Ladies and gentlemen, thank you for standing by. And welcome to the Utz Brands, Inc. Third quarter 2020 Earnings Conference Call. At this time all participants are in listen-only mode. And after the speaker's presentation, there will be a question-and-answer session.

[Operator Instructions] I'd now like to turn the conference over to your speaker today, Anna Kate Heller from Investor Relations. Go ahead please, Ms. Heller..

Good morning and thank you for joining us on Utz Brands third quarter fiscal year 2020 earnings conference call. On the call today are Dylan Lissette, Chief Executive Officer and Cary Devore, Chief Financial Officer. During this call management they make forward-looking statements within the meaning of the federal securities laws.

These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in the forward-looking statements.

Please refer to Utz Brands prospectus on Form S-1 filed with the Securities and Exchange Commission and the company's press release issued this morning for detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Please note management's remarks today will highlight certain non-GAAP financial measures. Our earnings release also presents a comparable GAAP numbers to the non-GAAP numbers provided and reconciliations of the non-GAAP results to the GAAP financial measures.

The company has also prepared presentation slides and additional supplemental financial information, which are posted on Utz Investor Relations website. You may want to refer to the slides during today's call. This call is being webcast and archive of that will also be available on the website.

And now, I'd like to turn the call over to Dylan Lissette..

Thanks, Anna Kate. Hello, everyone. I'm Dylan Lissette and I've been with Utz for 25 years and CEO since 2013. I'm very excited to kick-off our first earnings call as a public company after our successful business combination with Collier Creek in August.

Since our inception nearly 100 years ago as a family business, Utz has developed a strong portfolio of iconic consumer brands, a solid competitive position in our core geographies, and a tremendous history of consistently industry leading performance across economic cycles with over 40 years of consecutive sales growth.

The strength of our brands, our dedicated employee base, and our unique action oriented culture has driven our growth and enabled us to move confidently to our new chapter as a public company. My sincere appreciation and congratulations to all of our associates for this achievement.

On behalf of our associates, our management team and our board of directors, I'd like to welcome all of our new investors, you can rest assured that we'll continue to work hard to build our business sustainably and responsibly for all of our stakeholders over the long-term as we've always done.

After I conclude my remarks on the state of Utz, I will turn things over to Cary who will discuss our Q3 financial results and guidance for 2020. After that, we will open up the call for questions.

Before I begin though, I would like to turn to COVID-19 and take a moment to extend my deepest gratitude to all of our associates and business partners who have worked incredibly hard to keep Utz running safely and efficiently throughout the pandemic.

My deepest condolences and thoughts go out to those who are affected by the Coronavirus and their loved ones. As a consumer staples business, we are very fortunate that COVID related trends have been favorable to Utz brands. And we continue to believe that an increase in at-home food consumption will further benefit us long-term.

Given Utz’s superb execution capabilities and our well known brands, our consumption trends have remained strong, outperforming the salty snack category. In addition to successfully combining Utz with Collier Creek, we executed very well in the third quarter, driving solid results across several fronts.

First, our sales, margins and earnings for the third quarter were very strong. Second, our in-market retail sales performance meaningfully outpaced the salty snack category from a Power Brand, geographic, channel and product subcategory perspective.

Third, we are executing well against the value creation strategies that we presented in our stack business combinations materials in investor presentations. And fourth, we are ensuring the safety of our associates and the resiliency of our supply chain, while continuing to experience increased demand trends.

This performance allows us to raise our outlook for fiscal year 2020, which Cary will go into more detail later. When we look at the numbers, our financial results for the third quarter were very strong with reported net sales growing 24.2% and 7.2% on a pro forma basis, that includes acquisitions on a full year basis in 2019.

Adjusted gross profit margins increased approximately 313 basis points to 40% for the third quarter, leading to year-over-year growth and adjusted gross profits of 34.8%. In addition, adjusted EBITDA margins increased approximately 173 basis points year-over-year to 15.4% of sales for the third quarter, driving growth in adjusted EBITDA of 39.8%.

From an IRI retail sales perspective, our strong momentum continued in the third quarter, with retail sales growth of 12.9% for the 13 weeks, ending September 27 2020 versus category growth of 8.7%. We outperformed the market by approximately 420 basis points overall, gaining share again in the quarter.

Importantly, year-to-date, our retail sales growth was meaningfully above our key competitors. We remain focused on our mission of becoming the fastest growing, pure-play branded salty snack platform of scaled in the United States and continue to execute well against the value-creation strategies we outlined in our previous investor presentations.

To recap, there are three fundamental pillars of our strategy. First is reducing costs and increasing margins, which entails driving productivity, optimizing revenue and trade and improving margin mix. Second, is taking a portion of the productivity and reinvesting in our brands to accelerate revenue growth.

This involves accelerating the growth of our Power Brands through enhanced marketing and innovation, expanding distribution in under penetrated channels and customers, such as mass and convenience, continuing our national geographic expansion, and increasing our presence in key salty snacks, subcategories and adjacencies.

And third is continuing to make strategic acquisitions focused on branded snacking in the United States that deliver synergies. Acquisitions reinforce the first two pillars of our value creation strategy. And on that note, we are happy to report that on November 2, we closed our acquisition of H.K.

Anderson, a leading brand of peanut butter-filled pretzels, which I will discuss more later. We also just left the first anniversary of the acquisition of Conagra DSD Snacks business, and we are pleased to say that the integration has gone smoothly. The businesses are performing very well. And we are on track with our synergy and our growth targets.

Enhancing and expanding margins are an important part of our value-creation strategies, as they enable us to reinvest incremental dollars into our brands, our marketing, and our innovation initiatives, which we believe further enhances long-term revenue growth potential.

As I noted previously, in the third quarter, our adjusted gross profit margin increased approximately 313 basis points to 40%. This is driven by the increasing leverage in our manufacturing network from higher volumes, lower commodity costs, and mix shift to Power Brands and larger package sizes.

Incremental productivity efforts are cornerstone of driving higher margins and we believe meaningful progress will be made in 2021 in this area. A dedicated team to drive incremental productivity has been formed and we have identified the slate of projects that will drive our 2021 productivity ramp up.

These projects are in areas such as continuous improvement, automation, network optimization, packaging, design, product formulation, and procurement. Turning to the growth drivers for our third quarter results, IRI retail sales for our Power Brands grew 15.1% significantly outpacing the category at a 0.7%.

This is consistent with our strategy to focus on our Power Brands. Foundation brands grew 5.3% slightly below the category.

Our Power Brand increases were led by Utz, Zapps, Golden Flake Pork Skins and Tortiyahs!. Also and the developing better for you segment of salty snacks, our BFY or better-for-you Power Brands grew retail sales in the natural channel by 18.5% in the third quarter, significantly outpacing category growth of 10.3%.

Our main BFY Power Brands in the natural channel are Boulder Canyon, and Good Health, and our year-to-date market share in the natural channel was 6.6% above our approximately 4% share, as measured by traditional IRI MULO-C.

Importantly, based on IRI panel data, we saw a significant growth in households buying our product, with higher dollars per buyer being spent, and increasing rates of repurchase.

We grew household buying our product by approximately 1.7 million for the 52 weeks ending September 27 2020 versus the prior year and we also saw rates of repurchase increase year-over-year, suggesting stickiness from this increase in the number of households.

This gives us belief that the elevated demand that we have been experiencing and the share gains we've been seeing can continue long-term. Turning to the various channels where our products are sold, we again significantly grew our e-commerce business in the third quarter, which we believe will double in size this year.

Success in e-commerce is critical as consumers change their buying behaviors as a result of COVID-19. And is an area where we have been deploying meaningful marketing funds. In Q4, we will increase our investment in e-commerce even further across various digital and social platforms.

To assist with these efforts in October, we appointed the Sasha Group as our marketing agency of record. The Sasha Group is a VaynerX media company and has significant experience in e-commerce and in digital and social platforms. We are very excited to get our brand message to an even broader audience in Q4, 2020, and beyond.

Along with our incremental marketing spend, we have rolled out a slate of new product innovations, including the portables cheeseball product for the convenience store channel, expansion of flavors for Tortiyahs!, Tortiyahs! chip line, new BFG snacks under our Good Health Power Brand, and new flavors cashews and variety pack offerings, just to name a few.

Consistent with our strategy of expanding in under penetrated channels, we gain share of salty snacks in Q3 across several key retail channels, including mass and convenience, where we are currently underway, as well as in our largest channel grocery.

We grew retail sales in the mass segment by 16.4% in the third quarter, compared to category growth of 9.3%. And we grew retail sales in the grocery channel by 19.2% compared to category growth of 15.7%. Our retail sales and convenience declined albeit less than the category as COVID-19 continues to impact on the go consumption.

We also successfully continued our strategy of geographic expansion, as we grew strongly in our expansion and emerging geographies, while also performing well in our core markets, where our retail sales grew 10.6% for the third quarter versus a category growth of 8.5%.

Our expansion geographies grew 17.2% in the third quarter, double the category growth of 8.4% and emerging geographies grew 19.9% also nearly double the category growth of 10.2%. This outperformance and our expansion in emerging territories is particularly exciting, given that they make up approximately 40% of our overall total retail sales.

We continue to benefit from the geographic expansion efforts that have been underway for years at Utz, which have accelerated over the last five years during my acquisitions that provided an increased footprint to further grow our Power Brands.

And lastly, against our strategy of increasing our presence in key salty snack subcategories, we gained share across several subcategories including potato chips, Tortiyahs!, Cheese Snacks, and Pork Skins. In addition, our personal [ph] brands turned in very solid growth, while our Popcorn business lagged its subcategory.

Both Popcorn and Tortiyahs! remain areas of continued opportunity and future growth for Utz. Finally, I would like to touch on the acquisition of H.K. Anderson. H.K. Anderson is a leading brand in the peanut butter-filled pretzels segment which has approximately $100 million in retail sales and is growing well.

The acquisition will benefit from our platform and focus, and we expect it will deliver $12 million in net sales, and $2 million in adjusted EBITDA in 2021, creating a pro forma purchase multiple of less than five times.

This transaction is just a small example of the types of both bolt-on and more transformative acquisitions that our team is well positioned to source, execute and integrate in the future, as our M&A pipeline remains robust, and actionable.

So, as we begin our life as a public company, I'm very excited about our future growth and our position in the industry. Our strategy is to continue doing what we've been doing for so many decades, because we have proven for almost 100 years that it works. But we plan to do it at an even more accelerated rate.

We plan to continue to grow our Power Brands, expand our geographic presence, execute smart acquisitions, drive future productivity, reinvest in our platform with a long-term value creation mentality and deliver shareholder returns through a balanced capital allocation approach.

We strongly believe that because of our resilience to economic cycles, our strong brand portfolio and our fantastic team that is well-positioned for continued consistent growth. I will now turn it over to Cary to cover our third quarter 2020 results and provide updated guidance for fiscal year 2020..

Thank you, Dylan. And good morning, everyone. It's great to be speaking with you on our first earnings call as a public company.

Our net sales grew 24.2% in the third quarter, driven by acquisitions of 15.9%, volume of 9.7%, price mix at 1.2%, which were partially offset by the impact of higher discounts to independent operators, which reduced the growth rate by 2.5%.

As we outlined during our roadshow, we are in the process of converting company on DSD routes to independent operator routes. And as we make these conversions, we no longer incur certain selling costs, such as the route professional’s compensation, but instead we pay a sales discount independent operators.

This has the effect of decreasing that sales and gross profit. But it results in higher EBITDA and margins over the long-term. Growth in the quarter was driven by our Power Brands, which grew reported sales by 10% compared to the prior year, excluding the impact of IO discounts, and acquisitions.

The grocery, mass and club channels which account for approximately 70% of our total sales and our three geographies, core, expansion and merging, each of which experienced meaningful growth. As Dylan noted earlier, we had a very strong margin performance in the quarter.

Our growth and adjusted gross profit margin of 313 basis points, led to an increase in our adjusted EBITDA margin of approximately 173 basis points to 15.4% for the third quarter, dissecting the increase in adjusted EBITDA margin for the third quarter of it, versus volume, which was the biggest driver of the margin increase, contributing approximately 130 basis points of margin growth.

Price mix was the second largest driver, contributing approximately 100 basis points, which reflects stable to growing average selling prices, and more weighting toward both Power Brands as a group and larger package sizes.

Cost of goods sold contributed approximately 70 basis points, as we leveraged higher volume in our manufacturing facilities, and experienced lower commodity costs.

Partially offsetting these three drivers was selling an admin expense, which reduced margins by approximately 130 basis points, due primarily to higher incentive compensation, as a result of strong performance. We did see a rate benefit in other major areas of selling and admin expense, as a result of our net sales growth, as you would expect.

Moving to our balance sheet and other key points.

As of September 27, 2020, we had a strong cash balance of $32 million and total debt of $420 million, resulting in a net debt balance of $388 million or 3.1 times normalized further adjusted EBITDA of $126 million for the last 12 months ending September 27, 2020, which includes pro forma adjustments for unrealized acquisition synergies and public company costs.

Our liquidity is very strong. And in addition to our cash balance of $32 million at the end of the quarter, we had approximately $100 million available on our ABL revolving credit facility. I'd like to provide an update on two important strategic projects, whose timelines have been adjusted to provide us with more operational flexibility.

First is our ERP implementation, which continues to go very well. We are working through a phase deployment across our network, and now expect to complete the implementation in the first quarter of 2021.

Second, we expect to finish the conversion from company on routes to independent operators in the first half of 2022 in order to accommodate the COVID-19 impact, and ERP implementation.

We're very happy with our progress across both of these strategic initiatives and are focused on executing them well, while at the same time supporting our accelerated revenue and margin growth during this COVID-19 time.

Turning to our guides for fiscal year 2020, we are pleased to be increasing our expected ranges above what we provided in our spec [ph] business combination materials. For the 53 weeks ending January 3, 2021, excluding the impact of the H.K.

Anderson acquisition, we now expect net sales growth of 10% to 11% versus 2019 pro forma net sales of $865.5 million with a 53rd week representing approximately 2 percentage points, adjusted EBITDA in the range of $129 million to $132 million, including a projected 53rd week impact of approximately $3 million.

And net leverage ratio of approximately three times at the end of 2020 and full year capital expenditures of approximately $28 million, which is consistent with our previous guidance. And please note, we expect to provide 2021 guidance when we report fiscal 2020 results in March of 2021. In summary, the business continues to perform very well.

And we remain committed to executing on our value-creation strategies. With that, I'll now turn the call back over to Dylan..

Thanks, Cary. Again, thank you very much for joining us today on our first earnings call. We are excited about everyone who has become a shareholder of Utz. And we look forward to continuing to create value for all of our stakeholders. I’d now like to ask the operator to open up the call for questions..

[Operator Instructions] And our first question comes from the line of Andrew Lazar with Barclays. Go ahead, please. Your line is open..

Morning, everybody..

Morning..

Thanks for the question. I guess to start off with, I know that the company's productivity target is to reach levels, productivity levels of call it 3% to 4% of cost of goods annually, sort of several years from now, with identified supply chain opportunities of about $50 million to sort of jumpstart the program as you ramp up on this productivity.

I guess what the margin expansion that you saw this quarter, would you say there's increased visibility to that $50 million in supply chain saves? And if so, you know, is it possible that you reach that 3% to 4% of sales of COGS target, if you will, maybe more quickly than you had initially anticipated?.

Hey, Andrew, thanks for the question. This is Cart, I would say you know, we're currently still around the 1% in productivity, the margin, you know, increase you saw this quarter is due to higher net sales, volume scale we have in our manufacturing footprint, larger packet sizes, things of that nature.

But we are making significant progress toward that 3% to 4% target. We've stood up the team, we've identified the projects. And we'll provide you more details when we give 2021 guidance. But 2021 will provide a meaningful step in terms of getting from where we are today to that 3% to 4%..

Great, thanks for that.

And then, as you talked about in the presentation, you gained share not just in sort of expansion in emerging markets, but in core as well, trying to get a sense of what drove those share games and if that's something you expect moving forward and you know, I asked because you've already have obviously a pretty high share and penetration levels in those core markets.

And so we had kind of conservatively assume that most of the growth in share ultimately comes from expansion and emerging, but obviously was good to see share gains in core as well. So just trying to get a better handle on what drove that? Thank you..

Yeah. Thanks, Andrew. This is Dylan. I mean core has always been in the area that we have a lot of opportunity to grow. And it's always been an area that obviously, when we do grow, it will endure quite well to our financials because of the proximity to manufacturing and whatnot. So I think a lot of that is our DSD system.

I think a lot of it is our connection to the retailers. I think a lot of it is our Power Brands that we're investing and innovating behind.

And so our relationships with our core, grocery, retailers have been very well through you know, throughout the last nine months and through the COVID-19 and the flexibility of our DSD has really done well as on top of it.

So I think we'll expect to ideally continue to get a higher percentage of growth from emerging and expansion, but, really can lean on our core to develop solid sort of, you know, mid single digit growth as well..

Great. Thanks very much..

Our next question comes from line of Brian Holland with DA Davidson. Go ahead, please. Your line is open..

Well, thanks. Good morning, and congratulations on getting to this point. Maybe if I could just start with the non-track channels, which still seem a little bit softer than maybe what I was looking for in the model. So I'm just curious, if you could maybe talk about kind of the sequential progress it trends in that channel.

You know, kind of broad based from what we started to see initially from lockdown post, you know, the early days of COVID, kind of where we are today, and maybe how you see that kind of going forward in the interim, as we still kind of await maybe a second wave here and potential impacts from that?.

Yeah, Brian. Its Cary. Good question. So we're about 25% to 30% unmeasured, we have narrowed the gap, narrowed in Q3 as we expected it to narrow.

So I think we the, you know, if you kind of look at the IRI to the net sales performance pro forma, that delta is smaller in Q3 than it was in Q2, and that's reflecting some improvement in unmeasured, that were significantly impacted by COVID-19.

But when you really break down the differential, it's really driven by two things, it's your unmeasured, which is we dug into it a little bit, in Power and Foundation brands. Power Brands are about 20% unmeasured, in foundation brands are about 40$ to 45% unmeasured.

So if you look at the Power Brands, our Power Brand IRI growth is tracking much closer to overall IRI, then the Foundation is, so it's really Foundation that brings it down. So when you look at that, you know, 500 basis point plus gap between IRI and pro forma net sales, I would say about half of that is driven by unmeasured channels.

And of that half about 70% is due to the Foundation brands. And then the remaining gap between IRI and net sales, pro forma net sales growth is IO discounts, predominantly, you know, our IO discounts increased 25% year-over-year, and that's a reflection of the IO conversion. So as we - that will always create a gap until we're fully converted.

But I think we're making progress and narrowing the gap. And I think we should see some sequential improvement and barring any changing kind of the COVID environment right now. And demand trends, I think we'll continue to see sequential improvement and we'll see that gap narrow..

Appreciate all the color Cary. And then maybe just kind of pivoting over to the acquisition. If I look at your portfolio, a lot of new several iconic brands, I look, the HK Anderson acquisition is bringing you capabilities.

I'm curious are these capabilities, can they be leveraged against the Power Brands? And if so, what would be sort of a timeline for maybe introducing new products, et cetera under one of your larger banners?.

Yeah, this is Dylan. Thanks for the question. For sure, I mean, HK is a unique opportunity for us that we were able to extract from Conagra. We believe it has, on the backs of our platform, a lot of growth opportunity for top line sales.

Into 2021, we think also that we can utilize the co-manufacturing arrangements and agreements that came with the acquisition to help us really innovate, I think from a timeline perspective, we will definitely be seeing order innovation in 2021.

Under that filled pretzel category, I think to your question about how it factors into Power Brands, that is definitely on our slate, where we can take some of that knowledge and capability and move it into Power Brands like us, and expand on that.

So we have a sort of multifaceted DSD and DTW approach, director to warehouse approach on that brand, as well as the Utz power brands.

So without giving away all of the secrets as to how we'll do that in 2021, we do think that with $100 million sub-category opportunity of filled pretzels we’ll be able to take significant share there and grow that, which is really a creative, I don't think it's cannibalizing, really to what we have as well..

I'll leave it there. Thanks a lot gentlemen..

Thank you..

Our next question comes from the line of Rupesh Parikh from Oppenheimer. Go ahead please. Your line is open..

Good morning. Thanks for taking my question. So I had a question just on the club channel. So your growth did under paste the channel.

So I am just curious, what's driving that? And what are some of the opportunities to narrow the gap versus the gap versus the channel?.

Yeah, I don't think there's anything in particular that's driving the underperformance. I mean, we continue to do very well in club. The - we've been, you know, we had outperformed it earlier in the year. So, Dylan, I don't know if you have any other thoughts on that. But I think club continues to be a strong performer or us..

Yeah, I mean, if you look at the year-to-date numbers being up 14.5%, I think most people would be very happy with that, the club was up a little bit as a category or as a channel was up a little bit more than we were. Club is something we've been in for 20 plus years, I've been here 25 years. And I think we started in club before I got here.

We've been in it for quite some time. We have a very broad portfolio of items and skews. It's a very item-driven channel, where as opposed to like food and grocery where you have perhaps hundreds of skews across food and grocery, club is very item-driven.

And so there are some opportunities there where, you know, if you do have a lapping of a program from the year before, you might get negatively impacted just because of the skew-by-skew basis. And I think last year, in 2019, during that period, we had a very large MDM, in one of the club markets that might have affected a little bit.

But - so it's great performance, the way we look at it. We continue to innovate around club. We've been very good at performing in club over a very long time. And we've got a lot of innovation. So I mean, I look at that as just a, you know, a slight underperformance to the category.

But we continue to believe that that's, you know, its going to be very positive as we go forward..

Right. And then maybe just one follow up question, and I know you're not ready to provide guidance for next year.

But just curious, just given what you've seen with repeat rates, how are you guys feeling about some of the stickiness some this year, as we look towards next year?.

Yeah, I mean, I think in general, the stickiness, you know, we like it. I mean, we look at new households, we look at repeat rates. And the customers and the households that we're gaining through our brands, especially our Power Brands, it's very positive for us.

So I think, the way that we look at it going forward is, we're picking up new customers, and we're retaining those customers. We have very iconic long lived brands that have been around for a long time that consumers love. And as we gain new households, we're creating stickiness.

We're also investing in the fourth quarter, as I'm sure you're aware into a lot of media and a lot of social, digital consumer marketing and innovation that will hopefully continue to drive that new household penetration and also maintain or really increase the repeat rates as well..

Great, thank you..

Our next question comes from the line of Michael Lavery with Piper Sandler. Go ahead please. Your line is open..

Morning. Thank you..

Morning..

When you look at the transition to the IOs and adjusting that timeline a little bit, how should we think about the pacing or the trajectory of the discount? And when - would this quarter's level be indicative of what we should expect over the next few or might not accelerate any? How do you think that'll play out?.

Yeah, I think the trend will continue, certainly. We're going to convert approximately 70% call it of the remaining routes at the end of this year, we’ll target and get those converted in ‘21. And then finishing up, you know, the remaining 100 or so in 2022. So we still feel very good about the plan, and we're executing it well.

But yeah, it will continue to be a headwind, until we kind of finish the conversion and then lap it completely..

And just by magnitude, would this quarter be about the pace of - I'm sure there's a little volatility, but is that about what we should expect over the next several quarters?.

I'd have to go back and look at the last couple quarters and provide you with some further thinking. But yeah, I don't think there's any reason to say that this quarter was an anomaly percent..

Okay, great.

And just on the 1.7 million new consumers, do you have a sense of how that might break down geographically? Is that driven more by core markets or some of the expansion areas?.

Actually more weighted towards expansion in emerging, South, Midwest territories, like that. Core certainly is seeing new buyers, but more weighted outside the core..

Okay, great. Thank you very much..

Yeah. Thank you..

[Operator Instructions] Our next question comes from the line of Robert Moskow with Credit Suisse. Go ahead, please. Your line is open..

Hi, thanks for the question. I was wondering if you've gone deeper into the data on how much of that growth is coming from distribution gains versus velocity gains.

And if you had any - provide us to show that you know that your velocity is good in the emerging markets, it's just buying the shelf space and can engender more distribution to come?.

Yeah, I think - I don't have specifics to share with you. But we do - we are seeing distribution of velocity gains. You know, people are buying more, products are doing well. And we're seeing stickiness in our - outside our core market. So I think we continue to do well and picking up new customers across the country.

So I think there's positive tailwinds in kind of both areas..

Okay.

So they're both up distribution and velocity?.

Overall, we're seeing gains in both..

Okay. Can you can you break it down between emerging markets versus core markets or is emerging markets just the distribution is - it's growing….

Yeah, I can't - I don't have it at my fingertips right now. But I can follow up with you Rob..

Okay, but I would say high level is that, as you do look at the difference between the growth that we're experiencing in kind of ties into one of the earlier questions about core’s versus expansion, versus emerging, I mean, if you do look at the expansion in emerging markets, I mean, some of those are areas that we as a brand have been in for well over a decade, right, it's not like totally new areas, its our velocity and our share pickup, and our sales results are doing quite well in those areas.

So I think we could get very specific if you'd like to offline, if you have a particular data point that you're looking at. But as we look at many of this sub - you know, we dial in literally into some of the IRI markets that make up those emerging and expansion markets. We're doing quite well.

We're outpatient in the category, and we continue to just become a larger and larger part of the share of that - of those markets..

Okay. And quick follow up. You mentioned increased media investment in fourth quarter more digital marketing, you’re historically more of a push marketer than a pull marketer.

Is there anything that you've seen in terms of tactics that are new and able to reach specific consumers with their digital marketing and 4Q? Just to try to maximize the retention?.

Yeah, I mean, we announced the selection of the Sasha Group, which is VaynerX media company to be our advertising and media partner as we go forward.

And I don't know if you know much about them, but they're very oriented towards, towards sort of the new world of advertising and marketing to create that higher pole versus our more traditional push style marketing. So they're very creative and very fast moving.

And I think that's really where we're orienting our mindset towards is to spend dollars, where we see what works, and then we follow that and continue down that path, as opposed to, you know, doing what may have been a more, you know, in the years past a more traditional form of advertising and marketing, where you, you know, you do one major campaign and you play that major campaign out for six months.

This is going to be a much more smaller campaign, see what works and then build upon each. So we're really excited, because a lot of that spend will start to really occur, you know, kind of today, forward right into November and December is we really ramped up with that spending. And then we'll see how that works.

We wanted to be meaningful, we wanted to be high ROI. We wanted to be highly oriented towards social and digital, we wanted to tie into e-commerce, because we do believe that there's more of a 360 type of advertising loop that falls into e-commerce as well.

So that's really where we're trying to worry as to, you know, and spend money on that, as well as ramping up our innovation in our insights that we're targeting the right people with our spends..

Our next question comes from the line of Wendy Nicholson with Citi. Go ahead, please. Your line is open..

Hi, good morning. My first question has to do with Popcorn, and you're doing so well across the board in every other category, it seems.

So I'm just wondering, why is Popcorn an anomaly? Do you think you can fix that organically? Or do you need to go outside to make an acquisition? Or is that just a matter of time and focus?.

Yeah, that's a great question. I think we - you know, self-admitted that we have some weakness in Popcorn. We think there's a lot of opportunity there. If you go back to our investor roadshow presentations, we kind of identified that we had opportunity in Tortiyahs!, as well as Popcorn to grow relative to our size, relative to the category, right.

So we're under weighted in Tortiyahs! And in popcorn. We have focused on Tortiyahs! It's a larger subset of the overall Salty Snack, I believe it's in the four plus billion subcategory of salted snacks, where popcorn is only 1.5 billion. So we wanted to focus on Tortiyahs! first. And so that we're, you know, not trying to do all things at once.

We're really trying to be good at everything we do. And so we're focusing on Tortiyahs! Now we've got our own internal brand called TORTIYAHS! that's grown over 150%. We've migrated towards you know that as a brand to grow. We obviously know that Popcorn is an area for improvement.

We've got some package design stuff that's sort of coming soon, that will help to prop that up as a sub category for us. But we do look that there's - you know, there are opportunities, we either have to in the future create something on our own, or there may be M&A opportunities.

And so we - that's part of our playbook and part of our strategy to organically grow where we can, but also to look at M&A as opportunities to take care of sort of that underweight in certain subcategories..

Fair enough. Okay. And then my second question just has to do with kind of the bigger picture retail environment. I mean, a lot of retailers have said, they haven't wanted to do shelf realignments or change shelf space on and there hasn't been as much promotional activity just during the COVID period.

Can you give us a sense of kind of what your experience has been and do you start to see a pickup in promotional activity? Or maybe comment or just what you're seeing at retail? Thanks..

Yeah, I would say at retail, very high level, very macro.

It feels to me like things kind of return to normal in August, September, October, I mean, on level of what we're seeing in terms in terms the traditional print advertising, the promotional schedules, the - salted snacks is a very promotional display and activity-driven category, right, every high impulse.

We have a lot of fish [ph] traffic going through food, grocery club and mass today. And honestly, I think, you know, from a promotional perspective, it does seem like they're things have somewhat returned to normal. We're still doing the traditional advertising and display activity that we've always done.

So I would think from our perspective, it is more of a return to normal over the last few months..

Superb. Thanks so much..

Yeah..

And there are no further questions in queue. I'd like to turn the call back over to Dylan Lissette for closing remarks..

Thank you very much. It was an exciting quarter for us. Our team came together and did phenomenal, especially in the face of all that is happening in the world around us from the COVID perspective. And I just wanted to thank all of our associates, all of our team, and thank you very much for a great first quarter.

And I appreciate everyone joining us today as we had our inaugural third quarter 2020 earnings call. Thank you..

Ladies and gentlemen, this does conclude today's conference call. We thank you for your participation. You may now disconnect..