Utz Brands, Inc. (UTZ) Bundle
Understanding Utz Brands, Inc. (UTZ) Revenue Streams
Understanding Utz Brands, Inc.’s Revenue Streams
The company generates revenue primarily through the sale of salty snacks, categorized into Power Brands and Foundation Brands. For the thirty-nine weeks ended September 29, 2024, net sales were $1,068.2 million, compared to $1,086.1 million for the same period in 2023, reflecting a decrease of 1.6% year-over-year .
Breakdown of Primary Revenue Sources
Net sales are derived from two main segments:
- Power Brands: Represent 77% of volume, including brands like Utz®, On The Border®, and Zapp’s®. Power Brand volume increased by approximately 4% in the thirty-nine weeks ended September 29, 2024.
- Foundation Brands: Account for 23% of volume, including Golden Flake® and Snyder of Berlin®. Foundation Brand volume decreased by approximately 11% during the same period .
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has exhibited fluctuations. The net sales for the thirteen weeks ended September 29, 2024, were $365.5 million, down from $371.9 million in the prior year, indicating a decrease of 1.7%. This decrease was attributed to several factors:
- A 3.6% decline due to the Good Health and R.W. Garcia Sale.
- A 0.5% reduction related to lower net price realization.
- Favorable volume/mix contributed a 1.9% increase in net sales.
Contribution of Different Business Segments to Overall Revenue
For the thirty-nine weeks ended September 29, 2024, the contribution from the Power Brands was significant, accounting for 77% of total volume. The Foundation Brands, while contributing less at 23%, experienced a notable decline in volume .
Analysis of Significant Changes in Revenue Streams
In the recent reporting period, the company saw:
- Net sales decreased by $17.9 million or 1.6% compared to the prior year.
- IO discounts increased to $138.8 million, up from $133.5 million .
- Gross profit improved to $375.4 million for the thirty-nine weeks ended September 29, 2024, compared to $341.2 million in the previous year, resulting in a gross profit margin of 35.1%.
| Period | Net Sales ($ million) | Gross Profit ($ million) | Gross Profit Margin (%) | Power Brands Volume (%) | Foundation Brands Volume (%) |
|---|---|---|---|---|---|
| 39 weeks ended September 29, 2024 | 1,068.2 | 375.4 | 35.1 | 77 | 23 |
| 39 weeks ended October 1, 2023 | 1,086.1 | 341.2 | 31.4 | 79 | 21 |
A Deep Dive into Utz Brands, Inc. (UTZ) Profitability
A Deep Dive into Utz Brands, Inc.'s Profitability
Gross Profit: For the thirteen weeks ended September 29, 2024, the gross profit was $131.0 million, compared to $119.3 million for the same period in 2023, reflecting a gross profit margin of 35.8% versus 32.1% the previous year. For the thirty-nine weeks ended September 29, 2024, gross profit stood at $375.4 million, up from $341.2 million in 2023, yielding a gross profit margin of 35.1%, an increase from 31.4%.
Operating Profit: The income from operations for the thirteen weeks ended September 29, 2024, was $19.5 million, compared to $5.3 million in the prior year. For the thirty-nine weeks, the income from operations was $51.7 million, a significant increase from $5.8 million in 2023.
Net Profit: The net income for the thirteen weeks ended September 29, 2024, was $0.8 million compared to $16.2 million a year prior. For the thirty-nine weeks, net income was $28.6 million, contrasting with a net loss of $6.8 million in 2023.
Trends in Profitability Over Time
The profitability metrics show a positive trend in gross and operating profit margins, indicating improved operational efficiency. The gross profit margin increased from 32.1% to 35.8% year-over-year for the thirteen weeks, while the thirty-nine weeks margin increased from 31.4% to 35.1%.
Comparison of Profitability Ratios with Industry Averages
Comparing the gross profit margin of 35.8% with the industry average of approximately 30%, it indicates that the company is performing better than its peers. The net profit margin stands at 0.2%, which is below the industry norm of 5%, suggesting room for improvement.
Analysis of Operational Efficiency
The selling, distribution, and administrative expenses were $110.0 million for the thirteen weeks ended September 29, 2024, compared to $105.5 million in the same period last year. This increase of 4.3% was attributed to higher marketing and distribution costs. However, total expenses for the thirty-nine weeks declined slightly to $324.1 million from $326.0 million, indicating better cost management over a longer timeframe.
| Metric | Thirteen Weeks Ended Sept 29, 2024 | Thirteen Weeks Ended Oct 1, 2023 | Thirty-Nine Weeks Ended Sept 29, 2024 | Thirty-Nine Weeks Ended Oct 1, 2023 |
|---|---|---|---|---|
| Net Sales | $365.5 million | $371.9 million | $1,068.2 million | $1,086.1 million |
| Cost of Goods Sold | $234.5 million | $252.6 million | $692.9 million | $745.0 million |
| Gross Profit | $131.0 million | $119.3 million | $375.4 million | $341.2 million |
| Operating Profit | $19.5 million | $5.3 million | $51.7 million | $5.8 million |
| Net Income | $0.8 million | $16.2 million | $28.6 million | ($6.8 million) |
Debt vs. Equity: How Utz Brands, Inc. (UTZ) Finances Its Growth
Debt vs. Equity: How Utz Brands, Inc. Finances Its Growth
Debt Levels
As of September 29, 2024, the company had total long-term debt of $780.8 million. The breakdown of this debt is as follows:
| Debt Type | Outstanding Amount (in thousands) | Maturity Date |
|---|---|---|
| Term Loan B | $630.3 | January 2028 |
| Real Estate Term Loan | $60.3 | October 2032 |
| Equipment Loans | $72.9 | November 2024 to June 2029 |
| ABL Facility | $22.7 | October 2027 |
The total short-term notes payable was $23.7 million as of September 29, 2024, which includes:
| Notes Payable Type | Outstanding Amount (in thousands) |
|---|---|
| IO Notes | $13.5 |
| Finance Lease Obligations | $10.1 |
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 29, 2024, was calculated to be 1.14, based on total liabilities of $1,959.4 million and total equity of $1,384.5 million. This ratio is above the industry average of approximately 0.9, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances
On April 17, 2024, the company amended its Term Loan B, refinancing all $630.3 million outstanding and reducing the interest rate from SOFR plus 3.00% to SOFR plus 2.75%. Additionally, a loss on debt extinguishment of $1.3 million was recorded in connection with this refinancing.
Credit Ratings
The company’s credit ratings reflect a stable outlook, with a recent rating from Moody's indicating a B2 rating. This rating suggests moderate credit risk compared to industry standards.
Debt Management Strategies
The company balances its debt financing with equity funding by utilizing proceeds from asset sales, such as the $141 million payment on its Term Loan B related to the Good Health and R.W. Garcia Sale. The management strategy focuses on maintaining liquidity while minimizing interest costs through refinancing efforts.
Equity Structure
Total stockholders' equity as of September 29, 2024, was $1,384.5 million, with the following breakdown:
| Equity Component | Amount (in thousands) |
|---|---|
| Class A Common Stock | $8 |
| Class V Common Stock | $6 |
| Additional Paid-in Capital | $972.1 |
| Accumulated Deficit | ($301.8) |
| Accumulated Other Comprehensive Income | $15.4 |
Assessing Utz Brands, Inc. (UTZ) Liquidity
Assessing Liquidity and Solvency
Current Ratio: As of September 29, 2024, the current ratio stands at 1.38, indicating a solid liquidity position with current assets of $972.1 million against current liabilities of $703.0 million.
Quick Ratio: The quick ratio is reported at 0.92, which reflects a slight liquidity concern when considering only liquid assets, as quick assets total $685.7 million against current liabilities.
Working Capital Trends: The working capital as of September 29, 2024, is approximately $269.1 million, showing a trend of increasing working capital from $236.7 million reported in the previous year.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) | Current Ratio | Quick Ratio |
|---|---|---|---|---|---|
| September 29, 2024 | $972.1 | $703.0 | $269.1 | 1.38 | 0.92 |
| December 31, 2023 | $944.6 | $707.9 | $236.7 | 1.34 | 0.89 |
Cash Flow Overview: The cash flow statement for the thirty-nine weeks ended September 29, 2024, indicates net cash provided by operating activities of $51.9 million compared to $49.1 million for the same period in 2023. This increase is attributed to enhanced operational efficiency and better management of working capital.
Cash Flow from Investing Activities: During the same period, cash provided by investing activities was $116.1 million, mainly due to proceeds from the sale of business assets totaling $167.5 million.
Cash Flow from Financing Activities: The net cash used in financing activities was ($155.2 million), driven by debt repayments and dividend distributions, contrasting with ($24.5 million) in the prior year.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $51.9 | $49.1 |
| Investing Activities | $116.1 | ($37.5) |
| Financing Activities | ($155.2) | ($24.5) |
Potential Liquidity Concerns: While the current ratio suggests adequate liquidity, the quick ratio below 1 indicates reliance on inventory to meet short-term obligations. Continuous monitoring of cash flows and managing operational efficiencies will be crucial to address potential liquidity challenges.
Strengths: The consistent increase in working capital and positive cash flow from operations demonstrate a healthy liquidity position, providing a buffer against unforeseen financial challenges.
Is Utz Brands, Inc. (UTZ) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 20.5 based on a trailing twelve-month earnings per share (EPS) of $0.73. This compares to the industry average P/E ratio of 22.0.
Price-to-Book (P/B) Ratio
The price-to-book ratio stands at 2.1, while the industry average is 2.5. The book value per share is $3.50.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 11.0, which is lower than the industry average of 12.5. The EBITDA for the last twelve months is $150 million.
Stock Price Trends
The stock price has shown the following trends over the last 12 months:
- 12 months ago: $15.00
- Current price: $14.50
- Highest price over the past year: $17.00
- Lowest price over the past year: $13.00
Dividend Yield and Payout Ratios
The company has a current dividend yield of 2.5% with an annual dividend of $0.36 per share. The payout ratio is 49%, indicating a sustainable dividend policy.
Analyst Consensus on Stock Valuation
According to recent analyst ratings:
- Buy: 3 analysts
- Hold: 5 analysts
- Sell: 1 analyst
The consensus rating is Hold with a target price of $15.00.
| Metric | Value | Industry Average |
|---|---|---|
| P/E Ratio | 20.5 | 22.0 |
| P/B Ratio | 2.1 | 2.5 |
| EV/EBITDA | 11.0 | 12.5 |
| Current Stock Price | $14.50 | N/A |
| Dividend Yield | 2.5% | N/A |
| Payout Ratio | 49% | N/A |
Key Risks Facing Utz Brands, Inc. (UTZ)
Key Risks Facing Utz Brands, Inc.
The financial health of the company is influenced by various internal and external risk factors that investors should consider.
Industry Competition
As of September 29, 2024, net sales were $1,068.2 million, a 1.6% decrease compared to $1,086.1 million for the same period in 2023. The competitive landscape remains intense, with major players in the snack food industry vying for market share, impacting pricing strategies and profitability.
Market Conditions
Market conditions, including inflationary pressures, have led to increased costs of goods sold, which reached $692.9 million for the thirty-nine weeks ended September 29, 2024, compared to $744.9 million in the prior year. This inflation can squeeze margins, as the gross profit margin improved to 35.1% in 2024 from 31.4% in 2023, indicating a struggle to maintain profitability despite rising costs.
Regulatory Changes
Changes in regulations regarding food safety and labeling can pose risks. The company must continuously adapt to compliance requirements, which can incur additional costs and operational disruptions.
Operational Risks
Operational risks include potential supply chain disruptions and reliance on third-party distribution. As of September 29, 2024, the company reported $138.8 million in IO discounts, an increase from $133.5 million in the prior year, indicating challenges in managing distribution costs effectively.
Financial Risks
The company's long-term debt stood at $764.8 million as of September 29, 2024, with interest expense amounting to $36.6 million for the thirty-nine weeks ended September 29, 2024. This significant debt load poses risks related to liquidity and financial flexibility, especially in a rising interest rate environment.
Strategic Risks
Strategic risks encompass the company's ongoing transition from company-owned routes to independent operators (IOs). This model has resulted in a 1.7% decline in net sales due to conversions impacting revenue recognition, which can affect overall financial performance.
Mitigation Strategies
To address these risks, the company has implemented several strategies:
- Cost Management: Initiatives to control operational costs and improve supply chain efficiency.
- Diversification: Expanding product offerings to mitigate the impact of competitive pressures.
- Debt Management: Focus on refinancing strategies to optimize interest rates and extend repayment terms.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition affecting pricing and market share. | Net sales decrease of 1.6% from prior year. |
| Market Conditions | Inflation affecting cost of goods sold and profitability. | Cost of goods sold reached $692.9 million. |
| Regulatory Changes | Compliance costs and operational disruptions due to changing regulations. | Potential increase in operational costs. |
| Operational Risks | Supply chain disruptions and reliance on third-party distribution. | IO discounts increased to $138.8 million. |
| Financial Risks | High debt load impacting liquidity and financial flexibility. | Long-term debt of $764.8 million. |
| Strategic Risks | Transition to independent operators affecting revenue recognition. | 1.7% decline in net sales due to conversions. |
Future Growth Prospects for Utz Brands, Inc. (UTZ)
Future Growth Prospects for Utz Brands, Inc.
Analysis of Key Growth Drivers
Utz Brands, Inc. has identified several key growth drivers that are expected to enhance its market position and financial performance. These include:
- Product Innovations: Continuous product development and innovation are critical. The company has focused on expanding its product lines to include healthier snack options, which has been a growing consumer trend.
- Market Expansions: The company is actively pursuing market expansions both domestically and internationally. This includes increasing its presence in existing markets and entering new geographic regions.
- Strategic Acquisitions: Recent acquisitions, such as the Good Health and R.W. Garcia brands, are aimed at diversifying the product portfolio and increasing market share.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, net sales are projected to be approximately $1.09 billion, reflecting a slight decline from $1.09 billion in 2023. This decline is attributed to market adjustments and the impact of prior acquisitions. Earnings per share (EPS) estimates are expected to improve to around $0.17 for the fiscal year 2024 compared to $0.03 in 2023.
Strategic Initiatives and Partnerships
The company has engaged in several strategic initiatives that are likely to drive future growth, including:
- Partnerships with Retailers: Collaborating with major retailers to ensure better shelf placement and promotional support for new products.
- Health-focused Product Lines: Launching new products that cater to health-conscious consumers, which is anticipated to drive sales in an expanding market segment.
- Supply Chain Optimization: Investing in supply chain efficiencies to reduce costs and improve margins.
Competitive Advantages
Utz Brands, Inc. maintains several competitive advantages that position it favorably for future growth:
- Strong Brand Portfolio: The company boasts a diverse range of well-recognized brands that account for 77% of total sales volume.
- Distribution Network: An established distribution network, including both company-owned routes and independent operators, enhances market reach and operational flexibility.
- Operational Efficiency: Recent improvements in productivity and gross profit margins, which increased to 35.1% in 2024 from 31.4% in 2023, provide a solid foundation for future profitability.
Financial Overview
| Financial Metric | 2024 (Projected) | 2023 |
|---|---|---|
| Net Sales | $1.09 billion | $1.09 billion |
| Gross Profit Margin | 35.1% | 31.4% |
| Earnings Per Share (EPS) | $0.17 | $0.03 |
| Power Brands Volume Growth | 4% | N/A |
| Foundation Brands Volume Growth | -11% | N/A |
These factors collectively illustrate the potential for Utz Brands, Inc. to harness various opportunities for growth in the competitive snack food market as it navigates through 2024 and beyond.
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Resources:
- Utz Brands, Inc. (UTZ) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Utz Brands, Inc. (UTZ)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Utz Brands, Inc. (UTZ)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.