, we had said last quarter that we kind of envisioned a -- that the category would get to flattish kind of growing into that as we went through the year, right? And to your point -- at this point, the category has been fairly stable in terms of where it's been sitting. And obviously, we are continuing to grow quite a bit more quickly. I think where you'll -- what we would expect is you should see some category progress in the third quarter as to your point, the lapping of last year's merchandising events occurs and the category should start to normalize. But our guide at this point is really predicated on the idea that the category is not going to get a whole lot better from here and that we continue to see the type of performance we saw in the first half of the year -- support kind of where we expect to be at least 2.5% or better.

Got it. And when you referenced the partnership between Zapp's and Potbelly, what can you tell us about the pipeline that you have or are developing in food service beyond this relationship? And also, what's the current mix of food service within your net sales? And do you have any view on what that could or should ultimately be?

Yes. So look, we -- I think many of us who have ever tried Zapp's, the first place that many of us may have tried it was in Potbelly, and we're very happy with that relationship. What we have been able to build and introduce our brand to a lot of consumers that way. And so I think that building brands away from home continues to be an area that we are interested in pursuing more of. Potbelly obviously, a significant partner for us, and we're thrilled to be launching the product.

I think the beyond -- food service is a relatively small piece of our business overall and remains so. We can get you numbers. But it tends to be pretty small in an area where we do think that there's growth potential. We know that most people -- who tend to want to buy brands away from home, typically experiencing them in home at first to kind of feel like driving our geographic expansion and the introduction into kind of traditional channels and grocery then sets up a really strong argument to be able to then be included in single-serve away-from-home. So it will come over time, but it's still early innings there, I think.

Appreciate the color. And if I could just sneak in one quick -- let me echo Rob's comments about the stock as you opened this morning. Look, are you still on pace to exceed your '26 financial goals that you set at the end of '23 on the bottom line? Mindful of kind of the adjustments that you've made today on EPS.

Yes. Look, I think what we said at Investor Day was that we'd be able to contribute 100 basis points of EBITDA margin expansion year-over-year over year and then we would be delivering double-digit EPS growth over that same period of time. If you look at what happened last year, we grew 120 basis points of EBITDA expansion going from 13% to 14.2%, and we grew EPS 35%. So at least as we look today and as you see our guide where we are, the building blocks, top line expansion or top line growth and expansion markets holding our core, being able to drive productivity at $135 million, which we revised to $150 million plus and where we are on EBITDA, we don't -- we continue to be very confident that we can meet the bottom line goals that we have. Given that we are, I think, executing what we promised in December 2023, and it continues to come through in our results. I think we feel really good about where we are and where we're headed.

We'll take our next question from John Baumgartner at Mizuho.

Howard, I'd like to ask about the comments on DSD investments. Can you elaborate on what's sort of changing or evolving there? And then looking specifically at the convenience channel, that was a focal point for you coming into the year and you're building some nice momentum in C-stores with good distribution point growth for the first time in a couple of years. How much of that improvement in C-stores is down to new package capabilities and flavors against sort of a static route to market relative to benefits from material changes or improvements in the actual routes and selling resources? Not sure if the C-stores and DSD investments are related, but I just wanted to ask on both.

Yes, I appreciate the question. Look, I think what -- part of the investment is there are two different investments that we're making in DSD more broadly. In our expansion markets, obviously, we're putting in infrastructure to be able to support the expanded distribution that you see in the -- as we're moving westward. And that part of that effort is actually still underway, and we're making infrastructure investments, which you can see in the numbers. And then the second piece is really in our core geographies, we have been working to kind of evaluate where the routes have been and make sure that the -- that our IO partners are getting the support that they need to be able to execute. And in some cases, we are buying back routes and then reselling them to new IOs who want to get into the business. So that is kind of a little bit of standard work, but it stepped up in the quarter, specifically in our core geographies.

So I think both of those things, one is laying in new and then the other is acquiring new IOs and making sure that we're providing the services that they require to be able to build their business. Both of those things, I think, are coming through in the top line performance.

I think with respect to C-store, I think there are a couple of things going on. There is no question that when the C-store business starts to improve, that, that also makes it a more attractive place for our IOs to place product as well. So there gets to be a little bit of a virtuous cycle there. We've also had distribution gains in a couple of the larger banners that is also coming through, and you can see positive trends, which is reversing some of the distribution losses that we talked about a couple of quarters ago or probably a year ago at this point.

And then yes, we are introducing better assortment and better assortment management and better product mix into those stores, which is also helping. We do expect C-store to get to flattish by the end of the year. But for the -- this has been a long and slow progression back towards where we want to be. Q1 was better than Q4, Q2 was better than Q1, and we expect that momentum to continue.

We'll go next to Jim Salera at Stephens Inc.

I wanted to ask a little bit, maybe starting off on Boulder and obviously, the very strong growth you guys see there in conventional channels. Is that coming from both core and expansion markets or just to -- maybe if you can kind of give us some detail on what's driving that? If it's being introduced across the footprint that there are specific areas? Kind of what the runway as you see it on a go-forward basis?

Yes. So look, I think Boulder Canyon, we talked at Investor Day that we thought we could get to $100 million within 3 years. Obviously, we got past $100 million this past year at the end of Q4. And that business continues to kind of be writing a perfect combination of things. It's a great product. It has a better-for-you benefit with non-seed oil and it has grown up in the natural, organic and better channels. And what you now see us doing is bringing that product into -- across our geographies, core and expansion as well as some unmeasured and club. And so you can see a broad-based distribution gain across channels. There's still quite a bit of room to go. I think we're still only around 50%, 49% ACV, which obviously is a step up, but still significantly lower than some of our other products. And then what you're seeing is not only are we continuing as the #1 potato chip brand and what you can see in national channels, but distribution is growing and velocity is growing as well. Those two things are both moving together across channels. So we're not seeing the cannibalization that you normally may see and there is a differentiation between the channels. But we're very bullish about that brand. And look, I don't think it's inconceivable to believe that, that could be a couple of hundred million dollar brand in the next few years. But right now, we're very pleased with that business. And mostly, what we're pleased about is what that brand stands for to its core shopper which is beyond just Avocado oil or non-seed but it's a great product that's performing quite well.

Great. And then maybe pulling on that thread a little bit, you guys talked about household penetration at an all-time high of around 50%. Do you see in the composition of the new households that they are maybe nontraditional households compared to where the core kind of Utz brand used to play or plays today and are a lot of them coming in through some of the other brands? Or is that balance between expansion geographies entering -- households entering from those geographies? Just any details you can offer on what that composition looks like as households continue to grow.

Yes. I'm not sure that we've broken out the household composition for household penetration. But what I would offer you is it's not surprising that as our Power 4 brands are entering into different geographies, respectively. That my hypothesis would be that you would be seeing our Power 4 brands driving the top line kind of commensurate with their business size on average. Although I would be surprised if -- is not a significant contributor, given just the sheer momentum of that business, kind of where we are right now, but we can get you a better sense of kind of how that growth is coming but the household pen -- penetration, the trial rates and the repeat rates are all very strong and continue to be quarter after quarter, year after year, which continues to make us bullish that our expansion strategy and our growth strategy is working.

We'll go next to Scott Marks at Jefferies.

First one I wanted to ask about, there was certainly some commentary about the supply chain, obviously, closing the Grand Rapids facility and some other comments about automation, some in-sourcing. So question really around how you're feeling about state of the supply chain currently and where you see maybe future opportunities for improvements and to make things more efficient.

Yes. So I think the first thing I would say, and I'll hand it over to BK as well. Look, I think if you look at what we have been able to accomplish over the last two years. At Investor Day, we basically laid out that on average, our manufacturing facilities had about $100 million of revenue coming through and the journey was to get to $200 million which obviously implied a plant -- a reduction in overall plans. We are now at that number a couple of years, I think, earlier than we would have expected. So I think from a perspective of kind of where are we in terms of the optimization, we're getting towards the end of a lot of the manufacturing piece of the work.

I think second, you then saw a significant step up to 6% productivity last year, and we expect to be around 6% or 6% this year as well. And I think that, that is also kind of an indication, you see the gross margin coming through. I think the thing that we're most pleased about, and I think what the supply chain is rightfully proud of is that we've been able to do all of those things while we've been driving expansion of our geographies and supporting a growing business and service has been outstanding for our retailers throughout the journey, really kind of starting with the middle of last year through to now.

So we're toward the end of a lot of that -- a lot of the work that we had to do. This is, to BK's point earlier, this is sort of the peak of the CapEx investment. Our automation is now in place and is now active, it started up in Q2, potato chip lines actually started up in Q2. We had a pretzel line that started up in Q1. We've expanded kettle capacity and invested in Kings Mountain. And all of those things are moving forward, which allows us to take this last step, which is to finish the shaping of the plant footprint.

BK, I don't know if you have anything to add.

I think that's all well said, Howard. The only thing that I would build on is that this does give us capability as we think about our margin profile going forward. These savings will be supportive the balance of this year as we head into next year as well.

Got it. And then last question for me. Obviously, you talked about material step-up in marketing spend. obviously, plans to maintain kind of higher levels of investment moving forward. Just wondering if you can kind of share a bit of color around maybe some of your marketing strategies in terms of core geographies, expansion geographies and how you're thinking about channels, I guess, to reach consumers.

Yes. So what we said at Investor Day was about 40% year-over-year over a year for 3 years. And depending on how our productivity programs came if we had more gross margin savings that we would consider to invest. Obviously, last year, we invested 70% more in A&C this year. In the second quarter, we actually invested 44% more than a year ago. And we have a combination of things that we're doing. So we do have retail media to support geographic expansion and making sure that shoppers are being interest -- used to the brand and expansion geographies as they're going in. We have a lot of social and digital media. We had some fun with how you pronounce our name with actual realized consumers asking them to say the name and having a debate because there are two pronunciations depending on geographically where you're from. So that's been fun to introduce the Utz brands, you can guess which team I'm on.

The Utz brand to that. We've also been investing in Zapp's Media as well. And we will be rolling toward a introducing and launching more consumer pressure on Boulder Canyon as we get into sort of the back half or the year-end. So we tend to try and hit consumers across channels. We try to hit them with a message at the right point where they're trying to think about us and our returns are quite good, but we know we have a lot to do and we have a lot more to learn as we continue to invest more.

And next, over to Rupesh Parikh at Oppenheimer.

So just going back to your commentary on quarter-to-date trends and the momentum you're seeing quarter-to-date. Just curious what's driving that. Is that compares, less promotional backdrop? Just curious what you think is driving this trend.

Yes. So look, I mean, I think there are a couple of things that are going on for us as we look at Q2 and into early Q3. I think if you look at the building blocks of our top line momentum, it has been expanded distribution, increased consumer pressure and support in-store behind our hybrid model. I think all three of those things are working pretty well for us right now. We've definitely enjoyed distribution gains in both our -- in our core markets and our expansion markets of our items. We are investing in the infrastructure. We're getting greater point of sale and greater perimeter support. And all of those things, I think, are driving our top line higher.

I think the compares are -- Obviously, we are in a different category environment than last year in terms of sort of the promotional price point environment, which is much more what I consider normal and rational in where we are competitively which obviously helps some. But I think the building blocks of distribution, A&C, customer support and IO execution are all the things that are driving this flywheel now backed up by the marketing that we are investing in.

Great. And then maybe one final question. Just on your value proposition. So with bonus stocks now winding down. Could you just talk about where you are with your key offers to improve the value opposition for consumers?

Yes. So bonus packs ended in April and had no net sales impact on the quarter. So -- which I think turned out to be a great trial driver for us. Look, we compete in value up and down the price ladder, right? And so in club stores where it's larger packs with more premium items, something like a Boulder, which is the most expensive product in our range as well as when we think about price pack and assortment through food, through mass, through drug, through dollar and discount. What you can see in our performance is we're seeing strength across the board. And some of it is by making sure we have the right price point at the right package at the right time. And some of it is playing the latter all the way through. We've got a great range of items. You can see strength in pork, and you can see strength in cheese as well. So I think our value proposition remains quite strong. We haven't had to make major tweaks in my opinion, to it, but rather running the play that we expected at the beginning of the year and driving the results that we have.

We'll move to our next question from Peter Grom at UBS.

I hope you're doing well. So I wanted to follow up on the prior question around underlying category growth. Howard, I think you mentioned you don't really expect the category to get much better, which makes sense given what we're kind of seeing today. But I was hoping to get your perspective longer term? Obviously, a lot of debate in terms of what the current backdrop means for the long-term growth for this industry. So I was just hoping to get your perspective on how you maybe see category growth evolving beyond 2025. Do you think we can get back to kind of the historical levels of growth we've seen over time? And if so, what kind of your perspective on a reasonable time line of getting back to that level?

Yes. So look, I remain bullish on the category long term. I still think it's one of, if not the best category in food, Part of that, I could be biased. But when you look at the underlying panel data, and I kind of always start there, which is what does household penetration look like? Is it growing? Is it contracting? And then what do you consumers do once they buy at once? And the thing that you do see is this category enjoys good strong repeat, but household penetration continues to grow, which at least says to me that consumers want this category in these products in the pantry.

I think if you look at over the last couple of years, the category had been, call it, a 0 to 1 volume and a 3 to 4 price category. And I think over the last couple of years, that 3 to 4 price has been a lot of the driver for it to obviously not perform. But household penetration continues to hold up.

So look, I think as you look outward, I think as the category gets back to brand building, innovation, marketing support and sort of consumers adjust to the pricing levels of where they've been over the last couple of years. I think the category can and will continue to grow and remain what it has always been, which is, I think, the best category in food.

I do think that the part of the way out is innovation, and I certainly think that investing in things beyond promotional price points is the way forward, and that's certainly what we are interested and focused on doing as we go forward. And I think our programs are working so far. But long term, I'm pretty -- I'm very positive on where we are.

That's super helpful, Howard. I guess -- and then just maybe on that innovation, point you made. I had a question on protein. Obviously, you've done a great job in the organic natural segment, but obviously, a lot of consumer interest in protein, one of your largest competitors appears to be leaning more into that segment a bit more. So I just would love to get your thoughts on kind of protein chips as a segment and maybe how you see this sub segment evolving within the category over the next several years?

Yes. Look, I think there are a couple of -- I think protein is certainly a place where all of us look, I feel like I've been in the meat and cheese business for a long -- for many years ago and protein snacking was a big driver. And look, I think the consumer interest will remain high in the category, and it's really how do you deliver a product that consumers want to buy with the benefits they want without a taste sacrifice. And so it's an area that we'll certainly look at, much likely you look at high flavor and spicy in the natural channel -- or I mean, sorry, the convenience channel or non-seed oils in the natural channel, where the consumer wants to travel is a place that we're going to do our best to meet those needs. So more to come, I think, on that. But I think, obviously, it's an area among many that we are -- that we look at and that we see a lot of consumer interest in.

And that concludes our Q&A session. I would like to turn the conference back over to Howard for closing remarks.

Yes. First of all, thank you all for joining us in Q2. I think if you went back to where we've been as a company over the last couple of years and the promises that we made at Investor Day, I think that you continue to see those results coming through in our numbers. We had promised productivity. We promised a more efficient network. We promised gross margin and EBITDA expansion and brand support and westward expansion. And if you look across what we just produced and what we've done through the first half, I think we are doing what we set out to do. I appreciate everybody's time, and I look forward to seeing you all in Q3.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, and thank you for joining us today for our prerecorded discussion of our second quarter 2025 earnings results. Joining me on the call today are Howard Friedman, CEO; and Bill Kelley, EVP and CFO. In addition, this morning at 9:30 a.m. Eastern Time, we will host a live question-and-answer session, which you can access via webcast on our Investor Relations website.

Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Please see the forward-looking statement disclaimer in the earnings materials and 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 Investor Relations website.

Finally, the company has also posted presentation slides and additional supplemental financial information on our Investor Relations website.

And now I'd like to turn the call over to Howard.

Good morning, everyone, and thank you, Trevor. It's great to have you on the team. I will start with the business update and review the second quarter, then turn it over to Bill to walk through financials. As previously announced, Bill Kelley joined us as CFO in May. His leadership and experience have already proven to be a tremendous asset as he brings new thinking and new approaches to us, and we are happy to have him on board.

We delivered a strong second quarter on the top line with net sales growth of 2.9%, led by branded salty snacks growth of 5.4%. Note that as there were no acquisitions or divestitures impacting the second quarter, organic net sales growth is equal to reported net sales growth. This marks our sixth consecutive quarter of growth in branded salty snacks and an improved mix shift as our branded salty snack portfolio has now grown to 88% of our total net sales. Marking our eighth consecutive quarter of volume share growth, we gained both dollar and volume share in the salty snacks category for the 13-week period ended June 29, 2025, as measured by Circana MULO+ with convenience, driven by the momentum of our Power Four Brands. Our strong consumption results reflect significant growth of Boulder Canyon, strong gains of our Power Four Brands in our expansion geographies and targeted promotional investments.

We're actively responding to evolving consumer preferences through our marketing approach. Our strong performance in non-measured channels, including e-commerce, natural, hard discount and dollar reflects our ability to meet different consumer needs and price points in all channels through our branded portfolio. We continue to support this momentum through strategic marketing investments and targeted promotions.

As part of our continued supply chain transformation, we are announcing the next phase of our manufacturing network optimization. We have made the decision to consolidate our plant network from eight primary locations to seven with the closure of our facility in Grand Rapids, Michigan. While it is never easy to close a plant, we believe this allows us to consolidate volume into our larger facilities and improve our transportation efficiency. While this strategic action required some accelerated capital spending in 2025, it will help position the business for long-term growth, margin improvement and continued geographic expansion. The action will contribute to our previously provided productivity target of approximately 6% of adjusted cost of goods sold for 2025. We are grateful for the contributions of our associates, and we will be supporting them in transition to other roles. We expect to complete this work by early 2026.

Turning to our consumption results in the quarter, we gained both dollar and volume share in measured channels as we outpaced the salty snacks category. Total dollar consumption growth was 3.3% in the quarter, driven by 4.3% volume growth. This compares to the category down 1.5% in the period. We are proud of our significant outgrowth in the second quarter. Consumption growth was driven by our Power Four Brands, which increased 5.7% in retail sales dollars, driven by 6.3% volume gains. Our growth was led by Boulder Canyon in our core and by distribution gains and higher velocities in our expansion geographies of our Power Four brands. Our reinvestment decisions remain disciplined and focused on delivering both short-term consumer benefits and sustained growth in brand awareness.

Now turning to core geographies. In the second quarter of 2025, we gained dollar and volume share relative to the total salty snack category across the company and with our Power Four Brands. Retail volume for the total company increased 0.4% and Power Four Brands grew even stronger at 2%, outpacing the category decline of 1.8%. Total company retail sales in our core declined 1.6%, with Power Four Brands down 0.1% compared to the total salty category decline of 1.8% in the quarter. We focused on promotional optimization to maintain our price gaps versus competition, primarily in potato chips.

In our expansion geographies, we drove both value and volume share for the eighth consecutive quarter for the total company and our Power Four Brands. Our 10.1% retail sales growth easily outpaced the salty snack category decline of 1.3% in these markets, fueled by continued distribution gains and higher velocities across our portfolio. We saw strong dollar growth in key parts of our portfolio, including across Utz, Boulder Canyon Potato Chips and Golden Flake Pork Rinds.

To support this momentum, we further increased our investments in several demand-creating activities, including brand marketing, enhancements to our direct-store delivery infrastructure and point-of-sale investment to drive in-store visibility.

Our expansion geographies now represent 45% of total company retail sales based on Circana data, up from 41% 2 years ago. We continue executing our proven expansion playbook, leveraging our hybrid distribution model that offers customers a choice between direct-to-warehouse or direct-store delivery services. Combined with targeted marketing investments and strong retailer partnerships, this approach has continued to accelerate market penetration and drive sustainable growth in new territories.

We believe there is substantial white space ahead in our westward expansion as we have an average market share of 3% in our expansion geographies versus 6.6% in our core. In the second quarter, we grew both retail sales dollars and share in our expansion geographies, highlighting the go-forward opportunity we see.

Another recent example of our success in expansion markets is the strong performance of two regions of the Midwest. In the second quarter, Illinois and Michigan grew retail sales 9% and 16.5%, respectively. This further validates our ability to drive meaningful growth beyond the core. Utz Brands, Inc. now holds a 4.2% share in Illinois and a 3% share in Michigan with more potential ahead.

From a subcategory perspective, our measured channel share gains for the total company were led by potato chips, cheese snacks and pork. In potato chips, our total retail sales grew 8.2% versus a subcategory decline of 3.0%. Our performance was largely driven by strong Boulder Canyon growth in club, food and natural channels.

In tortilla chips, our retail sales declined 4.4% versus a subcategory decline of 1.8%. Our sales performance came in lower than the subcategory, primarily due to lapping strong activities last year in club and the south central region. In pretzels, across our total portfolio, our retail sales declined 1.8%, which was lower than the subcategory increase of 3.8%, but our Utz branded pretzels grew at the same level as the subcategory, driven primarily by expanded distribution and increased promo support resulting in stronger velocities.

In cheese snacks, our retail sales increased 15.2% versus an overall subcategory increase of 0.5%. Our outperformance was driven by a 3% increase in the number of stores and 12% increase in the dollars per store velocity. In pork rinds, our retail sales were up 10.9% versus 2.6% for the subcategory, driven by velocity growth across all channels, food, mass and C-stores.

Our Boulder Canyon brand continues to outperform and gain share both in the natural and conventional channels with growth of 48% and 226%, respectively. Consumers are connecting with the brand and are appreciating its better-for-you attributes and bold flavor profile. To share a few stats with you, Boulder Canyon has the #1 selling salty snack SKU in the natural channel over the latest 4 weeks, 13 weeks, year-to-date and 52 weeks. It is also the #1 potato chip brand in total U.S. natural channel year-to-date. We're seeing Boulder Canyon's momentum spread across channels, supported by distribution expansion, product innovation and improved velocities.

Our innovation strategy continues to deliver results as we develop products tailored to specific channel opportunities and consumer needs. This quarter showcases how we're leveraging our brand's unique strengths across different retail formats.

Starting with our small format expansion, we introduced Boulder Canyon 2-ounce single-serve bags that are designed to meet the needs of health-conscious consumers looking for convenience with a premium, better-for-you brand. In the club channel, we are expanding our large-format offerings with top-performing Utz items in 15-ounce packaging, including new Utz Dill Pickle flavored potato chips.

Perhaps most exciting is the expansion of our foodservice partnership with Potbelly, where we've created exclusive hot pepper flavored potato chips under our Zapp's brand. This collaboration brings together Potbelly's cult favorite hot peppers with Zapp's distinctive kettle-style cooking process and bold flavor expertise. The partnership demonstrates our ability to create custom solutions that extend beloved restaurant flavors into portable snack formats, opening new avenues for growth in the foodservice channel.

These innovations reflect our strategic approach to channel-specific product development, allowing us to maximize our brand awareness while meeting the unique needs of different retail environments and consumer occasions.

Now moving to marketing. Our spend is up 44% year-over-year, reflecting our commitment to building stronger connections with our consumers as we aim to build our business overnight and brands over time. This strategic focus is generating meaningful progress across key consumer panel metrics, demonstrating the strength of our consumer-loved portfolio.

For the 52-week period ended June 15, 2025, versus the comparable period a year ago, our household penetration has increased 220 basis points to an all-time high of 50%. Buyers have increased by 3.4 million to 65.3 million. And while buyer repeat rates decreased slightly by 20 basis points to 69.6%, this was expected given the significant increase in both buyers and household penetration during the second quarter and reflects the quality of our products.

Broader category panel dynamics remain robust with household penetration continuing its upward trajectory. We maintain our conviction that salty snacks category will remain among the most attractive categories in food, underpinned by consistent consumer investment and disciplined competitive behavior.

These results demonstrate how our strategic positioning is delivering growth even in a challenging category environment. Our geographic expansion strategy continues to unlock substantial margin opportunities while focused investments in our Power Four Brands are generating strong returns through enhanced distribution reach and accelerating volume performance. This combination of expanding our footprint with targeted brand support is creating momentum that drives both revenue growth and margin improvement well into the future.

With that, I'll turn it over to Bill, who will walk you through our financial results in more detail. Bill, over to you.

Thank you, Howard, and good morning, everyone. I am pleased to be speaking with you today on my first earnings call as CFO. I was drawn to Utz by the company's impressive track record of expanding to new markets while staying true to what makes the brand special. I am energized by the opportunities ahead, and I have already thoroughly enjoyed working alongside Howard and our leadership team to build on this strong foundation and deliver results.

In the second quarter, our net sales increase of 2.9% was led by volume/mix growth of 3.9% or 3.1% excluding a 0.8 percentage point volume mix benefit from the bonus pack program carryover in April. This was partially offset by lower pricing of 1%, 0.8 percentage points of which was due to the bonus packs. This program was completed as expected and had a neutral impact on net sales in the second quarter.

We were pleased to deliver branded salty snacks net sales growth of 5.4%, led by volume/mix growth of 6.9%. Our non-branded and non-salty snacks net sales declined 11.8% due to softer partner brand and dips and salsa trends as we continue to carefully manage these low-margin components of our business.

Adjusted EBITDA decreased 2% and adjusted earnings per share decreased 10.5%. Despite this, we achieved significant adjusted gross profit margin expansion of 220 basis points, reflecting the continued strength of our productivity programs as our manufacturing and procurement projects delivered strong results. This margin expansion enabled us to make strategic investments in our future growth.

The decline in adjusted EBITDA margin by 70 basis points to 13.3% was caused by our deliberate decision to reinvest productivity gains into our brands and capabilities to support our long-term growth. This includes investments in expansion geographies, which require upfront SG&A investments as we scale, along with distribution costs as we ramp up in these expansion geographies. Productivity and supply chain contributed 370 basis points to adjusted EBITDA margin expansion. This was offset by 90 basis points of price/mix, 70 basis points of increased supply chain costs, 70 basis points of higher marketing spend and 210 basis points of selling and administrative expenses.

While we experienced some modest discrete cost pressures during the quarter, our productivity programs remain firmly on track, and we see significant opportunity in the back half of the year to mitigate these pressures. This quarter's results reflect our commitment to balancing near-term profitability with investments that we believe will drive sustainable growth and margin expansion over time, and we are pleased with the returns on our geographic expansion, consumer marketing activities and how our innovation is resonating with consumers.

Adjusted SG&A expense increased 15.1% versus the prior year quarter or 280 basis points as a percentage of net sales. This increase was largely driven by 131 basis points of planned investments in marketing, selling, product and brand, 71 basis points of DSD network investments related to geographic expansion and other support, 58 basis points of higher health care costs and other inflation and 20 basis points of investments in capabilities. As a self-insured plan for our employees, we bear the cost of the plan directly, which is generally more cost effective but leads to unpredictability in our claim portfolio on a year-over-year basis.

Our supply chain transformation continues to deliver meaningful results as we build the infrastructure needed to support our planned growth trajectory. In addition to the strategic facility consolidation Howard discussed, this quarter marked several additional key milestones in our multiyear investment program across manufacturing, packaging and distribution.

At our Hanover, Pennsylvania facility, we've successfully commissioned a new potato chip line that increases our site capacity by 20%. This expansion became fully operational in June and provides critical additional capacity to meet anticipated growing demand, particularly in our expansion geographies. Complementing this manufacturing investment, we've also implemented new automation capabilities in Hanover, including central palletizing. By early next year, product will be palletized and transferred via conveyor directly to our brand-new distribution center through automated equipment. These automation investments should enhance both our efficiency and throughput. These initiatives are essential to meeting expected consumer demand.

On the distribution front, we completed the transition to in-sourced warehousing at our Birmingham, Alabama facility in the second quarter. This strategic move, which shifted operations from our previous provider, gives us greater control over our distribution network and improved service levels in key southeastern markets.

These targeted investments continue to generate strong productivity savings that we reinvest across our business to fuel growth and margin expansion. We remain on track to deliver approximately 6% productivity savings in 2025, keeping up the momentum of accelerating savings from 1% of adjusted COGS in 2020 to 6% of adjusted COGS in 2024. We look forward to these significant investments in automation ramping through the back half.

Turning to cash flow and the balance sheet. Cash used in operations in the first half was $3.9 million, reflecting the use of working capital consistent with typical seasonality as well as quarterly pacing of certain uses of cash. Capital expenditures were $65.7 million in the first half and reflects spending primarily related to the aforementioned investments in our manufacturing plants to support our productivity and network optimization initiatives.

Our CapEx spend in the second quarter was higher than our normal pacing as we concluded several investments, partially in preparation for the upcoming facility transition. Through the first 2 quarters, we have deployed nearly 2/3 of our current $100 million CapEx expectation versus less than half through the second quarter of last year, which we believe will result in accelerated second half productivity. Finishing up cash flow, we have paid $20.1 million in dividends and distributions to shareholders year-to-date.

Turning to the balance sheet. Cash on hand was $54.6 million and our liquidity, including access to our revolver, remained strong at $171 million, giving us ample financial flexibility. Net debt at quarter end was $826.3 million, and our net leverage ratio was 4.1x trailing 12 months normalized adjusted EBITDA of $200.9 million.

Now turning to our outlook. Today, we are updating our 2025 outlook to reflect stronger top line trends through the first half and confidence in our growth drivers. We now expect organic net sales growth of 2.5% or better, an increase compared to our prior guidance of low single-digit growth. We believe the performance of our Power Four Brands and expansion geographies in the first half sets us up for a good second half. We are tightening our adjusted EBITDA guidance range to 7% to 10% growth compared to 6% to 10% previously, reflecting our confidence in the top line trajectory as well as accelerated CapEx spend to unlock second half productivity.

Given the unusual phasing of investments, CapEx and productivity in 2025, it is appropriate to give additional color on quarterly adjusted EBITDA progression in the second half. We expect third quarter adjusted EBITDA to be a few million dollars lower than fourth quarter adjusted EBITDA. This is due to the size and scale of productivity projects launched this year, in addition to certain cost efficiencies ramping further into the fourth quarter, including the facility closure.

On a separate note, we continue to watch the tariff environment closely. While we still believe that tariffs will have a modest and manageable impact on the business given our sourcing is primarily domestic, the situation is dynamic and assumes the current tariff rates.

We are lowering our adjusted EPS guidance to 7% to 10% growth compared to the prior expectation of 10% to 15%, due to higher interest expense and higher depreciation and amortization related to CapEx to support our network optimization and facility consolidation efforts.

We continue to expect an effective normalized tax rate of between 17% to 19%. We now expect interest expense of approximately $46 million versus $43 million previously, due to accelerated CapEx and timing of working capital, which impacted first half cash flows and borrowings. Capital expenditures are now expected to be $100 million, the high end of the previously provided $90 million to $100 million range, with the majority focused on building increased manufacturing network capacity and delivering accelerated productivity savings. Finally, we continue to expect our net leverage ratio to approach 3x at fiscal year-end 2025.

Thank you, Bill. As we close today's call, I'm pleased with our performance as we move through the year. We believe we are executing well against our December 2023 Investor Day commitments with our second quarter results demonstrating the strength of our strategy in action, delivering volume growth while making strategic investments for the future. The strong performance we've seen has carried into solid momentum through the summer months.

Looking ahead, we are confident about our updated outlook with our productivity programs, enabling both margin expansion and strategic reinvestment in growth. Our disciplined approach to portfolio management continues to shift our mix toward higher-margin branded salty snacks.

On behalf of our entire Utz team, thank you for your continued support as we work to deliver flavorful, quality snacks to more consumers across the country.