Utz Brands, Inc. (NYSE:UTZ) Q2 2024 Earnings Call Transcript

Utz Brands, Inc. (NYSE:UTZ) Q2 2024 Earnings Call Transcript August 1, 2024

Utz Brands, Inc. beats earnings expectations. Reported EPS is $0.19, expectations were $0.17.

Operator: Hello, and welcome to the Utz Second Quarter 2024 Earnings Call. This call is being recorded and all participants are currently in a listen-only mode. Shortly, we will move into a question-and-answer session. [Operator Instructions] I will now turn the call over to Kevin Powers, Senior Vice President of Investor Relations.

Kevin Powers: Thank you, Jeremy. Good morning, everyone. Thank you for joining us today for our live Q&A session for our second quarter results. With me today are Howard Friedman, CEO; Ajay Kataria, CFO; and Cary Devore, COO and Chief Transformation Officer. I hope everybody had a chance to listen or read our prepared remarks that we posted this morning, and also a presentation that is available on our Investor Relations website. Before we begin today’s Q&A session, just a few housekeeping items. Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance.

On today’s call, we will discuss certain adjusted non-GAAP financial measures, which are described in more detail in this morning’s earnings materials. Reconciliation of non-GAAP financial measures and other associated disclosures are contained in our earnings materials that are posted on our website. And with that operator, we are ready to open up the line for questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Andrew Lazar from Barclays. Please go ahead.

Andrew Lazar: Great. Thanks so much. Good morning, everybody.

Howard Friedman: Morning, Andrew.

Andrew Lazar: Thanks again for shifting around your sort of reporting schedule. That’s really helpful on a busy morning. Howard, I guess, 3% or about, call it 3% volume-driven organic sales growth for the full year certainly requires, as you know, a healthy step-up in growth in the second half, all in the context of a more competitive salty category. What drives the confidence in this outlook? And I guess how much of the step-up is coming from sort of the white space distribution actions that are maybe a bit more in your control, or sort of locked in, if you will, versus the underlying business? And what is enabling us to sort of raise the percent of sales on promo quite a bit less than the category average and why would that be sustainable? Thanks so much.

Howard Friedman: Yes. I appreciate the question. I think the first thing I would offer you is that our results are really predicated on us continue to execute against the strategies that we had at Investor Day. And as you know, one of the bigger ones for us is this geographic white space opportunities that we have not only in our expansion markets, but also being able to bring some of our Power Four brands into our existing core markets. And I think what you saw in the quarter and what we expect going forward is largely for that to continue to be the case. We’re seeing good distribution gains in already secured retailers as we go forward. Certainly in our unmeasured channels as we have continued to address where consumers are shifting and shopping, we have had better availability in those channels than we’ve historically had, which has been sort of accommodating to our approach.

And then we do have a meaningful step-up in AMC. It’s still modest by almost any standard that I would apply, but you went from 40% to 60% and our innovation is breaking, is starting to move into distribution. It kind of came out in the second quarter and we would expect that momentum to build as well. Certainly understand the focus on the promotional environment. And the one thing that I’m particularly proud of is our capability building over the last 12, 15 months. Our revenue growth management capabilities and our marketing capabilities really allow us to be disciplined and flexible. As the environment shifts and as the environment shifts, we can shift with it. So certainly, the environment will continue to evolve. That’s just life in our industry, and we intend to remain flexible and evolve with it.

Andrew Lazar: Thanks so much.

Howard Friedman: Thank you.

Operator: Our next question comes from the line of Peter Galbo from Bank of America. Please go ahead.

Peter Galbo: Hi, guys. Good morning. Thanks for taking the question.

Howard Friedman: Hi, Peter.

Peter Galbo: Howard, I just maybe wanted to pick up on the back of Andrew’s question, particularly around the competitive environment. And I think your largest competitor has really called out two subcategories, unflavored potato chips and then tortilla chips, kind of as the areas where we could potentially see more promotional activity. And that obviously is a pretty large portion of your portfolio. So maybe you can just give us a bit more detail on how you’re thinking about those kind of two large subcategories within the broader portfolio.

Howard Friedman: Yes. Thanks, Peter. I appreciate the question. I think, look, there are a couple of things that are unique to our business, and I suspect will continue to be. And again, we hit some of these themes at our Investor Day. Obviously, the geographic white space and the opportunity for us to continue to further penetrate those spaces with our brands gives us some confidence that we are able to compete across the industry, right? And second is we are, and we’ve talked a little bit about being a house of brands. It kind of feels sometimes like we talk a lot about geography when we talk a little bit less about brand building and kind of our portfolio of consumer brands. And if you are a consumer who’s looking for an unflavored potato chip, we certainly obviously have that.

But we also have opportunities, if you are a consumer looking for positive choices in our Boulder Canyon business or flavors in Zapp’s, our flavored business in Zapp’s. So we do have a fairly broad portfolio of brands that consumers can opt into up and down the price ladder as well. For a more value-conscious consumer who’s looking for an absolute price point, we have items that work there as well. So I think overall, we feel really good about the portfolio that consumers can opt into. Our revenue management skills are getting much sharper every quarter, and we’re able to now show we have clarity around price gaps and where we need to be, but across the price ladder and across channels. And the last thing is, again, I think on the availability side, probably the thing that we’re — we continue to focus on is making sure that we’re available across where consumers shop, whether it is in traditional grocery or club stores or in e-commerce and mass.

And so, in all of those places right now, we are making sure we have the right assortment. And so, it’s not just an unflavored potato chip or tortilla chip environment for us. It’s a far broader playing field that I think we can compete on.

Peter Galbo: Great. Thanks for that. And maybe just a very quick follow-up, a couple of questions this morning just on kind of the raise on EPS guidance, but not on EBITDA, particularly given kind of the 2Q over-delivery. So just curious kind of how you’re thinking about leaving flex or any sort of upside to be reinvested either into price or SG&A in the second half and just how you think about that setting you up for ’25. Thanks very much.

Howard Friedman: Yes. I think first, just a reminder in our current P&L, a lot of the SG&A growth that you saw was really being driven by marketing investments year-over-year. So again, I think we’re executing our strategy well. I think, look, we’ve been paying attention to the competitive environment as well. We’re aware of what that environment may look like in the back half, but we want to make sure that we can remain flexible. And so, it’s important to us that we have the tools we need to address the competition in a targeted way as required. And if we don’t wind up using those resources, great. But we have plenty of places where we can still invest. As far as the EPS, I’ll turn it to Ajay.

Ajay Kataria: Yes. So the EPS guide is really raised because of the revised assumptions on effective tax rate that you saw, also a step down on core D&A, which was a little — slightly higher than what we expected from the transactions.

Operator: Our next question comes from the line of Michael Lavery from Piper Sandler. Please go ahead.

Michael Lavery: Thank you. Good morning. Just recognized from Investor Day and how you’ve laid it all out how much savings opportunity there is and we’re seeing that. I guess just given that it seems to be tracking ahead of schedule, can you also give us a sense if savings are not only faster but bigger than you had kind of first assessed? And I know you don’t want to probably change any targets now or you would have, but is there more that you have a line of sight on, even since just a few months ago? And is that part of what’s helping it come in so much more quickly?

Howard Friedman: Yes. I appreciate the question, Mike. There’s no question that from a supply chain optimization perspective, we are coming in quicker. Obviously, we were able to execute the plant dispositions and we went from 13 plants at Investor Day to eight at this point, while maintaining our supply base and being secure that we can continue to service our business the way retailers and obviously our independent operators and consumers would expect. But the upside for us is it also has allowed us to really narrow our focus down to those eight plants, integrated work systems and some other places. So productivity is coming in ahead of where we expected. We’ve always talked a little bit about the opportunity for us to expand gross margins and then decide how to deploy them in marketing, distribution gains, as well as in capability building.

And I think we have confidence through the year. And as Ajay mentioned in the prepared remarks, we would expect that sets us up nicely for 2025 as well.

Michael Lavery: That’s great. And just to follow-up on some of the top line color that you just gave, you touched on the differentiated brands like Boulder Canyon and Zapp’s. Boulder Canyon, of course, is on fire right now, but Zapp’s had been, certainly has slowed. Can you just give a sense of what’s ahead there? How much of it is just comp-driven? What should we expect for how that brand plays out going forward?

Howard Friedman: I definitely agree that those two businesses are a little bit of a tale of two cities. Boulder Canyon is growing quite nicely. It’s got a great position in the marketplace and high perceived value for both the consumer as well as for retailers, really driven by avocado oil and the non-seed oil folks. We also have Boulder Canyon Poppers that is launching now, which is kind of, if you think about our company overall, a cheese ball is something we know a lot about and we’re very proud of and being able to bring that into another subcategory under that brand just kind of shows the elasticity of that brand and what we can do with it as we go forward. So that is a lot about distribution gains and a lot about high velocity.

So, we’re getting in and consumers are buying more of it. So a great story there. Yes, I think on Zapp’s, we talked about this last quarter, the opportunities we have in the price pack architecture and down the street in C-Store and making sure that we address those areas as we move forward. And Zapp’s is coming in a little bit slower than we would have expected. Potato chips specifically is an area of continued emphasis for us. And then the pretzel lap of the new item from a year ago, which we now have our two new items out at this point, our spicy Cajun and our brown sugar, which are now in market and picking up. So we would expect that trend to normalize. Potato chips is the area we need to continue to work.

Michael Lavery: Okay. Thanks so much.

Howard Friedman: Thank you.

Operator: Our next question comes from the line of Rob Dickerson from Jefferies. Please go ahead.

Rob Dickerson: Great. Thanks so much. Maybe just on the heels of that last question, I’m just curious, as you have started to expand a bit in your expansion geographies, have there been any incremental learnings with respect to kind of which products, which brands are maybe traveling a bit better? I just kind of asked because, I know — I think previously, the idea was, well, it definitely can push in Zapp’s, definitely can push in Canyon, but also seems like Utz is doing kind of very well as you kind of move west. So that’s just the first question.

Howard Friedman: Yes. I think overall, we feel really good about all four of our Power Four brands, right? I think they all travel — they all travel reasonably well at this point. I think the two things we have learned as we go is how repeatable our model seems to be, right? So, we had a theory of the case. We had great success expanding into Florida, and we continue to make great strides of continuing to grow our business there. But I think we have a formula down of what the right number of items are across which subcategories and the brands, as well as a support model that I think we’re showing is significantly incremental to the retailer and our brand. And there’s a great deal of interest from consumers to opt into our products as well.

So again, I think that the power of the portfolio, the catering to different consumers and making sure that our assortment reflects that and then investing some of our advertising and consumer to drive consumer pull as our sales organization and retailers are giving us the space is working for us, is working for the category, and we’re being rewarded with incremental support as we go.

Rob Dickerson: All right. Super. And then I guess just secondly, kind of what’s your updated thought on potential category growth for the year one? And then two, clearly, there’s acceleration baked into the guy that you expect in the back half. It seemed like — it seems like you have fairly high conviction on that acceleration. So I’m kind of assuming that’s all for distribution gains. Maybe just kind of comment on why the conviction’s there too. Thanks.

Howard Friedman: Yes, look, I think we have always maintained from the beginning of the year that we expected the category to call it around 2%, but our growth was going to be volume-led, we weren’t going to see any price. And obviously, the category has been a little bit softer than even we had thought it would be. I think we would say, right now, we would assume it’s kind of relatively flat as we go forward. Sorry, I lost your second question. I apologize.

Rob Dickerson: The second question is just what gives you conviction on the back half acceleration. Clearly, that does imply a fair amount of share gain.

Howard Friedman: Yes. Thank you. Look, I think as we look at our back half plans, there are a couple of things that are going on. First of all, we have secured distribution gains that we are aware of, that we are executing as we speak, and we’ll continue to expect that, that will support our top line as we go forward on a relative basis to the first half. I think second, our marketing steps up as does our innovation. And then the third, although I don’t always love this as an answer, we have — we do have easier comps in the back half of the year versus prior year. So kind of the year we can execute similarly as we are. And actually, the percentage growth will be more — will be more significant. So, we do have high conviction. The wildcards, I think, are well-known to everybody, but we feel pretty good that we’re executing the way we need to right now.

Rob Dickerson: All right. Super. Thank you.

Howard Friedman: Thank you.

Operator: Our next question comes from the line of Robert Moskow from TD Cowen. Please go ahead.

Robert Moskow: Hi. Thanks. I just wanted to ask in the context of your longer-term outlook for sales growth is 3% to 4%. Clearly, this is a volume-driven year. But you could see a scenario where pricing is kind of flattish for the next couple of years, three years, given all the backdrops. So does the long-term algo still hold up in a zero pricing environment? Is there enough distribution gains out there in ’25 and ’26 to keep that three to four going? Thanks.

Howard Friedman: Yes. I think the short answer is yes. We have a significant amount of geographic white space to go over the next couple of years. Remember, we still have about 60% of the total U.S. salty, where salty is over-indexes from a category perspective are the areas that we are moving — we’re moving toward. So I think the short answer is we can — we absolutely have confidence that we can continue to grow our volumes. If you think back to Investor Day, what we had said was that we would be growing volume share, that it had always been for us a volume-based program. And it’s really because we’re able to bring our core brands and sort of mix them into the geographies that they are less penetrated in as we go forward.

And I think the other thing is, given we are still in the earliest stages of our advertising and consumer investments, I think we also have confidence that as we learn more, those should also be supportive to continue to drive meaningful volume growth over the next three years.

Robert Moskow: Got it. Okay. Thank you very much.

Howard Friedman: Thanks, Rob.

Operator: Our next question comes from the line of Matt McGinley from Needham. Please go ahead.

Matt McGinley: Thank you. To deliver the full year EBITDA guide, you need to have a step-up in margin rate in the back half. Do you expect the sales growth to drive more operating leverage and offset that increase in marketing? Or do you expect to have more productivity gains that will ramp up in the back half?

Ajay Kataria: Yes, I would say both. So the leverage from distribution gains led sales growth or volume growth definitely helps. And our productivity program has been pretty strong throughout the first half. You should see that strength and that delivery continue. Our supply chain team is doing a great job accelerating program as well as investing where we need to in our network to get ready for 2025 as well.

Matt McGinley: A key part of your long-term plan is to sustain market share in your core markets. You’ve been pretty consistently gaining share in those expansion markets, but maybe not so consistent in the core. Are there any issues or changes you need to make in the core markets, or are you pretty happy with the market performance and how it’s playing out in core versus expansion?

Howard Friedman: Well, I think that was a generous statement about our core. I think, look, if you look across where we’ve been, we’re very happy with our expansion markets. And a part of our core market strategy is to do some of — some similar things, specifically around Boulder Canyon, Zapp’s and On The Border. I think we’re getting — we are having good results in doing those things, but we are more — it is clearly a geography where sort of more normal category dynamics tend to impact some of our business, specifically around our foundation brands, sort of the areas as we’re evolving our portfolio. We have a long tail. We have a tale of brands that we have been shifting away from, and the core disproportionately will reflect those trends in the near term.

We think longer term, those trends, I think, normalize and become very small. And that’s why we have confidence as we go forward. But really there are four things we’re doing there. We’re going to continue to drive our capabilities. We’re going to continue — we’re increasing our marketing investment and innovation, which should benefit the core disproportionately. We’re building our DSD route infrastructure, continuing to improve it and strengthen it as our sales teams are there. And then we’re driving that distribution we talked about. So I think we have a little bit of work to do in our core for sure. But we feel — I feel very good about our progress there and we just needed to continue to come through in metrics by holding our share.

Matt McGinley: Okay. Got it. Thank you.

Howard Friedman: Thank you.

Operator: Our next question comes from the line of Rupesh Parikh from Oppenheimer. Please go ahead.

Rupesh Parikh: Good morning, and thanks for taking my questions. So I had two questions just on the promotional backdrop. So I was curious what your team’s assuming for the back half of the year on the promotion front versus what we saw in Q2. And then as you look at some of your value initiatives so far, how are consumers responding to some of the promotional efforts?

Howard Friedman: Yes. So I think we look at our price — we’ll maintain our price gaps and remain disciplined as we go forward. I think we feel pretty good about where our price gaps are and if the market shifts, then we’ll be flexible and targeted to address them. I think from an overall perspective, one of the things that makes us feel even better is because expansion geographies and our untracked channels continue to perform, obviously, that actually takes a little bit of pressure off of just competing on a promotional calendar. We have a lot of growth drivers for us as we go forward. And so, I think we feel pretty good. Obviously, we showed you our difference in our promotional spending versus the category year-over-year. We do expect that the category will be more promotional and we’re prepared to compete there. If it changes more than we planned, we’ll be flexible.

Rupesh Parikh: Great. And then maybe just one follow-up question. Just on the cost side, what do you guys see in the cost backdrop and on the inflation front at this point?

Ajay Kataria: Yes. So, we are still expecting the inflation — overall inflation bucket that we track to be flat. Commodities are slightly deflationary, but we have transportation and labor inflation that’s baked into that bucket.

Rupesh Parikh: Great. Thank you.

Howard Friedman: Thanks, Rupesh.

Ajay Kataria: Thank you.

Operator: Our next question comes from the line of Mitchell Pinheiro from Sturdivant. Please go ahead.

Mitchell Pinheiro: Hi. Good morning. I’m curious about your foundation brands and how important sort of holding them somewhat steady is to sort of achieving your gross margin expansion. Is that a risk at all if you continue to see above average leakage in the foundation brands?

Howard Friedman: I appreciate the question. Look, I think for us, our foundation brands in general play a very specific role of being able to build out some route infrastructure and making sure that certainly in some geographies where they are important to the shopper and consumer that they are available. We’ll continue to deemphasize them as sort of contemplated in our original assumptions and thesis as we go forward is that as those businesses deemphasize, our higher margin and higher consumer value products actually offset those declines. But we love our foundation brands. We’ll maintain them and make sure that they’re available. But ultimately, I don’t suspect that it will be a meaningful impact to the overall P&L, given the growth opportunities we have for our Power Four and our Targeted Power brands.

Mitchell Pinheiro: Okay. Thanks for that. And then just one last question is, could you speak to the effectiveness of your promotions right now? Are they — is there one type doing better than another and or are they tracking with normal effectiveness and efficiencies from historical levels?

Howard Friedman: Look, I think we are — one of the things that, as we’ve been building out our revenue management capabilities, there are kind of a few things that we’ve been doing. One is making sure that we understand what our optimal price gaps are, so that we can compete responsibly in the category and be able to drive, obviously, the affordability consumers desire with the unit growth and the volume that I think everybody would like in a healthy and growing category. We know that through the course of the first half of the year and obviously all of last year, that promotional lists have been lower. And we’ve been experimenting with different promotional tactics and we continue to do that. I wouldn’t necessarily say that there’s one that’s working better than others, but clearly, you can see the consumer making choices, shopping the latter, and shopping across channels, which is obviously having some effect promotionally.

I think for us, while we will compete where we need to in a targeted way on price, the distribution gains and the marketing support that we are able to generate is also having very positive effects to our business. And so, we feel really good that the entire marketing mix is working the way we would expect it to and there will always be some trade-offs, which we’ll be flexible about.

Mitchell Pinheiro: Thank you. Very helpful. That’s all for me.

Howard Friedman: Thanks, Mitch.

Operator: [Operator Instructions] Our next question comes from the line of Jim Salera from Stephens. Please go ahead.

Jim Salera: Hi, guys. Good morning. Thanks for taking our question.

Howard Friedman: Hi, Jim.

Jim Salera: Howard, I wanted to drill down, if you look at the household penetration, the buyers and the repeat trends, obviously all going in the right direction, I would imagine driven in the expansion territories. Can you just talk through maybe what’s bringing the incremental households to the Utz brand? And then it seems like obviously, you’re retaining them with the repeat rate. What does it take to retain them if they’re maybe new to the brand moving forward such that we can have a more stable and ideally higher repeat rate from these new customers?

Howard Friedman: Yes, I appreciate the question. Look, I think we’re very happy with the underlying consumer metrics, right? It’s one thing to be able to enter into a new geography or enter into a new class of trade, which again, I think for us, the power of our portfolio is that we’re able to bring varied brands to varied geographies, some of them in the core and elsewhere. But then the reality is that once you get into the store, the consumer has to want to buy the product and repeat it to your point, which we’re seeing great progress across all of those things. I think there’s a couple of reasons why. Number one, we do have a great product. We are — we have a meaningfully different product that eats well. I think it meets the consumer expectations whether you want a plain chip or a wavy chip or tortilla across all of our subcats.

So the first thing is, I think we’re very proud of the product that we put out. I think the second thing is that we are now actually being able to drive awareness of those items, both in terms of point of sale displays and being able to drive our distribution, but also in market — using the marketing tactics to get consumer awareness up. And then third, we have great retailer and IO support. So the retailers are giving us the space out on the perimeter, which allows the consumer to be there. And then our IOs are keeping stocks, stores, shelves and giving consumers the opportunity to opt in. So I think what you see right now is the entire system is working reasonably well for us. Obviously, we have plenty to do, and we are far from perfect.

But across our business right now, we feel pretty good about how we’re executing.

Jim Salera: That’s great. And then if I can drill down on Boulder, if my notes served me correctly, in the Investor Day, you guys said it would be targeting $100 million retail sales in three years. And here we are, six months and some change later, and it’s approaching $100 million in retail sales now. So I would anticipate that you’ll probably be well ahead of that three-year time horizon. What does it take to get Boulder really increased shelf availability at traditional retail? I mean, I see it in club, in a natural, and in my area, but I feel like it has brought enough appeal to really be a mainstay in a traditional retail as well. So, what does it take to really expand your on-shelf presence in the Krogers and Albertsons of the world?

Howard Friedman: Yes. I — we are very pleased, obviously, with the performance of our Boulder Canyon business over the last, really, frankly, 18 months. We started probably when I first got here, we started talking more about Boulder Canyon as a power brand, and it has continues to grow quickly, both in terms of availability as well as velocity. So, we’re getting — to your point, we’re getting consumers to opt in, and retailers are putting it on the shelves, but then consumers are coming and buying it and then repeating. So its positioning is great, the product is great. I think from our point of view, there’s really nothing stopping us from continuing to drive — to drive the availability where retailers and consumers want it.

We have the firepower and manufacturing capabilities to continue to build that business. And you’re right we’re well ahead of the, what we thought at the time was a pretty bold statement of $100 million within three years. And we will be well ahead of that probably by 2026. We’ll certainly be exceeding that expectation that we set out. So we’ll continue to drive availability. We will innovate. You’ve seen Boulder Canyon Poppers showing up, and we think there’s a lot left to do with that brand.

Jim Salera: Okay, great. And maybe just one last question, just to tie off that train of thought. Do you have any capacity constraints for Boulder? If you get big orders from retailers, are you able to meet that right away, or is there like a ramp-up period we would anticipate?

Howard Friedman: No. We feel really good about our capacity right now. Obviously, given all the supply chain optimization work that we are doing and the capital that we are investing, as well as the increase in our capabilities around integrated business planning, we have much better visibility for both the demand and supply of that item. And so, we feel good about where we are. We feel really good about the ability to support that runway as we go forward.

Jim Salera: Okay, great. Thanks for the color, guys. I’ll hop back into queue.

Howard Friedman: Thank you.

Operator: All right. And our next question comes from the line of John Baumgartner from Mizuho. Please go ahead.

John Baumgartner: Hi, good morning. Thanks for the question.

Howard Friedman: Hi, John.

John Baumgartner: Maybe first off, Howard, how are you thinking about category mix in a weakening consumer environment? Is it fair to expect any sort of shifting, for example, some popcorn, potato chips? Or are there any broader shifts that could occur within salty snacks that could prove net favorable for you?

Howard Friedman: It’s an interesting question. I think we would expect, because there are consumers who — if you look at the consumer decision tree, consumers do tend to opt into subcategories first and then they kind of move up and down the brand and price ladder within that category more so than they do, say, jump from potato chips to pretzels. So while there is obviously people will shop across the subcats, people do tend to — consumers do tend to opt into one subcategory and kind of live there. And then there are — I think where there are items that they are buying for the entire family to eat, you might see a little bit more pressure just in terms of absolute. Maybe you don’t opt into two bags, you buy one. But I think that, that is pure speculation on my part.

I think what you are seeing in our results is the benefit of the portfolio strategy that we have and a lot of the efforts we’ve undertaken over the last, call it, 18 months, 2.5 years to optimize our portfolio mix and be able to shift it to more profitable businesses as we’ve deemphasized some others.

John Baumgartner: Okay. And then my follow-up, can you discuss some of the back half merchandising plans? I think last year, you began to ramp activity with some products for tailgating season. I think Halloween has been a focal point for you as well. So relative to last year and the improvements you made in manufacturing and supply chain, how does that set you up for the seasons this year in terms of display and feature?

Howard Friedman: Yes. So look, I think a couple things. One thing we certainly see is that our quality merchandising has — continues to get stronger. So, we have been fortunate to be driving more feature and display activity. Our perimeter displays have been higher through, really, the course of the last, call it, 18 months. And I think that we — our expectation is that we are justifying our space on the perimeter and our IOs do a great job of continuing to compete for that space, and we expect that to continue. One thing — a couple of things that we are certainly optimistic about is kind of where we are on distribution and merchandising in the back half of the year. Untracked channels, I think across we feel good about where we are.

We’re bringing back — while we have — while we’re repeating our normal pretzel — our normal pretzel Halloween rotation, we’ll actually have a Zapp’s Halloween rotation as well, which will be incremental to the prior year and feel very good about what we’re doing on, on the holiday as we go forward. So I think — we think all of those things will support our business. The already achieved distribution gains that we have are also going to obviously introduce more merchandising opportunities for us in some of our expansion geographies and the consumer support we have as well will be in support as well. So, we feel pretty good about where we are and we’re here to compete and do it responsibly and remain flexible.

John Baumgartner: Thanks, Howard.

Howard Friedman: Thank you.

Operator: All right. Thank you, everyone. That does conclude today’s Utz’s second quarter 2024 earnings call. Have a pleasant day.